CGM
AMERICAN
TAX FREE FUND
8th Quarterly Report
September 30, 1995
A No-Load Fund
CGM LOGO
(Man Fencing)
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
TO OUR SHAREHOLDERS:
CGM American Tax Free Fund increased 3.0% During the third quarter of 1995
compared to an increase of 2.9% For the Lehman Municipal Bond Index. Returns for
the first nine months of the year were +12.0% For CGM American Tax Free Fund and
+12.8% For the Lehman Municipal Bond Index.
The stock market believes the "soft landing" has occurred. Economic expansion
has slowed somewhat as indicated by average monthly gains in employment, which
are decidely lower than in 1994, but still in the plus territory to the tune of
150,000 additional jobs. Gross Domestic Product increased at a rate of just 1.1%
In the second quarter versus a 2.7% Gain in the first quarter. However, we
expect the rate could climb to roughly 2.5% In the recently completed third
quarter. Nonetheless, the pace of recovery is hardly strong enough to rekindle
fears of inflation. Some heavy capital goods sectors of the economy are slowing,
but we could see gains in consumer spending now that the hot summer is over.
Though the signals are mixed, we believe the slow recovery is still under way.
Sizeable gains in corporate profits combined with lower interest rates have
fueled an unusually strong stock market this year. Seldom does the cost of money
decline while the economy is improving. From this point in the economic cycle,
we can expect moderate gains in profits and level or even slightly lower
interest rates resulting in more modest gains in security prices.
Given the current scenario, why could long-term bond rates decline from present
levels? Simply answered, the bond market is influenced by more than supply and
demand for funds. Factors that could nudge rates lower are reduced inflation,
some progress in curbing government spending, lowering the budget deficit and
perhaps, down the road, a balanced budget. Bond investors would be impressed by
early signs of a change in direction toward fiscal conservatism.
The CGM American Tax Free portfolio benefited from a narrowing in quality
spreads as rates fell and investors sought increasingly higher yields. The
coupon and maturity structure of the portfolio is such that it does well in a
flat to modestly improving interest rate environment. As a class, tax exempt
securities remain inexpensive relative to taxable alternatives as a result of
flat tax talk. On the other hand, an imbalance of demand and new issue supply
has created a situation in which tax exempt securities are trading more like
commodities than at any other time in recent history. Despite the fact that new
issues are dominated by insured bonds, credit selection has added far less to
performance than has the portfolio's structure vis a vis coupon and callability.
CGM American Tax Free Fund holds significant positions in industrial
development, health care and insured bonds. The three largest holdings are Hodge
Louisiana (Stone Container), Howard County, Maryland Multi-family Housing
(Avalon Corp) and Ramsey and Washington Counties, Minnesota Resource Recovery
Bonds.
/s/ Robert L. Kemp
--------------------------------
Robert L. Kemp
President
October 12, 1995
<PAGE>
- ------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
Total Return for Periods Ended September 30, 1995
CGM AMERICAN LIPPER GENERAL MUNICIPAL
TAX FREE FUND DEBT FUND AVERAGE
------------- -------------------------
1 Year ............................... +10.4% 9.8%
9 Months ............................. +12.0 11.6
3 Months ............................. +3.0 2.3
The Fund's total return since inception (November 10, 1993) through September
30, 1995 is +3.0%. The adviser has agreed to absorb the Fund's total operating
expenses through December 31, 1995. Otherwise, the Fund's total return since
inception, and for the one-year, nine-month and three-month periods ended
September 30, 1995 would have been lower.
Lipper Analytical Services, Inc. is an independent mutual fund ranking service.
