<PAGE>
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CENTURY
SHARES
TRUST
SEVENTY-FIRST ANNUAL REPORT
DECEMBER 31, 1998
A GROWTH AND INCOME FUND
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<PAGE>
CENTURY SHARES TRUST
One Liberty Square
Boston, Massachusetts 02109
617-482-3060 800-321-1928
SHAREHOLDER HOTLINE
800-303-1928
OFFICERS AND TRUSTEES
Allan W. Fulkerson, Trustee and Chairman
William O. Bailey, Trustee
John E. Beard, Trustee
William W. Dyer, Jr., Trustee
Ernest E. Monrad, Trustee
Michael J. Poulos, Trustee
Jerry S. Rosenbloom, Trustee
Richard F. Cook, Jr., Secretary
INVESTMENT ADVISER
Century Capital Management, Inc.
AUDITORS
Deloitte & Touche LLP
CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT
Boston Financial Data Services, Inc.
LEGAL COUNSEL
Palmer & Dodge LLP
<PAGE>
DEAR FELLOW SHAREHOLDERS:
1998 was extraordinary. After three years of strongly rising stock markets,
few long-time observers would have been surprised by heightened price
volatility. Reasons are plentiful - the Asian crisis, the failure of major
Japanese financial institutions, collapse in Russia and related, the collapse
of a highly leveraged major hedge fund, and finally, the threat of a
Presidential impeachment. Interestingly, none of these events actually
affected the popular stock market averages more than briefly, with the
"benchmark" Standard & Poor's Index of 500 stocks ending the year with a
positive total return of 28.6%.
Looking beneath the average return, however, reveals a dichotomy in market
performance where a relatively few stocks, mostly large cap technology-
related, were responsible for much of the increase. In a pattern reminiscent
of 1987 and 1972, most common stocks, even of outstanding companies, showed
modest, if any, improvement. In this environment, the Trust's total return was
7.0%, a reasonable year following the extraordinary 50.1% gain in 1997.
Importantly, most of the companies in which we are invested had very
successful years, with estimates indicating a median earnings increase of
13.6%, in line with historical results of the past twenty-two years. With a
weighted average P/E of 17x 1999 estimated earnings, a deep discount to the
S&P 500's 28x, and superior earnings growth prospects as well, we believe our
portfolio of companies is solidly positioned even in this volatile stock
market environment.
One year ago, Bill Dyer succeeded me as Managing Trustee of Century Shares
Trust, while I continue my overall responsibilities as Chairman. We have
worked very closely over the years and are now focussed on continuing to build
for the future. In that connection, it gives me great pleasure to announce
that two highly knowledgeable investment analysts have recently joined Century
Capital Management, Inc., the Trust's investment adviser. We are very pleased
that John R. Casey and Alexander L. Thorndike have become members of the firm
as Managing Directors in our Public Securities Group. The four of us comprise
the Investment Committee for managing the Trust's investments on a day-to-day
basis. On page 3 of this report, you will find a description of their
impressive backgrounds.
On pages 4 through 7 of the report, we offer a different look at portfolio
companies. With the blurring of distinctions in financial services and as
structural barriers erode, many seemingly dissimilar enterprises have much in
common. We have often said that the insurance industry is not monolithic. As
you will see there are enormous differences among companies.
Finally, I want to express caution about the short term reflecting all-time
highs in the stock market mixed with the world's current uncertainties, but
optimism about the longer term. Investment-wise, the Trust is positioned in
well-run companies, and the Trust's adviser has been strengthened measurably.
Over the next few years, I believe we will be able to introduce new products
looking to serve our loyal shareholders even better than we have in the past.
On behalf of the all the Trustees, thank you for your continuing support. We
look to the future with optimism.
Respectfully submitted,
/s/ Allan W. Fulkerson
Allan W. Fulkerson
Chairman
February 10, 1999
<PAGE>
FELLOW SHAREHOLDERS:
The investment objective of Century Shares Trust is to seek long-term growth
of principal and income. Our goal is to provide competitive total returns over
extended periods of time. We believe that our focused investment philosophy
will continue to be a large contributor to our long-term success. Recent stock
market volatility highlights the increasing importance that risk assessment
and management play in all aspects of the global economy. We have chosen to
concentrate our investments in risk management businesses because we believe
that specialization in this attractive and complex area can produce superior
long-term results. Furthermore, we believe the concept of risk management is
expanding beyond traditional insurance and financial services.
Insurance is purchased by individuals and organizations in order to manage
financial risks of all kinds. The sum of such coverages reflects the total
value of an entire economy. Yet remarkably, the economics of the insurance
business are not widely understood, and securities prices of many excellent
companies fail to reflect intrinsic value. We are convinced that selecting
from among the very best enterprises in such a huge global industry provides a
much better chance to outperform our growth and income competitors than by
investing in more widely followed and efficiently priced stocks.
