<PAGE>
CGM
FIXED INCOME
FUND
13th Quarterly Report
June 30, 1995
A No-Load Fund
[CGM LOGO]
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
TO OUR SHAREHOLDERS:
--------------------------------------------------------------------------------
CGM Fixed Income Fund increased 9.9% during the second quarter of 1995 comparing
favorably to a return of 6.2% for the Merrill Lynch Master Bond Index. For the
first six months of the year, CGM Fixed Income Fund rose 17.2% compared to 11.5%
for the Merrill Lynch Master Bond Index.
In the first quarter of 1995, evidence of a weakening economy appeared in the
auto and housing sectors. The trend continued throughout the second quarter
spreading to retail sales and cutting construction spending by 1.5% in May to
make the month the worst in four years for construction spending and the second
down month in a row. Signs of weakness also took their toll on consumer
confidence as measured by an index drop from 102 in April to 92.8 in May.
In its attempt to contain inflation, has the Federal Reserve Board engineered
the very first "soft landing" (slowdown without recession), or has it ushered in
a recession? Though the answer remains to be seen, we favor the soft landing
scenario. Lower interest rates will encourage consumer spending in the months
ahead. In fact, signs of an increase in consumer spending were already evident
in late June and employment gains were well above average. Personal income
should continue to rise and the weaker dollar might well stimulate exports.
Interest rates on long-term government bonds have retraced more than 70% to 6.5%
from 8.3% in the fall of 1994. We expect the decline in rates to carry into 1996
as we experience a slow growth economy with no immediate threat of higher
inflation. In early July, the prospect of continuing low inflation prompted the
Federal Reserve Board to reduce the Federal Funds rate one quarter of a percent
to 5.75%.
The CGM Fixed Income Fund portfolio continues to benefit from low new issue
volume and the resulting tighter quality spreads of lower quality corporate
securities. Bank bonds also responded positively to news of an anticipated
upgrading of Citicorp both by Moody's and Standard & Poor's. The convertible
portion of the portfolio has gained from the rising stock market.
The CGM Fixed Income portfolio holds significant positions in the bank,
brokerage and media industries. Our exposure to bank and brokerage securities
ought not to be perceived so much as a comment on interest rate prospects,
especially since several of these holdings are convertible securities which are
tied instead to the activity of an underlying corporate stock. Rather, we see in
these holdings strong earnings momentum not yet recognized in the markets. The
three largest portfolio holdings are Citicorp, Bank of New York, Inc. and
Chemical Banking Corp.
/s/Robert L. Kemp
-----------------------
Robert L. Kemp
President
July 10, 1995
<PAGE>
INVESTMENT PERFORMANCE
(unaudited)
--------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 1995
CGM FIXED THE FUND'S AVERAGE
INCOME FUND ANNUAL TOTAL RETURN
----------- -------------------
3 Years .................................... +34.4% +10.3%
1 Year ..................................... +14.0 +14.0
3 Months ................................... + 9.9 --
The Fund's average annual total return since inception (March 17, 1992) through
June 30, 1995 is +10.8%. The adviser has agreed to limit the Fund's total
operating expenses to 0.85% of its average net assets annually through December
31, 1995. Otherwise the total return since inception, and for the three-year,
one-year and three-month periods ended June 30, 1995, would have been lower.
The performance data contained in the report represent past performance, which
is no guarantee of future results. The investment return and the principal value
of an investment in the Fund will fluctuate so that investors' shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
BOARD OF TRUSTEES
PETER O. BROWN
NICHOLAS J. GRANT
G. KENNETH HEEBNER
ROBERT L. KEMP
ROBERT B. KITTREDGE
LAURENS MACLURE
JAMES VAN DYKE QUEREAU, JR.