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>
INVESTMENTS AS OF SEPTEMBER 30, 1995
(unaudited)
MUNICIPAL BONDS -- 97.3% OF TOTAL NET ASSETS
FACE
AMOUNT VALUE(A)
------ --------
CALIFORNIA -- 2.2%
Castaic Unified School District,
0%, 5/01/18 .................................. $1,000,000 $ 252,530
-----------
FLORIDA -- 2.3%
Polk County Industrial Development Authority
Revenue Bonds (IMC Fertilizer), 7.525%,
1/01/15 ...................................... 250,000 262,378
-----------
ILLINOIS -- 9.5%
Chicago Toll Bridge, 6.50%, 1/01/10 ............ 250,000 251,265
Illinois Health Facilities Authority
Revenue Bonds (Lutheran Health System),
6.00%, 4/01/18 ............................... 500,000 481,505
Illinois Health Facilities Authority
Revenue Bonds (Evangelical Health),
6.25%, 4/15/22 ............................... 350,000 343,329
-----------
1,076,099
-----------
KENTUCKY -- 4.6%
Kenton County Airport Revenue Bonds
(Delta Airlines), 6.75%, 2/01/02 ............. 500,000 523,450
-----------
LOUISIANA -- 9.5%
Hodge Utility Revenue Bonds
(Stone Container), 9.00%,
3/01/10 ...................................... 1,000,000 1,085,440
-----------
MARYLAND -- 7.1%
Howard County Multifamily, Chase
Glen Apartments, 7.00%, 7/01/24 .............. 750,000 806,677
-----------
MASSACHUSETTS -- 6.5%
Massachusetts State Health & Education
(Newton-Wellesley Hospital),
7.00%, 7/01/15 ............................... 200,000 218,644
Massachusetts State Turnpike Authority,
5.125%, 1/01/23 .............................. 250,000 223,255
University of Massachusetts Building
Authority, 6.625%, 5/01/08 ................... 260,000 291,824
-----------
733,723
-----------
<PAGE>
INVESTMENTS AS OF SEPTEMBER 30, 1995 (CONTINUED)
(unaudited)
MUNICIPAL BONDS -- (CONTINUED)
FACE
AMOUNT VALUE(A)
------ --------
MICHIGAN -- 9.2%
Greater Detroit Resource Recovery,
9.25%, 12/13/08 .............................. $ 500,000 $ 518,415
Michigan State Housing Development, 7.05%,
10/01/12 ..................................... 500,000 526,705
-----------
1,045,120
-----------
MINNESOTA -- 4.7%
Ramsey & Washington Counties (Resource
Recovery Revenue), 6.75%, 12/01/06 ........... 500,000 533,475
-----------
NEVADA -- 2.4%
Clark County Industrial Development
Revenue Bonds (Nevada Power), 7.20%, 10/01/22 250,000 270,977
-----------
NEW YORK -- 7.4%
Metro Transportation Authority,
5.45%, 7/01/07 ............................... 250,000 244,677
New York General Obligation Bonds
Series B, 8.25%, 6/01/05 ..................... 100,000 116,700
New York State Dormitory Authority
Revenue Bonds, 5.75%, 7/01/13 ................ 250,000 239,003
New York State Dormitory Authority
Revenue Bonds, 5.875%, 5/15/11 ............... 250,000 246,342
-----------
846,722
-----------
NORTH CAROLINA -- 2.1%
Fayetteville Public Works Co.,
5.375%, 3/01/20 .............................. 250,000 234,655
-----------
PENNSYLVANIA -- 2.3%
Pennsylvania State Higher Education
(Temple University), 7.40%, 10/01/10 ......... 250,000 260,815
-----------
PUERTO RICO -- 2.3%
Puerto Rico Electric Power Authority,
6.125%, 7/01/09 .............................. 250,000 264,408
-----------
TEXAS -- 5.8%
Alliance Airport Authority Special Facilities
Revenue Bonds (American Airlines Inc.
Project), 7.00%, 12/01/11 ................... 250,000 267,815
Arlington General Obligation Bonds,
5.375%, 8/15/12 ............................. 400,000 386,840
-----------
654,655
-----------
<PAGE>
INVESTMENTS AS OF SEPTEMBER 30, 1995 (CONTINUED)
(unaudited)
MUNICIPAL BONDS -- (CONTINUED)
FACE
AMOUNT VALUE(A)
------ --------
VIRGINIA -- 13.7%
Augusta County Industrial Development
Authority (Augusta Hospital Corp.),
5.50%, 9/01/15 .............................. $ 500,000 $ 484,110
Hopewell Industrial Development Authority
(Stone Container), 8.25%, 6/01/16 ........... 125,000 136,961
Norfolk Redevelopment & Housing Authority,
5.875%, 11/01/15 ............................ 250,000 251,383
Richmond Metropolitan Expressway
Authority, 5.75%, 7/15/22 ................... 250,000 242,993
Roanoke County Water Systems,
5.00%, 7/01/21 .............................. 500,000 440,155
-----------
1,555,602
-----------
WASHINGTON -- 3.1%
Bellevue Convention Center, 0%, 2/01/17 ....... 1,290,000 353,021
-----------
WYOMING -- 2.6%
Platte County Pollution Control
(Basin Electric Power), 5.10%, 1/01/08 ...... 300,000 290,682
-----------
TOTAL MUNICIPAL BONDS (Identified
Cost $10,794,866) ........................ 11,050,429
-----------
SHORT TERM INVESTMENT -- 2.0%
Chevron Oil Finance Company,
6.00%, 10/02/95 (Cost $235,000) ............. 235,000 235,000
-----------
TOTAL INVESTMENTS -- 99.3% (Identified Cost
$11,029,866) .................................. 11,285,429
Cash and Receivables ................ 190,163
Liabilities ......................... (114,074)
-----------
TOTAL NET ASSETS -- 100.0% ...................... $11,361,518
===========
(a)Security Valuation--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. Short-term investments having a maturity of sixty
days or less are stated at amortized cost, which approximates value.
