-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ff9LBZp3bHDo73HgJI2/6klNqRK+brerZJwRXnjZCPWvPOEtCqtrsckqFT8VqCqe ipDPmOITwSnQC4z1+P8Zpw== 0000950156-04-000196.txt : 20040903 0000950156-04-000196.hdr.sgml : 20040903 20040903094625 ACCESSION NUMBER: 0000950156-04-000196 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040903 DATE AS OF CHANGE: 20040903 EFFECTIVENESS DATE: 20040903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CGM CAPITAL DEVELOPMENT FUND CENTRAL INDEX KEY: 0000060332 IRS NUMBER: 046014026 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00933 FILM NUMBER: 041015310 BUSINESS ADDRESS: STREET 1: ONE INTERNATIONAL PLACE CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 617-737-3225 MAIL ADDRESS: STREET 1: ONE INTERNATIONAL PLACE CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: LOOMIS SAYLES CAPITAL DEVELOPMENT FUND INC DATE OF NAME CHANGE: 19900302 N-CSRS 1 d61286.txt CGM CAPITAL DEVELOPMENT FUND SEMI UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-00933 CGM CAPITAL DEVELOPMENT FUND ---------------------------- (Exact name of registrant as specified in charter) One International Place, Boston, Massachusetts 02110 ---------------------------------------------------- (Address of principal executive offices) (Zip code) Jeremiah J. Bresnahan, Jr., Esq. Bingham McCutchen LLP 150 Federal Street Boston, MA 02110 (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-737-3225 -------------- Date of fiscal year end: December 31, 2004 ----------------- Date of reporting period: June 30, 2004 ------------- ITEM 1. REPORTS TO STOCKHOLDERS. CGM CAPITAL DEVELOPMENT FUND 172nd Quarterly Report June 30, 2004 A No-Load Fund [logo] Investment Adviser CAPITAL GROWTH MANAGEMENT Limited Partnership TO OUR SHAREHOLDERS - ------------------------------------------------------------------------------- CGM Capital Development Fund declined -7.8% during the second quarter of 2004 while the unmanaged Standard and Poor's 500 Index rose 1.7%. For the first six months of the year, CGM Capital Development Fund returned 0.5% compared to the unmanaged S&P 500 Index which rose 3.4%. A check of vital signs confirms an economic expansion is well under way with new gains in employment numbers in the lead. Payrolls have added approximately 210,000 new jobs each month since January 1 for a total of 1.3 million jobs through June 2004--a far cry from the media's so-called "jobless recovery" of late last year. Gross Domestic Product increased 3.9% during the first quarter of 2004 and it looks as though the expansion rate for the second quarter will be about the same. Consumer spending--the early leader in this recovery-- continues to increase though it is no longer considered robust. June spending levels fell off, we suspect, because consumers were discouraged by the daily drumbeat of Iraqi war news and reports of terrorism around the world. And, election year rhetoric is likely taking its toll on the consumer psyche as well. On a more positive note, the flip side of the economy--capital spending by corporations--is on an upswing, fueling optimism for a continuing recovery. Consumers are not alone in their worries about events overseas. The general uncertainty associated with developments in Iraq weighs heavily on investor confidence as well. However, the biggest questions facing investors these days have to do with inflation: How much and how fast? So far, inflation has kicked in this year at a higher rate than we expected, largely as a result of a jump in commodities prices driven by demand from China and the Pacific Rim. Though recent numbers suggest that business may be slowing in these countries, what if the economy continues to expand from current levels? The Federal Reserve Board's June 30 move to boost its target on the Federal Funds rate one quarter of one percent was so widely anticipated, the stock market barely took notice of the event and the bond market actually rose in response. For now, interest rates, while up from their lows, are still accommodating. At June 30, long term (10-year) bond yields were up to 4.6%, 30-year mortgage rates were 6.25% and three-month treasury bills were yielding 1.32%. Stock market behavior has been somewhat puzzling so far this year. Corporate profits since the beginning of the year have been impressive with estimates of year-to-year gains of more than 25% in the first quarter of this year. Yet the equity