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)
T. John Holton, 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, 2007
-----------------
Date of reporting period: December 31, 2007
-----------------
ITEM 1. REPORTS TO STOCKHOLDERS.
CGM
CAPITAL
DEVELOPMENT
FUND
47th Annual Report
December 31, 2007
A No-Load Fund
[Graphic Omitted] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
TO OUR SHAREHOLDERS:
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CGM Capital Development Fund returned -2.8% during the fourth quarter of 2007
compared to the unmanaged Standard and Poor's 500 Index which returned -3.3%
over the same period. For the year just ended, CGM Capital Development Fund
returned 28.3% and the S&P 500 Index, 5.5%.
THE YEAR IN REVIEW AND ECONOMIC OUTLOOK
November marked the sixth anniversary of the U.S. economic expansion. Indeed,
the longevity of the current economic cycle as well as the bull market in
common stocks is testing historical records. Now, however, there are signs of
slowdown on the business horizon as damage precipitated by past excesses in
the housing market along with years of easy credit availability is corrected.
Cheap money rates and the marketing of subprime mortgage loans mixed in with
high-grade paper (packaged and sold as prime credits) have led to payment
defaults on the consumer level and huge institutional losses. Home buyers were
wooed with mortgages they couldn't afford, wrong-headedly assuming that rising
home prices would bail them out. Instead home prices declined, loans went
south and the financial institutions and investors who purchased mortgage-
backed securities took the hit. Billions in assets have been and continue to
be written off as worthless while many banks and other financial entities
scramble to raise capital to shore up balance sheets. Well-publicized losses
have already cost top jobs at both Citigroup and Merrill Lynch and still the
full extent of the devastation is unclear since no one really knows the value
of many of these esoteric packages of now delinquent mortgages. The Federal
Reserve Board has taken several steps to encourage borrowing and inject
liquidity into the market which we hope will stabilize the credit markets. For
the moment though, the uncertainty has spawned a flight to quality in the bond
market driving yields on the 10-year government bond from 5.04% in June to
4.03% at year end.
In addition to the credit crisis, a second troubling sign emerged today with
the release of the Institute for Supply Management's index of manufacturing
which dropped to 47.7 in December from 50.8 the month before, thereby
confirming a slowdown. And, yet another uncertainty in the economic landscape
is the enormous rise in the price of crude oil. The year began with crude at
$50 a barrel and ended with it at $98. In the past, rising oil prices have
acted like a large tax resulting in a pull back in consumer spending. This
time around, the consumer appears to be a bit more resilient and so far,
despite some spending cuts, the dire consequences of past predictions have yet
to materialize.
The credit crisis is serious and has wreaked havoc on many financial
institutions. Manufacturing may well be slowing and the price of oil remains
high. However, there are many sectors of the economy prospering at the same
time. The annual GDP growth rate in the third quarter of 2007 was a hefty
4.9%. Businesses that supply global markets, rapidly developing countries like
China, Brazil, Russia and India in particular, are faring well. The U.S.
agricultural sector is booming and heavy capital industries, including
aerospace and defense, are strong. The unemployment rate remains low, the S&P
500 Index closed the year off just 6% from its all-time high in October
despite ongoing credit travails and the Fed continues to reduce short-term
interest rates. We are hopeful the economy can weather current turbulence and
resume a more measured growth pattern later in the new year.
PORTFOLIO STRATEGY
CGM Capital Development Fund remained fully invested throughout 2007
reflecting our expectation of continued global economic growth. The most
significant industry position in the Fund's portfolio was energy which we
increased during the year from 11% of the portfolio on December 31, 2006 to
24% of the portfolio at year end 2007. The Fund owned a selection of foreign
and domestic small and mid-cap companies which benefited from the strength in
the global economy.
The Fund's three largest gains occurred in Cameron International Corporation,
a manufacturer of equipment for offshore oil producing, Deckers Outdoor
Corporation, a producer of UGG brand footwear, and Priceline.com Incorporated,
a leading provider of online travel services.
