File Nos. 2-16252
811-933
As filed with the Securities and Exchange Commission on March 1, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 / /
POSTEFFECTIVE AMENDMENT NO. 64 /X/
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 32 /X/
CGM CAPITAL DEVELOPMENT FUND
(Exact Name of Registrant as Specified in Charter)
One International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 737-3225
Jeremiah J. Bresnahan, Jr., Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
It is proposed that this filing will become effective on April 30, 1999,
pursuant to paragraph (a) of Rule 485.
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CGM
[Fencer Logo] CAPITAL
DEVELOPMENT
FUND
A No-Load Fund
The Fund's investment objective is long-term capital appreciation.
PROSPECTUS & APPLICATION
May 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
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TABLE OF CONTENTS
FUND SUMMARY............................................................... 1
PAST PERFORMANCE........................................................... 2
EXPENSES.................................................................. 3
ADDITIONAL FUND INFORMATION................................................ 4
MANAGEMENT................................................................. 7
WHO CAN PURCHASE SHARES.................................................... 7
HOW TO PURCHASE SHARES..................................................... 8
SHAREHOLDER SERVICES....................................................... 9
HOW TO SELL SHARES.........................................................11
TELEPHONE TRANSACTIONS.....................................................15
DIVIDENDS, CAPITAL GAINS AND TAXES.........................................16
PRICING OF SHARES..........................................................18
YEAR 2000..................................................................18
FINANCIAL HIGHLIGHTS.......................................................19
CONTACT INFORMATION................................................Back Cover
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FUND SUMMARY
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation.
SUMMARY OF PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to attain its objective by investing in the equity securities of
a relatively small but diverse group of companies and industries. Under normal
circumstances the Fund invests substantially all of its assets in common stocks
and securities convertible into common stocks of domestic and foreign
companies.
The Fund may invest in many types of companies. In general, these companies
include:
o well-established companies with records of above-average growth
and promise of maintaining their industry leadership positions;
o companies likely to benefit from internal revitalization or
innovations, changes in consumer demand, or basic economic forces;
and
o smaller companies with good management and attractive prospects.
SUMMARY OF PRINCIPAL RISKS
Like all mutual funds, you may lose money if you invest in the Fund. Because
the Fund invests primarily in stocks, the Fund is subject to MARKET RISKS. This
means that you may lose money on your investment due to a fall in prices of
stocks or periods of below-average performance in the stock market. In
addition, the Fund is also subject to other principal risks:
o Although diversified, the Fund's focused approach means that its
RELATIVELY SMALL NUMBER OF HOLDINGS may result in greater share
price fluctuations than a portfolio holding more securities.
o Investments in SMALL AND MEDIUM-SIZED COMPANIES involve greater
risk than is customarily associated with more established
companies because these stocks may be more volatile and have
returns that vary significantly from the overall market.
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PAST PERFORMANCE
The bar chart and table below show the Fund's annual returns and its long-term
performance, and provide some indication of the risks of investing in the Fund.
The bar chart shows how the Fund's performance has varied from year to year.
The table compares the Fund's performance over time for the periods indicated
to that of the Standard and Poor's 500 Composite Index, a widely recognized
unmanaged index of common stock prices.
Both the bar chart and the table assume reinvestment of dividends and
distributions. The Fund's past performance does not necessarily indicate how
the Fund will perform in the future.
YEAR-BY-YEAR TOTAL RETURN (AS OF 12/31 EACH YEAR)
[Bar Chart]
During the ten-year period shown in the bar chart, the highest quarterly return
was 34.1% (for the quarter ended 3/31/91) and the lowest quarterly return was
- -23.2% (for the quarter ended 9/30/90).
AVERAGE ANNUAL TOTAL RETURN (AS OF 12/31/98)
1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
Fund 8.5% 13.4% 21.0%
S&P 500 Index 28.6% 24.1% 19.2%
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EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SCHEDULE OF FEES
Shareholder Transaction Expenses (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases....................None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends.........None
Redemption Fees*....................................................None
Exchange Fees.......................................................None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
(as a percentage of average net assets, based on expenses for year ended
12/31/98)
Management Fees.....................................................0.99%
Distribution (12b-1) Fees...........................................None
Other Expenses......................................................0.08%
Total Fund Operating Expenses.......................................1.07%
*A wire fee (currently $5.00) will be deducted from proceeds if a
shareholder elects to transfer redemption proceeds by wire.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you redeem your shares at the end of each period;
o your investment has a 5% return each year (the assumption of a 5%
return is required by the SEC and is not a prediction of the
Fund's future performance); and
o the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
Number of years 1 3 5 10
____________ ____________ ____________ ____________
Cost $109 $340 $590 $1,306
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ADDITIONAL FUND INFORMATION
The Fund's objective and principal investment strategies, and the main risks of
investing in the Fund, are summarized at the beginning of this prospectus. More
information on investment strategies, investments and risks appears in this
section. These are the strategies that, in the opinion of the Fund's investment
manager, are most likely to be important in trying to achieve the Fund's
investment objective. There can, of course, be no assurance that the Fund will
achieve its investment objective. The Fund's objective may be changed without
shareholder approval.
The Fund may also use strategies and invest in securities that are not
described below but which are described in the Statement of Additional
Information ("SAI"). Of course, the Fund's investment manager may decide, as a
matter of investment strategy, not to use the investments and investment
techniques described below and in the SAI at any particular time.
The Fund may also depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. When doing so, the Fund may hold a substantial portion of
its assets in cash or investment grade fixed-income securities and may not be
pursuing its investment objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to attain its objective by investing in the equity securities of
a relatively small but diverse group of companies and industries. Under normal
circumstances, the Fund invests substantially all of its assets in common
stocks and securities convertible into common stocks of domestic and foreign
companies.
The Fund may invest in many types of companies. In general, these companies
include:
o well-established companies with records of above-average growth
and promise of maintaining their industry leadership positions;
o companies likely to benefit from internal revitalization or
innovations, changes in consumer demand, or basic economic forces;
and
o smaller companies with good management and attractive prospects.
MANAGEMENT STYLE. Rather than following a particular style, the Fund's
investment manager employs a flexible approach and seeks to take advantage of
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opportunities as they arise. In making an investment decision, the Fund's
investment manager will generally employ the following method:
o It uses a top-down approach, meaning that it first analyzes the
overall economic factors that may affect a potential investment.
o It then conducts a thorough analysis of certain industries and
companies, evaluating the fundamentals of each on a case-by-case
basis and focusing on companies that it determines are
attractively valued.
o The investment manager will sell a security if it determines that
its investment expectations are not being met, if better
opportunities are identified, or if its price objective has been
attained.