market as measured by the S&P 500 Index is up only 3.4% in 2004 through June 30. We are inclined to think equities may be marking time for valuations to become even more attractive as earnings move higher. And, we believe investors may need to see more of the recovery accompanied by only modest inflation before stock prices react. In anticipation of stronger capital spending, we are invested in companies poised to benefit from that sector of the economy. CGM Capital Development Fund's three largest equity positions are in the housing and building materials, oil refining and telephone industries. The Fund's three largest holdings are D.R. Horton, Inc., Lennar Corporation and Valero Energy Corporation. /s/ Robert L. Kemp Robert L. Kemp President July 2, 2004 CGM CAPITAL DEVELOPMENT FUND - -------------------------------------------------------------------------------- INVESTMENT PERFORMANCE (unaudited) - -------------------------------------------------------------------------------- Total Return for Periods Ended June 30, 2004 CGM CAPITAL DEVELOPMENT THE FUND'S AVERAGE FUND ANNUAL TOTAL RETURN ------------- ----------------------- 10 Years ............................... +116.1% +8.0% 5 Years ............................... -2.0 -0.4 1 Year ................................ +35.7 +35.7 3 Months .............................. -7.8 -- The percentage figures for the Fund are based upon the beginning net asset values of $23.51, $24.93, $17.47 and $25.72, respectively, and the June 30, 2004 net asset value of $23.71 per share assuming the reinvestment of income dividends and capital gains during such respective periods. These percentage figures do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. The performance data contained in this 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. Current performance may be lower or higher than the performance data quoted. CGM CAPITAL DEVELOPMENT FUND - -------------------------------------------------------------------------------- BOARD OF TRUSTEES PETER O. BROWN G. KENNETH HEEBNER MARK W. HOLLAND ROBERT L. KEMP LAURENS MACLURE JAMES VAN DYKE QUEREAU, JR. J. BAUR WHITTLESEY OFFICERS ROBERT L. KEMP, President G. KENNETH HEEBNER, Vice President DAVID C. FIETZE, Chief Compliance Officer KATHLEEN S. HAUGHTON, Vice President JEM A. HUDGINS, Treasurer LESLIE A. LAKE, Vice President and Secretary MARTHA I. MAGUIRE, Vice President MARY L. STONE, Assistant Vice President W. DUGAL THOMAS, Vice President 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 CGM CAPITAL DEVELOPMENT FUND - -------------------------------------------------------------------------------- The Fund is supervised by the board of trustees (the "Board") of the Trust. The Board is responsible for the general oversight of the Fund, including general supervision and review of the Fund's investment activities. The Board, in turn, elects the officers who are responsible for administering the Fund's day-to-day operations. An asterisk in the table below identifies those trustees and officers who are "interested persons" of the Trust as defined in the Investment Company Act of 1940. Each trustee and officer of the Trust noted as an interested person is interested by virtue of that individual's position with Capital Growth Management Limited Partnership ("CGM"), the Fund's investment adviser, as described in the table below. Each trustee serves during the continued lifetime of the Trust or until he earlier dies, resigns or is removed, or if sooner, until the election and qualification of his successor. Each officer serves until his or her successor is elected or qualified or until the officer sooner dies, resigns, or is removed or becomes disqualified. The trustees and officers of the Trust, their ages, their principal occupations during the past five years, the number of CGM Funds they oversee, and other directorships they hold are set forth below. Unless otherwise noted below, the address of each interested trustee and officer is One International Place, Boston, Massachusetts 02110. Correspondence intended for the trustees who are not "interested persons" of the Trust may be sent c/o Capital Growth Management, One International Place, Boston, Massachusetts 02110. The Statement of Additional Information for the Fund includes additional information about Fund trustees and is available, without charge, upon request by calling the CGM Marketing Department, toll free, at 800-345-4048.