Century Shares Trust is well positioned to benefit from the expanding needs
for risk management products and services, not only within the converging
insurance and financial services sectors, but also in other industries such as
health care and business services. It seems likely that the evolution of the
risk management and financial services industry will continue to provide
investment opportunities outside the traditional mold, which we intend to
exploit where appropriate.
Our philosophy is to select a diversified group of the best managed companies,
stay with managements who perform, build value for shareholders without
incurring needless costs, and harvest capital profits periodically.
Implementing this view, our strategy has been to seek businesses capable of
growing book value per share 15% per year compounded over rolling five-year
periods. We also value companies that have the ability and willingness to
increase dividends regularly. We try to buy shares of such enterprises when
they are out of favor or their public market valuation is below that of
securities generally. The combination of superior profitability and superior
value historically has enabled the Trust to provide long-term shareholders
with returns which have been more favorable than many other investment
strategies.
Our investment process is comparatively simple. Each member of the Public
Securities Group of Century Capital Management, Inc., the Trust's adviser, is
an experienced securities analyst. Each follows a number of companies of
interest to the group and there is a good deal of overlap in company coverage
by design. Each also serves on the Investment Committee for Century Shares
Trust. Ideas for new investments or for deletions are discussed at regular
meetings, and general courses of action decided. Securities purchases and
sales are effected in line with the committee's general strategy as well as
the need to rebalance the portfolio to reflect market price changes and the
ebb and flow of funds created by sales and redemptions of the Trust's shares.
As Allan Fulkerson mentioned in his letter, we are fortunate to have added two
talented members to the Public Securities Group and the Investment Committee,
and expect that they will be instrumental in helping to lead Century into a
future which seems likely to be full of both challenges and opportunities.
Background information on each member of the Investment Committee is provided
on the next page.
Sincerely,
/s/ William W. Dyer, Jr., Managing
William W. Dyer, Jr., Managing
Trustee
<PAGE>
INVESTMENT COMMITTEE MEMBERS
ALLAN W. FULKERSON, Chairman of Century Shares Trust, is President and Chief
Executive Officer of Century Capital Management, Inc. Mr. Fulkerson joined the
Trust in 1966 and became Chairman and Managing Trustee in 1976. Over the
years, Mr. Fulkerson has held directorships in a wide range of insurance and
related risk management enterprises. Currently, his directorships include HCC
Insurance Holdings, Inc., Mutual Risk Management Ltd., and Wellington
Underwriting plc. A graduate of Williams College, he is a member of the
Association of Insurance and Financial Analysts, the Boston Security Analysts
Society and the Association for Investment Management and Research.
WILLIAM W. DYER, JR., Managing Trustee of Century Shares Trust, has been
associated with the Trust since 1976. He is the Director of the Public
Securities Group of Century Capital Management, Inc. and serves on the boards
of several insurance and insurance-related companies, including CORE Insurance
Holdings, Inc. and Sen-Tech International Holdings, Inc. Mr. Dyer joined the
Trust after twenty years with the New York Stock Exchange firm of H.C.
Wainwright & Co., where he was the institutional insurance industry analyst. A
graduate of Brown University, Mr. Dyer is a member of the Boston Security
Analysts Society, the Association for Investment Management and Research, and
the Association of Insurance and Financial Analysts.
JOHN R. CASEY, Managing Director of Century Capital Management, Inc., joined
the company and the Investment Committee in February 1999. Mr. Casey formerly
was a Partner and Senior Analyst at Dowling & Partners Securities, LLC, an
insurance investment and brokerage boutique, where he specialized in the
property-casualty industry. Prior to that, he served in a similar capacity as
Senior Analyst at Northington Partners, Inc. A graduate of the University of
Connecticut, Mr. Casey also received his MA in Economics, awarded with
distinction, from the same institution, and is a member of the Association of
Insurance and Financial Analysts.
ALEXANDER L. THORNDIKE is a Managing Director of Century Capital Management,
Inc. and an Investment Committee member. Prior to joining Century, Mr.
Thorndike was a health care securities analyst at William Blair and Company,
LLC (a NYSE member firm), where he formed their health services research
group. He worked as an investment analyst and portfolio manager for CC&F Asset
Management before joining William Blair. Mr. Thorndike is a graduate of
Harvard University and the Kellogg Graduate School of Management at
Northwestern University. He is a member of several industry associations.
<PAGE>
CENTURY SHARES TRUST PORTFOLIO COMPANIES
DIVERSIFICATION OF PRODUCTS, DISTRIBUTION AND TERRITORY
One of the primary goals of a diversified investment strategy is to reduce the
impact of fluctuations that take place in different business segments. When
effective, the overall portfolio attains relatively stable progression as one
geographic area or business category enjoys unusually favorable times when
another may be suffering from short-term difficulties.
