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CGM
CAPITAL
DEVELOPMENT
FUND
137th Quarterly Report
September 30, 1995
A No-Load Fund
CGM LOGO
(Man Fencing)
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
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TO OUR SHAREHOLDERS:
CGM Capital Development Fund increased 12% during the third quarter of 1995
comparing favorably to an increase of 7.9% for the unmanaged Standard and Poor's
500 Index. For the first nine months of the year, CGM Capital Development Fund
rose 32% compared to an increase of 29.7% in the S&P 500.
The stock market believes the "soft landing" has occurred. Economic expansion
has slowed somewhat as indicated by average monthly gains in employment, which
are decidedly lower than in 1994, but still in the plus territory to the tune of
150,000 additional jobs. Gross Domestic Product increased at a rate of just 1.1%
in the second quarter versus a 2.7% gain in the first quarter. However, we
expect the rate could climb to roughly 2.5% in the recently completed third
quarter. Nonetheless, the pace of recovery is hardly strong enough to rekindle
fears of inflation. Some heavy capital goods sectors of the economy are slowing,
but we could see gains in consumer spending now that the hot summer is over.
Though the signals are mixed, we believe the slow recovery is still under way.
Sizeable gains in corporate profits combined with lower interest rates have
fueled an unusually strong stock market this year. Seldom does the cost of money
decline while the economy is improving. From this point in the economic cycle,
we can expect moderate gains in profits and level or even slightly lower
interest rates resulting in more modest gains in security prices.
Given the current scenario, why could long-term bond rates decline from present
levels? Simply answered, the bond market is influenced by more than supply and
demand for funds. Factors that could nudge rates lower are reduced inflation,
some progress in curbing government spending, lowering the budget deficit and
perhaps, down the road, a balanced budget. Bond investors would be impressed by
early signs of a change in direction toward fiscal conservatism.
Though the equity market has increased nearly 30% this year as measured by the
S&P 500, we cannot expect the momentum to continue at the same rate. Signs of
short-term, long-overdue corrections are appearing in share prices of technology
and telecommunications companies. Overall, however, the market seems to be in a
mid-range of value relative to reported earnings.
CGM Capital Development Fund has major holdings in airlines, aluminum, and money
center banks. The three largest holdings are Biochem Pharm Inc., Citicorp and
Hewlett-Packard Company.
/s/ Robert L. Kemp
------------------------------
Robert L. Kemp
October 12, 1995 President
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INVESTMENT PERFORMANCE
(unaudited)
Total Return for Periods Ended September 30, 1995
CGM CAPITAL
DEVELOPMENT S&P 500 THE FUND'S AVERAGE
FUND INDEX ANNUAL TOTAL RETURN
----------- ------- -------------------
10 Years ...... +560.8% +341.7% +20.8%
5 Years ....... +246.9 +121.2 +28.2
1 Year ........ + 12.5 + 29.7 +12.5
3 Months ...... + 12.0 + 7.9 --
The percentage figures for the Fund are based upon the beginning net asset
values of $20.59, $16.46, $25.07 and $24.25, respectively, and the September 30,
1995 net asset value of $27.17 per share assuming the reinvestment of income
dividends, capital gains and paid-in capital distributions during such
respective periods. The S&P 500 Index has also been adjusted for the
reinvestment of income dividends during these periods. Although the S&P 500
Index and the Fund are not directly comparable, the index is shown because it is
widely used by investors to measure unmanaged stock market performance. When
viewing the Fund's performance, one should keep in mind the Fund's investment
objective and policies, the characteristics and quality of its portfolio
securities, and the periods selected.
The performance data contained in the report represent past performance, which
is no guarantee of future results. The investment return on, and the principal
value of, an investment in the Fund will fluctuate so that investors' shares,
when redeemed, may be worth more or less than their original cost.