<PAGE>
- -------------------------------------------------------------------------------
TELEPHONE NUMBERS
- -------------------------------------------------------------------------------
For information about:
[] Account Procedures and Status [] New Account Procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800 345-4048
----------------------------
MAILING ADDRESSES
----------------------------
FOR EXISTING ACCOUNTS FOR NEW ACCOUNT APPLICATIONS ONLY
CGM Shareholder Services The CGM Funds
c/o Boston Financial Data Services P.O. Box 449
P.O. Box 8511 Boston, MA 02117-0449
Boston, MA 02266-8511
- --------------------------------------------------------------------------------
<PAGE>
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
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.
AQR3 Printed in U.S.A.
<PAGE>
CGM
FIXED INCOME
FUND
14th Quarterly Report
September 30, 1995
A No-Load Fund
CGM LOGO
(Man Fencing)
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
To Our Shareholders:
- -------------------------------------------------------------------------------
CGM Fixed Income Fund increased 5.1% during the third quarter of 1995
comparing favorably to an increase of 1.9% for the Merrill Lynch Master Bond
Index. For the first nine months of the year, CGM Fixed Income Fund rose 23.2%
compared to an increase of 13.6% for the Merrill Lynch Master Bond Index.
The stock market believes the "soft landing" has occurred. Economic expansion
has slowed somewhat as indicated by average monthly gains in employment, which
are decidely lower than in 1994, but still in the plus territory to the tune
of 150,000 additional jobs. Gross Domestic Product increased at a rate of just
1.1% in the second quarter versus a 2.7% gain in the first quarter. However,
we expect the rate could climb to roughly 2.5% in the recently completed third
quarter. Nonetheless, the pace of recovery is hardly strong enough to rekindle
fears of inflation. Some heavy capital goods sectors of the economy are
slowing, but we could see gains in consumer spending now that the hot summer
is over. Though the signals are mixed, we believe the slow recovery is still
under way.
Sizeable gains in corporate profits combined with lower interest rates have
fueled an unusually strong stock market this year. Seldom does the cost of
money decline while the economy is improving. From this point in the economic
cycle, we can expect moderate gains in profits and level or even slightly
lower interest rates resulting in more modest gains in security prices.
Given the current scenario, why could long-term bond rates decline from
present levels? Simply answered, the bond market is influenced by more than
supply and demand for funds. Factors that could nudge rates lower are reduced
inflation, some progress in curbing government spending, lowering the budget
deficit and perhaps, down the road, a balanced budget. Bond investors would be
impressed by early signs of a change in direction toward fiscal conservatism.
Though the equity market has increased nearly 30% this year as measured by the
S&P 500, we cannot expect the momentum to continue at the same rate. Signs of
short-term, long-overdue corrections are appearing in share prices of
technology and telecommunications companies. Overall, however, the market
seems to be in a mid-range of value relative to reported earnings which bodes
well for the convertible holdings in the CGM Fixed Income Fund portfolio.
In the third quarter, CGM Fixed Income Fund continued to benefit from
manageable new issue volume and ongoing demand for any sort of higher yielding
investment grade paper. Portfolio performance can be attributed to credit
selection, a narrowing in quality spread and the strong performance of
convertible securities.
CGM Fixed Income Fund holds significant positions in banks, airlines and paper
companies. The three largest holdings are Citicorp, Chemical Banking Corp. and
Bowater, Inc.
/s/ Robert L. Kemp
---------------------------
Robert L. Kemp
President
October 12, 1995
- -------------------------------------------------------------------------------
<PAGE>
INVESTMENT PERFORMANCE
(unaudited)
Total Return for Periods Ended September 30, 1995
CGM FIXED THE FUND'S AVERAGE
INCOME FUND ANNUAL TOTAL RETURN
----------- -------------------
3 Years ...................................... +34.3% +10.3%
1 Year ....................................... +18.8 18.8
3 Months ..................................... + 5.1 --
The Fund's average annual total return since inception (March 17, 1992) through
September 30, 1995 is +11.5%. 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 September 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>
- -------------------------------------------------------------------------------
INVESTMENTS AS OF SEPTEMBER 30, 1995
(unaudited)
BONDS -- 66.2% OF TOTAL NET ASSETS
FACE
AMOUNT VALUE(A)
------ --------
AIRLINES -- 8.8%
AMR Corp., 9.00%, 8/01/12 ....................... $1,000,000 $ 1,071,110
UAL Corp., 6.375%, 2/01/25 (Convertible)......... 1,500,000 1,655,625
-----------
2,726,735
-----------
AUTO & RELATED -- 3.0%
Poindexter JB, Inc., 12.50%, 5/15/04 ............ 1,000,000 945,000
-----------
BANKS -- MONEY CENTER -- 1.6%
Morgan J.P. & Co., Inc., 7.25%, 10/01/10 ........ 500,000 496,250
-----------
BASIC MATERIALS -- 3.5%
USX Marathon Group, 9.125%, 1/15/13 ............. 1,000,000 1,094,500
-----------
BROKERS/INVESTMENT SERVICES -- 3.5%
Lehman Brothers Holdings, Inc., 8.50%, 5/01/07 .. 1,000,000 1,075,320
-----------
CHEMICALS -- MAJOR -- 3.3%
Polymer Group, Inc., 12.75%, 7/15/02 ............ 1,000,000 1,030,000
-----------
CONSUMER CYCLICALS -- 3.4%
Emhart Corp., 9.25%, 8/15/16 .................... 1,000,000 1,064,170
-----------
ELECTRONIC & COMMUNICATIONS EQUIPMENT -- 3.3%
Telephone & Data Systems, Inc., 8.40%, 2/24/23 .. 1,000,000 1,028,750
-----------
FOREST PRODUCTS -- 3.6%
Georgia Pacific Corp., 9.50%, 5/15/22 ........... 1,000,000 1,119,150
-----------
<PAGE>
INVESTMENTS AS OF SEPTEMBER 30, 1995 (CONTINUED)
(unaudited)
BONDS -- (CONTINUED)
FACE
AMOUNT VALUE(A)
------ --------
HOME BUILDING PRODUCTS -- 3.4%
Centex Corp., 8.75%, 3/01/07 .................... $1,000,000 $ 1,069,550
-----------
HOTELS & RESTAURANTS -- 3.0%
Flagstar Corp., 10.75%, 9/15/01 ................. 1,000,000 940,000
-----------
MEDIA -- 3.2%
Tele Communications, Inc., 8.75%, 2/15/23 ....... 1,000,000 1,003,400
-----------
METALS & MINING -- 3.5%
Newmont Gold Co., 9.25%, 7/05/12 ................ 1,000,000 1,103,750
-----------
PAPER PRODUCTS/CONSUMER -- 3.9%
Stone Container Corp., 8.875%, 7/15/00 (Convertible) 700,000 1,225,000
-----------
PERIPHERALS -- 5.3%
Seagate Technology, 5.00%, 11/01/03 (Convertible). 1,000,000 1,651,250
-----------
PLASTICS -- 3.3%
Berry Plastics Corp., 12.25%, 4/15/04 ............ 1,000,000 1,030,000
-----------
UTILITIES -- 6.6%
GGIB Funding Corp., 7.43%, 1/15/11 ............... 985,325 961,618
Great Lakes Power, Inc., 9.00%, 8/01/04 .......... 1,000,000 1,077,310
-----------
2,038,928
-----------
TOTAL BONDS (Identified Cost $20,065,146) .......... 20,641,753
-----------
PREFERRED STOCKS -- 23.5%
SHARES
------
AIRLINES -- 5.4%
Delta Air Lines, Inc., $3.50 (Convertible) ....... 30,000 1,702,500
-----------
BANKS -- MONEY CENTER -- 9.1%
Citicorp, $5.375 (Convertible) ................... 15,000 2,842,500
-----------
FINANCIAL SERVICES -- 1.6%
Morgan Stanley Financial, $2.10 .................. 20,000 505,000
-----------
<PAGE>
INVESTMENTS AS OF SEPTEMBER 30, 1995 (CONTINUED)
(unaudited)
PREFERRED STOCKS -- (CONTINUED)
SHARES VALUE
------ -----
REAL ESTATE INVESTMENT TRUSTS -- 1.7%
Oasis Residential, Inc., $2.25 (Convertible) ...... 20,000 $ 517,500
-----------
PAPER PRODUCTS/COSUMER -- 5.7%
Bowater, Inc., $1.645 (Convertible) ............... 45,000 1,766,250
-----------
TOTAL PREFERRED STOCKS (Identified Cost $5,823,323) . 7,333,750
-----------
COMMON STOCK -- 8.6%
Chemical Banking Corp. (Identified Cost $1,908,750) 43,930 2,674,239
-----------
COMMON STOCK WARRANTS -- 0.1%
BPC Holdings Corp., Exp. 4/15/04 (Identified Cost $0) 1,000 15,000
-----------
FACE
SHORT TERM INVESTMENT -- 0.3% AMOUNT
-------
Chevron Oil Finance Company, 6.00%, 10/02/95
(Cost $100,000) .................................. $100,000 100,000
-----------
TOTAL INVESTMENTS -- 98.7% (Identified Cost $27,897,219) ...... 30,764,742
Cash and Receivables .............................. 458,482
Liabilities ....................................... (46,888)
-----------
TOTAL NET ASSETS -- 100% ...................................... $31,176,336
===========
(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 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,
reported bid price. Short-term investments having a maturity of sixty days
or less are stated at amortized cost, which approximates value.
<PAGE>
- -------------------------------------------------------------------------------
TELEPHONE NUMBERS
- -------------------------------------------------------------------------------
For information about:
[] Account Procedures and Status [] New Account Procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800 345-4048
----------------------------
MAILING ADDRESSES
----------------------------
FOR EXISTING ACCOUNTS FOR NEW ACCOUNT APPLICATIONS ONLY
CGM Shareholder Services The CGM Funds
c/o Boston Financial Data Services P.O. Box 449
P.O. Box 8511 Boston, MA 02117-0449
Boston, MA 02266-8511
- ------------------------------------------------------------------------------
<PAGE>
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
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.
FQR3 Printed in U.S.A.
<PAGE>
CGM
MUTUAL FUND
262nd Quarterly Report
September 30, 1995
A No-Load Fund
CGM LOGO
Man Fencing
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
TO OUR SHAREHOLDERS:
CGM Mutual Fund increased 6.6% During the third quarter of 1995 compared to an
increase of 7.9% For the unmanaged Standard & Poor's 500 Index and an increase
of 1.9% For the Merrill Lynch Master Bond Index. Returns for the first nine
months of the year were +22.8% For CGM Mutual Fund; +29.7% For the unmanaged S&P
500; and +13.6% For the Merrill Lynch Master Bond Index.
The stock market believes the "soft landing" has occurred. Economic expansion
has slowed somewhat as indicated by average monthly gains in employment, which
are decidely lower than in 1994, but still in the plus territory to the tune of
150,000 additional jobs. Gross Domestic Product increased at a rate of just 1.1%
In the second quarter versus a 2.7% Gain in the first quarter. However, we
expect the rate could climb to roughly 2.5% In the recently completed third
quarter. Nonetheless, the pace of recovery is hardly strong enough to rekindle
fears of inflation. Some heavy capital goods sectors of the economy are slowing,
but we could see gains in consumer spending now that the hot summer is over.
Though the signals are mixed, we believe the slow recovery is still under way.
Sizeable gains in corporate profits combined with lower interest rates have
fueled an unusually strong stock market this year. Seldom does the cost of money
decline while the economy is improving. From this point in the economic cycle,
we can expect moderate gains in profits and level or even slightly lower
interest rates resulting in more modest gains in security prices.
Given the current scenario, why could long-term bond rates decline from present
levels? Simply answered, the bond market is influenced by more than supply and
demand for funds. Factors that could nudge rates lower are reduced inflation,
some progress in curbing government spending, lowering the budget deficit and
perhaps, down the road, a balanced budget. Bond investors would be impressed by
early signs of a change in direction toward fiscal conservatism.
Though the equity market has increased nearly 30% this year as measured by the
S&P 500, we cannot expect the momentum to continue at the same rate. Signs of
short-term, long-overdue corrections are appearing in share prices of technology
and telecommunications companies. Overall, however, the market seems to be in a
mid-range of value relative to reported earnings.
CGM Mutual Fund was 25% invested in corporate bonds, government bonds and
treasury bills as of September 30. The two largest equity positions are in the
bank and airlines industries. The three largest holdings are Chemical Banking
Corporation, Citicorp and Hewlett-Packard Company.
/s/ Robert L. Kemp
------------------------------------
Robert L. Kemp
President
October 12, 1995
<PAGE>
- --------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
Total Return for Periods Ended September 30, 1995
THE FUND'S AVERAGE
CGM MUTUAL FUND ANNUAL TOTAL RETURN
------------------- -----------------------
10 Years ................... +333.0% +15.8%
5 Years .................... +119.5 +17.0
1 Year ..................... + 18.6 +18.6
3 Months ................... + 6.6 --
The percentage figures for the Fund are based upon the beginning net asset
values of $18.31, $20.40, $26.61 and $28.64, respectively, and the September 30,
1995 asset value of $30.33 per share assuming the reinvestment of income
dividends, capital gains and paid-in capital distributions during such
respective periods.
