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 811-00082
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CGM TRUST
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(Exact name of registrant as specified in charter)
One International Place, Boston, Massachusetts 02110
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(Address of principal executive offices) (Zip code)
Jeremiah J. Bresnahan, Jr., Esq.
Bingham McCutchen LLP
150 Federal Street
Boston, MA 02110
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-737-3225
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Date of fiscal year end: December 31, 2005
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Date of reporting period: June 30, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
CGM
MUTUAL FUND
301st Quarterly Report
June 30, 2005
A No-Load Fund
[logo] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
TO OUR SHAREHOLDERS
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CGM Mutual Fund increased 1.8% during the second quarter of 2005 compared to
the unmanaged Standard and Poor's 500 Index which returned 1.4% and the
Merrill Lynch Master Bond Index which grew 3.1% over the same period. For the
first six months of the year, CGM Mutual Fund increased 7.5%, the unmanaged
S&P 500 Index declined -0.8% and the Merrill Lynch Master Bond Index increased
2.7%.
The U.S. economy is chugging along with real Gross Domestic Product for the
first quarter of 2005 clocked at a healthy 3.8% annual rate and we expect
second quarter GDP numbers will come in at nearly the same level. Auto and
retail sales picked up in June, homebuilding remains strong, inflation is
modest and corporate profits are generally increasing.
One year ago, the Federal Reserve Board began raising short-term interest
rates. One of the major concerns at the time was how much inflation would
accompany the anticipated U.S. economic expansion and what that would mean for
long-term interest rates, particularly if the price of crude oil were to rise
significantly. Over the months, we learned the answer: not very much, at least
for the moment. The Fed raised rates nine times over the last year, the price
of crude oil per barrel jumped from $35 to $58 and yet, inflation rose only a
modest 2.8% as measured by the Consumer Price Index and the yield on the ten-
year government bond actually declined from 4.7% on June 30, 2004 to 3.9% on
June 30, 2005. Nonetheless, the Fed has stated its intent to continue with a
"measured pace" of rate increases and, at its last meeting on June 30, raised
the Federal Funds rate one quarter of one percent to 3-1/4% while leaving open
the door to future increases.
Despite increasing productivity, rising corporate profits, modest inflation
and declining long-term interest rates--a near perfect set of market
conditions--common stock prices as measured by the S&P 500 Index rose only 6%
from June 30, 2004 to June 30, 2005. We believe that equities are getting
cheaper, but they are descending from lofty peaks and so far, aren't cheap
enough to generate much enthusiasm.
The question today is will a price tag of $58 or more for crude oil slow
economic growth going forward or will it be the source of much higher
inflation? The answer may be "both" and that possibility could well be what is
inhibiting equity prices. In years past, this phenomenon was termed
"stagflation." Some pundits do foresee a slowdown triggered by high oil
prices, lethargic foreign economies and a strengthening US dollar. We see no
evidence to support this outlook, but are nonetheless mindful of the history
lesson. For the moment, we believe the U.S. economy is leaning toward
continued expansion.
At the end of the second quarter of 2005, CGM Mutual Fund was approximately
72% invested in stocks and 28% in short-term government securities. Within the
equity portion of the portfolio, CGM Mutual Fund was heavily invested in a
variety of energy securities. Should the demand for crude oil continue to
rise, we believe our oil securities will provide good returns. In the equity
portion of the portfolio, the three largest industry positions were oil
refining, food retailers/wholesalers and independent oil producers. The three
largest company holdings were Murphy Oil Corporation, Amerada Hess Corporation
and Yum! Brands, Inc.
/s/ Robert L. Kemp
Robert L. Kemp
President
July 1, 2005
CGM MUTUAL FUND
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INVESTMENT PERFORMANCE
(unaudited)
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Total Return for Periods Ended June 30, 2005
CGM THE FUND'S AVERAGE
MUTUAL FUND ANNUAL TOTAL RETURN
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10 Years ...................... +103.6% +7.4%
5 Years ...................... +15.9 +3.0
1 Year ....................... +19.2 +19.2
3 Months ..................... +1.8 --
Commencing July 1, 2003 and ending June 30, 2004 Capital Growth Management
agreed to voluntarily waive a portion of the management fee, lowering the
annual rate to 0.72% of the Fund's average daily net assets. Otherwise, the
ten year and five year returns for the period ending June 30, 2005 would have
been lower.
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 a shareholder would pay on Fund distributions or the
redemption of Fund shares and assumes the reinvestment of all Fund
distributions during such respective periods. 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.
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See the Schedule of Investments beginning on the next page for the percentage
of net assets of the Fund invested in particular industries or securities.
CGM MUTUAL FUND
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INVESTMENTS AS OF JUNE 30, 2005
(unaudited)
COMMON STOCKS -- 72.2% OF TOTAL NET ASSETS
SHARES VALUE(a)
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BEVERAGE AND TOBACCO -- 4.0%
Altria Group, Inc. ...................................... 310,000 $ 20,044,600
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BROKERS/INVESTMENT SERVICES -- 3.7%
Legg Mason, Inc. ........................................ 181,000 18,843,910
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DRUGS -- 3.8%
Genentech, Inc.(b) ...................................... 235,000 18,865,800
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FOOD - RETAILERS/WHOLESALERS -- 9.0%
The Hershey Company ..................................... 410,000 25,461,000
The Kroger Co.(b) ....................................... 1,030,000 19,600,900
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45,061,900
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HEALTH CARE SERVICES -- 5.2%
HCA Inc. ................................................ 465,000 26,351,550
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HOME PRODUCTS AND COSMETICS -- 3.9%
The Procter & Gamble Company ............................ 370,000 19,517,500
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HOTEL AND RESTAURANTS -- 5.3%
YUM! Brands, Inc. ...................................... 508,000 26,456,640
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METALS AND MINING -- 4.1%
Arch Coal, Inc. ......................................... 285,000 15,523,950
Peabody Energy Corporation .............................. 93,000 4,839,720
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20,363,670
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OIL AND GAS WELL DRILLING -- 3.2%
Nabors Industries Ltd.(b) ............................... 265,000 16,064,300
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OIL - INDEPENDENT PRODUCTION -- 7.3%
Apache Corporation ...................................... 190,000 12,274,000
Occidental Petroleum Corporation ........................ 315,000 24,232,950
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36,506,950
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OIL REFINING -- 17.5%
Amerada Hess Corporation ................................ 279,200 29,737,592
ConocoPhillips .......................................... 458,000 26,330,420
Murphy Oil Corporation .................................. 614,000 32,069,220
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88,137,232
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OIL - SERVICE -- 5.2%
Baker Hughes Incorporated ............................... 515,000 26,347,400
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TOTAL COMMON STOCKS (Identified Cost $334,342,082) ......................... 362,561,452
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BILLS -- 27.5% OF TOTAL NET ASSETS
FACE
AMOUNT VALUE(a)
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UNITIED STATES TREASURY -- 27.5%
United States Treasury Bills, 2.701%, 7/21/05 ........... $ 34,000,000 $ 33,946,544
United States Treasury Bills, 2.743%, 8/18/05 ........... 8,500,000 8,468,380
United States Treasury Bills, 2.822%, 8/25/05 ........... 8,000,000 7,965,045
United States Treasury Bills, 2.973%, 9/08/05 ........... 14,000,000 13,919,542
United States Treasury Bills, 2.978%, 9/15/05 ........... 50,000,000 49,683,500
United States Treasury Bills, 2.993%, 9/22/05 ........... 24,500,000 24,330,068
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TOTAL BILLS (Identified Cost $138,322,218) ................................. 138,313,079
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SHORT-TERM INVESTMENT -- 1.1% OF TOTAL NET ASSETS
American Express Credit Corporation, 3.2%, 7/01/05
(Cost $5,235,000) ..................................... 5,235,000 5,235,000
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TOTAL INVESTMENTS -- 100.8% (Identified Cost $477,899,300)(c) ............... 506,109,531
Cash and receivables ...................................................... 17,160,027
Liabilities ............................................................... (20,978,667)
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TOTAL NET ASSETS -- 100.0% .................................................. $ 502,290,891
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(a) See Note 1A.
(b) Non-income producing security.
(c) Federal Tax Information: At June 30, 2005, the net unrealized appreciation
on investments based on cost of $479,545,754 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 ..................................... $30,039,396
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value ..................................... (3,475,619)
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Net unrealized appreciation ............................................... $ 26,563,777
=============
See accompanying notes to financial statements.