The portfolio's two largest price declines were experienced by the Men's
Wearhouse, Inc., a men's clothing retailer, and IHOP Corp., the owner of the
International House of Pancakes restaurant chain.
On December 31, 2007, CGM Capital Development Fund held important positions in
the oil service, metals and mining, and housing and building materials
industries. The Fund's three largest stock holdings at year end were Cameron
International Corporation, Deckers Outdoor Corporation and Priceline.com
Incorporated.
/s/ Robert L. Kemp
Robert L. Kemp
President
/s/ G. Kenneth Heebner
G. Kenneth Heebner
Portfolio Manager
January 2, 2008
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CGM CAPITAL DEVELOPMENT FUND AND THE UNMANAGED S&P 500 INDEX
assuming reinvestment of dividends and capital gains
- -------------------------------
CGM CAPITAL DEVELOPMENT FUND
Average Annual Total Returns
through 12/31/07
- -------------------------------
1 year 5 year 10 year
28.3% 25.6% 7.9%
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Past performance is no
indication of future results
- -------------------------------
Unmanaged
CGM Capital S&P 500
Development Fund Index
-------------------------------------------------
Start $10,000 $10,000
1998 10,850 12,860
1999 11,685 15,561
2000 11,241 14,145
2001 8,599 12,462
2002 6,810 9,708
2003 10,562 12,494
2004 12,484 13,856
2005 15,642 14,535
2006 16,627 16,832
2007 21,332 17,758
CGM CAPITAL DEVELOPMENT FUND
PORTFOLIO MANAGER
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G. Kenneth Heebner has managed CGM Capital Development Fund since 1976. In
1990, Mr. Heebner founded Capital Growth Management Limited Partnership with
Robert L. Kemp. Prior to establishing the new company, Mr. Heebner was at
Loomis, Sayles and Company where he managed the Fund, then known as Loomis-
Sayles Capital Development Fund. In addition to CGM Capital Development Fund,
Mr. Heebner currently manages CGM Mutual Fund, CGM Realty Fund and CGM Focus
Fund.
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See the Schedule of Investments on pages 3 and 4 for the percentage of net
assets of the Fund invested in particular industries or securities as of
December 31, 2007.
INVESTMENT PERFORMANCE
(unaudited)
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Cumulative Total Return for Periods Ended
December 31, 2007
CGM CAPITAL
DEVELOPMENT
FUND
-----------
10 Years ................................................... +113.3%
5 Years ................................................... +213.0
1 Year .................................................... + 28.3
3 Months .................................................. - 2.8
The performance data contained in the report represent past performance, which
is no guarantee of future results. The graph and table above do not reflect
the deduction of taxes a shareholder would pay on Fund distributions or the
redemption of Fund shares and assume the reinvestment of all Fund
distributions. The investment return and the principal value of an investment
in the Fund will fluctuate so that investors' shares, when redeemed, may be
worth more or less than their original cost. Current performance may be lower
or higher than the performance data quoted.
