CGM TRUST, N-30D, 1997-08-08

CGM TRUST
N-30D, 1997-08-08

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<PAGE>
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------

CGM Fixed Income Fund increased 3.4% during the second quarter of 1997 compared
to the Merrill Lynch Master Bond Index which returned 3.7% for the same period.
Over the first six months of the year, CGM Fixed Income Fund increased 2.0%
while the Merrill Lynch Master Bond Index returned 3.1%.

"Idyllic" is the word for the present combination of economic variables
influencing the securities markets. Increases in the Gross Domestic Product as
well as corporate profits, productivity and employment levels are significant.
Additionally the inflation rate, as reported by the Producer Price Index and the
Consumer Price Index, is moderate. Corporate profit margins are reaching 6% of
the Gross Domestic Product, a level not sustained since 1968.

While overall business activity is strong, Retail Sales and Housing Starts have
declined for three consecutive months to hold at bay an over-heating economy and
subsequent excesses. Though no tangible indication of a problem has emerged, the
tight labor market and potential for wage inflation remain a concern which
further expansion could exacerbate.

Taking its cue from the near-perfect economic picture and high corporate profit
levels, the equity market has placed generous valuations on many companies which
in turn, has sent the leading market averages to record highs, month after month
with only minor interruptions. Most historical market benchmarks have been
surpassed. Though prospects loom of increased market volatility and fewer
attractive securities from which to select, the long-term government bond is
back down to year-end 1996 levels at 6.6% after reaching 7.15% at March 31st.
Should long rates continue to fluctuate in this range, the market could remain
strong until such time as inflation strikes in earnest or the Federal Reserve
Board takes action in anticipation of the same.

The CGM Fixed Income Fund portfolio remained conservative in terms of duration
and maturity during the second quarter and consequently, slightly underperformed
its peers. Convertible and high yield securities continued to provide the best
returns for the quarter as the stock market rallied and rates fell. In addition
to U. S. Treasury Bills, which represent 6.8% of the portfolio, CGM Fixed Income
Fund's three largest holdings are Southdown, Inc., Moran Transportation Company
and Microsoft Corporation.

/s/ Robert L. Kemp
Robert L. Kemp
President

July 7, 1997
<PAGE>

INVESTMENT PERFORMANCE
(unaudited)
- ------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 1997

CGM FIXED THE FUND'S AVERAGE
INCOME FUND ANNUAL TOTAL RETURN
--------------- -----------------------
5 Years ......................... +71.7% +11.4%
1 Year .......................... + 8.8 + 8.8
3 Months ........................ + 3.4 --

The Fund's average annual total return from inception (March 17, 1992) through
June 30, 1997 is +11.6%. The adviser has agreed to limit the Fund's total
operating expenses to 0.85% of its average net assets annually through December
31, 1997. Otherwise the total return since inception, and for the five-year,
one-year and three-month periods ended June 30, 1997, would have been lower.

The performance data contained in the report represent past performance, which
is no guarantee of future results. The investment return and the principal value
of an investment in the Fund will fluctuate so that investors' shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>

CGM FIXED INCOME FUND
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES

PETER O. BROWN
NICHOLAS J. GRANT
G. KENNETH HEEBNER
ROBERT L. KEMP
ROBERT B. KITTREDGE
LAURENS MACLURE
JAMES VAN DYKE QUEREAU, JR.
J. BAUR WHITTLESEY

OFFICERS

ROBERT L. KEMP, President
G. KENNETH HEEBNER, Vice President
LESLIE A. LAKE, Vice President and Secretary
KATHLEEN S. HAUGHTON, Vice President
MARTHA I. MAGUIRE, Vice President
JANICE H. SAUL, Vice President
W. DUGAL THOMAS, Vice President
MARY L. STONE, Assistant Vice President
FRANK N. STRAUSS, Treasurer

INVESTMENT ADVISER

CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP
Boston, Massachusetts 02110

TRANSFER AND DIVIDEND PAYING
AGENT AND CUSTODIAN OF ASSETS

STATE STREET BANK AND TRUST COMPANY
Boston, Massachusetts 02102

SHAREHOLDER SERVICING AGENT
FOR STATE STREET BANK AND
TRUST COMPANY

BOSTON FINANCIAL DATA SERVICES, INC.
P.O. Box 8511
Boston, Massachusetts 02266-8511
<PAGE>
<TABLE>
CGM FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1997
(unaudited)

BONDS, NOTES AND BILLS -- 60.9% OF TOTAL NET ASSETS
<CAPTION>
FACE
AMOUNT VALUE(a)
------ --------
<S> <C> <C>
BEVERAGES AND TOBACCO -- 2.4%
Panamerican Beverages, Inc., 8.125%, 4/01/03 ............... $1,000,000 $ 1,035,030
-----------
CHEMICALS -- SPECIALTY -- 1.7%
Polymer Group, Inc., 12.25%, 7/15/02 ....................... 667,000 733,700
-----------
ENERGY -- 3.2%
Mitchell Energy & Development Corp., 8.00%, 7/15/99 ........ 300,000 306,969
Mitchell Energy & Development Corp., 9.25%, 1/15/02 ........ 1,000,000 1,077,430
-----------
1,384,399
-----------
HOUSING AND BUILDING MATERIALS -- 3.7%
Pulte Home Corp., 10.125%, 7/15/99 ......................... 1,500,000 1,592,175
-----------
INSURANCE -- 8.0%
Conseco, Inc., 8.125%, 2/15/03 ............................. 1,500,000 1,557,465
Leucadia National Corp., 7.75%, 8/15/13 .................... 2,000,000 1,949,560
-----------
3,507,025
-----------
MEDIA -- 5.6%
Adelphia Communications, Co., 12.50%, 5/15/02 .............. 250,000 265,000
Innova Sa De, 12.875%, 4/01/07 ............................. 1,000,000 1,055,000
TKR Cable, Inc., 10.50%, 10/30/07 .......................... 1,000,000 1,102,850
-----------
2,422,850
-----------
METALS AND MINING -- 1.1%
Freeport McMoran Copper, 7.50%, 11/15/06 ................... 500,000 496,410
-----------
OFFICE EQUIPMENT AND SUPPLY -- 4.2%
Dictaphone Corp., 11.75%, 8/01/05 .......................... 2,000,000 1,840,000
-----------
PLASTICS -- 2.5%
Berry Plastics Corp., 12.25%, 4/15/04 ...................... 1,000,000 1,090,000
-----------
REAL ESTATE INVESTMENT TRUSTS -- 9.7%
Liberty Property Limited Partnership, 8.00%, 7/01/01
(Convertible) ............................................ 1,700,000 2,108,000
Pacific Gulf Properties, Inc., 8.375%, 2/15/01 (Convertible) 1,850,000 2,118,250
-----------
4,226,250
-----------
TELEPHONE -- 2.3%
Econophone, Inc., 13.50%, 7/15/07 .......................... 1,000,000 1,010,000
-----------
TRANSPORTATION -- 5.0%
Moran Transportation Co., 11.75%, 7/15/04 .................. 2,000,000 2,201,250
-----------
See accompanying notes to financial statements
<PAGE>
CGM FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1997 (CONTINUED)
(unaudited)
BONDS, NOTES AND BILLS -- (CONTINUED)
FACE
AMOUNT VALUE(a)
------ --------
U.S. GOVERNMENT -- 9.1%
United States Treasury Bills, 4.965%, 8/28/97 .............. $ 3,000,000 $ 2,975,785
United States Treasury Notes, 6.25%, 6/30/02 ............... 1,000,000 994,060
-----------
3,969,845
-----------
UTILITIES -- 2.4%
Great Lakes Power, Inc., 9.00%, 8/01/04 .................... 1,000,000 1,068,270
-----------
TOTAL BONDS, NOTES AND BILLS (Identified Cost $25,893,672) ......... 26,577,204
-----------
PREFERRED STOCKS -- 36.7%
SHARES
------
Avalon Properties, Inc., $2.25 ............................. 61,000 1,578,375
Beacon Properties Corp., $2.245 ............................ 50,000 1,259,375
Conseco Financing Trust, $2.29 ............................. 22,500 583,594
DLJ Capital Trust, $2.105 .................................. 40,000 1,020,000
Duquesne Capital LP, $2.094 ................................ 10,000 252,500
Hartford Capital, $2.088 ................................... 30,000 768,750
Microsoft Corp., $2.196 (Convertible) ...................... 24,900 2,166,300
Placer Dome, Inc., $2.156 .................................. 60,000 1,481,250
Rouse Capital, $2.313 ...................................... 59,225 1,517,640
Southdown, Inc., $2.875 (Convertible) ...................... 39,000 2,583,750
UDS Capital, $2.08 ......................................... 30,000 741,000
Vornado Realty Trust, $3.25 (Convertible) .................. 39,000 2,067,000
-----------
TOTAL PREFERRED STOCKS (Identified Cost $15,622,132) ............... 16,019,534
-----------
COMMON STOCK WARRANTS -- 0%
BPC Holdings Corp. Exp 4/15/04 (Identified Cost $0) ........ 1,000 10,000
-----------
FACE
AMOUNT
------
SHORT-TERM INVESTMENT -- 2.6%
Chevron Oil Finance Co., 5.80%, 7/01/97 (Cost $1,150,000) .. $ 1,150,000 1,150,000
-----------
TOTAL INVESTMENTS -- 100.2% (Identified Cost $42,665,804)(b) .................. 43,756,738
Cash and Receivables ........................................................ 2,002,971
Liabilities ................................................................. (2,103,274)
-----------
TOTAL NET ASSETS -- 100.0% .................................................... $43,656,435
===========
(a) See Note 1A.
(b) Federal Tax Information: At June 30, 1997 the net unrealized appreciation of
investments based on cost of $42,665,804 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 ..................................... $ 1,191,844
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value ..................................... (100,910)
-----------
Net unrealized appreciation ................................................... $ 1,090,934
===========
See accompanying notes to financial statements