NUMBER OF FUNDS IN THE PRINCIPAL OCCUPATION DURING CGM FUNDS POSITION HELD AND PAST FIVE YEARS AND COMPLEX NAME, ADDRESS AND AGE LENGTH OF TIME SERVED OTHER DIRECTORSHIPS HELD OVERSEEN - --------------------- --------------------- ---------------------------- -------- INTERESTED TRUSTEES G. Kenneth Heebner* Trustee since 1993 Employee, CGM; Part Owner, 4 age 63 Kenbob, Inc. (managing partner of CGM) Robert L. Kemp* Trustee since 1990 Employee, CGM; Part Owner, 4 age 72 Kenbob, Inc. (managing partner of CGM) DISINTERESTED TRUSTEES Peter O. Brown Trustee since 1993 Counsel (formerly, Partner), 4 age 63 Harter, Secrest & Emery LLP (law firm); Trustee, TT International U.S.A. Master and Feeder Trusts (four mutual funds) Mark W. Holland Trustee since 2004 President, Wellesley Financial 4 age 54 Advisors, LLC; formerly Vice President and Chief Operating Officer, Fixed Income Management, Loomis, Sayles & Company L.P.; formerly Director, Loomis, Sayles & Company L.P. Laurens MacLure Trustee since 1990 Retired; formerly President 4 age 79 and Chief Executive Officer, New England Deaconess Hospital; formerly Trustee, New England Zenith Fund; formerly Director, Massachusetts Blue Cross/Blue Shield James Van Dyke Quereau, Jr. Trustee since 1993 Managing Partner and Director, 4 age 55 Stratton Management Company (investment management); Director and Vice President, Semper Trust Co. J. Baur Whittlesey Trustee since 1990 Member, Ledgewood Law Firm, P.C. 4 age 57 OFFICERS G. Kenneth Heebner* Vice President since 1990 Employee, CGM; Part Owner, 4 age 63 Kenbob, Inc. (managing partner of CGM) Robert L. Kemp* President since 1990 Employee, CGM; Part Owner, 4 age 72 Kenbob, Inc. (managing partner of CGM) David C. Fietze* Chief Compliance Officer Employee - Legal counsel, CGM; 4 age 35 since 2004 formerly counsel, Bartlett address: Hackett Feinberg, P.C.; 222 Berkeley Street, formerly counsel, McLane, Boston, Massachusetts Graf, Raulerson & Middleton 02116 Kathleen S. Haughton* Vice President since 1992 Employee - Investor Services 4 age 44 and Anti-Money Laundering Division, CGM address: Compliance Officer since 2002 222 Berkeley Street, Boston, Massachusetts 02116 Jem A. Hudgins* Treasurer since 2004 Employee - CGM; formerly Vice 4 age 41 President - Tax and Treasury, AEW Capital Management L.P. Leslie A. Lake* Vice President and Secretary Employee - Office 4 age 59 since 1992 Administrator, CGM Martha I. Maguire* Vice President since 1994 Employee - Funds Marketing, 4 age 48 CGM Mary L. Stone* Assistant Vice President Employee - Portfolio 4 age 59 since 1990 Transactions, CGM W. Dugal Thomas* Vice President since 1992 Employee - Director of 4 age 67 Marketing, CGM
CGM CAPITAL DEVELOPMENT FUND -------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD DECEMBER 31, 1978 -- JUNE 30, 2004 (UNAUDITED) -------------------------------------------------------------------------------------------------------------------------------- IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1978 -------------------------------------------------------------------------------------------------------------------------------- -- 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 1978 = 100.0 - -------------------------------------------------------------------------------------------------------------------------------- 1978 $13.05 100.0 1979 16.20 -- $0.35 $ 16.63 + 27.4% 127.4 1980 20.50 $ 1.65* 0.36 23.76 + 42.9 182.1 1981 17.34 3.38 0.36 24.83 + 4.5 190.3 1982 24.88 2.88 0.41 44.42 + 78.9 340.4 1983 25.21 2.50 0.47 51.35 + 15.6 393.5 1984 17.28 6.15 0.11 47.14 - 8.2 361.2 1985 25.02 -- 0.18 68.92 + 46.2 528.1 1986 23.12 7.46 0.16 88.49 + 28.4 678.1 1987 16.56 10.09 0.14 102.56 + 15.9 785.9 1988 15.87 0.02 0.62 102.25 - 0.3 783.5 1989 18.37 -- 0.34 120.55 + 17.9 923.7 1990 18.53 -- 0.10 122.24 + 1.4 936.6 1991 25.80 11.07* 0.06 243.38 + 99.1 1864.8 1992 27.43 2.68* 0.20 285.97 + 17.5 2191.1 1993 27.71 7.51 0.07 368.04 + 28.7 2819.9 1994 20.58 0.71 0.07 283.76 - 22.9 2174.1 1995 27.33 1.68 0.02 400.39 + 41.1 3067.7 1996 29.08 5.87 0.07 512.90 + 28.1 3929.7 1997 26.96 9.08 -- 635.48 + 23.9 4868.9 1998 24.95 4.19 0.11 689.50 + 8.5 5282.8 1999 26.20 0.56 0.11 742.59 + 7.7 5689.6 2000 25.12 -- 0.10 714.37 - 3.8 5473.4 2001 19.21 -- -- 546.49 - 23.5 4187.2 2002 15.22 -- -- 432.82 - 20.8 3316.3 2003 23.60 -- -- 671.30 + 55.1 5143.6 2004 (6/30) 23.71 -- -- 674.66 + 0.5 5169.3 ------ ----- -------- Totals $77.48 $4.41 + 5069.3 -------------------------------------------------------------------------------------------------------------------------------- *Includes $0.09, $0.02 and $0.02 per share distributed from paid-in capital. -------------------------------------------------------------------------------------------------------------------------------- The performance data contained in this report represent past performance, which is no guarantee of future results. The table above does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 the original cost. Current performance may be lower or higher than the performance data quoted.