CGM CAPITAL DEVELOPMENT FUND
- -----------------------------------------------------------------------------------------------
INVESTMENTS AS OF DECEMBER 31, 2007
COMMON STOCKS -- 98.9% OF TOTAL NET ASSETS
SHARES VALUE(a)
------ --------
FOOD - PACKAGE AND MISCELLANEOUS -- 6.0%
Wimm-Bill-Dann Foods OJSC ADR (b) ........................ 245,300 $ 32,144,112
------------
HOUSING AND BUILDING MATERIALS -- 11.3%
Desarrolladora Homex, S.A.B. de C.V. ADR (b)(c) .......... 550,000 27,197,500
NVR, Inc. (c) ............................................ 64,000 33,536,000
------------
60,733,500
------------
LIGHT CAPITAL GOODS -- 5.4%
The Middleby Corporation (c) ............................. 375,000 28,732,500
------------
METALS AND MINING -- 16.9%
Alpha Natural Resources, Inc. (c) ........................ 520,000 16,889,600
Foundation Coal Holdings, Inc. ........................... 575,000 30,187,500
Massey Energy Company .................................... 500,000 17,875,000
Patriot Coal Corporation (c) ............................. 620,000 25,878,800
------------
90,830,900
------------
MISCELLANEOUS -- 4.9%
Sotheby's ................................................ 690,000 26,289,000
------------
OFFSHORE DRILLING -- 2.1%
Atwood Oceanics, Inc. (c) ................................ 110,000 11,026,400
------------
OIL - INDEPENDENT PRODUCTION -- 3.4%
Berry Petroleum Company .................................. 415,000 18,446,750
------------
OIL SERVICE -- 18.5%
Cameron International Corporation (c) .................... 820,000 39,466,600
Dril-Quip, Inc. (c) ...................................... 485,000 26,995,100
Oceaneering International, Inc. (c) ...................... 490,000 33,001,500
------------
99,463,200
------------
ON-LINE SERVICES -- 7.1%
Priceline.com Incorporated (c) ........................... 330,000 37,903,800
------------
PERIPHERALS -- 5.6%
Western Digital Corporation (c) .......................... 1,000,000 30,210,000
------------
RETAIL -- 5.4%
The Pantry, Inc. (c) ..................................... 1,100,000 28,743,000
------------
STEEL -- 5.1%
Commercial Metals Company ................................ 920,000 27,094,000
------------
TEXTILE AND APPAREL -- 7.2%
Deckers Outdoor Corporation (c) .......................... 250,000 38,765,000
------------
TOTAL COMMON STOCKS (Identified cost $454,928,969) ........................... 530,382,162
------------
FACE
AMOUNT
------
SHORT-TERM INVESTMENT -- 2.2% OF TOTAL NET ASSETS
American Express Credit Corporation, 3.80%, 01/02/08 (Cost
$11,595,000) ........................................... $11,595,000 11,595,000
------------
TOTAL INVESTMENTS -- 101.1% (Identified cost $466,523,969) ................... 541,977,162
Cash and receivables ...................................................... 3,750,868
Liabilities ............................................................... (9,624,199)
------------
TOTAL NET ASSETS -- 100.0% ................................................... $536,103,831
============
(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.
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007
ASSETS
Investments at value (Identified cost -- $466,523,969) ..... $541,977,162
Cash ....................................................... 3,956
Receivable for:
Securities sold ............................................ $3,674,087
Shares of the Fund sold .................................. 25,401
Dividends and interest ................................... 47,424 3,746,912
---------- ------------
Total assets ........................................................... 545,728,030
------------
LIABILITIES
Payable for:
Securities purchased ..................................... 8,635,874
Shares of the Fund redeemed .............................. 444,578 9,080,452
----------
Accrued expenses:
Management fees .......................................... 466,254
Trustees' fees ........................................... 10,694
Accounting, administration and compliance expenses ....... 8,536
Transfer agent fees ...................................... 18,444
Other expenses ........................................... 39,819 543,747
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Total liabilities ...................................................... 9,624,199
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NET ASSETS ................................................................... $536,103,831
============
Net Assets consist of:
Capital paid-in ............................................................ $460,715,579
Accumulated net realized losses on investments ............................. (64,941)
Net unrealized appreciation on investments ................................. 75,453,193
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NET ASSETS ................................................................... $536,103,831
============
Shares of beneficial interest outstanding, no par value ...................... 19,022,637
============
Net asset value per share* ................................................... $28.18
======
* Shares of the Fund are sold and redeemed at net asset value ($536,103,831 / 19,022,637).