PORTFOLIO TURNOVER. 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. Frequent trading
involves higher securities transaction costs which may adversely affect the
Fund's performance. To the extent that this policy results in the realization
of gains on investments, the Fund will make distributions to its shareholders,
which may accelerate shareholders' tax liabilities.
PRINCIPAL RISKS
Investing in a mutual fund involves risk. Before investing, you should consider
the risks you will assume. Some of these risks are described below. More
information about risks appears in the Fund's SAI. Remember that you may
receive little or no return on your investment in the Fund. You may lose money
if you invest in the Fund.
MARKET RISK. This is the risk that the prices of securities will rise or fall
due to changing economic, political or market conditions, or due to a company's
individual situation. The value of the Fund's shares will change daily as the
value of its underlying securities change. This means that your Fund shares may
be worth more or less when you sell them than when you bought them.
Historically, equity securities have been more volatile than debt or
fixed-income securities.
SMALL AND MEDIUM CAPITALIZATION COMPANIEs. The securities of small and medium
capitalization companies may have more risks than those of larger, more
seasoned companies. They may be particularly susceptible to market downturns
because of limited product lines, markets, distribution channels or financial
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and management resources. Also, there may be less publicly available
information about small and medium cap companies. Investments in small and
medium cap companies may be in anticipation of future products or services to
be provided by the companies. If those products or services are delayed, the
prices of the securities of the companies may drop. Sometimes, the prices of
the securities of small and medium cap companies rise and fall based on
investor perception rather than economics. Securities of small and medium cap
companies may be thinly traded, making their disposition more difficult. For
all these reasons, the prices of the securities of small and medium cap
companies may be more volatile, causing the Fund's share price to be volatile.
Funds that invest a higher percentage of their assets in small and medium cap
stocks are generally more volatile than funds investing a higher percentage of
their assets in larger, more established companies.
LESS DIVERSIFICATION. The Fund generally takes larger positions in a smaller
number of companies than a more diversified fund. Therefore, when the value of
one of the Fund's holdings changes, this is likely to have a greater effect on
the Fund's overall performance than on the performance of a more diversified
fund.
DEBT AND FIXED-INCOME SECURITIES. While the Fund expects to invest primarily in
equity securities, the Fund may also invest in debt and fixed-income
securities. Debt and fixed-income securities are subject to credit risk (the
risk that the obligor will default in the payment of principal and/or interest)
and to interest rate risk (the risk that the market value of the securities
will decline as a result of changes in market rates of interest). These
securities are also subject to the risk that interest rate changes may affect
prepayment rates and their effective maturity.
SPECIAL CHARACTERISTICS OF CONVERTIBLE SECURITIES. Convertible securities,
which are debt securities that may be converted into stock, are subject to the
market risk of stocks, and, like other debt securities, are also subject to
interest rate risk and the credit risk of their issuers. Call provisions may
allow the issuer to repay the debt before it matures.
FOREIGN SECURITIES. The Fund may invest a portion of its assets in foreign
securities. Investing in foreign securities involves risks in addition to those
of investing in U.S. securities, including risks relating to political, social
and economic developments abroad, risks relating to currency fluctuation and
restrictions, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject.
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MANAGEMENT
THE INVESTMENT MANAGER
The Fund's investment manager is Capital Growth Management Limited Partnership
("CGM"), One International Place, Boston, Massachusetts, 02110. CGM, an
investment advisory firm founded in 1990, manages the Fund's daily investment
and business affairs subject to the policies established by the Fund's Board of
Trustees. CGM manages nine mutual fund portfolios and advisory accounts for
other clients.
In 1998, the Fund paid 0.99% of its average annual net assets in management
fees to CGM.
THE PORTFOLIO MANAGER
G. Kenneth Heebner has been the portfolio manager of the Fund or its
predecessor in interest since 1976. In 1990, Mr. Heebner founded CGM with
Robert L. Kemp. Prior to establishing the new company, Mr. Heebner managed
mutual fund portfolios at Loomis, Sayles & Company, Incorporated. In addition
to the Fund, he currently manages CGM Mutual Fund, CGM Realty Fund, CGM Focus
Fund and, with Janice H. Saul, co-manages CGM Fixed Income Fund.
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 CGM, and counsel to the Fund and CGM.
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HOW TO PURCHASE SHARES
The Fund sells its shares directly to investors without any sales load.
NEW ACCOUNTS
If you are not 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 check, made payable to CGM Capital Development
Fund, 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 or the Uniform Transfers to Minors
Act.
EXISTING ACCOUNTS
After your account has been established, you may send subsequent investments at
any time directly to the shareholder servicing agent at:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
You must include either the Additional Investment Stub detached from an account
statement 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 must be at least $50.
PAYMENT BY CHECK
If you pay for Fund shares by check, your 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 are not accepted.
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PAYMENT BY WIRE
You may also make subsequent investments 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: "DDA99046336, $
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.
ADDITIONAL INFORMATION
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 the Fund or
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.
The price you pay will be the per share net asset value next calculated after
your 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).
The Fund may reject any purchase order and may suspend, change or withdraw the
offering of its shares.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services as more fully described in
the Fund's SAI. Explanations and forms are available from the Fund.
EXCHANGE PRIVILEGE
You may exchange your shares of CGM Capital Development Fund for shares of CGM
Mutual Fund, CGM Fixed Income Fund, CGM American Tax Free Fund, CGM Realty Fund
and CGM Focus Fund. You may also exchange your shares for shares of money
market funds distributed by New England Funds, L.P.
All exchanges are free of charge. 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" below. Exchange requests cannot be revoked once they have been
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received in good order. 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 requirement.
You 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
you can make to four exchanges per account (or two round trips) per calendar
year. Monthly automatic exchanges from money market funds distributed by New
England Funds, L.P. to the Fund are not subject to this restriction. The Fund
also reserves the right to prohibit exchanges during the first 15 days
following an investment in the Fund.
For federal income tax purposes, an exchange constitutes a sale of shares,
which may result in a capital gain or loss.
The Fund may terminate or change the terms of the exchange privilege.
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 will
be cancelled and the amounts will be reinvested in the Fund at the per share
net asset value determined as of the date of cancellation of the 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 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
<PAGE>
institution. The Fund may terminate or modify the AIP at any time. Additional
information about this Plan is set forth in the SAI.
