UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-00933
---------
CGM CAPITAL DEVELOPMENT FUND
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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
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-737-3225
--------------
Date of fiscal year end: December 31, 2005
-----------------
Date of reporting period: June 30, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
CGM
CAPITAL
DEVELOPMENT
FUND
176th 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 Capital Development Fund increased 0.3% 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 Capital Development Fund increased
9.2% 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 Capital Development Fund was
heavily invested in a variety of energy securities and held important
positions in the energy, oil refining and metals and mining industries. The
Fund's three largest company holdings were Murphy Oil Corporation, Amerada
Hess Corporation and Newfield Exploration Company. Should the demand for crude
oil continue to rise, we believe our oil securities will provide good returns.
/s/ Robert L. Kemp
Robert L. Kemp
President
July 1, 2005
CGM CAPITAL DEVELOPMENT FUND
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INVESTMENT PERFORMANCE
(unaudited)
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Total Return for Periods Ended June 30, 2005
CGM CAPITAL
DEVELOPMENT THE FUND'S AVERAGE
FUND ANNUAL TOTAL RETURN
------------ -------------------
10 Years .............................. +159.2% +10.0%
5 Years .............................. + 17.6 + 3.3
1 Year ............................... + 28.4 +28.4
3 Months ............................. + 0.3 --
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 CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 2005
(unaudited)
COMMON STOCKS -- 98.8% OF TOTAL NET ASSETS
SHARES VALUE(a)
------ --------
AIRLINES -- 5.4%
GOL Linhas Aereas Inteligentes S.A. ADR(b) ...... 760,700 $ 22,866,642
------------
BASIC MATERIALS -- 2.7%
Florida Rock Industries, Inc. ................... 155,000 11,369,250
------------
CHEMICALS -- 2.7%
Olin Corporation ................................ 615,000 11,217,600
------------
ELECTRONIC COMPONENTS -- 6.5%
Hutchinson Technology, Incorporated(c) .......... 350,000 13,478,500
Komag, Incorporated(c) .......................... 490,000 13,901,300
------------
27,379,800
------------
HEALTH CARE SERVICES -- 3.9%
LifePoint Hospitals, Inc.(c) .................... 330,000 16,671,600
------------
HOUSING AND BUILDING MATERIALS -- 4.3%
Building Materials Holding Corporation .......... 265,000 18,361,850
------------
METALS AND MINING -- 10.2%
Arch Coal, Inc. ................................. 405,000 22,060,350
Foundation Coal Holdings, Inc. .................. 807,300 20,941,362
------------
43,001,712
------------
MISCELLANEOUS -- 5.0%
NS Group, Inc.(c) ............................... 650,000 21,131,500
------------
OIL AND GAS WELL DRILLING -- 11.7%
Grey Wolf, Inc.(c) .............................. 920,000 6,817,200
Helmerich & Payne, Inc. ......................... 460,000 21,583,200
Patterson-UTI Energy, Inc. ...................... 750,000 20,872,500
------------
49,272,900
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OIL - INDEPENDENT PRODUCTION -- 10.9%
Berry Petroleum Company ......................... 425,000 22,474,000
Newfield Exploration Company(c) ................. 588,000 23,455,320
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45,929,320
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OIL REFINING -- 17.2%
Amerada Hess Corporation ........................ 231,000 24,603,810
Murphy Oil Corporation .......................... 504,000 26,323,920
Tesoro Petroleum Corporation .................... 465,000 21,631,800
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72,559,530
------------
OIL - SERVICE -- 1.7%
Cal Dive International, Inc.(c) ................. 135,000 7,069,950
------------
RETAIL -- 9.3%
Jos. A Bank Clothiers, Inc.(c) .................. 450,000 19,485,000
Men's Wearhouse, Inc.(c) ........................ 572,500 19,711,175
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39,196,175
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TEXTILE AND APPAREL -- 7.3%
Hartmarx Corporation(c) ......................... 1,208,800 12,172,616
The Timberland Company(c) ....................... 482,000 18,663,040
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30,835,656
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TOTAL COMMON STOCKS (Identified Cost $367,746,281) .......... 416,863,485
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SHORT-TERM INVESTMENT -- 0.9% OF TOTAL NET ASSETS
FACE
AMOUNT
------
American Express Credit Corporation, 3.2%,
7/01/05 (Cost $3,845,000) ..................... $3,845,000 3,845,000
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TOTAL INVESTMENTS -- 99.7% (Identified Cost $371,591,281)(d) ... 420,708,485
Cash and receivables ......................................... 7,133,571
Liabilities .................................................. (5,905,625)
------------
TOTAL NET ASSETS -- 100.0% ..................................... $421,936,431
============