<PAGE>

</TABLE>
CGM FIXED INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES

June 30, 1997
(unaudited)

ASSETS
Investments at value (Identified cost -- $42,665,804)........... $43,756,738
Cash ........................................................... 2,282
Receivable for:
Securities sold ................................... $1,064,688
Shares of the Fund sold ........................... 137,784
Dividends and interest ............................ 798,217 2,000,689
---------- -----------
45,759,709
-----------
LIABILITIES
Payable for:
Securities purchased .............................. $1,993,607
Shares of the Fund redeemed ....................... 53,199 2,046,806
----------
Accrued expenses:
Management fees ................................... 6,868
Trustees' fees .................................... 6,096
Accounting and
Administration .................................. 875
Other expenses .................................... 42,629 56,468
---------- -----------
2,103,274
-----------
NET ASSETS ...................................................... $43,656,435
===========
Net Assets consist of:
Capital paid-in ............................................... $42,782,087
Undistributed net investment income ........................... 286,586
Accumulated net realized loss ................................. (503,172)
Unrealized appreciation on investments -- net ................. 1,090,934
-----------
NET ASSETS ...................................................... $43,656,435
===========
Shares of beneficial interest outstanding, no par value ....... 3,791,867
===========
Net asset value per share* ..................................... $11.51
===========

*Shares of the Fund are sold and redeemed at net asset value
($43,656,435 / 3,791,867).

See accompanying notes to financial statements
<PAGE>
CGM FIXED INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF
OPERATIONS

Six Months Ended June 30, 1997
(unaudited)

INVESTMENT INCOME
Income
Dividends .................................................. $ 391,823
Interest ................................................... 1,223,120
----------
1,614,943
----------
Expenses
Management fees ............................................ 136,290
Trustees' fees ............................................. 12,000
Accounting and Administration .............................. 5,250
Custodian .................................................. 28,000
Transfer agent ............................................. 36,000
Audit and tax services ..................................... 14,250
Legal ...................................................... 15,600
Printing ................................................... 10,800
Registration ............................................... 11,500
Amortization of organization expense ....................... 3,139
Miscellaneous .............................................. 480
----------
273,309
Less expenses assumed by the investment adviser .............. (95,084)
----------
Net investment income ........................................ 1,436,718
----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized loss on investments -- net ......................... (500,350)
Unrealized depreciation -- net .............................. (98,585)
----------
Net loss on investments ..................................... (598,935)
----------
NET INCREASE IN ASSETS FROM OPERATIONS ....................... $ 837,783
==========

See accompanying notes to financial statements
<PAGE>
<TABLE>
CGM FIXED INCOME FUND
- ----------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income .................................... $ 1,436,718 $ 2,360,314
Net realized gain (loss) from investments ................ (500,350) 4,650,369
Unrealized depreciation .................................. (98,585) (1,857,988)
----------- -----------
Increase in net assets from operations ................. 837,783 5,152,695
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................................... (1,181,972) (2,338,686)
Net realized gain on investments ......................... -- (2,496,647)
----------- -----------
(1,181,972) (4,835,333)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ............................. 7,986,648 11,932,341
Net asset value of shares issued in connection with
reinvestment of:
Dividends from net investment income ................... 951,030 1,891,848
Distributions from net realized gain ................... -- 2,175,884
----------- -----------
8,937,678 16,000,073
Cost of shares redeemed .................................. (5,582,875) (7,464,588)
----------- -----------
Increase in net assets derived from capital share
transactions ......................................... 3,354,803 8,535,485
----------- -----------
Total increase in net assets ............................. 3,010,614 8,852,847

NET ASSETS
Beginning of period ...................................... 40,645,821 31,792,974
----------- -----------
End of period (including undistributed net investment
income of $286,586 and $31,840, respectively) .......... $43,656,435 $40,645,821
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ............................... 693,257 992,699
Issued in connection with reinvestment of:
Dividends from net investment income ................... 83,372 157,948
Distributions from net realized gain ................... -- 187,576
----------- -----------
776,629 1,338,223
Redeemed ............................................... (487,369) (622,495)
----------- -----------
Net change ............................................. 289,260 715,728
=========== ===========

See accompanying notes to financial statements
</TABLE>

<PAGE>
<TABLE>
CGM FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SIX MONTHS FOR THE PERIOD
ENDED YEAR ENDED DECEMBER 31, MARCH 17, 1992(c)
JUNE 30, 1997 -------------------------------------------------------- THROUGH
(UNAUDITED) 1996 1995 1994 1993 DECEMBER 31, 1992
----------------- -------------- ------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
For a share of the
Fund outstanding
throughout each
period:
Net asset value at
the beginning of
period ......... $11.60 $11.41 $ 9.57 $11.17 $10.26 $10.00
------ ------ ------ ------ ------ ------
Net investment
income (a) ..... 0.39 0.77 0.70 0.73 0.67 0.50
Dividends from net
investment income (0.32) (0.77) (0.70) (0.73) (0.67) (0.49)
Net realized and
unrealized gain
(loss) on
investments .... (0.16) 0.95 1.84 (1.60) 1.23 0.40
Distribution from
net realized
gain ........... -- (0.76) -- -- (0.32) (0.13)
Distribution from
paid-in capital -- -- -- -- -- (0.02)
------ ------ ------ ------ ------ ------
Net increase
(decrease) in
net asset value (0.09) 0.19 1.84 (1.60) 0.91 0.26
------ ------ ------ ------ ------ ------
Net asset value at
the end of period $11.51 $11.60 $11.41 $ 9.57 $11.17 $10.26
====== ====== ====== ====== ====== ======
Total Return
(%) (b) ........ 2.0(d) 15.4 27.3 -8.0 18.9 9.2(d)
Ratios:
Operating expenses
to average net
assets (%) ..... 0.85(e) 0.85 0.85 0.85 0.85 0.85(e)
Operating expenses
to average net
assets before
expense
limitation (%) . 1.30(e) 1.26 1.53 1.46 2.02 3.21(e)
Net investment
income to
average net
assets (%) ..... 6.85(e) 6.53 6.46 7.00 6.30 7.29(e)
Portfolio turnover (%) 182(e) 149 148 129 149 212(e)
Average commission
rate(f) ........ $0.0700 $0.0700 -- -- -- --

Net assets at end
of period (in
thousands) ..... $43,656 $40,646 $31,793 $28,672 $32,883 $9,467

(a) Net of
reimbursement
which amounted
to ........... $ 0.02 $ 0.05 $ 0.07 $ 0.06 $ 0.12 $ 0.16
(b) The total return would have been lower had certain expenses not been reimbursed during the period.
(c) Commencement of operations.
(d) Not computed on an annualized basis.
(e) Computed on an annualized basis.
(f) SEC regulations require portfolios to disclose the average commission rate paid on trades for which commissions were
charged for fiscal years beginning on or after September 1, 1995.

See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM FIXED INCOME FUND
- -------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(unaudited)

1. The Fund is a series of CGM Trust which is organized as a Massachusetts
business trust under the laws of Massachusetts pursuant to an Agreement and
Declaration of Trust. The Trust is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Trust has
three other funds whose financial statements are not presented herein. The Fund
commenced operations on March 17, 1992. The investment objective of the Fund is
to maximize total return by investing in debt securities and preferred stock
that provide current income, capital appreciation or a combination of both
income and appreciation.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.

A. SECURITY VALUATION -- Corporate debt securities are generally valued on the
basis of valuations furnished by a pricing service authorized by the Board
of Trustees, which determines valuations for normal, institutional- size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. United States government debt
securities are valued at the current closing bid, as last reported by a
pricing service approved by the Board of Trustees. Equity securities are
valued on the basis of valuations furnished by a pricing service, authorized
by the Board of Trustees, which provides the last reported sale price for
securities listed on a national securities exchange or on the NASDAQ
national market system or, if no sale was reported and in the case of
over-the-counter securities not so listed, the last reported bid price.
Short-term investments having a maturity of sixty days or less are stated at
amortized cost, which approximates 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.

B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed) and dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Interest income is increased by the
accretion of discount. Premium is amortized against interest income with a
corresponding decrease in the cost basis. Net gain or loss on securities
sold is determined on the identified cost basis.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
are recorded by the Fund on the ex-dividend date. The classification of
income and capital gains distributions is determined in accordance with
income tax regulations. Permanent book and tax differences relating to
shareholder distributions may result in reclassifications to paid-in
capital. Undistributed net investment income, accumulated net investment
loss, or distributions in excess of net investment income may include
temporary book and tax differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
<PAGE>
CGM FIXED INCOME FUND
- -------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(unaudited)

E. ORGANIZATION EXPENSE -- Costs incurred in 1992 in connection with the Fund's
organization and registration amounting to $76,426 have been paid by the
Fund. These costs were amortized over 60 months from March 17, 1992 to March
16, 1997.