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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STATEMENT OF OPERATIONS
Year Ended December 31, 2007
INVESTMENT INCOME
Income:
Dividends (net of withholding tax of $602,706) ............ $ 2,875,021
Interest .................................................. 244,131
------------
3,119,152
------------
Expenses:
Management fees ........................................... 5,307,240
Trustees' fees ............................................ 43,435
Accounting, administration and compliance expenses ........ 102,432
Custodian fees and expenses ............................... 106,910
Transfer agent fees ....................................... 125,931
Audit and tax services .................................... 38,300
Legal ..................................................... 15,557
Printing .................................................. 37,028
Registration fees ......................................... 26,331
Miscellaneous expenses .................................... 1,512
------------
5,804,676
------------
Net investment loss ....................................... (2,685,524)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gains on investments (including net realized
loss of $12,908 on sales of investments in
non-controlled affiliated issuers) ...................... 92,358,558
Net unrealized appreciation ............................... 36,733,226
------------
Net realized and unrealized gains on investments .......... 129,091,784
------------
CHANGE IN NET ASSETS FROM OPERATIONS ........................ $126,406,260
============
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
- ---------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-----------------------------------
2007 2006
------------ ------------
FROM OPERATIONS
Net investment loss ...................................... $ (2,685,524) $ (3,081,298)
Net realized gains from investments ...................... 92,358,558 67,208,466
Unrealized appreciation (depreciation) ................... 36,733,226 (34,882,718)
------------ ------------
Change in net assets from operations ................... 126,406,260 29,244,450
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net short-term realized capital gains on investments ..... (64,853,777) (51,867,597)
Net long-term realized capital gains on investments ...... (23,069,672) (13,096,951)
------------ ------------
(87,923,449) (64,964,548)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ............................. 6,820,907 3,675,833
Net asset value of shares issued in connection with
reinvestment of:
Distributions from net short-term realized capital
gains on investments ................................. 56,416,804 44,224,486
Distributions from net long-term realized capital
gains on investments ................................. 20,070,906 11,167,178
------------ ------------
83,308,617 59,067,497
Cost of shares redeemed .................................. (39,202,879) (30,658,918)
------------ ------------
Change in net assets derived from capital share
transactions ......................................... 44,105,738 28,408,579
------------ ------------
Total change in net assets ............................... 82,588,549 (7,311,519)
NET ASSETS
Beginning of period ...................................... 453,515,282 460,826,801
------------ ------------
End of period ............................................ $536,103,831 $453,515,282
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ............................... 218,643 120,293
Issued in connection with reinvestment of:
Distributions from net short-term realized capital
gains on investments ................................. 1,969,173 1,681,551
Distributions from net long-term realized capital
gains on investments ................................. 700,555 424,614
------------ ------------
2,888,371 2,226,458
Redeemed ................................................. (1,247,975) (1,006,308)
------------ ------------
Net change ............................................... 1,640,396 1,220,150
============ ============
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
2007 2006 2005 2004 2003
------ ------ ------ ------ ------
For a share of the Fund outstanding
throughout each period:
Net asset value at beginning of period ........ $26.09 $28.51 $27.89 $23.60 $15.22
------ ------ ------ ------ ------
Net investment loss (a) ....................... (0.16) (0.19) (0.16) (0.01) (0.10)
Net realized and unrealized gains on
investments and foreign currency
transactions ................................ 7.62 2.02 7.23 4.30 8.48
------ ------ ------ ------ ------
Total from investment operations .............. 7.46 1.83 7.07 4.29 8.38
------ ------ ------ ------ ------
Distribution from net short-term realized
gains ....................................... (3.96) (3.39) (4.27) -- --
Distribution from net long-term realized
gains ....................................... (1.41) (0.86) (2.18) -- --
------ ------ ------ ------ ------
Total distributions ........................... (5.37) (4.25) (6.45) -- --
------ ------ ------ ------ ------
Net increase (decrease) in net asset value .... 2.09 (2.42) 0.62 4.29 8.38
------ ------ ------ ------ ------
Net asset value at end of period .............. $28.18 $26.09 $28.51 $27.89 $23.60
====== ====== ====== ====== ======
Total return (%) .............................. 28.3 6.3 25.3 18.2 55.1
Ratios:
Operating expenses to average net assets (%) .. 1.09 1.11 1.12 1.14 1.17
Net investment loss to average net assets (%) . (0.50) (0.65) (0.52) (0.06) (0.56)
Portfolio turnover (%) ........................ 232 300 211 263 305
Net assets at end of period (in thousands) ($) 536,104 453,515 460,827 400,349 369,021
(a) Per share net investment loss has been calculated using the average shares outstanding during the period.