(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) Federal Tax Information: At June 30, 2005 the net unrealized appreciation
on investments based on cost of $371,664,543 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 ....... $ 51,023,046
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value .......... (1,979,104)
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$ 49,043,942
============
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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STATEMENT OF
ASSETS AND LIABILITIES
June 30, 2005
(unaudited)
ASSETS
Investments at value (Identified cost --
$371,591,281) ............................................... $420,708,485
Cash .......................................................... 478
Receivable for:
Securities sold .................................. $6,469,901
Shares of the Fund sold .......................... 50
Dividends and interest ........................... 663,142 7,133,093
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427,842,056
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LIABILITIES
Payable for:
Securities purchased ............................. 4,900,868
Shares of the Fund redeemed ...................... 503,009
Tax withholding liability ........................ 95,445 5,499,322
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Accrued expenses:
Management fees .................................. 345,815
Trustees' fees ................................... 15,388
Accounting, Administration and Compliance fees ... 7,392
Transfer agent fees .............................. 10,730
Other expenses ................................... 26,978 406,303
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5,905,625
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NET ASSETS ......................................... $421,936,431
============
Net Assets consist of:
Capital paid-in .................................. $322,379,080
Undistributed net investment loss ................ (567,473)
Accumulated net realized gain on investments
and foreign currency ........................... 51,007,620
Unrealized appreciation on investments -- net .... 49,117,204
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NET ASSETS ......................................... $421,936,431
============
Shares of beneficial interest outstanding,
no par value .................................... 13,855,263
============
Net asset value per share* ........................ $ 30.45
============
* Shares of the Fund are sold and redeemed at net asset value
($421,936,431 / 13,855,263).
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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STATEMENT OF
OPERATIONS
Six Months Ended June 30, 2005
(unaudited)
INVESTMENT INCOME
Income
Dividends (net of withholding tax
of $101,950) ............................................ $ 1,715,933
Interest ................................................. 30,703
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1,746,636
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Expenses
Management fees .......................................... 2,057,794
Trustees' fees ........................................... 30,359
Accounting, Administration and
Compliance ............................................. 44,351
Custodian ................................................ 46,570
Transfer agent ........................................... 56,905
Audit and tax services ................................... 15,125
Legal .................................................... 35,807
Printing ................................................. 12,604
Registration ............................................. 13,484
Miscellaneous ............................................ 1,110
------------
2,314,109
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Net investment loss ....................................... (567,473)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain on investments and
foreign currency transactions ............................ 53,246,687
Net unrealized depreciation ............................... (16,379,253)
------------
Net gain on investments and foreign
currency transactions .................................... 36,867,434
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NET CHANGE IN ASSETS FROM OPERATIONS ....................... $ 36,299,961
============
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004
--------------- ---------------
FROM OPERATIONS
Net investment loss ..................................................... $ (567,473) $ (220,850)
Net realized gain from investments and foreign currency transactions .... 53,246,687 108,049,158
Unrealized depreciation ................................................. (16,379,253) (44,857,849)
--------------- ---------------
Change in net assets from operations .................................. 36,299,961 62,970,459
--------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ............................................ 1,550,214 4,782,667
Cost of shares redeemed ................................................. (16,262,499) (36,425,296)
--------------- ---------------
Change in net assets derived from capital share transactions .......... (14,712,285) (31,642,629)