2. PURCHASES AND SALES OF SECURITIES -- For the year ended June 30, 1997,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $36,995,936 and $30,217,285,
respectively. Purchases and sales of United States government obligations
aggregated $1,951,875 and $947,969, respectively.

3. A. MANAGEMENT FEES -- During the period ended June 30, 1997, the Fund
incurred management fees of $136,290 payable to the Fund's investment
adviser, Capital Growth Management Limited Partnership (CGM), certain
officers and directors of which are also officers and trustees of the
Fund. The management agreement provides for a fee at the annual rate
of 0.65% on the first $200 million of the Fund's average daily net
assets, 0.55% of the next $300 million and 0.40% of such assets in
excess of $500 million. For the period ended June 30, 1997, CGM waived
$95,084 of its fee. See Note 4.

B. OTHER EXPENSES -- CGM performs certain administrative, accounting and
other services for the Fund. The expenses of those services, which are
paid to CGM by the Fund, include the following: (i) expenses for
personnel performing bookkeeping, accounting, internal auditing and
financial reporting functions and clerical functions relating to the
Fund; (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, shareholder
reports and notices, proxy solicitation material furnished to
shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance; and (iii) registration, filing and
other fees in connection with requirements of regulatory authorities.
For the period ended June 30, 1997 these expenses amounted to $5,250 and
are shown separately in the financial statements as Accounting and
Administration.

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 CGM Funds
with an annual fee of $37,000 plus expenses for each meeting attended.
Of this amount, the Fund is responsible for $3,000 plus an annual
variable fee calculated based on the proportion of the Fund's average
net assets to the aggregate average net assets of the CGM Funds, which
for 1997 is $420. In addition, the chairman of the Independent Trustees
Committee receives an annual retainer of $1,000.

4. EXPENSE LIMITATION -- Until December 31, 1997, and, thereafter, until further
notice to the Fund, CGM has voluntarily agreed to reduce its management fee and,
if necessary, to assume expenses of the Fund in order to limit the Fund's
expenses to an annual rate of 0.85% of average daily net assets. As a result of
the Fund's expenses exceeding the voluntary expense limitation, CGM waived
$95,084 of its management fee. The Fund incurred operating expenses of $178,225,
representing 0.85% of the average daily net assets.
<PAGE>

INVESTMENT ADVISER

CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110

- ------------------------------------------------------------------------------
TELEPHONE NUMBERS

For information about:

[] Account Procedures and Status

[] Redemptions

[] Exchanges

Call 800-343-5678

[] New Account Procedures

[] Prospectuses

[] Performance

Call 800-345-4048

- ------------------------------------------------------------------------------
MAILING ADDRESSES

FOR EXISTING ACCOUNTS

Boston Financial Data Services
P.O. Box 8511
Boston, MA 02266-8511

FOR NEW ACCOUNT APPLICATIONS ONLY

The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
- ------------------------------------------------------------------------------

This report has been prepared for the shareholders of the Fund and is not
authorized for distribution to current or prospective investors in the Fund
unless it is accompanied or preceded by a prospectus.

FQR2 Printed in U.S.A.

CGM
FIXED INCOME
FUND

21st Quarterly Report
June 30, 1997

A No-Load Fund

[FENCER LOGO]
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------

CGM Mutual Fund increased 8.8% during the second quarter of 1997 compared to the
unmanaged Standard and Poor's 500 Stock Index which returned 17.4% and the
Merrill Lynch Master Bond Index which returned 3.7% for the same period. Over
the first six months of the year, CGM Mutual Fund increased 9.3%, the S&P 500
returned 20.6% and the Merrill Lynch Master Bond Index, 3.1%.

CGM Mutual Fund is 25% invested in U.S. Treasury bills and corporate bonds. The
equity section of the portfolio holds important positions in drug companies,
technology and real estate. The Fund's three largest holdings are Warner Lambert
Company, Pohang Iron and Steel Limited and Crescent Real Estate Equities.

/s/ Robert L. Kemp
Robert L. Kemp
President

July 7, 1997
<PAGE>
CGM MUTUAL FUND
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
- --------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 1997

CGM THE FUND'S AVERAGE
MUTUAL FUND ANNUAL TOTAL RETURN
------------- -----------------------

10 Years ........................... +225.0% +12.5%
5 Years ........................... +101.7 +15.1
1 Year ............................ + 27.9 +27.9
3 Months .......................... + 8.8 --

The percentage figures for the Fund are based upon the beginning net asset
values of $27.11, $25.85, $30.96 and $31.57, respectively, and the June 30, 1997
asset value of $34.18 per share assuming the reinvestment of income dividends,
capital gains and paid-in capital distributions during such respective periods.

The performance data contained in this report represent past performance, which
is no guarantee of future results. The investment return on, and the principal
value of, an investment in the Fund will fluctuate so that investors' shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
CGM MUTUAL FUND
- --------------------------------------------------------------------------------

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>

CGM MUTUAL FUND
- --------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1971 -- JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1971
- ----------------------------------------------------------------------------------------------------------------------------------
-- AND HAD TAKEN ALL DIVIDENDS OR -- HAD REINVESTED ALL DIVIDENDS AND CAPITAL
AND DISTRIBUTIONS IN CASH GAINS DISTRIBUTIONS IN ADDITIONAL SHARES
---------------------------------------- ----------------------------------------------------------------------
During the Year
You Would Have Received Which Would Represent
--------------------------- -------------------------------------------
The Value of A Cumulative
The Net Your Original Change
Asset Value Per Share Per Share Investment An Expressed
On of Your Capital Gains Income At Each Annual As An Index With
December Share Would Distributions Distributions Year End Total Return December 31,
31 Have Been of of Would Have Been of 1971 = 100.0
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1971 $15.37 100.0
1972 16.20 0.35 $ 0.42 $17.05 + 10.9 110.9
1973 14.20 0.42 0.42 15.77 - 7.5 102.6
1974 10.27 -- 0.46 11.86 - 24.8 77.2
1975 12.44 -- 0.43 14.88 + 25.5 96.9
1976 13.96 -- 0.43 17.25 + 15.9 112.3
1977 12.88 -- 0.52 16.54 - 4.1 107.7
1978 12.83 -- 0.65 17.35 + 4.9 113.0
1979 13.81 -- 0.72 19.73 + 13.7 128.5
1980 14.85 -- 0.88 22.65 + 14.8 147.5
1981 13.90 -- 0.97 22.67 + 0.1 147.6
1982 18.16 -- 1.09 31.96 + 41.0 208.1
1983 18.81 -- 1.09 35.12 + 9.9 228.7
1984 17.01 1.86 0.95 37.33 + 6.3 243.1
1985 21.53 -- 1.08 50.21 + 34.5 327.0
1986 22.86 2.75 0.94 62.81 + 25.1 409.1
1987 20.40 4.52 1.06 71.41 + 13.7 465.1
1988 19.94 -- 1.10 73.70 + 3.2 480.0
1989 22.34 0.95 0.93 89.69 + 21.7 584.2
1990 21.64 -- 0.93* 90.68 + 1.1 590.6
1991 26.80 2.64 0.97 127.77 + 40.9 832.2
1992 26.02 1.42 0.93 135.56 + 6.1 883.0
1993 28.88 1.93 0.86 165.11 + 21.8 1075.5
1994 25.05 -- 1.04 149.09 - 9.7 971.2
1995 29.43 0.89 0.77 185.32 + 24.3 1207.2
1996 31.42 4.15 0.74 229.24 + 23.7 1493.3
1997(6/30) 34.18 0.01 0.15 250.56 + 9.3 1632.2
------ ------ -------
Totals $21.89 $20.53 +1532.2
- ----------------------------------------------------------------------------------------------------------------------------------
*Includes $0.05 per share distributed from paid-in capital.
Shares were first offered on November 5, 1929; the net asset value per share, adjusted for stock splits 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>