See accompanying notes to financial statements.
CGM CAPITAL DEVELOPMENT FUND
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NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2007
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
Massachusetts business trust, there are four CGM Funds. The Fund commenced
operations on August 14, 1961. 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, 2007, there were no capital loss carryovers available to
offset future realized gains.
As of December 31, 2007, the components of distributable earnings on a tax
basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED LONG-TERM NET UNREALIZED
ORDINARY INCOME CAPITAL GAINS APPRECIATION/(DEPRECIATION)
--------------- ----------------------- ---------------------------
$ -- $ -- $75,388,252
The identified cost of investments in securities owned by the Fund for
federal income tax purposes, and their respective gross unrealized
appreciation and depreciation at December 31, 2007 was as follows:
GROSS UNREALIZED GROSS UNREALIZED NET UNREALIZED
IDENTIFIED COST APPRECIATION DEPRECIATION APPRECIATION
--------------- ---------------- ---------------- --------------
$466,588,910 $80,231,246 $(4,842,994) $75,388,252
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
netting net operating loss with net short-term gains. 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.
The tax character of distributions paid during the years ended December 31,
2007 and 2006, were as follows:
LONG-TERM
YEAR ORDINARY INCOME CAPITAL GAINS TOTAL
---- --------------- ------------- -----
2007 $64,853,777 $23,069,672 $87,923,449
2006 $51,867,597 $13,096,951 $64,964,548
E. FOREIGN CURRENCY TRANSLATION -- All assets and liabilities initially
expressed in terms of foreign currencies are translated into U.S. dollars.
Transactions affecting statement of operations accounts and net realized
gain/(loss) on investments are translated at the rates prevailing at the
dates of the transactions. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Reported net realized foreign
exchange gains or losses arise from sales of foreign currency, currency
gains or losses realized between the trade and settlement dates on
securities transactions and the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes
in the value of assets and liabilities other than investments in
securities at the end of the period, resulting from changes in the
exchange rate.
F. INDEMNITIES -- In the normal course of business, CGM Capital Development
Fund may enter into contracts that provide indemnities to third parties
for various potential losses and claims. CGM Capital Development Fund's
maximum exposure under these arrangements is unknown as this would depend
on future claims that may be made against CGM Capital Development Fund.
The risk of material loss from such claims is considered remote.
2. FOREIGN 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 foreign securities markets are less liquid and
at times more volatile than securities of comparable U.S. companies and U.S.
securities markets.
3. DIVERSIFICATION -- The Fund, although diversified, takes a focused
approach to investing within a single industry, sector of the economy or fewer
individual holdings than more diversified funds. Therefore, the Fund may be
subject to greater price volatility or be adversely affected by the
performance of particular industries, sectors, or individual holdings compared
to the performance of a more diversified fund.
4. PURCHASES AND SALES OF SECURITIES -- For the period ended December 31,
2007, purchases and sales of securities other than United States government
obligations and short-term investments aggregated $1,222,303,762 and
$1,271,341,802, respectively. There were no purchases or sales of United
States government obligations.
5. A. MANAGEMENT FEES -- During the period ended December 31, 2007, the Fund
incurred management fees of $5,307,240, 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 $102,432, for the period
ended December 31, 2007, is shown separately in the financial
statements. These expenses include the reimbursement of a portion of
the compensation expenses incurred by CGM for its employees who
provide these administrative, accounting, compliance, and other
services to the Fund, some of whom are officers of the Fund. Of the
total expense reimbursement, $79,672 represented reimbursements by the
Fund to CGM for a portion of the salaries of CGM employees who are
officers of the Fund.