J. BAUR WHITTLESEY
OFFICERS
ROBERT L. KEMP, President
G. KENNETH HEEBNER, Vice President
LESLIE A. LAKE, Vice President and Secretary
KATHLEEN S. HAUGHTON, Vice President
MARTHA I. MAGUIRE, Vice President
JANICE H. SAUL, 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>
CGM FIXED INCOME FUND
--------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1995
(unaudited)
BONDS -- 64.2% OF TOTAL NET ASSETS
FACE
AMOUNT VALUE(a)
------ --------
AIRLINES -- 3.3%
United Air Lines, Inc., 9.125%, 1/15/12 .... $1,000,000 $ 1,029,400
-----------
AUTO & RELATED -- 3.2%
Poindexter JB, Inc., 12.50%, 5/15/04 ....... 1,000,000 980,000
-----------
BANKS -- REGIONAL -- 7.0%
Bank of New York Company, Inc., 7.50%,
8/15/01 (Convertible) ...................... 1,000,000 2,160,000
-----------
BASIC MATERIALS -- 3.4%
USX Marathon Group, 9.125%, 1/15/13 ........ 1,000,000 1,060,090
-----------
BROKERS/INVESTMENT SERVICES -- 3.4%
Lehman Brothers Holdings, Inc., 8.50%,
5/01/07 .................................... 1,000,000 1,058,230
----------
CHEMICALS -- MAJOR -- 3.3%
Polymer Group, Inc., 12.75%, 7/15/02 ....... 1,000,000 1,010,000
----------
CONSUMER CYCLICALS -- 3.4%
Emhart Corp., 9.25%, 8/15/16 ............... 1,000,000 1,060,990
----------
ELECTRONIC & COMMUNICATIONS EQUIPMENT -- 3.1%
Telephone & Data Systems, Inc., 8.40% 2/24/23 1,000,000 966,250
-----------
FOOD -- RETAILERS & WHOLESALERS -- 3.0%
Great Atlantic & Pacific Tea, Inc.,
7.70%, 1/15/04 ............................. 1,000,000 942,940
-----------
FOREST PRODUCTS -- 3.6%
Georgia Pacific Corp., 9.50%, 5/15/22 ...... 1,000,000 1,108,730
-----------
HOTELS & RESTAURANTS -- 3.0%
Flagstar Corp., 10.75%, 9/15/01 ............ 1,000,000 940,000
-----------
MEDIA -- 3.1%
Tele Communications, Inc., 8.75%, 2/15/23 .. 1,000,000 963,300
-----------
METALS & MINING -- 3.5%
Newmont Gold Co., 9.25%, 7/05/12 ........... 1,000,000 1,100,000
-----------
PERIPHERALS -- 5.0%
Seagate Technology, 5.00%, 11/1/03 ......... 1,000,000 1,536,250
-----------
PLASTICS -- 3.3%
Berry Plastics Corp., 12.25%, 4/15/04 ....... 1,000,000 1,010,000
-----------
U.S. GOVERNMENT -- 3.0%
United States Treasury Bonds, 6.25%, 8/15/23 1,000,000 944,530
-----------
See accompanying notes to financial statements
<PAGE>
CGM FIXED INCOME FUND
--------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1995 (CONTINUED)
(unaudited)
BONDS -- (C0NTINUED) FACE
AMOUNT VALUE(a)
------ --------
UTILITIES -- 6.6%
GGIB Funding Corp., 7.43%, 1/15/11 ........ $1,000,000 967,160
Great Lakes Power, Inc., 9.00%, 8/01/04 .... 1,000,000 1,077,190
-----------
2,044,350
-----------
TOTAL BONDS (Identified Cost $18,815,058) .... 19,915,060
-----------
CONVERTIBLE PREFERRED STOCKS -- 23.8%
SHARES
------
AIRLINES -- 5.7%
Delta Air Lines, Inc., $3.50 ............... 30,000 1,755,000
-----------
BANKS -- MONEY CENTER -- 7.7%
Citicorp, $5.375 ........................... 15,000 2,400,000
-----------
REAL ESTATE INVESTMENT TRUSTS -- 4.9%
Oasis Residential, Inc., $2.25 ............. 60,000 1,515,000
-----------
PAPER PRODUCTS/CONSUMER -- 5.5%
Bowater, Inc., $1.645 45,000 1,698,750
-----------
TOTAL CONVERTIBLE PREFERRED
STOCKS (Identified Cost $6,323,323) .......... 7,368,750
-----------
COMMON STOCK -- 6.7%
Chemical Banking Corp. (Identified Cost
$1,908,750) ................................ 43,930 2,075,693
-----------
COMMON STOCK WARRANTS -- 0.1%
BPC Holdings Corp. Exp 4/15/04
(Identified Cost $0) ...................... 1,000 15,000
-----------
FACE
AMOUNT
------
SHORT-TERM INVESTMENT -- 2.6%
Chevron Oil Finance Company, 5.90%,
7/03/95 (Cost $810,000) ................... $ 810,000 810,000
-----------
TOTAL INVESTMENTS -- 97.4% (Identified Cost
$27,857,131)(b) ............................. 30,184,503
Cash and Receivables .................... 2,918,650
Liabilities ............................. (2,105,755)
-----------
TOTAL NET ASSETS -- 100.0% ................... $30,997,398
===========
(a) See Note 1A.