<TABLE>
<CAPTION>
CGM MUTUAL FUND
- ----------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1997
(unaudited)
COMMON STOCKS -- 74.6% OF TOTAL NET ASSETS
SHARES VALUE(a)
------ --------
<S> <C> <C>
BASIC MATERIALS -- 2.7%
British Steel PLC ADR(b) ............................... 1,390,000 $ 35,097,500
--------------
COMPUTER SOFTWARE AND SERVICES -- 10.5%
Compaq Computer Corporation(c) ......................... 390,000 38,707,500
Dell Computer Corporation(c) ........................... 380,000 44,626,250
Microsoft Corporation(c) ............................... 418,000 52,824,750
--------------
136,158,500
--------------
DRUGS -- 15.6%
Eli Lilly & Company .................................... 632,000 69,085,500
Pfizer, Inc. ........................................... 410,000 48,995,000
Warner Lambert Company ................................. 670,000 83,247,500
--------------
201,328,000
--------------
ELECTRONIC AND COMMUNICATION EQUIPMENT -- 5.5%
Nokia Corporation ...................................... 970,000 71,537,500
--------------
FOOD -- RETAILERS/WHOLESALERS -- 4.2%
Philip Morris Companies, Inc. .......................... 1,215,000 53,915,625
--------------
INSURANCE -- 5.2%
Progressive Corporation Ohio ........................... 780,000 67,860,000
--------------
MACHINERY -- 5.1%
Caterpillar, Inc. ...................................... 615,000 66,035,625
--------------
MISCELLANEOUS -- 2.8%
Tyco International Limited ............................. 260,000 18,086,250
United Technologies Corporation ........................ 215,000 17,845,000
--------------
35,931,250
--------------
OFFICE EQUIPMENT AND SUPPLIES -- 3.5%
International Business Machines ........................ 500,000 45,093,750
--------------
REAL ESTATE INVESTMENT TRUSTS -- 13.1%
Crescent Operations, Inc. .............................. 231,340 2,776,080
Crescent Real Estate Equities .......................... 2,313,400 73,450,450
Felcor Suite Hotels, Inc. ............................. 627,500 23,374,375
Reckson Associates Realty Corporation .................. 1,783,900 41,029,700
Spieker Properties, Inc. ............................... 830,000 29,205,625
--------------
169,836,230
--------------
STEEL -- 6.4%
Pohang Iron & Steel Limited ............................ 2,591,800 82,937,600
--------------
TOTAL COMMON STOCKS (Identified Cost $838,116,689) ..... 965,731,580
--------------
See accompanying notes to financial statements
<PAGE>

CGM MUTUAL FUND
- ----------------------------------------------------------------------------------------------

INVESTMENTS AS OF JUNE 30, 1997 (CONTINUED)
(unaudited)
BONDS AND BILLS -- 25.2%
FACE
AMOUNT VALUE(a)
------ --------
INDUSTRIAL BONDS -- 1.9%
Stone Container Corporation, 9.875%, 2/01/01 ........... $ 25,000,000 $ 24,875,000
--------------
UNITED STATES TREASURY -- 23.3%
United States Treasury Bills, 4.934%, 8/14/97 .......... 200,000,000 198,774,111
United States Treasury Bills, 5.062%, 9/11/97 .......... 40,000,000 39,593,600
United States Treasury Bills, 5.092%, 9/18/97 .......... 37,000,000 36,585,970
United States Treasury Bills, 4.894%, 9/25/97 .......... 26,500,000 26,180,410
--------------
301,134,091
--------------
TOTAL BONDS AND BILLS (Identified Cost $326,403,726) ... 326,009,091
--------------
SHORT-TERM INVESTMENT -- 0.9%
Chevron Oil Finance Company, 5.80% 7/01/97 (Cost
$11,965,000) ........................................... 11,965,000 11,965,000
--------------

TOTAL INVESTMENTS -- 100.7% (Identified Cost $1,176,485,415)(d) .......... 1,303,705,671
Cash and Receivables ......................................... 69,270,897
Liabilities .................................................. (78,315,263)
--------------
TOTAL NET ASSETS -- 100% ................................................. $1,294,661,305
==============

(a) See Note 1A.
(b) An American Depository Receipt (ADR) is a certificate issued by a U.S. bank representing
the right to receive securities of the foreign issuer described. The values of ADRs are
significantly influenced by trading on exchanges not located in the United States or
Canada.
(c) Non-income producing security.
(d) Federal Tax Information: At June 30, 1997, the net unrealized appreciation on investments
based on cost of $1,176,485,415 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 ............................ $ 132,198,965
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value ............................ (4,978,709)
--------------
Net unrealized appreciation .......................................... $ 127,220,256
==============
See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM MUTUAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES

June 30, 1997
(unaudited)

ASSETS
Investments at value (Identified
cost -- $1,176,485,415) ................................. $1,303,705,671
Cash ...................................................... 1,602
Receivable for:
Securities sold ......................... $64,566,037
Shares of the Fund sold ................. 902,892
Dividends and interest .................. 3,800,366 69,269,295
----------- --------------
1,372,976,568
--------------
LIABILITIES
Payable for:
Securities purchased .................... $76,043,732
Shares of the Fund redeemed ............. 1,209,179 77,252,911
-----------
Accrued expenses:
Management fees ......................... 864,821
Trustees' fees .......................... 28,000
Accounting and Administration ........... 7,083
Other expenses .......................... 162,448 1,062,352
----------- --------------
78,315,263
--------------
NET ASSETS .................................................. $1,294,661,305
==============
Net Assets consist of:
Capital paid-in ......................................... $ 971,247,276
Undistributed net investment income ..................... 8,007,597
Accumulated net realized gain ........................... 188,186,176
Unrealized appreciation on investments -- net ........... 127,220,256
--------------
NET ASSETS .................................................. $1,294,661,305
==============
Shares of beneficial interest outstanding, no par value .. 37,878,615
==============
Net asset value per share* ................................ $34.18
==============

*Shares of the Fund are sold and redeemed at net asset value
($1,294,661,305 / 37,878,615).

See accompanying notes to financial statements
<PAGE>
CGM MUTUAL FUND
- --------------------------------------------------------------------------------

STATEMENT OF
OPERATIONS

Six Months Ended June 30, 1997
(unaudited)

INVESTMENT INCOME
Income
Dividends (net of withholding tax of
$298,468) ............................................. $ 9,823,433
Interest ................................................ 9,416,590
------------
19,240,023
------------
Expenses
Management fees ......................................... 5,125,909
Trustees' fees .......................................... 52,000
Accounting and Administration ........................... 42,500
Custodian ............................................... 84,000
Transfer agent .......................................... 668,000
Audit and tax services .................................. 16,500
Legal ................................................... 10,000
Printing ................................................ 32,500
Registration ............................................ 11,500
Miscellaneous ........................................... 6,982
------------
6,049,891
------------
Net investment income ..................................... 13,190,132
------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized gain on investments -- net 188,409,601
Unrealized depreciation -- net .......................... (89,664,789)
------------
Net gain on investments ................................. 98,744,812
------------

NET INCREASE IN ASSETS FROM
OPERATIONS ................................................ $111,934,944
============
See accompanying notes to financial statements
<PAGE>
<TABLE>
CGM MUTUAL FUND
- -----------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income .............................. $ 13,190,132 $ 27,219,061
Net realized gain from investments ................. 188,409,601 145,714,784
Unrealized appreciation (depreciation) ............. (89,664,789) 77,414,751
-------------- --------------
Increase in net assets from operations ........... 111,934,944 250,348,596
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ......................... (5,722,820) (26,678,776)
From net realized gain on investments .............. (381,525) (142,888,891)
-------------- --------------
(6,104,345) (169,567,667)
-------------- --------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ....................... 55,418,166 85,970,440
Net asset value of shares issued in connection with
reinvestment of:
Dividends from net investment income ............. 5,179,911 24,156,561
Distributions from net realized gain ............. 359,354 131,950,732
-------------- --------------
60,957,431 242,077,733
Cost of shares redeemed ............................ (88,649,615) (260,774,531)
-------------- --------------
Decrease in net assets derived from capital share
transactions ................................... (27,692,184) (18,696,798)
-------------- --------------
Total increase in net assets ....................... 78,138,415 62,084,131

NET ASSETS
Beginning of period ................................ 1,216,522,890 1,154,438,759
-------------- --------------
End of period (including undistributed net
investment income of $8,007,597 and
$540,285, respectively) .......................... $1,294,661,305 $1,216,522,890
============== ==============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ......................... 1,705,023 2,757,585
Issued in connection with reinvestment of:
Dividends from net investment income ............. 165,183 776,634
Distributions from net realized gain ............. 11,466 4,199,578
-------------- --------------
1,881,672 7,733,797
Redeemed ......................................... (2,725,129) (8,241,929)
-------------- --------------
Net change ....................................... (843,457) (508,132)
============== ==============

See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
CGM MUTUAL FUND
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 -----------------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
For a share of the Fund outstanding throughout each period:

Net asset value at the
beginning of period $31.42 $29.43 $25.05 $28.88 $26.02 $26.80
------ ------ ------ ------ ------ ------

Net investment income 0.35 0.75 0.73 1.09 0.92 0.93
Dividends from net
investment income .... (0.15) (0.74) (0.77) (1.04) (0.86) (0.93)
Net realized and
unrealized gain (loss)
on investments ..... 2.57 6.13 5.31 (3.88) 4.73 0.64
Distribution from net
realized gain ...... (0.01) (4.15) (0.89) -- (1.81) (1.42)
Distribution in excess
of net realized gain -- -- -- -- (0.12) --
------ ------ ------ ------ ------ ------
Net increase (decrease)
in net asset value 2.76 1.99 4.38 (3.83) 2.86 (0.78)
------ ------ ------ ------ ------ ------
Net asset value at end
of period .......... $34.18 $31.42 $29.43 $25.05 $28.88 $26.02
====== ====== ====== ====== ====== ======
Total Return (%) ..... 9.3 23.7 24.3 -9.7 21.8 6.1
Ratios:
Operating expenses to
average net
assets (%) ......... 0.98* 0.87 0.91 0.92 0.93 0.93
Net investment income
to average net
assets (%) ......... 2.14* 2.33 2.55 4.39 3.45 3.74
Portfolio turnover (%) 473* 192 291 173 97 121
Average commission
rate** ............. $0.0690 $0.0695 -- -- -- --
Net assets at end of
period (in
thousands) ($) ..... 1,294,661 1,216,523 1,154,439 1,063,375 947,115 548,630

* Computed on an annualized basis

** SEC regulations require portfolios to disclose the average commission rate paid on trades for which commissions
were charged for fiscal years beginning on or after September 1, 1995.

