<PAGE>
INVESTMENT ADVISER
Century Capital Management, Inc.
CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT
Boston Financial Data Services, Inc.
LEGAL COUNSEL
Palmer & Dodge LLP
AUDITORS
Deloitte & Touche LLP
TELEPHONE
617-482-3060
800-321-1928
800-303-1928 (Shareholder Hotline)
AVERAGE ANNUAL TOTAL RETURNS
The average annual total returns for the Trust for the indicated investment
periods ended June 30, 1997, were as follows: (i) one year = 44.67%, (ii) five
years = 17.87%, (iii) ten years = 15.08%. These data represent past
performance. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
This report is submitted for the general information of the shareholders of
the Trust. It is not authorized for distribution to prospective investors in
the Trust unless preceded or accompanied by an effective prospectus.
- ----------------------------
CENTURY
SHARES
TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1997
- --------------------------
<PAGE>
DEAR FELLOW SHAREHOLDERS:
This extraordinary bull market continues. Sparked by minimal inflation and
solid profits, shares of well-known companies in many industries are advancing
strongly in 1997. While this euphoria is enjoyable, the history of markets is
one of price fluctuations, both up and down. Corrections, be they mild or
severe, have occurred and will occur again. At such times, quality counts;
earnings and intrinsic value count. As discussed below, we believe that our
portfolio of superbly managed companies possesses those positive
characteristics.
While the stock prices of quality insurance organizations have performed well
over the years, many investors often overlook the true fundamental strength
and profitability of leading companies. Following solid 1996 results and
continuing gains this year, however, our companies finally attracted deserved
investor recognition. At June 30, 1997, the Trust's total net assets stood at
$349.9 million, equivalent to $38.78 per share, making the Trust's total
return +24.5% year-to-date and +44.7% over the past twelve months. For those
periods, the unmanaged Standard and Poor's 500 Stock Index returns were +20.6%
and +34.7%, respectively.
These latest results have brought the Trust's annual compound total returns
for the past five, ten and fifteen years to 17.9%, 15.1% and 18.1%,
respectively. While some newer observers of the mutual fund industry classify
the Trust as a sector fund, long-time shareholders and more seasoned analysts
understand our management strategy, philosophy and style, and correctly
include the Trust in the "growth and income" category. That reflects the
Trust's investment objective; and, as shown in the following table, the Trust
has been competitive.
INVESTMENT PERFORMANCE: PERIODS THROUGH JUNE 30, 1997
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Century Shares Trust .................. +44.7% +127.6% +307.4%
Lipper Growth & Income Funds
Average ............................. +28.1 +122.5 +232.5
Standard & Poor's 500 Stock Index ..... +34.7 +146.6 +292.6
The most successful investors in the Trust are those who understand the
Trust's objectives, risk characteristics and the fundamental reasons
supporting our sustained excellent performance. We are long-term investors
with a growth and profitability emphasis. We believe we are part owners of
businesses and act as such. That means we aim to own shares of well-run
companies, monitor these companies through fundamental analysis and on-site
meetings with managements, and make changes only when managements fail to
perform or share prices far exceed real value.
Since 1976 our goal has been to construct a portfolio of investments producing
five-year annual compound growth of per share book value plus dividends of at
least 15%. Annual returns on equity at the same level provide a similar
measure of profitability. The chart below illustrates how our portfolio
companies have performed for the past ten such periods, relative to much of
American industry, as represented by the S&P 500.
