<PAGE>
CENTURY
SHARES
TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1999
<PAGE>
DEAR FELLOW SHAREHOLDERS:
The first half of the year ended on a more positive note than it began. Concerns
about inflation and foreign financial market stability diminished somewhat and
the conflict in Kosovo now appears resolved. Stock prices rose through the
Federal Reserve's announced interest rate increase in June, buoyed by Chairman
Greenspan's more positive perspectives on worker productivity and economic
growth.
Investor bias toward the largest capitalized companies, however, remained the
most noteworthy trend affecting relative stock performances, as reflected by the
"tiered" returns and price multiples of the companies included in the S&P 500
index, often used as a measure of the stock market as a whole.
As an example, the total value of the 25 largest companies within the S&P 500
grew 15.8% during the first half of the year. By comparison, the smallest 250
companies (bottom half) of the index grew a relatively modest 5.2%. Because the
index is calculated based upon individual company market values, the impact
these 25 largest stocks have on the S&P 500's overall performance is four times
greater than that of fully half of the stocks in the index.
From a valuation standpoint, the 25 largest companies sold at 33.8 times 1999
earnings estimates as of June 30 -- almost twice the price-to-earnings ratio of
the smallest 250 companies, and adding 3.0 points to the price-to-earnings ratio
of the index.
MEDIAN % OF GROWTH
AS OF 6/30/99 % TOTAL MARKET INDEX IN VALUE 1999E
S&P 500 STOCKS STOCKS VAL.($B) VALUE (6 MOS.) P/E
- -------------- ----------- ------------ ---------- ------------ ---
Top 25 5% $146.6 38.6% 15.8% 33.8
Top 250 50 20.1 90.4 12.5 28.2
Bottom 250 50 4.2 9.6 5.2 19.0
----------- ------------ ---------- ------------ ---------
100% $ 8.4 100.0% 11.7% 27.0
Though the outlook for the economy should bode well for corporate earnings going
forward, it falls short of explaining these marked differences in growth and
valuations. We see uncertainty among global investors and a preference for the
relative security and liquidity of large US dollar-based assets as key factors
affecting the valuation gap. Over time, these effects should work their way out
of the system, having a more favorable impact on relative valuations.
YOUR PORTFOLIO OF COMPANIES
The Trust's portfolio produced a +1.8% return for the first half of the year.
As long-term shareholders know, our philosophy is to own shares of the best
companies - industry leaders whose managements consistently turn in superior
absolute and relative operating results. This long-term investment strategy
focuses on a company-by-company analysis of the fundamental drivers of
profitability, earnings and dividend growth. We seek to add value in the
investing process by applying our in-depth research and industry knowledge in
selecting companies with the most attractive growth prospects relative to their
inherent risks and to the broader market.
From both an historical and prospective basis, the Trust's portfolio boasts more
attractive measures of growth and value creation than the S&P 500 index;
portfolio companies achieved a five-year weighted annual compounded growth in
book value plus dividends of 19.4%, compared to 14.8% for the S&P; earnings
estimates for 2000 reflect an 11.3% increase for our companies versus 8.5% for
the S&P 500. Currently, our portfolio is selling at approximately 17.3 times
this year's estimated earnings, which represents a 46% discount to the market's
31.8 times - one of the largest discounts in the 72-year history of the Trust.
On the whole, we view the market as exhibiting a favorable long-term risk/
reward tradeoff for Trust shareholders, with stock values expected to benefit
from several macro trends that include the following:
FASTER GROWTH AT A LARGE DISCOUNT
- --------------------------------------------------------------------------------
Century S&P
Shares Trust 500
------------ ---
Past 5 yr annualized growth of
book value plus dividends (%) 19.4% 14.8%
Estimated earnings growth, 2000
vs. 1999 (%) 11.3% 8.5%
Price to earnings ratio (1999E) 17.3% 31.8%
o Information technology: insurance and banking are extremely data intensive
industries, making them significant and "tangible" future beneficiaries of
current innovations in technology and communications that are key drivers to
valuations at the top end of the market.
o Secular growth: the fundamentals driving growth within the portfolio include
some of the largest demographic and economic forces, such as increased
longevity, financial services integration, and a global demand for financial
systems reform across most major economies.
Looking forward, it now appears likely that Congress will pass comprehensive
bank reform legislation that will effectively repeal existing Glass Steagall
restrictions. During the past twelve months, we have seen several preemptive
mergers (e.g. Citigroup), as well as a number of acquisitions of financial
companies by large foreign buyers.
We expect the pace of acquisitions and consolidation to accelerate over the next
twelve months. We believe our portfolio is uniquely positioned with one of the
highest concentrations of potential buyers and sellers in such an environment.
RELATIVE PRICE-TO-EARNINGS RATIO
CST VS S&P 500
1979 71.6%
1980 61.1%
1981 81.4%
1982 77.3%
1983 80.8%
1984 125.4%
1985 120.3%
1986 68.8%
1987 63.7%
1988 72.7%
1989 82.8%
1990 63.2%
1991 50.0%
1992 68.0%
1993 62.3%
1994 75.6%
1995 78.0%
1996 78.4%
1997 81.1%
1998 66.2%
1999 54.4%
In such times of dramatic change, we believe our long-term strategy of investing
in sustainable leading "franchise" companies will continue to reward our
investors. Though near-term market conditions can deteriorate before they
improve, the value of our portfolio companies should reflect their underlying
growth and market potential over time.