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").
CONFIRMATION STATEMENTS
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.
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 at 800-345-4048.
HOW TO SELL SHARES
You can sell (redeem) all or part of your shares in the Fund in three different
ways:
o by sending a written request for a check or wire representing the
redemption proceeds,
o 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
o by making a telephone request for redemption proceeds to be wired
to a bank account 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
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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.
WRITTEN REDEMPTION REQUESTS
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, 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), or
requesting that the proceeds be wired to a bank account that you have not
predesignated, 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
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the risk of loss of such certificates; consequently, you may wish to send your
certificates by registered mail.
TELEPHONE REDEMPTION REQUESTS
If you elect to redeem shares by telephone, call CGM Shareholder Services
directly at 800-343-5678. See "Telephone Transactions" below. 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 otherwise 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. 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.
REDEMPTION PROCEEDS
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 an automatic investment
plan) and elect to redeem shares within 15 days of the purchase, you may
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experience delays in receiving redemption proceeds. The Fund will generally
postpone sending your redemption proceeds from an investment until the Fund can
verify that your check (or automatic investment plan 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, the checks will be cancelled and the proceeds
will be reinvested in the Fund at the per share net asset value determined as
of the date of cancellation of the checks. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
POSTPONEMENT OF REDEMPTION PROCEEDS OR SUSPENSION OF REDEMPTION RIGHT
The Fund may postpone payment of redemption proceeds for up to seven days. The
Fund may not postpone payment for more than seven days or suspend the right of
redemption, except: if you purchased your Fund shares by check (or through an
automatic investment plan) and redeem shares within 15 days of the purchase as
described in the preceding section, when the New York Stock Exchange is closed
for other than weekends or holidays, when trading on the Exchange is
restricted, during an emergency (as determined by the SEC) which 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.
REDEMPTION IN KIND
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 interests 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.
MINIMUM ACCOUNT BALANCE AND AUTOMATIC REDEMPTION
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
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minimum does not apply to CGM Retirement Plans or accounts set up under the
Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act.
TELEPHONE TRANSACTIONS
You may initiate three types of transactions by telephone:
o telephone exchanges;
o telephone redemptions by wire; and
o telephone redemptions by check.
The terms and provisions for each of these services are explained fully in the
preceding sections. Once a telephone transaction request has been placed, it
cannot be revoked.
You must select the telephone exchange privilege and/or telephone redemption by
wire privilege 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 automatically unless you decline
this option in the application or otherwise 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 for 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.
During periods of unusual market activity, severe weather or other abnormal
circumstances, it may be difficult for you to reach a representative of the
Fund or CGM Shareholder Services by telephone. In this case, please consider
sending written instructions.
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DIVIDENDS, CAPITAL GAINS AND TAXES
Any income dividends and capital gains distributions are normally made annually
in December but may be made more frequently as deemed advisable by the Board of
Trustees. Certain restrictions may apply to participants in CGM Retirement
Plans.
You may elect to receive income dividends or capital gains distributions, or
both, in additional shares of the Fund or in cash. However, if you elect to
receive capital gains in cash, your income dividends must also be received in
cash. Certain restrictions may apply to participants in CGM Retirement Plans.
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" 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 the
six-month period, any undeliverable or uncashed checks will be cancelled and
the amounts will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation of the checks. No interest will
accrue on amounts represented by uncashed distribution or redemption checks.
Dividends paid by the Fund from net investment income (including dividends and
interest) and net short-term capital gains will be taxable to you as ordinary
income. If a portion of the Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be eligible for
the corporate dividends-received deduction. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses)
are taxable to you as long-term capital gains, regardless of how long you have
owned your 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 your tax basis
in your shares, and then, to the extent the distribution exceeds such basis, as
<PAGE>
a taxable gain from the sale of your shares. Dividends and distributions are
taxable to you in the same manner whether received in cash or reinvested in
additional shares.
If the Fund invests in foreign securities, it may be subject to foreign
withholding taxes on income earned on those securities and may be unable to
pass through to you foreign tax credits and deductions with respect to those
taxes.
A distribution will be treated as paid by the Fund and received by you 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,
generally depending upon how long you held your shares.
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.
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. In limited circumstances, your actual cost
basis may differ from your CGM account cost basis. 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. Some restrictions apply; for more information,
<PAGE>
please call 800-343-5678. Be sure to keep these statements as permanent
records. A fee may be charged for any duplicate information that you request.
Dividend distributions, capital gains distributions and capital gains or losses
from redemptions and exchanges may also be subject to state, local and foreign
taxes. In certain states, a portion of the Fund's income derived from certain
direct U.S. Government obligations may be exempt from state and local taxes.
Each year the Fund will indicate the portion of the Fund's income, if any,
which is derived from such obligations.
The tax discussion set forth above is included for general information only.
You should consult your own tax adviser 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 New York Stock Exchange (normally 4 p.m. Eastern time)
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 60 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. The valuation of
portfolio securities is more fully described in the SAI.
Trading may take place in foreign securities held by the Fund on days when the
Fund is not open for business. As a result, the Fund's net asset value may
change on days on which it is not possible to purchase or sell shares of the
Fund.
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 "Y2K
Problem." Failure to successfully address the Y2K Problem could result in
interruptions to and other material adverse effects on the Fund's business and
operations, such as problems calculating net asset value and difficulties in
<PAGE>
implementing the Fund's purchase and redemption procedures. CGM has taken steps
that it believes are reasonably designed to address any potential Y2K 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 Y2K 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. In addition, there can be no assurances that the Y2K Problem will not
have an adverse effect on the issuers whose securities are held by the Fund or
on the market or the economy in general.
FINANCIAL HIGHLIGHTS
The following Financial Highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been examined by PricewaterhouseCoopers
LLP, independent accountants, whose report, along with the Fund's financial
statements, is included in the Fund's Annual Report, which may be obtained from
the Fund free of charge.
[To be added by amendment.]
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CONTACT INFORMATION
CGM CAPITAL DEVELOPMENT FUND More information about this Fund is
c/o The CGM Funds available free by calling 800-345-4048,
P.O. Box 449 including the following:
Boston, MA 02117
ANNUAL/QUARTERLY REPORTS
SHAREHOLDER SERVICING AGENT
CGM Shareholder Services Additional information about the Fund's
c/o Boston Financial Data Services, Inc. investments is available in the Fund's
P.O. Box 8511 annual and quarterly reports to
Boston, MA 02266 shareholders. In the Fund's annual
report, you will find a discussion of the
INVESTMENT MANAGER market conditions and investment strategies
Capital Growth Management that significantly affected the
Limited Partnership Fund's performance during its last fiscal
One International Place year.