(b) Federal Tax Information: At June 30, 1995 the net unrealized appreciation of
investments based on cost of $27,857,131 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 ....................................................... $ 2,368,238
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ......... (40,866)
-----------
Net unrealized appreciation ................................ $ 2,327,372
===========
See accompanying notes to financial statements
<PAGE>
CGM FIXED INCOME FUND
--------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
June 30, 1995
(unaudited)
ASSETS
Investments at value (Identified cost -- $27,857,131) ....... $30,184,503
Cash ........................................................ 3,319
Receivable for:
Securities sold ............................ $2,278,626
Shares of the Fund sold .................... 7,399
Dividends and interest ..................... 603,142 2,889,167
-----------
Unamortized organization expenses ............................. 26,164
-----------
33,103,153
-----------
LIABILITIES
Payable for:
Securities purchased ....................... $2,043,712
Shares of the Fund redeemed ................ 39,979 2,083,691
-----------
Accrued expenses:
Trustees' fees .............................. 10,500
Other expenses .............................. 11,564 22,064
----------- -----------
2,105,755
-----------
NET ASSETS .................................................... $30,997,398
===========
Net Assets consist of:
Capital paid-in ............................................. $31,621,521
Undistributed net investment income ......................... 125,548
Accumulated net realized loss ............................... (3,077,043)
Unrealized appreciation on investments -- net ............... 2,327,372
------------
NET ASSETS .................................................... $30,997,398
===========
Shares of beneficial interest outstanding, no par value ..... 2,850,206
=========
Net asset value per share* ................................... $10.88
======
*Shares of the Fund are sold and redeemed at net asset value ($30,997,398 /
2,850,206).