--------------- ---------------
Total change in net assets .............................................. 21,587,676 31,327,830
NET ASSETS
Beginning of period ..................................................... 400,348,755 369,020,925
--------------- ---------------
End of period (including undistributed net investment loss of
$567,473 and $0 at June 30, 2005 and December 31, 2004, respectively) . $ 421,936,431 $ 400,348,755
=============== ===============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares .............................................. 52,904 195,724
Redeemed ................................................................ (551,232) (1,477,851)
--------------- ---------------
Net change .............................................................. (498,328) (1,282,127)
=============== ===============
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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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 each period:
Net asset value at the beginning
of period ...................... $27.89 $23.60 $15.22 $19.21 $25.12 $26.20
------ ------ ------ ------ ------ ------
Net investment income (loss) ..... (0.04)(a) (0.01)(a) (0.10)(a) (0.12)(a) (0.08)(b) 0.12(a)
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions 2.60 4.30 8.48 (3.87) (5.83) (1.10)
------ ------ ------ ------ ------ ------
Total from investment operations . 2.56 4.29 8.38 (3.99) (5.91) (0.98)
------ ------ ------ ------ ------ ------
Dividends from net investment
income ......................... -- -- -- -- -- (0.10)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net
asset value .................... 2.56 4.29 8.38 (3.99) (5.91) (1.08)
------ ------ ------ ------ ------ ------
Net asset value at end of period . $30.45 $27.89 $23.60 $15.22 $19.21 $25.12
====== ====== ====== ====== ====== ======
Total Return (%) ................. 9.2 18.2 55.1 (20.8) (23.5) (3.8)
Ratios:
Operating expenses to average net
assets (%) ..................... 1.12* 1.14 1.17 1.15 1.12 1.10
Net investment income (loss) to
average net assets (%) ......... (0.28)* (0.06) (0.56) (0.67) (0.38) 0.46
Portfolio turnover (%) ........... 230* 263 305 209 283 334
Net assets at end of period (in
thousands) ($) ................. 421,936 400,349 369,021 259,818 353,365 523,854
(a) Per share net investment income (loss) has been calculated using the average shares outstanding during the period.
(b) Per share net investment loss does not reflect the year's reclassification of permanent differences between book and tax basis
net investment loss. See Note 1D.
* Computed on an annualized basis.
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005
(unaudited)
1. The Fund is organized as a Massachusetts business trust under the laws of
Massachusetts pursuant to an Agreement and Declaration of Trust. The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. Along with three other funds in a separate
Trust, there are four CGM Funds. The Fund's objective is long-term capital
appreciation. The Fund seeks to attain its objective by investing in the
equity securities of a relatively small but diverse group of companies and
industries.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board of
Trustees. The pricing service provides the last reported sale price for
securities listed on a national securities exchange or, in the case of the
NASDAQ national market system, the NASDAQ official closing price. For
securities with no sale reported and in the case of over-the-counter
securities not so listed, the last reported bid price is used. Short-term
investments having a maturity of sixty days or less are stated at amortized
cost, which approximates value. Other assets and securities which are not
readily marketable will be valued in good faith at fair value using methods
determined by the Board of Trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed) and dividend income is recorded on the ex-dividend date net of
applicable foreign taxes. Interest income is recorded on the accrual basis.
Net gain or loss on securities sold is determined on the identified cost
basis.
C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders all of its taxable income
and net realized capital gains, within the prescribed time period.
Accordingly, no provision for federal income tax has been made. At December
31, 2004, there were capital loss carryovers available to offset future
realized gains of $1,538,498 expiring in year 2010. During the year 2004 the
Fund utilized $108,749,336 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 or
accumulated realized gain/loss. These differences are primarily related to
net investment loss write off and foreign exchange gains/losses.
Undistributed net investment income or accumulated net investment loss may
include temporary book and tax differences such as tax deferral of losses on
wash sales, which will reverse in a subsequent period. Any taxable income or
gain remaining at fiscal year end is distributed in the following year. For
tax purposes for the year ended December 31, 2004, there was no
undistributed ordinary income or capital gains except for unrealized
appreciation of $64,795,562.
