<PAGE>
CENTURY
SHARES
TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1998
<PAGE>
DEAR FELLOW SHAREHOLDERS:
In 1998, the long bull market in U.S. equities has continued with only brief
interruptions. Positive momentum has overcome concerns about Asia, slowing
demand in some industries, and a number of negative earnings surprises. In this
environment, Century Shares Trust rose 11.6% during the first six months versus
a total return of 17.7% for the Standard & Poor's 500 Stock Index. For the
twelve months ended June 30th, the Trust returned 34.5% compared with 30.2% for
the Index.
Operating results for portfolio companies during the first quarter were
satisfactory:
FIRST QUARTER OF 1998 MEDIAN RESULT
Revenue Growth ..................................... 6.9%
Increase in Operating Earnings Per Share ........... 14.3
Annualized Return on Equity ........................ 13.6
Annualized Growth in Book Value Plus Dividends ..... 14.0
Estimates published by analysts generally have projected full-year results in
line with actual first quarter experience. As second quarter comparisons for
some property-casualty insurance underwriters will be less favorable due to
weather conditions, earnings expectations may be lowered after first half
results are reported. It seems likely, however, that this possibility has been
reflected in stock prices already. While we believe it is important to comment
on recent performance of the Trust and its investee companies in these
semi-annual updates, it is critical that investors not get caught up in the
moment and lose perspective. The rest of this report focuses on long-term
operating results and valuations.
LONG-TERM OPERATING RESULTS
The Trust's investment objective is to produce long-term growth of principal and
income. To accomplish this goal, we buy and hold positions in companies that we
believe are well-managed and well-positioned to produce solid and profitable
operating growth over long periods of time. We try not to pay too high a price
for this growth, and, while we diversify, we also tend to concentrate assets
where we have the most confidence. The table below shows that operating results
for our portfolio companies during the last five years continued to compare
favorably with similar data for the S&P 500 Index, a good proxy for the largest,
most successful companies.
VALUATIONS
The last few years have been extraordinarily profitable for investors, and, as a
result of very favorable economic trends and expectations, prices of equities
now trade at relatively high levels. The table on the next page compares current
valuations against the mean valuations over the five years ended in 1997.
Whether measured by relationship to book value or earnings, stocks in general,
as represented by the S&P Index, are significantly more expensive than the norm
of recent years. On the other hand, alternatives for investors are expensive as
well, as anyone who has followed bond yields can attest.
- -------------------------------------------------------------------------------
FIVE-YEAR RESULTS -- PERIOD ENDED DECEMBER 31, 1997
GROWTH OF PER
SHARE BOOK VALUE AVERAGE ANNUAL
PLUS DIVIDENDS RETURN ON EQUITY
---------------- ----------------
Century Shares Trust 19.8% 15.6%
Standard & Poor's 500 Stock Index 15.0 16.9
Note: Century Shares Trust's portfolio company data weighted on the basis of the
Trust's investment in each security.
Standard & Poor's 500 Stock Index book value is estimated.
<TABLE>
<CAPTION>
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VALUATIONS
MARKET PRICE
TO BOOK VALUE MARKET PRICE TO EARNINGS
-------------------- ------------------------------------------
CURRENT CURRENT CURRENT
5-YEAR ON 1997 ON 1998 ON 1999 5-YEAR
CURRENT MEAN ACTUAL ESTIMATES ESTIMATES MEAN
------- ------ ------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Century Shares Trust ("CST") 2.46x 2.01x 21.1x 19.0x 16.8x 14.2x
Standard & Poor's 500 Stock Index 4.37 2.82 28.5 23.7 22.1 18.2
CST as % of S&P Valuation 56.3% 71.3% 76.1% 80.2% 76.0% 78.0%
Note: Current valuations are based on market prices as of June 30, 1998, and December 31, 1997 book values.