CGM MUTUAL FUND
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STATEMENT OF
ASSETS AND LIABILITIES
June 30, 2005
(unaudited)
ASSETS
Investments at value (Identified cost -- $477,899,300) ....... $506,109,531
Cash ......................................................... 517
Receivable for:
Securities sold ............................... $16,030,063
Shares of the Fund sold ....................... 52,432
Dividends and interest 1,077,015 17,159,510
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523,269,558
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LIABILITIES
Payable for:
Securities purchased .......................... 20,028,787
Shares of the Fund redeemed ................... 328,761
Tax withholding liability 127,260 20,484,808
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Accrued expenses:
Management fees ............................... 373,121
Trustees' fees ................................ 16,485
Accounting, Administration and Compliance fees 8,889
Transfer agent fees ........................... 57,371
Other expenses ................................ 37,993 493,859
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20,978,667
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NET ASSETS ..................................................... $502,290,891
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Net Assets consist of:
Capital paid-in ............................................ $494,196,819
Undistributed net investment income ........................ 1,453,562
Accumulated net realized loss on investments and foreign
currency ................................................. (21,569,721)
Unrealized appreciation on investments -- net .............. 28,210,231
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NET ASSETS ..................................................... $502,290,891
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Shares of beneficial interest outstanding, no par value ..... 18,467,147
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Net asset value per share* ................................... $27.20
======
* Shares of the Fund are sold and redeemed at net asset value
($502,290,891 / 18,467,147).
See accompanying notes to financial statements.
CGM MUTUAL FUND
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STATEMENT OF
OPERATIONS
Six Months Ended June 30, 2005
(unaudited)
INVESTMENT INCOME
Income
Dividends (net of withholding tax of $138,235) ............ $ 2,872,532
Interest .................................................. 1,653,952
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4,526,484
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Expenses
Management fees ........................................... 2,204,345
Trustees' fees ............................................ 32,553
Accounting, Administration and Compliance ................. 53,337
Custodian ................................................. 50,023
Transfer agent ............................................ 254,585
Audit and tax services .................................... 15,125
Legal ..................................................... 40,545
Printing .................................................. 33,082
Registration .............................................. 14,128
Miscellaneous ............................................. 1,408
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2,699,131
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Net investment income ....................................... 1,827,353
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REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments and foreign currency
transactions ............................................ 44,545,751
Net unrealized depreciation ............................... (11,017,149)
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Net gain on investments and foreign currency transactions . 33,528,602
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NET CHANGE IN ASSETS FROM
OPERATIONS .................................................. $ 35,355,955
============
See accompanying notes to financial statements.
CGM MUTUAL FUND
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004
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OPERATIONS
Net investment income ................................................... $ 1,827,353 $ 3,153,943
Net realized gain from investments and foreign currency transactions .... 44,545,751 109,328,753
Unrealized depreciation ................................................. (11,017,149) (64,617,245)
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Change in net assets from operations .................................. 35,355,955 47,865,451
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DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .............................................. (373,791) (3,214,099)
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CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ............................................ 10,060,091 8,478,985
Net asset value of shares issued in connection with reinvestment of:
Dividends from net investment income .................................. 329,360 2,826,556
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10,389,451 11,305,541
Cost of shares redeemed ................................................. (24,523,727) (51,660,870)
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Change in net assets derived from capital share transactions .......... (14,134,276) (40,355,329)
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Total change in net assets .............................................. 20,847,888 4,296,023
NET ASSETS
Beginning of period ..................................................... 481,443,003 477,146,980
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End of the period (including undistributed net investment income of
$1,453,562 and $0 at June 30, 2005 and December 31, 2004, respectively) $ 502,290,891 $ 481,443,003
============= =============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares .............................................. 375,192 361,240
Issued in connection with reinvestment of:
Dividends from net investment income .................................. 12,897 123,588
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388,089 484,828
Redeemed ................................................................ (930,873) (2,218,413)
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Net change .............................................................. (542,784) (1,733,585)
============= =============
See accompanying notes to financial statements.
CGM MUTUAL FUND
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FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 2005 -----------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001(a) 2000
------------- ------ ------ ------ ------ ------
For a share of the Fund outstanding
throughout each period:
Net asset value at the beginning of period $25.33 $23.00 $16.65 $20.47 $23.38 $27.28
------ ------ ------ ------ ------ ------
Net investment income(b) .................. 0.10(c) 0.16(c) 0.23(c) 0.26(c) 0.19 0.74
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions ............................ 1.79 2.33 6.35 (3.67) (2.90) (3.91)
------ ------ ------ ------ ------ ------
Total from investment operations .......... 1.89 2.49 6.58 (3.41) (2.71) (3.17)
------ ------ ------ ------ ------ ------
Dividends from net investment income ...... (0.02) (0.16) (0.23) (0.41) (0.20) (0.73)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net asset value 1.87 2.33 6.35 (3.82) (2.91) (3.90)
------ ------ ------ ------ ------ ------
Net asset value at end of period .......... $27.20 $25.33 $23.00 $16.65 $20.47 $23.38
====== ====== ====== ====== ====== ======
Total Return (%) .......................... 7.5 10.9(d) 39.7(d) (16.9) (11.6) (11.6)
Ratios:
Operating expenses to average net
assets (%) .............................. 1.10* 1.02 1.07 1.14 1.10 1.06
Operating expenses to average net assets
before management fee waiver (%) ........ N/A 1.11 1.17 N/A N/A N/A
Net investment income to average net
assets (%) .............................. 0.75* 0.68 1.23 1.30 1.00 2.99
Portfolio turnover (%) .................... 429* 314 260 191 236 230
Net assets at end of period
(in thousands) ($)......................... 502,291 481,443 477,147 376,089 498,972 654,468
(a) As required, effective January 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium and discount on debt securities. The effect of this change for the year
ended December 31, 2001 was to increase net investment income per share by $0.04, decrease net realized and unrealized
gains and losses per share by $0.04, and increase the ratio of net investment income to average net assets from 0.82% to
1.00%. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect
this change in presentation.
(b) Net of management fee waiver which
amounted to ($) ....................... N/A 0.02 0.02 N/A N/A N/A
(c) Per share net investment income has been calculated using the average shares outstanding during the period.
(d) The total return would have been lower had the management fee not been reduced during the period.
* Computed on an annualized basis.
CGM MUTUAL FUND
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NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005
(unaudited)
1. The Fund is a diversified series of CGM Trust which is organized as a
Massachusetts business trust under the laws of Massachusetts pursuant to an
Agreement and Declaration of Trust. The Trust is registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Trust has two other Funds whose financial statements are not presented
herein. Along with one other fund in a separate Trust, there are four CGM
Funds. The Fund's objective is reasonable long-term capital appreciation with
a prudent approach to protection of capital from undue risks. Current income
is a consideration in the selection of the Fund's portfolio securities, but it
is not a controlling factor.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
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. 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. 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 an accrual
basis and includes amortization of premium and discount. Net gain or loss on
securities sold is determined on the identified cost basis. Dividend
payments received by the Fund from its investment in REITs may be comprised
of ordinary income, capital gains, and return of capital and as such are
recorded as dividend income, capital gains or cost, as appropriate.
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, 2004, there were capital loss carryovers available to offset future
realized gains of $8,630,888 expiring in year 2009 and $57,484,584 expiring
in year 2010. During the year 2004 the Fund utilized $109,187,016 of capital
loss carryovers.
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.
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.
During the year ended December 31, 2004 and for the six month period ended
June 30, 2005, the tax character of distributions paid was as follows:
ordinary income $3,214,099 and $373,791 and long-term capital gains $0 and
$0, respectively. For tax purposes for the year ended December 31, 2004,
there was no undistributed ordinary income or capital gains except for
unrealized appreciation of $39,227,872.
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.
2. 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.
3. PURCHASES AND SALES OF SECURITIES -- For the period ended June 30, 2005,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $791,274,688 and
$816,263,377, respectively. There were no purchases or sales of long-term
United States government obligations.
4. A. MANAGEMENT FEES -- During the period ended June 30, 2005, the Fund
incurred management fees of $2,204,345, 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,
compliance 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 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; (iii) registration, filing and other fees in connection with
requirements of regulatory authorities and (iv) compliance in connection
to the Investment Company Act of 1940 and the Sarbanes Oxley Act of 2002.
