<PAGE>
Registration Nos. 2-16252
811-933
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ |_|
Post-Effective Amendment No. 63 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31 |X|
(Check appropriate box or boxes)
CGM CAPITAL DEVELOPMENT FUND
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(Exact Name of Registrant
as Specified in Charter)
One International Place, Boston, Massachusetts 02110
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(Address of Principal Executive Offices)
(617) 737-3225
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(Registrant's Telephone Number, including Area Code)
Edward T. O'Dell, Jr. P.C. and Regina M. Pisa, P.C.
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to |X| on May 1, 1998 pursuant to
paragraph (b) paragraph (b)
|_| 60 days after filing pursuant to |_| on May 1, 1997 pursuant to
paragraph (a)(1) paragraph (a)(1)
|_| 75 days after filing pursuant to |_| on ___________ pursuant to
paragraph (a)(2) paragraph (a)(2) of rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No.
of Form N-1A Location/Caption in Prospectus
- ------------ ------------------------------
1 ....................... Cover Page
2 ....................... Schedule of Fees
3 ....................... Financial Highlights
4 ....................... Investment Objective and Policies,
Additional Facts About the Fund, Cover Page
5 ....................... The Fund's Investment Manager;
How to Purchase Shares; Back Cover Page;
Additional Facts About the Fund
5A ....................... Financial Highlights
6 ....................... How to Purchase Shares; Cover Page;
Dividends, Capital Gains and Taxes
7 ....................... Back Cover Page; How to Purchase Shares;
Shareholder Services, Pricing the Shares
8 ....................... How to Redeem Shares
9 ....................... None
<PAGE>
Item No. Location/Caption in Statement
of Form N-1A of Additional Information
- ------------ -------------------------
10 ....................... Cover Page
11 ....................... Table of Contents
12 ....................... Introduction
13 ....................... Investment Objective, Policies and Restrictions;
Portfolio Turnover
14 ....................... Management of the Fund
15 ....................... Description of the Fund
16 ....................... Management of the Fund--Investment
Advisory and Other Services
17 ....................... Portfolio Transactions and Brokerage
18 ....................... Description of the Fund
19 ....................... How to Buy Shares; Net Asset Value and Public
Offering Price; Shareholder Services
20 ....................... Income Dividends, Capital Gain Distributions and
Tax Status
21 ....................... Not Applicable
22 ....................... Advertising and Performance Information
23 ....................... Financial Statements
<PAGE>
PART A
Prospectus for CGM Capital Development Fund
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
CGM Capital Development Fund (the "Fund") is a diversified mutual fund and
a registered open-end, no-load 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 Fund's investment manager is Capital Growth
Management Limited Partnership ("CGM" or the "Investment Manager").
The Fund is generally closed to new investors. See "Who Can Purchase
Shares."
PROSPECTUS
May 1, 1998
This prospectus sets forth information you should know before investing in
the Fund. It should be retained
for future reference. A Statement of Additional Information about the Fund
dated May 1, 1998 (the "Statement") has been filed with the Securities and
Exchange Commission (the "SEC") and is available free of charge. Write to the
Fund, c/o CGM Investor Services, 222 Berkeley Street, Boston, MA 02116 or call
the telephone number listed below to obtain a Statement. The Statement
contains more detailed information about the Fund and, as amended or
supplemented from time to time, is incorporated into this prospectus by
reference.
- --------------------------------------------------------------------------------
For additional information about:
[ ] Account procedures and status [ ] New account procedures
[ ] Redemptions [ ] Prospectuses
[ ] Exchanges [ ] Performance
Call 800-343-5678 Call 800-345-4048
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TABLE OF CONTENTS
Page
Schedule of Fees ....................... 2
Financial Highlights ................... 3
Investment Objective and Policies ...... 4
The Fund's Investment Manager .......... 4
The Portfolio Manager .................. 4
Who Can Purchase Shares ................ 5
How to Purchase Shares ................. 5
Shareholder Services ................... 6
How to Redeem Shares ................... 7
Telephone Transactions ................. 9
Dividends, Capital Gains and Taxes ..... 9
Pricing of Shares ...................... 11
Performance Information ................ 11
Additional Facts About the Fund ........ 11
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
SCHEDULE OF FEES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............................ None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) ............................ None
Redemption Fees* ............................................... None
Exchange Fees .................................................. None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................................................ 0.99%
12b-1 Fees ..................................................... None
Other Expenses ................................................. 0.08%
----
Total Fund Operating Expenses .................................. 1.07%
----
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*A wire fee (currently $5.00) will be deducted from proceeds if a shareholder
elects to transfer redemption proceeds by wire.
The purpose of this fee schedule is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly if you
invest in the Fund. For additional information about the Fund's fees and
expenses, please see "The Fund's Investment Manager" and the Statement.
The following example illustrates the approximate expenses that you would
incur on a $1,000 investment over the following periods, assuming a 5% annual
rate of return and redemption at the end of each period.
CUMULATIVE
------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------- ------------ ------------ ------------
$11 $34 $59 $131
Please keep in mind that the example shown above is hypothetical. The
information above should not be considered a representation of past or future
return or expenses; the actual return and expenses may be more or less.
<PAGE>
<TABLE>
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CGM CAPITAL DEVELOPMENT FUND
FINANCIAL HIGHLIGHTS
(For a share of the Fund outstanding throughout the indicated years)
These financial highlights have been examined by Price Waterhouse LLP, independent accountants. The table below should be read
in conjunction with the financial statements and the notes thereto, which, together with the Report of Independent Accountants
thereon, are included in the Fund's Annual Report and incorporated by reference into the Statement. In addition to the highlights
set forth below, further information about the performance of the Fund is contained in the Annual Report and the Statement, which
may be obtained from the Fund free of charge.
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990* 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of year .................. $29.08 $27.33 $20.58 $27.71 $27.43 $25.80 $18.53 $18.37 $15.87 $16.56
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income
(loss) ................... (0.08)(a) 0.07 0.02 0.07 0.07 0.19 0.03 0.09 0.28 0.70
Dividends from net investment
income ................... -- (0.07) (0.02) (0.07) (0.07) (0.20) (0.06) (0.10) (0.34) (0.62)
Net realized and unrealized
gain (loss) on investments 7.04 7.62 8.43 (6.42) 7.79 4.32 18.37 0.17 2.56 (0.75)
Distributions from net
realized gain ............ (9.08) (5.84) (1.68) (0.69) (7.51) (2.66) (11.05) -- -- (0.02)
Distributions in excess of
net realized gain ........ -- (0.03) -- (0.02) -- -- -- -- -- --
Distributions from paid-in
capital .................. -- -- -- -- -- (0.02) (0.02) -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) in
net asset value .......... (2.12) 1.75 6.75 (7.13) 0.28 1.63 7.27 0.16 2.50 (0.69)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at end of
year ..................... $26.96 $29.08 $27.33 $20.58 $27.71 $27.43 $25.80 $18.53 $18.37 $15.87
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return(%) ............ 23.9 28.1 41.1 (22.9) 28.7 17.5 99.1 1.4 17.9 (0.3)
Ratios:
Operating expenses to average
net assets (%) ........... 1.07 0.82 0.85 0.84 0.85 0.86 0.88 0.94 0.92 0.92
Net income to average net
assets (%) ............... (0.29) 0.23 0.07 0.25 0.23 0.79 0.21 0.40 1.26 3.89
Portfolio turnover (%)...... 230 178 271 146 143 163 272 226 254 301
Average commission rate** .. $0.0668 $0.0669 -- -- -- -- -- -- -- --
Net assets at end of year
(in thousands) ($) ....... 722,673 631,260 521,248 401,676 523,775 394,530 325,965 175,717 189,932 194,209
- ----------
(a) Per share net investment loss does not reflect the period's reclassification of permanent differences between book and tax
basis net investment loss.
* On March 1, 1990, the Capital Growth Management Division of Loomis, Sayles & Company, Incorporated was reorganized into CGM,
which assumed management of the Fund.
** SEC regulations require portfolios to disclose the average commission rate p aid on trades for which commissions were charged
for fiscal years beginning on or after September 1, 1995.
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</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund has as its investment objective long-term capital appreciation.
There are no assurances that the Fund will attain its objective.
The Fund seeks to attain its objective by investing substantially all of its
assets in common stocks and securities convertible into common stocks. Under
some market conditions, however, the Fund may, for temporary defensive purposes,
hold a substantial portion of its assets in cash or investment grade
fixed-income investments (bonds, notes and money market instruments, including
repurchase agreements). No estimate can be made as to when or for how long the
Fund will employ such defensive strategies. The Fund's investments, including
bonds purchased for defensive purposes which may fluctuate in value with
interest rate movements, are sub ject to the market risks inherent in all
securities.
The Fund may invest in many types of companies. These companies include:
well established companies with records of above average growth and with promise
of maintaining their leadership positions in their industries; companies likely
to benefit from internal revitalization or innovations, changes in consumer
demand or basic economic forces; and smaller companies with good management and
attractive prospects. Investments in small and medium-size companies involve
greater risk than is customarily associated with more established companies.
The Fund may not, with respect to 75% of its total assets, invest more than
5% of its assets in the securities of any one issuer. In accordance with this
restriction, however, the Fund may, with respect to 75% of its total assets,
hold securities of a single issuer which, when acquired, were valued at 5% or
less of the total assets of the Fund, but which, as a result of fluctuations in
the value of the securities or the value of the Fund, have a value in excess of
5% of the Fund's total assets. In such circumstances, the conditions and outlook
of such issuers may be expected to have a more significant impact on the
performance of the Fund.
Although the Fund's investment objective is long-term capital
appreciation, it frequently sells securities to respond to changes in market,
industry or individual company conditions or outlook, even though it may only
have held those securities for a short period. This policy may result in
higher brokerage fees.
THE FUND'S INVESTMENT MANAGER
The Fund's investment manager is Capital Growth Management Limited
Partnership, One International Place, Boston, Massachusetts 02110. CGM, an
investment advisory firm founded in 1990, manages nine mutual fund portfolios
and advisory accounts for other clients. The general partner of CGM is a
corporation controlled equally by Robert L. Kemp and G. Kenneth Heebner, who are
trustees and officers of the Fund.
In addition to selecting and reviewing the Fund's investments, CGM
provides executive and other personnel for the management of the Fund. The
Fund's Board of Trustees supervises CGM's conduct of the affairs of the Fund.
In 1997, the Fund paid 0.99% of its average annual net assets in management
fees to CGM.
The advisory agreement between CGM Capital Development Fund and CGM
provides for a management fee at an annual percentage rate of 1.00% of the
first $500 million of CGM Capital Development Fund's average daily net asset
value, 0.95% of the next $500 million of such value, and 0.80% of such value
in excess of $1 billion.
THE PORTFOLIO MANAGER
Since 1976, the Fund's investment portfolio has been managed by G. Kenneth
Heebner, an officer of the Fund's Investment Manager. Mr. Heebner, who is a
vice president and trustee of the Fund, also co-manages the investment
portfolio of CGM Fixed Income Fund and manages the investment portfolios of
CGM Mutual Fund, CGM Realty Fund and CGM Focus Fund. Prior to March 1, 1990,
Mr. Heebner managed the Fund in his capacity as vice president and director of
Loomis, Sayles & Company, Incorporated.
WHO CAN PURCHASE SHARES
Only shareholders of the Fund as of September 24, 1993, who have remained
shareholders continuously since that date, may purchase additional shares of
the Fund. The Fund reserves the right to reject any purchase order. This
policy supersedes all previous eligibility requirements.
Fund shares are not generally available to other persons except in special
circumstances that have been approved by, or under the authority of, the Board
of Trustees of the Fund. The special circumstances currently approved by the
Board of Trustees of the Fund are limited to the offer and sale of shares of
the Fund to the following additional persons: trustees of the Fund, employees
of the Investment Manager and counsel to the Fund and the Investment Manager.
HOW TO PURCHASE SHARES
The Fund sells its shares directly to investors without any sales load. If
you are currently a shareholder in the Fund, you may make a purchase of Fund
shares in a new regular account or retirement plan account by submitting a
completed application form and payment to:
The CGM Funds
P.O. Box 449
Boston, Massachusetts 02117-0449
The minimum initial investment is $2,500 for regular accounts and $1,000 for
retirement plans (see "Shareholder Services -- Retirement Plans") and accounts
set up under the Uniform Gifts to Minors Act ("UGMA") or the Uniform Transfers
to Minors Act ("UTMA"). Subsequent investments must be at least $50. See
"Shareholder Services" below for further information about minimum investments
in certain other circumstances.
All investments made by check should be in U.S. dollars and made payable
to CGM Capital Development Fund. Third party checks (i.e. checks not payable
to CGM Capital Development Fund) are generally not accepted and checks drawn
on credit card accounts will not be accepted.
After accepting an order, the Fund forwards the application and payment to
the CGM Shareholder Services Department ("CGM Shareholder Services") of Boston
Financial Data Services, Inc. ("BFDS"), which is the shareholder servicing
agent for State Street Bank and Trust Company ("State Street Bank"). CGM
Shareholder Services then opens an account, applies the payment to the
purchase of full and fractional shares, and mails a statement of the account
confirming the transaction.
After your account has been established, you may send subsequent
investments at any time directly to the shareholder servicing agent at the
following address:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The remittance for any subsequent investment must be accompanied by either the
Additional Investment Stub detached from a statement of account or a note
containing sufficient information to identify the account, i.e., the Fund
name, your account number, your name and social security number.
Subsequent investments may also be made by federal funds wire. Instruct
your bank to wire federal funds to State Street Bank and Trust Company, ABA #
011000028. The text of the wire should read as follows: "DDA 99046336,
$ Amount, STATE ST BOS ATTN Mutual Funds. Credit CGM Capital Development Fund,
Shareholder Name, Shareholder Account Number." Your bank may charge you a fee
for transmitting funds by wire.
The Fund reserves the right to reject any purchase order, including orders
in connection with exchanges, for any reason the Fund in its sole discretion
deems appropriate. Although the Fund does not anticipate that it will do so,
the Fund reserves the right to suspend, change or withdraw the offering of
shares of the Fund.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Fund (in the case of your
initial investment) or by CGM Shareholder Services (in the case of subsequent
investments).
If you wish transactions in your account to be effected by another person
under a power of attorney from you, special rules apply. Please contact CGM
Shareholder Services for details.
An investor will not receive any certificates for shares unless the
investor requests them in writing from CGM Shareholder Services. The Fund's
system for recording investments eliminates the problems of handling and
safekeeping certificates.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services as more fully described
in the Statement. Explanations and forms are available from the Fund.
EXCHANGE PRIVILEGE
Shares may be exchanged for shares of money market funds currently
distributed by New England Funds, L.P. ("Money Market Funds"). You may also
exchange shares for shares of CGM Mutual Fund, CGM Fixed Income Fund, CGM
American Tax Free Fund, CGM Realty Fund and CGM Focus Fund.
All exchanges may be made without charge. If you exchange all of your
shares of the Fund for shares of such other funds, you will no longer be a
shareholder and will no longer be eligible to purchase additional shares of
the Fund. You may make an exchange by written instruction or, if a written
authorization for telephone exchanges is on file with CGM Shareholder
Services, you may call 800-343-5678. See "Telephone Transactions." Under
certain circumstances, before an exchange can be made, additional documents
may be required to verify the authority or legal capacity of the person
seeking the exchange. Exchanges must be for amounts of at least $1,000. If you
wish to make an exchange into a new account, the exchange must satisfy the
applicable minimum initial investment requirements. Exchange requests cannot
be revoked once they have been received in good order.
Investors should not view the exchange privilege as a means for taking
advantage of short-term swings in the market, and the Fund limits the number
of exchanges each shareholder may make to four exchanges per account (or two
round trips) per calendar year. Monthly automatic exchanges from the Money
Market Funds to the Fund are exempt from this restriction. The Fund also
reserves the right to prohibit exchanges during the first 15 days following an
investment in the Fund. The Fund may terminate or change the terms of the
exchange privilege. In general, shareholders will receive notice of any
material change to the exchange privilege at least 60 days prior to the
change. For federal income tax purposes, an exchange constitutes a sale of
shares, which may result in a capital gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
If the value of your account is at least $10,000, you may have periodic cash
withdrawals automatically paid to you or any person you designate. If checks are
returned to the Fund as "undeliverable" or remain uncashed for more than six
months, the plan will be cancelled. Undeliverable or uncashed checks shall be
cancelled and such amounts shall be reinvested in the Fund at the per share net
asset value determined as of the date of cancellation of such checks. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
AUTOMATIC INVESTMENT PLAN ("AIP")
Once your account has been established, voluntary monthly investments of at
least $50 may be made automatically by pre-authorized withdrawals from your
checking account. Please contact CGM Shareholder Services at 800-343-5678 to
determine the requirements associated with debits from savings banks and credit
unions. Debits from money market accounts are not acceptable. You may terminate
your participation in the AIP by sending written notice to CGM Shareholder
Services, c/o Boston Financial Data Services, Inc., P.O. Box 8511, Boston,
Massachusetts 02266-8511 or by calling 800-343-5678 more than 14 days prior to
the next scheduled debit date. The Fund may terminate your participation in the
AIP immediately in the event that any item is unpaid by your financial
institution. The Fund may terminate or modify the AIP at any time. Additional
information about this Plan is set forth in the Statement.
RETIREMENT PLANS
The Fund's shares may be purchased by tax-deferred retirement plans. CGM
makes available retirement plan forms and plan documents for Traditional and
Roth IRAs, SEP-IRAs, 403(b)(7) custodial accounts, and money purchase pension
and profit sharing plans ("CGM Retirement Plans").
SHAREHOLDER REPORTS
Shareholders will receive the Fund's financial statements and a summary of
the Fund's investments at least semiannually. The Fund intends to consolidate
mailings of annual, semiannual and quarterly reports to households having
multiple accounts with the same address of record and to furnish a single copy
of each report to that address. Mailings of prospectuses and proxy statements
will not be consolidated and, if a report is included in such mailings, each
shareholder will receive a separate copy. You may request additional reports
by notifying the Fund in writing, or by calling the Fund.
Shareholders will receive statements confirming all purchases, redemptions
and changes of address. You may call CGM Shareholder Services and request a
duplicate statement for the current year without charge. A fee will be charged
for any duplicate information requested for prior years.
SYSTEMS - YEAR 2000
Like other mutual funds and other organizations around the world, the Fund
could be adversely affected if the computer systems used by the Fund or its
service providers do not properly process and calculate date-related information
from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." CGM has taken steps that it believes are reasonably designed to
address any potential Year 2000 Problem for computer programs used by the Fund
or CGM. Each of the Fund's and CGM's service providers are taking steps that
they believe are reasonably designed to address the Year 2000 Problem with
respect to computer systems that they use. At this time, however, there can be
no assurance that these steps being taken by third party service providers will
be sufficient to avoid any adverse impact to the Fund.
HOW TO REDEEM SHARES
You can redeem all or part of your shares in the Fund in three different
ways: by sending a written request for a check or wire representing the
redemption proceeds, by making a telephone request for redemption by check
(provided that the amount to be redeemed is not more than $25,000 and the check
is being sent to you at your record address, which has not changed in the prior
three months) or by making a telephone request for redemption proceeds to be
wired to a bank that you have predesignated. The redemption price will always be
the net asset value per share next determined after the redemption request is
received by CGM Shareholder Services in good order (including any necessary
documentation). Necessary documentation may include, in certain circumstances,
documents verifying the authority or legal capacity of the person seeking to
redeem shares. Redemption requests cannot be revoked once they have been
received in good order.
If you elect to redeem shares in writing, send your written request to:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, the number of shares or
the dollar amount to be redeemed and mailing or wire instructions. All owners
of shares must sign the request in the exact name(s) in which the shares are
registered (which appear(s) on your confirmation statement) and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity). If you
are signing in a special capacity, you may wish to contact CGM Shareholder
Services in advance to determine whether additional documentation will be
required before you send a redemption request.
Redemptions from CGM Retirement Plans for which State Street Bank is the
custodian or trustee must contain additional information. Please contact CGM
Shareholder Services for instructions and forms. Complete information,
including tax withholding instructions, must be included in your redemption
request.
If you are redeeming shares worth more than $25,000 or requesting that the
proceeds check be made payable to someone other than the registered owner(s)
or be sent to an address other than your record address (or sent to your
record address if such address has been changed within the previous three
months), you must have your signature guaranteed by an "eligible guarantor
institution" as defined in the rules under the Securities Exchange Act of 1934
(including a bank, broker, dealer, credit union, national securities exchange,
registered securities association, clearing agency or savings association, but
not a notary public).
If you hold certificates representing your investment, you must enclose
the certificates and a properly completed redemption form or stock power. You
bear the risk of loss of such certificates; consequently, you may wish to send
your certificates by registered mail.
If you elect to redeem shares by telephone, call CGM Shareholder Services
directly at 800-343-5678. See "Telephone Transactions." Telephone redemptions
are not available for CGM Retirement Plans. When you make a redemption request
by telephone, you may choose to receive redemption proceeds either by having a
check mailed to the address of record on the account, provided the address has
not changed for three months and you are redeeming $25,000 or less, or by
having a wire sent to a bank account you have previously designated.
Telephone redemptions by check are available to all shareholders of the
Fund automatically unless this option is declined in the application or in
writing. You may select the telephone redemption wire service when you fill
out your initial application or you may select it later by completing the
Service Options Form (with a signature guarantee), available from the Fund or
CGM Shareholder Services.
A telephone redemption request must be received by CGM Shareholder
Services prior to the close of the New York Stock Exchange (the "Exchange").
If you telephone your request to CGM Shareholder Services after the Exchange
closes or on a day when the Exchange is not open for business, the Fund cannot
accept your request and a new one will be necessary.
Wire redemptions by telephone may be made only if your bank is a member of
the Federal Reserve System or has a correspondent bank that is a member of such
System. If your account is with a savings bank, it must have only one
correspondent bank that is a member of the Federal Reserve System. A wire fee
(currently $5) will be deducted from the proceeds. If you decide to change the
bank account to which proceeds are to be wired, you must send in this change on
the Service Options Form with a signature guarantee.
Proceeds resulting from a written or regular telephone redemption request
will normally be mailed to you within seven days after receipt of your request
in good order. Telephone wire redemption proceeds will normally be wired to
your bank within seven days following receipt of a proper redemption request.
If you purchased your Fund shares by check (or through your AIP) and elect to
redeem shares within 15 days of such purchase, you may experience delays in
receiving redemption proceeds. The Fund will generally postpone sending your
redemption proceeds from such investment until the Trust can verify that your
check (or AIP investment) has been or will be collected. There will be no such
delay for redemptions following investments paid for by federal funds wire or
by bank cashier's check, certified check or treasurer's check. If checks
representing redemption proceeds are returned "undeliverable" or remain
uncashed for six months, such checks shall be cancelled and such proceeds
shall be reinvested in the Fund at the per share net asset value determined as
of the date of cancellation of such checks. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
The Fund may not suspend the right of redemption, or postpone payment for
more than seven days, except when the Exchange is closed for other than
weekends or holidays, when trading on the Exchange is restricted, during an
emergency (as determined by the SEC) that makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net
assets, or during any other period permitted by the SEC for the protection of
investors.
Because the expense of maintaining small accounts is disproportionately
high, the Fund may close accounts with 20 shares or less, and mail the
proceeds to the shareholder. Shareholders who are affected by this policy will
be notified of the Fund's intention to close the account and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to CGM Retirement Plans and UGMA/UTMA
accounts.
TELEPHONE TRANSACTIONS
You may initiate three types of transactions by telephone:
[ ] Telephone Exchange
[ ] Telephone Redemptions By Wire
[ ] Telephone Redemptions By Check
The terms and provisions for each of those services are explained fully in the
preceding sections. Once a telephone transaction request has been placed, it
cannot be revoked.
The Telephone Exchange privilege and/or Telephone Redemptions By Wire
privilege must be elected by you when you fill out your initial application or
you may select either option later by completing the Service Options Form
(with a signature guarantee) available from the Fund or CGM Shareholder
Services. The Telephone Redemptions By Check privilege is available to
shareholders of the Fund automatically, unless this option is declined in the
application or in writing.
The telephone redemption privileges are not available for Traditional or
Roth IRAs, SEP-IRAs, 403(b)(7) custodial accounts or for money purchase
pension and profit sharing accounts under a CGM Retirement Plan (in which
State Street Bank is the custodian or trustee).
The Fund will employ reasonable procedures to confirm that instructions
received by telephone (including instructions with respect to changes in
addresses) are genuine, such as requesting personal identification information
that appears on your account application and recording the telephone
conversation. You will bear the risk of loss due to unauthorized or fraudulent
instructions regarding your account, although the Fund may be liable if
reasonable procedures are not employed.
DIVIDENDS, CAPITAL GAINS AND TAXES
The Fund pays out substantially all of its net investment income to
shareholders as dividends and also distributes its net capital gains realized
from the sale of portfolio securities. Income dividends and any capital gain
distributions (after applying any available capital loss carryovers) are
normally made annually in December but may be made more frequently as deemed
advisable by the Board of Trustees. The Fund's dividend and capital gains
distributions may be reinvested in additional shares or received in cash.
Certain restrictions may apply to participants in CGM Retirement Plans.
You may elect to receive income dividends or capital gains distributions,
or both, in cash. However, if you elect to receive capital gains in cash, your
income dividends must also be received in cash. You can elect to receive
payments of cash dividends and capital gains distributions either by check or
by direct deposit to a bank account that you have predesignated. These
elections may be made at the time your account is opened and may be changed at
any time by submitting a written request to CGM Shareholder Services or by
calling 800-343-5678. However, changes in bank account information for direct
deposits of cash dividends and capital gains distributions must be made
through a Service Options Form. In order for a change to be effective for any
dividend or distribution, it must be received by CGM Shareholder Services on
or before the record date for such dividend or distribution.
If you elect to receive distributions in cash and checks are returned
"undeliverable" to the Fund or remain uncashed for six months, your cash
election will be changed automatically and your future dividend and capital
gains distributions will be reinvested in the Fund at the per share net asset
value determined as of the date of payment of the distribution. In addition,
following such six month period, any undeliverable or uncashed checks shall be
cancelled and such amounts shall be reinvested in the Fund at the per share
net asset value determined as of the date of cancellation of such checks. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
The Fund intends to qualify annually as a "regulated investment company"
under the Internal Revenue Code. To qualify, the Fund must meet certain
income, distribution, and diversification requirements. In any year in which
the Fund so qualifies it generally will not be subject to federal income or
excise tax to the extent that its taxable income is distributed to
shareholders.
The distributions received by the Fund from investments may, for federal
income tax purposes, consist of ordinary income, long term capital gains, or a
return of capital. The characterization of these distributions to the Fund may,
in turn, affect the tax treatment of the Fund's distributions to its
shareholders. Dividends and distributions are taxable to shareholders in the
same manner whether received in cash or reinvested in additional shares.
Dividends paid by the Fund from net investment income, including
dividends, interest and net short-term capital gains, will be taxable to
shareholders as ordinary income. Distributions of net capital gains (the
excess of net long-term capital gains over net short-term capital losses)
which are designated by the Fund as capital gain dividends are taxable as
long-term capital gains, regardless of the length of time shareholders have
owned shares in the Fund. To the extent that the Fund makes a distribution in
excess of its current and accumulated earnings and profits, the distribution
will be treated first as a tax-free return of capital, reducing the tax basis
in a shareholder's shares, and then, to the extent the distribution exceeds
such basis, as a taxable gain to be realized upon sale of such shares.
A distribution will be treated as paid by the Fund and received by its
shareholders on December 31 of the current calendar year if it is declared by
the Fund in October, November or December of that year with a record date in
such a month and paid by the Fund in January of the subsequent year.
Any dividends or distributions paid shortly after a purchase of shares
will have the effect of reducing the per share net asset value of the shares
by the amount of the dividends or distributions. Although in effect a return
of capital, these distributions are subject to taxes, even if their effect is
to reduce the per share net asset value below a shareholder's cost. The Fund
will notify you annually as to the tax status of dividend and capital gains
distributions paid by the Fund.
The sale or other disposition of shares of the Fund, including a
redemption of shares or an exchange of shares into another fund, is a taxable
event and may result in a capital gain or loss which will be long-term or
short-term, depending upon the shareholder's holding period for the shares.
Dividend distributions, capital gains distributions and capital gains or
losses from redemptions and exchanges may be subject to state and local taxes.
The Fund is required to withhold a portion of taxable dividends, capital
gains distributions, and redemptions paid to individuals and certain other
classes of shareholders if they fail to furnish the Fund with their correct
taxpayer identification number and certain certifications regarding their tax
status, or if they are otherwise subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against a shareholder's normal federal income tax liability. For additional
information about withholding, please see the Statement.
BFDS, the shareholder servicing agent, will send you and the Internal
Revenue Service an annual statement detailing federal tax information,
including information about dividends and distributions paid to you during the
preceding year. If you redeem or exchange shares in any year, following the
end of the year, you will receive a statement providing the cost basis and
gain or loss of each share lot that you sold during such year. Your CGM
account cost basis will be calculated using the "single category average cost
method," which is one of the four calculation methods allowed by the IRS.
Shareholders of the Fund generally will receive these cost basis statements
but only for accounts opened after January 1, 1991. Be sure to keep these
statements as permanent records. A fee may be charged for any duplicate
information that you request.
The tax discussion set forth above is included for general information
only. Shareholders and prospective investors should consult their own tax
advisers concerning the tax consequences of an investment in the Fund.
PRICING OF SHARES
The share price or "net asset value" per share of the Fund is computed
daily by dividing the total value of the investments and other assets of the
Fund, less any liabilities, by the total outstanding shares of the Fund. The
net asset value per share of the Fund is determined as of the close of the
regular trading session of the Exchange on each day the Exchange is open for
trading. Portfolio securities are generally valued at their market value. In
certain cases, market value may be determined on the basis of information
provided by a pricing service approved by the Board of Trustees. Instruments
with maturities of sixty days or less are valued at amortized costs, which
approximates market value. Other assets and securities which are not readily
marketable will be valued in good faith at fair value using methods determined
by the Board of Trustees. The valuation of portfolio securities is more fully
described in the Statement.
PERFORMANCE INFORMATION
The Fund may include total return information in advertisements or other
written sales material. The Fund will show its average annual total return for
the one-, five- and ten-year periods through the end of the most recent
calendar quarter. Total return is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the value of
the investment at the end of the period (assuming automatic reinvestment of
all dividends and capital gains distributions). The Fund may also show total
return over other periods or on an aggregate basis for the period presented.
The Fund may compare its performance to that of recognized financial indices
or groups of mutual funds. It may also include its ranking among other mutual
funds or its rating as published by mutual fund ranking services or major
financial publications. All performance information is based on past results and
is not an indication of likely future performance.
ADDITIONAL FACTS ABOUT THE FUND
[ ] The Fund was organized in 1986 as a Massachusetts business trust and is
authorized to issue an unlimited number of full and fractional shares. The
Fund is a series company that has only one series as of the date of this
prospectus. The Fund is a successor to Loomis-Sayles Capital Development
Fund.
[ ] When a shareholder invests in the Fund, the shareholder acquires freely
transferable shares of beneficial interest that entitle the shareholder to
receive dividends and to cast one vote at shareholder meetings for each
share owned. However, if an investor becomes a shareholder of the Fund by
means of a transfer from another shareholder after September 24, 1993, the
transferee shareholder will not be eligible to purchase additional shares of
the Fund.
[ ] The investment objective of the Fund is fundamental and cannot be changed
without shareholder approval. Non-fundamental policies may be changed at any
time without such approval.
<PAGE>
INVESTMENT ADVISER CGM
Capital Growth Management CAPITAL
Limited Partnership DEVELOPMENT
One International Place FUND
Boston, MA 02110
Prospectus & Application
TRANSFER AND DIVIDEND PAYING AGENT May 1, 1998
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company A No-Load Fund
Boston, MA 02102
SHAREHOLDER SERVICING AGENT FOR
STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, MA 02266
-----------------
[Fencer Logo]
-----------------
CFP98
<PAGE>
PART B.
Statement of Additional Information for
CGM Capital Development Fund
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
This Statement of Additional Information (the "Statement") is not a
prospectus. This Statement relates to the CGM Capital Development Fund
Prospectus dated May 1, 1998 (the "Prospectus"), and should be read in
conjunction therewith. A copy of the Prospectus may be obtained from CGM Capital
Development Fund, c/o The CGM Funds Investor Services Division, P.O. Box 449,
Boston, Massachusetts 02117 (Telephone: 800-345-4048).
CSAI98
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION...................................................................1
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS................................1
PORTFOLIO TURNOVER.............................................................3
MANAGEMENT OF THE FUND.........................................................3
INVESTMENT ADVISORY AND OTHER SERVICES.........................................6
Advisory Agreement.....................................................6
Custodial Arrangements.................................................7
Independent Accountants................................................7
Other Arrangements.....................................................7
PORTFOLIO TRANSACTIONS AND BROKERAGE...........................................8
DESCRIPTION OF THE FUND........................................................9
Shareholder Rights.....................................................9
Shareholder and Trustee Liability.....................................10
HOW TO BUY SHARES.............................................................11
ADVERTISING AND PERFORMANCE INFORMATION.......................................11
Calculation of Total Return...........................................11
Performance Comparisons...............................................12
NET ASSET VALUE AND PUBLIC OFFERING PRICE.....................................13
SHAREHOLDER SERVICES..........................................................14
Open Accounts.........................................................14
Systematic Withdrawal Plans ("SWP")...................................15
Exchange Privilege....................................................16
Automatic Investment Plans ("AIP")....................................16
Retirement Plans......................................................17
Address Changes.......................................................17
REDEMPTIONS...................................................................18
Redeeming by Telephone................................................18
Check Sent to the Record Address......................................18
Proceeds Wired to a Predesignated Bank................................19
All Redemptions.......................................................19
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS..................20
FINANCIAL STATEMENTS..........................................................22
<PAGE>
INTRODUCTION
CGM Capital Development Fund (the "Fund"), registered with the
Securities and Exchange Commission ("SEC") as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of Massachusetts in 1986. The Trust is governed by an Amended and Restated
Agreement and Declaration of Trust (the "Declaration of Trust") dated January
23, 1997. The Fund is a successor in interest to Loomis-Sayles Capital
Development Fund, which was organized in 1960. On March 1, 1990, the Fund's name
was changed from "Loomis-Sayles Capital Development Fund" to "CGM Capital
Development Fund" to reflect the assumption by Capital Growth Management Limited
Partnership ("CGM" or the "Investment Manager") of investment advisory
responsibilities with respect to the Fund.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The Fund's investment objective is long-term capital appreciation. The
Fund seeks to attain its objective by investing substantially all of its assets
in common stocks and securities convertible into common stocks. Under some
market conditions, however, the Fund may, for temporary defensive purposes, hold
a substantial portion of its assets in cash or investment grade fixed-income
investments. There are no assurances that the Fund will attain its objective.
The Fund may not:
(1) Issue any senior securities, except as it may be permitted by the
terms of any exemptive order or similar rule issued by the
Securities and Exchange Commission (the "SEC") relating to
multiple classes of shares of beneficial interest of the Fund,
and provided further that collateral arrangements with respect to
forward contracts, futures contracts, short sales or options,
including deposits of initial and variation margin, shall not be
considered to be the issuance of a senior security for the
purposes of this restriction;
(2) Underwrite the distribution of securities issued by others;
(3) Invest in oil, gas or other mineral leases, rights or royalty
contracts or in real estate, commodities or commodity contracts;
(4) Make loans to other persons, except by the purchase of bonds or
other obligations constituting part of an issue and short term
obligations which are well protected (i.e., creditworthy) in the
opinion of management. (For purposes of this investment
restriction, neither (i) entering into repurchase agreements nor
(ii) the purchase of bonds, debentures, commercial paper,
corporate notes and similar evidences of indebtedness, which are
part of an issue to the public, is considered the making of a
loan;
(5) With respect to 75% of its total assets, purchase more than 10%
of the outstanding voting securities of any one issuer or invest
more than 5% of the value of its total assets in the securities
of one issuer, except the U.S. Government, its agencies and
instrumentalities;
(6) Borrow money in excess of 10% of its total assets (taken at cost)
or 5% of its total assets (taken at current value), whichever is
lower, nor borrow any money except as a temporary measure for
extraordinary or emergency purposes.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment restrictions above have been adopted by the Fund as
fundamental policies. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined under the 1940 Act. "Majority" means the lesser of (1) 67%
or more of the shares present at a meeting of shareholders of the Fund, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (2) more than 50% of the outstanding shares of the
Fund. Non-fundamental investment restrictions may be changed at any time by vote
of a majority of the Trust's Board of Trustees.
In addition to the fundamental restrictions set forth above, it is the
fundamental policy of the Fund not to purchase any security (other than U.S.
Government obligations) if, as a result, more than 25% of the Fund's total
assets (taken at current value) would then be invested in any one industry.
Although it is a fundamental policy of the Fund not to invest in real estate,
the Fund may purchase publicly traded securities issued by real estate
investment trusts.
Repurchase agreements in which the Fund may invest are agreements by
which the Fund purchases a security and obtains a simultaneous commitment from
the seller (a bank or, to the extent permitted by the 1940 Act, a recognized
securities dealer) to repurchase the security at an agreed-upon price and date
(usually seven days or less from the date of original purchase). The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
the Fund the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality of
the U. S. Government, the obligation of the seller is not guaranteed by the U.S.
Government and there is a risk that the seller may fail to repurchase the
underlying security. In such event, the Fund would attempt to exercise rights
with respect to the underlying security, including possible disposition in the
market. However, the Fund may be subject to various delays and risks of loss,
including (1) possible declines in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (2) possible
reduced levels of income and lack of access to income during this period, and
(3) inability to enforce rights and the expenses involved in attempted
enforcement.
PORTFOLIO TURNOVER
Although the Fund's objective is long-term capital appreciation, it
frequently sells portfolio securities in response to changes in market
conditions or outlook, even though those securities may only have been held for
short periods of time. This policy may result in higher securities transaction
costs. To the extent that this policy results in gains on investments, the Fund
will make distributions to shareholders, which may accelerate the shareholders'
tax liabilities for realized gains and may result in the distribution of
short-term capital gains taxable as ordinary income. See "Income Dividends,
Capital Gains Distributions and Tax Status."
The Fund's portfolio turnover rate for each of the last ten years is set
forth in the Prospectus under the table entitled "Financial Highlights." The
Fund's portfolio turnover rate has varied significantly from year to year in the
recent past due to the volatility of economic and market conditions, and the
Fund anticipates similar variations in the future.
MANAGEMENT OF THE FUND
PETER O. BROWN (Age 57) -- Trustee;
30 Douglas Road, Rochester, NY; Partner, Harter, Secrest & Emery;
formerly Executive Vice President and Chief Operating Officer,
The Glenmede Trust Company; formerly Senior Vice President, Chase
Lincoln First Bank, N.A.