C. TRUSTEES FEES AND EXPENSES -- The Fund does not pay any compensation
directly to any trustees who are directors, officers or employees of
CGM, or any affiliate of CGM (other than registered investment
companies). For the period ended December 31, 2007, each disinterested
trustee was compensated by the CGM Funds with an annual fee of $50,000
plus travel expenses for each meeting attended. The disinterested
trustees are responsible for the audit committee functions of the CGM
Funds and have designated a chairman to oversee these functions who
receives an additional $30,000 annually. Of these amounts, each of the
CGM Funds is responsible for $7,000 per trustee annually, plus an
annual variable fee calculated based on the proportion of each of the
CGM Funds' average net assets relative to the aggregate average net
assets of the CGM Funds.
6. 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 December 31, 2007
NUMBER OF NUMBER OF
SHARES HELD GROSS GROSS SHARES HELD DIVIDEND MARKET VALUE
NAME OF ISSUER DECEMBER 31, 2006 PURCHASES SALES DECEMBER 31, 2007 INCOME DECEMBER 31, 2007
- -------------- ----------------- --------- ----- ----------------- -------- -----------------
The Pantry, Inc.+* -- 1,150,000 (50,000) 1,100,000 $ -- $28,743,000
==== ===========
- ------------
+ Non-income producing security.
* No longer considered an affiliated issuer.
7. NEW ACCOUNTING PRONOUNCEMENTS -- The Fund adopted the provisions of FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement 109 ("FIN 48"), on January 1, 2007. FIN 48
prescribes a minimum threshold for financial statement recognition of the
benefit of a tax position taken or expected to be taken in a tax return. The
implementation of FIN 48 did not result in any unrecognized tax benefits in
the accompanying financial statements. The Fund's federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue
Service.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, (FAS 157) "Fair Value Measurements". FAS 157 defines fair value,
establishes a framework for measuring fair value in accordance with generally
accepted accounting principles and expands disclosure about fair value
measurements. FAS 157 is effective for fiscal years beginning after November
15, 2007. Management is currently evaluating the impact of adopting FAS 157.
8. SUBSEQUENT EVENT -- On January 31, 2008, the Trustees of CGM Capital
Development Fund approved an agreement and plan of reorganization pursuant to
which all of the assets and liabilities of CGM Capital Development Fund will
be acquired by CGM Focus Fund as part of a tax-free reorganization. This
transaction is subject to CGM Capital Development Fund shareholder approval.
Proxy materials regarding the reorganization of CGM Capital Development Fund
into CGM Focus Fund will be distributed to CGM Capital Development
shareholders in mid March 2008.
CGM CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of CGM Capital Development Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of CGM Capital
Development Fund (the "Fund") at December 31, 2007, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
As noted in Note 8, the Board of Trustees have approved an agreement and plan
of reorganization pursuant to which all of the assets and liabilities of the
Fund will be acquired by CGM Focus Fund, subject to the Fund's shareholder
approval.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 15, 2008
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,
2007 are available without charge, upon request by calling 1-800-345-3048. 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 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 CGM Capital Development Fund, you incur two types of
costs: (1) transaction costs, which could include, among other charges, wire
fees and custodial maintenance 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 July 1, 2007 to December 31, 2007.
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 such as any wire
fees or custodial maintenance fees that may be payable. 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*
7/01/07 12/31/07 7/01/07 - 12/31/07
- -------------------------------------------------------------------------------
Actual $1,000.00 $1,026.10 $5.52
- -------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000.00 $1,019.76 $5.50
- -------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.08%,
multiplied by the average account value over the period, multiplied by 184/
365 (to reflect the one-half year period).