Boston, MA 02110
STATEMENT OF ADDITIONAL INFORMATION (SAI)
TRANSFER AND DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS The SAI provides more detailed
State Street Bank and Trust Company information about the Fund and is
Boston, MA 02102 incorporated into this prospectus by
reference (i.e. is legally considered part
of it).
</TABLE>
_______________________________________________________________________________
For additional information about:
[ ] Account procedures and status [ ] Prospectuses
[ ] Redemptions [ ] SAI
[ ] Exchanges [ ] Annual/Quarterly Reports
[ ] New account procedures [ ] Performance
Call 800-343-5678 Call 800-345-4048
_______________________________________________________________________________
Information about the Fund (including the SAI) is also available from the
Securities and Exchange Commission. You can find it on the SEC's Internet site
at http://www.sec.gov. You can receive copies of Fund information by sending
your request and a duplicating fee to the SEC's Public Reference Section,
Washington, DC 20549-6009. Information can also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. You can get information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
SEC File No. 811-933
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
This Statement of Additional Information (the "Statement" or "SAI") provides
further information concerning the activities and operations of CGM Capital
Development Fund. This Statement is not a prospectus and should be read in
conjunction with the CGM Capital Development Fund Prospectus dated May 1, 1999
(the "Prospectus"). Certain information which is included in the Prospectus is
incorporated by reference into this Statement. A copy of the Prospectus may be
obtained from CGM Capital Development Fund by writing to: c/o The CGM Funds
Investor Services Division, P.O. Box 449, Boston, Massachusetts 02117, or by
calling 800-345-4048.
Certain financial information which is included in the Fund's Annual Report to
Shareholders dated December 31, 1998 is incorporated by reference into this
Statement. A copy of the Annual Report accompanies this Statement.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION...............................................................1
ADDITIONAL INFORMATION REGARDING STRATEGIES AND RISKS......................1
FUNDAMENTAL INVESTMENT RESTRICTIONS........................................2
PORTFOLIO TURNOVER.........................................................3
MANAGEMENT OF THE FUND.....................................................4
INVESTMENT ADVISORY AND OTHER SERVICES.....................................6
Advisory Agreement.................................................6
Custodial Arrangements.............................................7
Independent Accountants............................................8
Other Arrangements.................................................8
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................................8
DESCRIPTION OF THE FUND....................................................9
Shareholder Rights................................................10
Shareholder and Trustee Liability.................................11
ADVERTISING AND PERFORMANCE INFORMATION...................................12
Calculation of Total Return.......................................12
Performance Comparisons...........................................12
NET ASSET VALUE AND PUBLIC OFFERING PRICE.................................14
HOW TO PURCHASE SHARES....................................................15
SHAREHOLDER SERVICES......................................................15
Open Accounts.....................................................15
Systematic Withdrawal Plans ("SWP")...............................16
Exchange Privilege................................................17
Automatic Investment Plans ("AIP")................................17
Retirement Plans..................................................18
Address Changes...................................................18
REDEMPTIONS...............................................................19
Redeeming by Telephone............................................19
Check Sent to the Record Address..................................20
Proceeds Wired to a Predesignated Bank............................20
All Redemptions...................................................20
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS..............21
FINANCIAL STATEMENTS......................................................25
<PAGE>
INTRODUCTION
CGM Capital Development Fund (the "Fund") is registered with the Securities and
Exchange Commission ("SEC") as a diversified open-end management investment
company. The Fund was established as a Massachusetts business trust under the
laws of Massachusetts in 1986. 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.
Descriptions in the Prospectus and in this Statement of a particular investment
practice or technique in which a Fund may engage or a financial instrument
which a Fund may purchase are meant to describe the spectrum of investments
that CGM, in its discretion, might, but is not required to, use in managing the
Fund's portfolio assets. CGM may, in its discretion, at any time employ such
practice, technique or instrument for one or more funds but not for all funds
advised by it. Furthermore, it is possible that certain types of financial
instruments or investment techniques described herein may not be available,
permissible, economically feasible or effective for their intended purposes in
all markets. Certain practices, techniques, or instruments may not be principal
activities of a Fund but, to the extent employed, could from time to time have
a material impact on the Fund's performance.
ADDITIONAL INFORMATION REGARDING STRATEGIES AND RISKS
THE FOLLOWING SUPPLEMENTS THE DISCUSSION IN THE PROSPECTUS OF THE VARIOUS
INVESTMENT STRATEGIES AND TECHNIQUES THAT MAY BE EMPLOYED BY THE FUND AND
CERTAIN ASSOCIATED RISKS.
REPURCHASE AGREEMENTS. 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
Investment Company Act of 1940, as amended (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
<PAGE>
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.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities. Securities that may be resold without registration
pursuant to Rule 144A under the Securities Act of 1933, as amended, may be
treated as liquid for these purposes, subject to the supervision and oversight
of the Board of Trustees, in accordance with guidelines established by the
Board of Trustees to determine whether there is a readily available market for
such securities. The foregoing investment practice could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become uninterested in purchasing the securities.
TEMPORARY DEFENSIVE POSITIONS. The Fund may depart from its principal
investment strategies by taking temporary defensive positions in response to
adverse market, economic or political conditions. When doing so, the Fund may
hold a substantial portion of its assets in cash or investment grade
fixed-income securities and may not be pursuing its investment objective.
FUNDAMENTAL INVESTMENT RESTRICTIONS
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
<PAGE>
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; or
(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 Fund'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.
PORTFOLIO TURNOVER
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. Frequent trading involves higher
securities transaction costs which may adversely affect the Fund's performance.
To the extent that this policy results in the realization of gains on
investments, the Fund will make distributions to its shareholders, which may
accelerate shareholders' tax liabilities.
<PAGE>
The Fund's portfolio turnover rate for each of the last five 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
The Fund's Board of Trustees (the "Board") is responsible for the overall
management of the Fund, including general supervision and review of the Fund's
investment activities. The Board, in turn, elects the officers who are
responsible for administering the Fund's day-to-day operations.
The affiliations of the officers and Board members and their principal
occupations for the past five years are shown below.
PETER O. BROWN (Age 58) -- 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.
G. KENNETH HEEBNER (Age 58)* -- Trustee and Vice President
Employee, CGM; formerly Vice President and Director, Loomis Sayles and
Company, Incorporated ("Loomis Sayles").
