<PAGE>
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------
CGM Capital Development Fund returned 17.6% during the fourth quarter of 1999
compared to the unmanaged Standard and Poor's 500 Index which increased 14.9%
for the same period. For the year just ended, CGM Capital Development Fund
returned 7.7% while the unmanaged S&P 500 Index increased 21.0%.
THE YEAR IN REVIEW AND ECONOMIC OUTLOOK
The U.S. economy expanded without interruption throughout 1999 and the
expansion now threatens to break all records for growth and duration. Real
economic growth, net of inflation, is approaching an annual rate of 4% which
is well in excess of the Federal Reserve Board's recommended rate of 2.5% to
maintain a healthy economy. The unemployment rate is down to 4.1% of the labor
force and understandably, pressure is building for higher wages. Thus far,
increased wage and material demands have had little effect on the Consumer
Price Index. However, now we must also add to the equation foreign markets,
which are expanding and will increase demand for our products as well as for
raw materials. Looking forward, we believe inflationary pressures will
increase in 2000.
Economic strength has given rise to higher interest rates. The long-term
government bond bottomed out with an interest rate of 4.75% in October 1998.
Since then, it has risen to 6.5%. The Federal Reserve Board has already
increased short-term rates several times and is expected to raise rates again
early in 2000 in order to slow the pace of business activity.
Higher interest rates have already affected most common stocks, particularly
those of companies in older, well-established industries. As previously
mentioned, we believe we have two distinct stock markets: The new technology
and telecommunications companies have enjoyed a bull market of their own where
prices have been driven skyward based on unbridled enthusiasm. We remain
skeptical about how long this process can last and we continue to believe
there is good value in the "other" stock market which includes many depressed
cyclical securities and real estate investment trusts.
PORTFOLIO STRATEGY
CGM Capital Development Fund remained fully invested in 1999. The Fund lagged
the S&P 500 Index largely because it was underweighted in technology and large
capitalization growth stocks which provided dramatic gains last year. We
continue to believe these stocks are overvalued. The Fund also realized
significant losses in several individual issues.
During 1999, the Fund established significant positions in foreign paper and
steel stocks which we believe will benefit from a robust global economy this
year. We also invested 9% of the Fund in real estate investment trusts (REITs)
in anticipation of investor recognition of the strong fundamentals and low
valuation of this industry.
CGM Capital Development Fund holds important positions in the electronic
components, steel and aluminum industries. The Fund's three largest holdings
are Companhia Siderurgica National Sponsored ADR, Pohang Iron & Steel Co.,
Ltd. Sponsored ADR and Atmel Corporation.
/s/ Robert L. Kemp
Robert L. Kemp
President
/s/ G. Kenneth Heebner
G. Kenneth Heebner
Portfolio Manager
January 5, 2000
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CGM CAPITAL DEVELOPMENT FUND AND THE UNMANAGED S&P 500 INDEX
assuming reinvestment of dividends and capital gains
---------------------------------
CGM Capital Development Fund
Average Annual Total Returns
---------------------------------
1 year 5 year 10 year
7.7% 21.2% 19.9%
---------------------------------
Past performance is no indication
of future results
---------------------------------
CGM Unmanaged
Capital Development Fund S&P 500 Index
------------------------ -------------
1990 10,140 9,690
1991 20,189 12,636
1992 23,772 13,590
1993 30,530 14,969
1994 23,539 15,184
1995 33,213 20,850
1996 42,546 25,646
1997 52,715 34,212
1998 57,195 43,996
1999 61,599 53,235
CGM CAPITAL DEVELOPMENT FUND
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
G. Kenneth Heebner has managed CGM Capital Development Fund since 1976. In
1990, Mr. Heebner founded Capital Growth Management Limited Partnership with
Robert L. Kemp. Prior to establishing the new company, Mr. Heebner was at
Loomis, Sayles and Company where he managed the Fund, then known as Loomis-
Sayles Capital Development Fund. In addition to CGM Capital Development Fund,
Mr. Heebner currently manages CGM Mutual Fund, CGM Realty Fund and CGM Focus
Fund as well as two other mutual funds. He also co-manages CGM Fixed Income
Fund with Janice Saul.