See accompanying notes to financial statements
</TABLE>
<PAGE>

CGM MUTUAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(unaudited)

1. The Fund is a series of CGM Trust which is organized as a Massachusetts
business trust under the laws of Massachusetts pursuant to an Agreement and
Declaration of Trust. The Trust is registered under the Investment Company Act
of 1940 as 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.

A. SECURITY VALUATION -- Equity securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board of
Trustees, which provides the last reported sale price for securities listed
on a national securities exchange or on the NASDAQ national market system
or, if no sale was reported and in the case of over-the-counter securities
not so listed, the last reported bid price. Corporate debt securities 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.
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.

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 1996, return of capital and capital gain distributions
from REITs totaled $736,681 and $13,963, 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.
<PAGE>
CGM MUTUAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(unaudited)

2. PURCHASES AND SALES OF SECURITIES -- For the period ended June 30, 1997,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $2,257,895,938 and
$2,322,619,996, respectively. There were no purchases or sales of United States
government obligations.

3. A. MANAGEMENT FEES -- During the period ended June 30, 1997, the Fund
incurred management fees of $5,125,909, paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership
(CGM), certain officers and directors of which are also officers and
trustees of the Fund. The management agreement provides for a fee at
the annual rate of 0.90% on the first $500 million of the Fund's
average daily net assets, 0.80% of the next $500 million and 0.75% of
such assets in excess of $1 billion.

B. OTHER EXPENSES -- CGM performs certain administrative, accounting and
other services for the Fund. The expenses of those services, which 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 $42,500 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 CGM
Funds with an annual fee of $37,000 plus expenses for each meeting
attended. Of this amount, the Fund is responsible for $3,000 plus an
annual variable fee calculated based on the proportion of the Fund's
average net assets to the aggregate average net assets of the CGM Funds,
which for 1997 is $13,613. In addition, the Chairman of the Independent
Trustees Committee receives an annual retainer of $1,500.
<PAGE>
CGM MUTUAL FUND
- -------------------------------------------------------------------------------

INVESTMENT ADVISER

CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110

- --------------------------------------------------------------------------------
TELEPHONE NUMBERS

For information about:
[] Account Procedures and Status

[] Redemptions

[] Exchanges

Call 800-343-5678

[] New Account Procedures

[] Prospectuses

[] Performance

Call 800-345-4048

- ------------------------------------------------------------------------------
MAILING ADDRESSES

FOR EXISTING ACCOUNTS

Boston Financial Data Services
P.O. Box 8511
Boston, MA 02266-8511

FOR NEW ACCOUNT APPLICATIONS ONLY

The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
- ------------------------------------------------------------------------------

MQR2 Printed in U.S.A.

CGM
MUTUAL FUND

269th Quarterly Report
June 30, 1997

A No-Load Fund

[FENCER LOGO]
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------

CGM American Tax Free Fund rose 2.8% during the second quarter of 1997 compared
to the Lehman Municipal Bond Index which returned 3.4% for the same period. Over
the first six months of the year, CGM American Tax Free Fund increased 3.0%
while the Lehman Index returned 3.2%.

As a class, municipal bonds continue to be relatively expensive. However, in the
absence of significant new issue supply pressures, the favorable relationship of
municipal bonds to taxable alternatives should be sustainable.

Though the long-term government bond is back down to year-end 1996 levels at
6.6% after reaching 7.15% at March 31st, the CGM American Tax Free Portfolio
structure remains defensive in anticipation of rising inflation or precautionary
Federal Reserve Board action. The Fund continues to focus on income and
minimizing downside price volatility. CGM American Tax Free Fund's biggest
sector concentrations are industrial development/pollution control bonds and
escrowed paper. The three largest holdings are Maricopa County, Arizona
Hospital, Michigan State Hospital and Hodge, Louisiana (Stone Container).

/s/ Robert L. Kemp
Robert L. Kemp
President

July 7, 1997
<PAGE>

INVESTMENT PERFORMANCE
(unaudited)
- ------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 1997

CGM AMERICAN LIPPER GENERAL MUNICIPAL
TAX FREE FUND DEBT FUND AVERAGE
---------------- ----------------------------

1 Year ....................... +8.3% +7.8%
3 Months ..................... +2.8 +3.4

The Fund's average annual total return since inception (November 10, 1993)
through June 30, 1997 is +4.7%. The adviser has agreed to absorb the Fund's
total operating expenses through December 31, 1997. Otherwise, the Fund's total
return since inception, and for the one-year, and three-month periods ended June
30, 1997 would have been lower.

Lipper Analytical Services, Inc. is an independent mutual fund ranking service.
The performance data contained in the report represent past performance. The
investment return and the principal value of an investment in the Fund will
fluctuate so that investors' shares, when redeemed, may be worth more or less
than their original cost.
<PAGE>
CGM AMERICAN TAX FREE FUND
- --------------------------------------------------------------------------------
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

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>
<CAPTION>
CGM AMERICAN TAX FREE FUND
- ------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1997
(unaudited)
MUNICIPAL BONDS -- 92.7% OF TOTAL NET ASSETS
FACE
AMOUNT VALUE(a)
------ --------
ARIZONA -- 9.6%
<S> <C> <C>
Maricopa County Hospital Revenue, 7.625%, 1/01/08 ........... $ 550,000 $ 640,337
Maricopa County Hospital Revenue, 8.75%, 2/01/10 ............ 500,000 613,660
-----------
1,253,997
-----------
CALIFORNIA -- 12.4%
Los Angeles Regional Airport, 6.875%, 11/15/12 .............. 500,000 532,035
San Jose Redevelopment Tax Allocation, 5.00%, 8/01/20 ....... 500,000 458,355
Yuba County Water Agency Revenue, 4.00%, 3/01/16 ............ 710,000 638,510
-----------
1,628,900
-----------
FLORIDA -- 6.3%
Dade County Water & Sewer Systems, 6.25%, 10/01/11 .......... 500,000 553,915
Polk County Industrial Development Authority Revenue Bonds
(IMC Fertilizer), 7.525%, 1/01/15 ......................... 250,000 271,335
-----------
825,250
-----------
KENTUCKY -- 3.2%
Kenton County Airport Revenue Bonds (Delta Airlines),
6.75%, 2/01/02 ............................................ 400,000 421,452
-----------
LOUISIANA -- 8.2%
Hodge Utility Revenue Bonds (Stone Container), 9.00%, 3/01/10 1,000,000 1,070,820
-----------
MARYLAND -- 6.2%
Howard County Multifamily, Chase Glen Apartments,
7.00%, 7/01/24 ............................................ 750,000 809,175
-----------
MASSACHUSETTS -- 3.0%
Massachusetts Municipal Wholesale Electric, 8.75%, 7/01/18 .. 330,000 397,746
-----------
MICHIGAN -- 17.6%
Detroit Sewer Disposal Revenue Bonds, 7.10%, 12/15/09 ....... 725,000 825,724
Michigan State Hospital Finance Authority, 7.125%, 5/01/09 .. 395,000 443,996
Michigan State Hospital Finance Authority, 9.00%, 5/01/08 ... 500,000 642,240
Michigan State Housing Development, 7.05%, 10/01/12 ......... 370,000 393,713
-----------
2,305,673
-----------
MONTANA -- 3.4%
Montana State Board, 6.875%, 6/01/20 ........................ 410,000 447,257
-----------
NEW YORK -- 11.8%
New York General Obligation Bonds Series B, 8.25%, 6/01/05 .. 100,000 119,068
New York General Obligation Bonds Series J, 5.50%, 2/15/26 .. 500,000 473,140
New York State Dormitory Authority Revenue Bonds,
5.75%, 7/01/13 ............................................ 250,000 254,987
New York State Dormitory Authority Revenue Bonds,
5.875%, 5/15/11 ........................................... 250,000 257,035
Port Authority New York and New Jersey Special Obligation
9.125%, 12/01/15 .......................................... 395,000 446,571
-----------
1,550,801
-----------
See accompanying notes to financial statements
<PAGE>
CGM AMERICAN TAX FREE FUND
- ------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1997 (CONTINUED)
(unaudited)
MUNICIPAL BONDS -- (CONTINUED)
FACE
AMOUNT VALUE(a)
------ --------
TEXAS -- 6.5%
Alliance Airport Authority Special Facilities Revenue Bonds
(American Airlines Inc.
Project), 7.00%, 12/01/11 ................................. $ 250,000 $ 281,895
Southeast Texas Hospital Financing Agency, 6.50%, 5/01/09 ... 525,000 577,747
-----------
859,642
-----------
VIRGINIA -- 4.5%
Hopewell Industrial Development Authority (Stone Container),
8.25%, 6/01/16 ............................................ 350,000 379,334
Virginia State Housing Development Authority, 7.10%, 1/01/22 200,000 209,720
-----------
589,054
-----------
TOTAL MUNICIPAL BONDS (Identified Cost $11,886,610) ........................... 12,159,767
-----------