The Accounting, Administration and Compliance expense of $53,337, for the
period ended June 30, 2005, 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 ending December 31, 2005, each
disinterested trustee will be compensated by the CGM Funds with an annual
fee of $50,000 plus travel expenses for each meeting attended. The
trustees are responsible for the audit committee functions of the Funds
and have designated a chairman to oversee those functions who receives an
additional $30,000 annually. Of these amounts, each fund is responsible
for $7,000 per trustee annually, 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 four CGM Funds.
ADDITIONAL INFORMATION
(unaudited)
AVAILABILITY OF PROXY VOTING INFORMATION:
Proxy voting policies and information regarding how the Fund voted proxies
relating to portfolio securities during the twelve month period ended June 30,
2005 are available without charge, upon request by calling 1-800-345-4048. The
policies also appear in the Fund's Statement of Additional Information, which
can be found on the SEC's website, http://www.sec.gov. The voting records can
also be found on the SEC's website on the Fund's Form N-PX filing.
PORTFOLIO HOLDINGS:
The Fund files its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms
N-Q are available on the SEC's website at http://www.sec.gov and may be
reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
CGM MUTUAL FUND
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FUND EXPENSES
As a shareholder of the CGM Mutual Fund, you incur two types of costs: (1)
transaction costs, which could include, among other charges, wire fees and
exchange fees for certain types of accounts and (2) ongoing costs, including
management fees and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period January 1, 2005 to June 30, 2005.
ACTUAL RETURN AND EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
second line of the table is useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
- -------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
01/01/05 6/30/05 1/01/05 - 6/30/05
- -------------------------------------------------------------------------------
Actual $1,000.00 $1,075.00 $5.66
- -------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000.00 $1,019.34 $5.51
- -------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.10%,
multiplied by the average account value over the period, multiplied by
181/365 (to reflect the one-half year period).
CGM MUTUAL FUND
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1979 -- JUNE 30, 2005 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------------
IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1979
- ---------------------------------------------------------------------------------------------------------------------------------
-- 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 1979 = 100.0
- --------------------------------------------------------------------------------------------------------------------------------
1979 13.81 100.0
1980 14.85 -- $ 0.88 $ 15.85 + 14.8 114.8
1981 13.90 -- 0.97 15.87 + 0.1 114.9
1982 18.16 -- 1.09 22.38 + 41.0 162.0
1983 18.81 -- 1.09 24.60 + 9.9 178.0
1984 17.01 $ 1.86 0.95 26.15 + 6.3 189.2
1985 21.53 -- 1.08 35.17 + 34.5 254.5
1986 22.86 2.75 0.94 44.00 + 25.1 318.4
1987 20.40 4.52 1.06 50.03 + 13.7 362.0
1988 19.94 -- 1.10 51.63 + 3.2 373.6
1989 22.34 0.95 0.93 62.83 + 21.7 454.7
1990 21.64 -- 0.93* 63.52 + 1.1 459.7
1991 26.80 2.64 0.97 89.50 + 40.9 647.7
1992 26.02 1.42 0.93 94.96 + 6.1 687.2
1993 28.88 1.93 0.86 115.66 + 21.8 837.0
1994 25.05 -- 1.04 104.44 - 9.7 755.8
1995 29.43 0.89 0.77 129.82 + 24.3 939.5
1996 31.42 4.15 0.74 160.59 + 23.7 1162.2
1997 25.52 7.81 0.67 173.76 + 8.2 1257.5
1998 26.36 0.25 0.98 188.01 + 8.2 1360.6
1999 27.28 3.54 0.84 226.55 + 20.5 1639.5
2000 23.38 -- 0.73 200.27 - 11.6 1449.3
2001 20.47 -- 0.20 177.04 - 11.6 1281.2
2002 16.65 -- 0.41 147.12 - 16.9 1064.7
2003 23.00 -- 0.23 205.53 + 39.7 1487.4
2004 25.33 -- 0.16 227.93 + 10.9 1649.5
2005 (6/30) 27.20 -- 0.02 245.02 + 7.5 1773.2
------ ------ -------
Totals $32.71 $20.57 +1673.2
- --------------------------------------------------------------------------------------------------------------------------------
* 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 and dividends, was $8.33.
- --------------------------------------------------------------------------------------------------------------------------------
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. The
advisor waived $0.02 and $0.02 per share of management fee in 2003 and 2004, respectively. Otherwise, the annual total return for
2003 and 2004 and cumulative 25-year return would have been lower.
CGM MUTUAL 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
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 and Voting Records
[ ] Complete Schedule of Portfolio Holdings for the
1st & 3rd Quarters (as filed on Form N- Q)
Call 800-345-4048
- --------------------------------------------------
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.
MQR2 05 Printed in U.S.A.
CGM
REALTY FUND
45th Quarterly Report
June 30, 2005
A No-Load Fund
[logo] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
TO OUR SHAREHOLDERS
- ------------------------------------------------------------------------------
CGM Realty Fund increased 8.6% during the second quarter of 2005 compared to the
unmanaged Standard and Poor's 500 Index which returned 1.4% and the National
Association of Real Estate Investment Trusts' (NAREIT) Equity REIT Index which
grew 14.5% over the same period. For the first six months of the year, CGM
Realty Fund increased 9.3%, the unmanaged S&P 500 Index declined -0.8% and the
NAREIT Equity REIT Index increased 6.4%.
The U.S. economy is chugging along with real Gross Domestic Product for the
first quarter of 2005 clocked at a healthy 3.8% annual rate and we expect second
quarter GDP numbers will come in at nearly the same level. Auto and retail sales
picked up in June, homebuilding remains strong, inflation is modest and
corporate profits are generally increasing.
One year ago, the Federal Reserve Board began raising short-term interest rates.
One of the major concerns at the time was how much inflation would accompany the
anticipated U.S. economic expansion and what that would mean for long-term
interest rates, particularly if the price of crude oil were to rise
significantly. Over the months, we learned the answer: not very much, at least
for the moment. The Fed raised rates nine times over the last year, the price of
crude oil per barrel jumped from $35 to $58 and yet, inflation rose only a
modest 2.8% as measured by the Consumer Price Index and the yield on the ten-
year government bond actually declined from 4.7% on June 30, 2004 to 3.9% on
June 30, 2005. Nonetheless, the Fed has stated its intent to continue with a
"measured pace" of rate increases and, at its last meeting on June 30, raised
the Federal Funds rate one quarter of one percent to 3-1/4% while leaving open
the door to future increases.
Despite increasing productivity, rising corporate profits, modest inflation and
declining long-term interest rates--a near perfect set of market
conditions--common stock prices as measured by the S&P 500 Index rose only 6%
from June 30, 2004 to June 30, 2005. We believe that equities are getting
cheaper, but they are descending from lofty peaks and so far, aren't cheap
enough to generate much enthusiasm.
The question today is will a price tag of $58 or more for crude oil slow
economic growth going forward or will it be the source of much higher inflation?
The answer may be "both" and that possibility could well be what is inhibiting
equity prices. In years past, this phenomenon was termed "stagflation." Some
pundits do foresee a slowdown triggered by high oil prices, lethargic foreign
economies and a strengthening US dollar. We see no evidence to support this
outlook, but are nonetheless mindful of the history lesson. For the moment, we
believe the U.S. economy is leaning toward continued expansion.
At the end of the second quarter of 2005, CGM Realty Fund was approximately 75%
invested in real estate investment trusts. The portfolio's largest sector
positions were in hotel and retail REITs. The Fund's three largest company
holdings were Arch Coal, Inc., CB Richard Ellis Group, Inc. and CONSOL Energy
Inc.
/s/ Robert L. Kemp
Robert L. Kemp
President
July 1, 2005
CGM REALTY FUND
- -------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
- --------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 2005
THE FUND'S
CGM AVERAGE
REALTY ANNUAL
FUND TOTAL RETURN
-------- --------------
10 years ........................ +564.7% +20.9%
5 years ......................... +241.8 +27.9
1 Year .......................... + 43.4 +43.4
3 Months ........................ + 8.6 --
The adviser limited the Fund's total operating expenses to 1.00% of its average
net assets from inception through December 31, 1997. Otherwise, the Fund's total
return for the ten-year period would have been lower.
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 a shareholder would pay on Fund distributions or the
redemption of Fund shares and assumes the reinvestment of all Fund distributions
during such respective periods. 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.
- -------------------------------------------------------------------------------
See the Schedule of Investments beginning on the next page for the percentage of
net assets of the Fund invested in particular industries or securities.