See accompanying notes to financial statements
<PAGE>
STATEMENT OF
OPERATIONS
Six Months Ended June 30, 1995
(unaudited)
INVESTMENT INCOME
Income
Dividends .................................................. $ 158,861
Interest ................................................... 997,607
------------
1,156,468
------------
Expenses
Management fees ............................................ 80,413
Trustees' fees ............................................. 20,400
Accounting and Administration .............................. 5,100
Custodian .................................................. 28,500
Transfer agent ............................................. 37,200
Audit and tax services ..................................... 15,000
Legal ...................................................... 15,000
Printing ................................................... 13,800
Registration ............................................... 14,500
Amortization of organization expense ....................... 7,575
Miscellaneous .............................................. 750
------------
238,238
Less expenses assumed by the investment adviser .............. (113,963)
------------
Net investment income ........................................ 1,032,193
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS
Realized loss on investments -- net ......................... (434,474)
Unrealized appreciation -- net .............................. 4,078,671
------------
Net gain on investments ..................................... 3,644,197
------------
NET INCREASE IN ASSETS FROM
OPERATIONS .................................................. $4,676,390
==========
<PAGE>
CGM FIXED INCOME FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1995 DECEMBER 31,
(UNAUDITED) 1994
----------- ------------
FROM OPERATIONS
Net investment income .............. $ 1,032,193 $ 2,358,599
Net realized loss from investments . (434,474) (2,642,569)
Unrealized appreciation
(depreciation) .................... 4,078,671 (2,637,334)
--------------- ---------------
Increase (decrease) in net assets
from operations ................. 4,676,390 (2,921,304)
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .............. (906,645) (2,365,025)
--------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ....... 2,271,730 14,341,336
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment
income .......................... 743,847 1,974,015
--------------- ---------------
3,015,577 16,315,351
Cost of shares redeemed ............ (4,459,880) (15,240,426)
--------------- ---------------
Increase (decrease) in net assets
derived from capital share
transactions ................... (1,444,303) 1,074,925
--------------- ---------------
Total increase (decrease) in net
assets ......................... 2,325,442 (4,211,404)
NET ASSETS
Beginning of period (including
undistributed net investment
income of $0 and $0, respectively) 28,671,956 32,883,360
--------------- ---------------
End of period (including
undistributed net investment
income of $125,548 and $0,
respectively) ..................... $30,997,398 $28,671,956
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares .......... 223,684 1,319,688
Issued in connection with
reinvestment of:
Dividends from net investment
income ........................... 73,391 191,354
--------------- ---------------
297,075 1,511,042
Redeemed .......................... (441,548) (1,460,881)
--------------- ---------------
Net change ........................ (144,473) 50,161
======== ======
See accompanying notes to financial statements
<PAGE>
CGM FIXED INCOME FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED FOR THE YEAR FOR THE YEAR MARCH 17, 1992(c)
JUNE 30, 1995 ENDED ENDED THROUGH
(UNAUDITED) DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
For a share of the Fund outstanding
throughout each period:
Net asset value at the beginning of
period ........................... $ 9.57 $11.17 $10.26 $10.00
------ ------ ------ ------
Net investment income(a) ........... 0.36 0.73 0.67 0.50
Dividends from net investment income (0.31) (0.73) (0.67) (0.49)
Net realized and unrealized gain
(loss) on investments 1.26 (1.60) 1.23 0.40
Distribution from net realized gain -- -- (0.32) (0.13)
Distribution from paid-in capital -- -- -- (0.02)
------ ------ ------ ------
Net increase (decrease) in net
asset value....................... 1.31 (1.60) 0.91 0.26
------ ------ ------ ------
Net asset value at the end of period $10.88 $ 9.57 $11.17 $10.26
====== ====== ====== ======
Total Return (%) (b) ............... 17.2(d) -8.0 18.9 9.2(d)
Ratios:
Operating expenses to average
net assets (%) ................... 0.85(e) 0.85 0.85 0.85(e)
Operating expenses to average net assets
before expense limitation (%) 1.63(e) 1.46 2.02 3.21(e)
Net income to average net assets (%) 7.06(e) 7.00 6.30 7.29(e)
Portfolio turnover (%) 150(e) 129 149 212(e)
Net assets at end of period
(in thousands) 30,997 28,672 32,883 9,467
(a) Net of reimbursement which
amounted to $ 0.04 $ 0.06 $ 0.12 $ 0.16
(b) The total return would have been lower had certain expenses not been reduced during the period.
(c) Commencement of operations.
(d) Not computed on an annualized basis.
(e) Computed on an annualized basis.
See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM FIXED INCOME FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1995
(unaudited)
1. The Fund is a series of CGM Trust which is organized as a Massachusetts
business trust under the laws of Massachusetts pursuant to an Agreement and
Declaration of Trust. The Trust is registered under the Investment Company Act
of 1940 as an open-end management investment company. The Trust has three other
funds whose financial statements are not presented herein. The Fund commenced
operations on March 17, 1992.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITY VALUATION -- Corporate debt securities are valued on the basis of
valuations furnished by a pricing service authorized by the Board of
Trustees, which determines 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. United States government debt
securities are valued at the current closing bid, as last reported by a
pricing service approved by the Board of Trustees. Equity securities are
valued on the basis of valuations furnished by a pricing service, authorized
by the Board of Trustees, which service provides the last reported sale
price for securities listed on a national securities exchange or on the
NASDAQ national market system or, if no sale was reported and in the case of
over-the-counter securities not so listed, the last reported bid price.