INVESTMENT PERFORMANCE
(unaudited)
- --------------------------------------------------------------------------------
Total Return for Periods Ended December 31, 1999
CGM CAPITAL
DEVELOPMENT
FUND
-----------
10 Years .......................................................... +516.2%
5 Years .......................................................... +161.8%
1 Year ........................................................... + 7.7%
3 Months ......................................................... + 17.6%
The performance data contained in the report represent past performance. The
investment return and the principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
<PAGE>
<TABLE>
CGM CAPITAL DEVELOPMENT FUND
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1974 -- DECEMBER 31, 1999 (UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------------
IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1974
--------------------------------------------------------------------------------------------------------------------------------
--AND HAD TAKEN ALL DIVIDENDS OR -- HAD REINVESTED ALL DIVIDENDS AND CAPITAL
AND DISTRIBUTIONS IN CASH GAINS DISTRIBUTIONS IN ADDITIONAL SHARES
--------------------------------------------------------------------------------------------------------------------------------
During the Year
You Would Have Received Which Would Represent
--------------------------------------------------------------------------------------------------------------------------------
The Value of A Cumulative
The Net Your Original Change
Asset Value Per Share Per Share Investment An Expressed
On of Your Capital Gains Income At Each Annual As An Index With
December Shares Would Distributions Distributions Year End Total Return December 31,
31 Have Been of of Would Have Been of 1974 = 100.0
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1974 $ 7.78 100.0
1975 9.35 -- $0.15 $ 9.53 + 22.5% 122.5
1976 10.98 -- 0.13 11.35 + 19.1 145.9
1977 10.74 -- 0.18 11.28 - 0.6 145.0
1978 13.05 -- 0.27 14.09 + 24.9 181.1
1979 16.20 -- 0.35 17.95 + 27.4 230.7
1980 20.50 $ 1.65* 0.36 25.65 + 42.9 329.7
1981 17.34 3.38 0.36 26.80 + 4.5 344.5
1982 24.88 2.88 0.41 47.95 + 78.9 616.3
1983 25.21 2.50 0.47 55.43 + 15.6 712.4
1984 17.28 6.15 0.11 50.88 - 8.2 654.0
1985 25.02 -- 0.18 74.39 + 46.2 956.1
1986 23.12 7.46 0.16 95.52 + 28.4 1227.6
1987 16.56 10.09 0.14 110.71 + 15.9 1422.8
1988 15.87 0.02 0.62 110.38 - 0.3 1418.5
1989 18.37 -- 0.34 130.14 + 17.9 1672.4
1990 18.53 -- 0.10 131.96 + 1.4 1695.8
1991 25.80 11.07* 0.06 262.73 + 99.1 3376.3
1992 27.43 2.68* 0.20 308.71 + 17.5 3967.2
1993 27.71 7.51 0.07 397.31 + 28.7 5105.8
1994 20.58 0.71 0.07 306.33 - 22.9 3936.6
1995 27.33 1.68 0.02 432.23 + 41.1 5554.5
1996 29.08 5.87 0.07 553.69 + 28.1 7115.3
1997 26.96 9.08 -- 686.02 + 23.9 8815.9
1998 24.95 4.19 0.11 744.33 + 8.5 9565.3
1999 26.20 0.56 0.11 801.64 + 7.7 10301.8
------- ----- ------
Totals $ 77.48 $5.04 +10201.8
--------------------------------------------------------------------------------------------------------------------------------
* Includes $0.09, $0.02 and $0.02 per share distributed from paid-in capital.
--------------------------------------------------------------------------------------------------------------------------------
The performance data contained in this report represent past performance, which is no guarantee of future results. The investment
return on, and the principal value of, an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be
worth more or less than the original cost.
</TABLE>
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
PETER O. BROWN
G. KENNETH HEEBNER
ROBERT L. KEMP
ROBERT B. KITTREDGE
LAURENS MACLURE
JAMES VAN DYKE QUEREAU, JR.