CGM REALTY FUND
- ----------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 2005
(unaudited)
COMMON STOCKS -- 98.8% OF TOTAL NET ASSETS
REAL ESTATE INVESTMENT TRUSTS -- 74.5% SHARES VALUE(a)
---------- ------------
APARTMENTS -- 4.0%
Essex Property Trust, Inc. ................................. 445,000 $ 36,961,700
------------
HOTELS -- 30.3%
DiamondRock Hospitality Company(b) ......................... 2,839,000 32,080,700
FelCor Lodging Trust, Inc.(c) .............................. 2,977,600 43,115,648
Host Marriott Corporation .................................. 2,830,000 49,525,000
Innkeepers USA Trust(b) .................................... 3,309,200 49,439,448
LaSalle Hotel Properties(b) ................................ 1,635,300 53,654,193
Sunstone Hotel Investors, Inc.(b) .......................... 2,098,900 50,919,314
------------
278,734,303
------------
MISCELLANEOUS -- 5.7%
Entertainment Properties Trust ............................. 1,148,000 52,808,000
------------
OFFICE AND INDUSTRIAL -- 13.1%
Boston Properties, Inc. .................................... 140,000 9,800,000
Maguire Properties, Inc. ................................... 525,000 14,878,500
SL Green Realty Corp. ...................................... 756,300 48,781,350
Vornado Realty Trust ....................................... 580,000 46,632,000
------------
120,091,850
------------
RETAIL -- 21.4%
CBL & Associates Properties, Inc. .......................... 1,150,000 49,530,500
General Growth Properties, Inc. ............................ 1,325,000 54,444,250
Simon Property Group, Inc. ................................. 640,000 46,393,600
The Macerich Company ....................................... 700,000 46,935,000
------------
197,303,350
------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Identified Cost $549,987,848) ............ 685,899,203
------------
OTHER COMMON STOCKS -- 24.3%
METALS AND MINING -- 18.0%
Arch Coal, Inc. ............................................ 1,100,000 59,917,000
CONSOL Energy Inc. ......................................... 1,040,000 55,723,200
Foundation Coal Holdings, Inc. ............................. 832,000 21,582,080
Peabody Energy Corporation ................................. 549,300 28,585,572
------------
165,807,852
------------
REAL ESTATE SERVICES -- 6.3%
CB Richard Ellis Group, Inc.(c) ............................ 1,327,900 58,241,694
------------
TOTAL OTHER COMMON STOCKS (Identified Cost $191,251,397) ...................... 224,049,546
------------
TOTAL COMMON STOCKS (Identified Cost $741,239,245) ............................ 909,948,749
------------
FACE
SHORT-TERM INVESTMENT -- 1.6% OF TOTAL NET ASSETS AMOUNT
-----------
American Express Credit Corporation, 3.2%,
7/01/05 (Cost $15,095,000) ............................... $15,095,000 15,095,000
------------
TOTAL INVESTMENTS -- 100.4% (Identified Cost $756,334,245)(d) ................. 925,043,749
Cash and receivables .............................................. 18,758,748
Liabilities ....................................................... (22,434,282)
------------
TOTAL NET ASSETS -- 100.0% .................................................... $921,368,215
============
(a) See Note 1A.
(b) Non-controlled affiliate (See Note 5).
(c) Non-income producing security.
(d) Federal Tax Information: At June 30, 2005 the net unrealized
appreciation on investments based on cost of $756,802,671 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 ............................ $ 168,241,078
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value ............................ 0
------------
Net unrealized appreciation ............................................ $ 168,241,078
=============
See accompanying notes to financial statements.
CGM REALTY FUND
- -----------------------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
June 30, 2005
(unaudited)
ASSETS
Investments at value:
Unaffiliated issuers (identified cost --
$624,800,979) ........................................... $738,950,094
Non-controlled affiliates
(identified cost -- $131,533,266) ....................... 186,093,655 $925,043,749
------------
Cash ........................................................................ 1,654
Receivable for:
Securities sold 14,285,923
Shares of the Fund sold 928,659
Dividends and interest ................................... 3,542,512 18,757,094
------------ ------------
943,802,497
------------
LIABILITIES
Payable for:
Securities purchased ..................................... 11,147,512
Shares of the Fund redeemed .............................. 10,548,685 21,696,197
------------
Accrued expenses:
Management fees .......................................... 600,825
Trustees' fees ........................................... 20,601
Accounting, Administration and Compliance fees ........... 14,501
Transfer agent fees ...................................... 46,731
Other expenses ........................................... 55,427 738,085
------------ ------------
22,434,282
------------
NET ASSETS ................................................................... $921,368,215
============
Net Assets consist of:
Capital paid-in ............................................................ $479,737,556
Undistributed net investment income......................................... 5,923,329
Accumulated net realized gain
on investments and foreign
currency .................................................................. 266,997,826
Unrealized appreciation on
investments -- net ........................................................ 168,709,504
------------
NET ASSETS ................................................................... $921,368,215
============
Shares of beneficial interest
outstanding, no par value ................................................. 28,576,493
============
Net asset value per share* .................................................. $32.24
============
*Shares of the Fund are sold and redeemed at net asset value ($921,368,215 / 28,576,493).
See accompanying notes to financial statements.
CGM REALTY FUND
- ------------------------------------------------------------------------------------------
STATEMENT OF
OPERATIONS
Six Months Ended June 30, 2005
(unaudited)
INVESTMENT INCOME
Income
Dividends (including dividend income of $2,589,355 from non-controlled
affiliated issuers) ................................................. $ 11,246,454
Interest ............................................................. 425,330
-------------
11,671,784
-------------
Expenses
Management fees ...................................................... 3,475,517
Trustees' fees ....................................................... 40,785
Accounting, Administration and Compliance............................. 87,010
Custodian ............................................................ 71,654
Transfer agent ....................................................... 183,303
Audit and tax services ............................................... 15,250
Legal ................................................................ 79,098
Printing ............................................................. 32,243
Registration ......................................................... 17,282
Line of credit commitment fee ........................................ 10,139
Miscellaneous ........................................................ 1,810
-------------
4,014,091
-------------
Net investment income ................................................. 7,657,693
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on investments ...................................... 267,470,606
Net unrealized depreciation ........................................... (200,204,011)
-------------
Net gain on investments ............................................... 67,266,595
-------------
NET CHANGE IN ASSETS FROM
OPERATIONS ............................................................ $ 74,924,288
=============
See accompanying notes to financial statements.
CGM REALTY FUND
- -------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004
------------- -------------
FROM OPERATIONS
Net investment income .............................................. $ 7,657,693 $ 4,666,175
Net realized gain from investments and foreign currency transactions 267,470,606 89,728,133
Unrealized appreciation (depreciation) ............................. (200,204,011) 108,077,150
------------- -------------
Change in net assets from operations ............................. 74,924,288 202,471,458
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .............................................. (1,734,364) (4,272,407)
Net realized short-term capital gain on investments ................ 0 (3,828,368)
Net realized long-term capital gain on investments ................. 0 (85,899,002)
------------- -------------
(1,734,364) (93,999,777)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ....................................... 185,055,400 215,709,993
Net asset value of shares issued in connection with reinvestment of:
Dividends from net investment income ............................. 1,422,039 3,538,293
Distributions from net short-term capital realized gain .......... 0 3,236,998
Distributions from net long-term capital realized gain ........... 0 72,630,888
------------- -------------
186,477,439 295,116,172
Cost of shares redeemed ............................................ (123,698,327) (262,608,312)
------------- -------------
Change in net assets derived from capital share transactions ..... 62,779,112 32,507,860
------------- -------------
Total change in net assets ......................................... 135,969,036 140,979,541
NET ASSETS
Beginning of period ................................................ 785,399,179 644,419,638
------------- -------------
End of period (including undistributed net investment income
of $5,923,329 and $0 at June 30, 2005 and December 31, 2004,
respectively) .................................................... $ 921,368,215 $ 785,399,179
============= =============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ......................................... 6,013,375 8,092,763
Issued in connection with reinvestment of:
Dividends from net investment income ............................. 48,802 130,730
Distributions from net short-term capital realized gain .......... 0 110,027
Distributions from net long-term capital realized gain ........... 0 2,468,759
------------- -------------
6,062,177 10,802,279
Redeemed ........................................................... (4,058,437) (10,268,528)
------------- -------------
Net change ......................................................... 2,003,740 533,751
============= =============
See accompanying notes to financial statements.