CGM CAPITAL DEVELOPMENT FUND - ---------------------------------------------------------------------------------------------- INVESTMENTS AS OF JUNE 30, 2004 (unaudited) COMMON STOCKS -- 99.7% OF TOTAL NET ASSETS
SHARES VALUE(a) AUTO AND RELATED -- 4.8% Toyota Motor Corporation ADR(b) ......................... 210,000 $ 17,140,200 ------------- CONSUMER DURABLES -- 5.2% Thor Industries, Inc. ................................... 400,000 13,384,000 Winnebago Industries, Inc. .............................. 130,000 4,846,400 ------------- 18,230,400 ------------- ELECTRONIC COMPONENTS -- 7.4% AU Optronics Corporation ADR(b) ......................... 900,750 14,718,255 Harman International Industries, Inc. ................... 125,600 11,429,600 ------------- 26,147,855 ------------- ENGINEERING AND SCIENTIFIC COMPUTERS -- 0.7% Fluor Corporation ....................................... 50,000 2,383,500 ------------- HOME PRODUCTS AND COSMETICS -- 5.3% Helen of Troy Limited(c) ................................ 505,000 18,619,350 ------------- HOUSING AND BUILDING MATERIALS -- 18.9% D.R. Horton, Inc. ....................................... 907,350 25,768,740 Hovnanian Enterprises, Inc.(c) .......................... 90,000 3,123,900 Lennar Corporation; Class A ............................. 490,000 21,912,800 Lennar Corporation; Class B ............................. 36,000 1,491,480 M.D.C. Holdings, Inc. ................................... 68,700 4,370,007 Toll Brothers, Inc.(c) .................................. 150,000 6,348,000 WCI Communities, Inc.(c) ................................ 175,000 3,904,250 ------------- 66,919,177 ------------- LEISURE -- 3.3% Station Casinos, Inc. ................................... 242,000 11,712,800 ------------- MISCELLANEOUS -- 1.8% Champion Enterprises, Inc.(c) ........................... 700,000 6,426,000 ------------- OIL - INDEPENDENT PRODUCTION -- 3.8% Canadian Natural Resources Limited ...................... 249,000 7,445,100 PetroKazakhstan, Inc. ................................... 220,000 5,988,400 ------------- 13,433,500 ------------- OIL REFINING -- 16.9% Amerada Hess Corporation ................................ 234,000 18,530,460 Tesoro Petroleum Corporation(c) ......................... 685,000 18,906,000 Valero Energy Corporation ............................... 300,000 22,128,000 ------------- 59,564,460 ------------- RETAIL -- 5.4% Urban Outfitters, Inc.(c) ............................... 312,000 $ 19,003,920 ------------- STEEL -- 9.7% Commercial Metals Company ............................... 270,000 8,761,500 Nucor Corporation ....................................... 96,000 7,368,960 United States Steel Corporation ......................... 520,000 18,262,400 ------------- 34,392,860 ------------- TELEPHONE -- 16.5% America Movil S.A. de C.V. ADR(b) ....................... 490,000 17,821,300 Mobile TeleSystems OJSC ADR(b)(d) ....................... 170,000 20,740,000 Open Joint Stock Company "Vimpel-Communications" ADR(b)(c)(d) ............................................ 204,000 19,675,800 ------------- 58,237,100 ------------- TOTAL COMMON STOCKS (Identified Cost $299,540,698) ...................... 352,211,122 ------------- SHORT-TERM INVESTMENT -- 0.5% FACE AMOUNT ----------- American Express Credit Corporation, 1.3%, 7/01/04 (Cost $1,710,000) ................................... $1,710,000 1,710,000 ------------- TOTAL INVESTMENTS -- 100.2% (Identified Cost $301,250,698) (e).. 353,921,122 Cash and receivables .................................................... 