While concentrating its investments in equities of businesses which provide
insurance and other financial services, the Trust's holdings are well
diversified whether viewed geographically, by product-mix, or by marketing
methods. In the discussion below, each issue in the portfolio has been
assigned to a single category which depicts one of its major characteristics.
While several are diverse enough internally to be placed in more than one
category, the point is to illustrate the differences among companies that tend
to be overlooked by many investors.
Increasingly, the companies in which we invest are becoming more global and
distributing a wider range of products through more sophisticated and diverse
distribution channels. The traditional independent agent is not becoming
extinct as predicted by some, but the survivors, while still independent, are
not likely to be tradition-bound. Meanwhile, other marketing methods, such as
affinity groups and direct selling, are proving to be both volume and cost
effective.
PROPRIETARY PRODUCTS AND DISTRIBUTION
Allstate and Horace Mann specialize in offering property-casualty, life and
financial products to individuals through company-owned marketing
organizations. Allstate is very broadly based, while Horace Mann concentrates
on serving persons in public education. In 1998, Berkshire Hathaway (BRK)
acquired General Re, the largest U.S. reinsurer that typically deals directly
with its clients, complementing GEICO, BRK's highly successful direct writing
auto insurer. MBIA, which helped create an industry - the financial guaranty
business - has grown to be the most important player in the U.S. market and is
leading the development of the business in Europe. Bank One and Wachovia,
among the most profitable of U.S. banks over the years, have used their
strengths to diversify both geographically and into fee-based businesses.
While often viewed as a traditional life insurer, Torchmark has built an
enormous and efficient direct response marketing capability. Waddell & Reed,
spun off from Torchmark, markets life insurance and other financial services
products through a company owned sales force and manages more than $25 billion
in mutual fund assets.
GLOBAL FINANCIAL SERVICES
Originally formed to offer cancer insurance in the United States, AFLAC forged
a hugely profitable business in Japan, and is now establishing a leading
position in U.S. workplace marketed insurance. AIG, a dominant force in
international commercial property-casualty insurance, and life insurance in
Asia, recently acquired Sunamerica Corp., a leading U.S. annuity writer. In
recent years, AON and Marsh & McLennan have competed to be the world's number
one insurance broker. In addition, Marsh owns Putnam Management Corp., one of
the biggest U.S. money management organizations. J.P. Morgan, which long has
held a special place in global banking, is making important headway in its
drive toward the top of investment banking ranks.
<PAGE>
DIVERSIFICATION OF OPERATING RESULTS
Overall, 1998 was a solid operating year with an estimated median earnings
increase of 13.6% over 1997 for Century Shares Trust portfolio companies.
Despite an unfavorable swing in weather-related claims and inadequate pricing
in commercial property-casualty lines, two-thirds of holdings are expected to
post increased profits for the year based on published consensus estimates of
analysts covering the companies. Meanwhile, 24 of 26 declared increased cash
dividends during 1998.
Preliminary consensus estimates for 1999 are for a median increase in earnings
per share of 17.0% for the Trust's portfolio companies. While, the recovery
anticipated in the commercial property casualty sector may take longer than
generally expected, we believe that operating results for the overall
portfolio will be favorable, and that most holdings will increase dividends
again.
<TABLE>
<CAPTION>
ANNUAL GROWTH RATES PER SHARES
---------------------------------------------
1998 1998 1993-1998E
ESTIMATED CASH BOOK VALUE
CATEGORY/COMPANY AND % OF TRUST PORTFOLIO EARNINGS DIVIDENDS PLUS DIVIDENDS
- ----------------------------------------- -------- --------- --------------
<S> <C> <C> <C>
PROPRIETARY PRODUCTS AND DISTRIBUTION (25.2%)
The Allstate Corp. (2.7%) 10.8 % 12.5 % 16.0 %
Bank One Corp. (1.4%) 31.0A 0.0 11.4
Berkshire Hathaway Inc. (5.9%) 2.7 0.0 25.9
Horace Mann Educators Corp. (0.8%) 0.0A 17.7 12.2
MBIA Inc. (6.2%) 13.6A 2.6 17.6
Torchmark Corp. (4.5%) 18.0A* 5.1* 17.3
Wachovia Corp. (2.8%) 12.4A 10.7 15.5
Waddell & Reed Financial, Inc. (0.9%) 18.8A* N/A N/A
GLOBAL FINANCIAL SERVICES (21.9%)
AFLAC Inc. (2.1%) 17.3A% 13.5 % 29.1 %
American International Group, Inc. (8.4%) 13.3 12.1 13.9
AON Corp. (5.4%) 34.1A 7.8 14.9
J.P. Morgan & Co., Inc. (2.6%) -27.2A 7.0 9.6
Marsh & McLennan Companies, Inc. (3.4%) 32.0 17.9 32.0
A. Indicates change based on actual reported 1998 earnings.
* Adjusted for the spin-off of Waddell & Reed Financial from its parent Torchmark Corp.