CGM REALTY FUND
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 2005 -----------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
------------- ------ ------ ------ ------ ------
For a share of the Fund outstanding
throughout each period:
Net asset value at the beginning of period $29.56 $24.75 $13.39 $13.47 $13.53 $11.08
------ ------ ------ ------ ------ ------
Net investment income ..................... 0.27(a) 0.19(a) 0.03(a) 0.40(a) 0.48(a) 0.52
Net realized and unrealized gain on
investments and foreign currency
transactions ............................ 2.47 8.55 11.93 0.10 0.17 2.66
------ ------ ------ ------ ------ ------
Total from investment operations .......... 2.74 8.74 11.96 0.50 0.65 3.18
------ ------ ------ ------ ------ ------
Dividends from net investment income ...... (0.06) (0.18) (0.04) (0.58) (0.71) (0.73)
Distribution from net short-term realized
gain -- (0.16) -- -- -- --
Distribution from net long-term realized
gain -- (3.59) (0.56) -- -- --
------ ------ ------ ------ ------ ------
Total Distributions ....................... (0.06) (3.93) (0.60) (0.58) (0.71) (0.73)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net asset value 2.68 4.81 11.36 (0.08) (0.06) 2.45
------ ------ ------ ------ ------ ------
Net asset value at end of period .......... $32.24 $29.56 $24.75 $13.39 $13.47 $13.53
====== ====== ====== ====== ====== ======
Total Return (%) .......................... 9.3 35.5 89.7 3.5 5.1 29.2
Ratios:
Operating expenses to average net assets
(%) 0.93* 0.96 1.02 1.03 1.00 1.02
Net investment income to average net assets
(%) ..................................... 1.78* 0.73 0.16 2.70 3.63 4.27
Portfolio turnover (%) .................... 253* 43 68 173 131 78
Net assets at end of period
(in thousands) ($) ...................... 921,368 785,399 644,420 339,757 383,156 499,922
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
* Computed on an annualized basis.
See accompanying notes to financial statements.
CGM REALTY FUND
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005
(unaudited)
1. The Fund is a diversified series of CGM Trust which is organized as a
Massachusetts business trust under the laws of Massachusetts pursuant to an
Agreement and Declaration of Trust. The Trust is registered under the Investment
Company Act of 1940 as an open-end management investment company. The Trust has
two other funds whose financial statements are not presented herein. Along with
one other fund in a separate Trust, there are four CGM Funds. The Fund commenced
operations on May 13, 1994. The Fund's investment objective is to provide a
combination of 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.
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, a portion of which may be recoverable. The Fund
will accrue such taxes and recoveries as applicable based upon its current
interpretations of the tax rules and regulations that exist in the markets
in which it invests. Interest income is recorded on the accrual basis and
includes amortization of premium and discount. Net gain or loss on
securities sold is determined on the identified cost basis. Dividend
payments received by the Fund from its investment in REITs may consist of
ordinary income, capital gains and return of capital and as such are
recorded as dividend income, capital gains or cost, as appropriate. Non-cash
dividend payments, if any, are recorded at the fair market value of the
securities received.
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, 2004 there were no capital loss carryovers available to offset future
realized gains.
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 or
accumulated realized gain/loss. The Fund also utilized earnings and profits
distributed to shareholders on redemption of shares as a part of the
dividend deduction for income tax purposes. 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. During the year ended December 31,
2004 and for the six month period ended June 30, 2005, the tax character of
distributions paid was as follows: ordinary income $8,100,775 and $1,734,364
and long-term capital gains $85,899,002 and $0, respectively. For tax
purposes for the year ended December 31, 2004, there was no undistributed
ordinary income or capital gains except for unrealized appreciation of
$368,440,736.
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.
2. 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.
3. PURCHASES AND SALE OF SECURITIES -- For the period ended June 30, 2005,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $1,129,170,302 and
$1,067,548,485, respectively. There were no purchases or sales of United States
government obligations.
4. A. MANAGEMENT FEES -- During the period ended June 30, 2005, the Fund
incurred management fees of $3,475,517, 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.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting,
compliance 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; (iii) registration, filing and other fees in connection with
requirements of regulatory authorities; and (iv) compliance in connection
to the Investment Company Act of 1940 and the Sarbanes Oxley Act of
2002. For the period ended June 30, 2005 these expenses amounted to
$87,010 and are shown separately in the financial statements as
Accounting, Administration and Compliance.
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 ending December 31, 2005, each
disinterested trustee will be compensated by the CGM Funds with an
annual fee of $50,000 plus travel expenses for each meeting attended.
The trustees are responsible for the audit committee functions of the
funds and have designated a chairman to oversee those functions who
receives an additional $30,000 annually. Of these amounts, each fund is
responsible for $7,000 per trustee annually, 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.
4. LINE OF CREDIT -- The Fund has a $20,000,000 committed unsecured line of
credit with State Street Corporation. 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, payable quarterly. There were no borrowings under the line of credit
during the period ended June 30, 2005.
5. AFFILIATED ISSUERS -- Affiliated issuers, as defined under the Investment
Company Act of 1940, are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
following summarizes transactions with affiliates of the Fund during the period
ended June 30, 2005:
NUMBER OF NUMBER OF
SHARES HELD GROSS GROSS SHARES HELD DIVIDEND MARKET VALUE
NAME OF ISSUER DECEMBER 31, 2004 ADDITIONS REDUCTIONS JUNE 30, 2005 INCOME JUNE 30, 2005
- -------------- ----------------- --------- ---------- ------------- ------ -------------
DiamondRock Hospitality
Company .................. 0 $2,839,000 0 2,839,000 $ 78,566 $ 32,080,700
Innkeepers USA Trust ....... 2,864,200 445,000 0 3,309,200 529,472 49,439,448
LaSalle Hotels Properties 1,635,300 0 0 1,635,300 784,944 53,654,193
Sunstone Hotel Investors,
Inc. ..................... 1,940,000 158,900 0 2,098,900 1,196,373 50,919,314
---------- ------------
Total .................. $2,589,355 $186,093,655
========== ============
CGM REALTY FUND
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
AVAILABILITY OF PROXY VOTING INFORMATION:
Proxy voting policies and information regarding how the Fund voted proxies
relating to portfolio securities during the twelve month period ended June 30,
2005 are available without charge, upon request by calling 1-800-345-4048. The
policies also appear in the Fund's Statement of Additional Information, which
can be found on the SEC's website, http://www.sec.gov. The voting records can
also be found on the SEC's website on the Form N-PX filing.
PORTFOLIO HOLDINGS:
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
CGM REALTY FUND
- -------------------------------------------------------------------------------
FUND EXPENSES
As a shareholder of the Realty Fund, you incur two types of costs: (1)
transaction costs, which could include, among other charges, wire fees and
exchange fees for certain types of accounts and (2) ongoing costs, including
management fees and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period January 1, 2005 to June 30, 2005.
ACTUAL RETURN AND EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
second line of the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher.
- -------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
1/01/05 6/30/05 1/01/05 - 6/30/05
- -------------------------------------------------------------------------------
Actual $1,000.00 $1,093.00 $4.83
- -------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000.00 $1,020.18 $4.66
- -------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 0.93%, multiplied
by the average account value over the period, multiplied by 181/ 365 (to
reflect the one-half year period).
CGM REALTY 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
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 and Voting Records
[ ] Complete Schedule of Portfolio Holdings for the
1st & 3rd Quarters (as filed on Form N- Q)
Call 800-345-4048
- --------------------------------------------------
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.
RQR2 05 Printed in U.S.A.
CGM
FOCUS FUND
31st Quarterly Report
June 30, 2005
A No-Load Fund
[logo] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
TO OUR SHAREHOLDERS
- ------------------------------------------------------------------------------
CGM Focus Fund increased 3.1% during the second quarter of 2005 compared to
the unmanaged Standard and Poor's 500 Index which returned 1.4%. For the first
six months of the year, CGM Focus Fund increased 14.3% while the unmanaged S&P
500 Index declined -0.8%.
The U.S. economy is chugging along with real Gross Domestic Product for the
first quarter of 2005 clocked at a healthy 3.8% annual rate and we expect
second quarter GDP numbers will come in at nearly the same level. Auto and
retail sales picked up in June, homebuilding remains strong, inflation is
modest and corporate profits are generally increasing.