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INVESTMENTS AS OF SEPTEMBER 30, 1995
(unaudited)
COMMON STOCKS -- 100.0% OF TOTAL NET ASSETS
SHARES VALUE(A)
------ --------
AEROSPACE -- 3.8%
Boeing Company................................ 282,000 $ 19,246,500
------------
AIRLINES -- 21.4%
AMR Corporation............................... 342,000 24,666,750
Alaska Air Group, Inc......................... 180,000 2,812,500
Continental Airlines, Inc..................... 307,000 11,243,875
Northwest Airlines Corporation................ 815,000 34,637,500
UAL Corporation............................... 200,500 34,260,438
------------
107,621,063
------------
ALUMINUM -- 14.7%
Alcan Aluminium Limited....................... 622,000 20,137,250
Aluminum Company of America................... 459,000 24,269,625
Kaiser Aluminum Corporation................... 1,080,000 15,795,000
Maxxam, Inc................................... 280,100 13,759,912
------------
73,961,787
------------
BANKS -- MONEY CENTER -- 12.6%
Chemical Banking Corporation.................. 462,000 28,124,250
Citicorp...................................... 496,000 35,092,000
------------
63,216,250
------------
BIOTECHNOLOGY -- 7.1%
Biochem Pharm, Inc............................ 1,125,000 35,859,375
------------
ELECTRONIC & COMMUNICATION
EQUIPMENT -- 5.2%
Nokia Corporation ADR ........................ 378,000 26,365,500
------------
ENVIRONMENTAL SERVICES -- 10.4%
Potash Corporation of
Saskatchewan, Inc........................... 463,500 28,852,875
Vigoro Corporation............................ 550,000 23,237,500
------------
52,090,375
------------
INSURANCE -- 4.6%
American International
Group, Inc.................................. 270,000 22,950,000
------------
MACHINERY -- 2.6%
AGCO Corporation ............................. 282,000 $ 12,831,000
------------
MISCELLANEOUS -- 5.9%
NIKE, Inc..................................... 265,000 29,448,125
------------
MICROCOMPUTERS -- 7.0%
Hewlett-Packard Company....................... 420,000 35,017,500
------------
PERIPHERALS -- 4.7%
Seagate Technology............................ 563,000 23,716,375
------------
TOTAL COMMON STOCKS (Identified Cost
$410,656,892) ................................ 502,323,850
------------
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FACE
AMOUNT
SHORT-TERM INVESTMENT -- 0.1% ------
Chevron Oil Finance Company, 6.00%, 10/02/95
(Cost $330,000) .............................. $330,000 330,000
------------
TOTAL INVESTMENTS -- 100.1%
(Identified Cost $410,986,892) .................................. 502,653,850
Cash and Receivables .......................................... 3,986,486
Liabilities ................................................... (4,422,592)
------------
TOTAL NET ASSETS -- 100% ..........................................$502,217,744
============
(a)Security valuation--Equity securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
provides the last reported sale price for securities listed on a national
securities exchange or on the NASDAQ national market system, or if no sale
was reported and in the case of over-the-counter securities not so listed,
the last reported bid price. Short-term notes having a maturity of less than
sixty days are stated at amortized cost, which approximates value.
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TELEPHONE NUMBERS
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For information about:
[] Account Procedures and Status [] New Account Procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800 345-4048
----------------------------
MAILING ADDRESSES
----------------------------
FOR EXISTING ACCOUNTS FOR NEW ACCOUNT APPLICATIONS ONLY
The CGM Funds
CGM Shareholder Services P.O. Box 449
c/o Boston Financial Data Services Boston, MA 02117-0449
P.O. Box 8511
Boston, MA 02266-8511
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<TABLE>
<CAPTION>
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25 YEAR INVESTMENT RECORD
DECEMBER 31, 1969 -- SEPTEMBER 30, 1995 (UNAUDITED)
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IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1969
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--AND HAD TAKEN ALL DIVIDENDS OR -- HAD REINVESTED ALL DIVIDENDS AND CAPITAL
AND DISTRIBUTIONS IN CASH GAINS DISTRIBUTIONS IN ADDITIONAL SHARES
----------------------------------------------------------------------------------------------------
DURING THE YEAR
YOU WOULD HAVE RECEIVED WHICH WOULD REPRESENT
----------------------------- -------------------------------------------
THE VALUE OF A CUMULATIVE
THE NET YOUR ORIGINAL CHANGE
ASSET VALUE PER SHARE PER SHARE INVESTMENT AN EXPRESSED
ON OF YOUR CAPITAL GAINS INCOME AT EACH ANNUAL AS AN INDEX WITH
DECEMBER SHARE WOULD DISTRIBUTIONS DIVIDENDS YEAR END TOTAL RETURN DECEMBER 31,
31 HAVE BEEN OF OF WOULD HAVE BEEN OF 1969 = 100.0
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<S> <C> <C> <C> <C> <C> <C>
1969 $11.41 -- -- 100.0
1970 10.45 $ 0.30 $0.22 $ 10.98 - 3.8 96.2
1971 12.55 -- 0.20 13.44 + 22.4 117.7
1972 14.63 -- 0.08 15.79 + 17.5 138.4
1973 12.69 -- 0.08 13.75 - 12.9 120.5
1974 7.78 0.37* 0.14 8.80 - 36.0 77.1
1975 9.35 -- 0.15 10.78 + 22.5 94.5
1976 10.98 -- 0.13 12.84 + 19.1 112.5
1977 10.74 -- 0.18 12.76 - 0.6 111.8
1978 13.05 -- 0.27 15.94 + 24.9 139.7
1979 16.20 -- 0.35 20.31 + 27.4 178.0
1980 20.50 1.65* 0.36 29.02 + 42.9 254.3
1981 17.34 3.38 0.36 30.32 + 4.5 265.8
1982 24.88 2.88 0.41 54.25 + 78.9 475.5
1983 25.21 2.50 0.47 62.71 + 15.6 549.6
1984 17.28 6.15 0.11 57.57 - 8.2 504.6
1985 25.02 -- 0.18 84.17 + 46.2 737.7
1986 23.12 7.46 0.16 108.07 + 28.4 947.2
1987 16.56 10.09 0.14 125.26 + 15.9 1097.8
1988 15.87 0.02 0.62 124.88 - 0.3 1094.5
1989 18.37 -- 0.34 147.23 + 17.9 1290.4
1990 18.53 -- 0.10 149.30 + 1.4 1308.5
1991 25.80 11.07* 0.06 297.25 + 99.1 2605.1
1992 27.43 2.68* 0.20 349.27 + 17.5 3061.0
1993 27.71 7.51 0.07 449.50 + 28.7 3939.6
1994 20.58 0.71 0.07 346.57 - 22.9 3037.4
1995(9/30) 27.17 -- -- 457.47 + 32.0** 4009.4
----- ---- ------
Totals $56.77 $5.45 +3909.4
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*Includes $0.15, $0.09, $0.02 and $0.02 per share distributed from paid-in capital.
**Total return for the nine months ended September 30, 1995.
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The performance data contained in this report represent past performance, which is no guarantee of future results.
The investment return on, and the principal value of, an investment in the Fund will fluctuate so that investors'
shares, when redeemed, may be worth more or less than their original cost.
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INVESTMENT ADVISER
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110
TRANSFER AND DIVIDEND PAYING
AGENT AND CUSTODIAN OF ASSETS
STATE STREET BANK AND TRUST COMPANY
Boston, Massachusetts 02102
SHAREHOLDER SERVICING AGENT
FOR STATE STREET BANK AND
TRUST COMPANY
BOSTON FINANCIAL DATA SERVICES, INC.
P.O. Box 8511
Boston, Massachusetts 02266
This report has been prepared for the shareholders of the Fund and is not
authorized for distribution to current or prospective investors in the Fund
unless it is accompanied or preceded by a prospectus.
CQR3 Printed in U.S.A.