ROBERT L. KEMP (Age 66)* -- Trustee and President
Employee, CGM; formerly President and Director, Loomis Sayles.
ROBERT B. KITTREDGE (Age 78) -- Trustee
21 Sturdivant Street, Cumberland Foreside, ME; Retired; formerly Vice
President, General Counsel and Director, Loomis Sayles.
LAURENS MACLURE (Age 73) -- Trustee
183 Sohier Street, Cohasset, MA; Retired; formerly President and Chief
Executive Officer, New England Deaconess Hospital.
JAMES VAN DYKE QUEREAU, JR. (Age 50) -- Trustee
59 Annewood Lane, Wayne, PA; Managing Partner, Stratton Management
Company; formerly Institutional Managing Partner, Loomis Sayles.
J. BAUR WHITTLESEY (Age 52) -- Trustee 1521 Locust Street, Philadelphia, PA;
Attorney.
<PAGE>
KATHLEEN S. HAUGHTON (Age 38) -- 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 54) -- Vice President and Secretary
Employee -- Office Administrator, CGM; formerly Office Administrator,
Capital Growth Management Division of Loomis Sayles.
MARTHA I. MAGUIRE (Age 43) -- Vice President
Employee -- Funds Marketing, CGM; formerly marketing communications
consultant (self-employed); formerly Sales Promotion Consultant, The
New England.
MARY L. STONE (Age 54) -- Assistant Vice President
Employee -- Coordinator, Mutual Fund Recordkeeping, CGM; formerly
Coordinator, Mutual Fund Recordkeeping, Loomis Sayles.
FRANK N. STRAUSS (Age 37) -- Treasurer
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 61) -- 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 or 222 Berkeley Street,
Boston, Massachusetts 02116.
As of February 5, 1999, the trustees and officers 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. Trustees and officers receive no
pension or retirement benefits paid from Fund expenses. The following table
sets forth the compensation paid by the Fund to its trustees for the year ended
December 31, 1998:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
___________________________________________________________________________________________________________
PENSION OR
RETIREMENT
BENEFITS ESTIMATED
AGGREGATE ACCRUED AS ANNUAL COMPENSATION
COMPENSATION PART OF FUND BENEFITS UPON FROM THE TRUSTS AND FUND
NAME OF TRUSTEE FROM TRUST EXPENSES RETIREMENT COMPLEX PAID TO TRUSTEES (A)
___________________________________________________________________________________________________________
PETER O. BROWN $8,602 None None $37,000
___________________________________________________________________________________________________________
NICHOLAS J. GRANT (B) $10,102 None None $44,000
___________________________________________________________________________________________________________
G. KENNETH HEEBNER None None None None
___________________________________________________________________________________________________________
ROBERT L. KEMP None None None None
___________________________________________________________________________________________________________
ROBERT B. KITTREDGE $8,602 None None $37,000
___________________________________________________________________________________________________________
LAURENS MACLURE $8,602 None None $37,000
___________________________________________________________________________________________________________
JAMES VAN DYKE QUEREAU, JR. $8,602 None None $37,000
___________________________________________________________________________________________________________
J. BAUR WHITTLESEY $8,602 None None $37,000
___________________________________________________________________________________________________________
</TABLE>
(a) The Fund Complex is comprised of two Trusts with a total of six funds.
(b) Nicholas Grant retired as of February 4, 1999.
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. The Fund has been continuously managed since
1976 by G. Kenneth Heebner.
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, 1996, 1997 and 1998, the advisory fee paid to
CGM in respect of services rendered to the Fund amounted to $4,263,484,
$7,210,245 and $6,997,004 respectively.
<PAGE>
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
<PAGE>
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 PricewaterhouseCoopers LLP, 160 Federal
Street, Boston, Massachusetts 02110. PricewaterhouseCoopers 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 PricewaterhouseCoopers 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, 1996, 1997 and 1998, CGM was reimbursed in the amounts of $58,000,
$60,000 and $53,000 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
<PAGE>
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 1998, brokerage transactions of the Fund aggregating $4,036,470,788 were
allocated to brokers providing research services and $5,713,763 in commissions
were paid on these transactions. During 1996, 1997 and 1998, the Fund paid
total brokerage fees of $3,432,939, $3,635,840 and $5,776,713, 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
<PAGE>
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
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)
on 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.
<PAGE>
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.
On January 29, 1999, there were 27,955,446.96 shares of the Fund outstanding.
On that date State Street Bank, acting as trustee for various retirement plans
and individual retirement accounts, owned 9,157,858.639 shares -- about 33% 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.
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
<PAGE>
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.
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, 1998, the Fund's
average annual total return was 8.5%, 13.4% and 21.0%, respectively. For the
one, five and ten year periods ended December 31, 1998, the total return on a
hypothetical $1,000 investment in the Fund on an aggregate basis was 8.5%,
87.3% and 574.3%, respectively.
In computing performance information for the Fund, no adjustment is 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 indexes for stock and bond market performance
or against the U.S. Bureau of Labor Statistics' Consumer Price Index.
<PAGE>
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
<PAGE>
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, programs and articles about the Fund regarding performance,
rankings and other characteristics of the Fund and information about persons
responsible for its portfolio management may appear on television and in
national publications and major metropolitan newspapers including, but not
limited to, CNBC, PBC, CNN-fn, 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 media 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 may also include in its advertising
and sales literature information concerning the experience of Mr. Heebner, the
Fund's portfolio manager, in managing other mutual funds and private accounts,
including ranking and rating information about such funds.
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.
<PAGE>
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.
HOW TO PURCHASE 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."
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.
<PAGE>
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 cancelled, 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
<PAGE>
"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 Fund, or (ii) a written exchange request or Service Options Form to CGM
Shareholder Services. 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.
<PAGE>
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.
<PAGE>
If a statement or check sent to a shareholder is returned three times, mailings
to the shareholder may be discontinued until the shareholder contacts CGM
Shareholder Services with correct address information.
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the Prospectus
under "How to Sell Shares."
Except as noted below, signatures on redemption requests must be guaranteed by
an eligible guarantor institution in accordance with procedures established by
the Fund. 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, as amended (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, as amended (the "1934 Act");
credit unions (as defined in ss. 19(b)(1)(A) of the Federal Reserve Act, as
amended [12 U.S.C. ss. 461(b)]); national securities exchanges, registered
securities associations and clearing agencies, as those terms are defined under
the 1934 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.
<PAGE>
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 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.