NICHOLAS J. GRANT (Age 82) -- Trustee;
77 Massachusetts Avenue, Cambridge, MA; Professor of Metallurgy
and Materials Science, Massachusetts Institute of Technology.
G. KENNETH HEEBNER (Age 57)* -- Trustee and Vice President;
Employee, CGM; formerly Vice President and Director, Loomis
Sayles and Company, Incorporated ("Loomis Sayles").
ROBERT L. KEMP (Age 65)* -- Trustee and President;
Employee, CGM; formerly President and Director, Loomis Sayles.
ROBERT B. KITTREDGE (Age 77) -- Trustee;
21 Sturdivant Street, Cumberland Foreside, ME; Retired; formerly
Vice President, General Counsel and Director, Loomis Sayles.
LAURENS MACLURE (Age 72) -- Trustee;
183 Sohier Street, Cohasset, MA; Retired; formerly President and
Chief Executive Officer, New England Deaconess Hospital.
JAMES VAN DYKE QUEREAU, JR. (Age 49) -- Trustee;
59 Annewood Lane, Wayne, PA; Managing Partner, Stratton
Management Company; formerly Institutional Managing Partner,
Loomis Sayles.
J. BAUR WHITTLESEY (Age 51) -- Trustee;
1521 Locust Street, Philadelphia, PA; Attorney.
KATHLEEN S. HAUGHTON (Age 37) -- Vice President;
222 Berkeley Street, Boston, MA 02116; Employee -- Investor
Services Division, CGM; formerly Vice President, Boston Financial
Data Services, Inc.
LESLIE A. LAKE (Age 53) -- Vice President and Secretary;
Employee -- Office Administrator, CGM; formerly Office
Administrator, Capital Growth Management Division of Loomis
Sayles.
MARTHA I. MAGUIRE (Age 42) -- Vice President;
Employee -- Funds Marketing, CGM; formerly marketing
communications consultant (self-employed); formerly Sales
Promotion Consultant, The New England.
MARY L. STONE (Age 53) -- Assistant Vice President;
Employee -- Coordinator, Mutual Fund Recordkeeping, CGM; formerly
Coordinator, Mutual Fund Recordkeeping, Loomis Sayles
FRANK N. STRAUSS (Age 36) -- Treasurer;
222 Berkeley Street, Boston, MA 02116; Employee -- Chief
Financial Officer, CGM; formerly Vice President of Fund
Accounting, Freedom Capital Management Corporation and Assistant
Vice President, The Boston Company, Inc.
W. DUGAL THOMAS (Age 60) -- Vice President;
Employee -- Director of Marketing, CGM; formerly Director of
Marketing, Loomis Sayles.
- ----------
*Trustee deemed to be an "interested person" of the Fund, as defined by the
1940 Act.
Each of the Fund's trustees is also a trustee of one or more other
investment companies for which CGM acts as investment manager. Except as
indicated above, the address of each trustee and officer of the Fund affiliated
with CGM is One International Place, Boston, Massachusetts 02110.
As of March 31, 1998, the officers and trustees of the Fund owned
beneficially less than 1% of the outstanding shares of the Fund.
The Fund pays no compensation to its officers or to the trustees listed
above who are interested persons of the Fund. Officers and trustees receive no
pension or retirement benefits paid from Fund expenses. The following table sets
forth the compensation paid by the Trust to its trustees for the year ended
December 31, 1997:
<TABLE>
<CAPTION>
Pension Total
or Retirement Estimated Compensation From
Aggregate Benefits Accrued Annual Registrant and
Name of Compensation as Part of Fund Benefit Upon Fund Complex
Trustee From Trust Expenses Retirement Paid to Trustees(a)
- ------- ---------- ---------------- ------------ -------------------
<S> <C> <C> <C> <C>
Peter O. Brown $ 9,847 None None $37,000
Nicholas J. Grant 11,347 None None 43,000
G. Kenneth Heebner None None None None
Robert L. Kemp None None None None
Robert B. Kittredge 9,847 None None 37,000
Laurens MacLure 9,847 None None 37,000
James Van Dyke Quereau, Jr. 9,847 None None 37,000
J. Baur Whittlesey 9,847 None None 37,000
</TABLE>
- ----------
(a) The Fund Complex is comprised of two Trusts with a total of six funds.
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory Agreement CGM serves as investment manager of the Fund under an
advisory agreement approved by the shareholders of the Fund at a special meeting
held on December 12, 1996 and effective as of December 13, 1996. CGM has served
as investment manager of the Fund since March 1, 1990. Prior to March 1, 1990,
the Fund was managed by Loomis Sayles, whose Capital Growth Management Division
was reorganized into CGM on that date.
Under the advisory agreement, CGM manages the investment and
reinvestment of assets of the Fund and generally administers its affairs,
subject to supervision by the Board of Trustees of the Fund. CGM furnishes, at
its own expense, all necessary office supplies, facilities and equipment,
services of executive and other personnel of the Fund and certain administrative
services. For these services, CGM is compensated at the annual percentage rate
of 1.00% of the first $500 million of the Fund's average daily net asset value,
0.95% of the next $500 million of such value and 0.80% of such value in excess
of $1 billion. While this rate is higher than that paid by most other investment
companies, it is comparable to the fees paid by many investment companies having
investment objectives and policies similar to those of the Fund. For the fiscal
years ended December 31, 1995, 1996 and 1997, the advisory fee paid to CGM in
respect of services rendered to the Fund amounted to $3,323,791, $4,263,484 and
$7,210,245, respectively.
The Fund pays the compensation of its trustees who are not partners,
directors, officers or employees of CGM or its affiliates (other than registered
investment companies); registration, filing, and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Fund; the expenses of
meetings of the shareholders and trustees of the Fund; the charges and expenses
of the Fund's legal counsel; interest, including on any borrowings by the Fund;
the cost of services, including services of counsel, required in connection with
the preparation of, and the costs of printing registration statements and
prospectuses relating to the Fund, including amendments and revisions thereto,
annual, semiannual, and other periodic reports of the Fund, and notices and
proxy solicitation material furnished to shareholders of the Fund or regulatory
authorities, to the extent that any such materials relate to the Fund or its
shareholders; and the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
CGM also acts as investment adviser to CGM Mutual Fund, CGM Fixed Income
Fund, CGM American Tax Free Fund, CGM Realty Fund and CGM Focus Fund and three
other mutual fund portfolios. CGM also provides investment advice to other
institutional clients.
Certain officers and trustees of the Fund also serve as officers,
directors or trustees of other investment companies advised by CGM. The other
investment companies and clients served by CGM sometimes invest in securities in
which the Fund also invests. If the Fund and such other investment companies or
clients advised by CGM desire to buy or sell the same portfolio securities at
the same time, purchases and sales will be allocated to the extent practicable
on a pro rata basis in proportion to the amounts desired to be purchased or sold
for each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities which the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
trustees that the desirability of retaining CGM as adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.
Custodial Arrangements State Street Bank and Trust Company ("State
Street Bank"), Boston, Massachusetts 02102, is the Fund's custodian. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to the Fund. Upon instruction,
State Street Bank receives and delivers cash and securities of the Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Fund and calculates the total
net asset value, total net income, and net asset value per share of the Fund on
each business day.
Independent Accountants The Fund's independent accountants are Price
Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse LLP conducts an annual audit of the Fund's financial statements,
assists in the preparation of the Fund's federal and state income tax returns
and consults with the Fund as to matters of accounting and federal and state
income taxation. The information concerning financial highlights in the
Prospectus, and the financial statements incorporated by reference into this
Statement, have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Other Arrangements Certain office space, facilities, equipment and
administrative services for the Fund and other mutual funds under the investment
management of the CGM organization are furnished by CGM. In addition, CGM
provides bookkeeping, accounting, auditing, financial recordkeeping and related
clerical services for which it is reimbursed by the Fund based on the cost of
providing these services. For the services rendered to the Fund for the fiscal
years ended December 31, 1995, 1996 and 1997, CGM was reimbursed in the amounts
of $55,000, $58,000 and $60,000, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of portfolio securities for
the Fund, CGM always seeks the best price and execution. Transactions in
unlisted securities will be carried out through broker-dealers who make the
primary market for such securities unless, in the judgment of CGM, a more
favorable price can be obtained by carrying out such transactions through other
brokers.
CGM selects only brokers it believes are financially responsible, will
provide efficient and effective services in executing, clearing and settling an
order and will charge commission rates which, when combined with the quality of
the foregoing services, will produce the best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be competitive
with generally prevailing rates. CGM will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Fund will not
pay a broker a commission at a higher rate than is otherwise available for the
same transaction in recognition of the value of research services provided by
the broker or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which CGM believes will provide the best price and execution
for a transaction. These research services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce CGM's expenses. Such services may be used by CGM in servicing
other client accounts and in some cases may not be used with respect to the
Fund. Receipt of services or products other than research from brokers is not a
factor in the selection of brokers.
In 1997, brokerage transactions of the Fund aggregating $2,378,897,015
were allocated to brokers providing research services and $3,532,390 in
commissions were paid on these transactions. During 1995, 1996 and 1997, the
Fund paid total brokerage fees of $3,854,028, $3,432,939 and $3,635,840,
respectively.
DESCRIPTION OF THE FUND
The Declaration of Trust of the Fund currently permits the trustees to
issue an unlimited number of shares of beneficial interest of separate series
thereof. Interests in the portfolio described in the Prospectus and in this
Statement are represented by shares of a single series, which is the only series
authorized as of the date of this Statement (the "Original Series"). Each
share of the Original Series represents an interest in such series which is
equal to and proportionate with the interest represented by each other share.
The shares of the Original Series do not have any preemptive rights. Upon
liquidation of the portfolio, shareholders of the Original Series are entitled
to share pro rata in the net assets of such portfolio available for distribution
to shareholders. The Declaration of Trust also permits the trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses. The
trustees have no present intention of making such direct charges.
The Declaration of Trust also permits the trustees, without shareholder
approval, to create one or more additional series or classes of shares or to
reclassify any or all outstanding shares as shares of particular series or
classes, with such preferences and rights and eligibility requirements as the
trustees may designate. While the trustees have no current intention to exercise
the power to establish separate classes of the existing series of the Fund, it
is intended to allow them to provide for an equitable allocation of the impact
of any future regulatory requirements, which might affect various classes of
shareholders differently. The trustees may also, without shareholder approval,
merge two or more existing series.
Shareholder Rights
On March 31, 1998, there were 26,619,510 shares of the Fund outstanding.
On that date State Street Bank, acting as trustee for various retirement plans
and individual retirement accounts, owned 8,390,503 shares -- about 32% of the
total. In almost all cases, State Street Bank does not have the power to vote or
to dispose of the shares except at the direction of the beneficial owner.
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and may vote (to the extent
provided herein) in the election of trustees of the Fund and the termination of
the Fund and on other matters submitted to the vote of shareholders. There will
normally be no meetings of shareholders for the purpose of electing trustees,
except that in accordance with the 1940 Act (i) the Fund will hold a
shareholders' meeting for the election of trustees at such time as less than a
majority of the trustees holding office have been elected by shareholders, and
(ii) if the appointment of a trustee to fill a vacancy in the Board of Trustees
would result in less than two-thirds of the trustees having been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Fund's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for the purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by ten or more shareholders of record who have been such
for at least six months and who hold in the aggregate shares equal to at least
the lesser of (i) $25,000 in net asset value or (ii) 1% of the outstanding
shares, stating that shareholders wish to communicate with the other
shareholders for the purpose of obtaining the signatures necessary to demand a
meeting to consider removal of a trustee, the Fund will either provide access to
a list of shareholders or disseminate appropriate materials (at the expense of
the requesting shareholders). Except as set forth above, the trustees shall
continue to hold office and may appoint successor trustees. Voting rights are
not cumulative.
Shares of the Fund are freely transferable to new owners. However, new
owners will not be permitted to purchase additional shares.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the holders of the outstanding shares of the
Fund except (i) to change the Fund's name or to cure technical problems in the
Declaration of Trust and (ii) to establish, designate or modify new and existing
series or subseries of Fund shares or other provisions relating to Fund shares
in response to applicable laws or regulations. If one or more new series is
established and designated by the trustees, the shareholders of the Original
Series shall not be entitled to vote on matters exclusively affecting such new
series, such matters including, without limitation, the adoption of or change in
the investment objectives, policies or restrictions of the new series and the
approval of the investment advisory contracts of the new series. Similarly, the
shareholders of the new series shall not be entitled to vote on any such matters
exclusively affecting the Original Series. In particular, the phrase "majority
of the outstanding voting securities of the Fund" as used in this Statement
shall refer only to the shares of the Original Series.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund;
however, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Fund or
trustees. The Declaration of Trust provides for indemnification out of Fund
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Fund provide for indemnification by the Fund of
the trustees and officers of the Fund except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Fund. No officer
or trustee may be indemnified against any liability to the Fund or the Fund's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
HOW TO BUY SHARES
The eligibility requirements and procedures for purchasing shares of the
Fund are summarized in the Prospectus under "Who Can Purchase Shares" and "How
to Purchase Shares."
ADVERTISING AND PERFORMANCE INFORMATION
Calculation of Total Return
The Fund may include total return information in advertisements or
written sales material. Total return is a measure of the change in value of an
investment in the Fund over the period covered, which assumes that any dividends
or capital gains distributions are automatically reinvested in the Fund rather
than paid to the investor in cash. The formula for total return used by the Fund
includes three steps:
(1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares that would have been
purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested;
(2) calculating the value of the hypothetical initial investment as of
the end of the period by multiplying the total number of shares owned at the end
of the period by the net asset value per share on the last trading day of the
period; and
(3) dividing this account value for the hypothetical investor by the
amount of the initial investment, and annualizing the result for periods of less
than one year.
For the one, five and ten year periods ended December 31, 1997, the
Fund's average annual total return was 23.9%, 17.3% and 20.0%, respectively. For
the one, five, ten and twenty-five year periods ended December 31, 1997, the
total return on a hypothetical $1,000 investment in the Fund on an aggregate
basis was 23.9%, 122.1%, 519.6% and 4,808.8%, respectively.
In computing performance information for the Fund, no adjustment will be
made for a shareholder's tax liability on taxable dividends and capital gains
distributions.
Performance Comparisons
Total return may be used to compare the performance of the Fund against
certain widely acknowledged standards or indices for stock and bond market
performance or against the U.S.
Bureau of Labor Statistics' Consumer Price Index.
The Standard & Poor's 500 Composite Index (the "S&P 500") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the New York Stock
Exchange.
No brokerage commissions or other fees are factored into the values of
the S&P 500 and the Dow Jones Industrial Average.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of change, over time, in the prices of
goods and services in major expenditure groups.
Lipper Analytical Services, Inc., an independent service that monitors
the performance of over 11,332 mutual funds, calculates total return for those
funds grouped by investment objective. From time to time, the Fund may include
its ranking among mutual funds tracked by Lipper in advertisements or sales
literature.
Morningstar, Inc. ("Morningstar") is an independent mutual fund ranking
service. Morningstar proprietary ratings reflect historical risk-adjusted
performance and are subject to change every month. Funds with at least three
years of performance history are assigned ratings from one star (lowest) to five
stars (highest). Morningstar ratings are calculated from the funds' three-,
five-, and ten-year average annual returns (when available) and a risk factor
that reflects the fund performance relative to three-month Treasury bill monthly
returns. Funds' returns are adjusted for fees and sales loads. Ten percent of
the funds in an investment category receive five stars, 22.5% receive four
stars, 35% receive three stars, 22.5% receive two stars, and the bottom 10%
receive one star. From time to time, the Fund may include its ranking among
mutual funds tracked by Morningstar in advertisements or sales literature.
Value Line, Inc. ("Value Line"), an independent mutual fund ranking
service reviews the performance of 7,976 mutual funds. In ranking mutual funds,
Value Line uses two indicators: a Risk Rank to show the total level of risk a
fund has assumed and an Overall Rank measuring various performance criteria
taking risk into account. Funds are ranked from 1 to 5, with 1 the highest
Overall Rank (the best risk-adjusted performance) and the best Risk Rank (the
least risky). From time to time, the Fund may include ranking information
provided by Value Line in advertisements and sales literature.
From time to time, articles about the Fund regarding performance,
rankings and other characteristics of the Fund and information about persons
responsible for its portfolio management may appear in national publications and
major metropolitan newspapers including, but not limited to, The Wall Street
Journal, The Boston Globe, The New York Times and Barron's, Forbes, Fortune,
Money, Worth, Kiplinger's Personal Finance, Mutual Funds, Individual Investor,
Bloomberg Personal and Business Week magazines. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints of, or quotations
from, such articles may be used in the Fund's promotional literature.
The Fund has been continuously managed since 1976 by G. Kenneth Heebner.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price and net asset value
per share is summarized in the Prospectus under "Pricing of Shares."
The net asset value of a share of the Fund is determined by dividing the
Fund's total net assets (the excess of its assets over its liabilities) by the
total number of shares outstanding and rounding to the nearest cent. Such
determination is made as of the close of normal trading on the New York Stock
Exchange on each day on which the Exchange is open for unrestricted trading, and
no less frequently than once daily on each day during which there is sufficient
trading in the Fund's portfolio securities that the value of the Fund's shares
might be materially affected. During the 12 months following the date of this
Statement, the New York Stock Exchange is currently expected to be closed on the
following holidays: Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, New Year's Day, Martin Luther King, Jr. Day, Presidents' Day and
Good Friday.
Securities which are traded over-the-counter or on a stock exchange will
be valued according to the broadest and most representative market based on 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.
U.S. government securities are valued at the most recent quoted price on the
date of valuation.
For equity securities, it is expected that the broadest and most
representative market will ordinarily be either (i) a national securities
exchange, such as the New York Stock Exchange or American Stock Exchange, or
(ii) the NASDAQ National Market System. For corporate bonds, notes, debentures
and other fixed-income securities, it is expected that the broadest and most
representative market will ordinarily be the over-the-counter market.
Fixed-income securities may, however, be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees when such prices are
believed to reflect the fair market value of such securities. The prices
provided by the pricing service may be determined based on valuations for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Instruments with maturities of sixty days or less are valued at amortized cost,
which approximates market value. Other assets and securities which are not
readily marketable will be valued in good faith at fair value using methods
determined by the Board of Trustees.
SHAREHOLDER SERVICES
Open Accounts
A shareholder's investment is credited to an open account maintained for
the shareholder by the CGM Shareholder Services Department ("CGM Shareholder
Services") of Boston Financial Data Services, Inc. ("BFDS"), the shareholder
servicing agent for State Street Bank. The address is: CGM Shareholder Services,
c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
Certificates representing shares are issued only upon written request to
CGM Shareholder Services but are not issued for fractional shares. Following
each transaction in the account, a shareholder will receive an account statement
disclosing the current balance of shares owned and the details of recent
transactions that have taken place during the year. After the close of each
fiscal year, CGM Shareholder Services will send each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. The year-end statement should be retained as a
permanent record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates problems of handling and safekeeping, and the
cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are borne by the Fund,
and no direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
Systematic Withdrawal Plans ("SWP")
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of a shareholder provided that the account has a value of at least
$10,000 at the time the plan is established. A shareholder may establish a SWP
by completing the Service Options Form.
Payments will be made either to the shareholder or to any other person
or entity designated by the shareholder. If payments are issued to an individual
other than the registered owner(s) and/or mailed to an address other than the
address of record, a signature guarantee will be required on the Service Options
Form. Shares to be included in a Systematic Withdrawal Plan must be held in an
Open Account rather than certificated form. Income dividends and capital gain
distributions will be reinvested at the net asset value determined as of the
close of the New York Stock Exchange on the record date for the dividend or
distribution. If withdrawal checks are returned to the Fund as "undeliverable"
or remain uncashed for more than six months the shareholder's Systematic
Withdrawal Plan will be canceled, such undeliverable or uncashed checks will be
cancelled and such amounts reinvested in the Fund at the per share net asset
value determined as of the date of cancellation of the checks.
Since withdrawal payments represent in whole or in part proceeds from
the liquidation of shares, the shareholder should recognize that withdrawals may
reduce and possibly exhaust the value of the account, particularly in the event
of a decline in net asset value. Accordingly, the shareholder should consider
whether a Systematic Withdrawal Plan and the specified amounts to be withdrawn
are appropriate in the circumstances. The Fund makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
Exchange Privilege
A shareholder may exchange shares of the Fund for shares of CGM Mutual
Fund, CGM Fixed Income Fund, CGM American Tax Free Fund, CGM Realty Fund, CGM
Focus Fund, New England Cash Management Trust or New England Tax Exempt Money
Market Trust. The value of shares exchanged must be at least $1,000 and all
exchanges are subject to the minimum investment requirements of the fund into
which the exchange is being made. This option is summarized in the Prospectus
under "Shareholder Services--Exchange Privilege." The Fund reserves the right to
terminate or limit the privilege of a shareholder who makes more than four
exchanges (or two round trips) per year and to prohibit exchanges during the
first 15 days following an investment in the Fund. A shareholder may exercise
the exchange privilege only when the fund into which shares will be exchanged is
registered or qualified in the state in which such shareholder resides. If a
shareholder exchanges all shares from the Fund, he will be unable to reopen an
account in the Fund (unless he is currently the registered owner of another
account in the Fund).
Exchanges may be effected by (i) a telephone request to CGM Shareholder
Services at 800-343-5678, provided a special authorization form is on file with
the Trust, or (ii) a written exchange request to CGM Shareholder Services
accompanied by an account application for the appropriate fund. Exchange
requests cannot be revoked once they have been received in good order. The Fund
reserves the right to modify this exchange privilege without prior notice,
except as otherwise required by law or regulation.
For federal income tax purposes, an exchange constitutes a sale of
shares, which may result in a capital gain or loss.
Automatic Investment Plans ("AIP")
Once initial investment minimums have been satisfied (see "How to
Purchase Shares" in the Prospectus), a shareholder may participate in an
Automatic Investment Plan, pursuant to which the Fund debits $50.00 or more on
or about the same date each month from a shareholder's checking account and
transfers the proceeds into the shareholder's Fund account. To participate, a
shareholder must authorize the Fund and its agents to initiate Automated
Clearing House ("ACH") debits against the shareholder's designated checking
account at a bank or other financial institution. Please contact CGM Shareholder
Services at 800-343-5678 to determine the requirements associated with debits
from savings banks and credit unions. Debits from money market accounts are not
acceptable. Shareholders receive a confirmation of each purchase of Fund shares
under the AIP. If a shareholder elects to redeem shares of the Fund purchased
under the AIP within 15 days of such purchase, the shareholder may experience
delays in receiving redemption proceeds. See "All Redemptions."
Once a shareholder enrolls in the AIP, the Fund and its agents are
authorized to initiate ACH debits against the shareholder's account payable to
the order of The CGM Funds. Such authority remains in effect until revoked by
the shareholder, and, until the Fund actually receives such notice of
revocation, the Fund is fully protected in initiating such debits. Participation
in the AIP may be terminated by sending written notice to CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by calling
800-343-5678 more than 14 days prior to the next scheduled debit date. The Fund
may terminate a shareholder's participation in the AIP immediately in the event
that any item is unpaid by the shareholder's financial institution. The Fund may
terminate or modify the AIP at any time.
Retirement Plans
Under "Shareholder Services--Retirement Plans" the Prospectus refers to
several retirement plans. These include tax deferred money purchase pension or
profit sharing plans, as well as SEP-IRAs, Traditional and Roth IRAs and
403(b)(7) custodial accounts established under retirement plans sponsored by
CGM. These plans may be funded with shares of the Fund.
For participants under age 59 1/2, generally, all income dividends and
capital gain distributions of plan participants must be reinvested. Plan
documents and further information can be obtained from the Fund by writing or
calling the Fund as indicated on the cover of this Statement.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
Address Changes
Shareholders can request to change their record address either by
telephone or in writing (by mail or delivery service, but not by facsimile) in
accordance with the policies and procedures of the Fund. After an address change
is made, no telephone or written redemption requests will be honored for three
months unless the registered owner's signature is guaranteed on the request.
Written requests for a change of address may be mailed to: CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be
guaranteed by an eligible guarantor institution in accordance with procedures
established by the Trust. Signature guarantees by notaries public are not
acceptable.
The procedures established by the Fund provide that an "eligible
guarantor institution" means any of the following: banks (as defined in ss. 3(a)
of the Federal Deposit Insurance Act (the "FDIA") [12 U.S.C. ss. 1813(a)]);
brokers, dealers, municipal securities brokers, government securities dealers
and government securities brokers, as those terms are defined under the
Securities Exchange Act of 1934 (the "Act"); credit unions (as defined in ss.
19(b)(1)(A) of the Federal Reserve Act [12 U.S.C. ss. 461(b)]); national
securities exchanges, registered securities associations and clearing agencies,
as those terms are defined under the Act and savings associations (as defined in
ss. 3(b) of the FDIA [12 U.S.C. ss. 1813(b)]). However, as noted in the
Prospectus, a signature guarantee will not be required if the proceeds of the
redemption do not exceed $25,000, and the proceeds check is made payable to the
registered owner(s) and mailed to the record address, which has not changed in
the prior three months. If the record address has changed within the prior three
months, a signature guarantee will be required. This policy applies to both
written and telephone redemption requests.
Redeeming by Telephone
There are two ways to redeem by telephone. In either case, a shareholder
should call 800-343-5678 prior to 4:00 p.m. (Eastern time). Requests made after
that time or on a day when the New York Stock Exchange is not open for business
cannot be accepted. Telephone redemptions are not available for Traditional or
Roth IRAs, SEP-IRAs, 403(b)(7) custodial accounts or money purchase pension and
profit sharing plans under a CGM retirement plan where State Street Bank is the
custodian or trustee.
Check Sent to the Record Address
A shareholder may request that a check be sent to the record address on
the account, provided that the address has not changed for the last three months
and the shareholder is redeeming $25,000 or less. Except in the case of a CGM
retirement plan, the service option of telephone redemption by check is
available to shareholders automatically unless this option is declined in the
application or in writing. The check will be made payable to the registered
owner(s) of the account.
If checks representing redemption proceeds are returned "undeliverable"
or remain uncashed for six months, such checks shall be canceled and such
proceeds shall be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation of such
checks.
Proceeds Wired to a Predesignated Bank
A shareholder may request that the redemption proceeds be wired to the
bank selected on the Fund application or subsequently on the Service Options
Form available from the Fund. A nominal wire fee, currently $5.00, is deducted
from the proceeds. When selecting the service, a shareholder must designate a
bank account to which the redemption proceeds should be wired. Any change in the
bank account so designated may be made by furnishing CGM Shareholder Services a
completed Service Options Form with a signature guarantee. Whenever the Service
Options Form is used, the shareholder's signature must be guaranteed as
described above. Telephone redemptions may only be made if an investor's bank is
a member of the Federal Reserve System or has a correspondent bank that is a
member of the System. If the account is with a savings bank, it must have only
one correspondent bank that is a member of the System.
All Redemptions
The redemption price will be the net asset value per share next
determined after the redemption request is received by CGM Shareholder Services
in good order (including any necessary documentation). Redemption requests
cannot be revoked once they have been received in good order. Proceeds resulting
from a written redemption request will normally be mailed to you within seven
days after receipt of your request in good order. Telephone redemption proceeds
will normally be mailed or wired within seven days following receipt of a proper
redemption request. If you purchased your Fund shares by check (or through your
AIP) and elect to redeem shares within 15 days of such purchase, you may
experience delays in receiving redemption proceeds. The Fund will process your
redemption request upon receipt of a request in good order. However, the Fund
will generally postpone sending your redemption proceeds from such investment
until it can verify that your check (or AIP investment) has been or will be
collected. Under ordinary circumstances, the Fund cannot verify collection of
individual checks (or AIP investments) and may therefore automatically hold
proceeds from redemptions requested during the 15 day period following such
investment for a total of up to seven days. There will be no such automatic
delay following investments paid for by federal funds wire or by bank cashier's
check, certified check or treasurer's check although the Fund may in any case
postpone payment of redemption proceeds for up to seven days.
The Fund will normally redeem shares for cash; however, the Fund
reserves the right to pay the redemption price wholly in kind or partly in kind
and partly in cash if the Board of Trustees of the Fund determines it to be
advisable in the interest of the remaining shareholders. If portfolio securities
are distributed in lieu of cash, the shareholder will normally incur brokerage
commissions upon subsequent disposition of any such securities. However, the
Fund has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Fund is obligated to redeem shares solely in cash for any shareholder
during any 90-day period up to the lesser of $250,000 or 1% of the total net
asset value of the Fund at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gains Distributions and Tax Status."
Because the expense of maintaining small accounts is disproportionately
high, the Fund may close accounts with 20 shares or less and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of the Fund's intention to close the account, and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to retirement and Uniform Gifts to Minors Act
or Uniform Transfers to Minors Act accounts.
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Capital Gains
Distributions and Taxes" it is the policy of the Fund to pay annually, as
dividends, substantially all net investment income and to distribute annually
all net realized capital gains, if any, after offsetting any capital loss
carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of the New York Stock Exchange on the record date for such dividend or
distribution. Shareholders, however, may elect to receive their income dividends
or capital gain distributions, or both, in cash. However, if a shareholder
elects to receive capital gains in cash, his or her income dividends must also
be received in cash. Shareholders can elect to receive payments of cash
dividends and capital gains distributions either by check or by direct deposit
to a bank account that they have predesignated. These elections can be made at
the time the account is opened and may be changed by the shareholder at any time
by submitting a written request directly to CGM Shareholder Services or by
calling 800-343-5678. However, changes in bank account information for direct
deposits of cash dividends and capital gains distributions must be made through
a Service Options Form. In order for a change to be effective for any dividend
or distribution, it must be received by CGM Shareholder Services on or before
the record date for such dividend or distribution. If a shareholder elects to
receive distributions in cash and checks are returned "undeliverable" or remain
uncashed for six months, such shareholder's cash election will be changed
automatically and the shareholder's future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, following
such six month period, any undeliverable or uncashed checks will be canceled and
such amounts reinvested in the Fund at the per share net asset value determined
as of the date of cancellation of such checks.
The Fund has met, and intends to continue to meet, the requirements of
the Internal Revenue Code with respect to regulated investment companies.
The distributions received by the Fund from its investments may, for
federal income tax purposes, consist of ordinary income, long-term capital gains
or a return of capital. The characterization of these distributions to the Fund
may, in turn, affect the tax treatment of the Fund's distributions to its
shareholders. Dividends and distributions are taxable to shareholders in the
same manner whether received in cash or reinvested in additional shares of the
Fund.
Dividends paid by the Fund from net investment income, including
dividends, interest and net short-term capital gains, will be taxable to
shareholders as ordinary income. Distributions of net capital gains (the excess
of net long-term capital gains over net short-term capital losses) which are
designated by the Fund as capital gains distributions are taxable as long-term
capital gains, regardless of the length of time shareholders have owned shares
in the Fund. Dividends and distributions are taxable to shareholders in the same
manner whether received in cash or reinvested in additional Fund shares. Because
of recent changes in the tax law, capital gains distributions to shareholders
that are individuals, trusts and estates may be subject to varying tax rates. To
the extent that the Fund makes a distribution in excess of its current and
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing the tax basis in a shareholder's shares,
and then, to the extent the distribution exceeds such basis, as a taxable gain
to be realized upon sale of such shares.
Dividends and distributions on Fund shares received shortly after their
purchase, although in effect a return of capital, are subject to federal income
taxes.
The Fund will report to its U.S. shareholders and the IRS the amount of
dividends paid during each calendar year and the amount of tax withheld, if any.
Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid and redemptions
unless such shareholder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies that the shareholder is not subject to
backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder who does not provide the Fund with his
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
shareholder's income tax liability.
As required by federal law, detailed federal tax information is
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
Investors should consult their tax advisors regarding the application of
the above-described general federal taxation rules to their own circumstances
and the state, local, or foreign tax consequences to them of any investment in
the Fund.
FINANCIAL STATEMENTS
The financial statements and Report of Independent Accountants for the
year ended December 31, 1997, included in the Fund's Annual Report to
Shareholders for the year ended December 31, 1997, are incorporated herein by
reference.
DOCSC\338977.6
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements with respect to CGM Capital Development
Fund are incorporated herein by reference to the Fund's Annual
Report to Shareholders for the year ended December 31, 1997
(File No. 2-16252) filed on February 24, 1998.
(b) Exhibits:
(1) Amended and Restated Agreement and Declaration of Trust
of the Registrant.(i)
(2) By-Laws of the Registrant.(i)
(3) None.
(4) Form of share certificate of the Registrant.(i)
(5) Advisory Agreement dated December 13, 1996.(i)
(6) None.
(7) None.
(8) Custodian Agreement of the Registrant.(i)
(9) Powers of Attorney.(i)
(10) None.
(11) Consent of independent accountants is filed herewith.
(12) None.
(13) None.
(14) Forms of The CGM Funds Retirement Plans are filed
herewith.
(15) None.
(16) None.
(17) Financial data schedule is filed herewith.
(18) None.
(i) Filed as an exhibit to Post-Effective Amendment No. 62 to
the Registrant's Registration Statement on Form N-1A (File
No. 2-16252) filed February 27, 1997 under the same
exhibit number and incorporated herein by reference.
<PAGE>
Item 25. Persons Controlled by or Under Common Control With Registrant
Information pertaining to persons controlled by or under common
control with the Registrant is hereby incorporated by reference to
the section captioned "The Fund's Investment Manager" in the
Prospectus and the section captioned "Investment Advisory and Other
Services - Advisory Agreement" in the Statement of Additional
Information.
Item 26. Number of Holders of Securities
The following table sets forth the number of record holders of each
class of securities of the Registrant as of March 31, 1998:
Number of Record
Title of Class Holders
-------------- ----------------
Shares of Beneficial
Interest, Original Series 10,819
Item 27. Indemnification
See Article 4 of the Trust's By-Laws filed herewith. In addition,
the Trust maintains a trustees and officers liability insurance
policy with maximum coverage of $5 million under which the Trust and
its trustees and officers will be named insureds.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the Trust's
By-Laws, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Capital Growth Management Limited Partnership ("CGM"), the
Registrant's investment manager, provides investment advice to a
number of other registered investment companies and to other
organizations and individuals.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents
required by the specified rules:
(a) Registrant
Rule 31a-l(a)(4); Rule 31a-1(d)
Rule 31a-2(a); Rule 31a-2(c)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-l(a)
Rule 31a-l(b)(1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)
(c) Capital Growth Management Limited Partnership
One International Place
Boston, Massachusetts 02110
Rule 31a-l(a); 31a-l(b)(9), (10), (11); 31a-l(f)
Rule 31a-2(a); 31a-2(e)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes to comply with Section 16(c)
of the Investment Company Act of 1940 as though such
provision of the Act were applicable to the Registrant,
except that the request referred to therein may only be
made by shareholders who hold in the aggregate at least
one percent of the outstanding shares of the Registrant
or shares with an aggregate net asset value of $25,000.
(b) Not Applicable.
(c) The Registrant undertakes to furnish, upon request and
without charge, to each person to whom a prospectus is
delivered, a copy of the Registrant's latest annual
report to shareholders.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
post-effective amendment to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and the Registrant further certifies that it has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts, on the 24th day of April, 1998.
CGM Capital Development Fund
By: /s/ Robert L. Kemp
-------------------
Robert L. Kemp
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to this Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <C> <C>
/s/ Robert L. Kemp President (Principal Executive April 24, 1998
- --------------------------- Officer) and Trustee
Robert L. Kemp
/s/ Frank N. Strauss Treasurer (Principal Financial April 24, 1998
- --------------------------- and Accounting Officer)
Frank N. Strauss
* Trustee April 24, 1998
- ---------------------------
Peter O. Brown
* Trustee April 24, 1998
- ---------------------------
Nicholas J. Grant
* Trustee April 24, 1998
- ---------------------------
G. Kenneth Heebner
* Trustee April 24, 1998
- ---------------------------
Robert B. Kittredge
* Trustee April 24, 1998
- ---------------------------
Laurens MacLure
* Trustee April 24, 1998
- ---------------------------
James Van Dyke Quereau, Jr.
* Trustee April 24, 1998
- ---------------------------
J. Baur Whittlesey
*By: /s/ Robert L. Kemp
-----------------------
Attorney-In-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ------ ------- -------------
11 Consent of Independent Accountants
14 Forms of the CGM Retirement Plans
27 Financial Data Schedule
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 63 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 9, 1998, relating to the financial
statements and financial highlights appearing in the December 31, 1997 Annual
Report to Shareholders of the CGM Capital Development Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the heading "Independent Accountants" and "Financial Statements" in
the Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
April 24, 1998
<PAGE>
Exhibit 14
THE CGM FUNDS
- --------------------------------------------------------------------------------
IRA
PLAN DOCUMENT AND
DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSIDE . . .
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE 1 INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE 2 Q&As ABOUT IRAs
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE 4 DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE 9 PLAN DOCUMENT
- --------------------------------------------------------------------------------
IRAF2/98
<PAGE>
INVESTMENT OPTIONS
NO-LOAD MUTUAL FUNDS
The no-load funds eligible for your IRA investments are listed below. You may
invest either in one, or in a combination of the funds best suited to your
circumstances. The funds have different investment objectives and offer a
range of investment income and appreciation potential. Be sure to read each
fund's prospectus before you invest or send money.
STOCKS AND BONDS
CGM MUTUAL FUND is a flexibly managed balanced fund that seeks reasonable
long-term capital appreciation with a prudent approach to protection of
capital from undue risks. Consideration is given to the production of current
income in the selection of stocks and bonds for the Fund's portfolio.
BONDS
CGM FIXED INCOME FUND is a "total return" bond fund. The Fund's objective is
to maximize total return by investing in debt securities and preferred stocks
that provide current income, capital appreciation or a combination of both
income and appreciation.
MONEY MARKET
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES is a money market
fund that seeks to provide maximum current income consistent with preservation
of capital by investing in a variety of high quality money market instruments.
The Trust is managed by Back Bay Advisors, L.P.
STOCKS
CGM FOCUS FUND is a non-diversified and flexibly managed mutual fund that
seeks long-term growth of capital. The Fund intends to pursue its objective by
investing in a core position of equity securities. The Fund may engage in a
variety of investment techniques designed to capitalize on declines in the
price of specific equity securities of one or more companies.
CGM REALTY FUND is a mutual fund that seeks above-average income and long-term
growth of capital. The Fund pursues its objective by investing primarily in
equity securities of companies in the real estate industry.
CGM CAPITAL DEVELOPMENT FUND is an aggressively managed growth fund that seeks
long-term capital appreciation in a diverse group of companies and industries
believed to provide opportunities for capital development. Note: Shares are
available only to certain individuals. Eligibility categories are listed
below.