24,575,905 Liabilities ............................................................. (25,150,794) ------------- TOTAL NET ASSETS -- 100.0% ................................................. $353,346,233 ============ (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) The Fund has approximately 11% of its assets at June 30, 2004 invested in companies incorporated in the Russian Federation. (e) Federal Tax Information: At June 30, 2004 the net unrealized appreciation on investments based on cost of $301,250,698 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 .................... $ 59,485,533 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value .................... (6,815,109) ------------- Net unrealized appreciation ............................................ $ 52,670,424 ============ See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES June 30, 2004 (unaudited) ASSETS Investments at value (Identified cost -- $301,250,698) ..................................... $353,921,122 Cash ....................................................... 4,050 Receivable for: Securities sold .......................... $23,871,765 Shares of the Fund sold 939 Dividends and interest.................... 699,151 24,571,855 --------------- ------------ 378,497,027 ------------ LIABILITIES Payable for: Securities purchased ..................... 24,229,876 Shares of the Fund redeemed ................................ 441,650 Withholding tax .......................... 131,827 24,803,353 --------------- Accrued expenses: Management fees .......................... 281,822 Trustees' fees ........................... 16,247 Accounting and Administration fees ..................... 3,500 Transfer agent fees ...................... 19,642 Other expenses ........................... 26,230 347,441 --------------- ------------ 25,150,794 ------------ NET ASSETS .................................................. $353,346,233 ============ Net Assets consist of: Capital paid-in ........................................... $351,335,692 Undistributed net investment income........................ 435,915 Accumulated net realized loss on investments and foreign currency -- net ......................................... (51,096,243) Unrealized appreciation on investments -- net ....................................... 52,670,869 ------------ NET ASSETS .................................................. $353,346,233 ============ Shares of beneficial interest outstanding, no par value ................................. 14,905,758 ============ Net asset value per share* ................................. $23.71 ====== * Shares of the Fund are sold and redeemed at net asset value ($353,346,233 / 14,905,758). See accompanying notes to financial statements. CGM CAPITAL DEVELOPMENT FUND - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS Six Months Ended June 30, 2004 (unaudited) INVESTMENT INCOME Income Dividends (net of withholding tax of $199,971) ................................................ $ 2,470,450 Interest ..................................................... 7,387 ------------ 2,477,837 ------------ Expenses Management fees .............................................. 1,792,510 Trustees' fees ............................................... 29,577 Accounting and Administration ................................ 21,000 Custodian .................................................... 46,264 Transfer agent ............................................... 68,345 Audit and tax services ....................................... 19,000 Legal ........................................................ 35,888 Printing ..................................................... 17,746 Registration ................................................. 10,657 Miscellaneous ................................................ 935 ------------ 2,041,922 ------------ Net investment income ......................................... 435,915 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain on investments and foreign currency transactions -- net ......................................... 59,191,591 Unrealized depreciation -- net ................................ (57,683,437) ------------ Net gain on investments and foreign currency transactions ........................................ 1,508,154 ------------ NET CHANGE IN ASSETS FROM OPERATIONS .................................................... $ 1,944,069 ============ See accompanying notes to financial statements. CGM CAPITAL DEVELOPMENT FUND - ----------------------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 ---------------- ---------------- FROM OPERATIONS Net investment income (loss) ........................... $ 435,915 $ (1,644,271) Net realized gain from investments and foreign currency transactions ......................................... 