J. BAUR WHITTLESEY
OFFICERS
ROBRT L. KEMP, President
G. KENNETH HEEBNER, Vice President
LESLIE A. LAKE, Vice President and Secretary
KATHLEEN S. HAUGHTON, Vice President
MARTHA I. MAGUIRE, Vice President
W. DUGAL THOMAS, Vice President
MARY L. STONE, Assistant Vice President
FRANK N. STRAUSS, Treasurer
INVESTMENT ADVISER
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP
Boston, Massachusetts 02110
TRANSFER AND DIVIDEND PAYING
AGENT AND CUSTODIAN OF ASSETS
STATE STREET BANK AND TRUST COMPANY
Boston, Massachusetts 02102
SHAREHOLDER SERVICING AGENT
FOR STATE STREET BANK AND
TRUST COMPANY
BOSTON FINANCIAL DATA SERVICES, INC.
P.O. Box 8511
Boston, Massachusetts 02266-8511
<PAGE>
<TABLE>
CGM CAPITAL DEVELOPMENT FUND
- -----------------------------------------------------------------------------------------------
INVESTMENTS AS OF DECEMBER 31, 1999
COMMON STOCKS -- 100.0% OF TOTAL NET ASSETS
<CAPTION>
SHARES VALUE(a)
------ --------
<S> <C> <C>
ALUMINUM -- 11.7%
Alcan Aluminium Limited(b) ............................. 835,000 $ 34,391,563
Alcoa Inc. ............................................. 480,000 39,840,000
------------
74,231,563
------------
BEVERAGES AND TOBACCO -- 1.5%
Canandaigua Brands, Inc.(c) ............................ 180,000 9,180,000
------------
ELECTRONIC COMPONENTS -- 22.3%
Atmel Corporation(c) ................................... 1,480,000 43,752,500
Koninklijke Philips Electronics Sponsored ADR(d) ....... 259,840 35,078,400
Micron Technology, Inc.(c) ............................. 450,000 34,987,500
National Semiconductor Corporation(c) .................. 630,000 26,971,875
------------
140,790,275
------------
LIGHT CAPITAL GOODS -- 4.9%
Novellus Systems, Inc.(c) .............................. 255,000 31,245,469
------------
METALS AND MINING -- 5.4%
Inco Limited(b)(c) ..................................... 1,455,000 34,192,500
------------
OFFICE EQUIPMENT AND SUPPLIES -- 5.5%
Lexmark International Group, Inc.(c) ................... 382,000 34,571,000
------------
OIL -- SERVICE -- 7.7%
Maverick Tube Corporation(c) ........................... 650,000 16,046,875
Tubos De Acero De Mexico ADR(d) ........................ 2,430,000 32,956,875
------------
49,003,750
------------
PAPER PRODUCTS/CONSUMER -- 5.3%
Asia Pulp & Paper Company Ltd. ADR(c)(d) ............... 4,250,000 33,468,750
------------
PRINTING -- 6.9%
Aracruz Celulose S.A. ADR(b)(d) ........................ 1,650,000 43,312,500
------------
REAL ESTATE INVESTMENT TRUSTS -- 9.6%
Apartment Investment and Management Company ............ 835,000 33,243,437
Home Properties New York, Inc. ......................... 1,000,600 27,453,962
------------
60,697,399
------------
STEEL -- 15.4%
Companhia Siderurgica National Sponsored ADR(b)(d) ..... 1,417,000 $ 52,074,750
Pohang Iron & Steel Co., Ltd. Sponsored ADR(d) ......... 1,300,000 45,500,000
------------
97,574,750
------------
TELEPHONE -- 3.8%
Telefonos de Mexico, S.A. de C.V.(d) ................... 215,000 24,187,500
------------
TOTAL COMMON STOCKS (Identified Cost $551,670,928) ......................... 632,455,456
============
COMMON STOCK WARRANTS -- 0.1%
Asia Pulp & Paper Company Ltd. Exp. 7/27/00
(Identified Cost $2,800,000)(c) ....................... 800,000 750,000
FACE
SHORT-TERM INVESTMENT -- 0.5% AMOUNT
------
American Express Credit Corporation, 4.25% 1/03/00
(Cost $2,885,000) ................................... $2,885,000 2,885,000
------------
TOTAL INVESTMENTS -- 100.6% (Identified Cost $557,355,928)(e) .............. 636,090,456
Cash and Receivables .................................................... 3,251,055
Liabilities ............................................................. (6,804,439)
------------
TOTAL NET ASSETS -- 100.0% ................................................. $632,537,072
============
(a) See Note 1A.