</TABLE>
<PAGE>
CENTURY SHARES TRUST PORTFOLIO COMPANIES
DIVERSIFICATION OF PRODUCTS, DISTRIBUTION AND TERRITORY
LIFE, HEALTH AND ANNUITY BASED FINANCIAL PRODUCTS
American General and ReliaStar have grown internally and through acquisition
into large and very diverse financial services companies offering life
insurance, retirement products and other services through numerous
distribution channels. American Heritage's focus on workplace marketing has
helped maintain its record of more than twenty years of continuous growth in
revenue and profit. Protective has achieved outstanding profitability through
aggressive exploitation of opportunities, both internal and through
acquisitions. In 1998, Provident, the largest writer of individual disability
insurance, and UNUM, the leading group disability carrier agreed to merge. The
combination of these two holdings would give the Trust a sizeable investment
in an entity with outstanding long-term growth potential.
SPECIALTY AUTOMOBILE INSURANCE
Once noted mostly for its expertise in non-standard auto insurance sold
through agents, Progressive is expanding rapidly in standard auto through both
agents and direct marketing. Mercury General, extremely successful selling
auto coverage through independent agents in its home state of California, is
striving to continue that record with its recently opened operations in Texas
and Florida.
REGIONAL AGENCY BASED PROPERTY-CASUALTY INSURERS
Cincinnati Financial, founded by independent agents in 1968, is noted for its
continuing strong agency relationships, favorable underwriting results, and
extremely profitable total return investment program. Ohio Casualty, which has
increased shareholder dividends in each of the last fifty-three years, is in
the midst of an ambitious strategic plan to improve its competitive position
and utilization of resources. By acquiring American States Financial Corp. in
late 1997, Safeco doubled its agency force, deepened its penetration of the
Midwest, and added a leading writer of small commercial accounts to its own
very profitable, predominantly West Coast book of agent-produced personal
lines.
COMMERCIAL PROPERTY-CASUALTY INSURANCE SPECIALISTS
Chubb's specialty products helped insulate it somewhat from unfavorable
weather-related experience and competitive deterioration in standard
commercial lines which hit many property-casualty insurers in 1998. HSB,
dominant in the niche of providing insurance and related engineering services
for all kinds of capital equipment, operates within its own unique cycle. St
Paul's Midwest orientation exposed it to the brunt of 1998 bad weather, which,
combined with the results of recently acquired USF&G and commercial lines
malaise, caused earnings to fall sharply from 1997's record level.
<PAGE>
DIVERSIFICATION OF OPERATING RESULTS
<TABLE>
<CAPTION>
ANNUAL GROWTH RATES PER SHARES
---------------------------------------------
1998 1998 1993-1998E
ESTIMATED CASH BOOK VALUE
CATEGORY/COMPANY AND % OF TRUST PORTFOLIO EARNINGS DIVIDENDS PLUS DIVIDENDS
- ----------------------------------------- -------- --------- --------------
<S> <C> <C> <C>
LIFE, HEALTH AND ANNUITY BASED PRODUCTS (16.0%)
American General Corp. (3.6%) 16.0A% 7.1 % 13.1 %
American Heritage Life Investment Corp. (2.7%) 14.3A 6.3 13.4
Protective Life Corp. (3.3%) 13.2 10.3 20.4
Provident Companies, Inc. (2.3%) 23.2 37.9 15.3
Reliastar Financial Corp. (1.1%) 11.9A 17.4 17.3
UNUM Corp. (3.0%) 16.3 3.5 11.0
SPECIALTY AUTOMOBILE INSURANCE (14.1%)
Mercury General Corp. (3.8%) 18.1 % 20.7 % 20.4 %
The Progressive Corp. (10.3%) 34.8A 4.2 24.1
REGIONAL AGENCY BASED P/C INSURERS (13.7%)
Cincinnati Financial Corp. (6.7%) -22.7A% 12.2 % 28.0 %
Ohio Casualty Corp. (2.8%) -21.4A 4.8 17.5
SAFECO Corp. (4.2%) -23.9A 9.6 17.1
COMMERCIAL P/C INSURANCE SPECIALISTS (9.1%)
The Chubb Corp. (4.2%) - 5.0A% 6.9 % 11.5 %
HSB Group, Inc. (0.7%) 16.1A 5.1 20.6
St. Paul Companies, Inc. (4.2%) -45.4A 6.4 13.8
MEDIAN OF ALL PORTFOLIO EQUITIES 13.6% 7.5% 16.6%
A. Indicates change based on actual reported 1998 earnings.
</TABLE>
<PAGE>
INVESTMENT RESULTS
As noted in the Century Shares Trust prospectus and repeated often in
shareholder reports, our investment objective is long-term growth of principal
and income. Thus, we focus on long-term results whether evaluating the
companies in which we invest or the investment performance of the Trust.