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
(with a signature guarantee) available from the Fund or CGM Shareholder
Services. 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 or wired 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.
<PAGE>
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.
A redemption constitutes a sale of the shares for federal income tax purposes
on which the investor may realize a long-term 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 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
<PAGE>
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 cancelled 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 meet, the requirements of the Internal Revenue
Code with respect to regulated investment companies. To qualify, the Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; (b) diversify its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash and cash items (including
receivables), U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of any
one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets and not greater than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies); and (c) distribute at least 90% of its
investment company taxable income (which includes, among other items,
dividends, interest and the excess of net short-term capital gains over net
long-term capital losses) and its net tax-exempt interest income each taxable
year, if any. As a regulated investment company, the Fund generally will not be
subject to U.S. federal income tax on its investment company taxable income and
net capital gains (the excess of net long-term capital gains over net
short-term capital losses), if any, that it distributes to shareholders. The
Fund intends to distribute to its shareholders, at least annually,
substantially all of its investment company taxable income and net capital
<PAGE>
gains. Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, the Fund must distribute during each
calendar year an amount equal to the sum of (1) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses, as prescribed by the Code) for the
one-year period ending on October 31 of the calendar year, and (3) any ordinary
income and capital gains for previous years that was not distributed during
those years. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund in October, November or
December with a record date in such a month and paid by the Fund during January
of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received. To
prevent application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
Dividends paid by the Fund from net investment income (including dividends and
interest) and net short-term capital gains will be taxable to shareholders as
ordinary income. If a portion of a Fund's income consists of dividends paid by
U.S. corporations, a portion of the dividends paid by the Fund may be eligible
for the corporate dividends-received deduction. 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 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 from the sale of such shares. Dividends and
distributions are taxable to shareholders in the same manner whether received
in cash or reinvested in additional shares of the Fund.
Dividends and distributions on Fund shares received shortly after their
purchase, although in effect a return of capital, are subject to federal income
taxes.
Upon the sale or other disposition of shares of the Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including shares acquired pursuant to a dividend
reinvestment plan) within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
<PAGE>
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency, and the time the Fund actually collects such
receivables or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "section 988" gains or losses,
may increase or decrease the amount of the Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
If the Fund invests in stock of certain foreign investment companies, the Fund
may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income tax rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
The Fund may elect to mark to market its foreign investment company stock,
resulting in the stock being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income; any resulting loss and any loss from an actual disposition of
the stock would be reported as ordinary loss to the extent of any net gains
reported in prior years. Alternatively, the Fund may be able to make an
election, in lieu of being taxable in the manner described above, to include
annually in income its pro rata share of the ordinary earnings and net capital
gain of the foreign investment company, regardless of whether it actually
received any distributions from the foreign company. These amounts would be
included in the Fund's investment company taxable income and net capital gain
which, to the extent distributed by the Fund as ordinary or capital gain
dividends, as the case may be, would not be taxable to the Fund. In order to
<PAGE>
make this election, the Fund would be required to obtain certain annual
information from the foreign investment companies in which it invests, which in
many cases may be difficult to obtain.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
A shareholder may be subject to backup withholding at the rate of 31% of any
taxable distributions 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, 1998, included in the Fund's Annual Report to Shareholders
for the year ended December 31, 1998, are incorporated herein by reference.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Agreement and Declaration of Trust
of the Registrant.(1)
(b) By-laws of the Registrant.(1)
(c) Form of share certificate of the Registrant.(1)
(d) Advisory Agreement of the Registrant.(1)
(e) None.
(f) None.
(g) Custodian Agreement of the Registrant.(1)
(h) Transfer Agency Agreement of the Registrant is filed
herewith.
(i) Opinion and consent of counsel is filed herewith.
(j) None.
(k) None.
(l) None.
(m) None.
(n) None.
(o) None.
(p) Powers of attorney are filed herewith.
(1) 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 and
incorporated herein by reference.
Item 24. 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 "Investment Manager" in the Prospectus
and the section captioned "Investment Advisory and Other
Services - Advisory Agreement" in the Statement of Additional
Information.
<PAGE>
Item 25. Indemnification
See Article 4 of the Trust's By-laws which is incorporated by
reference herein to Post-Effective Amendment No. 62 to the
Registrant's Registration Statement on Form N-1A (File No.
2-16252) filed February 27, 1997. 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 26. Business and Other Connections of the 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.
CGM is owned by KenBob, Inc., which is in turn owned by Robert
L. Kemp and G. Kenneth Heebner. Both Mr. Kemp and Mr. Heebner
are trustees and officers of the Registrant and of the CGM
Trust, another registered investment company, each of the series
of which is managed by CGM.
Item 27. Principal Underwriters
Not applicable.
Item 28. Location of Accounts and Records
The following companies maintain possession of the documents
required by the specified rules:
(a) Registrant
Rule 31a-1(a)(4); Rule 31a-1(d)
Rule 31a-2(a); Rule 31a-2(c)
<PAGE>
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a-1(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-1(a); 31a-1(b)(9), (10), (11); 31a-1(f)
Rule 31a-2(a); 31a-2(e)
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 1st day of March, 1999.
CGM CAPITAL DEVELOPMENT FUND
By: /s/ Robert L. Kemp
--------------------------------
Robert L. Kemp
President
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 on March 1, 1999 in the capacities indicated.
Signature Title
President (Principal
Executive Officer) and
/s/ Robert L. Kemp Trustee
- -----------------------------------
Robert L. Kemp
Treasurer (Principal
Financial and
/s/ Frank N. Strauss Accounting Officer)
- -----------------------------------
Frank N. Strauss
* Peter O. Brown Trustee
- -----------------------------------
Peter O. Brown
/s/ G. Kenneth Heebner Trustee
- -----------------------------------
G. Kenneth Heebner
* Robert B. Kittredge Trustee
- -----------------------------------
Robert B. Kittredge
* Laurens MacLure Trustee
- -----------------------------------
Laurens MacLure
* James Van Dyke Quereau, Jr. Trustee
- -----------------------------------
James Van Dyke Quereau, Jr.
* J. Baur Whittlesey Trustee
- -----------------------------------
J. Baur Whittlesey
*By: /s/ Robert L. Kemp
------------------------------
Robert L. Kemp
Attorney-In-Fact pursuant to powers of attorney filed herewith.
<PAGE>
EXHIBIT INDEX
(h) Transfer Agency Agreement.
(i) Opinion and Consent of Counsel.
(p) Powers of Attorney.