Data for CST reflects the June 30, 1998 portfolio weighted according to the size of investment in each
issue. Standard & Poor's 500 Stock Index book value is estimated.
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</TABLE>
The Trust's portfolio continues to sell at a discount to the market which is
wider than average relative to book values and roughly in line with the past
five years based on P/E ratios. There have been times when the Trust's portfolio
stocks sold at a premium to the general market, and such an environment could
well be repeated. While that would be an exciting experience, there is something
to be said for owning relatively good values at a time like the present.
OUTLOOK
The profound structural, product and distribution changes occurring in the risk
management and financial services industries are creating both opportunities and
dangers for the players involved. Some bold moves will fail due to faulty
strategies or execution. Many new developments, however, will lead to better
products delivered much more efficiently and provide enhanced profits to the
winners.
We believe our current holdings are well-positioned for the future. Sixteen
portfolio companies have increased dividends so far in 1998, suggesting that
their directors share our confidence. While concerned with the possibility of
significant short-term volatility in equity markets generally, we are
enthusiastic about the business prospects, quality of management, and long-term
growth potential of the Trust's holdings.
NEW APPOINTMENTS
Jerry S. Rosenbloom Ph.D., Professor of Insurance and Risk Management at the
Wharton School of the University of Pennsylvania, was elected a trustee of
Century Shares Trust effective April 1, 1998. Dr. Rosenbloom has written
extensively in the insurance, risk management and employee benefits areas and
has long been involved in industry activities.
Michael J. Poulos, retired Chairman and CEO of Western National Corporation, was
elected a trustee of the Trust on June 26, 1998. A Director of American General
Corporation, Mr. Poulos' distinguished professional career includes serving as
president and vice chairman of that leading financial services company.
Both Mr. Poulos and Dr. Rosenbloom have service as directors of insurance and
investment management organizations. We are honored that these industry
leaders have joined the Board and look forward to the Trust's benefitting from
their many years of experience and perspective.
Respectfully submitted,
/s/ William W. Dyer, Jr.
William W. Dyer, Jr.,
Managing Trustee
Boston, Massachusetts August 10, 1998
<PAGE>
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1998
COMMON STOCKS: INSURANCE COMPANIES -- 90.1%
SHARES VALUE
------ -----
200,000 AFLAC Inc. ............................... $ 6,062,500
140,000 The Allstate Corp. ....................... 12,818,750
200,000 American General Corp. ................... 14,237,500
450,000 American Heritage Life Investment Corp. .. 10,406,250
275,000 American International Group, Inc. ....... 40,150,000
430,000 AON Corp. ................................ 30,207,500
265,000 The Chubb Corp. .......................... 21,299,375
750,000 Cincinnati Financial Corp. ............... 28,781,250
115,000 General Re Corp. ......................... 29,152,500
75,000 HSB Group, Inc. .......................... 4,012,500
225,000 Marsh & McLennan Companies ............... 13,598,436
390,000 MBIA, Inc. ............................... 29,201,250
360,000 Mercury General Corp. .................... 23,197,500
285,000 Ohio Casualty Corp. ...................... 12,611,250
295,000 The Progressive Corp. .................... 41,595,000
340,000 Protective Life Corp. .................... 12,473,750
220,000 Provident Companies., Inc. ............... 7,590,000
50,000 Reliastar Financial Corp. ................ 2,400,000
385,000 SAFECO Corp. ............................. 17,493,438
542,840 St. Paul Companies, Inc. ................. 22,833,208
525,000 Torchmark Corp. .......................... 24,018,750
200,000 UNUM Corp. ............................... 11,100,000
------------
415,240,707
------------
COMMON STOCKS: BANKING INSTITUTIONS -- 6.3%
110,000 Banc One Corp. ........................... 6,139,375
100,000 J.P. Morgan & Co., Inc. .................. 11,712,500
130,000 Wachovia Corp. ........................... 10,985,000
------------
28,836,875
------------
TOTAL INVESTMENTS IN COMMON STOCKS -- 96.4%
(Identified cost, $104,098,962) ......................... 444,077,582
------------
CASH EQUIVALENTS -- 3.6%
16,501,000 State Street Bank and Trust Eurodollar
Time Deposit, at cost approximating
value, maturity 7/1/98 ................. 16,501,000
------------
TOTAL INVESTMENTS -- 100% (Identified cost, $120,599,962) . $460,578,582
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES -- June 30, 1998
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<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (Identified cost, $120,599,962) .............. $460,578,582
Dividends and interest receivable ............................................ 541,627
Receivable for Trust shares sold ............................................. 2,163,999
Prepaid expenses ............................................................. 6,097
------------