One year ago, the Federal Reserve Board began raising short-term interest
rates. One of the major concerns at the time was how much inflation would
accompany the anticipated U.S. economic expansion and what that would mean for
long-term interest rates, particularly if the price of crude oil were to rise
significantly. Over the months, we learned the answer: not very much, at least
for the moment. The Fed raised rates nine times over the last year, the price
of crude oil per barrel jumped from $35 to $58 and yet, inflation rose only a
modest 2.8% as measured by the Consumer Price Index and the yield on the ten-
year government bond actually declined from 4.7% on June 30, 2004 to 3.9% on
June 30, 2005. Nonetheless, the Fed has stated its intent to continue with a
"measured pace" of rate increases and, at its last meeting on June 30, raised
the Federal Funds rate one quarter of one percent to 3-1/4% while leaving open
the door to future increases.
Despite increasing productivity, rising corporate profits, modest inflation
and declining long-term interest rates--a near perfect set of market
conditions--common stock prices as measured by the S&P 500 Index rose only 6%
from June 30, 2004 to June 30, 2005. We believe that equities are getting
cheaper, but they are descending from lofty peaks and so far, aren't cheap
enough to generate much enthusiasm.
The question today is will a price tag of $58 or more for crude oil slow
economic growth going forward or will it be the source of much higher
inflation? The answer may be "both" and that possibility could well be what is
inhibiting equity prices. In years past, this phenomenon was termed
"stagflation." Some pundits do foresee a slowdown triggered by high oil
prices, lethargic foreign economies and a strengthening US dollar. We see no
evidence to support this outlook, but are nonetheless mindful of the history
lesson. For the moment, we believe the U.S. economy is leaning toward
continued expansion.
At the end of the second quarter of 2005, CGM Focus Fund was approximately 39%
invested in stocks sold short. The Fund's three largest short positions were
Sirius Satellite Radio Inc., Amazon.com, Inc. and Qwest Communications
International Inc. On the long side, the Fund was heavily invested in a
variety of energy securities and held important positions in the oil refining,
retail and oil and gas well drilling industries. The Fund's three largest long
holdings were Canadian Natural Resources Limited, Peabody Energy Corporation
and Tenaris S.A. ADR (drilling equipment). Should the demand for crude oil
continue to rise, we believe the Fund's energy sector holdings will provide
good returns.
/s/ Robert L. Kemp
Robert L. Kemp
President
July 1, 2005
CGM FOCUS FUND
- -------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
- -------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 2005
THE FUND'S
CGM FOCUS AVERAGE ANNUAL
FUND TOTAL RETURN
------------- ------------------
5 Years ..................................... +274.2% +30.2%
1 Year ...................................... +28.0 +28.0
3 Months .................................... +3.1 --
The Fund's average annual total return since inception (September 3, 1997)
through June 30, 2005 is +20.2%. The adviser agreed to limit the Fund's total
operating expenses to 1.20% of its average net assets exclusive of any
dividend expense incurred on short sales from inception through December 31,
2001. Otherwise, the Fund's average annual total return since inception and
the Fund's total return and average annual total return for the five-year
period ended June 30, 2005, would have been lower.
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 a shareholder would pay on Fund distributions or the
redemption of Fund shares and assumes the reinvestment of all Fund
distributions during such respective periods. 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.
- -------------------------------------------------------------------------------
See the Schedule of Investments beginning on the next page for the percentage
of net assets of the Fund invested in particular industries or securities.
CGM FOCUS FUND
- -------------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 2005
(unaudited)
COMMON STOCKS -- 99.0% OF TOTAL NET ASSETS
SHARES VALUE(a)
------ --------
AEROSPACE -- 4.5%
Embraer-Empresa Brasileira de Aeronautica S.A. ADR(b) .............. 1,665,000 $ 55,061,550
-------------
AIRLINES -- 3.1%
Lan Airlines S.A. ADR(b) ........................................... 1,094,600 38,256,270
-------------
BROKERS/INVESTMENT SERVICES -- 5.2%
Legg Mason, Inc. ................................................... 610,000 63,507,100
-------------
DRUGS -- 1.2%
Genentech, Inc.(c) ................................................. 175,000 14,049,000
-------------
ENGINEERING AND SCIENTIFIC COMPUTERS -- 5.1%
Fluor Corporation(d) ............................................... 1,085,000 62,485,150
-------------
HOTELS AND RESTAURANTS -- 3.5%
YUM! Brands, Inc. .................................................. 825,000 42,966,000
-------------
LEISURE -- 5.2%
Harrah's Entertainment, Inc.(d) .................................... 875,000 63,061,250
-------------
METALS AND MINING -- 5.3%
Peabody Energy Corporation(d) ...................................... 1,248,000 64,945,920
-------------
MISCELLANEOUS -- 5.3%
Tenaris S.A. ADR(b) ................................................ 825,000 64,572,750
-------------
OIL AND GAS WELL DRILLING -- 10.2%
Nabors Industries Ltd.(c) .......................................... 1,059,600 64,232,952
Transocean Inc.(c)(d) .............................................. 1,120,000 60,446,400
-------------
124,679,352
-------------
OIL - INDEPENDENT PRODUCTION -- 6.3%
Canadian Natural Resources Limited(d) .............................. 1,880,000 68,394,400
Occidental Petroleum Corporation ................................... 100,000 7,693,000
-------------
76,087,400
-------------
OIL REFINING -- 19.2%
Amerada Hess Corporation(d) ........................................ 591,000 62,947,410
ConocoPhillips(d) .................................................. 1,042,000 59,904,580
Murphy Oil Corporation(d) .......................................... 1,230,000 64,242,900
Suncor Energy, Inc.(d) ............................................. 1,001,200 47,376,784
-------------
234,471,674
-------------
OIL - SERVICE -- 6.9%
Baker Hughes Incorporated(d) ....................................... 1,245,000 63,694,200
Smith International, Inc. .......................................... 315,000 20,065,500
-------------
83,759,700
-------------
RETAIL -- 10.3%
Abercrombie & Fitch Co. ............................................ 920,000 63,204,000
Best Buy Co., Inc. ................................................. 900,000 61,695,000
-------------
124,899,000
-------------
TECHNOLOGY -- 7.7%
Corning Incorporated(c) ............................................ 3,000,000 49,860,000
Google Inc.(c) ..................................................... 150,000 44,122,500
-------------
93,982,500
-------------
TOTAL COMMON STOCKS (Identified Cost $1,033,089,556) ................. 1,206,784,616
-------------
NOTES -- 0.1% OF TOTAL NET ASSETS
FACE
AMOUNT
------
UNITED STATES TREASURY -- 0.1%
United States Treasury Notes, 2.875%, 11/30/06
(Identified Cost $998,918)(e) ................................... $ 1,000,000 989,805
-------------
SHORT-TERM INVESTMENT -- 1.7% OF TOTAL NET ASSETS
American Express Credit Corporation, 3.2%,
7/01/05 (Cost $20,820,000) ...................................... 20,820,000 20,820,000
-------------
TOTAL INVESTMENTS -- 100.8% (Identified Cost $1,054,908,474)(f) ...................... 1,228,594,421
Cash and receivables .............................................................. 510,671,649
Liabilities ....................................................................... (520,252,977)
-------------
TOTAL NET ASSETS -- 100.0% ........................................................... $1,219,013,093
=============
FUTURE CONTRACTS
UNREALIZED
CONTRACTS GAIN (LOSS)
--------- -----------
Long, Euro Currency Futures Contracts, expiration 9/05
(Market Value of Contracts $2,275,688) ............................ 15 $ (218,362)
Long, Yen Currency Futures Contracts, expiration 9/05
(Market Value of Contracts $1,704,750) ............................ 15 (115,613)
-------------
$ (333,975)
-------------
Net payments (receipts) of variation margin to date ............... $ 331,912
-------------
Variation margin receivable (payable) on open future contracts .... $ (2,063)
=============
(a) See Note 1A.
(b) An American Depositary 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) A portion of this security has been segregated as collateral in connection with short sale investments (See Note
1E).
(e) This security is pledged to cover margin requirements on futures currency contracts at June 30, 2005 (See Note 1F).