Exhibit (h)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
LOOMIS-SAYLES CAPITAL DEVELOPMENT FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank....................1
Article 2 Fees and Expenses...........................................5
Article 3 Representations and Warranties of the Bank..................6
Article 4 Representations and Warranties of the Fund..................7
Article 5 Indemnification.............................................7
Article 6 Covenants of the Trust and the Bank........................11
Article 7 Termination of Agreement...................................12
Article 8 Assignment.................................................12
Article 9 Amendment..................................................13
Article 10 Massachusetts Law to Apply.................................13
Article 11 Entire Agreement...........................................13
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of June, 1987, by and between
LOOMIS-SAYLES CAPITAL DEVELOPMENT FUND, a Massachusetts business trust (the
"Trust"), having its principal office and place of business at One Financial
Center, Boston, Massachusetts 02111, and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business
at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Trust, on behalf of its Original Series (the "Fund"), desires
to appoint the Bank as its transfer agent, dividend disbursing agent and agent
in connection with certain other activities, and the Bank desires to accept
such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement,
the Trust hereby employs and appoints the Bank to act as, and the Bank agrees
to act as its transfer agent for the Fund's authorized and issued shares of
beneficial interest ("Shares"), dividend disbursing agent and agent in
connection with any accumulation, open-account or similar plans provided to the
shareholders of the Fund ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus") of
the Fund, including without limitation any periodic investment plan or periodic
withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Trust and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
therefor to the Authorized Custodian of the Fund (the
"Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor
to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions; upon receipt of
proper request for transfer and surrender to it of Share
certificates in proper form for transfer, the Bank is
authorized to transfer Shares on the records of the Trust
maintained by it from time to time and upon cancellation of
surrendered certificates to credit a like amount of Shares to
the transferee and to countersign, issue and deliver new
certificates, if requested;
<PAGE>
(vi) Prepare and transmit payments for dividends and distributions
declared by the Trust;
(vii) Maintain records of account for and advise the Trust and its
Shareholders as to the foregoing;
(viii) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of Shares of the Fund which are issued and outstanding. Bank
shall also provide the Trust on a regular basis with the
total number of Shares which are issued and outstanding and
shall have no obligation, when recording the issuance of
Shares, to monitor the issuance of such Shares or to take
cognizance of any state blue sky laws relating to the issue
or sale of such Shares, which functions shall be the sole
responsibility of the Trust; and
(ix) If a Shareholder of uncertified Shares requests the issuance
of a Share certificate or the registration of a pledge of
such Shares, the Bank, as Transfer Agent, shall countersign
and mail by first class mail a Share certificate to the
Shareholder at his address as set forth on the transfer books
of the Trust, subject to any other instructions for delivery
of certificates which the Trust may give to the Bank with
respect to certificates representing newly purchased Shares,
and subject to the limitation that no certificates
representing newly purchased Shares shall be mailed until the
<PAGE>
cash purchase price of the Shares has been deposited in the
bank account of the Fund maintained by the Custodian.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), the Bank shall: (i) perform all of the customary services
of a transfer agent, dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program),
including but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating proxies,
mailing Shareholder reports and prospectuses to current Shareholders,
withholding taxes on non-resident alien accounts, withholding income dividends,
capital gains distributions and redemption proceeds as required by federal
withholding regulations, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to Shareholders for all
purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and (ii) provide a
system which will enable the Trust to monitor the total number of Shares sold
in each state. The Trust shall (i) identify to the Bank in writing those Fund
transactions and assets to be treated as exempt from blue sky reporting for
each state and (ii) verify the establishment of transactions for each state on
the system prior to activation and thereafter monitor the daily activity for
each state. The responsibility of the Bank for the blue sky state registration
<PAGE>
status of the Trust and the Fund is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Trust or the Fund, as
appropriate, and the reporting of such transactions to the Trust as provided
above.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Trust and the Bank.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement, the
Trust agrees on behalf of each of the Fund, to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.02 below may be changed from time to time subject to
mutual written agreement, between the Trust and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Trust
agrees, on behalf of the Fund, to reimburse the Bank for out-of-pocket expenses
or advances incurred by the Bank for the items set out in the fee schedule
attached hereto. In addition, any other expenses incurred by the Bank at the
request or with the consent of the Trust, will be reimbursed by the Trust on
behalf of the Fund.
2.03 The Trust agrees, on behalf of the Fund, to pay all fees and
reimbursable expenses within five days following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all shareholder accounts shall be advanced to the Bank by the
Trust on behalf of the Fund at least seven (7) days prior to the mailing date
of such materials.
<PAGE>
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Trust that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in The
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that;
4.01 It is a business trust duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust, as amended (the "Declaration of Trust") and By-Laws to
enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940.
<PAGE>
4.05 A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect to all
Shares of the Fund being offered for sale.
4.06 The beneficial interest in the Fund is divided into an unlimited
number of Shares of beneficial interest, without a par value.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Trust on behalf
of the Fund shall indemnify and hold the Bank harmless from and against, any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Trust hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records and documents which (i) are received by
the Bank or its agents or subcontractors and furnished to it by or on behalf of
the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund.
<PAGE>
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.02 The Bank shall indemnify and hold the Trust harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it
without negligence and in good faith in reliance upon such instructions or upon
the opinion of such counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Trust, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction, information,
data, records or documents provided the Bank or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means authorized
by the Trust, and shall not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Trust. The
<PAGE>
Bank, its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
5.04 In the event either party to unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform or otherwise
from such causes. The Bank shall use its best efforts to minimize the
likelihood of such damage resulting from the events described in the
immediately preceding sentence and if such damage occurs, the Bank shall use
its best efforts to mitigate the effects of such events.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for
any act or failure to act hereunder.
5.06 In order that the Indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in
any case in which the other party may be required to indemnify it except with
the other party's prior written consent.
Article 6 Covenants of the Trust and the Bank
6.01 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Trust
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and
all amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed by
the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund on and in accordance with its request.