The performance data contained in this report represent past performance, which
is no guarantee of future results. The investment return on, and the principal
value of, an investment in the Fund will fluctuate so that investors' shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
INVESTMENTS AS OF SEPTEMBER 30, 1995
(unaudited)
COMMON STOCKS -- 74.8% OF TOTAL NET ASSETS
SHARES VALUE(A)
------ --------
AEROSPACE -- 5.2%
Boeing Company .............................. 901,000 $ 61,493,250
------------
AIRLINES -- 16.4%
AMR Corporation ............................. 746,000 53,805,250
Northwest Airlines Corporation .............. 1,590,000 67,575,000
UAL Corporation ............................. 415,000 70,913,125
-------------
192,293,375
-------------
ALUMINUM -- 5.1%
Aluminum Company of America ................. 1,128,600 59,674,725
-------------
AUTO & RELATED -- 5.1%
Volvo AB ADR ................................ 2,450,000 60,025,000
--------------
BANKS -- MONEY CENTER -- 20.5%
Bankers Trust New York Corporation .......... 735,000 51,633,750
Chemical Banking Corporation ................ 1,580,000 96,182,500
Citicorp .................................... 1,317,500 93,213,125
--------------
241,029,375
--------------
ELECTRONIC & COMPUTER EQUIPMENT -- 7.1%
Hewlett-Packard Company ..................... 1,002,000 83,541,750
--------------
FOOD -- RETAILERS/WHOLESALERS -- 5.4%
Philip Morris Companies, Inc. ............... 755,000 63,042,500
--------------
MISCELLANEOUS -- 2.7%
NIKE, Inc. .................................. 280,000 31,115,000
--------------
PAPER PRODUCTS/CONSUMER -- 4.1%
Bowater, Inc. ............................... 1,024,200 47,753,325
--------------
REAL ESTATE INVESTMENT TRUSTS -- 3.2%
Beacon Properties Corporation ............... 859,200 18,365,400
Pacific Gulf Properties ..................... 380,000 6,175,000
Reckson Associates Realty Corporation........ 500,000 13,250,000
--------------
37,790,400
--------------
TOTAL COMMON STOCKS (Identified Cost
$723,258,061) ............................... 877,758,700
--------------
<PAGE>
BONDS AND BILLS -- 24.9%
FACE
AMOUNT VALUE (A)
------ ---------
INDUSTRIAL BONDS -- 4.2%
Kaiser Aluminum & Chemical Corporation,
12.75%, 2/01/03 ........................... $ 20,000,000 $ 21,650,000
Rohr, Inc., 11.625%, 5/15/03 ................ 5,000,000 5,325,000
Stone Container Corporation,
9.875%, 2/01/01 ........................... 23,000,000 22,712,500
--------------
49,687,500
--------------
UNITED STATES TREASURY -- 20.7%
United States Treasury Bills,
5.30%, 6/27/96 ............................ 150,000,000 144,015,000
United States Treasury Bills,
5.315%, 7/25/96 ........................... 70,860,000 67,732,240
United States Treasury Bonds,
7.625%, 2/15/25 ........................... 27,000,000 30,573,180
--------------
242,320,420
--------------
TOTAL BONDS AND BILLS (Identified Cost $292,214,872) ...... 292,007,920
--------------
SHORT-TERM INVESTMENT -- 0.2%
Chevron Oil Finance Company,
6.00%, 10/ 02/95 (Cost $2,080,000) ......... 2,080,000 2,080,000
--------------
TOTAL INVESTMENTS -- 99.9%
(Identified Cost $1,017,552,933) ...................... 1,171,846,620
Cash and Receivables .................................... 22,485,052
Liabilities ............................................. (21,434,706)
--------------
TOTAL NET ASSETS -- 100% ................................ $1,172,896,966
==============
(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. Corporate debt securities (other than
short-term notes having a maturity of less than sixty days) are valued on the
basis of valuations furnished by a pricing service, authorized by the Board
of Trustees, which service 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. U.S.
Government debt securities are valued at the current closing bid, as last
reported by a pricing service approved by the Board of Trustees. Short-term
notes having a maturity of less than sixty days are stated at amortized cost,
which approximates value.