(f) Federal Tax Information: At June 30, 2005 the net unrealized appreciation on investments based on cost of
$1,057,505,412 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 ................................................. $173,926,566
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value .............................................. (2,837,557)
------------
$171,089,009
============
SECURITIES SOLD SHORT (PROCEEDS $469,336,291)
(unaudited)
SHARES VALUE(a)
------ --------
Abgenix, Inc. ............................................. 340,000 $ 2,917,200
Alexion Pharmaceuticals, Inc. ............................. 290,000 6,681,600
Alkermes, Inc. ............................................ 340,000 4,494,800
Amazon.com, Inc. .......................................... 1,941,500 64,224,820
Apple Computer, Inc. ...................................... 1,300,000 47,853,000
Cubist Pharmaceuticals, Inc. .............................. 340,000 4,477,800
CV Therapeutics, Inc. ..................................... 340,000 7,622,800
Dendreon Corporation ...................................... 340,000 1,778,200
Geron Corporation ......................................... 340,000 2,631,600
Harley-Davidson, Inc. ..................................... 470,000 23,312,000
ICOS Corporation .......................................... 340,000 7,197,800
InterMune, Inc. ........................................... 340,000 4,433,600
International Business Machines Corporation ............... 770,000 57,134,000
Medarex, Inc. ............................................. 390,000 3,248,700
Millennium Pharmaceuticals Inc. ........................... 340,000 3,151,800
Neurochem Inc. ............................................ 90,000 904,500
NPS Pharmaceuticals, Inc. ................................. 340,000 3,859,000
Progenics Pharmaceuticals, Inc. ........................... 330,000 6,883,800
Qwest Communications International Inc. ................... 17,300,000 64,183,000
Sirius Satellite Radio Inc. ............................... 10,800,000 69,984,000
Sun Microsystems, Inc. .................................... 5,200,000 19,396,000
Wal-Mart Stores, Inc. ..................................... 1,310,000 63,142,000
------------
$469,512,020
============
See accompanying notes to financial statements.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
June 30, 2005
(unaudited)
ASSETS
Investments at value (Identified
cost -- $1,054,908,474) ............................................ $1,228,594,421
Cash ................................................................ 4,886
Restricted cash ..................................................... 489,663,786
Receivable for:
Securities sold .................................................... $ 11,659,560
Shares of the Fund sold ............................................ 6,133,961
Dividends and interest ............................................. 3,209,456 21,002,977
------------- -------------
1,739,266,070
-------------
LIABILITIES
Securities sold short at current market
value (Proceeds $469,336,291) ...................................... 469,512,020
Payable for:
Securities purchased ............................................... 46,363,874
Shares of the Fund
redeemed .......................................................... 2,807,604
Dividend on short sale ............................................. 154,000
Variation margin on
futures ........................................................... 2,063
Tax withholding liability .......................................... 324,401 49,651,942
-------------
Accrued expenses:
Management fees .................................................... 932,126
Trustees' fees ..................................................... 22,416
Accounting, Administra-
tion and Compliance fees .......................................... 16,965
Transfer agent fees ................................................ 48,577
Other expenses ..................................................... 68,931 1,089,015
------------- -------------
520,252,977
-------------
NET ASSETS ........................................................................... $1,219,013,093
=============
Net Assets consist of:
Capital paid-in .................................................................... $ 946,819,814
Undistributed net investment income ................................................ 4,423,525
Accumulated net realized gain on investments and foreign currency .................. 94,592,628
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
in foreign currencies:
Long positions ................................................................... 173,686,830
Short positions .................................................................. (175,729)
Future contracts ................................................................. (333,975)
-------------
NET ASSETS ........................................................................... $1,219,013,093
=============
Shares of beneficial interest
outstanding, no par value .......................................................... 36,156,193
=============
Net asset value per share* .......................................................... $ 33.72
=============
*Shares of the Fund are sold and redeemed at net asset value ($1,219,013,093 / 36,156,193).
See accompanying notes to financial statements.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
STATEMENT OF
OPERATIONS
Six Months Ended June 30, 2005
(unaudited)
INVESTMENT INCOME
Income
Dividends (net of withholding tax
of $430,391) ............................................ $ 7,092,015
Income on restricted cash ................................ 3,590,515
Interest ................................................. 191,619
------------
10,874,149
------------
Expenses
Management fees .......................................... 5,037,606
Trustees' fees ........................................... 44,413
Accounting, Administration and
Compliance .............................................. 101,791
Custodian ................................................ 89,384
Transfer agent ........................................... 256,174
Audit and tax services ................................... 15,250
Legal .................................................... 92,409
Printing ................................................. 46,896
Registration ............................................. 18,476
Line of credit commitment fee ............................ 12,674
Dividend on short sale ................................... 579,450
Interest related to securities sold short ................ 153,989
Miscellaneous ............................................ 2,112
------------
6,450,624
------------
Net investment income ..................................... 4,423,525
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on investments and foreign currency
transactions:
Long transactions ........................................ 96,904,269
Short transactions ....................................... 3,549,616
Future contracts ......................................... (258,486)
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
in foreign currencies:
Long transactions ........................................ 29,429,468
Short transactions ....................................... 569,409
Future contracts ......................................... (538,394)
------------
Net gain on investments and foreign currency transactions .. 129,655,882
------------
NET CHANGE IN ASSETS FROM
OPERATIONS ................................................ $134,079,407
============
See accompanying notes to financial statements.
CGM FOCUS FUND
- -----------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004
--------------- ---------------
FROM OPERATIONS
Net investment income ................................................... $ 4,423,525 $ 1,172,585
Net realized gain from investments and foreign currency transactions .... 100,195,399 195,830,533
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign currency ......... 29,460,483 (102,607,485)
--------------- ---------------
Change in net assets from operations .................................. 134,079,407 94,395,633
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ................................................... 0 (1,122,661)
Net realized long-term capital gain on investments ...................... 0 (114,230,602)
--------------- ---------------
0 (115,353,263)
--------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ............................................ 299,972,952 350,770,119
Net asset value of shares issued in connection with reinvestment of:
Dividends from net investment income .................................. 0 902,239
Distributions from net long-term capital realized gain ................ 0 94,668,422
--------------- ---------------
299,972,952 446,340,780
Cost of shares redeemed ................................................. (133,876,312) (282,045,208)
--------------- ---------------
Change in net assets derived from capital share transactions .......... 166,096,640 164,295,572
--------------- ---------------
Total change in net assets .............................................. 300,176,047 143,337,942
NET ASSETS
Beginning of period ..................................................... 918,837,046 775,499,104
--------------- ---------------
End of period (including undistributed net investment income of
$4,423,525 and $0 at June 30, 2005 and December 31, 2004,
respectively) $ 1,219,013,093 $ 918,837,046
=============== ===============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares .............................................. 9,337,386 11,433,308
Issued in connection with reinvestment of:
Dividends from net investment income .................................. 0 30,751
Distributions from net long-term capital realized gain ................ 0 3,226,599
--------------- ---------------
9,337,386 14,690,658
Redeemed ................................................................ (4,320,878) (9,464,607)
--------------- ---------------
Net change .............................................................. 5,016,508 5,226,051
=============== ===============
See accompanying notes to financial statements.
CGM FOCUS FUND
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2005 ----------------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
-------------- --------- --------- --------- --------- --------
For a share of the Fund outstanding
throughout the period:
Net asset value at the beginning
of period ..................... $29.51 $29.93 $17.98 $21.87 $15.80 $10.50
------ ------ ------ ------ ------ ------
Net investment income (loss)(a) . 0.13(b)(c) 0.04(b)(c) (0.21)(b) (0.21)(b) 0.01 0.36
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions . 4.08 3.65 12.16 (3.68) 7.51 5.30
------ ------ ------ ------ ------ ------
Total from investment operations 4.21 3.69 11.95 (3.89) 7.52 5.66
------ ------ ------ ------ ------ ------
Dividends from net investment
income ........................ -- (0.04) -- -- (0.01) (0.36)
Distribution from net realized
gain .......................... -- (4.07) -- -- (1.44) --
------ ------ ------ ------ ------ ------
Total Distributions ............. -- (4.11) -- -- (1.45) (0.36)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net
asset value ................... 4.21 (0.42) 11.95 (3.89) 6.07 5.30
------ ------ ------ ------ ------ ------
Net asset value at end of period $33.72 $29.51 $29.93 $17.98 $21.87 $15.80
====== ====== ====== ====== ====== ======
Total Return (%) ................ 14.3 12.4 66.5 (17.8) 47.7(d) 53.9(d)
Ratios:
Operating expenses to average net
assets (%) .................... 1.10* 1.12 1.18 1.18 1.20 1.20
Dividends and interest on short
positions to average net assets(%) 0.14* 0.09 -- 0.02 0.00 0.01
------ ------ ------ ------ ------ ------
Total expenses to average net
assets (%) .................... 1.24* 1.21 1.18 1.20 1.20 1.21
====== ====== ====== ====== ====== ======
Operating expenses to average net
assets before expense
limitation (%) ................ N/A N/A N/A N/A 1.32 1.64
Dividends and interest on short
positions to average net assets
before expense limitation (%) . N/A N/A N/A N/A 0.00 0.01
------ ------ ------ ------ ------ ------
Total expenses to average net
assets before expense
limitation (%) ................ N/A N/A N/A N/A 1.32 1.65
====== ====== ====== ====== ====== ======
Net investment income (loss) to
average net assets (%) ........ 0.85* 0.14 (0.92) (0.98) 0.11 3.02
Portfolio turnover (%) .......... 271* 327 204 155 254 551
Net assets at end of period
(in thousands) ($) ............ 1,219,013 918,837 775,499 383,983 249,562 78,889
(a) Net of reimbursement
which amounted to ($) ....... N/A N/A N/A N/A 0.01 0.05
(b) Per share net investment income (loss) has been calculated using the average shares outstanding during the period.