59,191,591 48,060,800 Unrealized appreciation (depreciation) ................. (57,683,437) 88,597,743 ------------ ------------ Change in net assets from operations ................. 1,944,069 135,014,272 ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS Proceeds from sale of shares ........................... 3,795,514 2,561,863 Cost of shares redeemed ................................ (21,414,275) (28,373,410) ------------ ------------ Change in net assets derived from capital share transactions ....................................... (17,618,761) (25,811,547) ------------ ------------ Total change in net assets ............................. (15,674,692) 109,202,725 NET ASSETS Beginning of period .................................... 369,020,925 259,818,200 ------------ ------------ End of period (including undistributed net investment income of $435,915 and $0, respectively) ............. $353,346,233 $369,020,925 ============ ============ NUMBER OF SHARES OF THE FUND: Issued from sale of shares ............................. 156,923 140,277 Redeemed ............................................... (886,883) (1,574,532) ------------ ------------ Net change ............................................. (729,960) (1,434,255) ============ ============ See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND - ------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2004 --------------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 For a share of the Fund outstanding throughout each period: Net asset value at the beginning of period ...................... $23.60 $15.22 $19.21 $25.12 $26.20 $24.95 ------ ------ ------ ------ ------ ------ Net investment income (loss) ..... 0.03(a) (0.10)(a) (0.12)(a) (0.08)(b) 0.12(a) 0.12 Dividends from net investment income -- -- -- -- (0.10) (0.11) Distribution from net realized gain -- -- -- -- -- (0.56) ------ ------ ------ ------ ------ ------ Total Distributions .............. -- -- -- -- (0.10) (0.67) ------ ------ ------ ------ ------ ------ Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.08 8.48 (3.87) (5.83) (1.10) 1.80 ------ ------ ------ ------ ------ ------ Net increase (decrease) in net asset value .................... 0.11 8.38 (3.99) (5.91) (1.08) 1.25 ------ ------ ------ ------ ------ ------ Net asset value at end of period . $23.71 $23.60 $15.22 $19.21 $25.12 $26.20 ====== ====== ====== ====== ====== ====== Total Return (%) ................. 0.5 55.1 (20.8) (23.5) (3.8) 7.7 Ratios: Operating expenses to average net assets (%) ..................... 1.14* 1.17 1.15 1.12 1.10 1.08 Net investment income (loss) to average net assets (%) ......... 0.24* (0.56) (0.67) (0.38) 0.46 0.46 Portfolio turnover (%) ........... 290* 305 209 283 334 335 Net assets at end of period (in thousands) ($) ................. 353,346 369,021 259,818 353,365 523,854 632,537 (a) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (b) Per share net investment loss does not reflect the year's reclassification of permanent differences between book and tax basis net investment loss. See Note 1D. * Computed on an annualized basis. See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2004 (unaudited) 1. The Fund is organized as a Massachusetts business trust under the laws of Massachusetts pursuant to an Agreement and Declaration of Trust. The Fund is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. Along with three other funds in a separate Trust, there are four CGM Funds. The Fund's objective is long-term capital appreciation. The Fund seeks to attain its objective by investing in the equity securities of a relatively small but diverse group of companies and industries. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. SECURITY VALUATION -- Equity securities are valued on the basis of valuations furnished by a pricing service, authorized by the Board of Trustees. The pricing service provides the last reported sale price for securities listed on a national securities exchange or, in the case of the NASDAQ national market system, the NASDAQ official closing price. For securities with no sale reported and in the case of over-the-counter securities not so listed, the last reported bid price is used. 