Below we show details of an investment made in the Trust on January 1, 1976,
the beginning of the year in which the senior members of current management
assumed accountability. Data are shown for each year in order to highlight how
variable and often misleading short-term equity results can be. This year, we
are showing the Trust's performance in comparison with both the Standard &
Poor's 500 Stock Index and the Lipper Growth and Income Fund Index, a
performance measurement covering mutual funds that have investment objectives
similar to the Trust. For investors interested in results for other periods,
including since inception in March, 1928, please contact the Shareholder
Services Department of the Trust.
<TABLE>
TWENTY-THREE YEAR INVESTMENT RECORD PER SHARE
<CAPTION>
VALUE OF ANNUAL TOTAL RETURN
YEAR NUMBER OF VALUE OF REINVESTED VALUE OF TOTAL ------------------------------------
ENDED SHARES ORIGINAL CAPITAL GAIN REINVESTED VALUE OF LIPPER
12/31 OWNED SHARE + DISTRIBUTIONS + DIVIDENDS = INVESTMENT CST S&P 500 G&I
- ------------- ------------- ------------ ----------------- -------------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1975 1.000 $ 9.07 $ 9.07
1976 1.029 12.05 $ 0.00 $ 0.35 12.40 36.7% 23.9% 25.7%
1977 1.087 11.17 0.30 0.67 12.14 -2.1 -7.2 -3.6
1978 1.191 11.20 1.00 1.14 13.34 9.9 6.6 8.0
1979 1.336 12.15 2.18 1.90 16.23 21.7 18.6 23.9
1980 1.526 11.32 3.35 2.61 17.28 6.4 32.5 28.3
1981 1.706 12.17 4.82 3.77 20.76 20.2 -4.9 -1.4
1982 1.881 12.25 5.73 5.06 23.04 11.0 21.6 24.2
1983 2.047 13.62 7.35 6.91 27.88 21.0 22.6 22.8
1984 2.296 14.02 9.63 8.55 32.20 15.5 6.3 4.3
1985 2.534 18.22 15.43 12.52 46.17 43.4 31.7 28.6
1986 2.765 18.30 18.47 13.83 50.60 9.6 18.7 17.6
1987 3.154 14.76 19.41 12.38 46.55 -8.0 5.3 2.6
1988 3.683 14.62 25.43 13.80 53.85 15.7 16.6 18.4
1989 3.927 19.42 36.53 20.32 76.27 41.6 31.7 23.7
1990 4.179 16.82 33.99 19.47 70.28 -7.8 -3.1 -6.0
1991 4.395 21.03 44.95 26.45 92.43 31.5 30.5 27.8
1992 4.571 25.68 57.40 34.30 117.38 27.0 7.6 9.6
1993 4.865 24.04 58.85 34.07 116.96 -0.4 10.1 14.6
1994 5.163 21.77 57.66 32.97 112.40 -3.9 1.3 -0.4
1995 5.415 28.07 79.17 44.76 152.00 35.2 37.6 31.1
1996 5.690 31.30 94.30 52.48 178.08 17.2 23.0 20.7
1997 5.987 44.66 145.52 77.18 267.36 50.1 33.4 26.9
1998 6.405 44.66 161.96 79.44 286.06 7.0 28.6 13.6
23-year annualized total return 16.2% 16.3% 15.1%
</TABLE>
The dollar amount of shares accepted at the time reinvestment occurred was
$81.14 for capital gains and $34.30 for income dividends. If capital gains
distributions and dividends had been withdrawn in cash, the total dollar
amount received would have been $21.78 and $11.13, 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.
<PAGE>
PERFORMANCE OF A $10,000 INVESTMENT
The following charts compare the performance over the past ten years of a
hypothetical $10,000 investment in Century Shares Trust, the S&P 500 Index,
and the Lipper Growth and Income Fund Index. The S&P 500 Index is a well-known
gauge of how large-capitalization U.S. equities are doing. On the other hand,
its results are not adjusted for the costs to manage and trade a portfolio of
securities so that it is not directly comparable to a real-life investor's
performance. The Lipper Growth & Income Fund Index traces the results of 30
large mutual funds which have as objectives growth of capital and income as
does the Trust. While their strategies and portfolios differ from each other
and from the Trust, they are real managed investment accounts with all the
associated requirements and costs.