Total assets ......................................................... 463,290,305
LIABILITIES:
Payable for Trust shares repurchased ......................... $ 19,082
Accrued investment adviser fee (Note 5) ...................... 252,774
Accrued expenses and other liabilities ....................... 83,883
----------
Total liabilities .................................................... 355,739
------------
NET ASSETS (Note 3) .......................................................... $462,934,566
============
Per share net asset value, offering price and redemption price ($462,934,566 /
9,326,009 shares of $1.00 par value capital stock outstanding) (Note 2) .... $49.64
======
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS -- Six Months Ended June 30, 1998
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<S> <C> <C>
INVESTMENT INCOME:
Dividends ................................................................. $ 3,051,238
Interest .................................................................. 534,807
------------
Total income .......................................................... 3,586,045
Expenses:
Investment adviser fee (Note 5) ........................... $1,460,232
Non-interested trustees' remuneration ..................... 35,000
Transfer agent ............................................ 99,287
Custodian ................................................. 34,788
Insurance ................................................. 9,714
Professional fees ......................................... 25,454
Registration costs ........................................ 34,046
Printing and other ........................................ 18,079
----------
Total expenses ........................................................ 1,716,600
------------
Net investment income ............................................. 1,869,445
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions .............................. 9,275,388
Increase in net unrealized appreciation of investments ...................... 36,632,004
------------
Net realized and unrealized gain on investments ................... 45,907,392
------------
Net increase in net assets resulting from operations .......................... $ 47,776,837
============
</TABLE>
See notes to financial statements.
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<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
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SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income ................................ $ 1,869,445 $ 3,432,283
Net realized gain on investment transactions ......... 9,275,388 17,070,025
Increase in net unrealized appreciation of investments 36,632,004 115,223,568
------------ ------------
Net increase in net assets resulting from operations 47,776,837 135,725,876
------------ ------------
Net equalization (Note 1C) ............................. (22,696) 53,124
------------ ------------
Distributions to shareholders from:
Net investment income ................................ (1,846,701) (3,370,609)
Realized gain from investment transactions ........... 0 (16,991,380)
Trust share transactions -- net (Note 2) ............... 2,451,604 28,377,066
------------ ------------
Total increase ................................... 48,359,044 143,794,077
NET ASSETS:
At beginning of period ............................... 414,575,522 270,781,445
------------ ------------
At end of period (including accumulated distributions
in excess of net investment income of $270,104 and
$270,152, respectively) ............................ $462,934,566 $414,575,522
============ ============
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period ... $ 44.66 $ 31.30 $ 31.30 $ 28.07 $ 21.77 $ 24.04 $ 25.68
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . $ 0.20 $ 0.20 $ 0.39 $ 0.46 $ 0.41 $ 0.44 $ 0.43
Net realized and
unrealized gain
(loss) on investments . 4.98 7.48 15.25 4.34 7.22 (1.38) (0.52)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total income from
investment operations . $ 5.18 $ 7.68 $ 15.64 $ 4.80 $ 7.63 $ (0.94) $ (0.09)
---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS FROM:
Net investment income . $ (0.20) $ (0.20) $ (0.38) $ (0.46) $ (0.41) $ (0.45) $ (0.45)
Net realized gain on
investmenttransactions -- -- (1.90) (1.11) (0.92) (0.88) (1.10)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions $ (0.20) $ (0.20) $ (2.28) $ (1.57) $ (1.33) $ (1.33) $ (1.55)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, end of
period ............... $ 49.64 $ 38.78 $ 44.66 $ 31.30 $ 28.07 $ 21.77 $ 24.04
========== ========== ========== ========== ========== ========== ==========
TOTAL RETURN ............ 11.6% 24.5% 50.1% 17.2% 35.2% (3.9)% (0.4)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) ......... $ 462,935 $ 349,939 $ 414,576 $ 270,781 $ 267,181 $ 205,904 $ 242,781
Ratio of expenses to
average net assets .. 0.79%* 0.83%* 0.82% 0.87% 0.94% 1.01% 0.82%
Ratio of net investment
income to average
net assets .......... 0.86%* 1.19%* 1.04% 1.58% 1.60% 1.93% 1.72%
PORTFOLIO TURNOVER RATE . 1% 3% 6% 3% 5% 2% 19%
*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
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. Actual results could differ from those
estimates.