(b) The Fund has greater than 10% of its assets at December 31, 1999 invested in Canada and
ADRs from Brazil.
(c) Non-income producing security.
(d) An American Depository Receipt (ADR) is a certificate issued by a U.S. bank representing
the right to receive securities of the foreign issuer described. The values of ADRs are
significantly influenced by trading on exchanges not located in the United States or
Canada.
(e) Federal Tax Information: At December 31, 1999 the net unrealized appreciation on
investments based on cost of $561,336,539 for Federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost ............................ $106,505,696
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value .............................. (31,751,779)
------------
Net unrealized appreciation ............................................ $ 74,753,917
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
ASSETS
Investments at value (Identified cost -- $557,355,928) ........ $636,090,456
Cash .......................................................... 444
Receivable for:
Securities sold ................................ $2,875,166
Shares of the Fund sold ........................ 65,116
Dividends and interest (net of withholding
tax of $59,846) ............................... 303,194
Foreign tax reclaim............................. 7,135 3,250,611
---------- ------------
639,341,511
------------
LIABILITIES
Payable for:
Securities purchased ........................... 1,953,663
Shares of the Fund redeemed .................... 3,160,582
Distributions declared ......................... 1,064,948 6,179,193
----------
Accrued expenses:
Management fees ................................ 514,049
Trustees' fees ................................. 11,192
Accounting and Administration .................. 4,750
Transfer Agent fees ............................ 45,929
Other expenses ................................. 49,326 625,246
---------- ------------
6,804,439
------------
NET ASSETS .................................................... $632,537,072
============
Net Assets consist of:
Capital paid-in .............................................. $557,539,898
Undistributed net investment income .......................... 243,258
Accumulated net realized loss ................................ (3,980,612)
Unrealized appreciation on
investments -- net .......................................... 78,734,528
------------
NET ASSETS ..................................................... $632,537,072
============
Shares of beneficial interest
outstanding, no par value .................................... 24,140,456
============
Net asset value per share* .................................... $ 26.20
============
*Shares of the Fund are sold and redeemed at net asset value
($632,537,072 / 24,140,456).
See accompanying notes to financial statements
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
INVESTMENT INCOME
Income
Dividends (net of withholding tax of $325,111) ............. $ 9,430,258
Interest ................................................... 135,187
-----------
9,565,445
-----------
Expenses
Management fees ............................................ 6,128,531
Trustees' fees ............................................. 44,762
Accounting and Administration .............................. 57,000
Custodian .................................................. 120,375
Transfer agent ............................................. 208,976
Audit and tax services ..................................... 33,000
Legal ...................................................... 49,275
Printing ................................................... 23,599
Registration ............................................... 29,795
Miscellaneous .............................................. 5,015
-----------
6,700,328
-----------
Net investment income ....................................... 2,865,117
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments -- net ......................... 11,715,570
Unrealized appreciation -- net .............................. 27,062,257
-----------
Net gain on investments ..................................... 38,777,827
-----------
NET CHANGE IN ASSETS FROM OPERATIONS ......................... $41,642,944
===========
See accompanying notes to financial statements
<PAGE>
<TABLE>
CGM CAPITAL DEVELOPMENT FUND
- -----------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ............................... $ 2,865,117 $ 2,753,284
Net realized gain from investments .................. 11,715,570 100,982,649
Unrealized appreciation (depreciation) .............. 27,062,257 (46,707,964)
------------ ------------
Change in net assets from operations .............. 41,642,944 57,027,969
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ............................... (2,621,859) (2,753,284)