(c) Net investment income (loss) per share before dividends and interest on short positions for the period ended
December 31, 2004 and June 30, 2005 was $0.07 and $0.15, respectively.
(d) The total return would have been lower had certain expenses not been reduced during the period.
* Computed on an annualized basis.
See accompanying notes to financial statements.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005
(unaudited)
1. The Fund is a non-diversified series of CGM Trust which is organized as a
Massachusetts business trust under the laws of Massachusetts pursuant to an
Agreement and Declaration of Trust. The Trust is registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Trust has two other funds whose financial statements are not presented
herein. Along with one other fund in a separate Trust, there are four CGM
Funds. The Fund's investment objective is long-term growth of capital. The
Fund intends to pursue its objective by investing in a smaller number of
companies, and/or in a more limited number of sectors than diversified mutual
funds. In addition, should the investment outlook of the Fund's investment
manager so warrant, the Fund may engage in a variety of investment techniques
including short sales designed to capitalize on declines in the market price
of specific equity securities of one or more companies or declines in market
indexes.
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 securites 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
and includes amortization of premium and discount. 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, 2004, there were no capital loss carryovers available to offset future
realized gains. During the year 2004 the Fund utilized $78,257,264 of
capital loss carryovers.
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 amortization on bonds held short. The
Fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividend deduction for income tax
purposes. 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 and unrealized gain (loss) on futures contracts, which
will reverse in a subsequent period. Any taxable income or gain remaining at
fiscal year end is distributed in the following year. During the year ended
December 31, 2004, the tax character of distributions paid was as follows:
ordinary income $1,122,661 and long-term gains $114,230,602. For tax
purposes for the year ended December 31, 2004, there was no undistributed
ordinary income or capital gains except for unrealized appreciation of
$142,262,535.
E. SHORT SALES -- The Fund may sell securities short. A short sale is a
transaction in which the Fund sells a security it does not own in
anticipation that the market price of that security will decline. When the
Fund makes a short sale, it must borrow the security sold short to make
delivery to the buyer. The Fund then is obligated to replace the security
borrowed by purchasing the security at the market price at the time of
replacement. The Fund is liable for any dividends or interest paid on
securities sold short. While the short sale is outstanding, the Fund is
required to collateralize its obligations, which has the practical effect of
limiting the extent to which the Fund may engage in short sales. The market
value of securities held in a segregated account at June 30, 2005 was
$507,508,021 and the value of cash held in a segregated account was
$489,663,786.
F. CURRENCY FUTURE CONTRACTS -- The Fund may seek to manage exposure to the
relevant markets or to profit from changes in currency exchange rates using
currency future contracts and other derivatives. The Fund will only engage
in transactions in futures contracts that are traded on a United States
exchange or board of trade. The value of futures contracts positions could
be adversely affected by a number of complex political and economic factors
applicable to the countries issuing the underlying currencies. When the Fund
invests in future contracts these investments can disproportionately
increase losses when currency exchange rates are changing. The Fund may not
fully benefit from, or may lose money on, currency futures contracts if the
Fund's investment manager fails to accurately predict changes in their
value.
Upon entering into a contract, the Fund deposits and maintains as collateral
such initial margin as required by the exchange on which the transaction is
effected. At June 30, 2005 the market value of the U.S. Treasury note
pledged to cover margin requirements was $989,805. Pursuant to the contract
the Fund agrees to receive from or pay to the futures broker an amount of
cash equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains and losses. When the contract is closed the Fund
records a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it was
closed.
G. 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.
2. 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.
3. PURCHASES AND SALES OF SECURITIES -- For the period ended June 30, 2005,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $1,555,855,792 and
$1,388,767,977, respectively. There were no purchases nor sales of long-term
United States government obligations for the period ended June 30, 2005.
4. A. MANAGEMENT FEES -- During the period ended June 30, 2005, the Fund
incurred management fees of $5,037,606, 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 0.90% on
amounts in excess of $1 billion.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting,
compliance 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 questionnaires for SEC compliance; (iii)
registration, filing and other fees in connection with requirements of
regulatory authorities; and (iv) compliance in connection to the
Investment Company Act of 1940 and the Sarbanes Oxley Act of 2002. For
the period ended June 30, 2005 these expenses amounted to $101,791 and
are shown separately in the financial statements as Accounting,
Administration and Compliance.
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 ending December 31,
2005, each disinterested trustee will be compensated by the CGM Funds
with an annual fee of $50,000 plus travel expenses for each meeting
attended. The trustees are responsible for the audit committee
functions of the Funds and have designated a chairman to oversee those
functions who receives an additional $30,000 annually. Of these
amounts, each fund is responsible for $7,000 per trustee annually,
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 four CGM Funds.
5. LINE OF CREDIT -- The Fund has a $20,000,000 committed, secured line of
credit with State Street Corporation. 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 0.125% per annum on the unused portion of
the line of credit, payable quarterly. There were no borrowings under the line
of credit during the period ended June 30, 2005.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
AVAILABILITY OF PROXY VOTING INFORMATION:
Proxy voting policies and information regarding how the Fund voted proxies
relating to portfolio securities during the twelve month period ended June 30,
2005 are available without charge, upon request by calling 1-800-345-4048. The
policies also appear in the Fund's Statement of Additional Information, which
can be found on the SEC's website, http://www.sec.gov. The voting records can
also be found on the SEC's website on the Fund's Form N-PX filing.
PORTFOLIO HOLDINGS:
The Fund files its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms
N-Q are available on the SEC's website at http://www.sec.gov and may be
reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
FUND EXPENSES
As a shareholder of the CGM Focus Fund, you incur two types of costs: (1)
transaction costs, which could include, among other charges, wire fees and
exchange fees for certain types of accounts and (2) ongoing costs, including
management fees and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period January 1, 2005 to June 30, 2005.
ACTUAL RETURN AND EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
second line of the table is useful in comparing ongoing costs only, and will
not help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
- -------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
1/01/05 6/30/05 1/01/05 - 6/30/05
- -------------------------------------------------------------------------------
Actual $1,000.00 $1,143.00 $6.59
- -------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000.00 $1,018.65 $6.21
- -------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.24%, which
includes expenses related to short sales activity, multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period).
CGM FOCUS 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
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 and Voting Records
[ ] Complete Schedule of Portfolio Holdings for the
1st & 3rd Quarters (as filed on Form N-Q)
Call 800-345-4048
- --------------------------------------------------
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.
FFQR2 05 Printed in U.S.A.
ITEM 2. CODE OF ETHICS.
Not applicable for semi-annual reports.
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. Investments in securities of unaffiliated issuers as of June
30, 2005, as set forth in 210.12-12 of Regulation S-X, is included as part of
the report to shareholders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
As described in the CGM Trust's most recent proxy statement on Schedule 14A
filed on September 24, 2004, the CGM Trust does not have a formal policy for
considering any trustee candidates recommended by shareholders.
ITEM 11. CONTROLS AND PROCEDURES.
a) Based on their evaluation of the CGM Trust'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 Trust have concluded
that the CGM Trust's disclosure controls and procedures are effective to
provide reasonable assurance that information required to be disclosed by the
CGM Trust on Form N-CSR and Form N-Q is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commission rules and forms.
(b) There were no changes in CGM Trust's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the
CGM Trust's second fiscal quarter of the period covered by this report.
ITEM 12. 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 as required by Rule 30a-2(b) under the Investment
Company Act of 1940 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 Trust
By: /S/Robert L. Kemp
Robert L. Kemp
President
Principal Executive Officer
Date: August 22, 2005
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: August 22, 2005
By: /S/ Jem A. Hudgins
Jem A. Hudgins
CFO & Treasurer
Principal Financial Officer
Date: August 22, 2005