Lehman
Century Century Growth and
Shares S&P 500 Shares Income Fund
Trust Index Trust Index
1988 $10,000 $10,000 1988 $10,000 $10,000
14,163 13,169 14,163 12,373
1990 13,052 12,760 1990 13,052 11,631
17,165 16,648 17,165 14,860
1992 21,797 17,917 1992 21,797 16,291
21,719 19,723 21,719 18,673
1994 20,873 19,984 1994 20,873 18,595
28,227 27,494 28,227 24,386
1996 33,072 33,806 1996 33,072 29,428
49,651 45,084 49,651 37,337
1998 53,125 57,970 1998 53,125 42,408
Century Shares Trust's investment results for various periods ended December
31, 1998 are shown below:
AVERAGE ANNUAL
TOTAL RETURN
1 Year 7.00%
5 Years 19.59%
10 Years 18.18%
Past performance should not be considered a representation of the income or
capital gain or loss which may be realized from an investment in the Trust
today. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Achievement of objectives cannot be assured;
however, the Trust's management seeks to reduce risks and to provide rewarding
results through diversification and careful supervision of investments. The
illustrations throughout this report do not take into account income taxes
that might have been payable by a shareholder on distributions received or
reinvested, or upon sale of the investment.
<PAGE>
YEAR 2000 MATTERS
With this last Annual Report written in the twentieth century, we thought it
appropriate to provide information to our shareholders regarding "Year 2000"
matters, and how the Trust is addressing certain issues. To restate what has
already received considerable publicity, "Year 2000" or "Y2K" has come to
refer to the situation resulting from computer programming of date-specific
information which provided space only for two digits, rather than four, to
represent a year, e.g., "00" rather than "2000." Thus, programs and date-
sensitive embedded chips may not be able to distinguish January 1, 2000 from
January 1, 1900 (or 2100 for that matter). The publicity over the Y2K issue
reflects concern that this may cause widespread failure of computers and the
systems that depend on them.
The Trust's investment adviser has undertaken a complete review of the
equipment and software used by the adviser to provide services to the Trust.
Certain equipment and software upgrades intended to reduce any Y2K effects
have already been purchased and installed by the adviser. The adviser
continues to test these systems internally and in conjunction with external
service providers. A major portion of the Trust's shareholder servicing and
accounting functions are performed by State Street Bank & Trust and, its
affiliate, Boston Financial Data Services, and the Trust and the adviser have
been periodically advised by those companies (as well as other external
vendors) that they are taking appropriate actions to address any of their Y2K
issues which might affect the Trust. As a result, the adviser believes that
the services it provides the Trust will not be materially impacted by Y2K
issues with its computer systems or those of its vendors. However, failure by
any of these parties to address all Y2K issues affecting these systems could
disrupt the Trust's functions, such as calculations of net asset value,
purchases and redemptions, or shareholder reporting, which could have a
material adverse effect on the Trust and its shareholders.
Finally, the adviser is assessing the status of Y2K compliance as reported by
portfolio companies owned by the Trust, to determine the degree to which their
operations might be impacted by Y2K issues. Such potential impact may include,
on one hand, substantial expenditures to correct Y2K problems and, on the
other, operational failures and related business costs (including litigation
in which insurers may be involved) if their Y2K problems or those of their
insured are not corrected. This review is necessarily limited by the varied
quality of Y2K reporting by companies. In each case, the adviser will use its
best judgment as to the possible consequences of an issuer's noncompliance in
light of the issuer's business and weighting within the Trust's portfolio.
However, despite these efforts, the Year 2000 issue may have a material
adverse effect on the companies held in the portfolio and, in any event, may
materially affect the securities markets and the economy generally.
INVESTOR INFORMATION
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 column as "CNT SHS" or "Century Sh." You may also call the
shareholder hotline, (800) 303-1928, for the daily share price.
Q. How can I find the Net Asset Value of the Trust on the Internet?
A. Many web sites, including those of most securities broker-dealers, offer a
price look-up feature. Price information can be accessed by entering the
ticker symbol of the security or mutual fund. The ticker symbol for the Trust
is CENSX.