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 net of applicable foreign taxes. Interest income is recorded on the accrual basis. Net gain or loss on securities sold is determined on the identified cost basis. C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies, and to distribute to its shareholders all of its taxable income and net realized capital gains, within the prescribed time period. Accordingly, no provision for federal income tax has been made. At December 31, 2003, there were capital loss carryovers available to offset future realized gains of $59,361,211 expiring in year 2009 and $50,926,623 expiring in year 2010. 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. Distributions from net investment income and short-term capital gains are treated as ordinary income for income tax purposes. Permanent book and tax differences relating to shareholder distributions may result in reclassifications to paid-in capital. These differences are primarily related to net investment loss write off. Undistributed net investment income or accumulated net investment loss may include temporary book and tax differences such as tax deferral of losses on wash sales, which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. For tax purposes, for the year ended December 31, 2003, there was no undistributed ordinary income or capital gains except for unrealized appreciation of $110,354,306. E. FOREIGN CURRENCY TRANSLATION -- All assets and liabilities initially expressed in terms of foreign currencies are translated into U.S. dollars. Transactions affecting statement of operations accounts and net realized gain/(loss) on investments are translated at the rates prevailing at the dates of the transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities at the end of the period, resulting from changes in the exchange rate. F. INVESTMENT RISK -- There are certain additional risks involved in investing in foreign securities that are not inherent in investments in domestic securities. These risks may involve adverse political and economic developments and the possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. In addition, the securities of some foreign companies and securities markets are less liquid and at times more volatile than securities of comparable U.S. companies and U.S. securities markets. 2. PURCHASES AND SALES OF SECURITIES -- For the period ended June 30, 2004, purchases and sales of securities other than United States government obligations and short-term investments aggregated $516,411,835 and $533,236,331, respectively. There were no purchases or sales of United States government obligations. 3. A. MANAGEMENT FEES -- During the period ended June 30, 2004, the Fund incurred management fees of $1,792,510 paid or payable to the Fund's investment adviser, Capital Growth Management Limited Partnership (CGM), certain officers and directors of which are also officers and trustees of the Fund. The management agreement provides for a fee at the annual rate of 1.00% on the first $500 million of the Fund's average daily net assets, 0.95% of the next $500 million and 0.80% of such assets in excess of $1 billion. B. OTHER EXPENSES -- CGM performs certain administrative, accounting and other services for the Fund. The expenses of those services, which are paid to CGM by the Fund, include the following: (i) expenses for personnel performing bookkeeping, accounting, and financial reporting functions and clerical functions relating to the Fund; (ii) expenses for services required in connection with the preparation of registration statements and prospectuses, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Fund or regulatory authorities and reports and questionnaires for SEC compliance; and (iii) registration, filing and other fees in connection with requirements of regulatory authorities. The Accounting and Administration expense of $21,000, for the period ended June 30, 2004, 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). For the period ended June 30, 2004 each other trustee was compensated by the CGM Funds with an annual fee of $50,000 (the financial expert receives an additional $30,000 annually) plus travel expenses for each meeting attended. Of this amount, each fund was responsible for $7,000 per trustee, plus an annual variable fee calculated based on the proportion of each fund's average net assets relative to the aggregate average net assets of the CGM Funds, which