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 $474,298,939 and
$493,431,975, 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 $2,057,794 paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership
(CGM), certain officers and directors of which are also officers and
trustees of the Fund. The management agreement provides for a fee at
the annual rate of 1.00% on the first $500 million of the Fund's
average daily net assets, 0.95% of the next $500 million and 0.80% of
such assets in excess of $1 billion.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting,
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 with the Investment Company Act of
1940 and the Sarbanes Oxley Act of 2002. The Accounting,
Administration and Compliance expense of $44,351, 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 these
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.
CGM CAPITAL DEVELOPMENT 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 CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
FUND EXPENSES
As a shareholder of the Capital Development 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 - 6/01/05
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,092.00 $5.81
- --------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000.00 $1,019.24 $5.61
- --------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.12%,
multiplied by the average account value over the period, multiplied by 181/365
(to reflect the one-half year period).
CGM CAPITAL DEVELOPMENT 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 $16.20 100.0
1980 20.50 $ 1.65* 0.36 $ 23.15 + 42.9% 142.9
1981 17.34 3.38 0.36 24.19 + 4.5 149.3
1982 24.88 2.88 0.41 43.28 + 78.9 267.1
1983 25.21 2.50 0.47 50.03 + 15.6 308.8
1984 17.28 6.15 0.11 45.93 - 8.2 283.5
1985 25.02 -- 0.18 67.15 + 46.2 414.5
1986 23.12 7.46 0.16 86.22 + 28.4 532.2
1987 16.56 10.09 0.14 99.93 + 15.9 616.8
1988 15.87 0.02 0.62 99.63 - 0.3 614.9
1989 18.37 -- 0.34 117.46 + 17.9 725.0
1990 18.53 -- 0.10 119.10 + 1.4 735.2
1991 25.80 11.07* 0.06 237.13 + 99.1 1463.8
1992 27.43 2.68* 0.20 278.63 + 17.5 1720.0
1993 27.71 7.51 0.07 358.60 + 28.7 2213.6
1994 20.58 0.71 0.07 276.48 - 22.9 1706.7
1995 27.33 1.68 0.02 390.11 + 41.1 2408.2
1996 29.08 5.87 0.07 499.73 + 28.1 3084.9
1997 26.96 9.08 -- 619.17 + 23.9 3822.2
1998 24.95 4.19 0.11 671.80 + 8.5 4147.1
1999 26.20 0.56 0.11 723.53 + 7.7 4466.4
2000 25.12 -- 0.10 696.04 - 3.8 4296.7
2001 19.21 -- -- 532.47 - 23.5 3287.0
2002 15.22 -- -- 421.72 - 20.8 2603.3
2003 23.60 -- -- 654.09 + 55.1 4037.7
2004 27.89 -- -- 773.13 + 18.2 4772.6
2005 (6/30) 30.45 -- -- 844.26 + 9.2 5211.7
------ ----- --------
Totals $77.48 $4.06 + 5111.7
- --------------------------------------------------------------------------------------------------------------------------------
* Includes $0.09, $0.02 and $0.02 per share distributed from paid-in capital.
- --------------------------------------------------------------------------------------------------------------------------------
The performance data contained in this report represent past performance, which is no guarantee of future results. The table
above does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund
shares. The investment return and the principal value of an investment in the Fund will fluctuate so that investors' shares,
when redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the
performance data quoted.
CGM CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
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.
CQR2 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 Capital Development Fund's most recent proxy statement
on Schedule 14A filed on September 24, 2004, the CGM Capital Development Fund
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 Capital Development Fund's disclosure
controls and procedures within 90 days of the filing of this Form N-CSR, the
principal executive officer and principal financial officer of CGM Capital
Development Fund have concluded that the CGM Capital Development Fund's
disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed by the CGM Capital
Development Fund on 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 Capital Development Fund's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act) that
occurred during the CGM Capital Development Fund'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 Capital Development Fund
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