<PAGE>
- -------------------------------------------------------------------------------
TELEPHONE NUMBERS
- -------------------------------------------------------------------------------
For information about:
[] Account Procedures and Status [] New Account Procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800 345-4048
----------------------------
MAILING ADDRESSES
----------------------------
FOR EXISTING ACCOUNTS FOR NEW ACCOUNT APPLICATIONS ONLY
CGM Shareholder Services The CGM Funds
c/o Boston Financial Data Services P.O. Box 449
P.O. Box 8511 Boston, MA 02117-0449
Boston, MA 02266-8511
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1969 -- SEPTEMBER 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1969
- --------------------------------------------------------------------------------------------------------------------
--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 SHARE WOULD DISTRIBUTIONS DIVIDENDS YEAR END TOTAL RETURN DECEMBER 31,
31 HAVE BEEN OF OF WOULD HAVE BEEN OF 1969 = 100.0
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1969 $14.60 -- -- 100.0
1970 13.89 $ 0.60 $ 0.50 $ 15.04 + 3.0 103.0
1971 15.37 0.35 0.41 17.55 + 16.7 120.2
1972 16.20 0.35 0.42 19.46 + 10.9 133.3
1973 14.20 0.42 0.42 18.00 - 7.5 123.3
1974 10.27 -- 0.46 13.54 - 24.8 92.7
1975 12.44 -- 0.43 16.99 + 25.5 116.4
1976 13.96 -- 0.43 19.69 + 15.9 134.9
1977 12.88 -- 0.52 18.88 - 4.1 129.3
1978 12.83 -- 0.65 19.81 + 4.9 135.7
1979 13.81 -- 0.72 22.52 + 13.7 154.3
1980 14.85 -- 0.88 25.86 + 14.8 177.1
1981 13.90 -- 0.97 25.88 + 0.1 177.3
1982 18.16 -- 1.09 36.49 + 41.0 250.0
1983 18.81 -- 1.09 40.11 + 9.9 274.7
1984 17.01 1.86 0.95 42.63 + 6.3 292.0
1985 21.53 -- 1.08 57.34 + 34.5 392.8
1986 22.86 2.75 0.94 71.74 + 25.1 491.3
1987 20.40 4.52 1.06 81.56 + 13.7 558.7
1988 19.94 -- 1.10 84.17 + 3.2 576.5
1989 22.34 0.95 0.93 102.44 + 21.7 701.6
1990 21.64 -- 0.93* 103.57 + 1.1 709.4
1991 26.80 2.64 0.97 145.93 + 40.9 999.5
1992 26.02 1.42 0.93 154.83 + 6.1 1060.5
1993 28.88 1.93 0.86 188.58 + 21.8 1291.6
1994 25.05 -- 1.04 170.29 - 9.7 1166.4
1995(9/30) 30.33 -- 0.40 209.12 + 22.8** 1432.3
----- ----- ------
Totals $17.79 $20.18 +1332.3
- --------------------------------------------------------------------------------------------------------------------
*Includes $0.05 per share distributed from paid-in capital.
**Total return for the nine months ended September 30, 1995.
The table above covers the period from the end of 1969 to September 30, 1995. Shares were first offered on November
5, 1929; the net asset value per share, adjusted for stock splits and dividends, was $8.33.
- --------------------------------------------------------------------------------------------------------------------
The performance data contained in this report represent past performance, which is no guarantee of future results.
The investment return on, and the principal value of, an investment in the Fund will fluctuate so that investors'
shares, when redeemed, may be worth more or less than their original cost.
</TABLE>
<PAGE>
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
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.
MQR3 Printed in U.S.A.
<PAGE>
CGM
REALTY FUND
6th Quarterly Report
September 30, 1995
A No-Load Fund
CGM LOGO
(Man Fencing)
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
TO OUR SHAREHOLDERS:
- -------------------------------------------------------------------------------
CGM Realty Fund increased 8.2% during the third quarter of 1995 which compares
favorably to the National Association of Real Estate Investment Trust's Equity
REIT Index which rose 4.7% during the same period. For the first
nine months of the year, CGM Realty Fund increased 13.7% compared to the
NAREIT Equity REIT Index which rose 10.7%.
The stock market believes the "soft landing" has occurred. Economic expansion
has slowed somewhat as indicated by average monthly gains in employment, which
are decidedly lower than in 1994, but still in the plus territory to the tune
of 150,000 additional jobs. Gross Domestic Product increased at a rate of just
1.1% in the second quarter versus a 2.7% gain in the first quarter. However,
we expect the rate could climb to roughly 2.5% in the recently completed third
quarter. Nonetheless, the pace of recovery is hardly strong enough to rekindle
fears of inflation. Some heavy capital goods sectors of the economy are
slowing, but we could see gains in consumer spending now that the hot summer
is over. Though the signals are mixed, we believe the slow recovery is still
under way.
Sizeable gains in corporate profits combined with lower interest rates have
fueled an unusually strong stock market this year. Seldom does the cost of
money decline while the economy is improving. From this point in the economic
cycle, we can expect moderate gains in profits and level or even slightly
lower interest rates resulting in more modest gains in security prices.
Given the current scenario, why could long-term bond rates decline from
present levels? Simply answered, the bond market is influenced by more than
supply and demand for funds. Factors that could nudge rates lower are reduced
inflation, some progress in curbing government spending, lowering the budget
deficit and perhaps, down the road, a balanced budget. Bond investors would be
impressed by early signs of a change in direction toward fiscal conservatism.
Though the equity market has increased nearly 30% this year as measured by the
S&P 500, we cannot expect the momentum to continue at the same rate. Signs of
short-term, long-overdue corrections are appearing in share prices of
technology and telecommunications companies. Overall, however, the market
seems to be in a mid-range of value relative to reported earnings.