Q. How can I request information about the Trust on the Internet?
A. If you would like to request information about the Trust using e-mail,
please send your request to [email protected]
<PAGE>
PORTFOLIO OF INVESTMENTS -- December 31, 1998
COMMON STOCKS: INSURANCE COMPANIES -- 91.5%
SHARES VALUE
200,000 AFLAC Inc. ........................................ $ 8,800,000
290,000 The Allstate Corp. ................................ 11,201,250
190,000 American General Corp. ............................ 14,820,000
450,000 American Heritage Life Investment Corp. ........... 10,996,875
360,000 American International Group, Inc. ................ 34,785,000
400,000 AON Corp. ......................................... 22,150,000
350 Berkshire Hathaway Inc. CL A ...................... 24,500,000
265,000 The Chubb Corp. ................................... 17,191,875
750,000 Cincinnati Financial Corp. ........................ 27,468,750
75,000 HSB Group, Inc. ................................... 3,079,688
110,000 Horace Mann Educators Corp. ....................... 3,135,000
240,000 Marsh & McLennan Companies, Inc. .................. 14,025,000
390,000 MBIA Inc. ......................................... 25,569,375
360,000 Mercury General Corp. ............................. 15,772,500
285,000 Ohio Casualty Corp. ............................... 11,720,625
250,000 The Progressive Corp. ............................. 42,343,750
340,000 Protective Life Corp. ............................. 13,536,250
230,000 Provident Companies, Inc. ......................... 9,545,000
100,000 Reliastar Financial Corp. ......................... 4,612,500
400,000 SAFECO Corp. ...................................... 17,175,000
500,000 St. Paul Companies, Inc. .......................... 17,375,000
525,000 Torchmark Corp. ................................... 18,539,063
210,000 UNUM Corp. ........................................ 12,258,750
29,872 Waddell & Reed Financial, Inc. CL A ............... 707,592
128,572 Waddell & Reed Financial, Inc. CL B ............... 2,989,299
------------
384,298,142
------------
COMMON STOCKS: BANKING INSTITUTIONS -- 6.5%
110,000 Bank One Corp. .................................... 5,616,875
100,000 J.P. Morgan & Co., Inc. ........................... 10,506,250
130,000 Wachovia Corp. .................................... 11,366,875
------------
27,490,000
------------
(Identified cost, $108,618,500) .............................. 411,788,142
------------
ASH EQUIVALENTS -- 2.0%
8,405,000 State Street Bank and Trust Eurodollar Time Deposit,
at cost approximating value, maturity 01/04/99 .. 8,405,000
------------
TOTAL INVESTMENTS -- 100% (Identified cost, $117,023,500) ...... $420,193,142
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES -- December 31, 1998
- -------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (Identified
cost, $117,023,500) ........................................ $420,193,142
Dividends and interest receivable ............................ 581,342
Receivable for Trust shares sold ............................. 264,554
------------
Total assets ......................................... 421,039,038
LIABILITIES:
Distributions payable ......................... $5,420,267
Payable for Trust shares repurchased .......... 201,264
Accrued expenses and other liabilities ........ 288,572
----------
Total liabilities .................................... 5,910,103
------------
NET ASSETS (Note 3) .......................................... $415,128,935
============
Per share net asset value, offering price and redemption price
($415,128,935 / 9,295,373 shares of $1.00 par value capital
stock outstanding) (Note 2) ............................... $44.66
======
STATEMENT OF OPERATIONS -- Year Ended December 31, 1998
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends ................................................ $ 6,233,563
Interest ................................................. 727,838
-----------
Total income ......................................... 6,961,401
Expenses:
Investment adviser fee (Note 5) ............. $2,776,322
Non-interested trustees' remuneration ....... 85,001
Transfer agent .............................. 180,851
Custodian ................................... 65,545
Insurance ................................... 19,821
Professional fees ........................... 52,990
Registration costs .......................... 61,935
Printing and other .......................... 37,709
Total expenses ....................................... 3,280,174
-----------
Net investment income ............................ 3,681,227
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions ............. 24,282,825
Decrease in unrealized appreciation on
investments .............................................. (176,974)
-----------
Net realized and unrealized gain on investments .. 24,105,851
-----------
Net increase in net assets resulting from operations ......... $27,787,078
===========
See notes to financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income .................................. $ 3,681,227 $ 3,432,283
Net realized gain on investment transactions ........... 24,282,825 17,070,025
Increase in net unrealized appreciation of investments . (176,974) 115,223,568
------------ ------------
Net increase in net assets resulting from operations ... 27,787,078 135,725,876
Net equalization (Note 1C) ............................... (41,282) 53,124
Distributions to shareholders from:
Net investment income .................................. (3,609,921) (3,370,609)
Realized gain from investment transactions ............. (24,160,837) (16,991,380)
Trust share transactions -- net (Note 2) ................. 578,375 28,377,066
------------ ------------
Total increase ............................... 553,413 143,794,077
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 $240,128 and
$270,152, respectively) .............................. $415,128,935 $414,575,522