We hope you will visit our new website (www.centurycap.com) later this summer to
learn more about our investment strategy and to receive updates on the Trust's
portfolio or, if you prefer, call, write, or e-mail us at [email protected].
Respectfully submitted,
/s/ Allan W. Fulkerson
Allan W. Fulkerson
Chairman
Boston, Massachusetts August 1, 1999
<PAGE>
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1999
COMMON STOCKS: INSURANCE COMPANIES -- 91.6%
SHARES VALUE
------ -----
200,000 AFLAC Inc. .................................. $ 9,575,000
198,000 The Allstate Corp. .......................... 7,103,250
190,000 American General Corp. ...................... 14,321,250
450,000 American Heritage Life Investment Corp. ..... 11,025,000
220,000 American International Group, Inc. .......... 25,753,750
585,000 AON Corp. ................................... 24,131,250
325 Berkshire Hathaway Inc. CL A ................ 22,392,500
265,000 The Chubb Corp. ............................. 18,417,500
710,000 Cincinnati Financial Corp. .................. 26,669,375
85,000 HCC Insurance Holdings, Inc. ................ 1,928,438
100,000 HSB Group, Inc. ............................. 4,118,750
160,000 Horace Mann Educators Corp. ................. 4,350,000
220,000 Marsh & McLennan Companies, Inc. ............ 16,610,000
380,000 MBIA, Inc. .................................. 24,605,000
360,000 Mercury General Corp. ....................... 12,240,000
285,000 Ohio Casualty Corp. ......................... 10,295,625
230,000 The Progressive Corp. ....................... 33,350,000
300,000 Protective Life Corp. ....................... 9,900,000
230,000 Provident Companies, Inc. ................... 9,200,000
217,000 RenaissanceRe Holdings ...................... 8,029,000
294,500 SAFECO Corp. ................................ 12,994,812
400,000 St. Paul Companies, Inc. .................... 12,725,000
525,000 Torchmark Corp. ............................. 17,915,625
210,000 UNUM Corp. .................................. 11,497,500
60,000 United Healthcare Corp. ..................... 3,757,500
29,872 Waddell & Reed Financial, Inc. CL A ......... 819,613
128,572 Waddell & Reed Financial, Inc. CL B ......... 3,471,444
------------
357,197,182
------------
COMMON STOCKS: BANKING INSTITUTIONS -- 8.2%
110,000 Bank One Corp. ............................... 6,551,875
100,000 J.P. Morgan & Co., Inc. ...................... 14,050,000
130,000 Wachovia Corp. ............................... 11,123,125
------------
31,725,000
------------
TOTAL INVESTMENTS IN COMMON STOCKS -- 99.8%
(Identified cost, $107,493,744) ............................ 388,922,182
------------
CASH EQUIVALENTS -- 0.2%
877,000 State Street Bank and Trust Eurodollar
Time Deposit, at cost approximating value,
maturity 7/1/99 ............................ 877,000
------------
TOTAL INVESTMENTS -- 100% (Identified cost, $108,370,744) .... $389,799,182
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES -- June 30, 1999
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (Identified cost, $108,370,744) .............. $389,799,182
Dividends and interest receivable ............................................ 570,112
Receivable for Trust shares sold ............................................. 8,290
------------
Total assets ......................................................... 390,377,584
LIABILITIES:
Payable for Trust shares repurchased ......................... $ 277,229
Accrued investment adviser fee (Note 5) ...................... 215,160
Accrued expenses and other liabilities ....................... 102,544
----------
Total liabilities .................................................... 594,933
------------
NET ASSETS (Note 3) .......................................................... $389,782,651
============
Per share net asset value, offering price and redemption price
($389,782,651 / 8,611,785 shares of $1.00 par value capital
stock outstanding) (Note 2) ................................................ $45.26
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS -- Six Months Ended June 30, 1999
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C>
Dividends ................................................................. $ 3,239,740
Interest .................................................................. 31,566
------------
Total income .......................................................... 3,271,306
Expenses:
Investment adviser fee (Note 5) ........................... $1,292,389
Non-interested trustees' remuneration ..................... 48,000
Transfer agent ............................................ 114,311
Custodian ................................................. 27,387
Insurance ................................................. 9,819
Professional fees ......................................... 44,369
Registration costs ........................................ 31,572
Printing and other ........................................ 21,923
----------
Total expenses ........................................................ 1,589,770
------------
Net investment income ............................................. 1,681,536
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions .............................. 26,464,425
Decrease in net unrealized appreciation on investments ...................... (21,741,204)
------------
Net realized and unrealized gain on investments ................... 4,723,221
------------
Net increase in net assets resulting from operations .......................... $ 6,404,757
============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income ................................ $ 1,681,536 $ 3,681,227
Net realized gain on investment transactions ......... 26,464,425 24,282,825