Net realized gain on investments .................... (11,715,570) (100,982,649)
In excess of net realized gain on investments ....... (1,551,121) (1,692,581)
------------ ------------
(15,888,550) (105,428,514)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ........................ 18,708,382 32,751,922
Net asset value of shares issued in connection with
reinvestment of:
Dividends from net investment income .............. 2,246,333 2,347,427
Distributions from net realized gain .............. 10,098,811 89,237,891
Distributions in excess of net realized gain on
investments ..................................... 1,337,065 1,495,726
------------ ------------
32,390,591 125,832,966
Cost of shares redeemed ............................. (129,025,877) (96,687,361)
------------ ------------
Change in net assets derived from capital share
transactions .................................... (96,635,286) 29,145,605
------------ ------------
Total change in net assets .......................... (70,880,892) (19,254,940)
NET ASSETS
Beginning of period ................................. 703,417,964 722,672,904
------------ ------------
End of period (including undistributed net investment
income of $243,258 and $0, respectively) .......... $632,537,072 $703,417,964
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares .......................... 772,324 1,202,694
Issued in connection with reinvestment of:
Dividends from net investment income .............. 87,048 91,218
Distributions from net realized gain .............. 391,340 3,580,435
Distributions in excess of net realized gain on
investments ..................................... 51,813 59,422
------------ ------------
1,302,525 4,933,769
Redeemed ............................................ (5,359,335) (3,544,824)
------------ ------------
Net change .......................................... (4,056,810) 1,388,945
============ ============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
CGM CAPITAL DEVELOPMENT FUND
- ----------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
For a share of the Fund outstanding throughout
each year:
Net asset value at the beginning of year ...... $24.95 $26.96 $29.08 $27.33 $20.58
------ ------ ------ ------ ------
Net investment income (loss) .................. 0.12 0.11 (0.08)(a) 0.07 0.02
Dividends from net investment income .......... (0.11) (0.11) -- (0.07) (0.02)
Net realized and unrealized gain on
investments ................................. 1.80 2.18 7.04 7.62 8.43
Distribution from net realized gain ........... (0.49) (4.12) (9.08) (5.84) (1.68)
Distribution in excess of net realized
gain on investments ......................... (0.07) (0.07) -- (0.03) --
------ ------ ------ ------ ------
Net increase (decrease) in net asset
value ....................................... 1.25 (2.01) (2.12) 1.75 6.75
------ ------ ------ ------ ------
Net asset value at end of year ................ $26.20 $24.95 $26.96 $29.08 $27.33
====== ====== ====== ====== ======
Total Return (%) .............................. 7.7 8.5 23.9 28.1 41.1
Ratios:
Operating expenses to average net assets (%) .. 1.08 1.07 1.07 0.82 0.85
Net investment income (loss) to average
net assets (%) .............................. 0.46 0.39 (0.29) 0.23 0.07
Portfolio turnover (%) ........................ 335 335 230 178 271
Net assets at end of year (in thousands)($) ... 632,537 703,418 722,673 631,260 521,248
(a) Per share net investment loss does not reflect the year's reclassification of permanent differences between
book and tax basis net investment loss. See Note 1D.
See accompanying notes to financial statements
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1999
1. The Fund is organized as a Massachusetts business trust under the laws of
Massachusetts pursuant to an Agreement and Declaration of Trust. The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. Along with five other funds in a separate
Trust, there are six CGM funds (CGM Funds). The Fund's objective is long-term
capital appreciation. The Fund seeks to attain its objective by investing in
the equity securities of a diverse group of companies and industries.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board of
Trustees, which provides the last reported sale price for securities listed
on a national securities exchange or on the NASDAQ national market system
or, if no sale was reported and in the case of over-the-counter securities
not so listed, the last reported bid price. Short-term investments having a
maturity of sixty days or less are stated at amortized cost, which
approximates value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed) and dividend income is recorded on the ex-dividend date net of
applicable taxes. Interest income is recorded on the accrual basis. Net gain
or loss on securities sold is determined on the identified cost basis.