SHORT TERM INVESTMENT -- 4.4%
Chevron Oil Finance Co., 5.80%, 7/01/97 (Cost $580,000) ..... 580,000 580,000
-----------
TOTAL INVESTMENTS -- 97.1% (Identified Cost $12,466,610)(b) ................... 12,739,767
Cash and Receivables ........................................................ 430,635
Liabilities ................................................................. (54,839)
-----------
TOTAL NET ASSETS -- 100.0% .................................................... $13,115,563
===========

(a) See Note 1A.
(b) Federal Tax Information: At June 30, 1997 the net unrealized appreciation on investments based
on cost of $12,466,610 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 ....................................... $ 287,861
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value ....................................... (14,704)
-----------
Net unrealized appreciation ............................................... $ 273,157
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM AMERICAN TAX FREE FUND
- --------------------------------------------------------------------------------

STATEMENT OF
ASSETS AND LIABILITIES

June 30, 1997
(unaudited)

ASSETS
Investments at value (Identified cost -- $12,466,610) ........ $12,739,767
Cash ......................................................... 4,267
Receivable for:
Shares of the Fund sold ....................... $200,500
Interest ...................................... 225,868 426,368
-------- -----------
13,170,402
-----------
LIABILITIES
Payable for:
Shares of the Fund redeemed ................... $ 7,255
Expense advance from adviser .................. 47,584 54,839
-------- -----------
NET ASSETS .................................................... $13,115,563
===========
Net Assets consist of:
Capital paid-in ........................................... $13,835,108
Undistributed net investment income ....................... 66,625
Accumulated net realized loss ............................. (1,059,327)
Unrealized appreciation on investments -- net ............. 273,157
-----------
NET ASSETS .................................................... $13,115,563
===========
Shares of beneficial interest outstanding, no par value .... 1,381,727
===========
Net asset value per share* .................................. $9.49
===========

*Shares of the Fund are sold and redeemed at net asset value ($13,115,563 /
1,381,727).

See accompanying notes to financial statements
<PAGE>
CGM AMERICAN TAX FREE FUND
- --------------------------------------------------------------------------------
STATEMENT OF
OPERATIONS

Six Months Ended June 30, 1997
(unaudited)

INVESTMENT INCOME
Income
Interest .................................................. $ 397,187
----------
Expenses
Management fees ........................................... 37,881
Trustees' fees ............................................ 11,250
Accounting and Administration ............................. 2,000
Custodian ................................................. 25,500
Transfer agent ............................................ 12,500
Audit and tax services .................................... 9,750
Legal ..................................................... 15,600
Printing .................................................. 7,750
Registration .............................................. 9,540
Miscellaneous ............................................. 300
----------
132,071

Less expenses assumed by the
investment adviser ...................................... (132,071)
----------
Net investment income ..................................... 397,187
----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized gain on investments -- net ......................... 52,612
Unrealized depreciation -- net .............................. (78,976)
----------
Net loss on investments ..................................... (26,364)
----------
NET INCREASE IN ASSETS FROM OPERATIONS ........................ $ 370,823
==========

See accompanying notes to financial statements
<PAGE>
<TABLE>
CGM AMERICAN TAX FREE FUND
- ------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income .................................. $ 397,187 $ 712,505
Net realized gain (loss) from investments .............. 52,612 (224,953)
Unrealized depreciation ................................ (78,976) (149,674)
----------- -----------
Increase in net assets from operations ............... 370,823 337,878
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................................. (330,696) (713,442)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ........................... 1,557,268 2,728,617
Net asset value of shares issued in connection with
reinvestment of:
Dividends from net investment income ................. 244,173 544,091
----------- -----------
1,801,441 3,272,708
Cost of shares redeemed ................................ (1,155,666) (2,322,772)
----------- -----------
Increase in net assets derived from capital share
transactions ....................................... 645,775 949,936
----------- -----------
Total increase in net assets ........................... 685,902 574,372
NET ASSETS
Beginning of period .................................... 12,429,661 11,855,289
----------- -----------
End of period (including undistributed net investment
income of $66,625 and $134, respectively) ............ $13,115,563 $12,429,661
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ............................. 165,086 289,359
Issued in connection with reinvestment of:
Dividends from net investment income ................. 25,951 57,875
----------- -----------
191,037 347,234
Redeemed ............................................. (122,722) (247,063)
----------- -----------
Net change ........................................... 68,315 100,171
=========== ===========

See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
CGM AMERICAN TAX FREE FUND
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
FOR THE FOR THE PERIOD
SIX MONTHS NOVEMBER 10,
ENDED YEAR ENDED DECEMBER 31, 1993(c) THROUGH
JUNE 30, 1997 ----------------------------------------------------- DECEMBER 31,
(UNAUDITED) 1996 1995 1994 1993
----------------- ----------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
For a share of the Fund outstanding throughout each period:

Net asset value at
the beginning of
period ........... $ 9.46 $ 9.77 $ 8.83 $10.25 $10.00
------ ------ ------ ------ ------
Net investment
income (a) ....... 0.29 0.58 0.61 0.58 0.04
Dividends from net
investment income (0.24) (0.58) (0.61) (0.58) (0.04)
Net realized and
unrealized gain
(loss) on
investments ...... (0.02) (0.31) 0.94 (1.42) 0.25
------ ------ ------ ------ ------
Net increase
(decrease) in net
asset value ...... 0.03 (0.31) 0.94 (1.42) 0.25
------ ------ ------ ------ ------
Net asset value at
end of period .... $ 9.49 $ 9.46 $ 9.77 $ 8.83 $10.25
====== ====== ====== ====== ======

Total Return (%) (b) 3.0(d) 2.9 18.0 -8.2 2.9(d)

Ratios:
Operating expenses
to average net
assets (%) ....... 0 0 0 0 0
Operating expenses
to average net
assets before
waiver (%) ....... 2.09(e) 2.14 2.59 2.42 3.59(e)
Net investment
income to average
net assets (%) 6.29(e) 6.10 6.50 6.39 4.95(e)
Portfolio turnover (%) 143(e) 107 125 169 0

Net assets at end of
period (in
thousands) ....... $13,116 $12,430 $11,855 $10,150 $ 4,786

(a) Net of fees
waived and
reimbursed
amounted to .... $ 0.10 $ 0.20 $ 0.24 $ 0.22 $ 0.03
(b) The total return would have been lower had the total fees and expenses not been waived or reimbursed during the
period.
(c) Commencement of operations.
(d) Not computed on an annualized basis.
(e) Computed on an annualized basis.

See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM AMERICAN TAX FREE FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(unaudited)

1. The Fund is a series of CGM Trust which is organized as a Massachusetts
business trust under the laws of Massachusetts pursuant to an Agreement and
Declaration of Trust. The Trust is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Trust has
three other funds whose financial statements are not presented herein. The Fund
commenced operations on November 10, 1993. The primary investment objective of
the Fund is to provide high current income exempt from federal income tax. The
Fund's secondary investment objective is capital appreciation.

A. SECURITY VALUATION -- Debt securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
determines valuations for normal, institutional-size trading units of such
securities using market information, transactions for comparable securities
and various relationships between securities which are generally recognized
by institutional traders. Short-term investments having a maturity of sixty
days or less are stated at amortized cost, which approximates value.

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. The Fund
may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices. Interest
income is recorded on the accrual basis. Interest income is increased by the
accretion of discount. Premium is amortized against interest income with a
corresponding decrease in the cost basis. Net gain or loss on securities
sold is determined on the identified cost basis.

C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders all of its taxable and tax
exempt income and net realized capital gains, within the prescribed time
period. Accordingly, no provision for federal income tax has been made. At
December 31, 1996, there were capital loss carryovers available to offset
future realized gains of $886,986 expiring in the year 2002 and
approximately $225,000 expiring in 2004.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
are recorded by the Fund on the ex-dividend date. The classification of
income and capital gains distributions is determined in accordance with
income tax regulations. Permanent book and tax differences relating to
shareholder distributions may result in reclassifications to paid-in
capital. Undistributed net investment income, accumulated net investment
loss, or distributions in excess of net investment income may include
temporary book and tax differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
<PAGE>
CGM AMERICAN TAX FREE FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(unaudited)

E. OTHER -- The Fund has greater than 10% of its net assets at June 30, 1997
invested in California, Michigan and New York. There are certain risks
arising from geographical concentration in any state. Certain revenue or tax
related events in a state may impair the ability of certain issuers of
municipal securities to pay principal and interest on their obligations.

2. PURCHASES AND SALES OF SECURITIES -- For the period ended June 30, 1997,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $8,787,779 and $8,952,029,
respectively. There were no purchases or sales of United States government
obligations.