6.04 The Bank and the Trust agree that all books, records,
information and data pertaining to the business of the other party which are
<PAGE>
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust relating to the Fund, the Bank will endeavor
to notify the Trust and to secure instructions from an authorized officer of
the Trust as to such inspection. The Bank reserves the right, however, to
exhibit the Shareholder records to any person whenever it to advised by its
counsel that it may be held liable for the failure to exhibit the Shareholder
records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
7.02 Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material
will be borne by the Trust on behalf of the Fund. Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated with
such termination.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
<PAGE>
8.03 The Bank may, without further consent on the part of the Trust,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934 ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a
transfer agent pursuant to Section 17A(c)(1); provided, however, that the Bank
shall be as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 11 Entire Agreement
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
LOOMIS-SAYLES CAPITAL DEVELOPMENT
FUND
BY: /s/ Charles J. Finlayson
--------------------------------
President
ATTEST:
- --------------------------
Assistant Vice President
STATE STREET BANK AND TRUST COMPANY
BY: /s/ W. J. Hayes
--------------------------------
Vice President
ATTEST:
- --------------------------
Assistant Secretary
A copy of the Agreement and Declaration of Trust establishing
Loomis-Sayles Capital Development Fund in on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement
is executed with respect to the Fund on behalf of the Fund by officers of the
Trust as officers and not individually and that the obligations of or arising
out of this Agreement are not binding upon any of the trustees, officers and
shareholders individually but are binding only upon the assets and property
belonging to the Fund.
<PAGE>
State Street Bank and Trust Company
Fee Schedule for Services as
Plan, Transfer and Dividend Disbursing Agent
Loomis-Sayles Capital Development Fund
--------------------------------------------------------------------
Annual Maintenance. . . . . . . . . . . . . . . . . . . $4.80 per account
The annual maintenance charge includes the processing of all
transactions and correspondence. The fee is billable on a monthly
basis at the rate of 1/12 of the annual fee. A charge is made for an
account in the month that an account opens or closes.
Out-of-Pocket Expenses
Out-of-Pocket Expenses include but are not limited to: postage,
forms, telephone, microfilm, microfiche and expenses incurred at the
specific direction of the fund.
A charge is made for forgery coverage of the deductible amount of
State Street Bankers Blanket Bond.
Postage for mass mailings is due seven days in advance of the mailing
date.
Monthly Minimum Fee Schedule
No minimum will be assessed since this is part of the NEL Fund
complex.
Other Services (as requested)
Appraisal Service - $.25/month/group statement
- Assume Loomis maintains cross index file
ARMS - $.06/master mailing record/month
- Assumes Loomis data enters mailing list
Loomis-Sayles
Capital Development Fund State Street Bank & Trust Company
/s/ Louis T. Ballerene /s/ E. D. Hawkes, Jr.
------------------------- ----------------------------
Assistant Treasurer Vice President
Date_____________
Exhibit (i)
[Letterhead of Ropes & Gray]
April 30, 1986
Loomis-Sayles Capital Development Fund
One Financial Center
Boston, Massachusetts 02111
Gentlemen:
We are furnishing this opinion in connection with the proposed offer and
sale by Loomis-Sayles Capital Development Fund, a Massachusetts business trust
(the "Trust"), of its shares of beneficial interest (the "Shares") pursuant to
Registration Statement No. 216252 on Form N1A under the Securities Act of 1933,
which Registration Statement was initially filed by Loomis-Sayles Capital
Development Fund, Inc., a Massachusetts corporation, and which is to be
expressly adopted by the Trust, as the successor in interest to such
corporation, in accordance with procedures approved by the staff of the
Securities and Exchange Commission.
We are familiar with the action taken by the Trustees of the Trust to
authorize the issuance of the Shares. We have examined the Trust's records of
Trustee and shareholder action, its By-Laws and its Agreement and Declaration
of Trust on file in the Office of the Secretary of State of The Commonwealth of
Massachusetts. We have examined copies of such Registration Statement, in the
form filed or to be filed with the Securities and Exchange Commission, and such
other documents as we deem necessary for the purposes of this opinion.
We assume that upon sale of the Shares the Trust will receive the net
asset value thereof. We also assume that, in connection with any offer and sale
of the Shares, the Trust will take proper steps to effect compliance with
applicable federal and state laws regulating offerings and sales of securities.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when the Shares
<PAGE>
are issued and sold, they will be validly issued, fully paid and nonassessable
by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of the Trust property for all loss and expense
of any shareholder held personally liable for the obligations of the Trust.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
Exhibit (p)
CGM CAPITAL DEVELOPMENT FUND
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Robert L. Kemp and G.
Kenneth Heebner, and each of them, with full powers of substitution, as his
true and lawful attorneys and agents to execute in his name and on his behalf
in any and all capacities the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by CGM Capital Development Fund (on behalf of
each of its series now or hereinafter created) (the "Registrant") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorneys and agents, or either of them, deem
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as amended,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof. Either one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 28th day of
January, 1999.
/s/ Peter O. Brown
-----------------------------
Peter O. Brown
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Robert L. Kemp and G.
Kenneth Heebner, and each of them, with full powers of substitution, as his
true and lawful attorneys and agents to execute in his name and on his behalf
in any and all capacities the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by CGM Capital Development Fund (on behalf of
each of its series now or hereinafter created) (the "Registrant") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorneys and agents, or either of them, deem
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as amended,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof. Either one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 28th day of
January, 1999.
/s/ Robert B. Kittredge
-----------------------------
Robert B. Kittredge
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Robert L. Kemp and G.
Kenneth Heebner, and each of them, with full powers of substitution, as his
true and lawful attorneys and agents to execute in his name and on his behalf
in any and all capacities the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by CGM Capital Development Fund (on behalf of
each of its series now or hereinafter created) (the "Registrant") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorneys and agents, or either of them, deem
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as amended,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof. Either one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 28th day of
January, 1999.
/s/ Laurens MacLure
----------------------------
Laurens MacLure
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Robert L. Kemp and G.
Kenneth Heebner, and each of them, with full powers of substitution, as his
true and lawful attorneys and agents to execute in his name and on his behalf
in any and all capacities the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by CGM Capital Development Fund (on behalf of
each of its series now or hereinafter created) (the "Registrant") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorneys and agents, or either of them, deem
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as amended,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof. Either one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 28th day of
January, 1999.
/s/ James Van Dyke Quereau, Jr.
-----------------------------------
James Van Dyke Quereau, Jr.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Robert L. Kemp and G.
Kenneth Heebner, and each of them, with full powers of substitution, as his
true and lawful attorneys and agents to execute in his name and on his behalf
in any and all capacities the Registration Statements on Form N-1A, and any and
all amendments thereto, filed by CGM Capital Development Fund (on behalf of
each of its series now or hereinafter created) (the "Registrant") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorneys and agents, or either of them, deem
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as amended,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorneys and agents, or either of them, shall
do or cause to be done by virtue hereof. Either one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 28th day of
January, 1999.
/s/ J. Baur Whittlesey
-------------------------------
J. Baur Whittlesey