ELIGIBILITY FOR CGM CAPITAL DEVELOPMENT FUND
Only shareholders of the Fund as of September 24, 1993 who have remained
shareholders continuously since that date may purchase additional shares of the
Fund. The Fund reserves the right to reject any purchase order. This policy
supersedes all previous eligibility requirements.
Fund shares are not generally available to other persons except in special
circumstances that have been approved by, or under the authority of, the Board
of Trustees of the Fund. The special circumstances currently approved by the
Board of Trustees of the Fund are limited to the offer and sale of shares of
the Fund to the following additional persons: trustees of the Fund, employees
of the Investment Manager and counsel to the Fund and the Investment Manager.
<PAGE>
QUESTIONS AND ANSWERS ABOUT IRAS
ELIGIBILITY
WHO CAN OPEN AN IRA?
Anyone who earns income and is still under age 70 1/2 at the end of the
calendar year can set up an IRA.
CAN I SIMULTANEOUSLY HAVE TWO OR MORE IRA ACCOUNTS?
Yes. However, no more than a total of $2,000 may be contributed to your IRA
accounts in any one tax year.
CAN I CONTRIBUTE TO MY SPOUSE'S IRA?
Yes. A separate IRA (a "spousal IRA") can be set up for the benefit of your
spouse if
- --you have compensation or earned income,
- --your spouse has not attained age 70 1/2, and
- --you and your spouse file a joint income tax return.
CAN MY CHILD, WHO IS A MINOR, ESTABLISH AN IRA ACCOUNT?
Yes, provided he or she has earned income. The application must be signed by
both the parent and child.
CONTRIBUTIONS
WHAT IS THE MAXIMUM ANNUAL CONTRIBUTION I CAN MAKE TO MY IRA (DEDUCTIBLE PLUS
NON-DEDUCTIBLE)?
You may contribute $2,000 or 100% of your earned income, whichever is less.
Please refer to IRS Publication 590 for information about computing the amount
that may be deductible.
WHAT IS THE MAXIMUM ANNUAL CONTRIBUTION THAT CAN BE MADE TO MY IRA AND MY
SPOUSE'S IRA?
A total of $4,000 or 100% of your joint earned income, whichever is less, can
be contributed to your own IRA and your spouse's IRA. The contributions may be
divided between the two separate IRAs in any way you wish, provided neither
IRA receives more than $2,000, and the contribution to the higher earning
spouse's IRA does not exceed his or her earned income.
CAN I CONTRIBUTE LESS THAN THE MAXIMUM?
Yes, you can contribute any amount you wish up to the maximum amount for your
IRA (and your spouse's IRA) for each taxable year. CGM requires an initial
investment of $1,000 per account, and a $50 minimum for each subsequent
investment.
CAN BOTH A HUSBAND AND WIFE WHO WORK HAVE IRAS?
Yes. If you both have earned income, you can each have your own IRA.
WHEN DO I MAKE MY CONTRIBUTION?
You can make a contribution for a particular year any time from the beginning
of the tax year until April 15 of the following year.
TO WHOM SHOULD I MAKE MY CHECK PAYABLE?
Make your check payable to the fund in which you want to invest. If you are
investing in more than one fund, enclose a check for each fund. Be sure to add
$5 to your investment to establish your IRA.
WHEN WILL I RECEIVE A STATEMENT CONFIRMING MY INITIAL INVESTMENT?
Upon receipt of your application and check, we will establish your account and
send you a confirmation statement.
DO I HAVE TO CONTRIBUTE TO AN IRA EACH YEAR?
No. You need not contribute to an IRA each year. You can also vary the amount
of contributions to your IRA when you do contribute.
WHAT IF I CONTRIBUTE MORE THAN THE MAXIMUM AMOUNT ALLOWED?
If you withdraw the excess contribution and its earnings before you file your
tax return (including extensions) for the year, you won't be subject to the 6%
penalty on the excess contribution described below. You will be subject,
however, to income taxes (and a 10% penalty tax if you are under age 59 1/2)
on the earnings of the excess contribution.
Another method for correcting the excess contribution is to leave the money in
your IRA and apply the excess to your next year's contribution. If you do
that, however, you would be subject to a 6% penalty tax on the excess
contribution in the year in which it was made and each subsequent year it
remains an excess contribution.
MAY I MAKE ANNUAL CONTRIBUTIONS TO AN IRA AFTER I REACH AGE 70 1/2?
No. If you reach age 70 1/2 by the end of the year, you will not be able to
make a regular contribution to your IRA. (You may make a rollover
contribution, however.) In addition, no contributions may be made to your
spouse's IRA after he or she reaches age 70 1/2.
TRANSFERS AND ROLLOVERS
HOW DO I TRANSFER ASSETS OR DIRECTLY ROLLOVER ASSETS TO CGM?
Complete the CGM IRA Account Application, Direct Rollover Form or IRA Transfer
Form and send them to The CGM Funds at the address on the back of this
booklet, along with a check for $5.
IF I ALREADY HAVE RECEIVED A CHECK FOR MY ROLLOVER, WHAT FORMS DO I SUBMIT?
Send the CGM IRA Account Application and your investment check, plus $5 to
CGM.
WHEN WILL I RECEIVE A STATEMENT CONFIRMING MY TRANSFER OF ASSETS OR DIRECT
ROLLOVER?
Upon receipt of your application and transfer or rollover request we will then
establish your Account and send your current trustee and you a Letter of
Acceptance. Once we receive the proceeds of the transfer or rollover, we will
send you a confirmation statement. Asset transfers generally take 2-4 weeks.
Direct rollovers can take as long as three months, depending on how frequently
the current trustee makes distributions from the plan.
WHAT IS A TRANSFER OF ASSETS?
A transfer of assets is the direct transfer of monies from one IRA to another
IRA. The assets must be transferred directly from one trustee, custodian or
insurance company to another.
WHAT ARE THE THREE TYPES OF IRA ROLLOVERS?
You may make three types of IRA rollovers: regular rollovers, direct rollovers
and indirect rollovers.
A REGULAR IRA ROLLOVER occurs when you withdraw assets from your IRA and,
within 60 days, reinvest them into another IRA. Such rollovers may be made
only once every 365 days.
A DIRECT ROLLOVER takes place when you choose to have an eligible rollover
distribution from a qualified plan or 403(b) plan placed directly in an IRA
already established at a financial organization. In this case, there is no
mandatory tax withholding.
An INDIRECT ROLLOVER occurs when you receive an eligible rollover distribution
from a qualified plan or 403(b) plan and then, within 60 days, you roll the
distribution into an IRA plan. In this case, the payor is required by law to
withhold 20% of the amount of your distribution for taxes. You will receive
only 80% of the distribution amount. Such distribution proceeds should not be
commingled with your contributory IRA account if you ever plan to reinvest the
assets in a qualified plan or tax sheltered annuity.
PLEASE NOTE: The IRS has no provisions for extending the 60 day rollover
period. The 60 days begin on the day that you receive the check and end on the
day you mail the check to the successor custodian.
<PAGE>
DISCLOSURE STATEMENT
THE CGM FUNDS IRA
FEATURES OF THE PLAN
The following information is provided to you as required by the Internal
Revenue Code. Please read this information along with the Individual
Retirement Custodial Account Agreement for an explanation of the key features
of the applicable law and the Plan. Your right to your account, or, in the
event of death, the right of your beneficiary or estate, is at all times non-
forfeitable.
RIGHT TO REVOKE
You may revoke your enrollment in an IRA account by giving written notice
within seven days after the account is established. Notice of revocation must
be mailed to the Custodian, State Street Bank and Trust Company, at P.O. Box
8511, Boston, MA 02266 or hand delivered to the Custodian, c/o BFDS, 2
Heritage Drive, N. Quincy, MA 02171. Notice will be deemed to have been mailed
on the date of the postmark (or if sent by registered or certified mail, the
date of certification or registration) when deposited in the mail in the
United States, first class postage prepaid, properly addressed. If you revoke
your account, the entire amount you paid in will be returned to you promptly,
without deductions or adjustments of any kind. If you participate in an IRA
account plan established by your employer, your seven-day withdrawal period
will commence as of the date on which your first contribution is made.
ELIGIBILITY
In general, everyone under age 70 1/2 who earns a wage or salary or earns a
profit from his work is eligible to participate. Also married individuals who
are eligible may establish a separate IRA on behalf of their non-working
spouses (a "Spousal IRA"). Furthermore, divorced or legally separated
individuals may contribute to an IRA based on the alimony payments they
receive.
CONTRIBUTIONS
You are eligible to make a contribution each year to your IRA until the
calendar year in which you attain age 70 1/2. The maximum amount that you can
contribute in any year is an amount equal to the lesser of your total annual
compensation or $2,000. Compensation includes earned income from self-
employment. Alimony payments may be treated as compensation. If an IRA is also
established for the benefit of your spouse, the overall limit for
contributions to both IRAs is $2,250 for years before 1997 and $4,000 for 1997
and thereafter (but you still may not contribute more than 100% of your total
annual compensation, and the amount contributed to either IRA may not exceed
$2,000). Your contribution may be made at any time during the taxable year or
after the end of the taxable year up to the time for filing your individual
tax return for that year (without regard to any extension). For most
individuals, the deadline would be April 15. You do not have to contribute
each year, nor are you required to contribute the same amount each year. You
may make your contributions in convenient installments as set forth in the
Account Application. Your account will be in your name, your spouse's account,
if any, will be in his or her name, and you are entitled to the tax deduction.
To keep an IRA qualified, you will need to report your deduction on your
annual IRS tax return, Form 1040. You do not have to itemize deductions in
order to deduct an IRA contribution on your income tax return. Your regular
contributions must be made in cash or by check. Your employer may be willing
to help by deducting from your pay the amount you specify and sending it to
the Custodian for your account.
DEDUCTIBILITY OF IRA CONTRIBUTIONS
The amount of the contribution for which you may take a tax deduction will
depend upon whether you (or your spouse) are an active participant in an
employer-maintained retirement plan. If you (and your spouse) are not an
active participant, your IRA contribution will be totally deductible. If you
(or your spouse) are an active participant, the deductibility of your
contribution will depend on your adjusted gross income (AGI) for the tax year
for which the contribution was made. AGI is determined on your tax return
(disregarding any deductible IRA contribution).
Definition of Active Participant: Generally, you will be an active participant
if you are covered by one or more of the following employer-maintained
retirement plans:
1. a qualified pension, profit sharing, or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation plans
under IRC Section 457);
5. a tax sheltered annuity for employees of certain tax-exempt organizations
or public schools;
6. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan); and
7. a Savings Incentive Match Plan for Employees (SIMPLE) IRA or 401(k) plan.
If you do not know whether your employer maintains one of these plans or
whether you are an active participant in it, check with your employer and your
tax advisor. Also, the Form W-2 (Wage and Tax Statement) that you receive at
the end of the year from your employer will indicate whether you are an active
participant.
The deductible amount of your contribution is determined by taking your
threshold AGI level plus $10,000 and subtracting from it your AGI --
determined prior to taking your itemized deductions. [N.B. If you are single,
your threshold AGI level is $25,000. The threshold level if you are married
and file a joint tax return is $40,000, and if you are married but file a
separate tax return, the threshold level is $0.00. If your AGI is less than
$10,000 above the threshold level, you will still be able to make a deductible
contribution but it may be limited in amount -- but never less than $200.]
Multiply the resulting number by 0.2 (or 0.4 if you are making spousal
contributions) to give you your personal deduction limit. You must round up
the resulting number to the next highest $10.00 if the number is not a
multiple of 10.
ROLLOVER CONTRIBUTIONS
An IRA may be used to make a "rollover" contribution of assets received by you
from a qualified employee benefit plan in which you previously participated.
Anyone who receives a lump sum payment of accumulated benefits in a qualified
employee benefit plan can preserve tax sheltered treatment of these assets by
investing them in an IRA within 60 days. In order to avoid tax withholding,
the rollover should be made as a "direct rollover," and should be coordinated
through your employer. In this manner, assets transferred from another
retirement program are kept invested, tax consequences stemming from the
payment are deferred until distributions are made from your IRA account, and
you have the option to "rollover" the assets later to a tax-qualified program
of a subsequent employer, a retirement annuity or another IRA. You can
rollover the entire amount of your distribution from a qualified employee
benefit plan (less any non-deductible contributions you made to the plan) to
your IRA or you can rollover only a portion of the distribution. If you do not
rollover the entire distribution, however, the portion of the distribution not
included in the rollover will be taxed as ordinary income.
The rollover contribution should be segregated from an IRA account into which
current contributions are made if you wish to preserve the option to rollover
such amount at a later time to a tax-qualified program of a subsequent
employer. Anyone desiring to make such a segregation of a "rollover"
contribution should open two separate IRA accounts. Rollover contributions may
be made in the form of securities or other assets with the Trustee's approval.
An IRA rollover also occurs in the case where assets from one IRA to which you
have made current contributions are withdrawn by you and within 60 days are
reinvested into another IRA. A rollover can be made only once every 365 days.
Such rollover assets need not be segregated from an IRA account into which
current contributions are being made.
EXCESS CONTRIBUTIONS
If you contribute more to the Plan than the law allows (as explained under
"Contributions"), you may withdraw the excess without the 6% penalty
(described below) if you do so by the due date for filing your Federal income
tax return (with extensions). You must also withdraw the earnings on the
excess and pay taxes and a 10% penalty on the amount of earnings. Excess
contributions in a taxable year can be corrected by withdrawing the excess
contribution in any later year provided that a tax deduction has not been
allowed for the excess contribution. Additionally, an excess contribution in
one taxable year (for which no tax deduction was taken) will be deductible in
a subsequent taxable year if, and to the extent that, the taxpayer contributes
less than the maximum deductible amount in that later year. Excess
contributions that are not withdrawn or utilized as a current contribution
during the year will be subject to a non-deductible excise tax of 6% for each
taxable year in which they remain uncorrected.
SEP-IRA CONTRIBUTIONS
If you participate in your employer's Simplified Employee Pension Plan (SEP-
IRA), your employer can make a contribution of 15% of your salary (up to
$160,000, as indexed). For Federal income tax purposes, these contributions
are deductible by your employer and are excluded from your income.
TRANSFERS OF ASSETS
You can transfer all or any portion of your IRA to or from any other IRA at
any time provided the proceeds are made payable and sent directly to the
Successor Trustee or Successor Custodian.
INVESTMENTS AND EARNINGS
Your contributions will be used to purchase shares of Funds selected on your
Account Application. Any dividend or capital gains distributions on the Funds'
shares will be invested in additional Funds' shares automatically. After age
59 1/2, you have the option of receiving your dividends and capital gains in
cash. These additional shares will represent your earnings from the account.
The assets available for distribution when you reach age 59 1/2, die, or
become disabled will be the market value of the shares your contributions and
earnings have purchased over the years. Due to the fluctuating value of the
Funds' investments, it is not possible to make a projection of expected
growth, and growth cannot be guaranteed. Investment information can be found
in each Fund's prospectus.
The law requires that the shares in your account be held by a custodian that
is a bank or other organization approved by the IRS. The Custodian of the Plan
meets this requirement. You will be entitled to vote the shares in your
account.
DISTRIBUTIONS
You may withdraw assets from your account at any time after age 59 1/2, and
before 70 1/2, without any restrictions. Penalties may apply in certain other
circumstances. (See Account Restrictions and Penalties, below). You must begin
to withdraw assets from your account no later than April 1 following the year
in which you attain age 70 1/2, (or the year you create a rollover IRA, if
later).
Your assets may, at your option, be distributed to you in the following ways:
(1) a lump sum payment of your entire account, in cash or Fund shares; (2)
installment payments in cash over a period certain not extending beyond your
life expectancy; (3) installment payments in cash over a period certain not
extending beyond the joint life and last survivor expectancy of you and your
beneficiary; or (4) in the form of an annuity contract.
If you die before distribution of your IRA begins, then the entire balance
must be distributed in cash or Fund shares to your beneficiary by December 31
of the year which contains the fifth anniversary of your death, or in
installment payments over a period certain not exceeding your beneficiary's
life expectancy, or in the form of an annuity contract for a similar period.
Installment payments must begin either by December 31 of the year following
your death or, if your beneficiary is your surviving spouse, not later than
the date you would have attained age 70 1/2. A surviving spouse beneficiary
also may elect to treat the IRA as his or her own IRA. If you die after
distribution of your IRA begins but before it is completed, the remaining
balance must be distributed to your beneficiary under a method which provides
for payment at least as rapidly as under the method of distribution in use
before your death.
You must begin to withdraw assets from your account no later than April 1
following the year you reach age 70 1/2. If you do not, or if you withdraw
less than the minimum amount described earlier under "Distributions," you will
incur an excise tax equal to 50% of the amount you should have withdrawn but
did not. The Secretary of the Treasury has the power to waive this 50% tax
penalty if the excess accumulation is due to reasonable cause and reasonable
steps are being taken to correct the excess. A non-deductible 50% excise tax
will be imposed on the difference between the minimum amount which should have
been paid out in any year based on the form of payment selected and the amount
actually paid out in that year. The tax is to be paid by the individual to
whom the minimum payments should have been made.
You will pay income taxes when your account is distributed. If the amount of
distributions you receive in any one year from your IRA and other retirement
plan exceeds $160,000 (as indexed), you will be subject to a 15% penalty on
the amount distributed in excess of $160,000. (IRC Sec 4980A -- This 15%
penalty tax is suspended for distributions received in 1997, 1998 and 1999.)
Depending upon your particular circumstances, you may find it advantageous to
withdraw your account in installments over a number of years. If you die
before receiving all of the assets in your account, the remainder of the
account is included in the assets of your estate for Federal estate tax
purposes. In addition, if the benefits in your IRA and other retirement plans
exceed certain threshold amounts, your estate may be subject to a 15% excise
tax on amounts in excess of the threshold amounts.
The tax laws provide that payments received from your IRA plan are subject to
Federal income tax withholding unless you elect not to have withholding apply.
Such election must be made in writing to the Custodian at the time you submit
your authorization for distribution.
DESIGNATING A BENEFICIARY
You may designate a beneficiary and change beneficiaries from time to time. If
you do not designate a beneficiary, your estate will receive the balance in
your account. Designating a beneficiary and changing beneficiaries is not
considered the making of a taxable gift.
FEES
The Custodian charges $5.00 when you establish your plan, $10.00 per year per
account as a maintenance fee, and $5.00 when an account is closed (including
exchanges). The Custodian reserves the right to increase these charges at any
time upon 30 days' advance notice. Capital Growth Management may partake in a
portion of the annual maintenance fee. The Custodian will send you a statement
of account annually informing you of the exact amount of contributions,
earnings, distributions, and year-end value. The Custodian will also send a
statement to the Internal Revenue Service as required by law.
ACCOUNT RESTRICTIONS AND PENALTIES
If you withdraw assets from your account before age 59 1/2, the distributions
will not only be included in your gross income, but also you will pay a non-
deductible excise tax equal to 10% of the amount withdrawn. An exception to
the 10% excise tax rule is made in the following five instances: (1) if assets
are withdrawn from your account upon your becoming disabled; (2) if assets are
withdrawn from your account for purposes of a rollover transfer; (3) if assets
are withdrawn from your account as part of a series of substantially equal
periodic payments for your life or life expectancy; (4) if assets are
withdrawn from your account for medical expenses to the extent that the
distributions do not exceed the amount allowed as a deduction, currently
7.5%,or (5) if assets are withdrawn from your account because you are
unemployed and have received unemployment compensation for 12 consecutive
weeks and because you use the proceeds to pay for health insurance.
There are very severe consequences if you use your Plan assets as security for
a loan or borrow any money from or through your IRA account, or engage in
other transactions prohibited by Section 4975(c) of the Internal Revenue Code.
Not only would your account lose its tax-exempt status, but you would be
required to include the entire value of the account's assets in your gross
income for the year in which the prohibited transaction occurred and to pay a
10% penalty, as well.
If you receive a premature distribution, make an excess contribution which is
not corrected in the time allowed, fail to withdraw the minimum amount
required to be withdrawn upon attainment of age 70 1/2, or receive an excess
distribution, you must file Form 5329 (return of excise tax) with the IRS
along with your annual tax return, Form 1040. In addition, if you make a non-
deductible contribution to your IRA in any year, you must file Form 8606 to
report the amount of the non-deductible contribution.
HOW TO PARTICIPATE
You may establish your own account simply by completing the Account
Application and mailing it to The CGM Funds with your first contribution. If
you need any assistance in completing the Account Application, please
telephone CGM at (800) 345-4048.
PLEASE NOTE: The foregoing is not a complete or definitive explanation of the
Plan or of the provisions of applicable law. Please do not complete the
Account Application without reading the Plan and the Fund prospectus which
must always accompany the Plan. Consult your financial or tax advisor if you
are uncertain whether a CGM Funds IRA is an appropriate program for your
investment needs.
<PAGE>
PLAN DOCUMENT
THE CGM FUNDS INDIVIDUAL
RETIREMENT ACCOUNT (THE "PLAN")
Form 5305-A under Section 408(a) of the Internal Revenue Code.
The Depositor whose name appears on the Application is establishing an
Individual Retirement Account under Section 408(a) to provide for his or her
retirement and for the support of his or her beneficiaries after death.
The Custodian named on the Application has given the Depositor the disclosure
statement required under Regulations Section 1.408-6.
The Depositor has assigned the Custodial Account the sum indicated on the
Application.
The Depositor and the Custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a Simplified
Employee Pension Plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a Simplified Employee Pension Plan described in Section
408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial Account is
nonforfeitable.
ARTICLE III
1. No part of the Custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of Section 408(a)(5)).
2. No part of the Custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the Custodial Account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are herein incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the Custodial Account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/ 2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the Custodial Account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is the
Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial Account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case of
distributions under paragraph 3, determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance
with paragraph 4(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) and
Regulations Sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with Section 408(a) and
related regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Application.
ARTICLE VIII
1. PLEASE REFER TO THE CGM IRA APPLICATION WHICH IS INCORPORATED INTO THIS
AGREEMENT AS THIS PARAGRAPH OF ARTICLE VIII.
2. DEFINITIONS The following definitions shall apply to terms used in this
Article VIII:
(a) "Account" or "Custodial Account" means the custodial account
established hereunder for the benefit of the Depositor.
(b) "Agreement" means the CGM IRA Custodial Agreement, including the
information and provisions set forth in any Account Application that
goes with this Agreement. This Agreement, including the Account
Application and any designation of Beneficiary filed with the
Custodian, may be proved either by an original copy or by a reproduced
copy thereof, including, without limitation, a copy reproduced by
photocopying, facsimile transmission, or electronic imaging.
(c) "Application" or "Account Application" shall mean CGM IRA Account
Application by which this Agreement, as may be amended from time to
time, is established between the Depositor and the Custodian. The
statements contained therein shall be incorporated into this Agreement.
(d) "Beneficiary" means the person or persons (including without limitation
an individual, a trust, an estate, an association or a corporation)
designated as such by the Depositor on a signed form acceptable to and
filed with the Custodian pursuant to Article VIII, Section 5.(a) of
this Agreement.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Company" shall mean Capital Growth Management Limited Partnership
("CGM"), or any successor or affiliate thereof to which CGM may, from
time to time, delegate or assign any or all of its rights or
responsibilities under this Agreement.
(g) "Custodian" shall mean State Street Bank and Trust Company of Boston,
Massachusetts, or its successors, as specified in the Account
Application.
(h) "Depositor" means the person named in the Account Application.
(i) "Fund" shall mean any corporation, partnership, trust or other entity
registered under the Investment Company Act of 1940 for which CGM, or
its successors or affiliates, serves as investment adviser, and which
CGM designates in writing to the Custodian as an eligible investment
under this Custodial Agreement.
(j) "Fund Shares" or "Shares" shall mean shares of stock, trust
certificates, or other evidences of interest (including fractional
shares) in any Fund.
(k) "Money Market Shares" shall mean any Shares that are issued by a Fund
that is a money market mutual fund.
3. INVESTMENT OF CONTRIBUTIONS
(a) Investment Options. The Depositor has exclusive responsibility for and
control over the investment of the assets of his or her IRA.
Contributions to the Account may be invested only in Fund Shares. The
Depositor may direct the Custodian to invest assets in Shares of one or
more Funds in such percentage as the Depositor shall specify on the
Account Application or thereafter in writing to the Custodian from time
to time, provided that minimum investment amounts are met.
(b) Investment Instructions. Contributions will be invested in accordance
with the Depositor's written instructions on the Application, and with
subsequent instructions given by the Depositor (or, following the death
of the Depositor, his or her Beneficiary) to the Custodian in a manner
acceptable to the Custodian. By giving such instructions to the
Custodian, such persons will be deemed to have acknowledged receipt of
the then-current prospectus for any Fund in which the Depositor directs
the Custodian to invest assets in his or her Custodial Account. All
charges incidental to carrying out such instructions shall be charged
and collected in accordance with Article VIII, Section 6(e). All Fund
Shares in the Custodial Account shall be held in the name of the
Custodian for the benefit of the Depositor.
(c) Investment Changes and Reinvestment. The Depositor may change any
portion of his or her investment in a Fund to another Fund by
requesting the change in the manner the Custodian requires, and subject
to the provisions of the then-current Fund prospectus.
Prior to the date the Depositor attains age 59 1/2, all income,
dividends and capital gains distributions from a Fund shall be
reinvested in additional shares of that Fund. On or after the date the
Depositor attains age 59 1/2, he or she may elect to receive all income
dividends and/or capital gains distributions from a Fund in cash. Such
cash payments will constitute a taxable distribution of assets.
(d) Investment Minimums. Each Fund may impose a minimum investment limit on
initial and subsequent investments. The Company reserves the right to
change those investment minimums at any time without prior notice. The
Custodian will invest all contributions promptly after their receipt,
as set forth in the prospectus of the Fund in which shares are being
purchased. The Custodian will mail a statement confirming each
investment to the Depositor at the address of record on the Custodial
Account.
(e) Unclear Investment Instructions. If the Custodian or the Company
receives instructions from the Depositor that are in their opinion not
clear, the Custodian or the Company may request additional instructions
from the Depositor (or the Depositor's Beneficiary, executor or
administrator). Pending receipt of such instructions, any cash assets
may be invested by the Custodian in Money Market Shares. Neither the
Custodian nor the Company shall be liable to anyone for any loss
resulting from the delay in investing such cash or in implementing such
instructions.
4. CONTRIBUTIONS
(a) Nature and Timing of Contributions. All contributions by the Depositor
to the Custodial Account must be in cash, except for initial
contributions of rollovers that may be made in the form of Fund shares
if permitted by the Company and the Custodian. The Custodian will
designate contributions (other than rollover contributions) as being
made for the current tax year unless the Depositor designates, in a
manner acceptable to the Custodian, that the contribution is being made
for the preceding taxable year. Contributions designated for the
preceding taxable year must be made by the deadline for filing the
Depositor's income tax return (not including extensions).
(b) Rollover Contributions. The Custodian will accept for the Custodial
Account all rollover contributions that consist of cash and may accept
Fund Shares if permitted by the Company. The Depositor shall designate
each rollover contribution as such to the Custodian, and by such
designation shall confirm to the Custodian that a proposed rollover
contribution qualifies as a rollover contribution within the meaning of
Sections 402(a)(5), 402(a)(6), 402(a)(7), 402(c), 403(a)(4), 403(b)(8),
and/or 408(d)(3) of the Code.
(c) Excess Contributions. If the Depositor exceeds the amount that may be
contributed to his or her Custodial Account for any year the Custodian
will, upon a proper written request from the Depositor, prior to his or
her tax filing deadline, return the excess and any attributable
earnings to the Depositor. If the request is received after the
Depositor's filing deadline, the Depositor may elect to have the
contribution treated as if it were made for a later year.
5. DISTRIBUTIONS
(a) Beneficiary Designation. A Depositor may designate a Beneficiary or
Beneficiaries at any time, and such designation may be changed or
revoked at any time, by written designation signed by the Depositor on
a form acceptable to, and filed with the Custodian; provided, however,
that such designation, or change, or revocation of a prior designation,
shall not be effective unless it is received and accepted by the
Custodian no later than thirty (30) days after the death of the
Depositor, and provided further that the latest such designation or
change or revocation shall control. If at the time of the Depositor's
death there is no properly designated Beneficiary of the Depositor in
existence, the Depositor's Beneficiary shall be his or her surviving
spouse or, if none, his or her estate. Unless otherwise specified in
the Depositor's designation of Beneficiary, if a Beneficiary dies
before receiving his or her interest in the Custodial Account, the
Beneficiary's remaining interest in the Custodial Account shall be paid
to the Beneficiary's estate.
A Depositor may designate as Beneficiary of his or her Account a trust
for the benefit of his or her surviving spouse that is intended to
satisfy the conditions of Sections 2056(b)(7) or 2056A of the Code (a
"Spousal Trust"). In that event, if the Depositor is survived by his or
her spouse, the following provisions shall apply to the account, from
and after the death of the Depositor's surviving spouse: (1) all of the
income of the Account shall be paid to the spousal trust annually or at
more frequent intervals, and (2) no person shall have the power to
appoint any part of the account to any person other than the spousal
trust. To the extent permitted by Section 401(a)(9) of the Code, as
determined by the trustee(s) of the spousal trust, the surviving spouse
of a Depositor who has designated a spousal trust as his or her
beneficiary may be treated as his or her "designated beneficiary" for
purposes of the distribution requirements of that Code section. The
Custodian shall have no responsibility to determine whether such
treatment is appropriate.
(b) Form of Distribution. All requests for distribution shall be in writing
on a form provided by or acceptable to the Custodian. The method of
distribution must be specified in writing. The tax identification
number must be provided to the Custodian and certified appropriately
before a distribution will be made. The Depositor is responsible for
making the distribution requests to the Custodian sufficiently in
advance of the date on which any requested or required distribution is
to be made to ensure that the distribution will be made on or before
that date.
The Depositor must provide to the Custodian any application,
certificates, tax waivers, signature guarantees, and other documents
(including proof of legal representative's authority) that the
Custodian requires. The Custodian will not be liable for complying with
a distribution request that appears on its face to be genuine, nor will
the Custodian be liable for refusing to comply with a distribution
request that the Custodian is not satisfied is genuine.
If a distribution request is not made in the correct form, the
Custodian is not responsible and will not be liable to the Depositor
for any losses while the Custodian awaits the distribution request to
be made in the proper form. The Depositor also agrees to fully
indemnify the Custodian for any losses that may result from the
Custodian's failing to act upon an improperly made distribution
request.
The Custodian is not obligated to make any distribution, including a
required minimum distribution as specified in Article IV above, absent
a specific written direction from the Depositor (or the Depositor's,
Beneficiary, executor, or administrator) to do so.
Any distributions shall be subject to all applicable tax and other laws
and regulations including possible early withdrawal penalties and
withholding requirements.
The Custodian is empowered to make distribution absent instructions
from the Depositor if directed to do so pursuant to a court order of
any kind and the Custodian shall in such event incur no liability to
anyone for acting in accordance with such court order.
(c) Distribution Upon Death. If the Depositor dies before receiving all of
the proceeds in his or her IRA, payments will be made to the designated
Beneficiary(ies). If a Beneficiary payment election described in
Article IV, Section 4(b) of this Agreement is not made by December 31
of the year after the year of death the following rules will apply. If
the Beneficiary is the spouse of the Depositor, the payment described
in Article IV, Section 4(b)(ii) will be deemed elected (that is,
payments over the life or life expectancy of the Depositor's spouse).
If the Beneficiaries are or include anyone other than the Depositor's
spouse, the payment method described in Article IV, Section 4(b)(i)
will be deemed elected (i.e. the 5-year rule).
(d) Required Minimum Distributions. The Depositor has the responsibility to
ensure that he or she will begin to receive distributions from the
Custodial Account on or before the required beginning date (i.e. April
1 following the year in which the Depositor reaches age 70 1/2) and
continue to receive distributions by December 31 each year. The
Depositor also has the sole responsibility to initiate distributions
from the Custodial Account and sole responsibility to ensure that all
distributions are made in accordance with the applicable provisions of
the Internal Revenue Code. If the Depositor fails to make an election
by the required beginning date, the Custodian shall have no obligation
to cause a distribution to be paid to the Depositor. The Custodian will
not be liable for any penalties or taxes related to the Depositor's
failure to take a distribution or to the Custodian's payment as a
result of such failure.
(e) Calculation of Life Expectancy. For distributions requested pursuant to
Article IV, life expectancy and joint life and last survivor expectancy
are calculated based on information provided by the Depositor, (or the
Depositor's, Beneficiary, executor, or administrator) using the
Expected Return Multiples in Section 1.72-9 of the Income Tax
Regulations. The Custodian shall not incur any liability for errors in
such calculations as a result of its reliance on information provided
by the Depositor (or the Depositor's Beneficiary, executor, or
administrator).
IF THE DEPOSITOR DOES NOT ELECT TO HAVE THE CUSTODIAN RECALCULATE LIFE
EXPECTANCY BY THE REQUIRED BEGINNING DATE, THE CUSTODIAN WILL NOT
RECALCULATE THE LIFE EXPECTANCY. THIS ELECTION OR DEEMED ELECTION TO
RECALCULATE OR NOT RECALCULATE IS IRREVOCABLE.
(f) Distributions to a Minor. If a distribution is payable to a person
known by the Custodian to be a minor or otherwise under a legal
disability, the Custodian may, in its absolute discretion, make all or
any part of the distribution to (a) a parent of such person, (b) the
guardian, committee, or other legal representative, whenever appointed,
of such person, (c) a custodial account established under a Uniform
Gifts to Minors Act, Uniform Transfers to Minors Act or similar act,
(d) any person having control or custody of such person, or (e) to such
person directly. The Depositor (or the Depositor's Beneficiary,
executor or administrator) may direct the Custodian to make any
distributions from the Custodial Account directly to any person,
corporation or other entity, including, but not limited to, the
fiduciary of a retirement plan account maintained on behalf of the
Depositor.
(g) Asset Transfers to Spouse Upon Divorce. All or any portion of the
Depositor's interest in the Custodial Account may be transferred to a
spouse or former spouse pursuant to a decree of divorce or separate
maintenance or a written instrument incident to such a decree as
provided in Section 408 of the Code, in which event the transferred
portion shall be held as a separate IRA for the benefit of such spouse
or former spouse.
(h) Transferring Assets to and from the Account. Assets held on behalf of
the Depositor in another IRA may be transferred by the trustee or
custodian thereof directly to the Custodian, in a form and manner
acceptable to the Custodian, to be held in the Custodial Account for
the Depositor under this Agreement. The Custodian will not be
responsible for any losses the Depositor may incur as a result of the
timing of any transfer from another trustee or custodian that are due
to circumstances reasonably beyond the control of the Custodian.
Assets held on behalf of the Depositor in the Account may be
transferred directly to the trustee or custodian of another IRA
established for the Depositor, if so directed by the Depositor in a
form and manner acceptable to the Custodian; provided, that it shall be
the Depositor's responsibility to ensure that any minimum distribution
required by Section 401(a)(9) of the Code is made prior to giving the
Custodian such transfer instructions. The Custodian will assume no
responsibility for the tax consequences of any transfer.
6. THE CUSTODIAN
(a) Instructions and Notices. All written notices or communication required
to be given by the Custodian to the Depositor shall be deemed to have
been given when sent by mail to the last known address of the Depositor
in the records of the Custodian. It is the responsibility of the
Depositor to notify the Custodian of any changes in address. All
written instructions, notices, or communications required to be given
by the Depositor to the Custodian shall be mailed or delivered to the
Custodian at the mailing address specified in the Prospectus, and no
such instruction, notice, or communication shall be effective until the
Custodian's actual receipt thereof.
The Custodian, may at its discretion, when so permitted by the Fund
prospectus, accept telephonic instructions, as if they were written
instructions. Any such telephonic instruction may be proved by audio
recorded tape.
(b) Reliance. The Custodian may conclusively rely upon and will be
protected from acting on any written order from or authorized by the
Depositor, or any other notice, request, consent, certificate or other
instrument, paper, or other communication that the Custodian believes
to be genuine and issued in proper form with proper authority, as long
as the Custodian acts in good faith in taking or omitting to take any
action in reliance upon the communication. Neither the Custodian nor
the Company shall not have any duty to question the directions of a
Depositor (or the Depositor's Beneficiary, executor or administrator)
in the investment, transfer or distribution of his or her Custodial
Account or to advise him or her regarding the purchase, retention, or
sale of assets credited to the Custodial Account or regarding
distributions from the Account. Neither the Custodian nor the Company
shall not be liable for any loss that results from the Depositor's (or
the Depositor's Beneficiary, executor, or administrator) exercise of
control (whether by his or her action or inaction) over the Custodial
Account.
(c) Reports; Tax Withholding. As soon as practicable after the close of
each taxable year, and whenever required by the Code, the Custodian
shall deliver to the Depositor a written record reflecting receipts,
distributions and other transactions effected in the Custodial Account
during such period and the fair market value of the assets and
liabilities of the Custodial Account as of the close of such period.
Unless the Depositor sends the Custodian written objection to a report
within sixty (60) days of receipt, the Depositor shall be deemed to
have approved such report, and the Custodian and the Company shall be
forever released and discharged from all liability and accountability
to anyone with respect to their acts, transactions, duties and
obligations or responsibilities as shown on, or reflected by, such
report.
The Custodian may reduce the amount of any distribution by the amount
of any required tax withholding unless specified otherwise.
(d) Exclusive Benefit. At no time shall it be possible for any part of the
assets of the Custodial Account to be used for, or diverted to,
purposes other than for the exclusive benefit of the Depositor or the
Depositor's beneficiaries except as specifically provided in this
Agreement.
(e) Account Fees and Expenses. The Custodian is entitled to receive the
fees for establishing and maintaining the Custodial Account set forth
in the Disclosure Statement. The Custodian may change its fee schedule
from time to time upon thirty (30) days' advance written notice to the
Depositor. The Custodian has the right to charge the Custodial Account,
including the right to liquidate Fund Shares or to charge the
Depositor, for the Custodian's fees, as well as for any income, gift,
estate, and inheritance taxes (including any transfer taxes incurred in
connection with the Custodial Account assets, and for all other
administrative expenses of the Custodian for performing its duties,
including any fees for legal services provided to the Custodian.
(f) Voting with Respect to Securities (Mailing of Prospectuses, Proxies,
etc.). The Custodian shall mail to the Depositor all prospectuses and
proxies that may come into the Custodian's possession by reason of its
holding Fund Shares in the Custodial Account. A Depositor may direct
the Custodian as to the manner in which any Fund Shares held in the
Custodial Account shall be voted with respect to any matters as to
which the Custodian as holder of record is entitled to vote, coming
before any meeting of shareholders of the Fund that issued such Fund
Shares. All such directions shall be in writing on a form approved by
the Custodian and signed by the Depositor, and delivered to the
Custodian within the time prescribed by it. The Custodian shall vote
only those Shares with respect to which it has received timely written
directions from the Depositor; provided, however, that the Custodian
may without such direction vote shares "present" to the extent that
such a vote is needed to establish a quorum.