Short-term investments having a maturity of sixty days or less are stated at
amortized cost, which approximates value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed) and dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Interest income is increased by the
accretion of discount. Premium is amortized against interest income with a
corresponding decrease in the cost basis. Net gain or loss on securities
sold is determined on the identified cost basis.
C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders all of its taxable income
and net realized capital gains within the prescribed time period.
Accordingly, no provision for federal income tax has been made. At December
31, 1994, the capital loss carryover available to offset future realized
gains aggregated approximately $2,643,000 and expires in the year 2002.
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 will result in reclassifications to paid-in
capital and may affect net investment income per share. 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. ORGANIZATION EXPENSE -- Costs incurred in 1992 in connection with the Fund's
organization and registration amounting to $76,426 have been paid by the
Fund. These costs are being amortized over 60 months beginning March 17,
1992.
2. PURCHASES AND SALES OF SECURITIES -- For the period ended June 30, 1995,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $19,406,806 and $22,643,466,
respectively. Purchases and sales of United States government obligations
aggregated $1,961,250 and $1,033,438, respectively.
3. A. MANAGEMENT FEES -- During the period ended June 30, 1995, the Fund
incurred management fees of $80,413 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 0.55% on the first $200 million of the Fund's average daily net
assets, 0.45% of the next $300 million and 0.35% of such assets in
excess of $500 million. CGM waived its entire fee. See Note 4.
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, internal auditing and
financial reporting functions and clerical functions relating to the
Fund; (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, shareholder
reports and notices, proxy solicitation material furnished to
shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance; and (iii) registration, filing and
other fees in connection with requirements of regulatory authorities.
For the period ended June 30, 1995 these expenses amounted to $5,100 and
are shown separately in the financial statements as Accounting and
Administration. The entire expense was waived by CGM. See Note 4.
C. TRUSTEES FEES AND EXPENSES -- The Fund does not pay any compensation
directly to its officers or to any trustees who are directors, officers
or employees of CGM, or any affiliate of CGM, other than registered
investment companies. Each other trustee is compensated by the Fund at
the rate of $6,000 per year plus travel expenses for each meeting
attended. In addition, the Chairman of the Independent Trustees
Committee receives an annual retainer of $1,000.
4. EXPENSE LIMITATION -- Until December 31, 1995, and, thereafter, until further
notice to the Fund, CGM has voluntarily agreed to reduce its management fee and,
if necessary, to assume expenses of the Fund in order to limit the Fund's
expenses to an annual rate of 0.85% of average daily net assets. As a result of
the Fund's expenses exceeding the voluntary expense limitation, CGM waived its
entire management fee of $80,413, the entire Accounting and Administration
expense of $5,100, and assumed Fund operating expenses of $28,450. The Fund
incurred operating expenses of $124,275, representing 0.85% of the average daily
net assets.
<PAGE>
INVESTMENT ADVISER
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110
------------------------------------------------------------------------------
TELEPHONE NUMBERS
For information about:
[] Account Procedures and Status
[] Redemptions
[] Exchanges
Call 800-343-5678
[] New Account Procedures
[] Prospectuses
[] Performance
Call 800-345-4048
------------------------------------------------------------------------------
MAILING ADDRESSES
FOR EXISTING ACCOUNTS
Boston Financial Data Services
P.O. Box 8511
Boston, MA 02266-8511
FOR NEW ACCOUNT APPLICATIONS ONLY
The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
------------------------------------------------------------------------------
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.
FQR2 Printed in U.S.A.
