<PAGE>
Registration Nos.2-10653
811-82
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ ___
Post-Effective Amendment No. 80 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 35 X
(Check appropriate box or boxes)
CGM TRUST
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(Exact Name of Registrant as Specified in Charter)
One International Place, Boston, Massachusetts 02110
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(Address of Principal Executive Offices)
(617) 737-3225
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(Registrant's Telephone Number, including Area Code)
Edward T. O'Dell, Jr. P.C. and Philip H. Newman, Esq.
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing ___ on ___________ pursuant to
pursuant to paragraph (b), paragraph (b),
___ 60 days after filing pursuant X on May 1, 1996 pursuant to
to paragraph (a)(1), paragraph (a)(1),
___ 75 days after filing pursuant ___ on ___________ pursuant to
to paragraph (a)(2), paragraph (a)(2) of rule 485.
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
STATEMENT UNDER RULE 24f-2(a)(1)
Registrant has registered an indefinite number of shares of CGM Mutual Fund, CGM
Fixed Income Fund, CGM American Tax Free Fund and CGM Realty Fund under the
Securities Act of 1933, as amended, in accordance with Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant filed on February 27,
1996, the notices on Form 24f-2 for CGM Mutual Fund, CGM Fixed Income Fund, CGM
American Tax Free Fund and CGM Realty Fund for the year ended December 31, 1995.
CALCULATION OF REGISTRATION FEE UNDER
THE SECURITIES ACT OF 1933 (1)
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Proposed Proposed
Title Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Unit (2) Price (3) Fee
- --------------------------------------------------------------------------------
Shares of
Beneficial
Interest
Name of Series:
- ---------------
CGM Mutual Fund 2,570,005 $30.57 $ 78,565,070 0
CGM Fixed
Income Fund 161,613 $11.89 $ 1,921,588 0
CGM American
Tax Free Fund 0 0 0 0
CGM Realty Fund 24,935 $11.63 $ 290,000 $ 100
- --------------------------------------------------------------------------------
(1) The shares being registered as set forth in this table are in addition to
the indefinite number of shares of beneficial interest which Registrant has
registered under the Securities Act of 1933, as amended (the "1933 Act"),
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Registrant's notice on Form 24f-2 for its fiscal year
ended December 31, 1995, was filed on February 27, 1996.
(2) Based on each Fund's respective net asset value on February 16, 1996
pursuant to Rule 457(d) under the 1933 Act and Rule 24e-2(a) under the 1940
Act.
(3) In response to Rule 24e-2(b) under the 1940 Act: (1) the calculation of the
maximum aggregate offering price is made pursuant to Rule 24e-2; (2)
11,006,919 shares of beneficial interest were redeemed by the Registrant
during the fiscal year ended December 31, 1995; (3) 8,275,301 shares are
being used for reductions pursuant to Rule 24f-2 during the current fiscal
year, and (4) 2,731,618 shares are being used for reduction in this
amendment pursuant to Rule 24e-2(a). While no fee is required for the
2,731,618 shares, the Registrant has elected to register, for $100, an
additional $290,000 of shares of CGM Realty Fund.
<PAGE>
CGM TRUST
CROSS REFERENCE SHEET
Items required by Form N-1A
Item No.
of Form N-1A Location/Caption in Prospectus
- ------------ ------------------------------
1 ............................... Cover Page
2 ............................... Schedule of Fees
3 ............................... Financial Highlights
4 ............................... Investment Objective and Policies
5 ............................... The Fund's Investment Manager; How to
Purchase Shares; Back Cover Page;
Additional Facts About the Fund
5A ............................... Financial Highlights
6 ............................... How to Purchase Shares; Cover Page;
Dividends, Capital Gains and Taxes
7 ............................... Back Cover Page; How to Purchase
Shares; Shareholder Services
8 ............................... How to Redeem Shares
9 ............................... None
<PAGE>
Item No. Location/Caption in Statement
of Form N-1A of Additional Information
- ------------ -----------------------------
10 ............................... Cover Page
11 ............................... Table of Contents
12 ............................... Not Applicable
13 ............................... Investment Objective, Policies and
Restrictions; Portfolio Turnover
14 ............................... Management of the Fund
15 ............................... Description of the Trust
16 ............................... Management of the Fund--Investment
Advisory and Other Services
17 ............................... Portfolio Transactions and Brokerage
18 ............................... Description of the Trust
19 ............................... How to Buy Shares; Net Asset Value and
Public Offering Price; Shareholder
Services
20 ............................... Income Dividends, Capital Gain
Distributions and Tax Status
21 ............................... Not Applicable
22 ............................... Advertising and Performance Information
23 ............................... Financial Statements
<PAGE>
PART A.
- -------
Prospectus for CGM Mutual Fund follows
--------------
Prospectuses for CGM Realty Fund,
CGM Fixed Income Fund, and CGM American Tax Free Fund
are omitted
<PAGE>
CGM MUTUAL FUND
CGM Mutual Fund (the "Fund") is a diversified and flexibly managed mutual
fund and a series of CGM Trust (the "Trust"), a registered, open-end, no-load
management investment company. The Fund's objective is reasonable long-term
capital appreciation with a prudent approach to protection of capital from
undue risks. Current income is a consideration in the selection of the Fund's
portfolio securities, but it is not a controlling factor. The Fund's
investment manager is Capital Growth Management Limited Partnership ("CGM" or
the "Investment Manager").
PROSPECTUS
May 1, 1996
This prospectus sets forth information you should know before investing in
the Fund. It should be retained for future reference. A Statement of
Additional Information about the Fund dated May 1, 1996 (the "Statement") has
been filed with the Securities and Exchange Commission (the "SEC") and is
available free of charge. Write to the Trust, c/o CGM Investor Services, 222
Berkeley Street, Boston, MA 02116 or call the telephone number listed below to
obtain a Statement. The Statement contains more detailed information about the
Fund and, as amended or supplemented from time to time, is incorporated into
this prospectus by reference.
- --------------------------------------------------------------------------------
For additional information about:
[] Account procedures and status [] New account procedures
[] Redemptions [] Prospectuses
[] Exchanges [] Performance
Call 800-343-5678 Call 800-345-4048
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Schedule of Fees .......................................................... 2
Financial Highlights ...................................................... 3
Investment Objective and Policies ......................................... 4
The Fund's Investment Manager ............................................. 5
The Portfolio Manager ..................................................... 5
How to Purchase Shares .................................................... 5
Shareholder Services ...................................................... 6
How to Redeem Shares ...................................................... 7
Telephone Transactions .................................................... 9
Dividends, Capital Gains and Taxes ........................................ 9
Pricing of Shares ......................................................... 11
Performance Information ................................................... 11
Additional Facts About the Fund ........................................... 12
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
CGM MUTUAL FUND
SCHEDULE OF FEES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) ............................... None
Redemption Fees* .................................................. None
Exchange Fees ..................................................... None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................................................... 0.68%
12b-1 Fees ........................................................ None
Other Expenses .................................................... 0.23%
----
Total Fund Operating Expenses ..................................... 0.91%
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*A wire fee (currently $5.00) will be deducted from proceeds if a shareholder
elects to transfer redemption proceeds by wire.
The purpose of this fee schedule is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly if you
invest in the Fund. For additional information about the Fund's fees and
expenses, please see "The Fund's Investment Manager" and the Statement.
The following example illustrates the approximate expenses that you would
incur on a $1,000 investment over a ten-year period, assuming a 5% annual rate
of return and redemption at the end of each period.
CUMULATIVE
------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$9 $29 $50 $112
Please keep in mind that the example shown above is hypothetical. The
information above should not be considered a representation of past or future
return and expenses; the actual return and expenses may be more or less.
<PAGE>
CGM MUTUAL FUND
FINANCIAL HIGHLIGHTS
(For a share of the Fund outstanding throughout the indicated years)
These financial highlights have been examined by Price Waterhouse LLP,
independent accountants. The table below should be read in conjunction with the
financial statements and the notes thereto, which, together with the Report of
Independent Accountants thereon, are included in the Fund's Annual Report and
incorporated by reference into the Statement. In addition to the highlights set
forth below, further information about the performance of the Fund is contained
in the Annual Report and the Statement, which may be obtained from the Trust
free of charge.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990* 1989 1988 1987 1986
---- ---- ---- ---- ---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of year .. $25.05 $28.88 $26.02 $26.80 $21.64 $22.34 $19.94 $20.40 $22.86 $21.53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income 0.73 1.09 0.92 0.93 0.97 0.87 0.97 1.08 0.87 0.82
Dividends from net
investment income .. (0.77) (1.04) (0.86) (0.93) (0.97) (0.88) (1.02) (1.10) (1.06) (0.94)
Net realized and
unrealized
gain (loss) on
investments ........ 5.31 (3.88) 4.73 0.64 7.80 (0.64) 3.31 (0.44) 2.25 4.20
Distributions from net
realized gain on
investments ........ (0.89) -- (1.81) (1.42) (2.64) -- (0.86) -- (4.52) (2.75)
Distributions in
excess of net
realized gain ...... -- -- (0.12) -- -- -- -- -- -- --
Distributions from
paid-in capital .... -- -- -- -- -- (0.05) -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase
(decrease) in net
asset value ........ 4.38 (3.83) 2.86 (0.78) 5.16 (0.70) 2.40 (0.46) (2.46) 1.33
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value at end
of year ............ $29.43 $25.05 $28.88 $26.02 $26.80 $21.64 $22.34 $19.94 $20.40 $22.86
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (%) ..... 24.3 -9.7 21.8 6.1 40.9 1.1 21.7 3.2 13.7 25.1
Ratios:
Operating expenses to
average net assets(%) 0.91 0.92 0.93 0.93 0.93 0.97 0.97 1.01 0.94 0.84
Net income to average
net assets (%) ..... 2.55 4.39 3.45 3.74 3.80 4.00 4.26 5.25 3.69 3.81
Portfolio turnover (%) 291 173 97 121 201 159 218 218 197 127
Net assets at end
of year (in
thousands) ($) ..... 1,154,439 1,063,375 947,115 548,630 401,887 295,868 312,080 292,735 303,053 203,412
*On March 1, 1990, the Capital Growth Management Division of Loomis, Sayles & Company, Incorporated was reorganized into CGM, which
assumed management of the Fund.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund has as its investment objective reasonable long-term capital
appreciation with a prudent approach to protection of capital from undue
risks. While consideration is given to current income in the selection of the
Fund's portfolio securities, it is not a controlling factor. There can be no
assurance that the Fund will achieve its objective.
The Fund seeks to attain its objective by investing substantially all of
the Fund's assets in equity securities and in debt or fixed-income securities.
The Fund is "flexibly managed"; it sometimes will be more heavily invested in
equity securities and at other times will be more heavily invested in debt or
fixed-income securities, depending on management's view of the economic and
investment outlook. The Fund's investments are subject to the market risks
inherent in all securities.
Equity securities are common stocks and securities convertible into common
stock. Equity securities are volatile investments, subject to price declines
as well as advances, and involve greater risks than some other investment
media. The Fund may invest up to 25% of its total assets in securities issued
by companies in any single industry, including the real estate industry.
Securities issued by companies in the real estate industry, including those
issued by real estate investment trusts, may be subject to certain risks
associated with the direct ownership of real estate as well as credit and
market risks generally associated with fixed-income securities.
Debt or fixed-income securities include notes, bonds, preferred stock and
money market instruments including repurchase agreements. Such securities are
subject to credit risk (the risk that the obligor will default in the payment
of principal and/or interest) and to market risk (the risk that the market
value of the securities will change as a result of changes in market rates of
interest).
The Fund may invest up to 35% of its total assets in debt or fixed-income
securities of a quality below investment grade at the time of investment (i.e.
securities rated lower than Baa by Moody's Investors Service, Inc. ("Moody's")
or lower than BBB by Standard and Poor's Corporation ("S&P"), or their
equivalent as determined by the investment manager), including up to 10% of
its total assets in fixed income securities rated at the time of investment
CAA by Moody's or CCC by S&P, or their equivalent as determined by the
investment manager.
Securities rated non-investment grade (lower than Baa or baa by Moody's or
lower than BBB by S&P) are sometimes referred to as "high yield" or "junk"
bonds. See Appendix A for further information about securities ratings.
Investors should consider the following risks associated with high yield
securities before investing in the Fund.
High yield securities may be regarded as predominantly speculative with
respect to the issuer's continuing ability to make principal and interest
payments. Analysis of the creditworthiness of issuers of high yield securities
may be more complex than for issuers of higher quality debt securities, and
the ability of the Fund to achieve its investment objectives may, to the
extent of its investments in high yield securities, be more dependent upon
such creditworthiness analysis than would be the case if the Fund were
investing in higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to
interest-rate changes than more highly rated investments, but more sensitive
to adverse economic downturns or individual corporate developments. Yields on
a high yield security will fluctuate. If the issuer of high yield securities
defaults, the Fund may incur additional expenses to seek recovery.
The secondary markets on which high yield securities are traded may be
less liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect the price at which the Fund
could sell a particular high yield security when necessary to meet liquidity
needs or in response to a specific economic event, such as a deterioration in
the credit-worthiness of the issuer, and could adversely affect and cause
large fluctuations in the daily net asset value of the Fund's shares. Adverse
publicity and investor perceptions may decrease the value and liquidity of
high yield securities.
It is resonable to expect any recession to severely disrupt the market for
high yield securities, have an adverse impact on the value of such securities,
and adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon. New laws and proposed new laws may
adversely impact the market for high yield securities.
Although the Fund's objective is long-term capital appreciation, it
frequently sells securities to respond to changes in market, industry, or
individual company conditions or outlook, although it may only have held those
securities for a short period. This policy may result in higher securities
transactions costs.
THE FUND'S INVESTMENT MANAGER
The Fund's investment manager is Capital Growth Management Limited
Partnership, One International Place, Boston, Massachusetts 02110. CGM, an
investment advisory firm founded in 1989, manages eight mutual fund portfolios
and advisory accounts for other clients. The general partner of CGM is a
corporation controlled equally by Robert L. Kemp and G. Kenneth Heebner, who are
trustees and officers of the Fund.
In addition to selecting and reviewing the Fund's investments, CGM
provides executive and other personnel for the management of the Fund. The
Trust's Board of Trustees supervises CGM's conduct of the affairs of the Fund.
In 1995, the Fund paid 0.68% of its average annual net assets in management
fees to CGM.
THE PORTFOLIO MANAGER
G. Kenneth Heebner manages the Fund. In 1989, Mr. Heebner founded CGM with
Robert L. Kemp. Prior to establishing the new company, Mr. Heebner managed
mutual fund portfolios at Loomis, Sayles & Company, Incorporated. He currently
manages CGM Capital Development Fund, CGM Realty Fund and, with Janice H.
Saul, co-manages CGM Fixed Income Fund.
HOW TO PURCHASE SHARES
The Trust sells shares of the Fund directly to investors without any sales
load. You may make an initial purchase of Fund shares by submitting a
completed application form and payment to:
The CGM Funds
P.O. Box 449
Boston, Massachusetts 02117-0449
The minimum initial investment is $2,500 for regular accounts and $1,000
for retirement plans (see "Shareholder Services -- Retirement Plans") and
accounts set up under the Uniform Gifts to Minors Act ("UGMA") or the Uniform
Transfers to Minors Act ("UTMA"). Subsequent investments must be at least $50.
See "Shareholder Services" below for further information about minimum
investments in certain other circumstances.
All investments made by check should be in U.S. dollars and made payable
to CGM Mutual Fund. Third party checks (i.e. checks not payable to CGM Mutual
Fund) will not ordinarily be accepted and the Trust reserves the right to
reject any third party check.
After accepting an order, the Trust forwards the application and payment
to the CGM Shareholder Services Department ("CGM Shareholder Services") of
Boston Financial Data Services, Inc. ("BFDS"), which is the shareholder
servicing agent for State Street Bank and Trust Company ("State Street Bank").
CGM Shareholder Services then opens an account, applies the payment to the
purchase of full and fractional shares, and mails a statement of the account
confirming the transaction.
After your account has been established, you may send subsequent
investments at any time directly to the shareholder servicing agent at the
following address:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The remittance for any subsequent investment must be accompanied by either the
Additional Investment Stub detached from a statement of account, or a note
containing sufficient information to identify the account, i.e., the Fund
name, your account number, your name and social security number.
Subsequent investments may also be made by federal funds wire. Instruct
your bank to wire federal funds to State Street Bank and Trust Company, ABA
#011000028. The text of the wire should read as follows: "DDA99046336,
$ Amount, STATE ST BOS ATTN Mutual Funds. Credit CGM Mutual Fund, Shareholder
Name, Shareholder Account Number." Your bank may charge you a fee for
transmitting funds by wire.
The Trust reserves the right to reject any purchase order, including
orders in connection with exchanges, for any reason the Trust, in its sole
discretion, deems appropriate. Although the Trust does not anticipate that it
will do so, the Trust reserves the right to suspend, change or withdraw the
offering of shares of the Fund.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust (in the case of your
initial investment) or by CGM Shareholder Services (in the case of subsequent
investments).
If you wish transactions in your account to be effected by another person
under a power of attorney from you, special rules apply. Please contact the
Trust or CGM Shareholder Services for details.
An investor will not receive any certificates for shares unless the
investor requests them in writing from CGM Shareholder Services. The Trust's
system for recording investments eliminates the problems of handling and
safekeeping certificates.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services as more fully described
in the Statement. Explanations and forms are available from the Trust.
EXCHANGE PRIVILEGE
Shares may be exchanged for shares of money market funds currently
distributed by New England Funds, L.P. ("Money Market Funds"). You may also
exchange shares for shares of CGM Fixed Income Fund, CGM American Tax Free Fund
and CGM Realty Fund. Additionally, you may exchange shares for shares of CGM
Capital Development Fund, but only if you were a shareholder on September 24,
1993, and have remained a shareholder in CGM Capital Development Fund
continuously since that date. CGM Capital Development Fund shares are not
generally available to other persons except in special circumstances that have
been approved by, or under the authority of, the Board of Trustees of CGM
Capital Development Fund as described in the Statement. CGM Realty Fund shares
are not available in South Dakota as described in the prospectus for CGM Realty
Fund.
All exchanges may be made without charge. You may make an exchange by
written instruction or, if a written authorization for telephone exchanges is
on file with CGM Shareholder Services, you may call 800-343-5678. See
"Telephone Transactions." Under certain circumstances, before an exchange can
be made, additional documents may be required to verify the authority or legal
capacity of the person seeking the exchange. Exchanges must be for amounts of
at least $1,000. If you wish to make an exchange into a new account, the
exchange must satisfy the applicable minimum initial investment requirement.
Exchange requests cannot be revoked once they have been received in good
order.
Investors should not view the exchange privilege as a means for taking
advantage of short-term swings in the market, and the Fund limits the number
of exchanges each shareholder may make to four exchanges per account (or two
round trips) per calendar year. Monthly automatic exchanges from the Money
Market Funds to the Fund are exempt from this restriction. The Trust also
reserves the right to prohibit exchanges during the first ten days following
an investment in the Fund. The Trust may terminate or change the terms of the
exchange privilege. In general, shareholders will receive notice of any
material change to the exchange privilege at least 60 days prior to the
change. For federal income tax purposes, an exchange constitutes a sale of
shares, which may result in a capital gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
If the value of your account is at least $10,000, you may have periodic
cash withdrawals automatically paid to you or any person you designate. If
checks are returned to the Fund as "undeliverable" or remain uncashed for more
than six months, the plan will be cancelled. Undeliverable or uncashed checks
shall be cancelled and such amounts shall be reinvested in the Fund at the per
share net asset value determined as of the date of cancellation of such
checks.
AUTOMATIC INVESTMENT PLAN ("AIP")
Once your account has been established, voluntary monthly investments of
at least $50 may be made automatically by pre-authorized withdrawals from your
checking account. Additional information about this Plan is set forth in the
Statement and also in Section 9 of the Account Application.
RETIREMENT PLANS
The Fund's shares may be purchased by certain types of tax-deferred
retirement plans. CGM makes available retirement plan forms and plan documents
for IRAs, SEP-IRAs, 403(b)(7) custodial accounts, and pension and profit
sharing plans ("CGM Retirement Plans").
SHAREHOLDER REPORTS
Shareholders will receive the Fund's financial statements and a summary of
the Fund's investments at least semiannually. The Fund intends to consolidate
mailings of annual, semiannual and quarterly reports to households having
multiple accounts with the same address of record and to furnish a single copy
of each report to that address. Mailings of prospectuses and proxy statements
will not be consolidated and if a report is included in such mailings, each
shareholder will receive a separate copy. You may request additional reports
by notifying the Fund in writing, or by calling the Trust.
Shareholders will receive statements confirming all purchases, redemptions
and changes of address. You may call CGM Shareholder Services and request a
duplicate statement for the current year without charge. A fee may be charged
for any duplicate information requested for prior years.
HOW TO REDEEM SHARES
You can redeem all or part of your shares in the Fund in three different
ways: by sending a written request for a check or wire representing the
redemption proceeds, by making a telephone request for redemption by check
(provided that the amount to be redeemed is not more than $25,000 and the
check is being sent to you at your record address, which has not changed in
the prior three months) or by making a telephone request for redemption
proceeds to be wired to a bank that you have predesignated. The redemption
price will always be the net asset value per share next determined after the
redemption request is received by CGM Shareholder Services in good order
(including any necessary documentation). Necessary documentation may include,
in certain circumstances, documents verifying the authority or legal capacity
of the person seeking to redeem shares. Redemption requests cannot be revoked
once they have been received in good order.
If you elect to redeem shares in writing, send your written request to:
CGM Shareholder Services
c/o Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, Massachusetts 02266-8511
The written request must include the name of the Fund, your account number,
the exact name(s) in which your shares are registered, the number of shares or
the dollar amount to be redeemed and mailing or wire instructions. All owners
of shares must sign the request in the exact name(s) in which the shares are
registered (which appear(s) on your confirmation statement) and should
indicate any special capacity in which they are signing (such as trustee or
custodian or on behalf of a partnership, corporation or other entity). If you
are signing in a special capacity, you may wish to contact CGM Shareholder
Services in advance to determine whether additional documentation will be
required before you send a redemption request.
Redemptions from CGM Retirement Plans for which State Street Bank is the
trustee must contain additional information. Please contact CGM Shareholder
Services for instructions and forms. Complete information, including tax
withholding instructions, must be included in your redemption request.
If you are redeeming shares worth more than $25,000 or requesting that the
proceeds check be made out to someone other than the registered owner(s) or be
sent to an address other than your record address (or sent to your record
address if such address has been changed within the previous three months),
you must have your signature guaranteed by an "eligible guarantor institution"
as defined in the rules under the Securities Exchange Act of 1934 (including a
bank, broker, dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association, but not a
notary public).
If you hold certificates representing your investment, you must enclose
the certificates and a properly completed redemption form or stock power. You
bear the risk of loss of such certificates; consequently, you may wish to send
your certificates by registered mail.
If you elect to redeem shares by telephone, call CGM Shareholder Services
directly at 800-343-5678. See "Telephone Transactions." Telephone redemptions
are not available for CGM Retirement Plans. When you make a redemption request
by telephone, you may choose to receive redemption proceeds either by having a
check mailed to the address of record on the account, provided the address has
not changed for three months and you are redeeming $25,000 or less, or by
having a wire sent to a bank account you have previously designated.
Telephone redemptions by check are available to all shareholders of the
Fund automatically and no special application is necessary. You may select the
telephone redemption wire service when you fill out your initial application
or you may select it later by completing the Service Options Form (with a
signature guarantee), available from the Trust or CGM Shareholder Services.
A telephone redemption request must be received by CGM Shareholder
Services prior to the close of the New York Stock Exchange (the "Exchange").
If you telephone your request to CGM Shareholder Services after the Exchange
closes or on a day when the Exchange is not open for business, the Trust
cannot accept your request and a new one will be necessary.
Wire redemptions by telephone may be made only if your bank is a member of
the Federal Reserve System or has a correspondent bank that is a member of
such System. If your account is with a savings bank, it must have only one
correspondent bank that is a member of the Federal Reserve System. A wire fee
(currently $5) will be deducted from the proceeds. If you decide to change the
bank account to which proceeds are to be wired, you must send in this change
on the Service Options Form with a signature guarantee.
Proceeds resulting from a written or regular telephone redemption request
will normally be mailed to you within seven days after receipt of your request
in good order. Telephone wire redemption proceeds will normally be wired to
your bank within seven days (and generally on the first business day)
following receipt of a proper redemption request. If you purchased your Fund
shares by check (or through your AIP) and your check (or AIP investment) was
deposited fewer than fifteen days prior to the redemption request, the Fund
will not honor your redemption request. If checks representing redemption
proceeds are returned "undeliverable" or remain uncashed for six months, such
checks shall be cancelled and such proceeds shall be reinvested in the Fund at
the per share net asset value determined as of the date of cancellation of
such checks.
The Fund may not suspend the right of redemption or postpone payment for
more than seven days except when the Exchange is closed for other than
weekends or holidays, when trading on the Exchange is restricted, during an
emergency (as determined by the SEC) which makes it impracticable for the Fund
to dispose of its securities or to determine fairly the value of its net
assets, or during any other period permitted by the SEC for the protection of
investors.
Because the expense of maintaining small accounts is disproportionately
high, the Fund may close accounts with 20 shares or less, and mail the
proceeds to the shareholder. Shareholders who are affected by this policy will
be notified of the Fund's intention to close the account and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to CGM Retirement Plans and UGMA/UTMA
accounts.
TELEPHONE TRANSACTIONS
You may initiate three types of transactions by telephone:
[] Telephone Exchanges
[] Telephone Redemptions By Wire
[] Telephone Redemptions By Check
The terms and provisions for each of these
services are explained fully in the preceding
sections. Once a telephone transaction request has been placed, it cannot be
revoked.
The Telephone Exchange privilege and/or Telephone Redemptions By Wire
privilege must be elected by you when you fill out your initial application or
you may select either option later by completing the Service Options Form
(with a signature guarantee) available from the Trust or CGM Shareholder
Services. The Telephone Redemptions By Check privilege is available to
shareholders of the Fund automatically, and no special application is
necessary.
The telephone redemption privileges are not available for IRAs, SEP-IRAs,
403(b)(7) custodial accounts or for pension and profit sharing accounts under
CGM Retirement Plans (in which case State Street Bank is the trustee).
The Fund will employ reasonable procedures to confirm that instructions
received by telephone (including instructions with respect to changes in
addresses) are genuine, such as requesting personal identification information
that appears on your account application and recording the telephone
conversation. You will bear the risk of loss due to unauthorized or fraudulent
instructions regarding your account, although the Fund may be liable if
reasonable procedures are not employed.
DIVIDENDS, CAPITAL GAINS AND TAXES
The Fund intends to declare and pay quarterly dividends consisting of
substantially all of its net investment income. Any capital gains distributions
are normally made annually in December (after applying any available capital
loss carryovers) but may be made more frequently as deemed advisable by the
Board of Trustees. The Fund's dividend and capital gains distributions may be
reinvested in additional shares or received in cash. Certain restrictions may
apply to participants in CGM Retirement Plans.
If you elect to receive distributions in cash and checks are returned
"undeliverable" or remain uncashed for six months, your cash
election will be changed automatically and your future dividend and capital
gains distributions will be reinvested in the Fund at the per share net asset
value determined as of the date of payment of the distribution. In addition,
following such six-month period, any undeliverable or uncashed checks shall be
cancelled and such amounts shall be reinvested in the Fund at the per share
net asset value determined as of the date of cancellation of such checks.
The Fund intends to qualify annually as a "regulated investment company"
under the Internal Revenue Code. To qualify, the Fund must meet certain
income, distribution and diversification requirements. In any year in which
the Fund so qualifies it generally will not be subject to federal income or
excise tax to the extent that its taxable income is distributed to
shareholders.
The distributions received by the Fund from its investments may, for
federal income tax purposes, consist of ordinary income, long-term capital
gains or a return of capital. The characterization of these distributions to
the Fund may, in turn, affect the tax treatment of the Fund's distributions to
its shareholders. Dividends and distributions are taxable to shareholders in
the same manner whether received in cash or reinvested in additional shares of
the Fund.
Dividends paid by the Fund from net investment income, including dividends,
interest and net short-term capital gains, will be taxable to shareholders as
ordinary income. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) which are designated by the
Fund as capital gains distributions are taxable as long-term capital gains,
regardless of the length of time shareholders have owned shares in the Fund. To
the extent that the Fund makes a distribution in excess of its current and
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing the tax basis in a shareholder's shares,
and then, to the extent the distribution exceeds such basis, as a taxable gain
to be realized upon sale of such shares.
Distributions that the Fund receives from a real estate investment trust,
and dividends of the Fund attributable to such distributions, will not
constitute "dividends" for purposes of the dividends-received deduction
applicable to corporate shareholders.
A distribution will be treated as paid by the Fund and received by its
shareholders on December 31 of the current calendar year if it is declared by
the Fund in October, November or December of that year with a record date in
such a month and paid by the Fund in January of the subsequent year.
Any dividends or distributions paid shortly after a purchase of shares
will have the effect of reducing the per share net asset value of the shares
by the amount of the dividends or distributions. Although in effect a return
of capital, these distributions are subject to taxes, even if their effect is
to reduce the per share net asset value below a shareholder's cost. The Fund
will notify you annually as to the tax status of dividend and capital gains
distributions paid by the Fund.
The sale or other disposition of shares of the Fund, including a
redemption of shares or an exchange of shares into another fund, is a taxable
event and may result in a capital gain or loss which will be long-term or
short-term, depending upon the shareholder's holding period for the shares.
Dividend distributions, capital gains distributions and capital gains or
losses from redemptions and exchanges may be subject to state and local taxes.
In certain states, a portion of the Fund's income derived from certain direct
U.S. Government obligations may be exempt from state and local taxes. The Fund
will indicate each year the portion of the Fund's income, if any, which is
derived from such obligations.
The Fund is required to withhold a portion of taxable dividends, capital
gains distributions, and redemptions paid to individuals and certain other
classes of shareholders if they fail to furnish the Fund with their correct
taxpayer identification number and certain certifications regarding their tax
status, or if they are otherwise subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against a shareholder's normal federal income tax liability. For additional
information about withholding, please see the Statement.
BFDS, the shareholder servicing agent, will send you and the Internal
Revenue Service an annual statement detailing federal tax information,
including information about dividends and distributions paid to you during the
preceding year. If you redeem or exchange shares in any year, following the
end of the year, you will receive a statement providing the cost basis and
gain or loss of each share lot that you sold during such year. Your CGM
account cost basis will be calculated using the "single category average cost
method," which is one of the four calculation methods allowed by the IRS.
Shareholders of the Fund will receive these cost basis statements only for
accounts opened after January 1, 1991. Be sure to keep these statements as
permanent records. A fee may be charged for any duplicate information that you
request.
The tax discussion set forth above is included for general information
only. Shareholders and prospective investors should consult their own tax
advisers concerning the tax consequences of an investment in the Fund.
PRICING OF SHARES
The share price or "net asset value" per share of the Fund is computed
daily by dividing the total value of the investments and other assets of the
Fund, less any liabilities, by the total outstanding shares of the Fund. The
net asset value per share of the Fund is determined as of the close of the
regular trading session of the Exchange on each day the Exchange is open for
trading. Portfolio securities are generally valued at their market value. In
certain cases, market value may be determined on the basis of information
provided by a pricing service approved by the Board of Trustees. Instruments
with maturities of sixty days or less are valued at amortized cost, which
approximates market value. Other assets and securities which are not readily
marketable will be valued in good faith at fair value using methods determined
by the Board of Trustees. The valuation of portfolio securities is more fully
described in the Statement.
PERFORMANCE INFORMATION
The Fund may include yield and total return information in advertisements
or other written sales material. The Fund will show its average annual total
return for the one-, five- and ten-year periods through the end of the most
recent calendar quarter. Total return is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the value of
the investment at the end of the period (assuming automatic reinvestment of
all dividends and capital gains distributions). The Fund may also show total
return over other periods or on an aggregate basis for the period presented.
Yield is computed in accordance with the SEC's standardized formula by
dividing the adjusted net investment income per share earned during a recent
thirty-day period by the maximum offering price of a Fund share on the last
day of the period. The Fund may also present one or more distribution rates in
its sales literature. These rates will be determined by annualizing the Fund's
distributions from net investment income and net short-term capital gains over
a recent twelve-month, three-month or thirty-day period and dividing that
amount by the net asset value on the last day of such period.
The Fund may compare its performance to that of recognized financial
indices or groups of mutual funds. It may also include its ranking among other
mutual funds or its rating as published by mutual fund ranking services or
major financial publications. All performance information is based on past
results and is not an indication of likely future performance.
ADDITIONAL FACTS ABOUT THE FUND
[] The Trust was organized in 1986 as a Massachusetts business trust and is
authorized to issue an unlimited number of full and fractional shares in
multiple series. The Trust currently has four series -- CGM Mutual Fund (a
successor to Loomis-Sayles Mutual Fund), CGM Fixed Income Fund, CGM American
Tax Free Fund and CGM Realty Fund (which commenced operations on May 13,
1994).
[] When a shareholder invests in the Fund, the shareholder acquires freely
transferable shares of beneficial interest that entitle the shareholder to
receive dividends and to cast one vote at shareholder meetings for each
share owned. On matters affecting the Fund, shares of the Fund vote
separately from shares of other series of the Trust, except as otherwise
required by law.
[] The investment objective of the Fund is fundamental and cannot be changed
without shareholder approval. Non-fundamental policies may be changed at any
time without such approval.
<PAGE>
APPENDIX A
RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.
DESCRIPTION OF STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS:
AAA -- Securities rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA -- Securities rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A -- Securities rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than securities in higher
rated categories.
BBB -- Securities rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for securities in this category than for securities in higher rated
categories.
BB, B and CCC -- Securities rated BB, B and CCC are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB represents
the lowest degree of speculation and CCC the highest degree of speculation.
While such securities will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB -- Securities rated BB have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BBB- rating.
B -- Securities rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or BB- rating.
CCC -- Securities rated CCC have a currently identifiable vulnerability to
default, and are dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating.
Plus (+) or Minus (-): The ratings from A to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
INVESTMENT ADVISER CGM
Capital Growth Management MUTUAL FUND
Limited Partnership Prospectus & Application
One International Place May 1, 1996
Boston, MA 02110
A No-Load Fund
TRANSFER AND DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, MA 02102
SHAREHOLDER SERVICING AGENT FOR
STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8511
Boston, MA 02266
[FENCER LOGO]
MFP96
<PAGE>
PART B.
- -------
Statement of Additional
Information for CGM Mutual Fund follows
--------------
Statements of Additional Information for CGM Realty Fund,
CGM Fixed Income Fund, and CGM American Tax Free Fund
are omitted
<PAGE>
CGM MUTUAL FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
This Statement of Additional Information (the "Statement") is not a
prospectus. This Statement relates to the CGM Mutual Fund Prospectus dated May
1, 1996 (the "Prospectus"), and should be read in conjunction therewith. A copy
of the Prospectus may be obtained from CGM Trust, c/o The CGM Funds Investor
Services Division, P.O. Box 449, Boston, Massachusetts 02117 (Telephone:
800-345-4048).
MSAI96
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INTRODUCTION................................................................. 1
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS.............................. 1
PORTFOLIO TURNOVER........................................................... 4
MANAGEMENT OF THE FUND....................................................... 5
INVESTMENT ADVISORY AND OTHER SERVICES....................................... 7
Advisory Agreement.................................................. 7
Custodial Arrangements.............................................. 9
Independent Accountants............................................. 9
Other Arrangements.................................................. 9
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................... 9
DESCRIPTION OF THE TRUST.....................................................10
Shareholder Rights..................................................11
Shareholder and Trustee Liability...................................12
HOW TO BUY SHARES............................................................12
ADVERTISING AND PERFORMANCE INFORMATION......................................13
Calculation of Total Return.........................................13
Calculation of Yield................................................13
Performance Comparisons.............................................14
NET ASSET VALUE AND PUBLIC OFFERING PRICE....................................15
SHAREHOLDER SERVICES.........................................................16
Open Accounts.......................................................16
Systematic Withdrawal Plans ("SWP").................................17
Exchange Privilege..................................................17
Automatic Investment Plans ("AIP")..................................18
Retirement Plans....................................................19
Address Changes.....................................................19
REDEMPTIONS..................................................................19
Redeeming by Telephone..............................................20
Check Sent to the Record Address....................................20
Proceeds Wired to a Predesignated Bank..............................20
All Redemptions.....................................................21
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS.................21
FINANCIAL STATEMENTS.........................................................23
<PAGE>
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INTRODUCTION
- --------------------------------------------------------------------------------
CGM Mutual Fund (the "Fund"), registered with the Securities and
Exchange Commission ("SEC") as a diversified open-end management investment
company, is organized as a separate series of shares of CGM Trust (the "Trust").
The Trust is a Massachusetts business trust established under the laws of
Massachusetts by an Agreement and Declaration of Trust (the "Declaration of
Trust") dated January 16, 1986, as amended. The Trust is a successor in interest
to Loomis-Sayles Mutual Fund. On March 1, 1990, the Trust's name was changed
from "Loomis-Sayles Mutual Fund" to "CGM Mutual Fund" to reflect the assumption
by Capital Growth Management Limited Partnership ("CGM" or the "Investment
Manager") of investment advisory responsibilities with respect to the Trust. On
December 20, 1991, the Trust's name was changed to CGM Trust and the Fund's name
was changed to CGM Mutual Fund in connection with the organization of CGM Fixed
Income Fund as a second series of the Trust.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund's investment objective is reasonable long-term capital
appreciation with a prudent approach to protection of capital from undue risks.
Current income is a consideration in the selection of the Fund's portfolio
securities, but it is not a controlling factor. There are no assurances that the
Fund will achieve its objective.
The Fund seeks to attain its objective by investing substantially all
of its assets in equity securities and fixed-income securities. The Fund is
"flexibly managed"; it sometimes will be more heavily invested in equity or
fixed-income securities, depending on management's view of the economic and
investment outlook. The Fund will ordinarily invest its assets so that
approximately 25% (or more) of the Fund's total assets will be invested in debt
or fixed-income securities.
The Fund may invest up to 35% of its total assets in debt or
fixed-income securities of a quality below investment grade at the time of
investment (i.e. securities rated lower than Baa by Moody's Investors Service,
Inc. ("Moody's) or lower than BBB by Standard and Poor's Corporation ("S&P"), or
their equivalent as determined by the Investment Manager), including up to 10%
of its total assets in fixed income securities rated at the time of investment
CAA by Moody's or CCC by S&P, or their equivalent as determined by the
Investment Manager. Risks associated with such investments are described in the
Prospectus.
The Fund may not:
(1) Invest in companies for the purpose of exercising control or
management;
(2) Issue any senior securities, except as it may be permitted by the
terms of any exemptive order or similar rule issued by the
Securities and Exchange Commission (the "SEC") relating to
multiple classes of shares of beneficial interest of the Trust,
and provided further that collateral arrangements with respect to
forward contracts, future contracts, short sales or options,
including deposits of initial and variation margin, shall not be
considered to be the issuance of a senior security for the
purposes of this restriction;
(3) Act as underwriter of securities issued by others;
(4) Invest in oil, gas or other mineral leases, rights or royalty
contracts or in real estate, commodities or commodity contracts;
(5) Make loans. (For purposes of this investment restriction, neither
(i) entering into repurchase agreements nor (ii) the purchase of
bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the
public, is considered the making of a loan);
(6) With respect to 75% of its total assets, purchase more than 10%
of the outstanding voting securities of any one issuer or invest
more than 5% of the value of its total assets in the securities
of one issuer, except the U.S. Government, its agencies or
instrumentalities;
(7) Invest more than 5% of its assets (taken at current value) in
securities of companies which (with predecessor companies) have a
record of less than three years of continuous operation, except
that the Fund may purchase securities issued by a real estate
investment trust in operation for less than 3 years if the
sponsor of such real estate investment trust has been in
operation for at least 3 years;
(8) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions or in connection with a merger, consolidation or
similar transaction. (Under the Investment Company Act of 1940,
as amended (the "1940 Act")), the Fund generally may not: (a)
invest more than 10% of its total assets (taken at current value)
in such securities; (b) own securities of any one investment
company having a value in excess of 5% of the Fund's total assets
(taken at current value); or (c) own more than 3% of the
outstanding voting stock of any one investment company);
(9) Pledge, mortgage, hypothecate or otherwise encumber any of its
assets;
(10) Purchase or retain securities of an issuer if officers and
trustees of the Fund and officers and directors of its investment
adviser who individually own more than 1/2 of 1% of the shares or
securities of such issuer together own more than 5% of such
shares or securities;
(11) Purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to
be invested in the securities of one or more issuers having their
principal business activities in the same industry, provided that
there is no limit with respect to investments in the U.S.
Government, its agencies or instrumentalities;
(12) Borrow money in excess of 10% of its total assets (taken at cost)
or 5% of its total assets (taken at current value), whichever is
lower, nor borrow any money except as a temporary measure for
extraordinary or emergency purposes;
(13) Purchase securities on margin (except such short-term credits as
are necessary for clearance of transactions); or make short sales
(except where, by virtue of ownership of other securities, it has
the right to obtain, without payment of additional consideration,
securities equivalent in kind and amount to those sold);
(14) Purchase "illiquid" securities, including repurchase agreements
maturing in more than seven days and options traded "over the
counter," if, as a result, more than 10% of the Fund's total net
assets would then be invested in such securities; and
(15) Write or purchase puts, calls or combinations of both except that
it may acquire warrants or rights to subscribe to securities of
companies issuing such warrants or rights, or of parents or
subsidiaries of such companies. The Fund has no present intention
to acquire any such warrants or rights, but may do so at any time
without shareholder approval.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease resulting from a change in the values of assets
will not constitute a violation of such restriction.
The investment restrictions numbered 2, 3, 4, 5, 6, 11 and 12 above
have been adopted by the Trust as fundamental policies of the Fund. Under the
1940 Act, a fundamental policy may not be changed without the vote of a majority
of the outstanding voting securities of the Fund, as defined under the 1940 Act.
"Majority" means the lesser of (1) 67% or more of the shares present at a
meeting of shareholders of the Fund, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (2) more
than 50% of the outstanding shares of the Fund. Investment restrictions numbered
1, 7, 8, 9, 10, 13, 14 and 15 above are non-fundamental and may be changed at
any time by vote of a majority of the Fund's Board of Trustees.
It is also a non-fundamental policy of the Fund not to invest in real
estate limited partnerships, except that the Fund may purchase publicly traded
securities issued by real estate investment trusts. Real estate investment
trusts may be affected by changes in underlying property values and mortgage
real estate investment trusts may also be affected by the quality of credit
extended. Other risks associated with real estate investment trusts include the
possibility of a decline in real estate values, overbuilding, increased
competition, and other risks related to local or general economic conditions;
rising operating costs and property taxes; and fluctuations in rental income.
Additionally, rising interest rates generally decrease the value of
high-yielding securities and increase the costs of obtaining financing, which
could cause the value of the Fund's investments in such securities to decline.
Although authorized to invest in restricted securities, the Fund as a
matter of policy currently does not intend to invest in such securities. Also,
the Fund has given undertakings to a state regulatory authority in connection
with the qualification of Fund shares for sale in such state that its
investments in warrants will not exceed 5% of the value of its net assets and
that not more than 2% of its net assets will be invested in warrants which are
not listed on the New York or American Stock Exchanges. Such policy and
undertakings can be changed without shareholder approval, but shareholders will
be advised if any such changes are made.
The Fund may invest in repurchase agreements which are agreements by
which the Fund purchases a security and obtains a simultaneous commitment from
the seller (a bank or, to the extent permitted by the 1940 Act, a recognized
securities dealer) to repurchase the security at an agreed-upon price and date
(usually seven days or less from the date of original purchase). The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
the Fund the opportunity to earn a return on temporarily available cash at
minimal market risk. While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality of
the U.S. Government, the obligation of the seller is not guaranteed by the U.S.
Government and there is a risk that the seller may fail to repurchase the
underlying security. In such event, the Fund would attempt to exercise rights
with respect to the underlying security, including possible disposition in the
market. However, the Fund may be subject to various delays and risks of loss,
including (1) possible declines in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (2) possible
reduced levels of income and lack of access to income during this period and (3)
inability to enforce rights and the expenses involved in attempted enforcement.
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------
Although the Fund's objective is long-term capital appreciation, it
frequently sells portfolio securities in response to changes in market, industry
or individual company conditions or outlook, even though those securities may
only have been held for short periods of time. This policy may result in higher
securities transaction costs. To the extent that this policy results in gains on
investments, the Fund will make distributions to shareholders, which may
accelerate the shareholders' tax liabilities for realized gains and may result
in the distribution of short-term capital gains taxable as ordinary income. See
"Income Dividends, Capital Gains Distributions and Tax Status."
The Fund's portfolio turnover rate for each of the last ten years is
set forth in the Prospectus in the table entitled "Financial Highlights." The
Fund's portfolio turnover rate has varied significantly from year to year in the
recent past due to the volatility of economic and market conditions, and the
Fund anticipates similar variations in the future.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
PETER O. BROWN -- Trustee;
30 Douglas Road, Rochester, NY; Partner, Harter, Secrest & Emery;
formerly Executive Vice President and Chief Operating Officer,
The Glenmede Trust Company; formerly Senior Vice President, Chase
Lincoln First Bank, N.A.
NICHOLAS J. GRANT -- Trustee;
77 Massachusetts Avenue, Cambridge, MA; Professor of Metallurgy
and Materials Science, Massachusetts Institute of Technology.
G. KENNETH HEEBNER* -- Trustee and Vice President;
Employee, CGM; formerly Vice President and Director, Loomis,
Sayles and Company, Incorporated ("Loomis Sayles").
ROBERT L. KEMP* -- Trustee and President;
Employee, CGM; formerly President and Director, Loomis Sayles.
ROBERT B. KITTREDGE -- Trustee;
21 Sturdivant Street, Cumberland Foreside, ME; Retired; formerly
Vice President, General Counsel and Director, Loomis Sayles.
LAURENS MACLURE -- Trustee;
183 Sohier Street, Cohasset, MA; Retired; formerly President and
Chief Executive Officer, New England Deaconess Hospital.
JAMES VAN DYKE QUEREAU, JR. -- Trustee;
59 Annewood Lane, Wayne, PA; Managing Partner, Stratton
Management Company; formerly Institutional Managing Partner,
Loomis Sayles.
J. BAUR WHITTLESEY -- Trustee;
1521 Locust Street, Philadelphia, PA; Attorney.
KATHLEEN S. HAUGHTON -- Vice President;
222 Berkeley Street, Boston, MA 02116; Employee -- Investor
Services Division, CGM; formerly Vice President, Boston Financial
Data Services, Inc.
LESLIE A. LAKE -- Vice President and Secretary;
Employee -- Office Administrator, CGM; formerly Office
Administrator, Capital Growth Management Division of Loomis
Sayles.
MARTHA I. MAGUIRE -- Vice President
Employee -- Funds Marketing, CGM; formerly marketing
communications consultant (self-employed); formerly Sales
Promotion Consultant, The New England.
MARY L. STONE -- Assistant Vice President;
Employee -- Coordinator, Mutual Fund Recordkeeping, CGM; formerly
Coordinator, Mutual Fund Recordkeeping, Loomis Sayles.
FRANK N. STRAUSS -- Treasurer;
222 Berkeley Street, Boston, MA 02116; Employee -- Chief
Financial Officer, CGM; formerly Vice President of Fund
Accounting, Freedom Capital Management Corporation and Assistant
Vice President, The Boston Company, Inc.
W. DUGAL THOMAS -- Vice President;
Employee -- Director of Marketing, CGM; formerly Director of
Marketing, Loomis Sayles.
- ----------
* Trustee deemed to be an "interested person" of the Fund, as defined by the
1940 Act.
Each of the Fund's trustees is also a trustee of one or more other
investment companies for which CGM acts as investment adviser. Except as
indicated above, the address of each trustee and officer of the Fund affiliated
with CGM is One International Place, Boston, Massachusetts 02110.
As of January 31, 1996, the officers and trustees of the Fund owned
beneficially less than 1% of the outstanding shares of the Fund.
The Fund pays no compensation to its officers or to the trustees listed
above who are interested persons of the Fund. Officers and trustees receive no
pension or retirement benefits paid from Fund expenses. The following table sets
forth the compensation paid by the Trust to its trustees for the year ended
December 31, 1995:
<TABLE>
<CAPTION>
Pension Total
or Retirement Estimated Compensation From
Aggregate Benefits Accrued Annual Registrant and
Name of Compensation as Part of Fund Benefit upon Fund Complex
Trustee From Trust Expenses Retirement Paid to Trustees(a)
- -------- ------------ ---------------- ------------ -------------------
<S> <C> <C> <C> <C>
Peter O. Brown $22,000 None None $32,000
Nicholas J. Grant 26,500 None None 38,000
G. Kenneth Heebner None None None None
Robert L. Kemp None None None None
Robert B. Kittredge 22,000 None None 32,000
Laurens Maclure 22,000 None None 32,000
James Van Dyke Quereau, Jr. 22,000 None None 32,000
J. Baur Whittlesey 22,000 None None 32,000
- -------------
(a) The Fund Complex is comprised of two Trusts with a total of five funds.
</TABLE>
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INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
Advisory Agreement. CGM serves as investment manager of the Fund under
an advisory agreement dated September 1, 1993. CGM has served as investment
manager of the Fund since March 1, 1990. Prior to March 1, 1990, the Fund was
managed by Loomis Sayles, whose Capital Growth Management Division was
reorganized into CGM on that date.
Under the advisory agreement, CGM manages the investment and
reinvestment of assets of the Fund and generally administers its affairs,
subject to supervision by the Board of Trustees of the Trust. CGM furnishes, at
its own expense, all necessary office supplies, facilities and equipment,
services of executive and other personnel of the Fund and certain administrative
services. For these services, CGM is compensated at the annual percentage rate
of 0.75% of the first $200 million of the Fund's average daily net asset value,
0.70% of the next $300 million of such value and 0.65% of such value in excess
of $500 million. While this rate is higher than that paid by most other
investment companies, it is comparable to the fees paid by many investment
companies having investment objectives and policies similar to those of the
Fund. For the fiscal years ended December 31, 1993, 1994 and 1995, the advisory
fee paid to CGM in respect of services rendered to the Fund amounted to
$5,100,940, $7,523,197 and $7,637,552, respectively.
The Fund pays the compensation of its trustees who are not partners,
directors, officers or employees of CGM or its affiliates (other than registered
investment companies); registration, filing, and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Fund; the expenses of
meetings of the shareholders and trustees of the Fund; the charges and expenses
of the Fund's legal counsel; interest, including on any borrowings by the Fund;
the cost of services, including services of counsel, required in connection with
the preparation of, and the costs of printing, registration statements and
prospectuses relating to the Fund, including amendments and revisions thereto,
annual, semiannual, and other periodic reports of the Fund, and notices and
proxy solicitation material furnished to shareholders of the Fund or regulatory
authorities, to the extent that any such materials relate to the Fund or its
shareholders; and the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses. Under the advisory
agreement, if the total of all ordinary business expenses of the Fund for any
fiscal year exceeds the lowest applicable limitation (based on percentage of
average net assets or income) prescribed by any state in which shares of the
Fund are qualified for sale, the total fee otherwise due CGM is reduced by the
amount of such excess, and if after giving effect to such reduction such total
continues to exceed such limitation, CGM pays such excess, unless such reduction
of payment would result in the inability of the Fund to qualify as a regulated
investment company under applicable tax law. At the date of this Statement, the
lowest applicable net asset percentage limitation on the Fund's total ordinary
expenses (including investment advisory fees, but excluding taxes, portfolio
brokerage commissions and interest) was 2.5% of the first $30 million of average
annual net assets, 2% of the next $70 million of such assets and 1.5% of such
assets in excess of $100 million.
CGM also acts as investment adviser to CGM Capital Development Fund,
CGM Fixed Income Fund, CGM American Tax Free Fund and CGM Realty Fund and three
other mutual fund portfolios. CGM also provides investment advice to other
institutional clients.
Certain officers and trustees of the Fund also serve as officers,
directors or trustees of other investment companies advised by CGM. The other
investment companies and clients served by CGM sometimes invest in securities in
which the Fund also invests. If the Fund and such other investment companies or
clients advised by CGM desire to buy or sell the same portfolio securities at
the same time, purchases and sales will be allocated to the extent practicable
on a pro rata basis in proportion to the amounts desired to be purchased or sold
for each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities which the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
trustees that the desirability of retaining CGM as adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.
Custodial Arrangements. State Street Bank and Trust Company ("State
Street Bank"), Boston, Massachusetts 02102, is the Fund's custodian. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to the Fund. Upon instruction,
State Street Bank receives and delivers cash and securities of the Fund in
connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Fund and calculates the total
net asset value, total net income, and net asset value per share of the Fund on
each business day.
Independent Accountants. The Fund's independent accountants are Price
Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse LLP conducts an annual audit of the Fund's financial statements,
assists in the preparation of the Fund's federal and state income tax returns
and consults with the Fund as to matters of accounting and federal and state
income taxation. The information concerning financial highlights in the
Prospectus, and the financial statements incorporated by reference into this
Statement, have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Other Arrangements. Certain office space, facilities, equipment and
administrative services for the Fund and other mutual funds under the investment
management of the CGM organization are furnished by CGM. In addition, CGM
provides bookkeeping, accounting, auditing, financial and related clerical
services for which it is reimbursed by the Fund based on the cost of providing
these services. For the services rendered to the Fund for the fiscal year 1995,
fiscal year 1994 and fiscal year 1993, CGM was reimbursed in the amounts of
$80,000, $80,000 and $34,150, respectively.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
In placing orders for the purchase and sale of portfolio securities for
the Fund, CGM always seeks the best price and execution. Transactions in
unlisted securities will be carried out through broker-dealers who make the
primary market for such securities unless, in the judgment of CGM, a more
favorable price can be obtained by carrying out such transactions through other
brokers.
CGM selects only brokers it believes are financially responsible, will
provide efficient and effective services in executing, clearing and settling an
order and will charge commission rates which, when combined with the quality of
the foregoing services, will produce the best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be competitive
with generally prevailing rates. CGM will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. The Fund will not
pay a broker a commission at a higher rate than is otherwise available for the
same transaction in recognition of the value of research services provided by
the broker or in recognition of the value of any other services provided by the
broker which do not contribute to the best price and execution of the
transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which CGM believes will provide the best price and execution
for a transaction. These research services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce CGM's expenses. Such services may be used by CGM in servicing
other client accounts and in some cases may not be used with respect to the
Fund. Receipt of services or products other than research from brokers is not a
factor in the selection of brokers.
In 1995, brokerage transactions of the Fund aggregating $3,625,472,842
were allocated to brokers providing research services and $4,958,325 in
commissions were paid on these transactions. During 1993, 1994 and 1995, the
Fund paid total brokerage fees of approximately $8,684,220, $5,775,145 and
$5,702,810, respectively. The variation in the Fund's brokerage commissions is
substantially attributable to fluctuating portfolio activity.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE TRUST
- --------------------------------------------------------------------------------
The Declaration of Trust of the Trust currently permits the trustees to
issue an unlimited number of shares of beneficial interest of separate series of
the Trust. Interests in the portfolio described in the Prospectus and in this
Statement are represented by shares of the Fund. Each share of the Fund
represents an interest in such series which is equal to and proportionate with
the interest represented by each other share. The shares of the Fund do not have
any preemptive rights. Upon liquidation of the portfolio, shareholders of the
Fund are entitled to share pro rata in the net assets of such portfolio
available for distribution to shareholders. The Declaration of Trust also
permits the trustees to charge shareholders directly for custodial, transfer
agency and servicing expenses. The trustees have no present intention of making
such direct charges.
The Declaration of Trust also permits the trustees, without shareholder
approval, to create one or more additional series or classes of shares or to
reclassify any or all outstanding shares as shares of particular series or
classes, with such preferences and rights and eligibility requirements as the
trustees may designate. While the trustees have no current intention to exercise
the power to establish separate classes of the existing series of the Fund, it
is intended to allow them to provide for an equitable allocation of the impact
of any future regulatory requirements, which might affect various classes of
shareholders differently. The trustees may also, without shareholder approval,
merge two or more existing series.
Shareholder Rights
On December 31, 1995, there were 39,230,204 shares of the Fund
outstanding. On that date State Street Bank, acting as trustee for various
retirement plans and individual retirement accounts, owned 9,226,741 shares --
about 24% of the total. In almost all cases, State Street Bank does not have the
power to vote or to dispose of the shares except at the direction of the
beneficial owner.
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and may vote (to the extent
provided herein) in the election of trustees and the termination of the Fund and
on other matters submitted to the vote of shareholders. There will normally be
no meetings of shareholders for the purpose of electing trustees, except that in
accordance with the 1940 Act (i) the Trust will hold a shareholders' meeting for
the election of trustees at such time as less than a majority of the trustees
holding office have been elected by shareholders, and (ii) if the appointment of
a trustee to fill a vacancy in the Board of Trustees would result in less than
two-thirds of the trustees having been elected by shareholders, that vacancy may
only be filled by a vote of the shareholders. In addition, trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares and filed with the Trust's custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for the
purpose, which meeting shall be held upon the written request of the holders of
not less than 10% of the outstanding shares. Upon written request by ten or more
shareholders of record who have been such for at least six months and who hold
in the aggregate shares equal to at least the lesser of (i) $25,000 in net asset
value or (ii) 1% of the outstanding shares, stating that such shareholders wish
to communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust will either provide access to a list of shareholders or disseminate
appropriate materials (at the expense of the requesting shareholders). Except as
set forth above, the trustees shall continue to hold office and may appoint
successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the holders of the outstanding shares of the
Trust except (i) to change the Trust's name or to cure technical problems in the
Declaration of Trust and (ii) to establish, designate or modify new and existing
series or subseries of Trust shares or other provisions relating to Trust shares
in response to applicable laws of regulations. The shareholders of the Fund
shall not be entitled to vote on matters exclusively affecting any other series,
such matters including, without limitation, the adoption of or change in the
investment objectives, policies or restrictions of the series and the approval
of the investment advisory contracts of the series. Similarly, no shareholders
of any other series shall be entitled to vote on any such matters exclusively
affecting the Fund. In particular, the phrase "majority of the outstanding
voting securities of the Fund" as used in this Statement shall refer only to the
shares of the Fund.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust;
however, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or trustees. The Declaration of Trust provides for indemnification out of Fund
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
All persons dealing with the Fund must look only to the assets of the
Fund for the enforcement of any claims against the Fund and no other series of
the Trust assumes any liability for obligations entered into on behalf of the
Fund.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
The procedures for purchasing shares of the Fund are summarized in the
Prospectus under "How to Purchase Shares."
- --------------------------------------------------------------------------------
ADVERTISING AND PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Calculation of Total Return
The Fund may include total return information in advertisements or
written sales material. Total return is a measure of the change in value of an
investment in the Fund over the period covered, which assumes that any dividends
or capital gains distributions are automatically reinvested in the Fund rather
than paid to the investor in cash. The formula for total return used by the Fund
includes three steps:
(1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Fund all additional shares that would have
been purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested;
(2) calculating the value of the hypothetical initial
investment as of the end of the period by multiplying the total number of shares
owned at the end of the period by the net asset value per share on the last
trading day of the period; and
(3) dividing this account value for the hypothetical investor
by the amount of the initial investment, and annualizing the result for periods
of less than one year.
For the one, five and ten year periods ended December 31, 1995, the
Fund's average annual total return was 24.3%, 15.4% and 13.9%, respectively. For
the one, five, ten and twenty-five year periods ended December 31, 1995, the
total return on a hypothetical $1,000 investment in the Fund on an aggregate
basis was 24.3%, 104.3%, 268.7% and 1,308.7%, respectively. In computing
performance information for the Fund, no adjustment has been made for a
shareholder's tax liability on taxable dividends and capital gains
distributions.
Calculation of Yield.
The Fund may use yield information in advertisements or written sales
material. The Fund's yield is based on a recent 30 day period, and is determined
in accordance with the SEC's standardized formula by:
(1) calculating the aggregate dividends and adjusted interest
earned during that period, net of recurring expenses accrued for the period; and
(2) dividing that amount by the product of (A) the average
daily number of shares outstanding during the period and (B) the maximum
offering price per share on the last day of the period (less any earned income
expected to be declared as a dividend shortly thereafter).
The result is annualized, assuming a quarterly compounding, to
determine the Fund's yield. Interest earned during the period will be adjusted
to reflect amortization of any premium or discount from par on the Fund's fixed
income securities (other than obligations backed by mortgages or other assets),
using the market value for these securities on the last day of the period, or,
for securities purchased during the period, using actual cost. The Fund's yield
will vary from time to time depending upon market conditions, the composition of
the Fund's portfolio and operating expenses of the Fund.
Performance Comparisons
Total return may be used to compare the performance of the Fund against
certain widely acknowledged standards or indices for stock and bond market
performance or against the U.S. Bureau of Labor Statistics' Consumer Price
Index.
The Standard & Poor's 500 Composite Index (the "S&P 500") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial services
concerns.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the New York Stock
Exchange.
No brokerage commissions or other fees are factored into the values of
the S&P 500 and the Dow Jones Industrial Average.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of change, over time, in the prices of
goods and services in major expenditure groups.
Lipper Analytical Services, Inc., an independent service that monitors
the performance of over 4,700 mutual funds, calculates total return for those
funds grouped by investment objective. From time to time, the Fund may include
its ranking among mutual funds tracked by Lipper in advertisements or sales
literature.
Morningstar, Inc. ("Morningstar") is an independent mutual fund ranking
service. Morningstar proprietary ratings reflect historical risk-adjusted
performance and are subject to change every month. Funds with at least three
years of performance history are assigned ratings from one star (lowest) to five
stars (highest). Morningstar ratings are calculated from the funds' three-,
five-, and ten-year average annual returns (when available) and a risk factor
that reflects the fund performance relative to three-month Treasury bill monthly
returns. Funds' returns are adjusted for fees and sales loads. Ten percent of
the funds in an investment category receive five stars, 22.5% receive four
stars, 35% receive three stars, 22.5% receive two stars, and the bottom 10%
receive one star. From time to time, the Fund may include its ranking among
mutual funds tracked by Morningstar in advertisements or sales literature.
Value Line, Inc. ("Value Line"), an independent mutual fund ranking
service reviews the performance of 2,000 mutual funds. In ranking mutual funds,
Value Line uses two indicators: a Risk Rank to show the total level of risk a
fund has assumed and an Overall Rank measuring various performance criteria
taking risk into account. Funds are ranked from 1 to 5, with 1 the highest
Overall Rank (the best risk-adjusted performance) and the best Risk Rank (the
least risky). From time to time, the Fund may include ranking information
provided by Value Line in advertisements and sales literature.
From time to time, articles about the Fund regarding performance,
rankings and other characteristics of the Fund and information about persons
responsible for its portfolio management may appear in national publications and
major metropolitan newspapers including, but not limited to, The Wall Street
Journal, The Boston Globe and Forbes, Fortune, and Money magazines. In
particular, some or all of these publications may publish their own rankings or
performance reviews of mutual funds, including the Fund. References to or
reprints of such articles may be used in the Fund's promotional literature.
The Fund has been continuously managed since 1981 by G. Kenneth
Heebner.
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NET ASSET VALUE AND PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
The method for determining the public offering price and net asset
value per share is summarized in the Prospectus under "Pricing of Shares."
The net asset value of a share of the Fund is determined by dividing
the Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares outstanding and rounding to the nearest cent. Such
determination is made as of the close of normal trading on the New York Stock
Exchange on each day on which the Exchange is open for unrestricted trading, and
no less frequently than once daily on each day during which there is sufficient
trading in the Fund's portfolio securities that the value of the Fund's shares
might be materially affected. During the 12 months following the date of this
Statement, the New York Stock Exchange is expected to be closed on the following
holidays: Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas
Day, New Year's Day, Presidents' Day and Good Friday.
Securities which are traded over-the-counter or on a stock exchange
will be valued according to the broadest and most representative market based on
the last reported sale price for securities listed on a national securities
exchange (or on the NASDAQ National Market System) or, if no sale was reported
and in the case of over-the-counter securities not so listed, the last reported
bid price. U.S. government securities are valued at the most recent quoted price
on the date of valuation.
For equity securities, it is expected that the broadest and most
representative market will ordinarily be either (i) a national securities
exchange, such as the New York Stock Exchange or American Stock Exchange, or
(ii) the NASDAQ National Market System. For corporate bonds, notes, debentures
and other fixed-income securities, it is expected that the broadest and most
representative market will ordinarily be the over-the-counter market.
Fixed-income securities may, however, be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees when such prices are
believed to reflect the fair market value of such securities. The prices
provided by the pricing service may be determined based on valuations for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Instruments with maturities of sixty days or less are valued at amortized cost,
which approximates market value. Other assets and securities which are not
readily marketable will be valued in good faith at fair value using methods
determined by the Board of Trustees.
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SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Open Accounts
A shareholder's investment in the Fund is credited to an open account
maintained for the shareholder by the CGM Shareholder Services Department ("CGM
Shareholder Services") of Boston Financial Data Services, Inc. ("BFDS"), the
shareholder servicing agent for State Street Bank. The address is: CGM
Shareholder Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511.
Certificates representing shares are issued only upon written request
to CGM Shareholder Services but are not issued for fractional shares. Following
each transaction in the account, a shareholder will receive an account statement
disclosing the current balance of shares owned and the details of recent
transactions that have taken place during the year. After the close of each
fiscal year, CGM Shareholder Services will send each shareholder a statement
providing federal tax information on dividends and distributions paid to the
shareholder during the year. The year-end statement should be retained as a
permanent record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates problems of handling and safekeeping, and the
cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are borne by the Fund,
and no direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
Systematic Withdrawal Plans ("SWP")
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of a shareholder provided that the account has a value of at least
$10,000 at the time the plan is established.
Payments will be made either to the shareholder or to any other person
or entity designated by the shareholder. If payments are issued to an individual
other than the registered owner(s) and/or mailed to an address other than the
address of record, a signature guarantee will be required on the SWP
application. Shares to be included in a Systematic Withdrawal Plan must be held
in an Open Account rather than certificated form. Income dividends and capital
gain distributions will be reinvested at the net asset value determined as of
the close of the New York Stock Exchange on the record date for the dividend or
distribution. If withdrawal checks are returned to the Fund as "undeliverable"
or remain uncashed for more than six months, the shareholder's Systematic
Withdrawal Plan will be cancelled, such undeliverable or uncashed checks will be
cancelled and such amounts reinvested in the Fund at the per share net asset
value determined as of the date of cancellation of the checks.
Since withdrawal payments represent in whole or in part proceeds from
the liquidation of shares, the shareholder should recognize that withdrawals may
reduce and possibly exhaust the value of the account, particularly in the event
of a decline in net asset value. Accordingly, the shareholder should consider
whether a Systematic Withdrawal Plan and the specified amounts to be withdrawn
are appropriate in the circumstances. The Trust makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
Exchange Privilege
A shareholder may exchange shares of the Fund for shares of CGM Fixed
Income Fund, CGM American Tax Free Fund, CGM Realty Fund, New England Cash
Management Trust, New England Tax Exempt Money Market Trust or CGM Capital
Development Fund; however, shares of CGM Capital Development Fund may only be
exchanged for if you were a shareholder on September 24, 1993, and have remained
a shareholder in the CGM Capital Development Fund. CGM Capital Development Fund
shares are not generally available to other persons except in special
circumstances that have been approved by, or under the authority of, the Board
of Trustees of CGM Capital Development Fund. The special circumstances currently
approved by the Board of Trustees of CGM Capital Development Fund are limited to
the offer and sale of shares of such fund to the following additional persons:
trustees of CGM Capital Development Fund, employees of the Investment Manager
and counsel to such fund and the Investment Manager. CGM Realty Fund shares are
not available in South Dakota as described in the prospectus for CGM Realty
Fund. The value of shares exchanged must be at least $1,000 and all exchanges
are subject to the minimum investment requirements of the fund into which the
exchange is being made. This option is summarized in the Prospectus under
"Shareholder Services--Exchange Privilege." The Trust reserves the right to
terminate or limit the privilege of a shareholder who makes more than four
exchanges (or two round trips) per year. A shareholder may exercise the exchange
privilege only when the fund into which shares will be exchanged is registered
or qualified in the state in which such shareholder resides.
Exchanges may be effected by (i) a telephone request to CGM Shareholder
Services at 800-343-5678, provided that a special authorization form is on file
with the Trust, or (ii) a written exchange request to CGM Shareholder Services
accompanied by an account application for the appropriate fund. Exchange
requests cannot be revoked once they have been received in good order. The Trust
reserves the right to modify this exchange privilege without prior notice,
except as otherwise required by law or regulation.
For federal income tax purposes, an exchange constitutes a sale of
shares, which may result in a capital gain or loss.
Automatic Investment Plans ("AIP")
Once initial investment minimums have been satisfied (see "How to
Purchase Shares" in the Prospectus), a shareholder may participate in an
Automatic Investment Plan, pursuant to which the Fund debits $50.00 or more on
or about the same date each month from a shareholder's checking account and
transfers the proceeds into the shareholder's Fund account. To participate, a
shareholder must authorize the Fund and its agents to initiate Automated
Clearing House ("ACH") debits against the shareholder's designated account at a
bank or other financial institution. Shareholders receive a confirmation of each
purchase of Fund shares, and each debit from a shareholder's bank account will
appear on the shareholder's monthly bank statement. Fund shares purchased under
the AIP must be owned for ten days before they may be redeemed.
Once a shareholder enrolls in the AIP, the Fund and its agents are
authorized to initiate ACH debits against the shareholder's account payable to
the order of The CGM Funds. Such authority remains in effect until revoked by
the shareholder, and, until the Fund actually receives such notice of
revocation, the Fund is fully protected in initiating such debits. Participation
in the AIP may be terminated by sending written notice to CGM Shareholder
Services, c/o BFDS, P.O. Box 8511, Boston, MA 02266-8511, or by calling
800-343-5678 more than 14 days prior to the next scheduled debit date. The Fund
may immediately terminate a shareholder's participation in the AIP in the event
that any item is unpaid by the shareholder's financial institution. The Fund may
terminate or modify the AIP at any time.
Retirement Plans
Under "Shareholder Services--Retirement Plans" the Prospectus refers to
several retirement plans. These include tax deferred pension or profit sharing
plans, as well as SEP-IRAs, IRAs and 403(b)(7) custodial accounts established
under retirement plans sponsored by CGM. These plans may be funded with shares
of the Fund.
For participants under age 59 1/2, all income dividends and capital
gain distributions of plan participants must be reinvested. Plan documents and
further information can be obtained from the Trust by writing or calling the
Trust as indicated on the cover of this Statement.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
Address Changes
Shareholders can request to change their record address either by
telephone or in writing (by mail or delivery service, but not by facsimile) in
accordance with policies and procedures of the Trust. After an address change is
made, no telephone or written redemption requests will be honored for three
months unless the registered owner(s) obtain(s) a signature guarantee. Written
requests for a change in address may be mailed to: CGM Shareholder Services, c/o
BFDS, P.O. Box 8511, Boston, MA 02266-8511.
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be
guaranteed by an eligible guarantor institution in accordance with procedures
established by the Trust. Signature guarantees by notaries public are not
acceptable.
The procedures established by the Trust provide that an "eligible
guarantor institution" means any of the following: banks (as defined in ss. 3(a)
of the Federal Deposit Insurance Act (the "FDIA") [12 U.S.C. ss. 1813(a)]);
brokers, dealers, municipal securities brokers, government securities dealers
and government securities brokers, as those terms are defined under the
Securities Exchange Act of 1934 (the "Act"); credit unions (as defined in ss.
19(b)(1)(A) of the Federal Reserve Act [12 U.S.C. ss. 461(b)]); national
securities exchanges, registered securities associations and clearing agencies,
as those terms are defined under the Act; and savings associations (as defined
in ss. 3(b) of the FDIA [12 U.S.C. ss. 1813(b)]). However, as noted in the
Prospectus, a signature guarantee will not be required if the proceeds of the
redemption do not exceed $25,000, and the proceeds check is made payable to the
registered owner(s) and mailed to the record address, which has not changed in
the prior three months. If the record address has changed within the prior three
months, a signature guarantee will be required. This policy applies to both
written and telephone redemption requests.
Redeeming by Telephone
There are two ways to redeem by telephone. In either case, a
shareholder should call 800-343-5678 prior to 4:00 p.m. (Eastern time). Requests
made after that time or on a day when the New York Stock Exchange is not open
for business cannot be accepted. Telephone redemptions are not available for
IRAs, SEP-IRAs, 403(b)(7) custodial accounts or pension and profit sharing plans
under a CGM retirement plan where State Street Bank is the trustee.
Check Sent to the Record Address
A shareholder may request that a check be sent to the record address on
the account, provided that the address has not changed for the last three months
and the shareholder is redeeming $25,000 or less. The check will be made payable
to the registered owner(s) of the account.
If checks representing redemption proceeds are returned "undeliverable"
or remain uncashed for six months, such checks shall be cancelled and such
proceeds shall be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation of such checks.
Proceeds Wired to a Predesignated Bank
A shareholder may request that the redemption proceeds be wired to the
bank selected on the Fund application or subsequently on the Service Option Form
available from the Trust. A nominal wire fee, currently $5.00, is deducted from
the proceeds. When selecting the service, a shareholder must designate a bank
account to which the redemption proceeds should be wired. Any change in the bank
account so designated may be made by furnishing CGM Shareholder Services a
completed Service Options Form with a signature guarantee. Whenever the Service
Options Form is used, the shareholder's signature must be guaranteed as
described above. Telephone redemptions may be made only if an investor's bank is
a member of the Federal Reserve System or has a correspondent bank that is a
member of the System. If the account is with a savings bank, it must have only
one correspondent bank that is a member of the System.
All Redemptions
The redemption price will be the net asset value per share next
determined after the redemption request is received by CGM Shareholder Services
in good order (including any necessary documentation). Redemption requests
cannot be revoked once they have been received in good order. Proceeds resulting
from a written redemption request will normally be mailed to you within seven
days after receipt of your request in good order. Telephone redemption proceeds
will normally be mailed or wired within seven days (and generally on the first
business day) following receipt of a proper redemption request. In those cases
where you have recently purchased your shares by check and your check was
deposited less than fifteen days prior to the redemption request, the Trust may
withhold redemption proceeds until your check has cleared.
The Trust will normally redeem shares for cash; however, the Trust
reserves the right to pay the redemption price wholly in kind or partly in kind
and partly in cash if the Board of Trustees of the Trust determines it to be
advisable in the interest of the remaining shareholders. If portfolio securities
are distributed in lieu of cash, the shareholder will normally incur brokerage
commissions upon subsequent disposition of any such securities. However, the
Trust has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Trust is obligated to redeem shares solely in cash for any shareholder
during any 90-day period up to the lesser of $250,000 or 1% of the total net
asset value of the Fund at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gains Distributions and Tax Status."
Because the expense of maintaining small accounts is disproportionately
high, the Trust may close accounts with 20 shares or less and mail the proceeds
to the shareholder. Shareholders who are affected by this policy will be
notified of the Trust's intention to close the account, and will have 60 days
immediately following the notice in which to acquire the requisite number of
shares. The minimum does not apply to retirement and Uniform Gifts to Minors Act
or Uniform Transfers to Minors Act accounts.
- --------------------------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
- --------------------------------------------------------------------------------
As described in the Prospectus under "Dividends, Capital Gains
Distributions and Taxes" it is the policy of the Fund to pay quarterly, as
dividends, substantially all net investment income and to distribute annually
all net realized capital gains, if any, after offsetting any capital loss
carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of the Fund based upon the net asset value determined as of
the close of the New York Stock Exchange on the record date for such dividend or
distribution. Shareholders, however, may elect to receive their income dividends
or capital gain distributions, or both, in cash. (However, if you elect to
receive capital gains in cash, your income dividends must also be received in
cash.) The election, made at the time the account is opened, may be changed by
the shareholder at any time by submitting a written request directly to CGM
Shareholder Services. In order for a change to be in effect for any dividend or
distribution, it must be received by CGM Shareholder Services on or before the
record date for such dividend or distribution. If you elect to receive
distributions in cash, and checks are returned "undeliverable" to the Fund or
remain uncashed for six months, your cash election will be automatically changed
and your future distributions will be reinvested in the Fund at the per share
net asset value determined as of the date of payment of the distribution. In
addition, following such six month period, any undeliverable or uncashed checks
will be cancelled and such amounts reinvested in the Fund at the per share net
asset value determined as of the date of cancellation of such checks.
The Fund has met, and intends to continue to meet, the requirements of
the Internal Revenue Code with respect to regulated investment companies.
The distributions received by the Fund from its investments may, for
federal income tax purposes, consist of ordinary income, long-term capital gains
or a return of capital. The characterization of these distributions to the Fund
may, in turn, affect the tax treatment of the Fund's distributions to its
shareholders. Dividends and distributions are taxable to shareholders in the
same manner whether received in cash or reinvested in additional shares of the
Fund.
Dividends paid by the Fund from net investment income, including
dividends, interest and net short-term capital gains, will be taxable to
shareholders as ordinary income. Distributions of net capital gains (the excess
of net long-term capital gains over net short-term capital losses) which are
designated by the Fund as capital gains distributions are taxable as long-term
capital gains, regardless of the length of time shareholders have owned shares
in the Fund. To the extent that the Fund makes a distribution in excess of its
current and accumulated earnings and profits, the distribution will be treated
first as a tax-free return of capital, reducing the tax basis in a shareholder's
shares, and then, to the extent the distribution exceeds such basis, as a
taxable gain to be realized upon sale of such shares.
Distributions that the Fund receives from a REIT, and dividends of the
Fund attributable to such distributions, will not constitute "dividends" for
purposes of the dividends-received deduction applicable to corporate
shareholders. Dividends and distributions on Fund shares received shortly after
their purchase, although in effect a return of capital, are subject to federal
income taxes.
The Fund is required to withhold and remit to the U.S. Treasury 31% of
all dividends from net investment income and capital gains distributions,
whether distributed in cash or reinvested in shares of the Fund, paid or
credited to any shareholder account for which an incorrect or no taxpayer
identification number has been provided or where the Fund is notified that the
shareholder has underreported income in the past (or the shareholder fails to
certify that he is not subject to withholding). In addition, the Fund will be
required to withhold and remit to the U.S. Treasury 31% of the amount of the
proceeds of any redemption of Fund shares from a shareholder account for which
an incorrect or no taxpayer identification number has been provided or where the
Fund is notified that the shareholder has underreported income in the past (or
the shareholder fails to certify that he is not subject to such withholding).
As required by federal law, detailed federal tax information is
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements and Report of Independent Accountants for the
year ended December 31, 1995, included in the Fund's Annual Report to
Shareholders for the year ended December 31, 1995, are incorporated herein by
reference.
167857.c5
<PAGE>
CGM TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements with respect to CGM Mutual Fund, CGM
Realty Fund, CGM Fixed Income Fund, and CGM American Tax
Free Fund are incorporated herein by reference to each
Fund's Annual Report to Shareholders for the year ended
December 31, 1995 (File No. 2-10653) filed on February 22,
1996.
(b) Exhibits:
(1)
(A) Agreement and Declaration of Trust of the
Registrant is contained in Post-Effective
Amendment No. 61 on Form N-1A (File No. 2-10653)
filed on June 27, 1986.
(B) Amendment No. 1 to the Agreement and Declaration
of Trust is contained in Post-Effective Amendment
No. 68 on Form N-1A (File No. 2-10653) filed on
April 15, 1991.
(C) Amendment No. 2 to the Agreement and Declaration
of Trust is contained in Post-Effective Amendment
No. 69 on Form N-1A (File No. 2-10653) filed on
December 23, 1991.
(D) Amendment No. 3 to the Agreement and Declaration
of Trust is contained in Post-Effective Amendment
No. 70 on Form N-1A (File No. 2-10653) filed on
April 30, 1992.
(E) Amendment No. 4 to the Agreement and Declaration
of Trust is contained in Post-Effective Amendment
No. 74 on Form N-1A (File No. 2-10653) filed on
September 10, 1993.
(F) Amendment No. 5 to the Agreement and Declaration
of Trust is contained in Post-Effective Amendment
No. 76 on Form N-1A (File No. 2-10653) filed on
March 14, 1994.
(2) By-Laws of the Registrant, as amended, are contained in
Post-Effective Amendment No. 66 on Form N-1A (File No.
2-10653) filed on May 1, 1989.
(3) None.
(4) (A) Form of share certificate of the Registrant's CGM
Mutual Fund is contained in Post-Effective
Amendment No. 77 on Form N-1A (File No. 2-10653)
filed on April 28, 1994.
(B) Form of share certificate of the Registrants' CGM
Fixed Income Fund is contained in Post-Effective
Amendment No. 77 on Form N- 1A (File No. 2-10653)
filed on April 28, 1994.
(C) Form of share certificate of the Registrant's CGM
American Tax Free Fund is contained in
Post-Effective Amendment No. 77 on Form N-1A (File
No. 2-10653) filed on April 28, 1994.
(D) Form of share certificate of the Registrant's CGM
Realty Fund is contained in Post-Effective
Amendment No. 77 on Form N-1A (File No. 2-10653)
filed on April 28, 1994.
(5) (A) Advisory Agreement of the Registrant dated
September 1, 1993 with respect to CGM Mutual Fund
is contained in Post-Effective Amendment No. 75 on
Form N-1A (File No. 2-10653) filed on February 24,
1994.
(B) Advisory Agreement of the Registrant dated
September 1, 1993 with respect to CGM Fixed Income
Fund is contained in Post-Effective Amendment No.
75 on Form N-1A (File No. 2-10653) filed on
February 24, 1994.
(C) Advisory Agreement of the Registrant dated
November 8, 1993 with respect to CGM American Tax
Free Fund is contained in Post-Effective Amendment
No. 75 on Form N-1A (File No. 2-10653) filed on
February 24, 1994.
(D) Advisory Agreement of the Registrant dated May 12,
1994 with respect to CGM Realty Fund is contained
in Post-Effective Amendment No. 2-10653) filed on
November 8, 1994.
(6) None.
(7) None.
(8) (A) Custodian Agreement with respect to CGM Mutual
Fund is contained in Post-Effective Amendment No.
61 on Form N-1A (File No. 2-10653) filed on June
27, 1986.
(B) Supplement dated March 6, 1992 to Custodian
Contract with respect to CGM Mutual Fund is
contained in Post-Effective Amendment No. 70 on
Form N-1A (File No. 2-10653) filed on April 30,
1992.
(C) Custodian Contract dated March 6, 1992 with
respect to CGM Fixed Income Fund is contained in
Post-Effective Amendment No. 70 on Form N-1A (File
No. 2-10653) filed on April 30, 1992.
(D) Amendment dated April 16, 1992 to the Custodian
Contract with respect to CGM Fixed Income Fund is
contained in Post-Effective Amendment No. 70 on
Form N-1A (File No. 2-10653) filed on April 30,
1992.
(E) Custodian Contract with respect to CGM American
Tax Free Fund is contained in Post-Effective
Amendment No. 77 on Form N-1A (File No 2-10653)
filed on April 28, 1994.
(F) Custodian Contract with respect to CGM Realty Fund
is contained in Post-Effective Amendment No. 78 on
Form N-1A (File No. 2- 10653) filed on November 8,
1994.
(9) (A) Service Agreement is contained in Post-Effective
Amendment No. 67 on Form N-1A (File No. 2-10653)
filed on May 1, 1990.
(B) Transfer Agency and Service Agreement with respect
to CGM Mutual Fund dated June 1, 1987 is contained
in Post-Effective Amendment No. 70 on Form N-1A
(File No. 2-10653) filed on April 30, 1992.
(C) Supplement dated March 6, 1992 to Transfer Agency
and Service Agreement with respect to CGM Mutual
Fund is contained in Post-Effective Amendment No.
70 on Form N-1A (File No. 2-10653) filed on April
30, 1992.
(D) Transfer Agency and Service Agreement dated March
6, 1992 with respect to CGM Fixed Income Fund is
contained in Post-Effective Amendment No. 70 on
Form N-1A (File No. 2-10653) filed on April 30,
1992.
(E) Transfer Agency Agreement with respect to CGM
American Tax Free Fund is contained in
Post-Effective Amendment No. 77 on Form N-1A (File
No 2-10653) filed on April 28, 1994.
(F) Powers of Attorney are contained on the signature
page of Post-Effective Amendment No. 74 on Form
N-1A (File No. 2-10653) filed on September 10,
1993.
(G) Transfer Agency Agreement with respect to CGM
Realty Fund is contained in Post-Effective
Amendment No. 78 on Form N-1A (File No. 2-10653)
filed on November 8, 1994.
(10) (A) Opinion and consent of counsel with respect to
shares of CGM Mutual Fund is contained in
Post-Effective Amendment No. 59 on Form N-1A (File
No. 2-10653) filed on April 30, 1986.
(B) Opinion and consent of counsel with respect to
shares of CGM Fixed Income Fund is contained in
Post-Effective Amendment No. 69 on Form N-1A (File
No. 2-10653) filed on December 23, 1991.
(C) Opinion and consent of counsel with respect to
shares of CGM American Tax Free Fund is contained
in Post-Effective Amendment No. 74 on Form N-1A
(File No. 2-10653) filed on September 10, 1993.
(D) Opinion and consent of counsel with respect to
shares of CGM Realty Fund is contained in
Post-Effective Amendment No. 76 on Form N-1A (File
No. 2-10653) filed on March 14, 1994.
(11) Consent of independent accountants is filed herewith.
(12) None.
(13) The annual report to shareholders of CGM Mutual Fund,
portions of which are incorporated by reference into
the Registration Statement, is included as Exhibit 13
hereto.
(14) Forms of The CGM Funds Retirement Plans are contained
in Post Effective Amendment No. 73 on Form N-1A (File
No. 2-10653) filed on April 30, 1993.
(15) None.
(16) None.
(17) Financial data schedule is filed herewith.
(18) None.
Item 25. Persons Controlled by or Under Common Control with Registrant
Information pertaining to persons controlled by or under common
control with the Registrant is hereby incorporated by reference
to the section captioned "The Fund's Investment Manager" in each
Prospectus and the section captioned "Investment Advisory and
Other Services -- Advisory Agreement" in each Statement of
Additional Information.
Item 26. Number of Holders of Securities
The following table sets forth the number of record holders of
each class of securities of the Registrant as of February 9,
1996:
<TABLE>
<CAPTION>
Number of Record
Title of Class Holders
-------------- -------
<S> <C>
Shares of Beneficial Interest, CGM Mutual Fund 76,856
Shares of Beneficial Interest, CGM Fixed Income Fund 2,301
Shares of Beneficial Interest, CGM American Tax Free Fund 1,087
Shares of Beneficial Interest, CGM Realty Fund 5,427
</TABLE>
Item 27. Indemnification
See Article 4 of the Trust's By-Laws which is incorporated herein
by reference to Post-Effective Amendment No. 66 on Form N-1A
(File No. 2-10653) filed on May 1, 1989. In addition, the Trust
maintains a trustees and officers liability insurance policy with
maximum coverage of $5 million under which the Trust and its
trustees and officers will be named insureds.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the Trust's
By-Laws, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against the public
policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Capital Growth Management Limited Partnership ("CGM"), the
investment manager of CGM Mutual Fund, CGM Fixed Income Fund, CGM
American Tax Free Fund and CGM Realty Fund, provides investment
advice to a number of other registered investment companies and
to other organizations and individuals.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents
required by the specified rules:
(a) Registrant
Rule 31a-1(a)(4); Rule 31a-1(d); Rule 31a-2(a); Rule 31a-2(c)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a); Rule 31a-1(b)(1), (2), (3), (5), (6), (7),
(8); Rule 31a-2(a)
(c) Capital Growth Management Limited Partnership
One International Place
Boston, Massachusetts 02110
Rule 31a-1(a); Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f);
Rule 31a-2(a); Rule 31a-2(e)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 as though such provision of the
Act were applicable to the Registrant, except that the request
referred to therein may only be made by shareholders who hold in
the aggregate at least one percent of the outstanding shares of
the Registrant or shares with an aggregate net asset value of
$25,000.
(b) The Registrant undertakes, with respect to CGM Mutual Fund, CGM
Fixed Income Fund, CGM American Tax Free Fund and CGM Realty
Fund, to furnish, upon request and without charge, to each person
to whom a fund's prospectus is delivered, a copy of such fund's
latest annual report to shareholders.
<PAGE>
CGM TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Boston, and the Commonwealth of
Massachusetts, on the 16th day of February, 1996.
CGM Trust
By: /s/ Robert L. Kemp
--------------------------
Robert L. Kemp
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to this Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert L. Kemp President (Principal Executive February 16, 1996
- ------------------------------- Officer) and Trustee
Robert L. Kemp
/s/ Frank N. Strauss Treasurer (Principal Financial February 20, 1996
- ------------------------------- and Accounting Officer)
Frank N. Strauss
* Trustee February 16, 1996
- -------------------------------
Peter O. Brown
* Trustee February 16, 1996
- -------------------------------
Nicholas J. Grant
* Trustee February 16, 1996
- -------------------------------
G. Kenneth Heebner
* Trustee February 16, 1996
- -------------------------------
Robert B. Kittredge
* Trustee February 16, 1996
- -------------------------------
Laurens MacLure
* Trustee February 16, 1996
- -------------------------------
James Van Dyke Quereau, Jr.
* Trustee February 16, 1996
- -------------------------------
J. Baur Whittlesey
* By: /s/ Robert L. Kemp
----------------------
Attorney-In-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ------ ------- -------------
11 Consent of Independent Accountants
13 Annual Report to Shareholders of CGM Mutual Fund
17 Financial Data Schedule
152768.c3
<PAGE>
Exhibit 99.11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Statement of
Additional Information and Prospectus of CGM Mutual Fund constituting part of
this Post-Effective Amendment No. 80 to the registration statement on Form N-1A
(the "Registration Statement") of CGM Trust of our report dated February 6,
1996, relating to the financial statements and the financial highlights of CGM
Mutual Fund which appears in the annual report for such Fund; which are also
incorporated by reference in the Registration Statement. We also consent to the
references to us under the heading "Financial Highlights" in the Prospectus and
under the heading "Independent Accountants" in the Statement of Additional
Information.
/s/ Price Waterhouse
- --------------------
Price Waterhouse LLP
Boston, Massachusetts
February 26, 1996
<PAGE>
Exhibit 99.13
TO OUR SHAREHOLDERS:
- ------------------------------------------------------------------------------
CGM Mutual Fund increased 24.3% during 1995 compared to the Standard and Poor's
500 Index which returned 37.5% and the Merrill Lynch Master Bond Index which
rose 18.5% for the year. During the fourth quarter of 1995, CGM Mutual Fund
increased 1.2% while the S&P 500 rose 6.0% and the Merrill Lynch Master Bond
Index increased 4.3%.
THE YEAR IN REVIEW AND INVESTMENT OUTLOOK
1995 was a banner year both for the U.S. economy and the securities markets.
Favorable trends established the previous year prevailed throughout 1995, almost
without exception. We continued to enjoy strong job growth, increased
productivity and higher corporate profits combined with moderate inflation as
measured by the Consumer Price Index. In November, the CPI stalled at October's
level, a positive indicator cited by the Federal Reserve Board as a reason to
lower the Federal Funds rate a quarter of a percent on December 19. The economy
is slowing and the Federal Reserve Board may well be calling for short-term
interest rates to come down in order to stimulate business.
The U.S. business outlook is also influenced by trends in other industrialized
nations, many of which are already lowering interest rates in an effort to spark
sluggish economies. Such precedent permits U.S. policymakers latitude in
reducing domestic short-term rates from current relatively high levels.
While the economic slowing will raise some questions about future corporate
profits, those companies with prospects for increased earnings could find that
lower rates mean higher stock prices. Last year was a case in point when a surge
in corporate profits occurred while long-term interest rates declined producing
the sensational equity gains of 1995. Although we expect the combination of
further gains in corporate profits and slightly lower interest rates will lead
to higher securities markets, we anticipate increases will be more modest and
the overall environment, more volatile than that of 1995.
PORTFOLIO STRATEGY
The CGM Mutual Fund portfolio mix remained roughly 25% fixed income securities
and 75% common stocks or securities convertible into common stocks during 1995.
A major position in real estate investment trusts was cut back from nearly one
quarter of the Fund at the beginning of the year to less than 5% of the
portfolio at mid-year where it remains today. Commodity cyclical companies,
which constituted more than 20% of the portfolio early in 1995, were eliminated
and proceeds from those sales as well as the real estate investment trusts were
invested in banks, airlines and technology stocks. The technology stocks were
sold later in the year, but the Fund continued to hold major positions in bank
and airline stocks at year-end, attesting to a continued positive outlook for
these industries.
Fund performance was favorably affected by investments in bank, airline and
technology stocks during 1995 and negatively influenced by real estate
investment trusts and treasury bills.
The CGM Mutual Fund portfolio is approximately 25% invested in government and
corporate bonds with the remainder of holdings in companies with a promising
earnings outlook. The three largest company holdings are Chemical Banking
Corporation, Citicorp and Northwest Airlines Corporation.
/s/ Robert L. Kemp
Robert L. Kemp
President
/s/ G. Kenneth Heebner
G. Kenneth Heebner
Portfolio Manager
January 10, 1996
<PAGE>
COMPARISONS OF CHANGE IN VALUE OF $10,000 INVESTMENT IN CGM MUTUAL FUND,
THE UNMANAGED S&P 500, AND THE MERRILL LYNCH MASTER BOND INDEX
assuming reinvestment of dividends and capital gains
---------------------------------
Average Annual Total Return
---------------------------------
1 year 5 year 10 year
24.3% 15.4% 13.9%
---------------------------------
Past performance is no indication
of future results
---------------------------------
CGM Unmanaged Merrill
10000.0 10000.0 10000.0
1986 12510.0 11870.0 11520.0
1987 14224.0 12452.0 11797.0
1988 14679.0 14519.0 12740.0
1989 17864.0 19107.0 14549.0
1990 18061.0 18514.0 15873.0
1991 25448.0 24143.0 18397.0
1992 27000.0 25977.0 19795.0
1993 32886.0 28601.0 21775.0
1994 29686.0 28976.0 21165.0
1995 36873.0 39842.0 25081.0
CGM MUTUAL FUND PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
G. Kenneth Heebner has managed CGM Mutual Fund since 1981. In 1989, 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
Mutual Fund. In addition to CGM Mutual Fund, Mr. Heebner currently manages CGM
Capital Development Fund and CGM Realty 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, 1995
CGM
MUTUAL FUND
-----------
10 Years ........................................................ +268.7%
5 Years ........................................................ +104.3
1 Year ......................................................... + 24.3
3 Months ....................................................... + 1.2
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>
- -------------------------------------------------------------------------------
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
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 MUTUAL FUND
- --------------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1970 -- DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1970
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-- 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 Wnich Would Represent
--------------------------- ----------------------------------
The Value of A Cumulative
Your Original Change
The 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 1970 = 100.0
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1970 $13.89 100.0
1971 15.37 $ 0.35 $ 0.41 $16.21 + 16.7 116.7
1972 16.20 0.35 0.42 17.98 + 10.9 129.4
1973 14.20 0.42 0.42 16.63 - 7.5 119.7
1974 10.27 -- 0.46 12.51 - 24.8 90.0
1975 12.44 -- 0.43 15.70 + 25.5 113.0
1976 13.96 -- 0.43 18.20 + 15.9 131.0
1977 12.88 -- 0.52 17.45 - 4.1 125.6
1978 12.83 -- 0.65 18.31 + 4.9 131.8
1979 13.81 -- 0.72 20.82 + 13.7 149.9
1980 14.85 -- 0.88 23.90 + 14.8 172.1
1981 13.90 -- 0.97 23.92 + 0.1 172.3
1982 18.16 -- 1.09 33.73 + 41.0 242.9
1983 18.81 -- 1.09 37.07 + 9.9 266.9
1984 17.01 1.86 0.95 39.41 + 6.3 283.7
1985 21.53 -- 1.08 53.01 + 34.5 381.6
1986 22.86 2.75 0.94 66.32 + 25.1 477.4
1987 20.40 4.52 1.06 75.41 + 13.7 542.8
1988 19.94 -- 1.10 77.82 + 3.2 560.2
1989 22.34 0.95 0.93 94.71 + 21.7 681.8
1990 21.64 -- 0.93* 95.75 + 1.1 689.3
1991 26.80 2.64 0.97 134.91 + 40.9 971.2
1992 26.02 1.42 0.93 143.14 + 6.1 1030.4
1993 28.88 1.93 0.86 174.34 + 21.8 1255.0
1994 25.05 -- 1.04 157.43 - 9.7 1133.3
1995 29.43 0.89 0.77 195.69 + 24.3 1408.7
------ ------ ------
Totals $18.08 $20.05 +1308.7
- --------------------------------------------------------------------------------------------------------------------------
*Includes $0.05 per share distributed from paid-in capital.