Dividend income received by the Fund from its investment in REITs may be
comprised of ordinary income, capital gains, and return of capital.
C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders all of its taxable income
and net realized capital gains, within the prescribed time period.
Accordingly, no provision for federal income tax has been made.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
are recorded by the Fund on the ex-dividend date. The classification of
income and capital gains distributions is determined in accordance with
income tax regulations. Permanent book and tax differences relating to
shareholder distributions may result in reclassifications to paid-in
capital. Undistributed net investment income, accumulated net investment
loss, or distributions in excess of net investment income may include
temporary book and tax differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
E. INVESTMENT RISK -- There are certain additional risks involved in investing
in foreign securities that are not inherent in investments in domestic
securities. These risks may involve adverse political and economic
developments and the possible imposition of currency exchange blockages or
other foreign governmental laws or restrictions. In addition, the securities
of some foreign companies and securities markets are less liquid and at
times more volatile than securities of comparable U.S. companies and U.S.
securities markets.
2. PURCHASES AND SALES OF SECURITIES -- For the year ended December 31, 1999,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $2,069,784,831 and
$2,178,781,228, respectively. There were no purchases or sales of United
States government obligations.
3. A. MANAGEMENT FEES -- During the year ended December 31, 1999, the Fund
incurred management fees of $6,128,531 paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership
(CGM), certain officers and directors of which are also officers and
trustees of the Fund. The management agreement provides for a fee at
the annual rate of 1.00% on the first $500 million of the Fund's
average daily net assets, 0.95% of the next $500 million and 0.80% of
such assets in excess of $1 billion.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting and
other services for the Fund. The expenses of those services, which are
paid to CGM by the Fund, include the following: (i) expenses for
personnel performing bookkeeping, accounting, and financial reporting
functions and clerical functions relating to the Fund; (ii) expenses for
services required in connection with the preparation of registration
statements and prospectuses, shareholder reports and notices, proxy
solicitation material furnished to shareholders of the Fund or
regulatory authorities and reports and questionnaires for SEC
compliance; and (iii) registration, filing and other fees in connection
with requirements of regulatory authorities. The Accounting and
Administration expense of $57,000, for the year ended December 31, 1999,
is shown separately in the financial statements.
C. TRUSTEES FEES AND EXPENSES -- The Fund does not pay any compensation
directly to its officers or to any trustees who are directors, officers
or employees of CGM, or any affiliate of CGM, (other than registered
investment companies). Each other trustee is compensated by the six CGM
Funds with an annual fee of $37,000 plus travel expenses for each
meeting attended. Of this amount, each fund was responsible for $3,000
per trustee plus an annual variable fee calculated based on the
proportion of each fund's average net assets relative to the aggregate
average net assets of the CGM Funds, which for the year ended December
31, 1999 was $5,554 for the Fund.
<PAGE>
CGM CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of CGM Capital Development Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of CGM Capital
Development Fund at December 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 8, 2000
<PAGE>
CGM
CAPITAL
DEVELOPMENT
FUND
39th Annual Report
December 31, 1999
A No-Load Fund
[Logo] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
INVESTMENT ADVISER
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110
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TELEPHONE NUMBERS
For information about:
[] Account Procedures and Status
[] Redemptions
[] Exchanges
Call 800-343-5678
[] New Account Procedures
[] Prospectuses
[] Performance
Call 800-345-4048
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MAILING ADDRESSES
FOR EXISTING ACCOUNTS
Boston Financial Data Services
P.O. Box 8511
Boston, MA 02266-8511
FOR NEW ACCOUNT APPLICATIONS ONLY
The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
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This report has been prepared for the shareholders of the Fund and is not
authorized for distribution to current or prospective investors in the Fund
unless it is accompanied or preceded by a prospectus.
CAR99 Printed in U.S.A.