(g) Limitations on Custodial Liability and Indemnification. The Depositor
and the Custodian intend that the Custodian shall have and exercise no
discretion, authority, or responsibility as to any investment in
connection with the Custodial Account and the Custodian shall not be
responsible in any way for the purpose, propriety, or tax treatment of
any contribution, or of any distribution, or any other action or
nonaction taken pursuant to the Depositor's direction or that of the
Depositor's Beneficiary, executor, or administrator. The Depositor who
directs the investment of his or her Account shall bear sole
responsibility for the suitability of any directed investment and for
any adverse consequences arising from such an investment, including,
without limitation, the inability of the Custodian to value or to sell
an illiquid investment, or the generation of unrelated business taxable
income with respect to an investment. To the fullest extent permitted
by law, the Depositor (or the Depositor's Beneficiary, executor, or
administrator, as appropriate) shall at all times fully indemnify and
save harmless the Custodian, the Company and their agents, affiliates,
successors, assigns and their officers, directors, and employees, from
any and all liability arising from the Depositor's investment direction
under this Custodial Account and from any other liability whatsoever
that may arise in connection with this Agreement except liability
arising under applicable law or liability arising from gross negligence
or willful misconduct on the part of the indemnified person. Although
the Custodian shall have no responsibility to give effect to a
direction from anyone other than the Depositor (or the Depositor's
Beneficiary, executor, or administrator), the Custodian may, in its
discretion, establish procedures pursuant to which the Depositor may
delegate to a third party any or all of the Depositor's powers and
duties hereunder; provided, however, that in no event may anyone other
than the Depositor's executor execute the application by which this
Agreement is adopted or the form by which the Beneficiary is appointed,
and provided, further, that any such third party to whom the Depositor
has so delegated powers and duties shall be treated as the Depositor
for purposes of applying the preceding sentences of this paragraph and
provisions of Article VIII, Section 3(a).
(h) Resignation or Removal of Custodian. The Company may remove the
Custodian at any time, and the Custodian may resign at any time, upon
thirty (30) days' written notice to the Depositor. Upon the removal or
resignation of the Custodian, the Company may, but shall not be
required to, appoint a successor custodian under this Custodial
Agreement; provided that any successor custodian shall satisfy the
requirements of Section 408(a)(2) of the Code. Upon any such
successor's acceptance of appointment, the Custodian shall transfer the
assets of the Custodial Account, together with the copies of relevant
books and records, to such successor custodian; provided, however, that
the Custodian is authorized to reserve such sum of money or property as
it may deem advisable for payment of any liabilities constituting a
charge on or against the assets of the Custodial Account, or on or
against the Custodian or the Company. The Custodian shall not be liable
for the acts or omissions of any successor to it. If no successor is
appointed by the Company, the Custodial Account shall be terminated and
the assets of the Account, reduced by the amount of any unpaid fees or
expenses, will be distributed to the Depositor.
7. AMENDMENT AND TERMINATION
(a) Amendment. The Depositor and Custodian authorize and direct the Company
to amend this Agreement in any respect at any time (including
retroactively), so that it may conform with applicable provisions of
the Internal Revenue Code, or with any other applicable law as in
effect from time to time. Any amendment made by the Company to comply
with the Code and related regulations does not require the consent of
the Depositor. Such other changes to this Agreement may be made as the
Company deems advisable. Any such amendment shall be effected by
delivery to the Custodian and mailing a copy of such amendment or a
restatement of the Custodial Agreement including any such amendment to
the Depositor at his or her last known address as shown in the records
of the Custodian. The Depositor shall be deemed to consent to any such
amendment(s) if he or she fails to object thereto by written notice
received by the Custodian within thirty (30) calendar days from the
date the Company mails a copy of such amendment(s) or restatement to
the Depositor.
(b) Termination. The Depositor may terminate the Custodial Account at any
time upon notice to the Custodian in a manner and form acceptable to
the Custodian. Upon such termination, the Custodian shall transfer the
assets of the Custodial Account, reduced by the amount of any unpaid
fees or expenses, to the custodian or trustee of another individual
retirement account (within the meaning of Section 408 of the Code) or
other retirement plan designated by the Depositor, as described in
Article VIII, Section 5(h). The Custodian shall not be liable for
losses arising from the acts, omissions, delays or other inaction of
any such transferee custodian or trustee. If notice of the Depositor's
intention to terminate the Custodial Account is received by the
Custodian and the Depositor had not designated a transferee custodian
or trustee for the assets in the Account, then the Account, reduced by
any unpaid fees or expenses, will be distributed to the Depositor.
8. MISCELLANEOUS
(a) Governing Law. This Agreement, and the duties and obligations of the
Company and the Custodian under the Agreement, shall be construed,
administered and enforced according to the laws of the Commonwealth of
Massachusetts, except as superseded by federal law or statute.
(b) When Effective. This Agreement shall not become effective until
acceptance of the Application by or on behalf of the Custodian as its
principal office, as evidenced by a written notice to the Depositor.
<PAGE>
The CGM Funds o P.O. Box 449 o Boston, MA 02117 o 800-345-4048
<PAGE>
- --------------------------------------------------------------------------------
Traditional IRA Disclosure Statement Amendment
- --------------------------------------------------------------------------------
AMENDMENT TO YOUR IRA
This IRA disclosure statement amendment updates your Individual Retirement
Account (IRA) documents we previously provided to you. The information provided
below amends your disclosure statement for recent law changes resulting from the
Taxpayer Relief Act of 1997.
Unless directed by us to do so, you do not need to sign or return anything to us
for this amendment to apply to your IRA. Your beneficiary designation we have on
file will remain in effect unless you change it by completing and signing the
form which we have for this purpose.
We recommend that you review this information carefully and keep it with your
other IRA information.
DISCLOSURE STATEMENT
MAXIMUM CONTRIBUTION MODIFIED -- The total amount you may contribute to an IRA
for any taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation. If you also maintain a Roth IRA, the maximum contribution to your
Traditional IRAs (i.e., IRAs subject to Internal Revenue Code (IRC) Sections
408(a) and 408(b)) is reduced by any contributions you make to your Roth IRA.
Your total annual contribution to all Traditional IRAs and Roth IRAs cannot
exceed the lesser of $2,000 or 100 percent of your compensation.
PERMISSIBLE IRA INVESTMENTS EXPANDED -- You may not invest the assets of your
IRA in collectibles (within the meaning of Internal Revenue Code (IRC) Section
408(m)). A collectible is defined as any work of art, rug or antique, metal or
gem, stamp or coin, alcoholic beverage, or any other tangible personal property
specified by the Internal Revenue Service. However, specially minted United
States gold and silver bullion coins and certain state-issued coins are
permissible investments. Beginning January 1, 1998, platinum coins and certain
gold, silver, platinum or palladium bullion (as described in IRC Section
408(m)(3)) are also permitted as IRA investments.
IRA DEDUCTIBILITY CHANGES -- If you have not yet reached the year in which you
attain age 701/2 and have earned income from services rendered, you may make an
IRA contribution of the lesser of 100 percent of compensation or $2,000.
However, the amount of the contribution for which you may take a tax deduction
will depend upon whether you (or, in some cases, your spouse) are an active
participant in an employer-maintained retirement plan. If you are not an active
participant, your IRA contribution will be totally deductible. If you are an
active participant, the deductibility of your contribution will depend on your
modified adjusted gross income (MAGI) for the tax year for which the
contribution was made. MAGI is determined on your tax return using your adjusted
gross income but disregarding any deductible IRA contribution.
Definition of Active Participant -- Generally, you will be an active participant
if you are covered by one or more of the following employer-maintained
retirement plans:
1. a qualified pension, profit sharing, 401(k), or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation plans
under IRC Section 457);
5. a tax sheltered annuity for employees of certain tax-exempt organizations or
public schools;
6. a plan meeting the requirements of IRC Section 501(c)(18);
7. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan; and
8. a SIMPLE IRA plan or a SIMPLE 401(k) plan.
If you do not know whether your employer maintains one of these plans or whether
you are an active participant in it, check with your employer and your tax
advisor. Also, the Form W-2 (Wage and Tax Statement) that you receive at the end
of the year from your employer will indicate whether you are an active
participant.
If you are an active participant and are single, the deductible amount of your
contribution is determined as follows: (1) take the Phase-out Maximum for the
applicable year (specified below) and subtract your MAGI, (2) multiply the
difference by .2. For example, if your 1998 MAGI is $35,000, your maximum
deductible contribution is $1,000 (the 1998 Phase-out Maximum of $40,000 minus
your MAGI of $35,000, multiplied by .2). You must round the resulting number to
the next highest $10 if the number is not a multiple of 10.
If you are an active participant, are married and you file a joint tax return,
the deductible amount of your contributions is determined as follows: (1) take
the Phase-out Maximum for the applicable year (specified below) and subtract
your MAGI, (2) multiply the difference by .2. (Multiply the difference between
the Phase-out Maximum and your MAGI by .1 beginning in 2007). For example, if
your MAGI in 1998 is $55,000, your maximum deductible contribution is $1000:
[($60,000 minus $55,000) multiplied by .2]. You must round the resulting number
to the next highest $10 if the number is not a multiple of 10.
JOINT FILERS SINGLE TAXPAYERS
TAX YEAR PHASE-OUT MAXIMUM PHASE-OUT MAXIMUM
- --------------------------------------------------------------------------------
1997 $50,000 $35,000
1998 $60,000 $40,000
1999 $61,000 $41,000
2000 $62,000 $42,000
2001 $63,000 $43,000
2002 $64,000 $44,000
2003 $70,000 $50,000
2004 $75,000 $55,000
2005 $80,000 $60,000
2006 $85,000 $60,000
2007 $100,000 $60,000
If you are married filing jointly and are not an active participant in an
employer-maintained retirement plan, but are married to someone who is an active
participant, your maximum deductible contribution is determined by taking
$160,000 minus your MAGI and multiplying the result by .2 (subject to the
maximum combined annual contribution limit for Traditional and Roth IRAs of the
lesser of $2,000 or 100 percent of earned income).
TRADITIONAL IRA TO ROTH IRA ROLLOVERS -- If your adjusted gross income is less
than $100,000, you are eligible to roll over (or convert) all or any portion of
your existing Traditional IRA(s) into your Roth IRA(s). The amount of the
rollover from your Traditional IRA to your Roth IRA shall be treated as a
distribution for income tax purposes and is includible in your gross income
(except for any nondeductible contributions). Although the rollover amount is
generally included in income, the 10 percent early distribution penalty shall
not apply to rollovers or conversions from a Traditional IRA to a Roth IRA,
regardless of whether you qualify for any exceptions to the 10 percent penalty.
If you roll over assets from your Traditional IRA to your Roth IRA prior to
January 1, 1999, you may spread the amount of the distributions which must be
included in your gross income ratably over a four year period beginning with the
year in which the payment or distribution is made.
NEW EXCEPTIONS TO 10 PERCENT EARLY DISTRIBUTION PENALTY -- If you are under age
591/2 and receive an IRA distribution, an additional tax of 10 percent will
apply, unless made on account of death, disability, a qualifying rollover, a
direct transfer, the timely withdrawal of an excess contribution; or if the
distribution is part of a series of substantially equal period payments (at
least annual payments) made over your life expectancy or the joint life
expectancy of you and your beneficiary. Payments made to pay medical expenses
which exceed 7.5 percent of your adjusted gross income and distributions to pay
for health insurance by an individual who has separated from employment and who
has received unemployment compensation under a federal or state program for at
least 12 weeks are also exempt from the 10 percent tax. Beginning January 1,
1998, payments to cover certain qualified education expenses and distributions
for first-home purchases (up to a life-time maximum of $10,000) are exempt from
the 10 percent tax. This additional tax will apply only to the portion of a
distribution which is includible in your income.
REPEAL OF EXCESS DISTRIBUTION PENALTY -- Prior to 1997, you would have been
taxed an additional 15 percent on any amount received and included in income
during a calendar year from qualified retirement plans, tax-sheltered annuities
and IRAs which exceeded $112,500 (indexed each year for the cost of living).
Certain exceptions applied. If you received an excess distribution as described
above, your tax advisor could determine if these exceptions applied to you. This
tax is referred to as an excess distribution penalty. However, this tax is
repealed effective for all payouts received after December 31, 1996, as a result
of the Taxpayer Relief Act of 1997.
REPEAL OF EXCESS RETIREMENT ACCUMULATION PENALTY -- In the past, your estate
would have paid additional Federal estate tax if you died with an excess
retirement accumulation. An excess retirement accumulation existed if, at the
time of your death, the value of all your interests in qualified plans,
tax-sheltered annuities and IRAs exceeded the present value of an annuity with
annual payments of $112,500 (indexed each year for the cost of living), payable
over your life expectancy immediately before your death. This tax was referred
to as an excess retirement accumulation tax penalty. However, this tax is
repealed for estates of decedents dying after December 31, 1996, as a result of
the Taxpayer Relief Act of 1997.
IRADISCAMEND 12/97
<PAGE>
- --------------------------------------------------------------------------------
CGM IRA ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
1. ACCOUNT INFORMATION
Name ----------------------------------------------------
Social Security # [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Address -------------------------------------------------
- ---------------------------------------------------------
Date of Birth -------------------------------------------
Daytime Telephone Number (---) --------------------------
2. IRA ACCOUNT INFORMATION
Check IRA Type:
[ ] TRADITIONAL CONTRIBUTORY [ ] TRADITIONAL ROLLOVER
[ ] ROTH CONTRIBUTORY [ ] ROTH CONVERSION
A SEPARATE APPLICATION MUST BE COMPLETED FOR EACH BOX THAT YOU CHECKED ABOVE.
Also check the transactions that apply below and specify the investment amount
for each option. If you want to establish a SEP-IRA, please call 800-345-4048.
[ ] ANNUAL CONTRIBUTION for the tax year -----------.
(maximum contribution for all IRAs is $2,000)
[ ] TRANSFER IRA: If you are transferring assets from another IRA to CGM,
complete this form and the CGM Transfer Form.
[ ] ROTH IRA TO ROTH IRA ROLLOVER: Please review the CGM Roth IRA Rollover Rules
included in this packet. Year of initial contribution: ----------.
[ ] TRADITIONAL IRA TO TRADITIONAL IRA ROLLOVER: Please review the CGM
Traditional IRA Rollover Rules included in this packet.
[ ] DIRECT ROLLOVER TO A TRADITIONAL IRA from a qualified pension, profit
sharing, 401(k), or 403(b) plan sent to CGM by your employer. Complete the
Direct Rollover Form.
[ ] INDIRECT ROLLOVER TO A TRADITIONAL IRA from a qualified pension, profit
sharing, 401(k), or 403(b) plan from which you have received the proceeds.
[ ] CONVERSION FROM TRADITIONAL IRA TO ROTH IRA: Complete the CGM Roth IRA
Conversion Form.
3. INVESTMENT SELECTION ($1,000 MINIMUM PER FUND)
$ ---------- CGM Focus Fund
$ ---------- CGM Mutual Fund
$ ---------- CGM Realty Fund
$ ---------- CGM Fixed Income Fund
$ ---------- CGM Capital Development Fund - see Section 9.
Existing account number:________________________.
$ ---------- New England Cash Management Trust - Money Market Series
5.00
$ ---------- ESTABLISHMENT FEE
(Required for all new plans, one fee per application)
$ ---------- AMOUNT OF CHECK ENCLOSED
Make all checks payable to State Street Bank and Trust Company. No third party
checks (checks endorsed over to CGM from an individual or institution) will be
accepted.
4. TELEPHONE EXCHANGE PRIVILEGES
[ ] Yes [ ] No
This service enables you to exchange monies ($1,000 minimum) by telephone among
accounts with the same registration in the CGM Funds or New England Cash
Management Trust.
5. AUTOMATIC INVESTMENT PLAN - OPTIONAL
Once you have met the $1,000 minimum, you may have us debit $50 or more each
month from your bank account to apply to your IRA account. Please check this box
M and complete Section 10 on the reverse side.
6. BENEFICIARY DESIGNATION
This Beneficiary Designation is to be used to indicate the person or persons to
whom the IRA assets should be turned over to in the event of your death. If you
are not survived by a validly designated Beneficiary, your benefits will be paid
to your estate in the event of your death. Important: If you do not designate a
Beneficiary or if the Beneficiary designated is not a person, you cannot base
your calculations for distributions from a Traditional IRA on joint life
expectancy. The Beneficiaries named herein and the manner of distribution may be
changed or revoked at any time by filing a new designation in writing with the
Custodian. This designation, and any changes or revocation, will only be
effective upon receipt by the Custodian. PLEASE RETAIN A COPY FOR YOUR RECORDS.
Upon my death, distribute my CGM IRA in equal shares to the following Principal
Beneficiary(ies) who survive me or, if none survives me, in equal shares to the
following Secondary Beneficiaries who survive me. (Attach an additional page if
necessary.)
Principal Beneficiary(ies):
- --------------------------------------------------------------------------------
Name Birthdate Relationship
- --------------------------------------------------------------------------------
Address
Secondary Beneficiary(ies):
- --------------------------------------------------------------------------------
Name Birthdate Relationship
Address
CONSENT OF SPOUSE
(If you live in a community property state, complete if spouse is not sole
primary beneficiary.) I consent to the above Beneficiary Designation. By signing
this consent, I intend to change the portion (if any) of this IRA which is
community property into the separate property of my spouse. I specifically give
to my spouse any interest I have in the funds deposited in this account.
- --------------------------------------------------------------------------------
Signature of Spouse Date
7. SIGNATURE
By signing below, I certify that I agree to the provisions on the reverse side
listed in Section 8.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE:
X ----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Please note that there is an annual $10 maintenance fee per account which will
be billed to you each year. (OVER)
IRAAPP 2/98
<PAGE>
8. PROVISIONS
By signing this application establishing an IRA, I (i) appoint State Street Bank
and Trust Company, or its successors, as Custodian of the Account, (ii) state
that I have received, read, accept, and specifically incorporate the Custodial
Agreement and Disclosure Statement by reference to this application, (iii)
acknowledge receipt of the current prospectus of the mutual fund(s) selected,
(iv) consent to the Custodian's fee, (v) agree to promptly give instructions to
the Custodian necessary to enable the Custodian to carry out its duties under
the Plan, (vi) affirm that my participation is completely voluntary, and (vii)
certify under penalties of perjury that the social security number provided is
correct. I hereby adopt The CGM Individual Retirement Account (IRA) upon the
terms and conditions thereof.
|_| If I have elected the "TELEPHONE EXCHANGE" service, I authorize the Fund and
its agents to accept and act upon telephone instructions from me, and I
acknowledge receipt of the current prospectus of the Fund into which the
exchange is made. I understand that the Fund may terminate or modify this
privilege at any time. The Fund will employ reasonable procedures to confirm
that instructions received by telephone are genuine, such as requesting
personal identification information that appears on my account application
and recording the telephone conversation. I will bear the risk of loss due
to unauthorized or fraudulent instructions regarding my account, although
the Fund may be liable if reasonable procedures are not employed.
|_| If I have enrolled in the "AUTOMATIC INVESTMENT PLAN" in Section 10, I
authorize the Fund and its agents to initiate Automated Clearing House (ACH)
debits against the designated account at a bank or other financial
institution. I understand that:
- Fund shares purchased by Automatic Investment Plan must be owned for 15
days before they may be redeemed.
- I may terminate my Automatic Investment Plan by sending written notice to
CGM Funds c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by calling
800-343-5678 no later than 10 days prior to my next scheduled debit date.
- The CGM Funds may immediately terminate my Plan in the event that any item
is unpaid by my financial institution.
- The Fund may terminate or modify this privilege at any time.
9. WHO CAN PURCHASE SHARES OF CGM CAPITAL DEVELOPMENT FUND
Only shareholders of the Fund as of September 24, 1993, who remain shareholders
thereafter may purchase additional shares of the Fund. The Fund reserves the
right to reject any purchase order. This policy supersedes all previous
eligibility requirements. Fund shares are not generally available to other
persons except in special circumstances that have been approved by, or under the
authority of, the board of trustees of the Fund. The special circumstances
currently approved by the board of trustees of the Fund are limited to the offer
and sale of shares of the Fund to the following additional persons: trustees of
the Fund, employees of the Investment Manager and counsel to the Fund and the
Investment Manager.
10. AUTOMATIC INVESTMENT PLAN (AIP)
You can have us debit $50 or more on the same day each month from your bank
account and have it applied to your IRA account. (Please allow 10 business days
for the AIP Plan to start.)
To elect this option, please: |_| ATTACH A CHECK MARKED "VOID" FROM THE
BANK ACCOUNT YOU WILL BE USING.
|_| FILL IN THE INFORMATION REQUESTED BELOW.
Please invest $ ---------- on or about M 5th day of each month or M 20th day of
each month (5th will be selected if no box is checked)
As a convenience to me, you are hereby requested and authorized to pay and
charge to my account Automated Clearing House (ACH) debits drawn on my account
by and payable to the order of The CGM Funds. This authority is to remain in
effect until revoked by me in writing and, until you actually receive such
notice, I agree you will be fully protected in honoring any such debits.
- --------------------------------------------------------------------------------
Name of Bank Bank Account Number
- --------------------------------------------------------------------------------
Name of Depositor(s) as Shown on Bank Records
X X
- --------------------------------------------------------------------------------
Signature of Participant Signature (if Joint Bank Account)
11. ACCEPTANCE BY CUSTODIAN
Accepted by State Street Bank and Trust Company, Custodian
/s/ Illegible
- --------------------------------------------------------------------------------
Authorized Signature, State Street Bank and Trust Company Date
A statement will be sent to you confirming the establishment of your account and
will serve as State Street Bank's acceptance. Please note that you will be
charged an annual maintenance fee of $10 for each fund account in your IRA.
QUESTIONS? CALL 800-345-4048
SEND APPLICATION TO: CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
<PAGE>
- --------------------------------------------------------------------------------
CGM DIRECT ROLLOVER FORM FOR NEW ACCOUNTS
- --------------------------------------------------------------------------------
Please use this form when rolling assets from a
Qualified Retirement Plan or 403(b) Plan directly to a CGM Traditional IRA.
YOUR NAME AND ADDRESS
- --------------------------------------- [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
- ---------------------------------------
Address
- --------------------------------------- (---) -----------------------
City State Zip Code Daytime Phone Number
INVESTMENT INSTRUCTIONS
|_| Enclose $5.00 plan establishment fee. Make check payable to State Street
Bank and Trust Company.
|_| Please type or print the name of the fund(s) you wish to invest in:
FUND NAME $ AMOUNT / % AMOUNT
- ------------------------------------ --------------------------------------
- ------------------------------------ --------------------------------------
PLEASE COMPLETE AND SIGN THESE INSTRUCTIONS
IMPORTANT: To ensure timely processing of your rollover, please call your
current Custodian's or Trustee's transfer department and verify the correct
address and any transfer requirements, such as a signature guarantee.
If you are 70 1/2 or older please check this box M and refer to the reverse side
of this form.
- ---------------------------------------------------------(---) ---------------
Name of Current Current IRA Account Custodian's Phone
Custodian Number Number
- --------------------------------------------------------------------------------
Address City State Zip Code
|_| Please accept this as your [ ] Transfer All OR [ ] Transfer $ or
authorization to: % ------ to my CGM IRA
|_| The transfer should be [ ] Immediately OR [ ] Upon Maturity of
processed: My Assets
- --------------------------------------------------------------------------------
I request that the above named Signature Guarantee (If Required
Custodian or Trustee liquidate and by Current Custodian)
rollover my plan assets as cash to
State Street Bank and Trust Name of Firm: ---------------------
Company, Custodian of my CGM IRA.
X
- ---------------------------------- BY: -------------------------------
YOUR SIGNATURE DATE Authorized Individual
- --------------------------------------------------------------------------------
CUSTODIAN: MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O CGM FUNDS,
P.O. BOX 8511, BOSTON, MA 02266-8511
(Please include the Participant's name and Social Security
Number on your check.)
- --------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN
State Street Bank and Trust Company accepts the assets being rolled over and
agrees to serve as the Custodian of the IRA Account established on behalf of the
above named individual.
/s/ Illegible
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
- --------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
IRADRNEW 2/98
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE 70 1/2 OR OLDER
If this direct rollover is being made during or after a year in which you turn
age 70 1/2, (or, if you are a "less than 5%" owner when you stop working,
whichever is later), you must take your annual Required Minimum Distribution
(RMD) based on your life expectancy or the life expectancy of you and your
beneficiary prior to rolling your assets to a Traditional IRA.
Additionally, RMDs are mandatory once your Traditional IRA is established.
Please call 1-800-345-4048 to request a "Traditional IRA Distribution Request"
form and our "Understanding Traditional IRA Distributions" brochure. It is your
responsibility to ensure that you are taking the appropriate RMD. Failure to do
so may result in a penalty tax of 50% of the amount not taken. Please call
1-800-345-4048 if you have any questions about RMDs.
- --------------------------------------------------------------------------------
HOW TO DIRECTLY ROLLOVER ASSETS FROM A QUALIFIED OR 403(B) PLAN TO CGM
1. Complete and sign the IRA Account Application.
2. Complete and sign the IRA Direct Rollover Form for New Accounts.
3. Enclose a check for $5.00 made payable to State Street Bank and Trust
Company.
4. Mail items 1-3 to CGM Funds, P.O. Box 449, Boston, MA 02117-0449 in the
return envelope provided.
5. Upon receipt of your IRA Account Application, Direct Rollover Form for New
Accounts and check, CGM will establish your IRA. We will send a letter of
acceptance and your authorization to rollover assets to your current plan
Custodian or Trustee and provide you with a copy of the letter.
6. After the rollover IRA proceeds have been received by CGM, a statement
confirming the transaction will be mailed to you.
PLEASE NOTE: If you elect to combine assets previously invested in a qualified
plan or 403(b) plan with IRA assets, you will be unable to roll over the
assets into a future employer's plan.
- --------------------------------------------------------------------------------
QUESTIONS? CALL 800-345-4048
<PAGE>
- --------------------------------------------------------------------------------
CGM DIRECT ROLLOVER FORM
- --------------------------------------------------------------------------------
Please use this form when rolling assets from a Qualified Retirement Plan or
403(b) Plan directly to a CGM Traditional IRA
YOUR NAME AND ADDRESS
- --------------------------------------- [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
- ---------------------------------------
Address
- --------------------------------------- (---) -----------------------
City State Zip Code Daytime Phone Number
CGM ACCOUNT INFORMATION
Please print or type the name of your current CGM Fund and your account number.
Indicate the dollar amount or percentage you want to invest in each account. If
you want to establish a new account in another CGM Fund, specify the Fund name
and write "new" under Account Number.
FUND NAME ACCOUNT NUMBER $ AMOUNT / % AMOUNT
- ----------------------- ------------------------ -----------------------------
- ----------------------- ------------------------ -----------------------------
PLEASE COMPLETE AND SIGN THESE INSTRUCTIONS
IMPORTANT: To ensure timely processing of your rollover, please call your
current Custodian's or Trustee's transfer department and verify the correct
address and any transfer requirements, such as a signature guarantee.
If you are 70 1/2 or older please check this box M and refer to the reverse side
of this form.
- ---------------------------------------------------------(---) ---------------
Name of Current Current IRA Account Custodian's Phone
Custodian Number Number
- --------------------------------------------------------------------------------
Address City State Zip Code
|_| Please accept this as your [ ] Transfer All OR [ ] Transfer $ or
authorization to: % ------ to my CGM IRA
|_| The transfer should be [ ] Immediately OR [ ] Upon Maturity of
processed: My Assets
- --------------------------------------------------------------------------------
I request that the above named Signature Guarantee (If Required
Custodian or Trustee liquidate and by Current Custodian)
rollover my plan assets as cash to
State Street Bank and Trust Name of Firm: ---------------------
Company, Custodian of my CGM IRA.
X
- ---------------------------------- BY: -------------------------------
YOUR SIGNATURE DATE Authorized Individual
- --------------------------------------------------------------------------------
CUSTODIAN: MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O CGM FUNDS,
P.O. BOX 8511, BOSTON, MA 02266-8511
(Please include the Participant's name and Social Security
Number on your check.)
- --------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN
State Street Bank and Trust Company accepts the assets being rolled over and
agrees to serve as the Custodian of the IRA Account established on behalf of the
above named individual.
/s/ Illegible
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
- --------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
- -------------------------------------------------------------------------------
IRADR 2/98
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE 70 1/2 OR OLDER
If this direct rollover is being made during or after a year in which you turn
age 70 1/2, (or, if you are a "less than 5%" owner when you stop working,
whichever is later), you must take your annual Required Minimum Distribution
(RMD) based on your life expectancy or the life expectancy of you and your
beneficiary prior to rolling your assets to a Traditional IRA.
Additionally, RMDs are mandatory once your Traditional IRA is established.
Please call 1-800-345-4048 to request a "Traditional IRA Distribution Request"
form and our "Understanding Traditional IRA Distributions" brochure. It is your
responsibility to ensure that you are taking the appropriate RMD. Failure to do
so may result in a penalty tax of 50% of the amount not taken. Please call
1-800-345-4048 if you have any questions about RMDs.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO DIRECTLY ROLLOVER ASSETS FROM A QUALIFIED OR 403(B) PLAN TO YOUR
EXISTING CGM IRA
- --------------------------------------------------------------------------------
1. Complete and sign the IRA Direct Rollover Form.
2. Mail the Direct Rollover Form to CGM Funds, P.O. Box 8511, Boston, MA
02266-8511 in the return envelope provided.
3. Upon receipt of your Direct Rollover Form, CGM will send a letter of
acceptance and your authorization to rollover assets to your current Plan
Trustee or Custodian and provide you with a copy of the letter.
4. After the rollover IRA proceeds have been received by CGM, a statement
confirming the transaction will be mailed to you.
PLEASE NOTE: If you elect to combine assets previously invested in a qualified
plan or 403(b) plan with IRA assets, you will be unable to roll over the assets
into a future employer's plan.
- --------------------------------------------------------------------------------
QUESTIONS? CALL 800-345-4048
<PAGE>
THE CGM FUNDS
- --------------------------------------------------------------------------------
ROTH IRA
PLAN DOCUMENT AND
DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSIDE . . .
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE 1 INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE 2 DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAGE 7 PLAN DOCUMENT
- --------------------------------------------------------------------------------
IRAR2/98
<PAGE>
INVESTMENT OPTIONS
NO-LOAD MUTUAL FUNDS
The no-load funds eligible for your IRA investments are listed below. You may
invest either in one, or in a combination of the funds best suited to your
circumstances. The funds have different investment objectives and offer a
range of investment income and appreciation potential. Be sure to read each
fund's prospectus before you invest or send money.
STOCKS AND BONDS
CGM MUTUAL FUND is a flexibly managed balanced fund that seeks reasonable
long-term capital appreciation with a prudent approach to protection of
capital from undue risks. Consideration is given to the production of current
income in the selection of stocks and bonds for the Fund's portfolio.
BONDS
CGM FIXED INCOME FUND is a "total return" bond fund. The Fund's objective is
to maximize total return by investing in debt securities and preferred stocks
that provide current income, capital appreciation or a combination of both
income and appreciation.
MONEY MARKET
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES is a money market
fund that seeks to provide maximum current income consistent with preservation
of capital by investing in a variety of high quality money market instruments.
The Trust is managed by Back Bay Advisors, L.P.
STOCKS
CGM FOCUS FUND is a non-diversified and flexibly managed mutual fund that
seeks long-term growth of capital. The Fund intends to pursue its objective by
investing in a core position of equity securities. The Fund may engage in a
variety of investment techniques designed to capitalize on declines in the
price of specific equity securities of one or more companies.
CGM REALTY FUND is a mutual fund that seeks above-average income and long-term
growth of capital. The Fund pursues its objective by investing primarily in
equity securities of companies in the real estate industry.
CGM CAPITAL DEVELOPMENT FUND is an aggressively managed growth fund that seeks
long-term capital appreciation in a diverse group of companies and industries
believed to provide opportunities for capital development. Note: Shares are
available only to certain individuals. Eligibility categories are listed
below.
ELIGIBILITY FOR CGM CAPITAL DEVELOPMENT FUND
Only shareholders of the Fund as of September 24, 1993 who have remained
shareholders continuously since that date may purchase additional shares of
the Fund. The Fund reserves the right to reject
any purchase order. This policy supersedes all previous eligibility
requirements.
Fund shares are not generally available to other persons except in special
circumstances that have been approved by, or under the authority of, the Board
of Trustees of the Fund. The special circumstances currently approved by the
Board of Trustees of the Fund are limited to the offer and sale of shares of
the Fund to the following additional persons: trustees of the Fund, employees
of the Investment Manager and counsel to the Fund and the Investment Manager.
<PAGE>
DISCLOSURE STATEMENT
RIGHT TO REVOKE YOUR ROTH IRA
If you receive this Disclosure Statement at the time you establish your Roth
IRA, you have the right to revoke your Roth IRA within seven (7) days of its
establishment. If revoked, you are entitled to a full return of the
contribution you made to your Roth IRA. The amount returned to you would not
include an adjustment for such items as sales commissions, administrative
expenses, or fluctuation in market value. You may make this revocation only by
mailing or delivering a written notice to the Custodian at the address listed
on the Application.
If you send your notice by first-class mail, your revocation will be deemed
mailed as of the date of the postmark.
If you have any questions about the procedure for revoking your Roth IRA,
please call the Custodian at the telephone number listed on the Application.
REQUIREMENTS OF A ROTH IRA
A. CASH CONTRIBUTIONS - Your contribution must be in cash, unless it is a
qualified rollover contribution.
B. MAXIMUM CONTRIBUTION - The total amount you may contribute to a Roth IRA for
any taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation. If you also maintain a Traditional IRA (i.e., an IRA subject
to the limits of Internal Revenue Code (IRC) Sec. 408(a) or 408(b)) the
maximum contribution to your Roth IRA is reduced by any contributions you
make to your Traditional IRA. Your total annual contribution to all
Traditional IRAs and Roth IRAs cannot exceed the lesser of $2,000 or 100
percent of your compensation.
Your Roth IRA contribution is further limited if your adjusted gross income
(AGI) exceeds $150,000 and you are a married individual filing jointly
($95,000 for single taxpayers). Married individuals filing jointly with AGI
which exceeds $160,000 may not fund a Roth IRA. Married individuals filing
separately with AGI exceeding $10,000 may not fund a Roth IRA. Single
individuals with AGI exceeding $110,000 may not fund a Roth IRA.
If you are married filing jointly and your AGI is between $150,000 and
$160,000, your maximum Roth IRA contribution is determined as follows: (1)
Subtract your AGI from $160,000, (2) divide the difference by $10,000, and
(3) multiply the result in step (2) by $2,000. For example, if your AGI is
$155,000, your maximum Roth IRA contribution is $1,000. This amount is
determined as follows: [($160,000 minus $155,000) divided by $10,000]
multiplied by $2,000.
If you are single and your AGI is between $95,000 and $110,000, your maximum
Roth IRA contribution is determined as follows: (1) Subtract your AGI from
$110,000, (2) divide the difference by $15,000, and (3) multiply the result
in step (2) by $2,000. For example, if your AGI is $98,000, your maximum
Roth IRA contribution is $1,600. This amount is determined as follows: [
($110,000 minus $98,000) divided by $15,000] multiplied by $2,000.
Your Roth IRA contribution is not limited by your participation in a
retirement plan other than a Traditional IRA, as discussed above. In
addition, unlike Traditional IRAs, you may continue to fund a Roth IRA after
age 70 1/2 so long as you have earned income and your AGI is below the
maximum thresholds discussed above.
C. NONFORFEITABILITY - Your interest in your Roth IRA is nonforfeitable.
D. ELIGIBLE CUSTODIANS - The Custodian of your Roth IRA must be a bank, savings
and loan association, credit union, or a person approved by the Secretary of
the Treasury.
E. COMMINGLING ASSETS - The assets of your Roth IRA cannot be commingled with
other property except in a common trust fund or common investment fund.
F. INVESTMENTS AND EARNINGS - No portion of your Roth IRA may be invested in
life insurance contracts.
Your contributions will be used to purchase shares of Funds selected on your
Account Application. Any dividend or capital gains distributions on the
Funds' shares will be invested in additional Funds' shares automatically.
After you have participated in a Roth IRA for five years and you have
attained age 59 1/2, become disabled or die, you have the option of
receiving your dividends and capital gains in cash. These additional shares
will represent your earnings from the account. The assets available for
distribution will be the market value of the shares your contributions and
earnings have purchased over the years. Due to the fluctuating value of the
Funds' investments, it is not possible to make a projection of expected
growth, and growth cannot be guaranteed. Investment information can be found
in each Fund's prospectus.
The law requires that the shares in your account be held by a custodian that
is a bank or other organization approved by the IRS. The Custodian of the
Plan meets this requirement. You will be entitled to vote the shares in your
account.
G. BENEFICIARY PAYOUTS - If your surviving spouse is your sole beneficiary,
your spouse may treat your Roth IRA as his or her own Roth IRA and would not
be subject to the required minimum distribution rules. Your surviving spouse
will also be entitled to such additional beneficiary payment options as are
permitted under the law or related regulations. If the beneficiary or
beneficiaries include anyone other than your surviving spouse, the entire
amount remaining in your account will, at the election of your beneficiary
or beneficiaries, either
(a) be distributed by December 31 of the year containing the fifth
anniversary of your death, or
(b) be distributed in equal or substantially equal payments over the life
or life expectancy of your designated beneficiary or beneficiaries.
A nonspouse beneficiary or beneficiaries must elect either option (a) or (b)
by December 31 of the year following the year of your death. If no election
is made, distribution will be made in accordance with option (a).
INCOME TAX CONSEQUENCES OF ESTABLISHING A ROTH IRA
A. CONTRIBUTIONS NOT DEDUCTED - No deduction is allowed for Roth IRA
contributions, including transfers and rollover contributions.
B. TAX-DEFERRED EARNINGS - The investment earnings of your Roth IRA are not
subject to federal income tax as they accumulate in your Roth IRA. In
addition, distributions of your Roth IRA earnings will be free from federal
income tax if you take a qualified distribution, as discussed below.
C. TAXATION OF DISTRIBUTIONS - The taxation of a Roth IRA distribution depends
on whether the distribution is a qualified distribution or a nonqualified
distribution.
1. QUALIFIED DISTRIBUTIONS - Qualified distributions from your Roth IRA
(both the contributions and earnings) are not included in gross income.
A qualified distribution occurs when the assets have been in the Roth
IRA for five years and one of the following events occurs:
o attainment of age 59 1/2,
o disability,
o the purchase of a first home, or
o death.
For contributory IRAs, the five-year period begins with the first year
for which you make a Roth IRA contribution. For example, if you make a
contribution to your Roth IRA for 1998, the five-year period will be
completed at the end of 2002. However, a separate five-year requirement
applies to each rollover contribution from a Traditional IRA. The
five-year period for these rollovers begins with the year in which the
rollover contribution is made.