for the period ended June 30, 2004 was $2,164 per trustee for the 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 [ ] Proxy Voting Policies Call 800-345-4048 Proxy voting policies are available without charge, upon request. These policies also appear in the Fund's Statement of Additional Information, which can be found on the SEC's website, http://www.sec.gov. - ------------------------------------------------------------------------------- MAILING ADDRESS CGM Shareholder Services c/o Boston Financial Data Services P.O. Box 8511 Boston, MA 02266-8511 - ------------------------------------------------------------------------------- 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. CQR2 04 Printed in U.S.A. ITEM 2. CODE OF ETHICS. A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer and principal financial officer is filed as an exhibit to the registrant's annual Form N-CSR. There were no amendments to the Code during the registrant's most recent fiscal half-year ended June 30, 2004. There were no waivers or implicit waivers from the Code granted by the registrant during the most recent fiscal half-year ended June 30, 2004. A copy of the Code is available without charge, upon request by calling Capital Growth Management at 1-800-345-4048. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semi-annual reports. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semi-annual reports. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable at this time. [Applicable for periods ending on or after July 9,2004 (beginning with Form N-CSRs filed at the end of September, 2004 for July 31, 2004 reporting period.)] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 10. CONTROLS AND PROCEDURES. (a) Based on their evaluation of the CGM Capital Development Fund's disclosure controls and procedures within 90 days of the filing of this Form N-CSR, the principal executive officer and principal financial officer of CGM Capital Development Fund have concluded that the CGM Capital Development Fund's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the CGM Capital Development Fund on this report is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. (b) Not applicable. ITEM 11. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 are attached hereto as EX-99.CERT. (a)(3) Not applicable. (b) Certifications for each principal executive officer and principal financial officer of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CGM Capital Development Fund By: /S/Robert L. Kemp Robert L. Kemp President Principal Executive Officer Date: September 3, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /S/ Robert L. Kemp Robert L. Kemp President Principal Executive Officer Date: September 3, 2004 By: /S/ Jem A. Hudgins Jem A. Hudgins CFO & Treasurer Principal Financial Officer Date: September 3, 2004 EX-99.CERT 2 ex99_cert.txt CERTIFICATION EX-99.CERT Registrant Name: CGM Capital Development Fund File Number: 811-00933 Registrant CIK Number: 0000060332 Certifications: I, Robert L. Kemp, certify that: 1. I have reviewed this report on Form N-CSR of CGM Capital Development Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation. 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 3, 2004 /s/ Robert L. Kemp Robert L. Kemp President Principal Executive Officer I, Jem A. Hudgins, certify that: 1. I have reviewed this report on Form N-CSR of CGM Capital Development Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation. 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 3, 2004 /s/ Jem A. Hudgins Jem A. Hudgins CFO & Treasurer Principal Financial Officer EX-99.906 CERT 3 ex99_906cert.txt 906 CERTIFICATION EX-99.906CERT Registrant Name: CGM Capital Development Fund File Number: 811-00933 Registrant CIK Number: 0000060332 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned officers of the CGM Capital Development Fund (the "Registrant"), with respect to the Fund's Form N-CSR for the six-month period ended June 30, 2004 as filed with the Securities and Exchange Commission, each hereby certify that, to the best of such officer's knowledge: 1. the Fund's Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: September 3, 2004 /s/ Robert L. Kemp Robert L. Kemp President Principal Executive Officer Date: September 3, 2004 /s/ Jem A. Hudgins Jem A. Hudgins CFO & Treasurer Principal Financial Officer This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----