3. A. MANAGEMENT FEES -- During the period ended June 30, 1997, the Fund
incurred management fees of $37,881 payable to the Fund's investment
adviser, Capital Growth Management Limited Partnership (CGM), certain
officers and directors of which are also officers and trustees of the
Fund. The management agreement provides for a fee at the annual rate
of 0.60% on the first $500 million of the Fund's average daily net
assets, 0.55% of the next $500 million and 0.45% of such assets in
excess of $1 billion. CGM waived its entire fee. See Note 4.

B. OTHER EXPENSES -- CGM performs certain administrative, accounting and
other services for the Fund. The expenses of those services, which are
paid to CGM by the Fund, include the following: (i) expenses for
personnel performing bookkeeping, accounting, internal auditing and
financial reporting functions and clerical functions relating to the
Fund; (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, shareholder
reports and notices, proxy solicitation material furnished to
shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance; and (iii) registration, filing and
other fees in connection with requirements of regulatory authorities.
For the period ended June 30, 1997, these expenses amounted to $2,000
and are shown separately in the financial statements as Accounting and
Administration. The entire expense was waived by CGM. See Note 4.

C. TRUSTEES FEES AND EXPENSES -- The Fund does not pay any compensation
directly to its officers or to any trustees who are directors, officers
or employees of CGM, or any affiliate of CGM, other than registered
investment companies. Each other trustee is compensated by the CGM Funds
with an annual fee of $37,000 plus expenses for each meeting attended.
Of this amount, the Fund is responsible for $3,000 plus an annual
variable fee calculated based on the proportion of the Fund's average
net assets to the aggregate average net assets of the CGM Funds, which
for 1997 is $140. In addition, the chairman of the Independent Trustees
Committee receives an annual retainer of $1,000.

4. EXPENSE LIMITATION -- Until December 31, 1997, and, thereafter, until further
notice to the Fund, CGM has voluntarily agreed to waive its management fee and
to assume all expenses of the Fund. For the period ended June 30, 1997, CGM
waived its entire management fee of $37,881, the entire Accounting and
Administration expense of $2,000 and assumed Fund expenses of $92,190.
<PAGE>

INVESTMENT ADVISER

CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110

- ------------------------------------------------------------------------------
TELEPHONE NUMBERS

For information about:
[] Account Procedures and Status

[] Redemptions

[] Exchanges

Call 800-343-5678

[] New Account Procedures

[] Prospectuses

[] Performance

Call 800-345-4048

- ------------------------------------------------------------------------------
MAILING ADDRESSES

FOR EXISTING ACCOUNTS

Boston Financial Data Services
P.O. Box 8511
Boston, MA 02266-8511

FOR NEW ACCOUNT APPLICATIONS ONLY

The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
- ------------------------------------------------------------------------------

AQR2 Printed in U.S.A.

CGM
AMERICAN
TAX FREE FUND

15th Quarterly Report
June 30, 1997

A No-Load Fund

[FENCER LOGO]
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
<PAGE>
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------

CGM Realty Fund increased 3.7% during the second quarter of 1997 compared to the
National Association of Real Estate Investment Trust's (NAREIT) Equity REIT
index which returned 5.0% for the same period. Over the first six months of the
year, CGM Realty Fund increased 8.2% while the NAREIT Equity REIT Index returned
5.7%.

Real Estate Investment Trusts continued to experience rising cash flows during
the quarter reflecting rising occupancies and rents. CGM Realty Fund's largest
concentrations are full service hotels and office and industrial properties. The
Fund is 36.4% invested in hotel REITs; 35.0% in office and industrial REITs;
16.9% in apartment REITs; and 10.3% in retail REITs. The three largest holdings
are Felcor Suite Hotels, Inc., Patriot American Hospitality and Boykin Lodging
Company.

/s/ Robert L. Kemp
Robert L. Kemp

July 7, 1997
<PAGE>
CGM REALTY FUND
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
- ------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 1997

CGM (NAREIT)
REALTY FUND EQUITY REIT INDEX
-------- -------------------
3 Year .................. +23.3% +17.3%
1 Year .................. +43.8 +33.9
3 Months ................ + 3.7 + 5.0

The Fund's average annual total return since inception (May 13, 1994) through
June 30, 1997 is +22.1%. The adviser has agreed to limit the Fund's total
operating expenses to 1.00% of its average net assets through December 31, 1997.
Otherwise, the Fund's total return since inception and for the three-year,
one-year and three-month periods ended June 30, 1997 would have been lower.

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>
<CAPTION>
CGM REALTY FUND
- ------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1997
(unaudited)

REAL ESTATE INVESTMENT TRUSTS -- 98.6% OF TOTAL NET ASSETS
SHARES VALUE(a)
------ --------
<S> <C> <C>
APARTMENTS -- 16.9%
Apartment Investment & Management Company .................. 548,000 $ 15,481,000
Essex Property Trust ....................................... 359,200 11,539,300
Home Properties New York, Inc. ............................. 482,000 10,845,000
Pacific Gulf Properties, Inc. .............................. 753,400 16,574,800
------------
54,440,100
------------
HOTELS -- 36.4%
American General Hospitality ............................... 637,000 15,765,750
Boykin Lodging Company ..................................... 770,000 18,431,875
Felcor Suite Hotels, Inc. .................................. 851,500 31,718,375
Patriot American Hospitality ............................... 735,000 18,742,500
Starwood Lodging Trust ..................................... 390,000 16,648,125
Sunstone Hotel Investments, Inc. ........................... 1,136,400 16,477,800
------------
117,784,425
------------
OFFICE AND INDUSTRIAL -- 35.0%
Arden Realty, Inc. ......................................... 580,000 15,080,000
Bedford Property Investments, Inc. ......................... 738,000 14,852,250
Boston Properties, Inc. .................................... 493,000 13,557,500
Cali Realty Corporation .................................... 287,400 9,771,600
Crescent Operations, Inc. .................................. 46,900 562,800
Crescent Real Estate Equities .............................. 469,000 14,890,750
Liberty Property Trust ..................................... 445,000 11,069,375
Parkway Properties, Inc. ................................... 100,000 2,687,500
Reckson Associates Realty Corporation ...................... 719,800 16,555,400
Spieker Properties, Inc. ................................... 405,000 14,250,938
------------
113,278,113
------------
RETAIL -- 10.3%
Chelsea GCA Realty, Inc. ................................... 444,000 16,872,000
Vornado Realty Trust ....................................... 229,000 16,516,625
------------
33,388,625
------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Identified Cost $285,321,004) ........... 318,891,263
------------
See accompanying notes to financial statements
<PAGE>
CGM REALTY FUND
- ------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 1997 (CONTINUED)
(unaudited)
FACE
SHORT-TERM INVESTMENT -- 0.4% AMOUNT VALUE(a)
------ --------
Chevron Oil Finance Company, 5.80%, 7/01/97 (Cost $1,425,000) $1,425,000 $ 1,425,000
------------

TOTAL INVESTMENTS -- 99.0% (Identified Cost $286,746,004) .................... 320,316,263
Cash, receivables and other assets ......................................... 12,544,047
Liabilities ................................................................ (9,481,712)
------------
TOTAL NET ASSETS -- 100% ..................................................... $323,378,598
============

(a) See Note 1A.
(b) Federal Tax Information: At June 30, 1997 the net unrealized appreciation on investments
based on cost of $286,746,004 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 ............................... $ 33,785,179
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value ............................... (214,920)
------------
Net unrealized appreciation .............................................. $ 33,570,259
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM REALTY FUND
- --------------------------------------------------------------------------------

STATEMENT OF
ASSETS AND LIABILITIES

June 30, 1997
(unaudited)

ASSETS
Investments at value (Identified cost -- $286,746,004)........ $320,316,263
Cash ......................................................... 3,269
Receivable for:
Securities sold ................................ $6,105,791
Shares of the Fund sold ........................ 4,610,562
Dividends and interest ......................... 1,798,275 12,514,628
----------
Unamortized organizational expenses .......................... 26,150
------------
332,860,310
------------
LIABILITIES
Payable for:
Securities purchased ........................... $7,739,988
Shares of the Fund
redeemed ...................................... 1,509,296 9,249,284
----------
Accrued expenses:
Management fees ................................ 188,585
Trustees' fees ................................. 6,295
Accounting and Administration .................. 2,000
Other expenses ................................. 35,548 232,428
---------- ------------
9,481,712
------------
NET ASSETS .................................................... $323,378,598
============
Net Assets consist of:
Capital paid-in ............................................. $271,689,841
Undistributed net investment income ......................... 3,458,958
Accumulated net realized gain ............................... 14,659,540
Unrealized appreciation on investments -- net ............... 33,570,259
------------
NET ASSETS .................................................... $323,378,598
============
Shares of beneficial interest outstanding, no par value ..... 20,821,550
============
Net asset value per share* ................................... $15.53
============

*Shares of the Fund are sold and redeemed at net asset value
($323,378,598 / 20,821,550).