Decrease in net unrealized appreciation of investments (21,741,204) (176,974)
------------ ------------
Net increase in net assets resulting from operations 6,404,757 27,787,078
------------ ------------
Net equalization (Note 1C) ............................. (30,071) (41,282)
------------ ------------
Distributions to shareholders from:
Net investment income ................................ (1,681,536) (3,609,921)
In excess of net investment income ................... (41,953) --
Realized gain from investment transactions ........... -- (24,160,837)
Trust share transactions -- net (Note 2) ............... (29,997,481) 578,375
------------ ------------
Total increase (decrease) ........................ (25,346,284) 553,413
NET ASSETS:
At beginning of period ............................... 415,128,935 414,575,522
------------ ------------
At end of period (including accumulated distributions
in excess of net investment income of $383,458 and
$311,434, respectively) ............................ $389,782,651 $415,128,935
============ ============
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period .......... $ 44.66 $ 44.66 $ 44.66 $ 31.30 $ 28.07 $ 21.77 $ 24.04
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... $ 0.19 $ 0.20 $ 0.41 $ 0.39 $ 0.46 $ 0.41 $ 0.44
Net realized and unrealized gain
(loss) on investments ..................... 0.61 4.98 2.71 15.25 4.34 7.22 (1.38)
-------- -------- -------- -------- -------- -------- --------
Total income (loss)from
investment operations ................. $ 0.80 $ 5.18 $ 3.12 $ 15.64 $ 4.80 $ 7.63 $ (0.94)
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS FROM:
Net investment income ....................... $ (0.20) $ (0.20) $ (0.40) $ (0.38) $ (0.46) $ (0.41) $ (0.45)
Net realized gain on investment
transactions .............................. -- -- (2.72) (1.90) (1.11) (0.92) (0.88)
-------- -------- -------- -------- -------- -------- --------
Total distributions ..................... $ (0.20) $ (0.20) $ (3.12) $ (2.28) $ (1.57) $ (1.33) $ (1.33)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period ................ $ 45.26 $ 49.64 $ 44.66 $ 44.66 $ 31.30 $ 28.07 $ 21.77
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN .................................. 1.8% 11.6% 7.0% 50.1% 17.2% 35.2% (3.9)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) ....... $389,783 $462,935 $415,129 $414,576 $270,781 $267,181 $205,904
Ratio of expenses to average net assets ..... 0.81%* 0.79%* 0.78% 0.82% 0.87% 0.94% 1.01%
Ratio of net investment income to
average net assets ........................ 0.86%* 0.86%* 0.88% 1.04% 1.58% 1.60% 1.93%
PORTFOLIO TURNOVER RATE ....................... 4% 1% 6% 6% 3% 5% 2%
* 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, 1999, 8,611,785 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, 1999 DECEMBER 31, 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Sold ............... 598,549 $ 25,977,058 1,893,592 $ 88,413,021
Issued to shareholders
in reinvestment of
distributions from:
Net investment
income ....... 26,416 1,191,861 53,174 2,523,968
Realized gain on
investment
transactions . -- -- 420,247 18,742,997
--------- ------------ --------- ------------
624,965 27,168,919 2,367,013 109,679,986
Repurchased ........ (1,308,553) (57,166,400) (2,354,844) (109,101,611)
--------- ------------ --------- ------------
Net increase
(decrease) (683,588) $(29,997,481) 12,169 $ 578,375
========= ============ ========= ============
(3) SOURCES OF NET ASSETS -- At June 30, 1999, net assets consisted of:
Capital paid-in .......................................... $ 82,361,486
Accumulated distributions in excess of net investment income (383,458)
Accumulated undistributed net realized gain on investment
transactions ......................................... 26,376,185
Unrealized appreciation in value of investments .......... 281,428,438
------------
Net assets applicable to outstanding capital stock $389,782,651
============
(4) INVESTMENT SECURITY TRANSACTIONS -- Other than U.S. Government obligations
and certificates of deposit, purchases and sales of investment securities
aggregated $14,002,008 and $41,591,188, respectively, during the six months
ended June 30, 1999. At June 30, 1999, the cost of investments for federal tax
purposes was $108,370,744. Net unrealized appreciation for all securities at
that date was $281,428,438. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost of $282,631,351 and aggregate gross unrealized depreciation for
all securities in which there was an excess tax cost over market value of
$1,202,913.
(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, 1999, the fee amounted to $1,292,389. 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, 1999, the
related statement of operations for the six months then ended, the statements of
changes in net assets for the six months then ended and for the year ended
December 31, 1998, and the financial highlights for the six months ended June
30, 1999 and 1998 and for each of the years in the five-year period ending
December 31, 1998. 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, 1999 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating 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, 1999, 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 20, 1999
<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 COMMITTEE
Allan W. Fulkerson, Chairman
William W. Dyer, Jr.
John R. Casey
Alexander L. Thorndike
INVESTMENT ADVISER
Century Capital Management, Inc.
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, 1999, were as follows: (i) one year = -2.41%, (ii) five
years = 21.33%, (iii) ten years = 16.21%. 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.