2. NONQUALIFIED DISTRIBUTIONS - If you do not meet the requirements for a
qualified distribution, any earnings you withdraw from your Roth IRA
will be included in your gross income and, if you are under age 59 1/2,
may be subject to an early distribution penalty. However, when you take
a nonqualified distribution, your basis (the amounts you contributed to
the account) will generally be removed first. Therefore, your
nonqualified distributions will not be taxable to you until your
withdrawals exceed the amount of your contributions. Special rules may
apply to the distribution of conversion amounts.
D. NO REQUIRED MINIMUM DISTRIBUTIONS - You are not required to take
distribution from your Roth IRA at age 70 1/2 (as required for Traditional
and SIMPLE IRAs).
E. ROLLOVERS AND CONVERSIONS - Your Roth IRA may be rolled over to another Roth
IRA of yours, or may receive rollover contributions, provided that all of
the applicable rollover rules are followed. Rollover is a term used to
describe a tax-free movement of cash or other property to your Roth IRA from
any of your Roth or Traditional IRAs. The rollover rules are generally
summarized below. These transactions are often complex. If you have any
questions regarding a rollover, please see a competent tax advisor.
1. ROTH IRA TO ROTH IRA ROLLOVERS - Funds distributed from your Roth IRA
may be rolled over to a Roth IRA of yours if the requirements of IRC
section 408(d)(3) are met. A proper Roth IRA to Roth IRA rollover is
completed if all or part of the distribution is rolled over not later
than 60 days after the distribution is received. You may not have
completed another Roth IRA to Roth IRA rollover from the distributing
Roth IRA during the 12 months preceding the date you receive the
distribution. Further, you may roll the same dollars or assets only once
every 12 months. Roth IRA assets may not be rolled over to other types
of IRAs (e.g., Traditional IRA, SIMPLE IRA).
2. TRADITIONAL IRA TO ROTH IRA CONVERSIONS - Unless your adjusted gross
income is more than $100,000, or you are married filing a separate tax
return, you are eligible to roll over, transfer or convert all or any
portion of your existing Traditional IRA(s) into your Roth IRA(s). A
separate Roth Conversion IRA should generally be established to hold
conversion amounts. If your Roth IRA is designated as a Roth Conversion
IRA, the only permissible contributions are amounts converted from a
Traditional IRA during the same tax year. The amount of the conversion
from your Traditional IRA to your Roth IRA will be treated as a
distribution for income tax purposes and is includible in your gross
income (except for any nondeductible contributions). Although the
conversion amount is generally included in income, the 10 percent early
distribution penalty will not apply to rollovers or conversions from a
Traditional IRA to a Roth IRA, regardless of whether you qualify for any
exceptions to the 10 percent penalty.
If you convert assets from your Traditional IRA to your Roth IRA prior
to January 1, 1999, you may include the taxable amount of the
distribution in your gross income ratably over a four year period
beginning with 1998.
3. WRITTEN ELECTION - At the time you make a proper rollover to a Roth IRA,
you must designate to the Custodian, in writing, your election to treat
that contribution as a rollover. Once made, the rollover election is
irrevocable.
4. NO ROLLOVERS FROM EMPLOYER PLANS - You may not roll over distributions
from your employer's qualified retirement plan or 403(b) arrangement
into your Roth IRA.
F. CARRYBACK CONTRIBUTIONS - A contribution is deemed to have been made on the
last day of the preceding taxable year if you make a contribution by the
deadline for filing your income tax return (not including extensions), and
you designate that contribution as a contribution for the preceding taxable
year. For example, if you are a calendar year taxpayer and you make your
Roth IRA contribution on or before April 15, your contribution is considered
to have been made for the previous tax year if you designate it as such.
LIMITATIONS AND RESTRICTIONS
A. SPOUSAL ROTH IRA - If you are married, you may make payments to a Roth IRA
established for the benefit of your spouse. You must file a joint tax return
for the year for which the contribution is made.
The amount you may contribute to your Roth IRA and your spouse's Roth IRA is
the lesser of $4,000 or 100 percent of your combined compensation. However,
you may not contribute more than $2,000 to any one Roth IRA. Your
contribution may be further limited if your AGI exceeds the levels discussed
in the section titled Maximum Contribution.
B. ESTATE TAX EXCLUSION - The $100,000 federal estate tax exclusion previously
available has been repealed for individuals dying after December 31, 1984.
No exclusion will be allowed for individuals dying after that date.
Transfers of your Roth IRA assets to a named beneficiary made during your
life and at your request or because of your failure to instruct otherwise,
may be subject to federal gift tax under IRC section 2501 if made after
October 22, 1986.
C. SPECIAL TAX TREATMENT - Capital gains treatment and the favorable five or
ten year forward averaging tax authorized by IRC section 402 do not apply to
Roth IRA distributions.
D. INCOME TAX TREATMENT - Any nonqualified withdrawal of earnings from your
Roth IRA, is subject to federal income tax withholding. You may, however,
elect not to have withholding apply to your Roth IRA withdrawal. If
withholding is applied to your withdrawal, not less than 10 percent of the
amount withdrawn must be withheld.
E. PROHIBITED TRANSACTIONS - If you or your beneficiary engage in a prohibited
transaction with your Roth IRA, as described in IRC section 4975, your Roth
IRA will lose its tax-exempt status and you must generally include the value
of the earnings in your account in your gross income for that taxable year.
F. PLEDGING - If you pledge any portion of your Roth IRA as collateral for a
loan, the amount so pledged will be treated as a distribution and may be
included in your gross income for that year to the extent it represents
earnings.
FEDERAL TAX PENALTIES
A. EARLY DISTRIBUTION PENALTY - If you are under age 59 1/2 and receive a
nonqualified Roth IRA distribution, an additional tax of 10 percent will
apply to the amount includible in income (i.e., the earnings), unless the
distribution is made on account of death, disability, a qualifying rollover,
a direct transfer, the timely withdrawal of an excess contribution; or if
the distribution is part of a series of substantially equal periodic
payments (at least annual payments) madeover your life expectancy or the
joint life expectancy of you and your beneficiary. Payments made to pay
medical expenses which exceed 7.5 percent of your adjusted gross income and
distributions to payfor health insurance by an individual who has separated
from employment and who has received unemployment compensation under a
federal or state program for at least 12 weeks are also exempt from the 10
percent tax. Payments to cover certain qualified education expenses and
distributions for first-home purchases (up to life-time maximum of $10,000)
are exempt from the 10 percent tax. This additional tax will apply only to
the portion of a distribution which is includible in your income.
B. EXCESS CONTRIBUTION PENALTY - An excise tax of 6 percent is imposed upon any
excess contribution you make to your Roth IRA. This tax will apply each year
in which an excess remains in your Roth IRA. An excess contribution is any
contribution amount which exceeds your contribution limit, excluding
rollover and direct transfer amounts. Your contribution limit is the lesser
of $2,000 or 100 percent of your compensation for the taxable year. Your
contribution may be further limited if your AGI exceeds the levels discussed
in the section titled Maximum Contribution.
C. EXCESS ACCUMULATION PENALTY - Unless your sole beneficiary is your surviving
spouse, your designated beneficiary(ies) is required to take certain minimum
distributions after your death. An additional tax of 50 percent is imposed
on the amount of the required minimum distribution which should have been
taken but was not. This tax is referred to as an excess accumulation penalty
tax.
D. PENALTY REPORTING - You must file Form 5329 with the Internal Revenue
Service to report and remit any penalties or excise taxes.
OTHER
A. IRS PLAN APPROVAL - The Agreement used to establish this Roth IRA has been
approved by the Internal Revenue Service. The Internal Revenue Service
approval is a determination only as to form. It is not an endorsement of the
plan in operation or of the investments offered.
B. FEES - The Custodian charges $5.00 when you establish your plan, $10.00 per
year for each account in your plan as a maintenance fee, and $5.00 when an
account is closed (including exchanges). The Custodian reserves the right to
increase these charges at any time upon 30 days' advance notice. Capital
Growth Management may partake in a portion of the annual maintenance fee.
The Custodian will send you a statement of account annually informing you of
the exact amount of the contributions, earnings, distributions, and year-end
value. The Custodian will also send a statement to the Internal Revenue
Service as required by law.
C. ADDITIONAL INFORMATION - You may obtain further information on Roth IRAs
from your District Office of the Internal Revenue Service. In particular,
you may wish to obtain IRS Publication 590, Individual Retirement
Arrangements (IRAs).
HOW TO PARTICIPATE
You may establish your own account simply by completing the Account
Application and mailing it to The CGM Funds with your first contribution. If
you need any assistance in completing the Account Application, please
telephone CGM at (800) 345-4048.
PLEASE NOTE: The foregoing is not a complete or definitive explanation of
the Plan or the provisions of applicable law. Please do not complete the
Account Application without reading the Plan and the Fund prospectus which
must always accompany the Plan. Consult your financial or tax advisor if you
are uncertain whether a CGM Funds IRA is an appropriate program for your
investment needs.
<PAGE>
PLAN DOCUMENT
THE CGM FUNDS ROTH INDIVIDUAL
RETIREMENT ACCOUNT (THE "PLAN")
The Depositor whose name appears on the Application is establishing a Roth
Individual Retirement Account under section 408A to provide for his or her
retirement and for the support of his or her beneficiaries after death.
The Custodian named on the Application has given the Depositor the disclosure
statement required under Regulations section 1.408-6.
The Depositor has assigned the Custodial account the sum indicated on the
Application.
The Depositor and the Custodian make the following agreement:
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then, except in
the case of a rollover contribution described in section 408A(e), the
Custodian will accept only cash contributions and only up to a maximum
amount of $2,000 for any tax year of the Depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA Conversion Contributions made during the same tax year will
be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married depositor who files jointly, between AGI of $150,000 and
$160,000; and for a married depositor who files separately, between $0 and
$10,000. In the case of a conversion, the Custodian will not accept IRA
Conversion Contributions in a tax year if the Depositor's AGI for that tax
year exceeds $100,000 or if the Depositor is married and files a separate
return. Adjusted gross income is defined in section 408A(c)(3) and does not
include IRA Conversion Contributions.
ARTICLE III
The Depositor's interest in the balance in the Custodial account is
nonforfeitable.
ARTICLE IV
1. No part of the Custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the Custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section
408(m)(3), which provides an exception for certain gold, silver, and
platinum coins, coins issued under the laws of any state, and certain
bullion.
ARTICLE V
1. If the Depositor dies before his or her entire interest is distributed to
him or her and the Depositor's surviving spouse is not the sole beneficiary,
the entire remaining interest will, at the election of the Depositor or, if
the Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of the
Depositor's death.
If distributions do not begin by the date described in (b), distribution
method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine the minimum
annual payment for each year, divide the Depositor's entire interest in the
Custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the designated beneficiary using
the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence and subtract 1
for each subsequent year.
3. If the Depositor's spouse is the sole beneficiary on the Depositor's date of
death, such spouse will then be treated as the Depositor.
ARTICLE VI
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under sections 408(i) and
408A(d)(3)(E), Regulations sections 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
ARTICLE VIII
This agreement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other
amendments may be made with the consent of the persons whose signatures appear
below.
ARTICLE IX
1. PLEASE REFER TO THE CGM IRA APPLICATION WHICH IS INCORPORATED INTO THIS
AGREEMENT AS THIS PARAGRAPH OF ARTICLE VIII.
2. DEFINITIONS
The following definitions shall apply to terms used in this Article VIII:
(a) "Account" or "Custodial Account" means the custodial account established
hereunder for the benefit of the Depositor.
(b) "Agreement" means the CGM IRA Custodial Agreement, including the
information and provisions set forth in any Account Application that
goes with this Agreement. This Agreement, including the Account
Application and any designation of Beneficiary filed with the Custodian,
may be proved either by an original copy or by a reproduced copy
thereof, including, without limitation, a copy reproduced by
photocopying, facsimile transmission, or electronic imaging.
(c) "Application" or "Account Application" shall mean CGM IRA Account
Application by which this Agreement, as may be amended from time to
time, is established between the Depositor and the Custodian. The
statements contained therein shall be incorporated into this Agreement.
(d) "Beneficiary" means the person or persons (including without limitation
an individual, a trust, an estate, an association or a corporation)
designated as such by the Depositor on a signed form acceptable to and
filed with the Custodian pursuant to Article VIII, Section 5.(a) of this
Agreement.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Company" shall mean Capital Growth Management Limited Partnership
("CGM"), or any successor or affiliate thereof to which CGM may, from
time to time, delegate or assign any or all of its rights or
responsibilities under this Agreement.
(g) "Custodian" shall mean State Street Bank and Trust Company of Boston,
Massachusetts, or its successors, as specified in the Account
Application.
(h) "Depositor" means the person named in the Account Application.
(i) "Fund" shall mean any corporation, partnership, trust or other entity
registered under the Investment Company Act of 1940 for which CGM, or
its successors or affiliates, serves as investment adviser, and which
CGM designates in writing to the Custodian as an eligible investment
under this Custodial Agreement.
(j) "Fund Shares" or "Shares" shall mean shares of stock, trust
certificates, or other evidences of interest (including fractional
shares) in any Fund.
(k) "Money Market Shares" shall mean any Shares that are issued by a Fund
that is a money market mutual fund.
3. INVESTMENT OF CONTRIBUTIONS
(a) Investment Options. The Depositor has exclusive responsibility for and
control over the investment of the assets of his or her IRA.
Contributions to the Account may be invested only in Fund Shares. The
Depositor may direct the Custodian to invest assets in Shares of one or
more Funds in such percentage as the Depositor shall specify on the
Account Application or thereafter in writing to the Custodian from time
to time, provided that minimum investment amounts are met.
(b) Investment Instructions. Contributions will be invested in accordance
with the Depositor's written instructions on the Application, and with
subsequent instructions given by the Depositor (or, following the death
of the Depositor, his or her Beneficiary) to the Custodian in a manner
acceptable to the Custodian. By giving such instructions to the
Custodian, such persons will be deemed to have acknowledged receipt of
the then-current prospectus for any Fund in which the Depositor directs
the Custodian to invest assets in his or her Custodial Account. All
charges incidental to carrying out such instructions shall be charged
and collected in accordance with Article IX, Section 7. All Fund Shares
in the Custodial Account shall be held in the name of the Custodian for
the benefit of the Depositor.
(c) Investment Changes and Reinvestment. The Depositor may change any
portion of his or her investment in a Fund to another Fund by requesting
the change in the manner the Custodian requires, and subject to the
provisions of the then-current Fund prospectus.
Prior to the date the Depositor has participated in a Roth IRA for five
years and attains age 59 1/2, all income, dividends and capital gains
distributions from a Fund shall be reinvested in additional shares of
that Fund. On or after the date the Depositor has participated in a Roth
IRA for five years and attains age 59 1/2, becomes disabled or dies, he
or she may elect to receive all income dividends and/or capital gains
distributions from a Fund in cash.
(d) Investment Minimums. Each Fund may impose a minimum investment limit on
initial and subsequent investments. The Company reserves the right to
change those investment minimums at any time without prior notice. The
Custodian will invest all contributions promptly after their receipt, as
set forth in the prospectus of the Fund in which shares are being
purchased. The Custodian will mail a statement confirming each
investment to the Depositor at the address of record on the Custodial
Account.
(e) Unclear Investment Instructions. If the Custodian or the Company
receives instructions from the Depositor that are in their opinion not
clear, the Custodian or the Company may request additional instructions
from the Depositor (or the Depositor's Beneficiary, executor or
administrator). Pending receipt of such instructions, any cash assets
may be invested by the Custodian in Money Market Shares. Neither the
Custodian nor the Company shall be liable to anyone for any loss
resulting from the delay in investing such cash or in implementing such
instructions.
4. CONTRIBUTIONS
(a) Nature and Timing of Contributions. All contributions by the Depositor
to the Custodial Account must be in cash, except for initial
contributions of rollovers that may be made in the form of Fund shares
if permitted by the Company and the Custodian. The Custodian will
designate contributions (other than rollover contributions) as being
made for the current tax year unless the Depositor designates, in a
manner acceptable to the Custodian, that the contribution is being made
for the preceding taxable year. Contributions designated for the
preceding taxable year must be made by the deadline for filing the
Depositor's income tax return (not including extensions).
(b) Rollover Contributions. The Custodian will accept for the Custodial
Account all rollover contributions that consist of cash and may accept
Fund Shares if permitted by the Company. The Depositor shall designate
each rollover contribution as such to the Custodian, and by such
designation shall confirm to the Custodian that a proposed rollover
contribution qualifies as a rollover contribution within the meaning of
Section 408A(e) of the Code.
(c) Excess Contributions. If the Depositor exceeds the amount that may be
contributed to his or her Custodial Account for any year the Custodian
will, upon a proper written request from the Depositor, prior to his or
her tax filing deadline, return the excess and any attributable earnings
to the Depositor. If the request is received after the Depositor's
filing deadline, the Depositor may elect to have the contribution
treated as if it were made for a later year.
5. BENEFICIARY(IES)
A Depositor may designate a Beneficiary or Beneficiaries at any time,
and such designation may be changed or revoked at any time, by written
designation signed by the Depositor on a form acceptable to, and filed
with the Custodian; provided, however, that such designation, or change,
or revocation of a prior designation, shall not be effective unless it
is received and accepted by the Custodian no later than thirty (30) days
after the death of the Depositor, and provided further that the latest
such designation or change or revocation shall control. If at the time
of the Depositor's death there is no properly designated Beneficiary of
the Depositor in existence, the Depositor's Beneficiary shall be his or
her surviving spouse or, if none, his or her estate. Unless otherwise
specified in the Depositor's designation of Beneficiary, if a
Beneficiary dies before receiving his or her interest in the Custodial
Account, the Beneficiary's remaining interest in the Custodial Account
shall be paid to the Beneficiary's estate.
A Depositor may designate as Beneficiary of his or her Account a trust
for the benefit of his or her surviving spouse that is intended to
satisfy the conditions of Sections 2056(b)(7) or 2056A of the Code (a
"Spousal Trust"). In that event, if the Depositor is survived by his or
her spouse, the following provisions shall apply to the account: (1) all
of the income of the Account shall be paid to the spousal trust annually
or at more frequent intervals, and (2) no person shall have the power to
appoint any part of the account to any person other than the spousal
trust. To the extent permitted by Section 401(a)(9) of the Code, as
determined by the trustee(s) of the spousal trust, the surviving spouse
of a Depositor who has designated a spousal trust as his or her
beneficiary may be treated as his or her "designated beneficiary" for
purposes of the distribution requirements of that Code section. The
Custodian shall have no responsibility to determine whether such
treatment is appropriate.
6. DISTRIBUTIONS
(a) Form of Distribution. All requests for distribution shall be in writing
on a form provided by or acceptable to the Custodian. The method of
distribution must be specified in writing. The tax identification number
must be provided to the Custodian and certified appropriately before a
distribution will be made. The Depositor is responsible for making the
distribution requests to the Custodian sufficiently in advance of the
date on which any requested or required distribution is to be made to
ensure that the distribution will be made on or before that date.
The Depositor must provide to the Custodian any application,
certificates, tax waivers, signature guarantees, and other documents
(including proof of legal representative's authority) that the Custodian
requires. The Custodian will not be liable for complying with a
distribution request that appears on its face to be genuine, nor will
the Custodian be liable for refusing to comply with a distribution
request that the Custodian is not satisfied is genuine.
If a distribution request is not made in the correct form, the Custodian
is not responsible and will not be liable to the Depositor for any
losses while the Custodian awaits the distribution request to be made in
the proper form. The Depositor also agrees to fully indemnify the
Custodian for any losses that may result from the Custodian's failing to
act upon an improperly made distribution request.
The Custodian is not obligated to make any distribution, including a
required minimum distribution as specified in Article IV above, absent a
specific written direction from the Depositor (or the Depositor's,
Beneficiary, executor, or administrator) to do so.
Any distributions shall be subject to all applicable tax and other laws
and regulations including possible early withdrawal penalties and
withholding requirements.
The Custodian is empowered to make distribution absent instructions from
the Depositor if directed to do so pursuant to a court order of any kind
and the Custodian shall in such event incur no liability to anyone for
acting in accordance with such court order.
(b) Distribution Upon Death. If the Depositor dies before receiving all of
the proceeds in his or her IRA, payments will be made to the designated
Beneficiary(ies). If the sole beneficiary is the spouse of the
Depositor, the Roth IRA will be treated as that of the spouse. If a
Beneficiary payment election described in Article V, Section 1 of this
Agreement is not made by December 31 of the year after the year of death
the following rules will apply. If the Beneficiaries are or include
anyone other than the Depositor's spouse, the payment method described
in Article V, Section 1(a) will be deemed elected (i.e. the 5-year
rule).
(c) Distributions to a Minor. If a distribution is payable to a person known
by the Custodian to be a minor or otherwise under a legal disability,
the Custodian may, in its absolute discretion, make all or any part of
the distribution to (a) a parent of such person, (b) the guardian,
committee, or other legal representative, whenever appointed, of such
person, (c) a custodial account established under a Uniform Gifts to
Minors Act, Uniform Transfers to Minors Act or similar act, (d) any
person having control or custody of such person, or (e) to such person
directly. The Depositor (or the Depositor's Beneficiary, executor or
administrator) may direct the Custodian to make any distributions from
the Custodial Account directly to any person, corporation or other
entity, including, but not limited to, the fiduciary of a retirement
plan account maintained on behalf of the Depositor.
(d) Asset Transfers to Spouse Upon Divorce. All or any portion of the
Depositor's interest in the Custodial Account may be transferred to a
spouse or former spouse pursuant to a decree of divorce or separate
maintenance or a written instrument incident to such a decree as
provided in Section 408 of the Code, in which event the transferred
portion shall be held as a separate IRA for the benefit of such spouse
or former spouse.
(e) Transferring Assets to and from the Account. The Custodian will accept
amounts transferred or rolled over to this Roth IRA from the trustee or
custodian of another Roth IRA as permitted by statute or applicable
regulations.
However, if this Custodial account is designated as a Roth Conversion
IRA, no contributions other than IRA Conversion Contributions made
during the same tax year will be accepted. The Custodian will not be
responsible for any losses the Depositor may incur as a result of the
timing of any transfer from another trustee or custodian that are due to
circumstances reasonably beyond the control of the Custodian.
Assets held on behalf of the Depositor in the Account may be transferred
directly to the trustee or custodian of another Roth IRA established for
the Depositor, if so directed by the Depositor in a form and manner
acceptable to the Custodian. The Custodian will assume no responsibility
for the tax consequences of any transfer.
7. THE CUSTODIAN
(a) Instructions and Notices. All written notices or communication required
to be given by the Custodian to the Depositor shall be deemed to have
been given when sent by mail to the last known address of the Depositor
in the records of the Custodian. It is the responsibility of the
Depositor to notify the Custodian of any changes in address. All written
instructions, notices, or communications required to be given by the
Depositor to the Custodian shall be mailed or delivered to the Custodian
at the mailing address specified in the Prospectus, and no such
instruction, notice, or communication shall be effective until the
Custodian's actual receipt thereof.
The Custodian, may at its discretion, when so permitted by the Fund
prospectus, accept telephonic instructions, as if they were written
instructions. Any such telephonic instruction may be proved by audio
recorded tape.
(b) Reliance. The Custodian may conclusively rely upon and will be protected
from acting on any written order from or authorized by the Depositor, or
any other notice, request, consent, certificate or other instrument,
paper, or other communication that the Custodian believes to be genuine
and issued in proper form with proper authority, as long as the
Custodian acts in good faith in taking or omitting to take any action in
reliance upon the communication. Neither the Custodian nor the Company
shall have any duty to question the directions of a Depositor (or the
Depositor's Beneficiary, executor or administrator) in the investment,
transfer or distribution of his or her Custodial Account or to advise
him or her regarding the purchase, retention, or sale of assets credited
to the Custodial Account or regarding distributions from the Account.
Neither the Custodian nor the Company shall be liable for any loss that
results from the Depositor's (or the Depositor's Beneficiary, executor,
or administrator) exercise of control (whether by his or her action or
inaction) over the Custodial Account.
(c) Reports; Tax Withholding. As soon as practicable after the close of each
taxable year, and whenever required by the Code, the Custodian shall
deliver to the Depositor a written record reflecting receipts,
distributions and other transactions effected in the Custodial Account
during such period and the fair market value of the assets and
liabilities of the Custodial Account as of the close of such period.
Unless the Depositor sends the Custodian written objection to a report
within sixty (60) days of receipt, the Depositor shall be deemed to have
approved such report, and the Custodian and the Company shall be forever
released and discharged from all liability and accountability to anyone
with respect to their acts, transactions, duties and obligations or
responsibilities as shown on, or reflected by, such report.
The Custodian may reduce the amount of any distribution by the amount
of any required tax withholding unless specified otherwise.
(d) Exclusive Benefit. At no time shall it be possible for any part of the
assets of the Custodial Account to be used for, or diverted to, purposes
other than for the exclusive benefit of the Depositor or the Depositor's
beneficiaries except as specifically provided in this Agreement.
(e) Account Fees and Expenses. The Custodian is entitled to receive the fees
for establishing and maintaining the Custodial Account set forth in the
Disclosure Statement. The Custodian may change its fee schedule from
time to time upon thirty (30) days' advance written notice to the
Depositor. The Custodian has the right to charge the Custodial Account,
including the right to liquidate Fund Shares or to charge the Depositor,
for the Custodian's fees, as well as for any income, gift, estate, and
inheritance taxes (including any transfer taxes incurred in connection
with the Custodial Account assets, and for all other administrative
expenses of the Custodian for performing its duties, including any fees
for legal services provided to the Custodian.
(f) Voting with Respect to Securities (Mailing of Prospectuses, Proxies,
etc.). The Custodian shall mail to the Depositor all prospectuses and
proxies that may come into the Custodian's possession by reason of its
holding Fund Shares in the Custodial Account. A Depositor may direct the
Custodian as to the manner in which any Fund Shares held in the
Custodial Account shall be voted with respect to any matters as to which
the Custodian as holder of record is entitled to vote, coming before any
meeting of shareholders of the Fund that issued such Fund Shares. All
such directions shall be in writing on a form approved by the Custodian
and signed by the Depositor, and delivered to the Custodian within the
time prescribed by it. The Custodian shall vote only those Shares with
respect to which it has received timely written directions from the
Depositor; provided, however, that the Custodian may without such
direction vote shares "present" to the extent that such a vote is needed
to establish a quorum.
(g) Limitations on Custodial Liability and Indemnification. The Depositor
and the Custodian intend that the Custodian shall have and exercise no
discretion, authority, or responsibility as to any investment in
connection with the Custodial Account and the Custodian shall not be
responsible in any way for the purpose, propriety, or tax treatment of
any contribution, or of any distribution, or any other action or
nonaction taken pursuant to the Depositor's direction or that of the
Depositor's Beneficiary, executor, or administrator. The Depositor who
directs the investment of his or her Account shall bear sole
responsibility for the suitability of any directed investment and for
any adverse consequences arising from such an investment, including,
without limitation, the inability of the Custodian to value or to sell
an illiquid investment, or the generation of unrelated business taxable
income with respect to an investment. To the fullest extent permitted by
law, the Depositor (or the Depositor's Beneficiary, executor, or
administrator, as appropriate) shall at all times fully indemnify and
save harmless the Custodian, the Company and their agents, affiliates,
successors, assigns and their officers, directors, and employees, from
any and all liability arising from the Depositor's investment direction
under this Custodial Account and from any other liability whatsoever
that may arise in connection with this Agreement except liability
arising under applicable law or liability arising from gross negligence
or willful misconduct on the part of the indemnified person. Although
the Custodian shall have no responsibility to give effect to a direction
from anyone other than the Depositor (or the Depositor's Beneficiary,
executor, or administrator), the Custodian may, in its discretion,
establish procedures pursuant to which the Depositor may delegate to a
third party any or all of the Depositor's powers and duties hereunder;
provided, however, that in no event may anyone other than the
Depositor's executor execute the application by which this Agreement is
adopted or the form by which the Beneficiary is appointed, and provided,
further, that any such third party to whom the Depositor has so
delegated powers and duties shall be treated as the Depositor for
purposes of applying the preceding sentences of this paragraph and
provisions of Article VIII, Section 3(a).
(h) Resignation or Removal of Custodian. The Company may remove the
Custodian at any time, and the Custodian may resign at any time, upon
thirty (30) days' written notice to the Depositor. Upon the removal or
resignation of the Custodian, the Company may, but shall not be required
to, appoint a successor custodian under this Custodial Agreement;
provided that any successor custodian shall satisfy the requirements of
Section 408(a)(2) of the Code. Upon any such successor's acceptance of
appointment, the Custodian shall transfer the assets of the Custodial
Account, together with the copies of relevant books and records, to such
successor custodian; provided, however, that the Custodian is authorized
to reserve such sum of money or property as it may deem advisable for
payment of any liabilities constituting a charge on or against the
assets of the Custodial Account, or on or against the Custodian or the
Company. The Custodian shall not be liable for the acts or omissions of
any successor to it. If no successor is appointed by the Company, the
Custodial Account shall be terminated and the assets of the Account,
reduced by the amount of any unpaid fees or expenses, will be
distributed to the Depositor.
8. AMENDMENT AND TERMINATION
(a) Amendment. The Depositor and Custodian authorize and direct the Company
to amend this Agreement in any respect at any time (including
retroactively), so that it may conform with applicable provisions of the
Internal Revenue Code, or with any other applicable law as in effect
from time to time. Any amendment made by the Company to comply with the
Code and related regulations does not require the consent of the
Depositor. Such other changes to this Agreement may be made as the
Company deems advisable. Any such amendment shall be effected by
delivery to the Custodian and mailing a copy of such amendment or a
restatement of the Custodial Agreement including any such amendment to
the Depositor at his or her last known address as shown in the records
of the Custodian. The Depositor shall be deemed to consent to any such
amendment(s) if he or she fails to object thereto by written notice
received by the Custodian within thirty (30) calendar days from the date
the Company mails a copy of such amendment(s) or restatement to the
Depositor.
(b) Termination. The Depositor may terminate the Custodial Account at any
time upon notice to the Custodian in a manner and form acceptable to the
Custodian. Upon such termination, the Custodian shall transfer the
assets of the Custodial Account, reduced by the amount of any unpaid
fees or expenses, to the custodian or trustee of another Roth individual
retirement account (within the meaning of Section 408 of the Code)
designated by the Depositor, as described in Article IX, Section 6(e).
The Custodian shall not be liable for losses arising from the acts,
omissions, delays or other inaction of any such transferee custodian or
trustee. If notice of the Depositor's intention to terminate the
Custodial Account is received by the Custodian and the Depositor had not
designated a transferee custodian or trustee for the assets in the
Account, then the Account, reduced by any unpaid fees or expenses, will
be distributed to the Depositor.
9. MISCELLANEOUS
(a) Governing Law. This Agreement, and the duties and obligations of the
Company and the Custodian under the Agreement, shall be construed,
administered and enforced according to the laws of the Commonwealth of
Massachusetts, except as superseded by federal law or statute.
(b) When Effective. This Agreement shall not become effective until
acceptance of the Application by or on behalf of the Custodian as its
principal office, as evidenced by a written notice to the Depositor.
INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-RA is a model Custodial account agreement that meets the
requirements of section 408A and has been automatically approved by the IRS. A
Roth individual retirement account (Roth IRA) is established after the form is
fully executed by both the individual (Depositor) and the Custodian. This
account must be created in the United States for the exclusive benefit of the
Depositor or his or her beneficiaries.
Do not file Form 5305-RA with the IRS. Instead, keep it for your records.
Unlike contributions to Traditional individual retirement arrangements,
contributions to a Roth IRA are not deductible from the Depositor's gross
income; and distributions after 5 years that are made when the Depositor is 59
1/2 years of age or older or on account of death, disability, or the purchase
of a home by a first-time homebuyer (limited to $10,000), are not includible
in gross income. For more information on Roth IRAs, including the required
disclosure the Depositor can get from the Custodian, get PUB. 590, Individual
Retirement Arrangements (IRAs).
This Roth IRA can be used by a Depositor to hold: (1) IRA Conversion
Contributions, amounts rolled over or transferred from another Roth IRA, and
annual cash contributions of up to $2,000 from the Depositor; or (2) if
designated as a Roth Conversion IRA (by checking the box on the Application),
only IRA Conversion Contributions for the same tax year.
To simplify the identification of funds distributed from Roth IRAs, Depositors
are encouraged to maintain IRA Conversion Contributions for each tax year in a
separate Roth IRA.
DEFINITIONS
Roth Conversion IRA: A Roth Conversion IRA is a Roth IRA that accepts only IRA
Conversion Contributions made during the same tax year.
IRA Conversion Contributions. IRA Conversion Contributions are amounts rolled
over, transferred, or considered transferred from a nonRoth IRA to a Roth IRA.
A nonRoth IRA is an individual retirement account or annuity described in
section 408(a) or 408(b), other than a Roth IRA.
Custodian: The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to
act as Custodian.
Depositor: The Depositor is the person who establishes the Custodial account.
SPECIFIC INSTRUCTIONS
Article I: The Depositor may be subject to a 6-percent tax on excess
contributions if (1) contributions to other individual retirement arrangements
of the Depositor have been made for the same tax year, (2) the Depositor's
adjusted gross income exceeds the applicable limits in Article II for the tax
year, or (3) the Depositor's and spouse's compensation does not exceed the
amount contributed for them for the tax year. The Depositor should see the
Disclosure Statement or Pub. 590 for more information.
Article IX: Article IX and any that follow it may incorporate additional
provisions that are agreed to by the Depositor and Custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
the Custodian, Custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the Depositor, etc. Use additional pages if
necessary and attach them to this form.
NOTE: Form 5305-RA may be reproduced and reduced in size for adaption to
passbook purposes.
<PAGE>
THE CGM FUNDS o P.O. BOX 449 o BOSTON, MA 02117 o 800-345-4048
<PAGE>
- --------------------------------------------------------------------------------
HOW TO ESTABLISH A CGM ROTH IRA
- --------------------------------------------------------------------------------
A separate application must be completed for Traditional IRAs,
Roth Contributory IRAs and Roth Conversion IRAs. You may use
photocopies if you need additional forms.
TO SET UP A CGM ROTH CONTRIBUTORY IRA . . .
(For individuals who want to make annual contributions up to $2,000 to a CGM
Roth IRA.)
|X| Please complete and sign the IRA Account Application. In Section 2 of
the IRA Account Application please be sure to check the Roth
Contributory IRA box and the Annual Contribution box. Also, in
Section 3 of the IRA Account Application you need to indicate the
investment amount next to each fund you want to invest in.
|X| Please enclose your check for the total investment amount and an
additional $5.00 for the establishment fee. Make your check payable
to State Street Bank and Trust Company. No third party checks (checks
endorsed over to CGM from an individual or institution) will be
accepted.
|X| Please mail the IRA Account Application and check in the enclosed
envelope to CGM.
TO SET UP A CGM ROTH CONVERSION IRA . . .
(For individuals who want to convert an existing Traditional IRA [either from
an existing CGM IRA or a non-CGM IRA] to a CGM Roth IRA.)
|X| Please complete and sign the IRA Account Application. In Section 2 of
the IRA Account Application, please be sure to check the Roth
Conversion IRA box and the Conversion from Traditional IRA to Roth
IRA box. Also, in Section 3 of the IRA Account Application you need
to indicate the investment amount next to each fund you want to
invest in.
|X| Please complete and sign the Roth IRA Conversion Form.
|X| Please make a check payable to:
|_| FOR INDIVIDUALS CONVERTING FROM AN EXISTING CGM IRA. Please
enclose your check for $5.00 for the establishment fee payable to
State Street Bank and Trust Company.
|_| FOR INDIVIDUALS CONVERTING FROM A NON-CGM IRA. If you received
the proceeds from a Traditional IRA, please enclose your check
for the total proceeds and an additional $5.00 for the
establishment fee. Make your check payable to State Street Bank
and Trust Company. If your current IRA Custodian is sending the
proceeds directly to us (for the distribution of your Traditional
IRA to your CGM Roth Conversion IRA), please enclose a $5.00
check payable to State Street Bank and Trust Company to cover the
establishment fee.
Please Note: No third party checks (checks endorsed over to CGM from
an individual or institution) will be accepted.
|X| Please mail the IRA Account Application, Roth IRA Conversion Form,
and check in the enclosed envelope to: CGM Funds, P.O. Box 449,
Boston, MA 02117-0449.
PLEASE CALL US WITH ANY QUESTIONS AT 800-345-4048
IRACHECK 2/98
<PAGE>
- --------------------------------------------------------------------------------
CGM ROTH IRA CONVERSION FORM
- --------------------------------------------------------------------------------
Please complete Sections 1 and 4. Also, fill in Section 2, 3, or 5 as
applicable. Refer to the reverse side for complete instructions. You
should submit a CGM IRA Account Application with this form. A
separate plan must be established for Roth Contributory and Roth
Conversion assets.
1. YOUR NAME AND ADDRESS
- --------------------------------------- [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name of Participant Social Security Number
- ---------------------------------------
Address
- --------------------------------------- (---) -----------------------
City State Zip Code Daytime Phone Number
2. CONVERTING YOUR CGM TRADITIONAL IRA TO A CGM ROTH IRA
|_| Please complete the enclosed CGM IRA Account Application and provide us with
the following information:
Existing CGM Traditional IRA Fund(s) Amount to be Converted
and Account Number(s) (if all indicate "all")
- --------------------------------------- $ ------------------------------------
- --------------------------------------- $ ------------------------------------
|_| Please enclose check for $5.00 payable to State Street Bank and Trust
Company to cover the establishment fee.
I authorize you to convert my CGM Traditional IRA assets in the accounts listed
above to a CGM Roth IRA. I have indicated how I want you
to invest those assets in Section 3 of the CGM IRA Account Application. I
understand that this conversion constitutes a rollover and is a taxable event.
3. CONVERTING YOUR TRADITIONAL IRA WITH ANOTHER FIRM TO A CGM ROTH IRA
|_| Please complete the enclosed IRA Account Application.
|_| If you received the proceeds from the distribution of your Traditional IRA,
enclose your check for the conversion proceeds and include a $5.00
establishment fee. Make your check payable to State Street Bank and Trust
Company. No third party checks can be accepted.
|_| If you want the Custodian of your current Traditional IRA to rollover the
proceeds directly to CGM, enclose a check for $5.00 payable to State Street
Bank and Trust Company, and complete Section 5 on the reverse side of this
form.
I certify that I received the enclosed distribution proceeds within the past 60
days and that the assets were previously invested in a Traditional IRA. I have
indicated how I want you to invest those assets in Section 3 of the CGM IRA
Account Application. If I am or will reach age 701/2 in this calendar year, I
certify that the Required Minimum Distribution was taken prior to the
distribution of the assets. I understand that this conversion constitutes a
rollover and is a taxable event.
4. SIGNATURE
I have read and understand the rules and conditions indicated on this form and I
have met the requirements for making a Roth conversion. Due to the important tax
consequences of converting assets to a Roth IRA, I have been advised to see a
tax professional. All information provided by me is true and correct, and may be
relied upon by the Custodian. I assume responsibility for this conversion
transaction and will not hold the Custodian liable for any adverse consequences
that may result. I hereby irrevocably designate the contribution indicated above
as a conversion contribution.
X
- ------------------------------------------ ----------------------------------
Signature Date
PLEASE REVIEW THE RULES AND CONDITIONS ON THE REVERSE SIDE.
5. CONVERTING THE ASSETS OF YOUR TRADITIONAL IRA DIRECTLY TO CGM
To convert your Traditional IRA to a Roth IRA and have the proceeds sent
directly to CGM, please call your current Custodian's transfer department and
verify the correct address and any requirements, such as a signature guarantee.
If you are 70 1/2 or older please refer to Section 6.
- ------------------------------------------ (---) ----------------------------
Name of Current Custodian Custodian's Phone Number
- ------------------------------------------ ----------------------------------
Address IRA Account Number (With Current
Custodian)
- ------------------------------------------ ----------------------------------
City State Zip Code
|_| Please accept this as your [ ] Transfer All OR [ ] Transfer $ or
authorization to: % ------ to a CGM IRA.
|_| The rollover should be [ ] Immediately OR [ ] Upon Maturity of
processed: My Assets
- --------------------------------------------------------------------------------
I request that the above named Signature Guarantee (If Required
Custodian liquidate and rollover my by Current Custodian)
plan assets as cash to State Street
Bank and Trust Company, Custodian Name of Firm: ---------------------
of my CGM Roth Conversion IRA.
X
- ---------------------------------- BY: -------------------------------
YOUR SIGNATURE DATE Authorized Individual
- --------------------------------------------------------------------------------
CUSTODIAN: MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O CGM FUNDS,
P.O. BOX 8511, BOSTON, MA 02266-8511
(Please include the Participant's name and Social Security Number
on your check.)
- --------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN: State Street Bank and Trust Company accepts the assets
being rolled over and agrees to serve as the Custodian of the Roth IRA
Conversion Account established on behalf of the above named individual.
/s/ Illegible
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
6. RULES AND CONDITIONS APPLICABLE TO CONVERSIONS
A rollover is a way to move money from one IRA plan to another IRA plan. If you
are converting your Traditional IRA to a Roth IRA, the distribution is treated
as a rollover. The Internal Revenue Code (IRC) limits how many rollovers may be
taken (although such annual limits do not apply to conversions), how quickly
rollovers must be completed, and how the Custodian must report the transaction.
By properly completing this form you are certifying to the Custodian that you
have satisfied the rules and conditions applicable to your conversion and that
you are making an irrevocable election to treat the transaction as a rollover.
1. TIMELINESS: The assets you receive from the distributing Traditional IRA
must generally be deposited into a Roth IRA within 60 days after you
receive them. However, this period is 120 days for certain rollovers
relating to first-home purchases. When counting the 60 (or 120) days
include weekends and holidays. There are generally no exceptions to the 60
day rule and the IRS cannot grant extensions. Receipt generally means the
day you actually have the assets in hand. For example, the 60 days would
begin on the day following the day you receive the check in the mail.
2. 70 1/2 ROLLOVER RESTRICTION: If this Roth IRA Conversion is made during or
after the year in which you turn age 701/2, you must take a Required
Minimum Distribution (RMD) based on your life expectancy or the life
expectancy of you and your beneficiary before you convert your IRA account.
It is your responsibility to ensure that you are taking the appropriate
RMD. Failure to do so may result in a penalty tax of 50% of the amount not
taken. Please call your current IRA Custodian if you have any questions
about RMDs.
3. INCOME RESTRICTION: If your adjusted gross income for a year exceeds
$100,000, you are not eligible to convert your Traditional IRA to a Roth
IRA during such year. RMDs are included in the adjusted gross income
restrictions.
4. TAX RETURN RESTRICTION: If you are married and you and your spouse file
separate tax returns for a year, you are not eligible to convert your
Traditional IRA to a Roth IRA during such year.
CAUTION ABOUT COMMINGLING ASSETS: YOU MAY NOT ROLL THE ASSETS INTO AN
EXISTING ROTH CONVERSION IRA WHICH CONTAINS CONVERSION CONTRIBUTIONS MADE
DURING ANOTHER CALENDAR YEAR, OR TO AN EXISTING ROTH CONTRIBUTORY IRA.
Questions? Call 800-345-4048.
IRACONVERT 2/98
<PAGE>
- --------------------------------------------------------------------------------
CGM 403(B)(7) TAX-SHELTERED CUSTODIAL ACCOUNT AGREEMENT
- --------------------------------------------------------------------------------
This Agreement allows you to establish a tax-sheltered custodial account
authorized under Section 403(b)(7) of the Internal Revenue Code. By electing to
reduce your compensation and have your Employer contribute into your
tax-sheltered custodial Account, you will not be taxed on the amounts
contributed or earnings attributable to such amounts until the funds are
withdrawn from your Account.
SECTION ONE: DEFINITIONS
The following words and phrases when used in this Agreement with initial capital
letters shall have the meanings set forth below.
1.01 ACCOUNT - Means the tax-sheltered custodial Account established pursuant
to this Agreement for the benefit of the Participant and when the context
so implies refers to the assets, if any, then held by the Custodian
hereunder.
1.02 AGREEMENT - Means this 403(b)(7) Tax-Sheltered Custodial Account
Agreement.
1.03 BENEFICIARY - Means the person or persons designated by the Participant in
accordance with Section 4.04 to receive any distributions from the Account
upon the Participant's death.
1.04 CODE - Means the Internal Revenue Code of 1986, as amended from time to
time.
1.05 CUSTODIAN - Means State Street Bank and Trust Company or any successor
thereto which qualifies to serve as Custodian in the manner prescribed by
Section 401(f)(2) of the Code.
1.06 EMPLOYER - Means the entity so designated on this Agreement. The Employer
must be an entity described in Section 501(c)(3) of the Code which is
exempt from tax under Section 501(a) of the Code, an educational
organization described in Section 170(b)(1)(A)(ii) of the Code or any
other entity eligible under Section 403(b) of the Code to make
contributions to tax-sheltered custodial accounts.
1.07 PARTICIPANT - Means any person who is regularly employed by the Employer
who elects to participate in this Agreement by completing and signing a
Salary Deferral Agreement or such other form as may be acceptable to the
Employer.
1.08 SALARY DEFERRAL AGREEMENT - Means the Salary Reduction Agreement signed by
the Employee and delivered to the Employer whereby the Employee authorizes
a reduction of salary to be contributed by the Employer to the Employee's
Account established hereunder.
1.09 SPONSOR - Means Capital Growth Management Limited Partnership.
SECTION TWO: CONTRIBUTIONS
2.01 SALARY DEFERRAL AGREEMENT - The Custodian may accept contributions from
the Employer on behalf of a Participant made pursuant to a Salary Deferral
Agreement. A Participant shall designate the amount or percentage of such
Participant's compensation which is to be deferred in the Salary Deferral
Agreement. Such amount or percentage shall be effective until otherwise
modified in writing by the Participant. A Participant may amend or
terminate his or her Salary Deferral Agreement at such times as may be
permitted by the Employer, however, the Participant may not change his or
her election more than once per tax year unless permitted by the Employer
in a uniform and nondiscriminatory manner.
2.02 MAXIMUM CONTRIBUTION LIMITS - In no event shall the contributions to the
Account for a tax year on behalf of a Participant exceed the maximum
allowable deferrals permitted under current law or regulation.
a. The maximum salary deferral made during a tax year on behalf of a
Participant, when aggregated with other salary deferral amounts made
through the Employer (or controlled group of Employers under IRC
414(b), (c), (m) or (o)), shall not exceed the lesser of the maximum
permitted amount for a Participant under Sections 403(b)(2) and 415(c)
of the Code for that year.
b. The maximum of all salary deferrals made during the Participant's tax
year shall not exceed the limitations set forth in Section 402(g) of
the Code.
c. The maximum salary deferrals may be based on a valid election by the
Participant to use available special increase options.
2.03 TRANSFER TO CUSTODIAL ACCOUNT - The Participant may transfer (or arrange
for the transfer of) assets from another annuity contract or custodial
account described in Section 403(b) of the Code to this Account. The
transfer shall be accepted by the Custodian if the Participant certifies
the transaction satisfies all current requirements for such a transaction.
The Custodian may request the Participant to provide such information it
deems necessary prior to accepting the transfer. The Custodian shall not
be responsible for determining whether any transfer is proper.
SECTION THREE: INVESTMENT OF CONTRIBUTIONS
3.01 SHARES OF REGULATED INVESTMENT COMPANIES - All Contributions by a
Participant to his or her Account shall be invested by the Custodian
pursuant to written instructions concerning investment delivered by the
Participant to the Custodian prior to or at the time a contribution is
made to the Account. The Custodian shall, within a reasonable time
following receipt of written instructions from the Participant, invest
such contributions in full or fractional shares of certain regulated
investment companies.
403(b)(7) CUST. AGMT.-5/97
<PAGE>
For purposes of this Agreement, "regulated investment companies" means any
of the following: CGM Mutual Fund, CGM Capital Development Fund (if the
Participant is an eligible investor), CGM Fixed Income Fund, CGM Realty
Fund, New England Cash Management Trust and/or any other taxable funds
sponsored by Capital Growth Management.
If the investment instructions provided by the Participant to the
Custodian are not received by the Custodian or are, in the opinion of the
Custodian, ambiguous, the Custodian may hold or return all or a portion of
the contribution uninvested without liability for loss of income or
appreciation, without liability for interest, dividends or any other gain
whatsoever, pending receipt of proper instructions or clarification. The
Custodian shall advise the Participant of the form and manner in which
investment instructions must be given.
3.02 PARTICIPANT CHANGE OF INVESTMENT - Subject to rules and procedures adopted
by the Custodian, a Participant may, at his or her election, direct the
Custodian to redeem any or all regulated investment company shares held by
the Custodian pursuant to this Agreement and to reinvest the proceeds in
such other regulated investment company shares as directed. Transactions
of this character must conform with the provisions of the current
prospectus for the regulated investment company shares subject to
purchase.
3.03 DIVIDENDS AND DISTRIBUTIONS - Dividends and other distributions received
by the Custodian on shares of any regulated investment company held in the
Account shall be reinvested in additional shares of the regulated
investment company from which the dividend or other distribution
originates, unless the Participant directs the Custodian to act otherwise.
A Participant, upon attaining the age of 591/2, may elect to receive
dividend and capital gains distributions in cash.
Should a Participant have the choice of receiving a distribution of shares
from a regulated investment company in additional shares, cash or other
property, the Custodian shall nonetheless elect to receive such
distribution in additional shares.
3.04 REGISTERED OWNER AND VOTING RIGHTS - All regulated investment company
shares acquired by the Custodian pursuant to this Agreement shall be
registered in the name of the Custodian or its nominee. The Custodian
shall deliver or cause to be executed and delivered to the Participant all
notices, prospectuses, financial statements, proxies and related proxy
information. The Custodian shall vote the shares in accordance with
instructions from the Participant.
SECTION FOUR: DISTRIBUTIONS
4.01 LIMITATIONS ON DISTRIBUTIONS - Subject to the limitations described in
this Agreement, a Participant may request a distribution from the Account.
A Participant's Account may not be distributed prior to the Participant's
a. attainment of age 59 1/2,
b. incurring a disability within the meaning of Section 72(m)(7) of the
Code,
c. death,
d. encountering a financial hardship, or
e. separation from service.
No distribution shall be made to a Participant or Beneficiary (if
applicable) until he or she completes such written forms and provides such
additional information and documentation as the Custodian, in its sole
discretion, may deem necessary.
If the value of the Account immediately preceding the 1989 Plan Year is
ascertainable, such pre-1989 amounts are not subject to the limitations of
Section 4.01.
4.02 FINANCIAL HARDSHIP - For purposes of this Agreement, "financial hardship"
shall include a financial need incurred by the Participant due to illness,
temporary disability, purchase of a home, or educational expenses of the
Participant or any member of his or her immediate family, or any other
immediate and heavy financial need of the Participant; provided, however,
no financial hardship shall exceed or otherwise not conform to the
requirements of Section 403(b)(7) of the Code. No distributions on account
of financial hardship shall exceed the amount determined to be required to
meet the immediate financial need created by the hardship which cannot be
otherwise reasonably accommodated from other resources of the Participant.
Any distribution made on account of a Participant's financial hardship
shall be made to such Participant in a single sum payment in cash pursuant
to written instructions in a form acceptable to the Custodian, and
delivered to the Custodian as may be provided in Section 403(b)(7) of the
Code.
Hardship distributions may consist only of the amounts contributed
pursuant to a Participant's Salary Deferral Agreement.
4.03 FORM OF DISTRIBUTION - Distributions for other than a financial hardship
shall be made in any one or more or any combination of the following
forms:
a. single lump sum payment;
b. monthly, quarterly, semiannual or annual payments over a period
elected by the Participant not to extend beyond the Participant's life
expectancy; or
c. in monthly, quarterly, semiannual or annual payments over a period
selected by the Participant not to exceed the joint life and last
survivor expectancy of the Participant and his or her Beneficiary. At
any time prior to commencement of distribution, the Participant may
make or change the foregoing distribution forms by delivering a
written notice to the Custodian.
Notwithstanding any other provision to the contrary, the Custodian may
make an immediate single sum distribution to the Participant or
Beneficiary (if applicable) if the value of the Account does not
exceed $3,500.
At the discretion of the Custodian, other forms of distribution, if
allowed under applicable provisions of the Code, may be allowed.
In the event a Participant does not elect any of the methods of
distribution described above on or before such Participant's 701/2
birthday, or, for years beginning after December 31, 1996, the
Participant's retirement, if later, the Participant shall be deemed to
have elected distribution made on his or her 701/2 birthday in the
form of periodic payments over the single life expectancy of the
participant using the declining years method of determining the
Participant's life expectancy multiple; provided, however, the
Custodian shall have no liability to the Participant for any tax
penalty or other damages which may result from any inadvertent failure
by the Custodian to make such a distribution. Notwithstanding anything
in this Agreement to the contrary, distributions shall conform to the
minimum distribution requirements of Section 401(a)(9) of the Code and
the regulations thereunder, including Treasury Regulations Sections
1.401(a)(9)-2 and 1.403(b)-2.
If the value of the Account prior to 1987 is determinable, the
pre-1987 amount need not be subject to a required minimum distribution
until the calendar year the Participant attains age 75, or such later
date as may be allowed by law or regulation.
4.04 DESIGNATION OF BENEFICIARY - Each Participant may designate, upon a form
provided by the Custodian, any person or persons (including an entity
other than a natural person) as primary or contingent Beneficiary to
receive all or a specified portion of the Participant's Account in the
event of the Participant's death. A Participant may change or revoke such
Beneficiary designation from time to time by completing and delivering the
proper form to the Custodian.
4.05 DISTRIBUTION UPON DEATH OF PARTICIPANT - If a Participant dies before his
or her entire interest in the Account is distributed to him or her, or if
distribution has commenced to the Participant and his or her surviving
spouse and such surviving spouse dies before the entire interest is
distributed to such spouse, the entire interest or remaining undistributed
balance of such interest shall be distributed in the form of a single sum
cash payment, or other form of payment as permitted under current
applicable code or regulations, to the Beneficiary or Beneficiaries, if
any, designated by the Participant, or his or her spouse as the case may
be. In the event no such Beneficiary has been designated, the
Participant's estate shall receive the balance of the Account.
4.06 DISTRIBUTION OF EXCESS AMOUNTS - The Custodian may make distribution of
any excess to the Participant.
4.07 ELIGIBLE ROLLOVER DISTRIBUTIONS - At the election of a Participant (or the
surviving spouse Beneficiary of a deceased Participant) the Custodian
shall pay any eligible rollover distribution to an individual retirement
plan described in Section 408 of the Code or another annuity contract or
custodial account described in Section 403(b) of the Code in a direct
rollover for that Participant (or Beneficiary). The term "eligible
rollover distribution" shall have the meaning set forth in Sections
402(c)(2) and (4) of the Code and Q&A-3 through Q&A-8 of Treasury
Regulations Section 1.402(c)-2T.
The Participant (or surviving spouse beneficiary) who desires a direct
rollover must specify the individual retirement plan or 403(b) plan to
which the eligible rollover distribution is to be paid and satisfy such
other reasonable requirements as the Custodian may impose.
SECTION FIVE: ADMINISTRATION
5.01 DUTIES OF THE CUSTODIAN - The Custodian shall have the following
obligations and responsibilities:
a. To hold contributions to the Account it receives, invest such
contributions pursuant to the Participant's instructions and
distribute Account assets pursuant to this Agreement;
b. To register any property held by the Custodian in its own name, or in
nominal bearer form, that will pass delivery;
c. To maintain records of all relevant information as may be necessary
for the proper administration of the Account;
d. To allocate earnings, if any, realized from such contributions and
such other data information as may be necessary;
e. To file such returns, reports and other information with the Internal
Revenue Service and other government agencies as may be required of
the Custodian under applicable laws and regulations.
5.02 REPORTS - As soon as practicable after December 31 of each calendar year,
and whenever required by regulations under the Code, the Custodian shall
deliver to the Participant a written report of the Custodian's
transactions relating to the Account during the period from the last
previous accounting and shall file such other reports as may be required
under the Code.
On receipt of the Custodian's report referenced in the preceding paragraph
a Participant shall have a period of 60 days following receipt to deliver
a written objection to the Custodian concerning information provided in
the report. In the event the Participant neglects to file such written
objection, the report shall be deemed approved and in such case, the
Custodian shall be forever released and discharged with respect to all
matters and things included herein.
5.03 CUSTODIAN NOT RESPONSIBLE FOR CERTAIN ACTIONS - Notwithstanding the
foregoing, the Custodian shall have no responsibility for determining the
amount of or collecting contributions to the Account made pursuant to this
Agreement; determining the amount, character or timing of any distribution
to a Participant under this Agreement; determining a Participant's maximum
contribution amount; maintaining or defending any legal action in
connection with this Agreement, unless agreed upon by the Custodian,
Employer and Participant.
5.04 INDEMNIFICATION OF CUSTODIAN - The Employer and Participant shall, to the
extent permitted under law, indemnify and hold the Custodian harmless from
and against any liability which may occur in the administration of the
Account unless arising from the Custodian's breach of its responsibilities
under this Agreement. By execution of this Agreement, it is the specific
intention of the parties that no fiduciary duties be conferred upon the
Custodian nor shall any be implied from this Agreement or the acts of this
Custodian.
5.05 CUSTODIAN'S FEES AND EXPENSES - The Custodian may charge fees in
connection with the Account. In addition, the Custodian has the right to
be reimbursed for any taxes or expenses incurred by or on behalf of the
Account. All such fees, taxes or expenses may be charged against the
Account or, at the option of the Custodian, may be paid directly by the
Participant or Employer. The Custodian reserves the right to change its
fee schedule, or add new fees, at any time upon 30 days prior written
notice to the Participant.
SECTION SIX: AMENDMENT AND TERMINATION
6.01 AMENDMENT OF AGREEMENT - This Agreement may be amended by an agreement in
writing between the Participant and Custodian. In addition, by execution
of this Agreement, the Employer and the Participant delegate to the
Custodian all authority to amend this Agreement by written notification
from the Custodian to the Participant as to any term hereof, at any time
(including retroactively) except that no amendment shall be made which may
operate to disqualify the Account under Section 403(b)(7) of the Code. The
effective date of any amendment hereto shall be the date specified in said
amendment or 30 days subsequent to the time the notification of amendment
is delivered by the Custodian to the Participant.
6.02 TERMINATION BY PARTICIPANT - The Participant reserves the right to
terminate further contributions to his or her Account pursuant to this
Agreement by executing and delivering to the Custodian an executed copy of
an agreement terminating said contributions. The Participant further
reserves the right to terminate his or her adoption of this Agreement in
the event that he or she shall be unable to secure a favorable ruling from
the Internal Revenue Service with respect to the Agreement. In the event
of such termination, the Custodian shall distribute the Account to the
Participant.
6.03 RESIGNATION OR REMOVAL OF CUSTODIAN - The Custodian may resign as
Custodian of any Participant's Account upon 30 days written notice to the
Participant. The Participant may remove a Custodian upon 30 days prior
written notice. Upon such resignation or removal, a successor Custodian
shall be named. Upon designation of a successor Custodian, the Custodian
shall transfer the assets held pursuant to the terms of this Agreement to
the successor Custodian. The Custodian may retain a portion of the assets
to the extent necessary to cover reasonable administrative fees and
expenses.
Where the Custodian is serving as a nonbank custodian pursuant to Section
1.401-12(n) of the Treasury Regulations, the Participant will appoint a
successor custodian upon notification by the Commissioner of Internal
Revenue that such substitution is required because the Custodian has
failed to comply with the requirements of Section 1.401-12(n) or is not
keeping such records or making such returns or rendering such statements
as are required by forms or regulations.
SECTION SEVEN: MISCELLANEOUS
7.01 APPLICABLE LAW - This Agreement is established with the intention that it
qualify as a tax-sheltered custodial account under Section 403(b)(7) of
the Code and that contributions to the same be treated accordingly. To the
extent not governed by Federal law, this Agreement shall be construed,
administered and enforced in accordance with the laws of the Custodian's
state of incorporation.
If any provision of this Agreement shall for any reason be deemed invalid
or unenforceable, the remaining provisions shall, nevertheless, continue
in full force and effect and shall not be invalidated.
7.02 NONALIENATION - The assets of a Participant in his or her Account shall be
nonforfeitable at all times and shall not be subject to alienation,
assignment, trustee process, garnishment, attachment, execution or levy of
any kind, nor shall such assets be subject to the claims of the
Participant's creditors.
7.03 TERMS OF EMPLOYMENT - Neither the fact of the implementation of this
Agreement nor the fact that a common law employee has become a
Participant, shall give to such employee any right to continued
employment; nor shall either fact limit the right of the Employer to
discharge or to deal otherwise with an employee without regard to the
effect such treatment may have upon the employee's rights as a Participant
under this Agreement.
7.04 NOTICES - Any notice or other communication which the Custodian may give
to a Participant shall be deemed given when sent by first class mail to
the Participant's last known address on the Custodian's records. Any
notice or other communication to the Custodian shall not become effective
until the Custodian actually receives it.
7.05 LOANS - The Custodian does not permit loans.
7.06 EMPLOYER CONTRIBUTIONS - The Employer may make contributions to the
Account on behalf of the Participant. The Custodian is not obligated to
operate the Account in accordance with any plan executed by the Employer
unless the Custodian so agrees and the Employer notifies the Custodian and
provides to the Custodian a copy of the Plan Document.
7.07 MATTERS RELATING TO DIVORCE - Upon receipt of a domestic relations order,
the Custodian may retain an independent third party to determine whether
the order is a Qualified Domestic Relations Order pursuant to Section
414(p) of the Code. The Custodian may charge to the Account any and all
expenses associated with the determination.
<PAGE>
- --------------------------------------------------------------------------------
THE CGM FUNDS 403(b)(7) SALARY DEFERRAL AGREEMENT
- --------------------------------------------------------------------------------
Please complete the information requested below and file this form
with your employer. Save a copy for your records.
- --------------------------------------------------------------------------------
PARTICIPANT INFORMATION
- --------------------------------------------------------------------------------
- -------------------------------------- [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
- --------------------------------------
Address
( )
- -------------------------------------- ------------- ------------------------
City State Zip Code Daytime Phone Number
- --------------------------------------------------------------------------------
EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name of Employer
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
CUSTODIAN INFORMATION
- --------------------------------------------------------------------------------
NAME AND ADDRESS OF CUSTODIAN: State Street Bank and Trust Company, P.O. Box
8511, Boston, MA 02266-8511
I, the undersigned Participant, hereby agree to defer the following amount or
percentage of my pay into a 403(b)(7) Tax-Sheltered Custodial Account each pay
period by way of payroll deduction:
[ ] $ ____________ (specify dollar amount), or
[ ] ____________ % (specify percentage of pay)
I agree that my pay will be reduced by the amount or percentage I have indicated
above and that my employer will contribute these dollars to my 403(b)(7)
Tax-Sheltered Custodial Account.
- --------------------------------------------------------------------------------
INVESTMENT SELECTION
- --------------------------------------------------------------------------------
I elect to have the Salary Deferral contributions, made on my behalf under this
Agreement, invested as follows: (Please indicate The CGM Fund(s) in which you
want your contributions invested.)
- ---------------------------------------------- -------------------------------%
Name of Fund Allocation Percentage
- ---------------------------------------------- -------------------------------%
Name of Fund Allocation Percentage
- ---------------------------------------------- -------------------------------%
Name of Fund Allocation Percentage
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
This Agreement shall be effective for the pay period which begins on:
- --------------------------------------
Date
X
- -------------------------------------- --------------------------------------
Signature of Participant Date
X
- -------------------------------------- --------------------------------------
Authorized Signature of Employer Title
403(b)(7) SALDEFAGMT-5/97
<PAGE>
- --------------------------------------------------------------------------------
THE CGM FUNDS 403(b)(7) TRANSFER FORM
- --------------------------------------------------------------------------------
Please use this form when moving assets directly from one 403(b) or 403(b)(7)
to a 403(b)(7) with CGM.
- --------------------------------------------------------------------------------
YOUR NAME AND ADDRESS
- --------------------------------------------------------------------------------
- -------------------------------------- [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
- --------------------------------------
Address
( )
- -------------------------------------- ------------- ------------------------
City State Zip Code Daytime Phone Number
- --------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS
- --------------------------------------------------------------------------------
If this is a new plan, please enclose the 403(b)(7) Account Application and
$5.00 plan establishment fee. Make check payable to State Street Bank and Trust
Company. Please note that third party checks are not acceptable.
Please type or print the name of the fund(s) you wish to invest in. If you are
transferring monies to an existing CGM account, please list your account number;
otherwise, write "new":
- ---------------------------------- --------------------- ---------------------
Fund Name Account Number $ Amount / % Amount
- ---------------------------------- --------------------- ---------------------
Fund Name Account Number $ Amount / % Amount
- --------------------------------------------------------------------------------
COMPLETE AND SIGN THESE INSTRUCTIONS
- --------------------------------------------------------------------------------
IMPORTANT: To ensure timely processing of your transfer, please call your
current Custodian and verify the correct address of their transfer department to
determine if there are any transfer requirements, such as a signature guarantee.
If you are 701/2 or older, please refer to the reverse side of this form.
( )
- --------------------------------- ---------------------------------------------
Name of Current Custodian Custodian's Phone Number
- --------------------------------- ---------------------------------------------
Address Account Name or Type (with Current Custodian)
- --------------------------------- ---------------------------------------------
City State Zip Code Account Number (with Current Custodian)
o Please accept this as
your authorization to: [] Transfer All OR [] Transfer $ or % ___________
to a CGM 403(b)(7) Account.
o The transfer should
be processed: [] Immediately OR [] Upon Maturity of my Assets
- --------------------------------------------------------------------------------
I request that the above-named Signature Guarantee (If Required by
Custodian liquidate and transfer my Current Custodian)
403(b)(7) or 403(b) Account assets,
as cash, to State Street Bank and Name of Firm:
Trust Company, Custodian of my CGM -------------------------
403(b)(7) Account.
X By:
- -------------------------------------- -----------------------------------
YOUR SIGNATURE DATE Authorized Individual
- --------------------------------------------------------------------------------
CUSTODIAN: PLEASE MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O THE CGM FUNDS, P.O. BOX 8511,
BOSTON, MA 02266-8511 (PLEASE INCLUDE THE PARTICIPANT'S NAME AND SOCIAL SECURITY
NUMBER ON YOUR CHECK.)
- --------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN
State Street Bank and Trust Company accepts the assets being transferred and
agrees to serve as the Custodian of the 403(b)(7) Account established on behalf
of the above named individual.
/s/ Douglass L. Coyne
- ---------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY
- --------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
403(b)(7)TRAN-5/97
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE AGE 70 1/2 OR OLDER.
In general, if this transfer is being made during or after a year in which you
turn age 70 1/2, you must take Required Minimum Distributions (RMD) based on
your life expectancy or the life expectancy of you and your beneficiary.
However, if you are still working, distributions can be deferred until you
retire. Once elected, the method of calculating distributions (recalculated or
non-recalculated) cannot be changed. It is your responsibility to ensure that
you are taking the appropriate RMD. Failure to do so may result in a penalty tax
of 50% of the amount not withdrawn. Please call 1-800-345-4048 if you have any
questions about RMDs.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO TRANSFER ASSETS TO CGM
- --------------------------------------------------------------------------------
1. Complete and sign the 403(b)(7) Application. Your employer's signature is
required only if you are making salary reductions.
2. Complete and sign the 403(b)(7) Transfer Form.
3. Enclose a check for $5.00 made payable to State Street Bank and Trust
Company.
4. Mail items 1-3 to The CGM Funds, P.O. Box 449, Boston, MA 02117 in the
return envelope provided.
5. Upon receipt of your Application, Transfer Form and check, CGM will
establish your 403(b)(7) Account. We will send a letter of acceptance and
your authorization to transfer assets to your current 403(b)(7) or 403(b)
Custodian and provide you with a copy of the letter.
6. After the transferred proceeds have been received by CGM, a statement
confirming the transaction will be mailed to you.
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QUESTIONS? CALL 800-345-4048
<PAGE>
THE CGM FUNDS 403(b)(7) ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
1. PARTICIPANT INFORMATION
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
Name Employer's Name
- -------------------------------------- --------------------------------------
Address Employer's Address
- -------------------------------------- --------------------------------------
City State Zip Code City State Zip Code
( )
[][][] - [][] - [][][][] ------------- ------------- ------------------------
Social Security Number Date of Birth Participant's Daytime Phone Number
- --------------------------------------------------------------------------------
2. CONTRIBUTIONS ($1,000 MINIMUM FOR INITIAL PURCHASE OR TRANSFER)
- --------------------------------------------------------------------------------
My initial investment in my CGM 403(b)(7) account will come to you from: (Please
check all that apply.)
[] Employer Contributions (salary reductions). I have completed the 403(b)(7)
Salary Deferral Agreement and have submitted it to my Employer. Enclosed is
my Employer's check (minimum of $1,000) for $____________________.
[] Transfer of Assets from another 403(b) or 403(b)(7) account. I have completed
the Transfer Form and am attaching it to this Application.
[] Rollover from an IRA whose assets previously had been invested in a 403(b) or
403(b)(7) Account.
Enclosed is my check for $____________________.
Enclose $5.00 establishment fee. Please make all checks payable to State Street
Bank and Trust Company. No third party checks.
- --------------------------------------------------------------------------------
3. INVESTMENTS
- --------------------------------------------------------------------------------
Select one or more of the following funds: CGM Mutual Fund, CGM Realty Fund, CGM
Fixed Income Fund, CGM Capital Development Fund*, New England Cash Management
Trust-Money Market or U.S. Government Series. There is a $1,000 minimum per
Fund.
- -------------------------------------- --------------------------------------
Fund Name $ Amount / % Amount
- -------------------------------------- --------------------------------------
Fund Name $ Amount / % Amount
*The CGM Capital Development Fund is generally closed to the public. If you are
an eligible investor, please list your current account number
here: ________________________________________. Please refer to Section 8 for
more information.
- --------------------------------------------------------------------------------
4. TELEPHONE EXCHANGE PRIVILEGES
- --------------------------------------------------------------------------------
[] YES [] NO
This service enables you to exchange monies ($1,000 minimum) by telephone among
accounts with the same registration in The CGM Funds or New England Cash
Management Trust. Please see Section 9 for full details.
- --------------------------------------------------------------------------------
5. SIGNATURE(S)
- --------------------------------------------------------------------------------
By this application, my employer and I direct the Custodian to open a separate
Custodial Investment Account for my benefit according to the CGM 403(b)(7)
Tax-Sheltered Custodial Account Agreement, and agree to the provisions listed in
Section 9 of this Form. I acknowledge that I have received a current prospectus
for the fund(s) selected for investment, and that I have completed the
beneficiary designation in Section 6 on the reverse side of this form.
- -------------------------------------- --------------------------------------
Signature of Participant Date Signature of Employer Date
(for salary reduction plans only)
/s/ Douglass L. Coyne (A statement will be sent to you
- -------------------------------------- confirming the above transactions and
Accepted by State Street Bank and will serve as notification of State
Trust Company Street Bank's acceptance. Please note
that there is a $10 annual maintenance
fee per mutual fund account.)
- --------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
403(b)(7)APP-5/97 (OVER)
<PAGE>
- --------------------------------------------------------------------------------
6. DESIGNATION OF BENEFICIARY(IES)
- --------------------------------------------------------------------------------
I designate the individual(s) named below as my primary and secondary
Beneficiary(ies) of this Tax-Sheltered Custodial Account Agreement (TSA). I have
attached an additional page if necessary. I revoke all prior TSA Beneficiary
designations, if any, made by me with respect to this TSA. I understand that I
may change or add Beneficiaries at any time by completing and delivering the
proper form to the Custodian.
If any primary or secondary Beneficiary dies before me, his or her interest and
the interest of his or her heirs shall terminate completely, and the percentage
share of any remaining Beneficiary(ies) shall be increased on a pro rata basis.
Primary Beneficiary(ies)
- -------------------------------------- --------------------------------------
Name Date of Birth Address
- -------------------------------------- --------------------------------------
% Share Social Relationship City State Zip Code
Security
Number
Secondary Beneficiary(ies)
- -------------------------------------- --------------------------------------
Name Date of Birth Address
- -------------------------------------- --------------------------------------
% Share Social Relationship City State Zip Code
Security
Number
- --------------------------------------------------------------------------------
7. SPOUSAL CONSENT
- --------------------------------------------------------------------------------
IF YOU LIVE IN A COMMUNITY OR MARITAL PROPERTY STATE, YOUR SPOUSE MUST COMPLETE
THIS SECTION UNLESS HE OR SHE IS THE SOLE PRIMARY BENEFICIARY.
I consent to the above named beneficiary(ies). By signing this consent, I intend
to change the portion (if any) of this 403(b)(7) which is community or marital
property into the separate property of my spouse. I specifically give to my
spouse any interest I have in the assets deposited in this Account.
- -------------------------------------- ----------------------
Signature of Participant's Spouse Date
- --------------------------------------------------------------------------------
8. WHO CAN PURCHASE SHARES OF CGM CAPITAL DEVELOPMENT FUND?
- --------------------------------------------------------------------------------
Only shareholders of the CGM Capital Development Fund as of September 24, 1993,
who remain shareholders thereafter, may purchase additional shares of the Fund.
The Fund reserves the right to reject any purchase order. This policy supersedes
all previous eligibility requirements. Fund shares are not generally available
to other persons except in special circumstances that have been approved by, or
under the authority of, the Board of Trustees of the Fund. The special
circumstances currently approved by the Board of Trustees of the Fund are
limited to the offer and sale of shares of the Fund to the following additional
persons: trustees of the Fund, employees of the Investment Manager and counsel
to the Fund and the Investment Manager.
- --------------------------------------------------------------------------------
9. PROVISIONS
- --------------------------------------------------------------------------------
I am the Participant named above and I state that I have read the 403(b)(7)
Tax-Sheltered Custodial Account Agreement (TSA) and understand and agree to its
terms and provisions. I hereby establish an Account pursuant to that Agreement
and appoint State Street Bank and Trust Company, or its successors, as Custodian
of the Account. I assume complete responsibility for: (a) determining that I am
eligible for a TSA each year I make a contribution; (b) insuring that all
contributions I make are within the limits set forth by the tax laws; and (c)
the tax consequences of any contributions (including rollover or transfer
contributions) and distributions. I expressly certify that I take complete
responsibility for the type of investment instrument(s) I choose to fund my TSA,
and that the Custodian is released of any liability regarding the performance of
any investment choice I make. I acknowledge receipt of a copy of this Agreement
and of the current prospectus(es) of the mutual fund(s) selected.
If I have elected the "Telephone Exchange" service, I understand that the Fund
may terminate or modify this privilege at any time. I authorize the Fund and its
agents to accept and act upon telephone instructions from me and acknowledge
receipt of the current prospectus of the Fund into which the exchange is made.
The Fund will employ reasonable procedures to confirm that instructions received
by telephone are genuine, such as requesting personal identification information
that appears on your account application and recording the telephone
conversation. I will bear the risk of loss due to unauthorized or fraudulent
instructions regarding my account, although the Fund may be liable if reasonable
procedures are not employed.
<PAGE>
QUESTIONS AND ANSWERS ABOUT 403(b)(7)s
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Q. WHAT IS THE CGM 403(B)(7) TAX SHELTERED CUSTODIAL ACCOUNT?
A. The CGM 403(b)(7) Custodial Account is a voluntary savings plan that allows
you to set aside pre-tax money for retirement. Contributions are made by salary
reduction, and earnings are tax-deferred until you withdraw them.
Q. WHO IS ELIGIBLE?
A. Employees of public schools, colleges and universities, and those working for
home health care, hospital, church and non-profit organizations recognized as
tax-exempt under Section 501(c)(3) of the Internal Revenue Code.
Q. HOW DO I MAKE CONTRIBUTIONS?
A. First, decide how much you want to contribute annually (up to the allowable
limits) to your 403(b)(7). Secondly, determine the amount for each pay period.
Then, complete and sign a Salary Deferral Agreement and give it to your
employer. This will authorize your employer to reduce your paycheck by the
amount of the contribution. Your employer then will send your contributions to
CGM. Once we receive your contribution, we will invest the monies in accordance
with your Investment Selection and will send you a statement to confirm your
purchase. All contributions must be made by your employer.
Q. WHAT ARE MY INVESTMENT OPTIONS?
A. The no-load funds eligible for your 403(b)(7) investments are listed below.
You may invest either in one, or in a combination of the funds best suited to
your circumstances. Be sure to read each fund's prospectus before you invest or
send money.
O CGM FOCUS FUND is a non-diversified and flexibly managed mutual fund that
seeks long-term growth of capital. The Fund intends to pursue its objective by
investing in a core position of equity securities. The Fund may engage in a
variety of investment techniques designed to capitalize on declines in the
price of specific equity securities of one or more companies.
O CGM MUTUAL FUND is a flexibly managed balanced fund that seeks reasonable
long-term capital appreciation with a prudent approach to protection of
capital from undue risks. Consideration is given to the production of current
income in the selection of stocks and bonds for the Fund's portfolio.
O CGM REALTY FUND is a mutual fund that seeks above-average income and
long-term growth of capital. The Fund pursues its objective by investing
primarily in equity securities of companies in the real estate industry.
O CGM FIXED INCOME FUND is a "total return" bond fund. The Fund's objective is
to maximize total return by investing in debt securities and preferred stocks
that provide current income, capital appreciation or a combination of both
income and appreciation.
O CGM CAPITAL DEVELOPMENT FUND is an aggressively managed growth fund that
seeks long-term capital appreciation in a diverse group of companies and
industries believed to provide opportunities for capital development. Note:
The Fund is generally closed to the public. Shares are available only to
certain individuals. Eligibility categories are listed in the 403(b)(7)
Application and in the Fund prospectus.
O NEW ENGLAND CASH MANAGEMENT TRUST is a money market fund that seeks to provide
maximum current income consistent with preservation of capital. The Money
Market Series invests in a variety of high quality money market instruments.
The U.S. Government Series invests only in obligations backed by the full
faith and credit of the U.S. Government and in related repurchase agreements.
Both Series are managed by Back Bay Advisors, L.P.
- --------------------------------------------------------------------------------
CONTRIBUTIONS
- --------------------------------------------------------------------------------
Q. HOW MUCH CAN I CONTRIBUTE TO MY PLAN THROUGH SALARY REDUCTION?
A. You can contribute the lesser of the amounts derived from the following three
formulas: (1) the exclusion allowance, (2) the IRC Sec. 415 limit on overall
contributions, including special elective alternatives [the 415 limit is
currently the lesser of 25% of the first $160,000 of compensation, indexed, or
$30,000] and (3) the IRC Sec. 402(g) limit, currently $9,500, indexed. If you
are attempting to maximize contributions, you must calculate each of the
formulas annually. We strongly recommend that you seek the guidance of a tax
adviser or financial planner to determine the amount that you can contribute to
your 403(b)(7) plan. IRS Publication 571 provides general information about
403(b)(7) plans and can be ordered free of charge by calling 800-TAX-FORM
(800-829-3676).
Q. ONCE MY SALARY REDUCTION HAS STARTED, CAN I CHANGE THE AMOUNT?
A. Yes. Your salary reduction amount may be changed by filing a new Salary
Deferral Agreement with your employer.
Q. CAN I STOP MY CONTRIBUTIONS?
A. Yes. You can ask your employer to stop contributing to the plan at the end of
any payroll period. You can participate in the plan again by filing a new Salary
Deferral Agreement with your employer.
Q. CAN I TRANSFER AN EXISTING 403(B) OR 403(B)(7) ACCOUNT INTO A CGM 403(B)(7)
CUSTODIAL ACCOUNT?
A. Yes. You can easily transfer the assets of your existing plan into your new
or existing CGM 403(b)(7) account. Please refer to the back of the Transfer Form
for specific instructions.
Q. WILL MY SALARY REDUCTIONS REDUCE MY EARNINGS FOR SOCIAL SECURITY PURPOSES?
A. No. Your gross income before 403(b)(7) contributions is used for Social
Security tax calculations.
Q. IF 403(B)(7) ASSETS HAVE BEEN DISTRIBUTED TO ME, MAY I ROLL OVER THOSE ASSETS
INTO A CGM IRA?
A. Yes. You can invest your distribution in a new or existing CGM IRA within 60
days from the date you receive the check. Make your check payable to State
Street Bank and Trust Company. Please note that third party checks are not
acceptable. If you are establishing a new account, please complete a CGM IRA
Application. You may wish to keep your rolled-over 403(b)(7) assets in a
separate IRA account for tax reasons.
403(b)(7) Q & A-5/97
<PAGE>
- --------------------------------------------------------------------------------
THE CGM FUNDS SEP-IRA EMPLOYEE ROSTER
- --------------------------------------------------------------------------------
Please use this form whenever you establish an account or make an additional
contribution for participants in your plan.
- --------------------------------------------------------------------------------
Name of Employer's Business
- --------------------------------------------------------------------------------
Employer's Address Daytime Telephone Number
Participant's Name and Investment Information
Social Security Number (Please see other side for list of
investment options)
- -------------------------------------- --------------------------------------
Name Fund
- -------------------------------------- --------------------------------------
Social Security Number (Required) Account Number (if new, write "new")
[ ] Business Owner or [ ] Non-Owner $ ____________________________________
Investment Amount
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
Name Fund
- -------------------------------------- --------------------------------------
Social Security Number (Required) Account Number (if new, write "new")
[ ] Business Owner or [ ] Non-Owner $ ____________________________________
Investment Amount
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
Name Fund
- -------------------------------------- --------------------------------------
Social Security Number (Required) Account Number (if new, write "new")
[ ] Business Owner or [ ] Non-Owner $ ____________________________________
Investment Amount
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
Name Fund
- -------------------------------------- --------------------------------------
Social Security Number (Required) Account Number (if new, write "new")
[ ] Business Owner or [ ] Non-Owner $ ____________________________________
Investment Amount
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
Name Fund
- -------------------------------------- --------------------------------------
Social Security Number (Required) Account Number (if new, write "new")
[ ] Business Owner or [ ] Non-Owner $ ____________________________________
Investment Amount
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Employer's Signature Date
SEPROSTER9/97
<PAGE>
INVESTMENT OPTIONS
CGM Focus Fund (815)
CGM Mutual Fund (35)
CGM Realty Fund (137)
CGM Fixed Income Fund (38)
CGM Capital Development Fund (36)*
New England Cash Management Trust - Money Market Series (12)
New England Cash Management Trust - U.S. Government Series (83)
* This Fund is currently closed to new investors. Only shareholders of the CGM
Capital Development Fund as of September 24, 1993 who have remained
shareholders continuously since that date, may purchase additional shares of
the Fund. Please refer to page 10, section 9, of the SEP-IRA Account
Application for complete disclosure about eligibility for the CGM Capital
Development Fund.
<PAGE>
- --------------------------------------------------------------------------------
The CGM Funds
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Simplified
- --------------------------------------------------------------------------------
Employee
- --------------------------------------------------------------------------------
Pension
- --------------------------------------------------------------------------------
Plan
- --------------------------------------------------------------------------------
- ------------------
[Fencer Logo]
- ------------------
- --------------------------------------------------------------------------------
<PAGE>
THE CGM FUNDS SEP-IRA
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page 4 Employer's Checklist for Setting Up a New SEP-IRA
Page 5 Eligibility Review and Plan Document Selection
Page 6 Adoption Agreement Instructions
Page 7 Adoption Agreement
Page 9 SEP-IRA Account Application
Page 11 SEP-IRA Transfer Form
Page 13 SEP Summary for Employees
Page 14 Contribution Worksheets
Page 17 Basic Plan Document
Page 19 IRS Opinion Letter
- --------------------------------------------------------------------------------
<PAGE>
EMPLOYER'S CHECKLIST FOR SETTING UP A NEW SEP-IRA
- --------------------------------------------------------------------------------
[1] DETERMINE WHETHER YOU ARE ELIGIBLE TO ESTABLISH A SEP-IRA
|X| Review the Basic Plan Document on page 17 with your attorney or
tax adviser.
|X| Complete the Eligibility Review and Plan Document Selection on
page 5.
- --------------------------------------------------------------------------------
[2] PLEASE COMPLETE THESE FORMS
|X| Complete the Adoption Agreement on page 7 and make an extra copy
for your files. See Adoption Agreement Instructions on page 6.
|X| Ask each participant to complete a copy of the SEP-IRA Account
Application on page 9 (and also the SEP-IRA Transfer Form on page
11 if assets are being transferred from another SEP Plan). You may
photocopy extra copies of both forms, if necessary.
- --------------------------------------------------------------------------------
[3] IF YOU HAVE EMPLOYEES
|X| Complete the SEP Summary for Employees Form on page 13 and
distribute a copy to each participant.
|X| Call us at 800-345-4048 for the following:
o CGM Prospectus. You must distribute copies of the prospectuses
for The CGM Funds to your employees before you make
contributions on their behalf. Please let us know the quantity
you'll need when you call.
o Employee Roster. This sheet asks you to identify each
participant in your SEP Plan and allows us to link all of the
IRAs under your plan.
o Employee Information Booklet. You must provide general
information about your SEP Plan to each employee. We will be
happy to furnish the Employee Information Booklet for each of
your employees. Just let us know the quantity you'll need when
you call.
- --------------------------------------------------------------------------------
[4] RETURN THESE ITEMS TO: CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117
|X| Eligibility Review (page 5)
|X| Adoption Agreement (page 7). Not required for IRS 5305-SEP Plans.
|X| SEP-IRA Account Application for each participant (page 9)*
|X| SEP-IRA Transfer Form for each participant who is transferring
assets to CGM (page 11)*
|X| Employee Roster, if there is more than one participant in the plan
|X| Investment check payable to "State Street Bank and Trust Company"
|X| Application fee check for $5 payable to "State Street Bank and
Trust Company." You may include the $5 application fee in your
investment check.
*You may use photocopies if necessary.
- --------------------------------------------------------------------------------
[5] PLEASE NOTE
The minimum initial investment is $1000 per account. There is a
$5 application fee for each participant; and a $10 annual
maintenance fee will be charged per mutual fund account.
Future contributions made by the employer into each participant's
account must meet the minimum additional investment of $50 per
account. Also, all contributions made by the employer on behalf
of a participant must be designated as "employer contributions."
- --------------------------------------------------------------------------------
ELIGIBILITY REVIEW AND PLAN DOCUMENT SELECTION
- --------------------------------------------------------------------------------
ARE YOU ELIGIBLE TO SET UP A SEP PLAN?
The following questions are designed to help you, as an employer, together with
your attorney and tax adviser, determine whether you are eligible to adopt a SEP
plan. Please answer the following questions and sign below.
YES NO
1. [ ] [ ] Are you the owner of a business or the person authorized by a
business to establish a SEP-IRA plan? If the answer is "NO",
please STOP. You are not eligible to establish this plan.
2. [ ] [ ] Has your business ever maintained a defined benefit plan which is
now terminated? If the answer is "YES", please STOP. You are not
eligible to establish this plan.
WHICH SEP DOCUMENT SHOULD YOU SELECT?
You may invest your SEP-IRA assets with CGM by using either a CGM prototype
SEP-IRA Plan or an IRS Form 5305-SEP. The questions below will help you and your
tax adviser determine which type of plan you should adopt. If you answer "yes"
to questions 3 - 5, you are only eligible to establish a CGM prototype SEP-IRA,
and you may have to include leased employees and/or employees of other
business(es) in your SEP-IRA Plan. Please consult your tax adviser to determine
what additional action, if any, you must take.
3. [ ] [ ] Is the business a member of a controlled group of corporations,
businesses or trades, (whether or not incorporated) within the
meaning of IRC Section 414(b) or 414(c)?
4. [ ] [ ] Is the business a member of an affiliated service group within
the meaning of IRC Section 414(m)?
5. [ ] [ ] Does the business use the services of leased employees within the
meaning of IRC Section 414(n)?
6. [ ] [ ] Do you currently have a SEP? If the answer is "yes," proceed to
the next question. If the answer is "no," you should establish a
CGM prototype SEP-IRA Plan. Please complete all forms requested
in the Employer's Checklist, including the Adoption Agreement on
page 7.
7. [ ] [ ] Will you retain your current SEP once you establish your CGM SEP
Plan? If the answer is "yes," proceed to the next question. If
the answer is no, you should establish a CGM prototype SEP-IRA
Plan. Please complete all forms requested in the Employer's
Checklist, including the Adoption Agreement on page 7.
8. Is your current SEP an IRS Form 5305-SEP or a prototype SEP? Please check
the appropriate box. (If you are uncertain, please check with your current
plan custodian.)
a. [ ] 5305-SEP - You do not need to complete the SEP Adoption Agreement
on page 7. Submit all other forms and check the "5305" box in
Section 2 of the IRA Application on page 9.
b. [ ] Prototype SEP - Please complete all forms requested in the
Employer's Checklist, including the Adoption Agreement on page 7.
SIGNATURE:
I certify that I am an authorized representative of the employer and that the
employer is eligible to establish this SEP-IRA Plan. In determining my
eligibility to adopt this plan, I relied solely upon the advice of my own
advisers, and I agree not to hold Capital Growth Management Limited Partnership,
CGM Trust, CGM Capital Development Fund or State Street Bank and Trust Company
responsible for any liabilities that I may suffer as a result of being found
ineligible to establish this SEP-IRA Plan.
- --------------------------------------------------------------------------------
Name of Employer (Please print or type)
X
- --------------------------------------------------------------------------------
Signature of Employer Date Executed
- --------------------------------------------------------------------------------
<PAGE>
THE CGM FUNDS STANDARD SIMPLIFIED EMPLOYEE PENSION PLAN ADOPTION AGREEMENT
INSTRUCTIONS
- --------------------------------------------------------------------------------
These instructions are designed to help you, the employer, along with your
attorney and/or tax advisor, establish your SEP plan. The instructions are meant
to be used only as a general guide and are not intended as a substitute for
qualified legal or tax advice.
ADOPTION AGREEMENT
This Adoption Agreement is a one-page form that needs to be completed and signed
by the Employer. We recommend that every Employer retain a photocopy of the
completed Adoption Agreement with his or her permanent records.
We will be happy to help you fill out the Adoption Agreement. However, we
recommend that you obtain the advice of your legal or tax advisor before you
sign the Adoption Agreement.
SECTION 1. EMPLOYER INFORMATION
Fill in the requested information.
SECTION 2. EFFECTIVE DATES
This SEP plan is either a new plan (an initial adoption) or an amendment and
restatement of an existing SEP plan.
If this is a new SEP plan, check Option A and fill in the effective date. The
effective date is usually the first day of the plan year in which this Adoption
Agreement is signed. For example, if an employer maintains a plan on a calendar
year basis and this Adoption Agreement is signed on September 24, 1997, the
effective date would be January 1, 1997. If you are establishing a plan for the
prior tax year, the effective date of the plan would be January 1 of the prior
tax year (assuming a calendar year tax basis).
If the reason you are adopting this plan is to amend and replace an existing SEP
plan, check Option B. The existing SEP plan which will be replaced is called a
"prior plan." You will need to know the effective date of the prior plan. The
best way to determine its effective date is to refer to the prior plan Adoption
Agreement. The effective date of this amendment and restatement is usually the
first day of the plan year in which the Adoption Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS
NOTE: SECTION 3 MUST BE COMPLETED EVEN IF YOU DO NOT HAVE EMPLOYEES.
Within limits, you, as the employer, can specify the number of years your
employees must work for you and the age they must attain before they are
eligible to participate in this plan. Note that the eligibility requirements
which you set up for the plan also apply to you.
Suppose, for example, you establish a service requirement of three of the
immediately preceding five years and an age requirement of 21. In that case,
only those employees (including yourself) who have worked for you for three of
the immediately preceding five years and are at least 21 years old are eligible
to participate in this plan.
PART A. YEARS OF ELIGIBILITY SERVICE REQUIREMENT
Fill in the number of years of service (0, 1, 2 or 3). This number must be
either 0, 1, 2 or 3.
PART B. AGE REQUIREMENT
Fill in the age an employee must attain (no more than 21) to be eligible to
participate in the plan.
PART C. CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE
1. Generally you are permitted to exclude employees covered by the terms of a
collective bargaining agreement (e.g., a union agreement) where retirement
benefits were bargained for and those employees who are nonresident aliens
with no U.S. income. If you wish to exclude those employees, check the first
box under Section 3, Part C.
2. You are permitted to exclude those employees who have received less than $400
for 1997 (indexed for cost of living increases) of compensation during the
plan year. Prior to 1996, the amount was $300. If you want to exclude those
employees, check the second box under Section 3, Part C.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
PART A. CONTRIBUTION FORMULA
Because a SEP plan allows for flexible contributions, the amount of the
contribution will be determined from year to year. There are no blanks to be
completed in Part A.
PART B. ALLOCATION FORMULA
Once the contribution amount has been decided for a plan year, it must be
allocated among the participants in the plan. The contribution can be allocated
using either a pro rata formula or an integrated formula. Check either Option 1
or 2.
OPTION 1. PRO RATA FORMULA
Check this option if you wish to have the contribution allocated to all
qualifying participants based on their compensation for the plan year.
OPTION 2. INTEGRATED FORMULA
Check this option if the plan is to be integrated. Generally, integration is
a method of giving some participants in the plan an extra contribution
allocation. Because of the complexity of integration, you should consult your
tax advisor regarding this issue.
SECTION 5. EMPLOYER SIGNATURE
An authorized representative of the employer must sign and date the Adoption
Agreement. In addition, the prototype sponsor must provide its name, address and
telephone number.
(C)1995 Universal Pensions, Inc., Brainerd, MN 56401
- --------------------------------------------------------------------------------
<PAGE>
------------------
THE CGM FUNDS SIMPLIFIED EMPLOYEE PENSION PLAN [Fencer Logo]
ADOPTION AGREEMENT
------------------
- --------------------------------------------------------------------------------
SECTION 1. EMPLOYER INFORMATION
Name of Employer --------------------------------------------------------------
Address -----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Daytime Telephone Number ------------------------------------------------------
Employer Tax Identification Number --------------------------------------------
Income Tax Year End -----------------------------------------------------------
(month) (day)
Plan Year End -----------------------------------------------------------------
(month) (day)
SECTION 2. EFFECTIVE DATES
Check and complete Option A or B
OPTION A.
[ ] This is the initial adoption of a Simplified Employee Pension plan by the
Employer. The Effective Date of this Plan is _____/_____/_____.
NOTE: The effective date is usually the first day of the Plan Year in which
this Adoption Agreement is signed.
OPTION B.
[ ] This is an amendment and restatement of an existing Simplified Employee
Pension plan (a Prior Plan). The Prior Plan was initially effective on
_____/_____/_____.
The Effective Date of this amendment and restatement is _____/_____/_____.
NOTE: The effective date is usually the first day of the Plan Year in which
this Adoption Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS
Complete Parts A, B and C
PART A. SERVICE REQUIREMENT
An Employee will be eligible to become a Participant in the Plan after having
performed Service for the Employer during at least _____________ (enter 0, 1, 2
or 3) of the immediately preceding 5 Plan Years.
NOTE: If left blank, the Service Requirement will be deemed to be 0.
PART B. AGE REQUIREMENT
An Employee will be eligible to become a Participant in the Plan after attaining
age _______ (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement for
eligibility.
PART C. CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE
All Employees shall be eligible to become a Participant in the Plan, except the
following (if checked):
[ ] Certain Employees covered by a collective bargaining agreement and
nonresident aliens, as described in Section 3.02 of the Plan.
[ ] Those Employees who have received less than $300 (indexed for cost of
living increases in accordance with Section 408(k)(8) of the Code) of
Compensation from the Employer during the Plan Year.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
PART A. CONTRIBUTION FORMULA
For each Plan Year the Employer will contribute an amount to be determined from
year to year.
PART B. ALLOCATION FORMULA (Check Option 1 or 2)
OPTION 1. PRO RATA FORMULA.
[ ] The Employer Contribution for each Plan Year shall be allocated to the
IRA of each Participant in the same proportion as such Participant's
Compensation (not in excess of $200,000, indexed for cost of living
increases in accordance with Section 408(k)(8) of the Code) for the
Plan Year bears to the total Compensation of all Participants for such
year. The amount allocated to each Participant's IRA shall be limited
to the lesser of 15 percent of the first $200,000 (indexed) of the
Participant's Compensation or $30,000.
NOTE: See the Basic Plan Document, Section 2.03, seventh paragraph for OBRA '93
changes in the compensation limit.
OPTION 2. INTEGRATED FORMULA.
[ ] Employer Contributions shall be allocated in the manner described in
Section 4.01(B) of the Plan. For purposes of the integrated formula,
the integration level shall be (Choose one):
OPTION 1. [ ] The Taxable Wage Base (TWB)
OPTION 2. [ ] ________% of the TWB level shall be the Taxable Wage
Base.
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
SECTION 5. EMPLOYER SIGNATURE
X
- --------------------------------------------------------------------------------
Signature for Employer Date Signed
- --------------------------------------------------------------------------------
(Print Name)
Capital Growth Management Limited Partnership
- --------------------------------------------------------------------------------
Name of Prototype Sponsor
222 Berkeley Street, Suite 1013, Boston, MA 02116
- --------------------------------------------------------------------------------
Address
(617) 859-7714 or (800) 345-4048
- --------------------------------------------------------------------------------
Telephone Number
Note to Employer: Before signing this Adoption Agreement, you should obtain the
advice of a qualified attorney and tax advisor regarding its completion and the
legal and tax implications of adopting this Plan.
(C)1995 Universal Pensions, Inc., Brainerd, MN 56401
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THE CGM FUNDS SEP-IRA ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
1. ACCOUNT INFORMATION
Name --------------------------------------------------------------------------
Social Security # [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Address -----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Date of Birth -----------------------------------------------------------------
Employer/Occupation -----------------------------------------------------------
Daytime Telephone Number (_____) ----------------------------------------------
2. INITIAL CONTRIBUTION INFORMATION (MINIMUM $1000)
Type of Plan: [ ] CGM Prototype or [ ] IRS Form 5305-SEP.
The enclosed check represents:
(If more than one option is selected below, please specify the contribution
amount for each option.)
[ ] SEP-IRA Contribution made by Employer for above participant.
$------------- current year $------------- prior year
[ ] Rollover contribution from another IRA or SEP-IRA.
$-------------
[ ] Transfer of assets from another SEP-IRA. COMPLETE SEP-IRA TRANSFER FORM AND
THE REST OF THIS FORM. $------------------
3. Investment Selection ($1000 minimum per fund)
$ ----------- CGM Focus Fund
$ ----------- CGM Mutual Fund
$ ----------- CGM Realty Fund
$ ----------- CGM Fixed Income Fund
$ ----------- CGM Capital Development Fund - see Section 9.
Existing account number:------------------------.
$ ----------- New England Cash Management Trust
[ ] Money Market Series [ ] U.S. Govt. Series
5.00
$ ----------- INITIAL APPLICATION FEE
(Required for all new plans)
$ ----------- AMOUNT OF CHECK ENCLOSED
MAKE ALL CHECKS PAYABLE TO STATE STREET BANK AND TRUST COMPANY (SSB). IF YOU
SELECT MORE THAN ONE FUND, PLEASE SUBMIT A CHECK FOR EACH FUND. NO THIRD PARTY
CHECKS (CHECKS ENDORSED OVER TO SSB AND CGM FROM AN INDIVIDUAL OR INSTITUTION)
WILL BE ACCEPTED.
4. TELEPHONE EXCHANGE PRIVILEGES
[ ] Yes [ ] No
This service enables you to exchange monies ($1,000 minimum) by telephone among
accounts with the same registration in the CGM Funds or New England Money Market
Funds. Shareholders exchanging into the CGM Capital Development Fund must meet
the eligibility requirements described in Section 9.
5. AUTOMATIC INVESTMENT PLAN - OPTIONAL
If you are the Employer, you can authorize us to debit your bank account and
apply the proceeds to your participant's SEP-IRA Account.
There is a $50 minimum per account. If you are an Employer and if you wish to
set up an Automatic Investment Plan for you or your Plan Participants, please
check this box and complete Section 10 on the reverse side.
6. BENEFICIARY DESIGNATION
This Beneficiary Designation is to be used to indicate the person or persons to
whom the IRA assets should be turned over in the event of your death. If you are
not survived by a validly designated Beneficiary, your benefits will be paid to
your estate in the event of your death. IMPORTANT: If you do not designate a
Beneficiary or if the Beneficiary designated is not a person, you cannot base
your calculations for distributions on joint life expectancy.
The Beneficiaries named herein and the manner of distribution may be changed
or revoked at any time by filing a new designation in writing with the
Custodian. This designation, and any changes or revocation, will only be
effective upon receipt by the Custodian.
PLEASE RETAIN A COPY FOR YOUR RECORDS.
Upon my death, distribute my IRA in equal shares to the following Principal
Beneficiaries who survive me or, if none survives me, in equal shares to the
following Secondary Beneficiaries who survive me:
Principal Beneficiary(ies):
- --------------------------------------------------------------------------------
Name Date of Birth Relationship
- --------------------------------------------------------------------------------
Address
Secondary Beneficiary(ies):
- --------------------------------------------------------------------------------
Name Date of Birth Relationship
- --------------------------------------------------------------------------------
Address
CONSENT OF SPOUSE
(To be used in community property states when spouse is not sole principal
beneficiary): I consent to the above Beneficiary Designation. By signing this
consent, I intend to change the portion (if any) of this IRA which is community
property into the separate property of my spouse. I specifically give to my
spouse any interest I have in the assets deposited in this account.
- --------------------------------------------------------------------------------
Signature of Spouse Date
7. SIGNATURE
By signing below, I certify that I agree to the provisions on the reverse side
listed in Section 8.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE:
X -----------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Please note that there is an annual $10 maintenance fee per account which will
be billed to you each year. (OVER)
- --------------------------------------------------------------------------------
SEPAPP9/97
8. PROVISIONS
By signing this application establishing an IRA under my Employer's Simplified
Employee Pension Plan (SEP-IRA), I (i) appoint State Street Bank and Trust
Company, or its successors, as Custodian of the Account, (ii) state that I have
received, read, accept, and specifically incorporate the Custodial Account
Agreement and Disclosure Statement by reference to this application, (iii)
acknowledge receipt of the current prospectus of the mutual fund(s) selected,
(iv) consent to the Custodian's fee, (v) agree to promptly give instructions to
the Custodian necessary to enable the Custodian to carry out its duties under
the plan, (vi) affirm that my participation is completely voluntary, and (vii)
confirm that my employer has made no specific endorsement of the choice of
investments available under this plan and (viii) certify under penalties of
perjury that the social security number provided is correct. I hereby adopt The
CGM Individual Retirement Account upon the terms and conditions thereof.
|_| If I have elected the "TELEPHONE EXCHANGE" service, I understand that the
Fund may terminate or modify this privilege at any time. The Fund will
employ reasonable procedures to confirm that instructions received by
telephone are genuine, such as requesting personal identification
information that appears on your account application and recording the
telephone conversation. You will bear the risk of loss due to unauthorized
or fraudulent instructions regarding your account, although the Fund may be
liable if reasonable procedures are not employed.
|_| FOR EMPLOYERS ONLY: If I have enrolled in the "AUTOMATIC INVESTMENT PLAN" in
Section 10, I authorize the Fund and its agents to initiate Automated
Clearing House (ACH) debits against the designated account at a bank or
other financial institution. I understand that:
- Fund shares purchased by Automatic Investment Plan must be owned for 15
days before they may be redeemed.
- My employer may terminate my Automatic Investment Plan by sending written
notice to CGM Funds c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by
calling 800-343-5678 within 14 days of my next scheduled debit date.
- The CGM Funds may immediately terminate my Plan in the event that any item
is unpaid by the financial institution.
- The Fund may terminate or modify this privilege at any time.
9. WHO CAN PURCHASE SHARES OF CGM CAPITAL DEVELOPMENT FUND
Only shareholders of the Fund as of September 24, 1993 who remain shareholders
thereafter may purchase additional shares of the Fund. The Fund reserves the
right to reject any purchase order. This policy supersedes all previous
eligibility requirements. Fund shares are not generally available to other
persons except in special circumstances that have been approved by, or under the
authority of, the Board of Trustees of the Fund. The special circumstances
currently approved by the Board of Trustees of the Fund are limited to the offer
and sale of shares of the Fund to the following additional persons: trustees of
the Fund, employees of the Investment Manager and counsel to the Fund and the
Investment Manager.
10. AUTOMATIC INVESTMENT PLAN (AIP) - AVAILABLE ONLY TO EMPLOYERS
If you are an Employer, you can have us debit $50 or more on the same day each
month from your bank account and have it applied to your SEP-IRA account or the
SEP-IRA accounts of your Plan Participants. (Please allow 14 days for the AIP
Plan to start.)
To elect this option, please: |_| ATTACH A CHECK MARKED "VOID" FROM THE BANK
ACCOUNT YOU WILL BE USING.
|_| FILL IN THE INFORMATION REQUESTED BELOW.
Please invest $___________on or about 5th day of each month or 20th day of each
month (5th will be selected if no box is checked)
Please allocate the above investment amount as follows: (Please attach an
additional page if necessary.)
<TABLE>
<CAPTION>
Participant's Name Social Security Number Specific CGM Fund Name Monthly Investment Amount
<S> <C> <C> <C>
$
- ---------------------------------------------------------------------------------------------------------------------------------
$
- ---------------------------------------------------------------------------------------------------------------------------------
$
- ---------------------------------------------------------------------------------------------------------------------------------
$
- ---------------------------------------------------------------------------------------------------------------------------------
$
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL MONTHLY INVESTMENT $
------------------------
I authorize CGM to pay and charge to my account listed below Automated Clearing House (ACH) debits to the CGM Account(s)
listed above. Drafts will be made payable to the order of The CGM Funds. This authority is to remain in effect until revoked
by me in writing and, until you actually receive such notice, I agree you will be fully protected in honoring any such
debits.
</TABLE>
- --------------------------------------------------------------------------------
Name of Bank Bank Account Number
- --------------------------------------------------------------------------------
Name of Depositor(s) as Shown on Bank Records
- --------------------------------------------------------------------------------
X X
- --------------------------------------------------------------------------------
Signature of Employer Signature (if Joint Bank Account)
SEND APPLICATION TO: CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
- --------------------------------------------------------------------------------
<PAGE>
PLEASE USE THIS FORM WHEN MOVING ASSETS DIRECTLY FROM ONE IRA TO ANOTHER IRA
- --------------------------------------------------------------------------------
THE CGM FUNDS SEP-IRA TRANSFER FORM
- --------------------------------------------------------------------------------
IMPORTANT: CGM will send a formal letter of instruction along with this SEP-IRA
Transfer form to your current Custodian. To ensure timely processing of your
transfer, please call your current Custodian and verify the current address of
their transfer department and any transfer requirements, such as a signature
guarantee. IF YOU ARE AGE 701 1/42 OR OLDER, YOU MUST COMPLETE THE BACK OF THIS
FORM.
TO: ( )
- --------------------------------------------------------------------------------
Name of Current Custodian Telephone Number
- --------------------------------------------------------------------------------
Address City State Zip Code
RE:
- --------------------------------------------------------------------------------
Name of Investment Account Number
|_| I have established an Individual Retirement Account under a SEP-IRA Plan
with the CGM Funds and have appointed State Street Bank and Trust Company as
the Successor Custodian.
|_| Please accept this as your authorization to (check one):
[ ] Liquidate and transfer $ or % ________________ of my IRA assets held by
you in the above account.
[ ] Liquidate and transfer all of my IRA assets held by you in the above
account.
|_| Please process this transaction as follows, effective (check one):
[ ] Immediately [ ] Upon maturity of my assets
|_| MAKE CHECK PAYABLE TO THE SPECIFIC CGM FUND IN WHICH YOU ARE INVESTING.
State Street Bank and Trust Company, Custodian for the SEP-IRA of:
---------------------------------------------------------------------
Participant Name Social Security Number
---------------------------------------------------------------------
CGM Fund CGM Account Number*
* (If existing SEP-IRA account with CGM, indicate your CGM
account number. If new, write "new" and complete SEP-IRA
Account Application.)
|_| Send check to: CGM Funds, c/o State Street Bank and Trust Company, P.O.
Box 8511, Boston, MA 02266-8511
- ------------------------------------
PLEASE SIGN HERE:
X --------------------------------
YOUR SIGNATURE DATE
- ------------------------------------
---------------------------------------
Your Street Address
Signature Guarantee (if required by
current Custodian)
---------------------------------------
City State Zip Code
Name of Firm: ---------------------
( )
By: ------------------------------- ---------------------------------------
Authorized Individual Your Daytime Phone Number
- --------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN
State Street Bank and Trust Company accepts the assets being transferred and
agrees to serve as the Custodian of the IRA Account established on behalf of the
above named individual.
- --------------------------------------------------------------------------------
/s/ Illegible
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
- --------------------------------------------------------------------------------
SEPIRATRAN9/97 (OVER)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PLEASE COMPLETE THIS SECTION IF YOU ARE 70 1/2 OR OLDER.
If this transfer is being made during or after the year in which you turn age
70 1/2, your required minimum distribution for the current year must be taken
prior to this transfer. You have the following options:
1. Take the distribution from the account to be transferred prior to the
transfer.
2. Determine the dollar amount of the required minimum distribution for the
current year and transfer all assets except that dollar amount. Take that
required minimum distribution by December 31 of the current year, or by April
1 of the next year if you reached age 70 1/2 this year.
3. Take the required minimum distribution from another IRA which you may have.
You must take this action prior to completing this transfer. Kindly notify
your current IRA Plan Custodian in writing if you elect this option. Please
check with your current IRA Custodian for more information about minimum
distributions.
Please complete the following information concerning your distributions:
1. My distributions are based on: (Choose one) single life expectancy or joint
life expectancy.
2. My life expectancy (Choose one) is being recalculated is not being
recalculated.
3. The life expectancy of my Beneficiary (Choose one) is being recalculated is
not being recalculated.
4. The Date of Birth of my Designated Beneficiary being used to calculate
minimum required distributions with respect to the transferor plan is
--------------------. (If there is more than one Designated Beneficiary, you
must use the birthdate of the oldest Beneficiary.)
- --------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS o P.O. BOX 449 o BOSTON, MA 02117-0449
SEPIRATRAN9/97
- --------------------------------------------------------------------------------
<PAGE>
------------------
THE CGM FUNDS SEP SUMMARY FOR EMPLOYEES [Fencer Logo]
- -------------------------------------------------------------
Please read together with your Employee Information Booklet. ------------------
ESTABLISHMENT OF SEP PLAN
Your employer has adopted a type of employee benefit plan known as a Simplified
Employee Pension (SEP) Plan. In order to become a participant in the Plan, you
must meet the Plan's eligibility requirements specified below. Once you become a
participant, you are entitled to receive a certain share of the amounts your
employer contributes to the Plan. All contributions will be deposited into a
SEP-IRA for you. Contributions made to the Plan for you are yours to keep. These
features of the Plan are explained further in the Employee Information Booklet.
(Employers: Please call the CGM Funds at 800-345-4048 to let us know how many
booklets you will need for your employees.)
The actual Plan is a complex legal document that has been written in a manner
required by the Internal Revenue Service. This document is called a SEP Summary
for Employees. It is designed to explain and summarize the important features of
the Plan. If you have any questions or need additional information about the
Plan, consult --------------------------------------.
(Name of Employer Representative)
You may examine the Plan itself at a reasonable time by making arrangements with
the above mentioned representative of your employer.
ELIGIBILITY REQUIREMENTS
EMPLOYER CONTRIBUTIONS: Your employer is not required to make contributions to
the Plan. However, if a contribution is made, your SEP-IRA will receive a share
of that contribution if you are an "eligible" employee and if you have met the
age and service requirements set forth below.
ELIGIBLE EMPLOYEES: Under the SEP Plan, all employees can participate except the
classifications of employees checked below:
[ ] Those employees covered by the terms of a collective bargaining agreement
(a union agreement) where retirement benefits were negotiated and those
employees who are nonresident aliens.
[ ] Those employees who did not earn at least $400 (for 1997) from the employer
during the year. (This $400 figure is increased by the IRS each year based
on changes in the cost of living.)
AGE REQUIREMENT: You must be at least ________ years old.
SERVICE REQUIREMENT: You must have worked for your employer in at least ________
(must be 0, 1, 2 or 3) of the immediately preceding 5 years.
CONTRIBUTION FORMULA
Any employer contribution will be allocated to your SEP-IRA in accordance with
the formula selected below (check one):
[ ] PRO RATA FORMULA. Each eligible employee will receive a pro rata portion
of the employer contribution equal to the ratio of his or her compensation
to the total compensation of all eligible employees. Thus, the contribution
will be the same percentage of compensation for all employees.
[ ] INTEGRATED FORMULA. Integration allows contribution percentages among
eligible employees to vary. Details about integration are provided in your
Employee Information Booklet. The integration level is (check one):
[ ] The Taxable Wage Base (TWB)
[ ] _______% of the TWB
SEP-IRA WITH PLAN SPONSOR
Under this SEP Plan, you must maintain your SEP-IRA at the following financial
organization subject to the following terms: THE CGM FUNDS, 222 BERKELEY STREET,
BOSTON, MA 02116.
MINIMUM MINIMUM
INITIAL SUBSEQUENT
INVESTMENT OPTIONS INVESTMENT INVESTMENT
- -----------------------------------------------------------------------------
CGM Focus Fund $1,000 $ 50
CGM Mutual Fund $1,000 $ 50
CGM Realty Fund $1,000 $ 50
CGM Fixed Income Fund $1,000 $ 50
CGM Capital Development Fund* $1,000 $ 50
New England Cash Management Trust $ 250 $100
Money Market Series
New England Cash Management Trust $ 250 $100
US Government Series
- --------------------------------------------------------------------------------
*Only shareholders of the CGM Capital Development Fund as of September 24, 1993
who have remained shareholders continuously since that date may purchase
additional shares of the Fund. Please see The CGM Fund SEP-IRA Account
Application (Section 9) for full details.
Before your Employer makes an investment on your behalf, please read the
prospectus(es) for the CGM Fund(s) in which your contribution will be invested.
Please refer to the Disclosure Statement and other documentation given to you by
the above named financial organization for the other terms and conditions which
apply to your SEP-IRA.
(C)1995 Universal Pensions, Inc., Brainerd, MN 56401
- --------------------------------------------------------------------------------
<PAGE>
WORKSHEET A FOR EMPLOYERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THIS SHEET OFFERS GUIDANCE IN CALCULATING YOUR SEP-IRA CONTRIBUTION. PLEASE
SEEK PROFESSIONAL TAX ADVICE TO VALIDATE YOUR COMPUTATIONS.
- -------------------------------------------------------------------------------
HOW TO CALCULATE SEP CONTRIBUTIONS FOR A SELF-EMPLOYED PERSON
Individuals with self-employed income must base their contributions on "net
earnings", rather than W-2 compensation, and special rules apply when
figuring the maximum deduction for these contributions. Please see the
formula and example below for a full explanation.
DEFINITIONS
SELF-EMPLOYED INDIVIDUAL: A self-employed individual is an employee for SEP
purposes. He or she is also the employer. Even if the self-employed
individual is the only eligible employee, he or she can have a SEP-IRA.
COMPENSATION: For self-employed individuals, compensation refers to net
earnings.
NET EARNINGS: For SEP purposes, your net earnings from your business refers
to your income less business expenses, reduced by a deduction for one-half of
your self-employment tax, less your SEP-IRA contribution. (In this case,
"expenses" include SEP plan contributions you make on behalf of any eligible
employees, but exclude the contribution you, as a self-employed person, would
make on your own behalf.)
FORMULA
As mentioned above, the deduction allowed for a contribution must be taken
into account when determining the earned income of a self-employed person.
Because your deduction amount and your net earnings are each dependent on the
other, this adjustment presents a problem.
To solve this problem, you make the adjustment to net earnings indirectly by
reducing the contribution rate called for in the plan. Use the following
worksheet and your income tax forms to find this reduced contribution rate
and your maximum deduction. Make no reduction to the contribution rate for
any common-law employees.
This sheet offers guidance in calculating your SEP-IRA contribution. Please
seek professional tax advice to validate your computations.
- -------------------------------------------------------------------------------
1. Start with the contribution rate (%) you have selected
for all employees. And show that rate as a decimal. ....... -----------
2. Add 1 to the rate. 3. Divide line (1) by line (2). ........ -----------
4. Show your net earnings (not reduced for contributions to
your SEP-IRA) from Schedule C, C-EZ or F (Form 1040) or
Schedule K-1 (Form 1065). ................................. $----------
5. Enter deduction for self-employment tax (from Form 1040) .. $----------
6. Adjusted net earnings (subtract line 5 from line 4) ....... $----------
7. Multiply line 3 by the lesser of $160,000* (indexed) or
the adjusted net earnings on line 6. This is the maximum
deductible contribution to a self-employed person's
SEP-IRA. .................................................. $----------
- -------------------------------------------------------------------------------
* The maximum compensation you may base your contribution on for 1997 is
$160,000
Please refer to the example on the next page.
9/97
WORKA97
- --------------------------------------------------------------------------------
<PAGE>
WORKSHEET A SAMPLE
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SHEET OFFERS GUIDANCE IN CALCULATING YOUR SEP-IRA CONTRIBUTIONS. PLEASE
SEEK PROFESSIONAL TAX ADVICE TO VALIDATE YOUR COMPUTATIONS.
- --------------------------------------------------------------------------------
EXAMPLE
You are a sole proprietor and have employees. This year you have decided to
contribute 15% of compensation for you and your employees. Your net earnings
from your business (not taking into account a deduction for contributions to
your own SEP-IRA) are $140,000.
Using the worksheet, you figure your maximum deduction for contributions to
your own SEP-IRA as follows:
- --------------------------------------------------------------------------------
1. Contribution rate selected (15%) shown as a decimal . ..... .15
2. Add 1 to the rate. ........................................ 1.15
3. Divide line (1) by line (2). .............................. .130435
4. Show your net earnings (not reduced for contributions to
your SEP-IRA) from Schedule C, C-EZ or F (Form 1040) or
Schedule K-1 (Form 1065) .................................. $140,000
5. Enter deduction for self-employment tax (from Form 1040) .. $ 10,000
6. Adjusted net earnings (subtract line 5 from line 4) ....... $130,000
7. Multiply line 3 by the lesser of $160,000* (indexed) or
the adjusted net earnings on line 6. This is the amount
of your SEP-IRA contribution. ............................. $ 16,956
- --------------------------------------------------------------------------------
* The maximum compensation you may base your contribution on for 1997 is
$160,000
- --------------------------------------------------------------------------------
For more information about SEP-IRAs, you may call the IRS at 800-829-3676
and ask for Publication 560 "Retirement Plans for the Self-Employed" or
Publication 590 "Individual Retirement Arrangements." Each publication is
free of charge.
- --------------------------------------------------------------------------------
9/97
WORKA97
- --------------------------------------------------------------------------------
<PAGE>
WORKSHEET B FOR EMPLOYEES
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS SHEET OFFERS GUIDANCE IN CALCULATING YOUR SEP-IRA CONTRIBUTIONS. PLEASE
SEEK PROFESSIONAL TAX ADVICE TO VALIDATE YOUR COMPUTATIONS.
- --------------------------------------------------------------------------------
HOW TO CALCULATE SEP CONTRIBUTIONS FOR YOUR COMMON-LAW EMPLOYEES
The SEP rules permit you, as the employer, to make a contribution every year
to each eligible employee's SEP-IRA. You can contribute 0% to 15% of the
common-law employee's compensation. The maximum compensation you may base
your contribution on for 1997 is $160,000 (indexed). These contributions are
funded by you. The contribution rate designated can vary from year to year.
The same rate must be applied to all plan participants, including yourself,
within the same year, if you selected pro rata as your allocation formula. If
you have selected the integrated formula as your allocation method, please
contact your tax adviser for assistance in determining your contributions as
the computation is more involved than can be explained in this worksheet.
DEFINITIONS
Common-law employees are those employees who have no financial interest in
your business. Compensation for these employees is the amount recorded on
their W-2 form.
FORMULA
The formula for computing the SEP-IRA contribution using pro-rata allocation
for a common-law employee is as follows:
- --------------------------------------------------------------------------------
1. Decide the percentage (%) of compensation you
wish to contribute for yourself and your employees. ....... ------
Show that rate as a decimal.
2. Show the common-law employee's compensation. .............. $------
3. Multiply line (1) by line (2). This is the maximum
deductible contribution to a common-law employee's
SEP-IRA. .................................................. $------
- --------------------------------------------------------------------------------
Example
Barry is a common-law employee. His compensation for 1997 is $20,000. Barry's
employer has decided to contribute 15% of compensation for each employee.
- --------------------------------------------------------------------------------
1. Contribution rate selected (15%) shown as a decimal. ...... .15
2. Compensation of common-law employee. ...................... $20,000
3. Multiply line (1) by line (2). $20,000 x .15 = ............ $ 3,000
- --------------------------------------------------------------------------------
$3,000 is the amount that the employer may contribute to Barry's SEP-IRA.
9/97
WORKB97
- --------------------------------------------------------------------------------
<PAGE>
------------------
THE CGM FUNDS SIMPLIFIED EMPLOYEE PENSION PLAN [Fencer Logo]
BASIC PLAN DOCUMENT
------------------
- --------------------------------------------------------------------------------
SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN
1.01 PURPOSE The purpose of this Plan is to provide, in accordance with its
provisions, a Simplified Employee Pension Plan providing benefits upon
retirement for the individuals who are eligible to participate hereunder.
1.02 INTENT TO QUALIFY It is the intent of the Employer that this Plan shall be
for the exclusive benefit of its Employees and shall qualify for approval under
Section 408(k) of the Internal Revenue Code, as amended from time to time (or
corresponding provisions of any subsequent Federal law at that time in effect).
In case of any ambiguity, it shall be interpreted to accomplish such result. It
is further intended that it comply with the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) as amended from time to time.
1.03 WHO MAY ADOPT An employer who has ever maintained a defined benefit plan
which is now terminated may not participate in this prototype Simplified
Employee Pension Plan. If, subsequent to adopting this Plan, any defined benefit
plan of the Employer terminates, the Employer will no longer participate in this
prototype plan and will be considered to have an individually designed plan.
1.04 USE WITH IRA This prototype Simplified Employee Pension Plan must be used
with an Internal Revenue Service model IRA (Form 5305 or Form 5305-A) or an
Internal Revenue Service approved master or prototype IRA.
SECTION 2. DEFINITIONS
2.01 ADOPTION AGREEMENT Means the document executed by the Employer through
which it adopts the Plan and thereby agrees to be bound by all terms and
conditions of the Plan.
2.02 CODE Means the Internal Revenue Code of 1986 as amended.
2.03 COMPENSATION For the purposes of the $300 limit of Section 408(k)(2)(C) of
the Code shall be defined as Section 414(q)(7) Compensation.
For all other purposes, Compensation shall mean all of a Participant's wages as
defined in Section 3401(a) of the Code for the purposes of income tax
withholding at the source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code).
For any Self-Employed Individual covered under the Plan, Compensation will mean
Earned Income.
Compensation shall include only that Compensation which is actually paid or made
available to the Participant during the Plan Year.
Compensation shall include any amount which is contributed by the Employer
pursuant to a salary reduction agreement and which is not includible in the
gross income of the Employee under Sections 125, 402(a)(8), 402(h) or 403(b) of
the Code.
The annual Compensation of each Participant taken into account under the Plan
for any year shall not exceed $200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under Section 415(d) of the
Code, except the dollar increase in effect on January 1 of any calendar year is
effective for years beginning in such calendar year and the first adjustment to
the $200,000 limitation is effected on January 1, 1990. If a Plan determines
Compensation on a period of time that contains fewer than 12 calendar months,
then the annual Compensation limit is an amount equal to the annual Compensation
limit for the calendar year in which the compensation period begins multiplied
by the ratio obtained by dividing the number of full months in the period by 12.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
Compensation limit. The OBRA '93 annual Compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual Compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this Plan
to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93
annual Compensation limit set forth in this provision.
2.04 EARNED INCOME Means the net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net earnings
will be determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions by
the Employer to a qualified plan or to a Simplified Employee Pension Plan to the
extent deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction allowed to the
Employer by Section 164(f) of the Code for taxable years beginning after
December 31, 1989.
2.05 EFFECTIVE DATE Means the date the Plan becomes effective as indicated in
the Adoption Agreement.
2.06 EMPLOYEE Means any person who is a natural person employed by the Employer
as a common-law employee and if the Employer is a sole proprietorship or
partnership, any Self-Employed Individual who performs services with respect to
the trade or business of the Employer. Further, any employee of any other
employer required to be aggregated under Section 414(b), (c), (m), or (o) of the
Code and any leased employee required to be treated as an employee of the
Employer under Section 414(n) of the Code shall also be considered an Employee.
2.07 EMPLOYER Means any corporation, partnership or sole proprietorship named in
the Adoption Agreement and any successor who by merger, consolidation, purchase
or otherwise assumes the obligations of the Plan. A partnership is considered to
be the Employer of each of the partners and a sole proprietorship is considered
to be the Employer of the sole proprietor.
2.08 EMPLOYER CONTRIBUTION Means the amount contributed by the Employer to this
Plan.
2.09 IRA Means the designated Individual Retirement Account or Individual
Retirement Annuity, which satisfies the requirements of Section 408 of the Code,
and which is maintained with the Prototype Sponsor by a Participant.
2.10 PARTICIPANT Means any Employee who has met the participation requirements
of Section 3.01 and who is or may become eligible to receive an Employer
Contribution.
2.11 PLAN Means this plan document plus the corresponding Adoption Agreement as
completed and signed by the Employer.
2.12 PLAN YEAR Means the 12 consecutive month period which coincides with
Employer's taxable year or such other 12 consecutive month period as is
designated in the Adoption Agreement.
2.13 PRIOR PLAN Means a plan which was amended or replaced by adoption of this
plan document, as indicated in the Adoption Agreement.
2.14 PROTOTYPE SPONSOR Means the entity specified in the Adoption Agreement
which sponsors this prototype Plan.
2.15 SELF-EMPLOYED INDIVIDUAL Means an individual who has Earned Income for a
Plan Year from the trade or business for which the Plan is established; also, an
individual who would have had Earned Income but for the fact that the trade or
business had no net profits for the Plan Year.
2.16 SERVICE Means the performance of duties by an Employee for the Employer,
for any period of time, however short, for which the Employee is paid or
entitled to payment. When the Employer maintains the Plan of a predecessor
employer, an Employee's Service will include his service for such predecessor
employer.
2.17 TAXABLE WAGE BASE Means the maximum amount of earnings which may be
considered wages for a year under Section 3121(a)(1) of the Code in effect as of
the beginning of the Plan Year.
SECTION 3. ELIGIBILITY AND PARTICIPATION
3.01 ELIGIBILITY REQUIREMENTS Except for those Employees excluded pursuant to
Section 3.02, each Employee of the Employer who fulfills the eligibility
requirements specified in the Adoption Agreement shall, as a condition for
further employment, become a Participant. Each Participant must establish an IRA
with the Prototype Sponsor to which Employer Contributions under this Plan will
be made.
3.02 EXCLUSION OF CERTAIN EMPLOYEES If the Employer has so indicated in the
Adoption Agreement, the following Employees shall not be eligible to become a
Participant in the Plan: (1) Those Employees included in a unit of Employees
covered by the terms of a collective bargaining agreement, provided retirement
benefits were the subject of good faith bargaining; and (2) those Employees who
are nonresident aliens, who have received no earned income from the Employer
which constitutes earned income from sources within the United States.
3.03 ADMITTANCE AS A PARTICIPANT
A. PRIOR PLAN If this Plan is an amendment or continuation of a Prior Plan, each
Employee of the Employer who immediately before the Effective Date was a
participant in said Prior Plan shall be a Participant in this Plan as of said
date.
B. NOTIFICATION OF ELIGIBILITY The Employer shall notify each Employee who
becomes a Participant of his status as a Participant in the Plan and of his
duty to establish an IRA with the Prototype Sponsor to which Employer
Contributions may be made.
C. ESTABLISHMENT OF AN IRA If a Participant fails to establish an IRA for
whatever reason, the Employer may execute any necessary documents to
establish an IRA with the Prototype Sponsor on behalf of the Participant.
3.04 DETERMINATIONS UNDER THIS SECTION The Employer shall determine the
eligibility of each Employee to be a Participant. This determination shall be
conclusive and binding upon all persons except as otherwise provided herein or
by law.
3.05 LIMITATION RESPECTING EMPLOYMENT Neither the fact of the establishment of
the Plan nor the fact that a common-law employee has become a Participant shall
give to that common-law employee any right to continued employment; nor shall
either fact limit the right of the Employer to discharge or to deal otherwise
with a common-law employee without regard to the effect such treatment may have
upon the Employee's rights under the Plan.
SECTION 4. CONTRIBUTIONS AND ALLOCATIONS
4.01 EMPLOYER CONTRIBUTIONS
A. ALLOCATION FORMULA Employer Contributions shall be allocated in accordance
with the allocation formula selected in the Adoption Agreement. Each Employee
who has satisfied the eligibility requirements pursuant to Section 3.01
(thereby becoming a Participant) will share in such allocation.
Employer Contributions made for a Plan Year on behalf of any Participant
shall not exceed the lesser of 15% of Compensation or the limitation in
effect under Code Section 415(c)(1)(A) (indexed for cost of living increases
in accordance with Code Section 415(d)).
B. INTEGRATED ALLOCATION FORMULA If the Employer has selected the integrated
allocation formula in the Adoption Agreement, then Employer Contributions for
the Plan Year will be allocated to Participants' IRAs as follows:
STEP 1 Employer Contributions will be allocated to each Participant's IRA in
the ratio that each Participant's total Compensation bears to all
Participants' total Compensation, but not in excess of 3% of each
Participant's Compensation.
STEP 2 Any Employer Contributions remaining after the allocation in Step 1
will be allocated to each Participant's IRA in the ratio that each
Participant's Compensation for the Plan Year in excess of the integration
level bears to the Compensation of all Participants in excess of the
integration level, but not in excess of 3%.
STEP 3 Any Employer Contributions remaining after the allocation in Step 2
will be allocated to each Participant's IRA in the ratio that the sum of each
Participant's total Compensation and Compensation in excess of the
integration level bears to the sum of all Participants' total Compensation
and Compensation in excess of the integration level, but not in excess of the
maximum disparity rate described in the table below.
STEP 4 Any Employer Contributions remaining after the allocation in Step 3
will be allocated to each Participant's IRA in the ratio that each
Participant's total Compensation for the Plan Year bears to all Participants'
total Compensation for that Plan Year.
The integration level shall be equal to the Taxable Wage Base or such lesser
amount elected by the Employer in the Adoption Agreement.
INTEGRATION LEVEL MAXIMUM DISPARITY RATE
----------------- ----------------------
Taxable Wage Base (TWB) 2.7%
More than $0 but not more than X* 2.7%
More than X* of TWB but not more than 80% of TWB 1.3%
More than 80% of TWB but not more than TWB 2.4%
* X means the greater of $10,000 or 20% of TWB.
C. TIMING OF EMPLOYER CONTRIBUTION Employer Contributions, if any, made on
behalf of Participants for a Plan Year shall be allocated and deposited to
the IRA of each Participant no later than the due date for filing the
Employer's tax return (including extensions).
4.02 VESTING, WITHDRAWAL RIGHTS TO CONTRIBUTIONS All Employer Contributions made
under the Plan on behalf of Employees shall be fully vested and nonforfeitable
at all times. Each Employee shall have an unrestricted right to withdraw at any
time all or a portion of the Employer Contributions made on his behalf. However,
withdrawals taken are subject to the same taxation and penalty provisions of the
Code which are applicable to IRA distributions.
4.03 SIMPLIFIED EMPLOYER REPORTS The Employer shall furnish reports, relating to
contributions made under the Plan, in the time and manner and containing the
information prescribed by the Secretary of the Treasury, to Participants. Such
reports shall be furnished at least annually and shall disclose the amount of
the contribution made under the Plan to the Participant's IRA.
SECTION 5. AMENDMENT OR TERMINATION OF PLAN
5.01 AMENDMENT BY EMPLOYER The Employer reserves the right to amend the
elections made or not made on the Adoption Agreement by executing a new Adoption
Agreement and delivering a copy of the same to the Prototype Sponsor. The
Employer shall not have the right to amend any nonelective provision of the
Adoption Agreement nor the right to amend provisions of this plan document. If
the Employer adopts an amendment to the Adoption Agreement or plan document in
violation of the preceding sentence, the Plan will be deemed to be an
individually designed plan and may no longer participate in this prototype Plan.
5.02 AMENDMENT BY PROTOTYPE SPONSOR By adopting this Plan, the Employer
delegates to the Prototype Sponsor the power to amend or replace the Adoption
Agreement or the Plan to conform them to the provisions of any law, regulations
or administrative rulings pertaining to Simplified Employee Pensions and to make
such other changes to the Plan, which, in the judgment of the Prototype Sponsor,
are necessary or appropriate. The Employer shall be deemed to have consented to
all such amendments; provided however, that no changes may be made without the
consent of the Employer if the effect would be to substantially change the costs
or benefits under the Plan. The Prototype Sponsor shall not have the obligation
to exercise or not to exercise the power delegated to it nor shall the Prototype
Sponsor incur liability of any nature for any act done or failed to be done by
the Prototype Sponsor in good faith in the exercise or nonexercise of the power
delegated hereunder.
5.03 LIMITATIONS ON POWER TO AMEND No amendment by either the Employer or the
Prototype Sponsor shall reduce or otherwise adversely affect any benefits of a
Participant or Beneficiary acquired prior to such amendment unless it is
required to maintain compliance with any law, regulation or administrative
ruling pertaining to Simplified Employee Pensions.
5.04 TERMINATION While the Employer expects to continue the Plan indefinitely,
the Employer shall not be under any obligation or liability to continue
contributions or to maintain the Plan for any given length of time. The Employer
may terminate this Plan at any time by appropriate action of its managing body.
This Plan shall terminate on the occurrence of any of the following events:
A. Delivery to the Prototype Sponsor of a notice of termination executed by the
Employer specifying the effective date of the Plan's termination.
B. Adjudication of the Employer as bankrupt or the liquidation or dissolution of
the Employer.
5.05 NOTICE OF AMENDMENT, TERMINATION Any amendment or termination shall be
communicated by the Employer to all appropriate parties as required by law.
Amendments made by the Prototype Sponsor shall be furnished to the Employer and
communicated by the Employer to all appropriate parties as required by law. Any
filings required by the Internal Revenue Service or any other regulatory body
relating to the amendment or termination of the Plan shall be made by the
Employer.
5.06 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER A successor of the Employer may
continue the Plan and be substituted in the place of the present Employer. The
successor and present Employer (or if deceased, the executor of the estate of a
deceased Self-Employed Individual who was the Employer) must execute a written
instrument authorizing such substitution and the successor must complete and
sign a new Adoption Agreement.
(C)1995 Universal Pensions, Inc., Brainerd, MN 56401
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
27
INTERNAL REVENUE SERVICE Department of the Treasury
Prototype SEP 001
FFN: 50495842700-001 Case: 9580029 Washington, DC 20224
EIN: 04-3076053
Letter Serial No: D410091a
Person to Contact: Ms. Arrington
* CAPITAL GROWTH MANAGEMENT
Telephone Number: (202) 622-8173
222 BERKELEY STREET SUITE 1013
Refer Reply to: CP:E:EP:Q:P3
BOSTON, MA 02116
Date: 03/22/95
Dear Applicant:
In our opinion, the form of your Simplified Employee Pension (SEP) arrangement
is acceptable under section 408(k) of the Internal Revenue Code. This SEP
arrangement is approved for use only in conjunction with an Individual
Retirement Arrangement (IRA) which meets the requirements of Code section 408
and has received a favorable opinion letter, or a model IRA (Forms 5305 and
5305-A).
Employers who adopt this approved plan will be considered to have a retirement
savings program that satisfies the requirements of Code section 408 provided
that it is used in conjunction with an approved IRA. Please provide a copy of
this letter to each adopting employer.
Code section 408(1) and related regulations require that employers who adopt
this SEP arrangement furnish employees in writing certain information about this
SEP arrangement and annual reports of savings program transactions.
Your program may have to be amended to include or revise provisions in order to
comply with future changes in the law or regulations.
If you have any questions concerning IRS processing of this case, call us at the
above telephone number. Please refer to the Letter Serial Number and File Folder
Number shown in the heading of this letter. Please provide those adopting this
plan with your phone number, and advise them to contact your office if they have
any questions about the operation of this plan.
You should keep this letter as a permanent record. Please notify us if you
terminate the form of this plan.
Sincerely yours,
/s/ Illegible
Chief, Employee Plans Technical Branch
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- ------------------ THE CGM FUNDS
[Fencer Logo] Post Office Box 449
Boston, Massachusetts 02117
- ------------------ 800-345-4048 o 617-859-7295 (fax)
SEPIRABOOK 9/97
<PAGE>
- --------------------------------------------------------------------------------
CGM IRA TRANSFER FORM
- --------------------------------------------------------------------------------
Please read the notes on the reverse side before you fill out this form.
To convert assets from a Traditional IRA to a Roth IRA, please call
800-345-4048 for the Roth Conversion Form.
YOUR NAME AND ADDRESS
- --------------------------------------- [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
- ---------------------------------------
Address
- --------------------------------------- (---) -----------------------
City State Zip Code Daytime Phone Number
CGM ACCOUNT INFORMATION
Type of IRA (please check one box): [ ] Traditional Contributory [ ] Traditional
Rollover [ ] Roth Contributory [ ] Roth Conversion
Please print or type the name of your current CGM Fund and your account number.
Indicate the dollar amount or percentage you want to invest in each account. If
you want to establish a new account in another CGM Fund, specify the Fund name
and write "new" under Account Number.
$ AMOUNT / %
FUND NAME ACCOUNT NUMBER AMOUNT TO BE INVESTED
- ---------------------- --------------------- ---------------------------
- ---------------------- --------------------- ---------------------------
PLEASE COMPLETE AND SIGN THESE INSTRUCTIONS
IMPORTANT: To ensure timely processing of your transfer, please call your
current Custodian's Transfer Department and verify the correct address and any
transfer requirements, such as a signature guarantee.
If you are 70 1/2 or older and are transferring assets from a Traditional IRA,
please check this box M and complete the first section on the reverse side of
this form.
Type of IRA (please check one box): [ ] Traditional Contributory
[ ] Traditional Rollover
[ ] Roth Contributory
[ ] Roth Conversion
For Roth IRAs only: Indicate tax year of Initial Investment _______________.
- ---------------------------------------------------------(---) ---------------
Name of Current Current IRA Account Custodian's Phone
Custodian Number Number
- --------------------------------------------------------------------------------
Address City State Zip Code
|_| Please accept this as your [ ] Transfer All OR [ ] Transfer $ or
authorization to: % ------ to my CGM IRA
|_| The transfer should be [ ] Immediately OR [ ] Upon Maturity of
processed: My Assets
- --------------------------------------------------------------------------------
I request that the above named Signature Guarantee (If Required
Custodian liquidate and transfer my by Current Custodian)
IRA assets as cash to State Street
Bank and Trust Company, Custodian Name of Firm: ---------------------
of my CGM IRA.
X
- ---------------------------------- BY: -------------------------------
YOUR SIGNATURE DATE Authorized Individual
- --------------------------------------------------------------------------------
CUSTODIAN: MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O CGM FUNDS,
P.O. BOX 8511, BOSTON, MA 02266-8511
(Please include the Participant's name and Social Security Number
on your check.)
ACCEPTANCE BY CUSTODIAN: State Street Bank and Trust Company accepts the assets
being transferred and agrees to serve as the Custodian of the IRA Account
established on behalf of the above named individual.
/s/ Illegible
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
IRATRAN 2/98
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE 70 1/2 OR OLDER AND TRANSFERRING ASSETS FROM
A TRADITIONAL IRA
If this transfer is being made during or after the year in which you turn age
70 1/2, your required minimum distribution for the current year must be taken
prior to this transfer. You have the following options:
1. Take the distribution from the account to be transferred prior to the
transfer.
2. Determine the dollar amount of the required minimum distribution for the
current year and transfer all assets except that dollar amount. Take that
required minimum distribution by December 31 of the current year, or by April
1 of the next year if you reached age 70 1/2 this year.
3. Take the required minimum distribution from another IRA which you may have.
You must take this action prior to completing this transfer. Kindly notify
your current IRA Plan Custodian in writing if you elect this option. Please
check with your current IRA Custodian for more information about minimum
distributions.
PLEASE COMPLETE THE FOLLOWING INFORMATION CONCERNING YOUR DISTRIBUTIONS:
1. My distributions are based on (Choose one) [ ] single life expectancy or
[ ] joint life expectancy.
2. My life expectancy (Choose one) [ ] is being recalculated [ ] is not being
recalculated.
3. The life expectancy of my Beneficiary (Choose one) [ ] is being recalculated
[ ] is not being recalculated.
4. The date of birth of my Designated Beneficiary being used to calculate
required minimum distributions with respect to the transferor plan is
-------------------. (If there is more than one Designated Beneficiary, you
must use the birthdate of the oldest Beneficiary.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES ABOUT IRA TRANSFERS...
There are four types of IRAs specified below which may be transferred.
|_| Traditional Contributory |_| Roth Contributory
|_| Traditional Rollover |_| Roth Conversion
Please note that when you transfer IRA assets from one financial institution
to another, you are generally required to move assets to and from the same
type of IRA except for Traditional Contributory and Traditional Rollover
assets which can be commingled. Also, a separate Roth Conversion Plan must be
maintained for each tax year in which a conversion is made. For example, if
you have a "Roth Contributory" IRA with another firm, you must move those
assets into a "Roth Contributory" IRA with the new firm. The Internal Revenue
Service requires you to keep IRA assets segregated in this manner so that tax
reporting can be handled more easily.
If you are unsure of the type of IRA you currently have, please check your
original plan documents or ask the financial institution with whom your
account is currently set up to verify your 'IRA type'. It is very important
that you correctly identify the type of assets before you transfer those
assets to CGM.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
How to Transfer Assets to Your Existing CGM IRA
1. Complete and sign the IRA Transfer Form.
2. Mail the Transfer Form to CGM Funds, P.O. Box 8511, Boston, MA 02266-8511 in
the return envelope provided.
3. Upon receipt of your Transfer Form, CGM will send a letter of acceptance and
your authorization to transfer assets to your current IRA Custodian and
provide you with a copy of the letter.
4. After the transferred IRA proceeds have been received by CGM, a statement
confirming the transaction will be mailed to you.
- --------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 8511, BOSTON, MA 02266-8511
QUESTIONS? CALL 800-345-4048
<PAGE>
- --------------------------------------------------------------------------------
CGM IRA TRANSFER FORM FOR NEW ACCOUNTS
- --------------------------------------------------------------------------------
Please read the notes on the reverse side before you fill
out this form. To convert assets from a Traditional IRA to a
Roth IRA, please use the Roth IRA Conversion Form in this packet.
YOUR NAME AND ADDRESS
- --------------------------------------- [ ] [ ] [ ] - [ ] [ ] - [ ] [ ] [ ] [ ]
Name Social Security Number
- ---------------------------------------
Address
- --------------------------------------- (---) -----------------------
City State Zip Code Daytime Phone Number
INVESTMENT INSTRUCTIONS
Type of IRA (please check one box): [ ] Traditional Contributory
[ ] Traditional Rollover
[ ] Roth Contributory
[ ] Roth Conversion
|_| Enclose $5.00 plan establishment fee. Make check payable to State Street
Bank and Trust Company.
Please type or print the name of the fund(s) you wish to invest in:
FUND NAME $ AMOUNT / % AMOUNT
- --------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------
PLEASE COMPLETE AND SIGN THESE INSTRUCTIONS
IMPORTANT: To ensure timely processing of your transfer, please call your
current Custodian's Transfer Department and verify the correct address and any
transfer requirements, such as a signature guarantee.
If you are 70 1/2 or older and are transferring assets from a Traditional IRA,
please check this box M and complete the first section on the reverse side of
this form.
Type of IRA (please check one box): [ ] Traditional Contributory
[ ] Traditional Rollover
[ ] Roth Contributory
[ ] Roth Conversion
For Roth IRAs only: Indicate tax year of initial investment -------------.
- ---------------------------------------------------------(---) ---------------
Name of Current Current IRA Account Custodian's Phone
Custodian Number Number
- --------------------------------------------------------------------------------
Address City State Zip Code
|_| Please accept this as your [ ] Transfer All OR [ ] Transfer $ or
authorization to: % ------ to my CGM IRA
|_| The transfer should be [ ] Immediately OR [ ] Upon Maturity of
processed: My Assets
- --------------------------------------------------------------------------------
I request that the above named Signature Guarantee (If Required
Custodian liquidate and transfer my by Current Custodian)
IRA assets as cash to State Street
Bank and Trust Company, Custodian Name of Firm: ---------------------
of my CGM IRA.
X
- ---------------------------------- BY: -------------------------------
YOUR SIGNATURE DATE Authorized Individual
- --------------------------------------------------------------------------------
CUSTODIAN: MAKE CHECK PAYABLE TO:
STATE STREET BANK AND TRUST COMPANY, C/O CGM FUNDS,
P.O. BOX 8511, BOSTON, MA 02266-8511
(Please include the Participant's name and Social Security Number on
your check.)
- --------------------------------------------------------------------------------
ACCEPTANCE BY CUSTODIAN: State Street Bank and Trust Company accepts the assets
being transferred and agrees to serve as the Custodian of the IRA Account
established on behalf of the above named individual.
/s/ Illegible
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE, STATE STREET BANK AND TRUST COMPANY DATE
- --------------------------------------------------------------------------------
IRATRANNEW 2/98
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION IF YOU ARE 70 1/2 OR OLDER AND TRANSFERRING ASSETS FROM
A TRADITIONAL IRA
If this transfer is being made during or after the year in which you turn age
70 1/2, your required minimum distribution for the current year must be taken
prior to this transfer. You have the following options:
1. Take the distribution from the account to be transferred prior to the
transfer.
2. Determine the dollar amount of the required minimum distribution for the
current year and transfer all assets except that dollar amount. Take that
required minimum distribution by December 31 of the current year, or by April
1 of the next year if you reached age 70 1/2 this year.
3. Take the required minimum distribution from another IRA which you may have.
You must take this action prior to completing this transfer. Kindly notify
your current IRA Plan Custodian in writing if you elect this option. Please
check with your current IRA Custodian for more information about minimum
distributions.
PLEASE COMPLETE THE FOLLOWING INFORMATION CONCERNING YOUR DISTRIBUTIONS:
1. My distributions are based on (Choose one) [ ] single life expectancy or
[ ] joint life expectancy.
2. My life expectancy (Choose one) [ ] is being recalculated [ ] is not being
recalculated.
3. The life expectancy of my Beneficiary (Choose one) [ ] is being recalculated
[ ] is not being recalculated.
4. The date of birth of my Designated Beneficiary being used to calculate
required minimum distributions with respect to the transferor plan is
---------------. (If there is more than one Designated Beneficiary, you must
use the birthdate of the oldest Beneficiary.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES ABOUT IRA TRANSFERS...
There are four types of IRAs specified below which may be transferred.
|_| Traditional Contributory |_| Roth Contributory
|_| Traditional Rollover |_| Roth Conversion
Please note that when you transfer IRA assets from one financial institution
to another, you are generally required to move assets to and from the same
type of IRA except for Traditional Contributory and Traditional Rollover
assets which can be commingled. Also, a separate Roth Conversion Plan must be
maintained for each tax year in which a conversion is made. For example, if
you have a "Roth Contributory" IRA with another firm, you must move those
assets into a "Roth Contributory" IRA with the new firm. The Internal Revenue
Service requires you to keep IRA assets segregated in this manner so that tax
reporting can be handled more easily.
If you are unsure of the type of IRA you currently have, please check your
original plan documents or ask the financial institution with whom your
account is currently set up to verify your 'IRA type'. It is very important
that you correctly identify the type of assets before you transfer those
assets to CGM.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO TRANSFER ASSETS TO CGM
1. Complete and sign the IRA Account Application.
2. Complete and sign the IRA Transfer Form for New Accounts.
3. Enclose a check for $5.00 made payable to State Street Bank and Trust
Company.
4. Mail the above items to CGM Funds, P.O. Box 449, Boston, MA 02117-0449 in the
return envelope provided.
5. Upon receipt of your IRA Account Application, Transfer Form for New Accounts
and check, CGM will establish your IRA. We will send a letter of acceptance
and your authorization to transfer assets to your current IRA Custodian and
provide you with a copy of the letter.
6. After the transferred IRA proceeds have been received by CGM, a statement
confirming the transaction will be mailed to you.
- --------------------------------------------------------------------------------
RETURN THIS FORM TO: THE CGM FUNDS, P.O. BOX 449, BOSTON, MA 02117-0449
QUESTIONS? CALL 800-345-4048
<PAGE>
- --------------------------------------------------------------------------------
IRA ROLLOVER RULES
- --------------------------------------------------------------------------------
ROTH IRA ROLLOVER
PLEASE REVIEW THIS SHEET WHEN ROLLING OVER ASSETS FROM A ROTH IRA WITH ANOTHER
FIRM TO A CGM ROTH IRA. COMPLETE INSTRUCTIONS FOR AUTHORIZING THE ROLLOVER ARE
GIVEN BELOW:
RULES AND CONDITIONS APPLICABLE TO ROLLOVERS
A rollover is a way to move money from one IRA plan to another IRA plan. The
Internal Revenue Code (IRC) limits how many rollovers may be taken, how quickly
rollovers must be completed, and how the Custodian must report the transaction.
By properly completing and signing the CGM IRA Account Application, you are
certifying to the Custodian that you have satisfied the rules and conditions
applicable to your rollover and that you are making an irrevocable election to
treat the transaction as a rollover. Below are the rules governing rollovers
when assets pass from one Roth IRA to another Roth IRA:
1. TIMELINESS: The assets you receive from the distributing Roth IRA must be
deposited into another Roth IRA within 60 days after you receive them.
However, this period is 120 days for certain rollovers relating to first-
home purchases. When counting the 60 (or 120) days include weekends and
holidays. There are generally no exceptions to the 60 day rule and the IRS
cannot grant extensions. Receipt generally means the day you actually have
the assets in hand. For example, the 60 days would begin on the day
following the day you receive the check in the mail.
2. TWELVE MONTH RESTRICTION: You are entitled to one rollover distribution
per year for each Roth IRA Plan which you have established. Twelve (12)
months must pass after receipt of one distribution which you roll over
before you may take another distribution from the same Roth IRA to roll
over. A Roth IRA is created by executing a plan agreement, not by
depositing a contribution into a separate investment within an existing
Roth IRA. The twelve-month rule is not applicable to conversions from a
Traditional IRA to a Roth IRA.
You are entitled to roll over the same assets only once in a twelve (12)
month period. Twelve (12) months must elapse between the time you receive
a distribution of the assets to be rolled until you receive another
distribution of those same assets for rollover purposes.
CAUTION ABOUT COMMINGLING ASSETS: YOU MAY GENERALLY NOT ROLL THE ASSETS INTO AN
EXISTING ROTH CONVERSION IRA.
HOW TO ROLLOVER YOUR ASSETS TO A CGM ROTH IRA FROM ANOTHER ROTH IRA
1. Complete and sign the IRA Account Application. Please note that Roth
Contributory and Roth Conversion assets must be segregated. A separate plan
must be established for each.
2. Enclose your check for the rollover proceeds (plus $5.00) payable to State
Street Bank and Trust Company.
3. Mail the above items to CGM Funds, PO Box 449, Boston, MA 02117-0449.
4. Upon receipt of your IRA Account Application and check, CGM will establish
your CGM Roth IRA Account. A statement confirming the transaction will be
sent to you.
Questions? Call 800-345-4048.
<PAGE>
TRADITIONAL IRA ROLLOVER
PLEASE REVIEW THIS SHEET WHEN ROLLING OVER ASSETS FROM A TRADITIONAL IRA WITH
ANOTHER FIRM TO A CGM TRADITIONAL IRA. COMPLETE INSTRUCTIONS FOR AUTHORIZING THE
ROLLOVER ARE GIVEN BELOW:
RULES AND CONDITIONS APPLICABLE TO ROLLOVERS
A rollover is a way to move money from one IRA plan to another IRA plan. The
Internal Revenue Code (IRC) limits how many rollovers may be taken, how quickly
rollovers must be completed, and how the Custodian must report the transaction.
By properly completing and signing the CGM IRA Account Application, you are
certifying to the Custodian that you have satisfied the rules and conditions
applicable to your rollover and that you are making an irrevocable election to
treat the transaction as a rollover. Below are the rules governing rollovers
when assets pass from one Traditional IRA to another Traditional IRA:
1. TIMELINESS: The assets you receive from the distributing Traditional IRA
must be deposited into another Traditional IRA within 60 days after you
receive them. However, this period is 120 days for certain rollovers
relating to first-home purchases. When counting the 60 (or 120) days
include weekends and holidays. There are generally no exceptions to the 60
day rule and the IRS cannot grant extensions. Receipt generally means the
day you actually have the assets in hand. For example, the 60 days would
begin on the day following the day you receive the check in the mail.
2. TWELVE MONTH RESTRICTION: You are entitled to one rollover distribution
per year for each Traditional IRA Plan which you have established. Twelve
(12) months must pass after receipt of one distribution which you roll
over before you may take another distribution from the same Traditional
IRA to roll over. A Traditional IRA is created by executing a plan
agreement, not by depositing a contribution into a separate investment
within an existing Traditional IRA.
You are entitled to roll over the same assets only once in a twelve (12)
month period. Twelve (12) months must elapse between the time you receive
a distribution of the assets to be rolled until your receive another
distribution of those same assets for rollover purposes.
HOW TO ROLLOVER YOUR ASSETS TO A CGM TRADITIONAL IRA FROM ANOTHER
TRADITIONAL IRA
1. Complete and sign the IRA Account Application.
2. Enclose your check for the rollover proceeds (plus $5.00) payable to State
Street Bank and Trust Company.
3. Mail the above items to CGM Funds, PO Box 449, Boston, MA 02117-0449.
4. Upon receipt of your IRA Account Application and check, CGM will establish
your CGM Traditional IRA Account. A statement confirming the transaction will
be sent to you.
Questions? Call 800-345-4048.
IRAROLL 2/98
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