FIVE-YEAR AVERAGE RETURN ON EQUITY
Century Shares Trust S&P 500
1987 14.5 12.6
1988 14.9 13.4
1989 15.8 13.5
1990 17.3 13.8
1991 17.0 13.4
1992 16.4 13.0
1993 15.5 12.3
1994 15.6 12.9
1995 15.4 14.1
1996 15.4 15.5
<PAGE>
UNDERWRITING MARGINS
Century
Shares Property-
Trust P/C Casualty
Companies Industry
1987 99.7 104.6
1988 99.8 105.4
1989 103.3 109.2
1990 99.6 109.6
1991 99.7 108.8
1992 101.5 115.7
1993 100.1 106.9
1994 99.1 108.4
1995 98.0 106.4
1996 98.7 105.9
CONSISTENT GROWTH AND PROFITABILITY VS FLUCTUATING PERCEPTIONS
Five-Year Growth Century's
Rate of Five-Year
Portfolio Company Average Annual
Book Values Total Returns
Dec-87 16.5 15.1
Jun-88 16.5 14.4
Dec-88 16.7 14.07
Jun-89 16.7 20.0
Dec-89 18.3 18.83
Jun-90 18.3 12.68
Dec-90 17.2 8.77
Jun-91 17.2 7.85
Dec-91 15.9 12.81
Jun-92 15.9 12.36
Dec-92 16.4 20.32
Jun-93 16.4 18.31
Dec-93 16.6 16.78
Jun-94 16.6 11.31
Dec-94 14.3 8.06
Jun-95 14.3 11.3
Dec-95 18.9 16.68
Jun-96 18.9 13.42
Dec-96 18.2 14.01
Jun-97 18.2 17.87
A key driver of these results is underwriting profitability. In simplest
terms, that means selling one's products at a profit. Our investments are not
focused on price discounters who "hope to make it up on volume." We believe in
supporting managements who plan for and achieve profitability in the sale of
insurance products. The chart to the left above shows results achieved by
Century companies with property-casualty operations over the past decade.
Some observers overemphasize the "cyclicality" of the industry and ignore the
stable profitability of the better companies. As shown in the chart above, the
property-casualty companies in Century's portfolio consistently earn higher
margins than the industry as a whole.
The chart to the right above illustrates clearly that the greatest cyclicality
is in investor sentiment. The solid line depicts the sustained high level of
growth and profitabilty of our portfolio companies over the past decade. The
dotted line shows trailing five-year total returns for the Trust which reflect
underlying share prices.
While prices have fluctuated, ultimately they return to underlying values. And
while the past year has shown strong performance, the Trust's total return
rate is just now catching up to the long-term growth rate of our holdings.
We cannot predict what the future holds for stock prices. Now at all-time
highs, there is downside risk that could be exacerbated by a negative event.
Historically, our success has been built by concentrating on growth and
profitability. We believe those criteria are enduring - enabling us to weather
adverse markets better while providing meaningful upside potential over the
long term.
Respectfully submitted,
/s/ Allan W. Fulkerson
Allan W. Fulkerson, Chairman
August 12, 1997
<PAGE>
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1997
COMMON STOCKS: INSURANCE COMPANIES -- 86.8%
SHARES VALUE
------ -----
65,162 AEGON N.V. ................................. $ 4,565,413
100,000 AFLAC Inc. ................................. 4,725,000
200,000 American General Corp. ..................... 9,550,000
225,000 American Heritage Life Investment Corp. .... 7,425,000
200,000 American International Group, Inc. ......... 29,875,000
487,500 AON Corp. .................................. 25,228,125
275,000 The Chubb Corp. ............................ 18,390,625
250,000 Cincinnati Financial Corp. ................. 19,750,000
115,000 General Re Corp. ........................... 20,930,000
150,000 Marsh & McLennan Companies ................. 10,706,250
195,000 MBIA Inc. .................................. 21,998,437
180,000 Mercury General Corp. ...................... 13,095,000
285,000 Ohio Casualty Corp. ........................ 12,540,000
300,000 The Progressive Corp. ...................... 26,100,000
170,000 Protective Life Corp. ...................... 8,542,500
50,000 Provident Companies., Inc. ................. 2,675,000
370,000 SAFECO Corp. ............................... 17,274,375
245,000 St. Paul Companies, Inc. ................... 18,681,250
265,000 Torchmark Corp. ............................ 18,881,250
200,000 UNUM Corp. ................................. 8,400,000
250,000 USF&G Corp. ................................ 6,000,000
------------
305,333,225
------------
COMMON STOCKS: BANKING INSTITUTIONS -- 6.9%
100,000 Banc One Corp. ............................. 4,843,750
100,000 J.P. Morgan & Co., Inc. .................... 10,437,500
50,000 Providian Financial Corp. .................. 1,606,250
130,000 Wachovia Corp. ............................. 7,580,625
------------
24,468,125
------------
MISCELLANEOUS SECURITIES -- 0.8% ............................ 2,920,000
------------
TOTAL INVESTMENTS IN COMMON STOCK -- 94.5%
(Identified cost, $87,305,045) ............................ 332,721,350
------------
FIXED INCOME -- 0.3%
FACE AMOUNT
- -----------
$ 1,000,000 U.S. Treasury Note, 5.625%, due 8/31/97 .... 1,000,000
------------
TOTAL FIXED INCOME (Identified cost, $1,030,625) ............ 1,000,000
------------
CASH EQUIVALENTS -- 5.2%
$18,150,000 State Street Bank and Trust Eurodollar Time
Deposit, at cost approximating value,
maturity 7/1/97 .......................... 18,150,000
------------
TOTAL INVESTMENTS -- 100% (Identified cost, $106,485,670) ... $351,871,350
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES -- June 30, 1997
- -------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (Identified cost,
$106,485,670) ............................................. $351,871,350
Cash ........................................................ 814
Dividends and interest receivable ........................... 557,798
Receivable for Trust shares sold ............................ 1,551,860
Prepaid expenses ............................................ 6,328
------------
Total assets ........................................ 353,988,150
LIABILITIES:
Payable for investments purchased .............. $3,661,295
Payable for Trust shares repurchased ........... 160,682
Accrued investment adviser fee (Note 5) ........ 183,228
Accrued expenses and other liabilities ......... 44,385
----------
Total liabilities ................................... 4,049,590
------------
NET ASSETS (Note 3) ......................................... $349,938,560
============
Per share net asset value, offering price and redemption price
($349,938,560 / 9,022,843 shares of $1.00 par value capital
stock outstanding) (Note 2) .............................. $38.78
======
<PAGE>
STATEMENT OF OPERATIONS -- Six Months Ended June 30, 1997
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends ................................................. $ 2,800,541
Interest .................................................. 177,110
-----------
Total income .......................................... 2,977,651
Expenses:
Investment adviser fee (Note 5) ............. $1,022,147
Non-interested trustees' remuneration ....... 23,750
Transfer agent .............................. 75,982
Custodian ................................... 25,890
Insurance ................................... 10,123
Audit ....................................... 17,950
Registration costs .......................... 30,755
Printing and other .......................... 17,387
----------
Total expenses ........................................ 1,223,984
-----------
Net investment income ............................. 1,753,667
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions .............. 6,862,848
Increase in net unrealized appreciation of
investments ............................................... 57,262,632
-----------
Net realized and unrealized gain on
investments ..................................... 64,125,480
-----------
Net increase in net assets resulting from
operations .................................................. $65,879,147
===========
See notes to financial statements.
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income ................................ $ 1,753,667 $ 4,012,180
Net realized gain on investment transactions ......... 6,862,848 9,627,266
Increase in net unrealized appreciation of investments 57,262,632 26,491,322
------------ ------------
Net increase in net assets resulting from operations . 65,879,147 40,130,768
------------ ------------
Net equalization (Note 1C) ............................. 43,813 (88,887)
------------ ------------
Distributions to shareholders from:
Net investment income ................................ (1,790,206) (3,903,632)
Realized gain from investment transactions ........... 0 (9,336,444)
Trust share transactions -- net (Note 2) ............... 15,024,361 (23,201,195)
------------ ------------
Total increase ................................... 79,157,115 3,600,610
NET ASSETS:
At beginning of period ............................... 270,781,445 267,180,835
------------ ------------
At end of period (including accumulated distributions
in excess of net investment income of $316,002 and
$323,276, respectively) ............................ $349,938,560 $270,781,445
============ ============
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of
period ......... $31.30 $28.07 $28.07 $21.77 $24.04 $25.68 $21.03
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income ....... $ 0.20 $ 0.24 $ 0.46 $ 0.41 $ 0.44 $ 0.43 $ 0.48
Net realized
and unrealized
gain (loss) on
investments .. 7.48 0.00 4.34 7.22 (1.38) (0.52) 5.15
------ ------ ------ ------ ------ ------ ------
Total
income from
investment
operations $ 7.68 $ 0.24 $ 4.80 $ 7.63 $(0.94) $(0.09) $ 5.63
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net
investment
income ....... $(0.20) $(0.21) $(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 $(0.20) $(0.21) $(1.57) $(1.33) $(1.33) $(1.55) $(0.98)
------ ------ ------ ------ ------ ------ ------
NET ASSET
VALUE, end of
period ......... $38.78 $28.10 $31.30 $28.07 $21.77 $24.04 $25.68
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN . 24.5% 0.9% 17.2% 35.2% (3.9)% (0.4)% 27%
RATIOS/SUPPLEMENTAL DATA:
Net assets,
end of period
(000 omitted) $349,939 $243,238 $270,781 $267,181 $205,904 $242,781 $260,265
Ratio of
expenses
to average
net assets 0.83%** 0.89%** 0.87% 0.94% 1.01% 0.82% 0.84%
Ratio of net
investment
income to
average
net assets 1.19%** 1.68%** 1.58% 1.60% 1.93% 1.72% 1.84%
PORTFOLIO
TURNOVER RATE 3% 1% 3% 5% 2% 19% 5%
AVERAGE
COMMISSION
RATE PAID ...... $.0400 $.0400 $.0400
**Annualized
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES -- The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
A. Investment Security Valuations -- Securities listed on national securities
exchanges are valued at closing prices. Unlisted securities or listed
securities for which closing prices are not available are valued at the latest
bid prices. Short-term obligations, maturing in 60 days or less, are valued at
amortized cost, which approximates value.