See accompanying notes to financial statements
<PAGE>
CGM REALTY FUND
- --------------------------------------------------------------------------------

STATEMENT OF
OPERATIONS

Six Months Ended June 30, 1997
(unaudited)

INVESTMENT INCOME
Income:
Dividends ................................................ $ 7,655,207
Interest ................................................. 80,917
-----------
7,736,124
-----------
Expenses:
Management fees .......................................... 1,166,818
Trustees' fees ........................................... 12,500
Accounting and Administration ............................ 12,000
Custodian ................................................ 45,750
Transfer agent ........................................... 174,000
Audit and tax services ................................... 11,125
Legal .................................................... 15,600
Printing ................................................. 19,000
Registration ............................................. 33,500
Amortization of organizational expense ................... 6,961
Miscellaneous ............................................ 480
-----------
1,497,734
Less expenses assumed by the investment adviser ........... (125,007)
-----------
Net investment income ..................................... 6,363,397
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain on investments -- net ...................... 14,715,356
Unrealized depreciation -- net ........................... (1,361,459)
-----------
Net gain on investments .................................. 13,353,897
-----------
NET INCREASE IN ASSETS FROM OPERATIONS ..................... $19,717,294
===========

See accompanying notes to financial statements
<PAGE>
<TABLE>
CGM REALTY FUND
- ---------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ............................ $ 6,363,397 $ 4,199,394
Net realized gain from investments ............... 14,715,356 5,829,586
Unrealized appreciation (depreciation) ........... (1,361,459) 28,466,645
------------ ------------
Increase in net assets from operations ......... 19,717,294 38,495,625
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ............................ (2,904,439) (4,209,203)
Net realized gain on investments ................. -- (4,289,171)
In excess of net investment income ............... -- (978,678)
------------ ------------
(2,904,439) (9,477,052)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ..................... 233,183,892 109,581,079
Net asset value of shares issued in connection
with reinvestment of:
Dividends from net investment income ........... 2,424,477 3,469,327
Distributions from net realized gain ........... -- 3,608,689
Distributions in excess of net investment income -- 802,054
------------ ------------
235,608,369 117,461,149
Cost of shares redeemed .......................... (90,769,660) (32,447,080)
------------ ------------
Increase in net assets derived from capital
share transactions ........................... 144,838,709 85,014,069
------------ ------------
Total increase in net assets ..................... 161,651,564 114,032,642
NET ASSETS
Beginning of period .............................. 161,727,034 47,694,392
------------ ------------
End of period (including undistributed net
investment income of $3,458,958 and
$0, respectively) .............................. $323,378,598 $161,727,034
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ....................... 15,640,940 8,792,108
Issued in connection with reinvestment of:
Dividends from net investment income ........... 169,748 272,920
Distributions from net realized gain ........... -- 248,876
Distributions in excess of net investment income -- 65,285
------------ ------------
15,810,688 9,379,189
Redeemed ....................................... (6,144,885) (2,602,008)
------------ ------------
Net change ..................................... 9,665,803 6,777,181
============ ============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
CGM REALTY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED MAY 13, 1994(c)
JUNE 30, 1997 YEAR ENDED YEAR ENDED THROUGH
(UNAUDITED) DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
For a share of the Fund outstanding throughout each period:
Net asset value at the
beginning of period ... $14.50 $10.89 $ 9.71 $10.00
------ ------ ------ ------
Net investment income (a) 0.31 0.52 0.54 0.31
Dividends from net
investment income (0.14) (0.52) (0.54) (0.23)
------ ------ ------ ------
Distributions from
net realized gain -- (0.41) -- --
Distributions from
tax return of capital ... -- -- (0.14) (0.08)
------ ------ ------ ------
Distributions in
excess of net
investment income ..... -- (0.12) -- --
Net realized and
unrealized gain (loss)
on investments ........ 0.86 4.14 1.32 (0.29)
------ ------ ------ ------
Net increase (decrease)
in net asset value .... 1.03 3.61 1.18 (0.29)
------ ------ ------ ------
Net asset value at end of
period ................ $15.53 $14.50 $10.89 $ 9.71
====== ====== ====== ======
Total Return (%) (b) .... 8.2(d) 44.1 19.8 0.2(d)
Ratios:
Operating expenses to
average net assets (%) 1.00(e) 1.00 1.00 1.00(e)
Operating expenses to
average net assets
before expense
limitation (%) ........ 1.09(e) 1.25 1.68 2.00(e)
Net income to average net
assets(%) ............. 4.64(e) 4.97 5.51 7.40(e)
Portfolio turnover (%) .. 125(e) 57 85 47(e)
Average commission rate (f) $0.0683 $0.0660 -- --
Net assets at end of
period (in thousands) $323,379 $161,727 $47,694 $34,277

(a) Net of reimbursement
which amounted to .. $ 0.01 $ 0.02 $ 0.07 $ 0.04
(b) The total return would have been lower had certain expenses not been reduced during the period.
(c) Commencement of operations.
(d) Not computed on an annualized basis.
(e) Computed on an annualized basis.
(f) SEC regulations require portfolios to disclose the average commission rate paid on trades for which commissions
were charged for fiscal years beginning on or after September 1, 1995.

See accompanying notes to financial statements
</TABLE>
<PAGE>
CGM REALTY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1997
(unaudited)

1. The Fund is a series of CGM Trust which is organized as a Massachusetts
business trust under the laws of Massachusetts pursuant to an Agreement and
Declaration of Trust. The Trust is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Trust has
three other funds whose financial statements are not presented herein. The Fund
commenced operations on May 13, 1994. The Fund's investment objective is to earn
above-average income and long-term growth of capital. The Fund intends to pursue
its objective by investing primarily in equity securities of companies in the
real estate industry.

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.

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, for tax purposes, consist of ordinary income,
capital gains and return of capital. The portion derived from capital gains
and return of capital will result in a reduction of the Fund's dividend
income and an increase in realized and unrealized gain on investments. These
dividends, when distributed by the Fund, are passed through to the Fund's
shareholders with these same tax characteristics. 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.
<PAGE>
CGM REALTY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(unaudited)

E. ORGANIZATION EXPENSE -- Costs incurred in 1994 in connection with the Fund's
organization and registration amounting to $70,186 have been paid by the
Fund. These costs are being amortized over 60 months beginning May 13, 1994.

2. PURCHASES AND SALE OF SECURITIES -- For the period ended June 30, 1997,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $313,043,783 and $168,522,644,
respectively. There were no purchases or sales of United States government
obligations.

3. A. MANAGEMENT FEES -- During the period ended June 30, 1997, the Fund
incurred management fees of $1,166,818, paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership
(CGM), certain officers and directors of which are also officers and
trustees of the Fund. The management agreement provides for a fee at
the annual rate of 0.85% on the first $500 million of the Fund's
average daily net assets and 0.75% on amounts in excess of $500
million. CGM waived a portion of its fee. See Note 4.

B. OTHER EXPENSES -- CGM performs certain administrative, accounting and
other services for the Fund. The expenses of those services, which are
paid to CGM by the Fund, include the following: (i) expenses for
personnel performing bookkeeping, accounting, internal auditing and
financial reporting functions and clerical functions relating to the
Fund; (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, shareholder
reports and notices, proxy solicitation material furnished to
shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance; and (iii) registration, filing and
other fees in connection with requirements of regulatory authorities.
For the period ended June 30, 1997, these expenses amounted to $12,000
and are shown separately in the financial statements as Accounting and
Administration.

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 CGM
Funds with an annual fee of $37,000 plus travel expenses for each
meeting attended. Of this amount, the Fund is responsible for $3,000
plus an annual variable fee calculated based on the proportion of the
Fund's average net assets to the aggregate average net assets of the CGM
Funds, which for 1997 is $980. In addition, the chairman of the
Independent Trustees Committee receives an annual retainer of $1,000.

4. EXPENSE LIMITATION -- Until December 31, 1997 and, thereafter, until further
notice to the Fund, CGM has voluntarily agreed to reduce its management fee and,
if necessary, to assume expenses of the Fund in order to limit the Fund's
expenses to an annual rate of 1.00% of average daily net assets. As a result of
the Fund's expenses exceeding the voluntary expense limitation, CGM waived
$125,007 of its management fee. The Fund incurred operating expenses of
$1,372,727, representing 1.00% of the average daily net assets.

5. LINE OF CREDIT -- Effective June 30, 1997, the Fund has a $20,000,000
committed unsecured line of credit with its custodian bank. Borrowings under the
line will be charged interest at 0.75% over the current Overnight Federal Funds
Rate. The Fund will incur a commitment fee of 0.10% per annum on the unused
portion of the line of credit.
<PAGE>
CGM REALTY FUND
- --------------------------------------------------------------------------------

INVESTMENT ADVISER

CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
Boston, Massachusetts 02110

- --------------------------------------------------------------------------------
TELEPHONE NUMBERS

For information about:
[] Account Procedures and Status

[] Redemptions

[] Exchanges

Call 800-343-5678

[] New Account Procedures

[] Prospectuses

[] Performance

Call 800-345-4048

- ------------------------------------------------------------------------------
MAILING ADDRESSES

FOR EXISTING ACCOUNTS

Boston Financial Data Services
P.O. Box 8511
Boston, MA 02266-8511

FOR NEW ACCOUNT APPLICATIONS ONLY

The CGM Funds
P.O. Box 449
Boston, MA 02117-0449
- ------------------------------------------------------------------------------

RQR2 Printed in U.S.A.

CGM
REALTY FUND

13th Quarterly Report
June 30, 1997

A No-Load Fund

[FENCER LOGO]
Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership