<PAGE>
TO OUR SHAREHOLDERS:
- ------------------------------------------------------------------------------
We are pleased to report CGM Capital Development Fund increased 41.1% for
1995, comparing favorably to the Standard and Poor's 500 Index which returned
37.5% for the year. For the fourth quarter of 1995, CGM Capital Development
Fund returned 6.8% compared to the S&P 500 which increased 6.0% from the
previous quarter.
THE YEAR IN REVIEW AND INVESTMENT OUTLOOK
1995 was a banner year both for the U.S. economy and the securities markets.
Favorable trends established the previous year prevailed throughout 1995, almost
without exception. We continued to enjoy strong job growth, increased
productivity and higher corporate profits combined with moderate inflation as
measured by the Consumer Price Index. In November, the CPI stalled at October's
level, a positive indicator cited by the Federal Reserve Board as a reason to
lower the Federal Funds rate a quarter of a percent on December 19. The economy
is slowing and the Federal Reserve Board may well be calling for short-term
interest rates to come down in order to stimulate business.
The U.S. business outlook is also influenced by trends in other industrialized
nations, many of which are already lowering interest rates in an effort to
spark sluggish economies. Such precedent permits U.S. policymakers latitude in
reducing domestic short-term rates from current relatively high levels.
While economic slowing will raise some questions about future corporate
profits, those companies with prospects for increased earnings could find that
lower rates mean higher stock prices. Last year was a case in point when a
surge in corporate profits occurred while long-term interest rates declined
producing the sensational equity gains of 1995. Although we expect the
combination of further gains in corporate profits and slightly lower interest
rates will lead to higher securities markets, we anticipate increases will be
more modest and the overall environment, more volatile than that of 1995.
PORTFOLIO STRATEGY
During 1995, CGM Capital Development Fund remained fully invested in
anticipation of modest noninflationary growth. A large position in basic
industry companies was sold during the first half of the year with proceeds
reinvested in bank, airline and technology stocks. Most of the portfolio's
technology stocks were later sold with significant gains during the second
half of 1995. Although the Fund has substantial unrealized gains in bank and
airline stocks, it retained these large positions at year end in expectation
of continued strong performance by these securities.
The CGM Capital Development Fund portfolio holds important positions in
airlines, retail and money center banks. The Fund's three largest holdings are
Northwest Airlines, Inc., UAL Corp. and NIKE, Inc.
/s/ Robert L. Kemp
Robert L. Kemp
President
/s/ G. Kenneth Heebner
G. Kenneth Heebner
Portfolio Manager
January 10, 1996
<PAGE>
COMPARISONS OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CGM CAPITAL DEVELOPMENT FUND AND THE UNMANAGED S&P 500
assuming reinvestment of dividends and capital gains
Average Annual Total Return
---------------------------
1 year 5 year 10 year
41.1% 26.8% 19.2%
---------------------------
Past performance is no indication
of future results
[plot points]
CGM Unmanaged S&P
10000.0 10000.0
1986 12840.0 11870.0
1987 14882.0 12452.0
1988 14837.0 14519.0
1989 17493.0 19107.0
1990 17738.17 18514.0
1991 35316.0 24143.0
1992 41496.0 25977.25
1993 53389.0 28601.0
1994 41152.0 28976.0
1995 58094.0 39842.0
CGM CAPITAL DEVELOPMENT FUND
PORTFOLIO MANAGER
- ------------------------------------------------------------------------------
G. Kenneth Heebner has managed CGM Capital Development Fund since 1976. In
1989, Mr. Heebner founded Capital Growth Management Limited Partnership with
Robert L. Kemp. Prior to establishing the new company, Mr. Heebner was at
Loomis, Sayles and Company where he managed the Fund, then known as Loomis-
Sayles Capital Development Fund. In addition to CGM Capital Development Fund,
Mr. Heebner currently manages CGM Mutual Fund and CGM Realty Fund as well as
two other mutual funds. He also co-manages CGM Fixed Income Fund with Janice
Saul.
INVESTMENT PERFORMANCE
(unaudited)
- ------------------------------------------------------------------------------
Total Return for Periods Ended December 31, 1995
CGM CAPITAL
DEVELOPMENT
FUND
-------------------
10 Years ................................................ +481.0%
5 Years ................................................ +227.5%
1 Year ................................................. + 41.1%
3 Months ............................................... + 6.8%
The performance data contained in the report represent past performance. The
investment return 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.
<PAGE>
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
PETER O. BROWN
NICHOLAS J. GRANT
G. KENNETH HEEBNER
ROBERT L. KEMP
ROBERT B. KITTREDGE
LAURENS MACLURE
JAMES VAN DYKE QUEREAU, JR.
J. BAUR WHITTLESEY
OFFICERS
ROBERT L. KEMP, President
G. KENNETH HEEBNER, Vice President
LESLIE A. LAKE, Vice President and Secretary
KATHLEEN S. HAUGHTON, Vice President
MARTHA I. MAGUIRE, Vice President
W. DUGAL THOMAS, Vice President
MARY L. STONE, Assistant Vice President
FRANK N. STRAUSS, Treasurer
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 02266-8511
<PAGE>
<TABLE>
CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1970 -- DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------------------------
IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1970
- --------------------------------------------------------------------------------------------------
<CAPTION>
--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
--------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
The Value of A Cumulative
The Net Your Original An Change
Asset Value Per Share Per Share Investment Annual Expressed
On of Your Capital Gains Income At Each Total As An Index With
December Share Would Distributions Distributions Year End Return December 31,
31 Have Been of of Would Have Been of 1970 = 100.0
- ----------------------------------------------------------------------------------------------------
1970 10.45 100.0
1971 12.55 -- 0.20 12.79 + 22.4 122.4
1972 14.63 -- 0.08 15.03 + 17.5 143.8
1973 12.69 -- 0.08 13.09 - 12.9 125.2
1974 7.78 0.37* 0.14 8.38 - 36.0 80.1
1975 9.35 -- 0.15 10.27 + 22.5 98.1
1976 10.98 -- 0.13 12.23 + 19.1 116.8
1977 10.74 -- 0.18 12.16 - 0.6 116.1
1978 13.05 -- 0.27 15.19 + 24.9 145.0
1979 16.20 -- 0.35 19.35 + 27.4 184.7
1980 20.50 1.65* 0.36 27.65 + 42.9 263.9
1981 17.34 3.38 0.36 28.89 + 4.5 275.8
1982 24.88 2.88 0.41 51.68 + 78.9 493.4
1983 25.21 2.50 0.47 59.74 + 15.6 570.4
1984 17.28 6.15 0.11 54.84 - 8.2 523.6
1985 25.02 -- 0.18 80.18 + 46.2 765.5
1986 23.12 7.46 0.16 102.95 + 28.4 982.9
1987 16.56 10.09 0.14 119.32 + 15.9 1139.2
1988 15.87 0.02 0.62 118.96 - 0.3 1135.8
1989 18.37 -- 0.34 140.25 + 17.9 1339.1
1990 18.53 -- 0.10 142.21 + 1.4 1357.8
1991 25.80 11.07* 0.06 283.14 + 99.1 2703.4
1992 27.43 2.68* 0.20 332.69 + 17.5 3176.5
1993 27.71 7.51 0.07 428.17 + 28.7 4088.2
1994 20.58 0.71 0.07 330.12 - 22.9 3152.0
1995 27.33 1.68 0.02 465.80 + 41.1 4447.5
----- ---- ------
Totals $58.15 $5.25 +4347.5
- ---------------------------------------------------------------------------------------------------------
*Includes $0.15, $0.09, $0.02 and $0.02 per share distributed from paid-in capital.
- ---------------------------------------------------------------------------------------------------------
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.
</TABLE>
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS -- 99.7% OF TOTAL NET ASSETS
SHARES VALUE(A)
------ --------
AEROSPACE -- 5.0%
Boeing Company ............................... 332,000 $ 26,020,500
------------
AIRLINES -- 21.8%
Continental Airlines, Inc.(b) ................ 703,600 30,606,600
Northwest Airlines Corporation(b) ............ 815,000 41,565,000
UAL Corporation(b) ........................... 231,800 41,376,300
------------
113,547,900
------------
BANKS -- MONEY CENTER -- 11.6%
Chemical Banking Corporation ................. 462,000 27,142,500
Citicorp ..................................... 496,000 33,356,000
------------
60,498,500
------------
BASIC MATERIALS -- 2.6%
Medusa Corporation ........................... 121,500 3,219,750
Southdown, Inc.(b) ........................... 520,000 10,140,000
------------
13,359,750
------------
BUSINESS SERVICES -- 1.3%
Champion Enterprises, Inc.(b) ................ 220,000 6,792,500
------------
CHEMICALS -- SPECIALTY -- 10.2%
IMC Global, Inc. ............................. 490,000 20,028,750
Potash Corporation of Saskatchewan, Inc. ..... 463,500 32,850,563
------------
52,879,313
------------
DRUGS -- 3.7%
Merck & Company, Inc. ........................ 295,000 19,396,250
------------
FOOD -- RETAILERS/WHOLESALERS -- 5.3%
Philip Morris Companies, Inc. ................ 305,000 27,602,500
------------
HOUSING & BUILDING MATERIALS -- 4.0%
Continental Homes Holding Corporation ........ 125,000 3,078,125
D.R. Horton, Inc. (b) ........................ 65,000 763,750
Toll Brothers, Inc. (b) ...................... 694,100 15,964,300
U.S. Home Corporation (b) .................... 40,000 1,165,000
------------
20,971,175
------------
INSURANCE -- 1.6%
Vesta Insurance Group, Inc. .................. 155,000 8,447,500
------------
LEISURE -- 0.5%
Coachmen Industries, Inc. .................... 130,000 2,827,500
------------
See accompanying notes to financial statements
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- ------------------------------------------------------------------------------
INVESTMENTS AS OF DECEMBER 31, 1995 (CONTINUED)
COMMON STOCKS -- (CONTINUED)
SHARES VALUE(A)
------ --------
MACHINERY -- 1.3%
Bearings, Inc. ............................... 225,000 $ 6,581,250
------------
MISCELLANEOUS -- 6.9%
NIKE, Inc. ................................... 520,000 36,205,000
------------
OFFSHORE DRILLING -- 4.6%
Diamond Offshore Drilling(b) ................. 714,000 24,097,500
------------
PERIPHERALS -- 5.5%
Seagate Technology(b) ........................ 603,000 28,642,500
------------
RETAIL -- 13.8%
Fila Holdings ADR(c) ......................... 665,000 30,257,500
Kohls Corporation(b) ......................... 476,000 24,990,000
Pier 1 Imports, Inc. ......................... 100,000 1,137,500
Tommy Hilfiger Corporation(b) ................ 364,100 15,428,737
------------
71,813,737
------------
TOTAL COMMON STOCKS (Identified
Cost $418,504,598) ........................................ 519,683,375
------------
FACE
AMOUNT
SHORT-TERM INVESTMENT -- 0.5% ------
Chevron Oil Finance Company, 5.75% 1/02/96
(Cost $2,620,000) ............................ $2,620,000 2,620,000
------------
TOTAL INVESTMENTS -- 100.2% (Identified Cost
$421,124,598)(d) ........................................ 522,303,375
Cash and Receivables ...................................... 23,100,089
Liabilities ............................................... (24,155,694)
------------
TOTAL NET ASSETS -- 100.0% .................................. $521,247,770
============
(a)See Note 1A.
(b)Non-income producing security.
(c)An American Depository Receipt (ADR) is a certificate issued by a U.S. bank
representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
(d)Federal Tax Information: At December 31, 1995 the net unrealized
appreciation on investments based on cost of $421,143,349 for Federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ...... $ 102,000,238
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ...... (840,212)
-------------
Net unrealized appreciation ............................... $ 101,160,026
=============
See accompanying notes to financial statements
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- ------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
December 31, 1995
ASSETS
Investments at value (Identified
cost -- $421,124,598) ........................ $522,303,375
Cash .......................................... 1,884
Receivable for:
Securities sold ............. $21,997,322
Shares of the Fund sold...... 671,927
Dividends and interest ...... 428,956 23,098,205
----------- ------------
545,403,464
------------
LIABILITIES
Payable for:
Securities purchased ........ $19,139,546
Shares of the Fund
redeemed ................... 1,338,887
Distributions declared ...... 3,196,129 23,674,562
-----------
Accrued expenses:
Management fees ............. 319,537
Trustees' fees .............. 15,750
Accounting and Administration 4,583
Other expenses .............. 141,262 481,132
----------- ------------
24,155,694
------------
NET ASSETS ..................................... $521,247,770
============
Net Assets consist of:
Capital paid-in .............................. $420,087,744
Accumulated net realized loss ................ (18,751)
Unrealized appreciation on
investments -- net .......................... 101,178,777
------------
NET ASSETS ..................................... $521,247,770
============
Shares of beneficial interest outstanding, no
par value .................................... 19,073,918
============
Net asset value per share* .................... $27.33
============
*Shares of the Fund are sold and redeemed at net asset value
($521,247,770 / 19,073,918).
<PAGE>
STATEMENT OF
OPERATIONS
Year Ended December 31, 1995
INVESTMENT INCOME
Income
Dividends (net of withholding
tax of $72,666) ................ $ 4,163,296
Interest ........................ 105,685
------------
4,268,981
------------
Expenses
Management fees ................. 3,323,791
Trustees' fees .................. 63,906
Accounting and Administration.... 55,000
Custodian ....................... 115,000
Transfer agent .................. 229,000
Audit and tax services .......... 35,620
Legal ........................... 26,000
Printing ........................ 45,000
Registration .................... 33,000
Miscellaneous ................... 10,389
------------
3,936,706
------------
Net investment income ........... 332,275
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Realized gain on investments -- net 30,780,337
Unrealized appreciation -- net 127,281,953
------------
Net gain on investments ...... 158,062,290
------------
NET INCREASE IN ASSETS FROM
OPERATIONS ................... $158,394,565
============
See accompanying notes to financial statements
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- ---------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994
------------ -------------
FROM OPERATIONS
Net investment income ....... $ 332,275 $ 1,241,468
Net realized gain from
investments ............... 30,780,337 13,012,183
Unrealized appreciation
(depreciation)............. 127,281,953 (137,179,697)
------------ -------------
Increase (decrease) in net
assets from operations .. 158,394,565 (122,926,046)
------------ -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ....... (325,671) (1,262,367)
Net realized gain on investments. (30,395,964) (13,037,525)
In excess of net realized
gain on investments ....... -- (436,578)
------------ -------------
(30,721,635) (14,736,470)
------------ -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 24,146,671 55,247,909
Net asset value of shares
issued in connection with
reinvestment of:
Dividends from net
investment income ....... 284,834 1,162,785
Distributions from net
realized gain ........... 27,239,616 11,841,641
Distributions in excess of net
realized gain on investments -- 396,532
------------ -------------
51,671,121 68,648,867
Cost of shares redeemed ..... (59,772,451) (53,085,099)
------------ -------------
Increase (decrease) in net
assets derived from capital
share transactions ...... (8,101,330) 15,563,768
------------ -------------
Total increase (decrease) in
net assets .............. 119,571,600 (122,098,748)
NET ASSETS
Beginning of period ......... 401,676,170 523,774,918
------------ -------------
End of period (including
undistributed net
investment income of
$0 and $0, respectively) .. $521,247,770 $ 401,676,170
============ =============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares .. 1,007,187 2,092,085
Issued in connection with
reinvestment of:
Dividends from net
investment income ....... 10,461 55,829
Distributions from net
realized gain ........... 996,693 575,395
Distributions in excess of
net realized gain on
investments ............. -- 19,268
------------ -------------
2,014,341 2,742,577
Redeemed .................. (2,458,372) (2,124,306)
------------ -------------
Net change ................ (444,031) 618,271
============ =============
See accompanying notes to financial statements
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
For a share of the Fund outstanding throughout each period:
Net asset value at the
beginning of period ... $20.58 $27.71 $27.43 $25.80 $18.53
------ ------ ------ ------ ------
Net investment income ... 0.02 0.07 0.07 0.19 0.03
Dividends from net
investment income...... (0.02) (0.07) (0.07) (0.20) (0.06)
Net realized and
unrealized gain (loss)
on investments ........ 8.43 (6.42) 7.79 4.32 18.37
Distribution from net
realized gain ......... (1.68) (0.69) (7.51) (2.66) (11.05)
Distribution in excess of
net realized gain ..... -- (0.02) -- -- --
Distribution from paid-in
capital ............... -- -- -- (0.02) (0.02)
------ ------ ------ ------ ------
Net increase (decrease)
in net asset value .... 6.75 (7.13) 0.28 1.63 7.27
------ ------ ------ ------ ------
Net asset value at end of
period ................ $27.33 $20.58 $27.71 $27.43 $25.80
====== ====== ====== ====== ======
Total Return (%) ........ 41.1 -22.9 28.7 17.5 99.1
Ratios:
Operating expenses to
average net assets (%) 0.85 0.84 0.85 0.86 0.88
Net investment income to
average net assets (%) 0.07 0.25 0.23 0.79 0.21
Portfolio turnover (%) .. 271 146 143 163 272
Net assets at end of
period (in thousands)($) 521,248 401,676 523,775 394,530 325,965
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1995
1. The Fund is organized as a Massachusetts business trust under the laws of
Massachusetts pursuant to an Agreement and Declaration of Trust. The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund's objective is long-term capital
appreciation. The Fund seeks to attain its objective by investing in the equity
securities of a diverse group of companies and industries.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
financial statements are prepared in conformity with generally accepted
accounting principles which require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board of
Trustees, which service 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 investments having a maturity of sixty days or less are stated
at amortized cost, which approximates value.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed) and dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Net gain or loss on
securities sold is determined on the identified cost basis.
C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies, and to distribute to its shareholders all of its
taxable income and net realized capital gains, within the prescribed time
period. Accordingly, no provision for federal income tax has been made.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
are recorded by the Fund on the ex-dividend date. The classification of
income and capital gains distributions is determined in accordance with
income tax regulations. Permanent book and tax differences relating to
shareholder distributions may result in reclassifications to paid-in
capital. Undistributed net investment income, accumulated net investment
loss, or distributions in excess of net investment income may include
temporary book and tax differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
2. PURCHASES AND SALES OF SECURITIES -- For the year ended December 31, 1995,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $1,236,769,976 and
$1,271,232,139, respectively. There were no purchases or sales of United States
government obligations.
3. A. MANAGEMENT FEES -- During the year ended December 31, 1995, the Fund
incurred management fees of $3,323,791 paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership
(CGM), certain officers and directors of which are also officers and
trustees of the Fund. The management agreement between the Fund and
CGM provides for a fee at the annual rate of 0.75% on the first $200
million of the Fund's average daily net assets, 0.70% of the next $300
million and 0.65% of such assets in excess of $500 million.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting and
other services for the Fund. The expense of those services, which are
paid to CGM by the Fund, include the following:
(i) expenses for personnel performing bookkeeping, accounting,
internal auditing and financial reporting functions and clerical
functions relating to the Fund; (ii) expenses for services required in
connection with the preparation of registration statements and
prospectuses, shareholder reports and notices, proxy solicitation
material furnished to shareholders of the Fund or regulatory
authorities and reports and questionnaires for SEC compliance; and
(iii) registration, filing and other fees in connection with
requirements of regulatory authorities. The Accounting and
Administration expense of $55,000 is shown separately in the financial
statements.
C. TRUSTEES FEES AND EXPENSES -- The Fund does not pay any compensation
directly to its officers or to any trustees who are directors,
officers or employees of CGM, or any affiliate of CGM, (other than
registered investment companies). Each other trustee is compensated by
the Fund at the rate of $10,000 per year plus travel expenses for each
meeting attended. In addition, the Chairman of the Independent
Trustees Committee receives an annual retainer of $1,500.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of CGM Capital Development Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CGM Capital Development Fund at
December 31, 1995, the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated in conformity with
generally accepted accounting principles. These financial statements and the
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 6, 1996
- ------------------------------------------------------------------------------
SHAREHOLDER MEETING -- DECEMBER 29, 1995
(unaudited)
On December 29, 1995 the Fund had a Special Meeting of its Shareholders. At
that meeting, Shareholders approved an Advisory Agreement between the Fund and
Capital Growth Management Limited Partnership, with no change from the terms
of the existing agreement and no change in the operation and management of the
Fund, (by a share vote of 11,307,999.807 in favor, 162,293.752 against and
273,425.086 abstentions) and ratified the selection of Price Waterhouse LLP as
the Fund's independent accountants for the year ending December 31, 1995 (by a
share vote of 11,491,389.906 in favor, 119,573.429 against and 132,755.310
abstentions).
<PAGE>
CGM
CAPITAL
DEVELOPMENT
FUND
35th Annual Report
December 31, 1995
A No-Load Fund
[Fencer Logo]
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
INVESTMENT ADVISER
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110
- ------------------------------------------------------------------------------
TELEPHONE NUMBERS
For information about:
[] Account Procedures and Status
[] Redemptions
[] Exchanges
Call 800-343-5678
[] New Account Procedures
[] Prospectuses
[] Performance
Call 800-345-4048
- ------------------------------------------------------------------------------
MAILING ADDRESSES
FOR EXISTING ACCOUNTS
Boston Financial Data Services
P.O. Box 8511
Boston, MA 02266-8511
FOR NEW ACCOUNT APPLICATIONS ONLY
The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
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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.
CAR95 Printed in U.S.A.