============ ============
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $44.66 $31.30 $28.07 $21.77 $24.04
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........... $ 0.41 $ 0.39 $ 0.46 $ 0.41 $ 0.44
Net realized and unrealized gain
(loss) on investments ......... 2.71 15.25 4.34 7.22 (1.38)
------ ------ ------ ------ ------
Total income from investment
operations ................ $ 3.12 $15.64 $ 4.80 $ 7.63 $(0.94)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ........... $(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 ......... $(3.12) $(2.28) $(1.57) $(1.33) $(1.33)
------ ------ ------ ------ ------
NET ASSET VALUE, end of year ...... $44.66 $44.66 $31.30 $28.07 $21.77
====== ====== ====== ====== ======
TOTAL RETURN ...................... 7.0% 50.1% 17.2% 35.2% (3.9)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000
omitted) ...................... $415,129 $414,576 $270,781 $267,181 $205,904
Ratio of expenses to average net
assets ........................ 0.78% 0.82% 0.87% 0.94% 1.01%
Ratio of net investment income to
average net assets ............ 0.88% 1.04% 1.58% 1.60% 1.93%
PORTFOLIO TURNOVER RATE ........... 6% 6% 3% 5% 2%
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES -- The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of
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 December 31, 1998, 9,295,373 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, 1998 DECEMBER 31, 1997
------------------------------------------- ------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold ............................ 1,893,592 $ 88,413,021 2,104,952 $ 83,150,199
Issued to shareholders in
reinvestment of distributions
from:
Net investment income ......... 53,174 2,523,968 60,077 2,472,550
Realized gain on investment
transactions ................ 420,247 18,742,997 298,078 13,237,627
---------- ------------- ---------- ------------
2,367,013 109,679,986 2,463,107 98,860,376
Repurchased ..................... (2,354,844) (109,101,611) (1,832,014) (70,483,310)
---------- ------------- ---------- ------------
Net increase ................ 12,169 $ 578,375 631,093 $ 28,377,066
========== ============= ========== ============
(3) SOURCES OF NET ASSETS -- At December 31, 1998, net assets consisted of:
Capital paid-in ............................................................................... $112,358,967
Accumulated distributions in excess of net investment income .................................. (311,434)
Accumulated undistributed net realized gain on investments transactions ....................... (88,240)
Unrealized appreciation in value of investments ............................................... 303,169,642
------------
Net assets applicable to outstanding capital stock ........................................ $415,128,935
============
</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 realized gains. The effect of the SOP for the year ended
December 31, 1998 was to increase distributions in excess of net investment
income by $71,306, increase accumulated distributions in excess of net realized
gains by $121,988, and increase capital paid-in by $193,294. 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 $23,306,579 and $32,076,369, respectively, during the
year ended December 31, 1998. At December 31, 1998, the cost of investments
for federal tax purposes was $117,023,500. Net unrealized appreciation for all
securities at that date was $303,169,642. 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 year ended December 31, 1998, the fee amounted to $2,776,322. 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 December
31, 1998, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended December 31, 1998 and
1997, and the financial highlights 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 at December 31, 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 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, 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
February 5, 1999
<PAGE>
FEDERAL INCOME TAX INFORMATION
The federal tax status of distributions per share in 1998 is as follows:
TAXABLE AS
TAXABLE AS CAPITAL GAIN
DATE PAID DIVIDENDS (SEE NOTE BELOW)
- --------- --------- ----------------
June 24, 1998 ..................... $.20
December 22, 1998 ................. .20
December 30, 1998 ................. $2.72
---- -----
Total ......................... $.40 $2.72
==== =====
An amount equal to $.40 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 $2.72 per share is
taxable in 1998 as a long-term capital gain, whether received in cash or
shares and irrespective of the period shareholders may have held shares of the
Trust. Please consult your tax advisor with questions you may have regarding
the application of this information to your tax return.
----------------
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 TAX COST AMOUNT OF TAX COST
CAPITAL BASIS OF CAPITAL BASIS OF
GAIN SHARES GAIN SHARES
DISTRIBUTIONS ISSUED DISTRIBUTIONS ISSUED
------------- ------ ------------- ------
1952 $.04 1/3 $ 5.25 1/3 1976 -- --
1953 -- -- 1977 $.30 $11.62
1954 .08 1/3 5.62 1978 .60 10.41
1955 .20 2/3 7.91 2/3 1979 .79 10.40
1956 .27 1/3 8.29 1/3 1980 .96 11.06
1957 .26 7.32 2/3 1981 .70 10.64
1958 .21 6.85 1/3 1982 .49 11.70
1959 .16 1/3 9.35 2/3 1983 .45 11.71
1960 .26 9.34 1984 .91 12.69
1961 .41 9.58 1985 .91 13.04
1962 .46 13.35 1986(1-2-86) .71 17.43
1963 .15 13.20 1986(12-30-86) .40 18.25
1964 .23 15.49 1987 1.61 14.75
1965 .30 14.89 1988 1.90 14.58
1966 .37 13.67 1989 .71 18.73
1967 .30 11.09 1990 .58 16.72
1968 .30 9.67 1991 .57 20.91
1969 .38 12.42 1992 .56 25.72
1970 .35 11.05 1993 1.10 24.04
1971 .30 11.77 1994 .88 21.77
1972 .35 13.72 1995 .92 28.07
1973 .54 15.94 1996 1.11 31.72
1974 .51 12.85 1997 1.90 44.41
1975 .29 8.32 1998 2.72 44.60
------
Total since 1952 $28.52
(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.