CGM Realty Fund is primarily committed to hotel and office and industrial
REITs in recognition of what we believe to be the highest growth potential and
lowest valuations of these property types. The Fund is 43% invested in hotel
REITs; 21% in office and industrial REITs; 16% in storage REITs; 14% in
apartment REITs; and 5% in homebuilding stocks. The Fund's three largest
holdings are Felcor Suite Hotels, Inc., Innkeepers USA Trust and Sunstone Hotel
Investments, Inc.
/s/Robert L. Kemp
-----------------------------------
Robert L. Kemp
President
October 12, 1995
<PAGE>
INVESTMENT PERFORMANCE
(unaudited)
Total Return for Periods Ended September 30, 1995
NAREIT
CGM REALTY FUND EQUITY REIT INDEX
------------------- ---------------------
1 Year ....................... +15.3% +10.7%
9 Months ..................... +13.7 +10.7
3 Months ..................... + 8.2 + 4.7
The Fund's average annual total return since inception (May 13, 1994) through
September 30, 1995 is +9.9%. The adviser has agreed to limit the Fund's total
operating expenses to 1.00% of its average net assets through December 31,
1995. Otherwise, the Fund's total return since inception and for the one-year,
nine-month and three-month periods ended September 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>
IVESTMENTS AS OF SEPTEMBER 30, 1995
(unaudited)
REAL ESTATE INVESTMENT TRUSTS -- 98.7% OF TOTAL NET ASSETS
SHARES VALUE(A)
------ --------
APARTMENTS -- 14.1%
Bay Apartment Community, Inc. .............. 108,800 $ 2,339,200
Mid-America Apartment Communities, Inc. .... 28,100 695,475
South West Property Trust, Inc. ............ 71,500 911,625
Walden Residential Properties, Inc. ........ 110,000 2,076,250
-----------
6,022,550
-----------
HOME BUILDERS -- 5.1%
NVR, Inc. .................................. 220,500 2,149,875
-----------
HOTELS -- 42.8%
Equity Inns, Inc. .......................... 187,000 2,197,250
Felcor Suite Hotels, Inc. .................. 220,000 6,600,000
Innkeepers USA Trust ....................... 255,000 2,422,500
RFS Hotel Investments, Inc. ................ 147,000 2,241,750
Sunstone Hotel Investments, Inc. ........... 248,000 2,387,000
Winston Hotels ............................. 211,500 2,379,375
-----------
18,227,875
-----------
OFFICE & INDUSTRIAL -- 21.0%
Beacon Properties Corporation............... 100,300 2,143,912
Cali Realty Corporation .................... 116,400 2,357,100
Highwoods Properties, Inc................... 84,500 2,228,687
Reckson Associates Realty Corporation ...... 83,300 2,207,450
-----------
8,937,149
-----------
<PAGE>
INVESTMENTS AS OF SEPTEMBER 30, 1995 (CONTINUED)
(unaudited)
REAL ESTATE INVESTMENT TRUSTS -- (CONTINUED)
SHARES VALUE(A)
------ --------
SELF-STORAGE -- 15.7%
Shurgard Storage Centers, Inc. ............. 86,900 $ 2,161,638
Sovran Self Storage, Inc. .................. 93,500 2,325,813
Storage USA, Inc. .......................... 71,000 2,192,125
-----------
6,679,576
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Identified Cost $37,756,904)............... 42,017,025
-----------
FACE
AMOUNT
------
SHORT-TERM INVESTMENT -- 0.8%
Chevron Oil Finance Company, 6.00%, 10/02/95
(Cost $350,000) ........................... $350,000 350,000
-----------
TOTAL INVESTMENTS -- 99.5% (Identified Cost
$38,106,904) .............................. 42,367,025
Cash and Receivables ....................... 442,430
Liabilities ................................ (214,061)
-----------
TOTAL NET ASSETS -- 100.0% ................. $42,595,394
===========
(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 notes
having a maturity of less than sixty days are stated at amortized cost,
which approximates value.
<PAGE>
- -------------------------------------------------------------------------------
TELEPHONE NUMBERS
- -------------------------------------------------------------------------------
For information about:
[] Account Procedures and Status [] New Account Procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800 345-4048
----------------------------
MAILING ADDRESSES
----------------------------
FOR EXISTING ACCOUNTS FOR NEW ACCOUNT APPLICATIONS ONLY
CGM Shareholder Services The CGM Funds
c/o Boston Financial Data Services P.O. Box 449
P.O. Box 8511 Boston, MA 02117-0449
Boston, MA 02266-8511
<PAGE>
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
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.
RQR3 Printed in U.S.A.