(2) TRUST SHARES -- At June 30, 1998, 9,326,009 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, 1998 DECEMBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sold ............... 1,238,237 $ 58,639,591 2,104,952 $ 83,150,199
Issued to
shareholders in
reinvestment of
distributions
from:
Net investment
income ....... 26,388 1,296,056 60,077 2,472,550
Realized gain on
investment
transactions . -- -- 298,078 13,237,627
---------- ------------ ---------- ------------
1,264,625 59,935,647 2,463,107 98,860,376
Repurchased ........ (1,221,820) (57,484,043) (1,832,014) (70,483,310)
---------- ------------ ---------- ------------
Net increase 42,805 $ 2,451,604 631,093 $ 28,377,066
========== ============ ========== ============
(3) SOURCES OF NET ASSETS -- At June 30, 1998, net assets consisted of:
Capital paid-in ........................................... $114,038,902
Accumulated distributions in excess of net
investment income ....................................... (270,104)
Accumulated undistributed net realized gain on
investment transactions ................................. 9,187,148
Unrealized appreciation in value of investments ........... 339,978,620
------------
Net assets applicable to outstanding capital stock .. $462,934,566
============
(4) INVESTMENT SECURITY TRANSACTIONS -- Other than U.S. Government obligations
and bank time deposits, purchases and sales of investment securities aggregated
$15,452,434 and $4,458,937, respectively, during the six months ended June 30,
1998. At June 30, 1998, the cost of investments for federal tax purposes was
$120,599,962. Net unrealized appreciation for all securities at that date was
$339,978,620. This consisted entirely of aggregate gross unrealized
appreciation.
(5) INVESTMENT ADVISER FEE -- The investment adviser fee is earned by Century
Capital Management, Inc. ("CCM"), as compensation for providing investment
advisory, management and administrative services to the Trust. CCM receives a
monthly fee equal on an annualized basis to 0.7% of the first $250 million and
0.6% of the amounts exceeding $250 million of the Trust's net asset value. For
the six months ended June 30, 1998, the fee amounted to $1,460,232. 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 June 30, 1998, 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, 1997, and the financial highlights for the six months ended June
30, 1998 and 1997 and for each of the years in the five-year period ended
December 31, 1997. 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. Our procedures included
confirmation of securities owned as of June 30, 1998 by correspondence with the
custodian. 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, 1998, 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 17, 1998
<PAGE>
TRUSTEES
Allan W. Fulkerson, Chairman
William O. Bailey
John E. Beard
William W. Dyer, Jr.
Ernest E. Monrad
Michael J. Poulos
Jerry S. Rosenbloom
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, 1998, were as follows: (i) one year = 34.55%, (ii) five
years = 19.88%, (iii) ten years = 19.09%. 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.