B. Federal Taxes -- It is the Trust's policy to comply with the provisions of
the Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income, including any net
realized gain on investments. Accordingly, no provision for Federal income or
excise tax is necessary.
C. Equalization -- The Trust follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Trust shares equivalent, on a per-share basis, to the amount of
undistributed net investment income on the date of the transaction, is
credited or charged to undistributed net investment income. As a result,
undistributed net investment income per share is unaffected by sales or
repurchases of Trust shares.
D. Other -- Investment security transactions are accounted for on the date the
securities are purchased or sold. Gain or loss on sales is determined on the
basis of identified cost. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Shares issuable to shareholders electing
to receive income dividends and capital gain distributions in shares are
recorded on the ex-dividend date.
E. Use of Estimates -- The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of assets,
liabilities, revenues and expenses of the Fund.
(2) TRUST SHARES -- At June 30, 1997, 9,022,843 shares were outstanding. The
number of authorized shares of $1.00 par value is unlimited. Transactions in
Trust shares were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Sold ............... 1,091,893 $ 39,247,815 699,331 $ 20,345,429
Issued to
shareholders in
reinvestment of
distributions
from:
Net investment
income ....... 36,556 1,392,101 88,021 2,669,827
Realized gain on
investment
transactions . -- -- 242,250 7,684,171
--------- ------------ --------- ------------
1,128,449 40,639,916 1,029,602 30,699,427
Repurchased ........ (757,717) (25,615,555) (1,896,822) (53,900,622)
--------- ------------ --------- ------------
Net increase
(decrease) 370,732 $ 15,024,361 (867,220) $(23,201,195)
========= ============ ========= ============
(3) SOURCES OF NET ASSETS -- At June 30, 1997, net assets consisted of:
Capital paid-in ............................................. $ 98,094,274
Accumulated distributions in excess of net investment income (316,002)
Accumulated undistributed net realized gains on investment
transactions ...................................... 6,774,608
Unrealized appreciation in value of investments ............. 245,385,680
------------
Net assets applicable to outstanding capital stock . $349,938,560
============
(4) INVESTMENT SECURITY TRANSACTIONS -- Other than U.S. Government obligations
and certificates of deposit, purchases and sales of investment securities
aggregated $11,143,859 and $9,932,105, respectively, during the six months
ended June 30, 1997. At June 30, 1997, the cost of investments for federal tax
purposes was $106,485,670. Net unrealized appreciation for all securities at
that date was $245,385,680. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost of $245,613,437 and aggregate gross unrealized depreciation for
all securities in which there was an excess tax cost over market value of
$227,757.
(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 of 0.7% of the first $250 million and
0.6% of the amounts exceeding $250 million of the Trust's net asset value. For
the six months ended June 30, 1997, the fee amounted to $1,022,147. Officers
and Trustees of the Trust who are employed by CCM receive remuneration for
their services out of such investment adviser fee.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of Century Shares Trust:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Century Shares Trust as of June 30,
1997, the related statement of operations for the six months then ended, the
statement of changes in net assets for the six months then ended and for the
year ended December 31, 1996, and the financial highlights for the six months
ended June 30, 1997 and 1996 and 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 June 30, 1996 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Century Shares
Trust at June 30, 1997, 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
July 18, 1997