The table above covers the period from December 31, 1970 to December 31, 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>
CGM MUTUAL FUND
- -------------------------------------------------------------------------------
INVESTMENTS AS OF DECEMBER 31, 1995
COMMON STOCKS -- 73.4% OF TOTAL NET ASSETS
SHARES VALUE(A)
------ --------
AEROSPACE -- 4.8%
Boeing Company ............................ 703,000 $ 55,097,625
------------
AIRLINES -- 13.6%
Northwest Airlines Corporation(b) ......... 1,590,000 81,090,000
UAL Corporation (b) ....................... 427,400 76,290,900
------------
157,380,900
------------
BANKS -- MONEY CENTER -- 17.2%
Bankers Trust New York Corporation ........ 274,000 18,221,000
Chemical Banking Corporation .............. 1,580,000 92,825,000
Citicorp .................................. 1,307,500 87,929,375
------------
198,975,375
------------
CHEMICALS -- SPECIALTY -- 10.8%
IMC Global, Inc. .......................... 1,620,000 66,217,500
Potash Corporation of Saskatchewan, Inc. .. 820,000 58,117,500
------------
124,335,000
------------
DRUGS -- 2.1%
Eli Lilly & Company ....................... 70,000 3,937,500
Merck & Company, Inc. ..................... 300,000 19,725,000
------------
23,662,500
------------
FOOD -- RETAILERS/WHOLESALERS -- 5.9%
Philip Morris Companies, Inc. ............. 755,000 68,327,500
------------
FREIGHT TRANSPORTATION -- 3.9%
Burlington Northern Santa Fe Corporation .. 573,000 44,694,000
------------
MISCELLANEOUS -- 6.6%
NIKE, Inc. ................................ 1,096,000 76,309,000
------------
PERIPHERALS -- 4.3%
Seagate Technology(b) ..................... 1,040,000 49,400,000
------------
REAL ESTATE INVESTMENT TRUSTS -- 4.2%
Felcor Suite Hotels, Inc. ................. 1,763,500 48,937,125
------------
TOTAL COMMON STOCKS (Identified Cost
$711,171,454) ............................. 847,119,025
------------
See accompanying notes to financial statements
<PAGE>
CGM MUTUAL FUND
- -----------------------------------------------------------------------------
INVESTMENTS AS OF DECEMBER 31, 1995 (CONTINUED)
BONDS -- 25.4%
FACE
AMOUNT VALUE(A)
------ --------
INDUSTRIAL BONDS -- 4.3%
Kaiser Aluminum & Chemical Corporation,
12.75%, 2/01/03 ......................... $20,000,000 $ 21,900,000
Rohr, Inc., 11.625%, 5/15/03 .............. 5,000,000 5,362,500
Stone Container Corporation,
9.875%, 2/01/01 ......................... 23,000,000 22,367,500
--------------
49,630,000
--------------
UNITED STATES TREASURY -- 21.1%
United States Treasury Bonds,
7.625%, 2/15/25 ......................... 199,616,000 244,092,441
--------------
TOTAL BONDS (Identified Cost $290,199,718) .. 293,722,441
--------------
SHORT-TERM INVESTMENT -- 0.3%
Chevron Oil Finance Company, 5.75%,
1/02/96 (Cost $3,210,000) ............... 3,210,000 3,210,000
--------------
TOTAL INVESTMENTS -- 99.1% (Identified Cost
$1,004,581,172)(c) .................................... 1,144,051,466
Cash and Receivables .................................. 91,260,128
Liabilities ........................................... (80,872,835)
--------------
TOTAL NET ASSETS -- 100% ................................ $1,154,438,759
==============
(a) See Note 1A.
(b) Non-income producing security.
(c) Federal Tax Information: At December 31, 1995, the net unrealized
appreciation on investments based on cost of $1,007,248,965 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 ..................................... $150,095,980
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ........................................ (13,293,479)
------------
Net unrealized appreciation ......................... $136,802,501
============
See accompanying notes to financial statements
<PAGE>
CGM MUTUAL FUND
- ------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
December 31, 1995
ASSETS
Investments at value (Identified cost --
$1,004,581,172).......................... $1,144,051,466
Cash ...................................... 3,047
Receivable for:
Securities sold ......................... $80,910,730
Shares of the Fund sold ................. 827,232
Dividends and interest .................. 9,519,119 91,257,081
----------- --------------
1,235,311,594
--------------
LIABILITIES
Payable for:
Securities purchased .................... $ 74,370,252
Shares of the Fund redeemed ............. 2,158,579
Distributions declared .................. 3,201,721 79,730,552
------------
Accrued expenses:
Management fees ......................... 668,017
Trustees' fees .......................... 63,560
Accounting and Administration ........... 6,667
Other expenses .......................... 404,039 1,142,283
------------ --------------
80,872,835
--------------
NET ASSETS ................................................ $1,154,438,759
==============
Net Assets consist of:
Capital paid-in ....................................... $1,017,636,258
Accumulated net realized loss ......................... (2,667,793)
Unrealized appreciation on investments -- net ......... 139,470,294
--------------
NET ASSETS ................................................ $1,154,438,759
==============
Shares of beneficial interest outstanding, no par value . 39,230,204
==============
Net asset value per share* .............................. $29.43
==============
*Shares of the Fund are sold and redeemed at net asset value
($1,154,438,759 / 39,230,204).
See accompanying notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
INVESTMENT INCOME
Income
Dividends (net of withholding tax of $334,123) .......... $ 17,871,907
Interest ................................................ 20,822,030
------------
38,693,937
------------
Expenses
Management fees ......................................... 7,637,552
Trustees' fees .......................................... 63,906
Accounting and Administration ........................... 80,000
Custodian ............................................... 185,000
Transfer agent .......................................... 1,824,000
Audit and tax services .................................. 35,950
Legal ................................................... 52,000
Printing ................................................ 132,700
Registration ............................................ 116,050
Miscellaneous ........................................... 21,846
------------
10,149,004
------------
Net investment income ..................................... 28,544,933
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments -- net ..................... 64,726,578
Unrealized appreciation -- net .......................... 149,522,113
------------
Net gain on investments ................................. 214,248,691
------------
NET INCREASE IN ASSETS FROM OPERATIONS ...................... $242,793,624
============
See accompanying notes to financial statements
<PAGE>
CGM MUTUAL FUND
- --------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994
------------- -------------
OPERATIONS
Net investment income ........ $ 28,544,933 $ 48,443,314
Net realized gain (loss) from
investments ................ 64,726,578 (34,802,351)
Unrealized appreciation
(depreciation) ............. 149,522,113 (129,938,895)
------------- -------------
Increase (decrease) in net
assets from operations ... 242,793,624 (116,297,932)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ... (30,206,254) (43,781,553)
From net realized gain on
investment ................. (33,830,922) --
------------- -------------
(64,037,176) (43,781,553)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares . 99,581,131 425,388,301
Net asset value of shares
issued in connection with
reinvestment of:
Dividends from net
investment income ........ 27,004,558 39,044,764
Dividends from net realized
gain ..................... 31,302,777 --
------------- -------------
157,888,466 464,433,065
Cost of shares redeemed ...... (245,581,485) (188,093,510)
------------- -------------
Increase (decrease) in net
assets derived from
capital share transactions (87,693,019) 276,339,555
------------- -------------
Total increase in net assets . 91,063,429 116,260,070
NET ASSETS
Beginning of period .......... 1,063,375,330 947,115,260
------------- -------------
End of the period (including
undistributed net investment
income of $0 and $4,784,966,
respectively) .............. $1,154,438,759 $1,063,375,330
============== ==============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ... 3,595,533 15,228,603
Issued in connection with
reinvestment of:
Dividends from net
investment income ........ 945,112 1,506,420
Distributions from net
realized gain ............ 1,063,635 --
------------- -------------
5,604,280 16,735,023
Redeemed ................... (8,827,153) (7,079,826)
------------- -------------
Net change ................. (3,222,873) 9,655,197
========== =========
See accompanying notes to financial statements
<PAGE>
CGM MUTUAL FUND
- -------------------------------------------------------------------------------
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
For a share of the Fund outstanding throughout each period:
Net asset value at the beginning of period ................ $25.05 $28.88 $26.02 $26.80 $21.64
------ ------ ------ ------ ------
Net investment income ..................................... 0.73 1.09 0.92 0.93 0.97
Dividends from net investment income ...................... (0.77) (1.04) (0.86) (0.93) (0.97)
Net realized and unrealized gain (loss) on investments .... 5.31 (3.88) 4.73 0.64 7.80
Distribution from net realized gain ....................... (0.89) -- (1.81) (1.42) (2.64)
Distribution in excess of net realized gain ............... -- -- (0.12) -- --
Distribution from paid-in capital ......................... -- -- -- -- --
------ ------ ------ ------ ------
Net increase (decrease) in net asset value ................ 4.38 (3.83) 2.86 (0.78) 5.16
------ ------ ------ ------ ------
Net asset value at end of period .......................... $29.43 $25.05 $28.88 $26.02 $26.80
====== ====== ====== ====== ======
Total Return (%) .......................................... 24.3 -9.7 21.8 6.1 40.9
Ratios:
Operating expenses to average net assets (%) .............. 0.91 0.92 0.93 0.93 0.93
Net investment income to average net assets (%) ........... 2.55 4.39 3.45 3.74 3.80
Portfolio turnover (%) .................................... 291 173 97 121 201
Net assets at end of period (in thousands) ($) ............ 1,154,439 1,063,375 947,115 548,630 401,887
See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM MUTUAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1995
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 a diversified, open-end management investment company. The Trust has
three other Funds whose financial statements are not presented herein. The
Fund's objective is reasonable long-term capital appreciation with a prudent
approach to protection of capital from undue risks. Current income is a
consideration in the selection of the Fund's portfolio securities, but it is not
a controlling factor.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
financial statements are prepared in conformity with generally accepted
accounting principles which require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
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 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. 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. Short-term investments having a maturity of sixty
days or less are stated at amortized cost, which approximates value.
<PAGE>
CGM MUTUAL FUND
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
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. 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.
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. Dividend income received by the Fund from its
investment in REITs may be comprised, for tax purposes, of ordinary income,
capital gains, and return of capital. These dividends, when distributed by
the Fund, are passed through to the Fund's shareholders with these same tax
characteristics. For 1995, return of capital and capital gain distributions
from REITs totaled $2,067,256 and $99,891, respectively, resulting in a
reduction of the Fund's dividend income and an increase in its realized and
unrealized gain on investments. 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.
2. PURCHASES AND SALES OF SECURITIES -- For the year ended December 31, 1995,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $2,214,583,140 and
$2,305,359,349, respectively. Purchases and sales of United States government
obligations aggregated $1,158,883,931 and $629,235,111, respectively.
3. A. MANAGEMENT FEES -- During the year ended December 31, 1995, the Fund
incurred management fees of $7,637,552, 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 between the Fund and
CGM provides for a fee at the annual rate of 0.75% on the first $200
million of the Fund's average daily net assets, 0.70% of the next $300
million and 0.65% of such assets in excess of $500 million.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting and
other services for the Fund. The expense of those services, which were
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.
The Accounting and Administration expense of $80,000 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 Fund at
the rate of $10,000 per year plus travel expenses for each meeting
attended. In addition, the chairman of the Independent Trustees
Committee receives an annual retainer of $1,500.
<PAGE>
CGM MUTUAL FUND
- ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of CGM Mutual 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 Mutual Fund at December 31,
1995, the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated in conformity with generally
accepted accounting principles. These financial statements and the 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 generally accepted
auditing standards 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, 1995 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 6, 1996
- ------------------------------------------------------------------------------
SHAREHOLDER MEETING -- DECEMBER 29, 1995
(unaudited)
On December 29, 1995 the Fund had a Special Meeting of its Shareholders. At that
meeting, Shareholders approved an Advisory Agreement between the Fund and
Capital Growth Management Limited Partnership, with no change from the terms of
the existing agreement and no change in the operation and management of the
Fund, (by a share vote of 20,401,894.104 in favor, 284,638.075 against and
840,815.905 abstentions) and ratified the selection of Price Waterhouse LLP as
the Fund's independent accountants for the year ending December 31, 1995 (by a
share vote of 20,737,434.922 in favor, 207,742.727 against and 582,170.435
abstentions).
<PAGE>
INVESTMENT ADVISER
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110
- ------------------------------------------------------------------------------
TELEPHONE NUMBERS
For information about:
o Account Procedures and Status
o Redemptions
o Exchanges
Call 800-343-5678
o New Account Procedures
o Prospectuses
o 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.
MAR95 Printed in U.S.A.
CGM
MUTUAL FUND
66th Annual Report
December 31, 1995
A No-Load Fund
[Fencer Logo]
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000060335
<NAME> CGM TRUST
<SERIES>
<NUMBER> 1
<NAME> CGM MUTUAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1004581172
<INVESTMENTS-AT-VALUE> 1144051466
<RECEIVABLES> 91257081
<ASSETS-OTHER> 3047
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1235311594
<PAYABLE-FOR-SECURITIES> 74370252
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6502583
<TOTAL-LIABILITIES> 80872835
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1017636258
<SHARES-COMMON-STOCK> 39230204
<SHARES-COMMON-PRIOR> 42453077
<ACCUMULATED-NII-CURRENT> 0
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