CGM CAPITAL DEVELOPMENT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1982 -- DECEMBER 31, 2007 (unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
IF YOU HAD PURCHASED ONE SHARE OF THE FUND ON DECEMBER 31, 1982
- -----------------------------------------------------------------------------------------------------------------------------------
-- 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 Shares Would Distributions Distributions Year End Total Return December 31,
31 Have Been of of Would Have Been of 1982 = 100.0
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
1982 $24.88 100.0
1983 25.21 $ 2.50 $0.47 $ 28.76 + 15.6% 115.6
1984 17.28 6.15 0.11 26.40 - 8.2 106.1
1985 25.02 -- 0.18 38.60 + 46.2 155.1
1986 23.12 7.46 0.16 49.56 + 28.4 199.1
1987 16.56 10.09 0.14 57.44 + 15.9 230.8
1988 15.87 0.02 0.62 57.27 - 0.3 230.1
1989 18.37 -- 0.34 67.52 + 17.9 271.3
1990 18.53 -- 0.10 68.47 + 1.4 275.1
1991 25.80 11.07* 0.06 136.32 + 99.1 547.7
1992 27.43 2.68* 0.20 160.18 + 17.5 643.5
1993 27.71 7.51 0.07 206.15 + 28.7 828.2
1994 20.58 0.71 0.07 158.94 - 22.9 638.5
1995 27.33 1.68 0.02 224.26 + 41.1 900.9
1996 29.08 5.87 0.07 287.28 + 28.1 1154.1
1997 26.96 9.08 -- 355.94 + 23.9 1429.9
1998 24.95 4.19 0.11 386.19 + 8.5 1551.4
1999 26.20 0.56 0.11 415.93 + 7.7 1670.9
2000 25.12 -- 0.10 400.12 - 3.8 1607.4
2001 19.21 -- -- 306.09 - 23.5 1229.7
2002 15.22 -- -- 242.42 - 20.8 973.9
2003 23.60 -- -- 375.99 + 55.1 1510.5
2004 27.89 -- -- 444.42 + 18.2 1785.4
2005 28.51 6.45 -- 556.86 + 25.3 2237.1
2006 26.09 4.25 -- 591.94 + 6.3 2378.0
2007 28.18 5.37 -- 759.46 + 28.3 3051.0
------ ----- --------
Totals $85.64 $2.93 + 2951.0
---------------------------------------------------------------------------------------------------------------------------------
* Includes $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 on, and the principal value of, an investment in the Fund will fluctuate so that investors'
shares, when redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the
performance data quoted.
CGM CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/2007
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
For the year ended December 31, 2007, the Fund designated $23,180,470 as long-
term capital dividends.
TRUSTEES AND OFFICERS
The Fund is supervised by the board of trustees (the "Board") of the Trust.
The Board is responsible for the general oversight of the Fund, including
general supervision and review of the Fund's investment activities. The Board,
in turn, elects the officers who are responsible for administering the Fund's
day-to-day operations.
An asterisk in the table below identifies those trustees and officers who are
"interested persons" of the Trust as defined in the Investment Company Act of
1940. Each trustee and officer of the Trust noted as an interested person is
interested by virtue of that individual's position with Capital Growth
Management Limited Partnership ("CGM"), the Fund's investment adviser, as
described in the table below. Each trustee serves during the continued
lifetime of the Trust or until he earlier dies, resigns or is removed, or if
sooner, until the election and qualification of his successor. Each officer
serves until his or her successor is elected or qualified or until the officer
sooner dies, resigns, or is removed or becomes disqualified.
The trustees and officers of the Trust, their ages, their principal occupations
during the past five years, the number of CGM Funds they oversee, and other
directorships they hold are set forth below. Unless otherwise noted below, the
address of each interested trustee and officer is One International Place,
Boston, Massachusetts 02110. Correspondence intended for the trustees who are
not "interested persons" of the Trust may be sent c/o Capital Growth
Management, One International Place, Boston, Massachusetts 02110.
The Statement of Additional Information for the Fund includes additional
information about Fund trustees and is available, without charge, upon request
by calling the CGM Marketing Department, toll free, at 800-345-4048.
NUMBER OF
FUNDS IN THE
PRINCIPAL OCCUPATION DURING CGM FUNDS
NAME, ADDRESS AND AGE POSITION HELD AND PAST 5 YEARS AND COMPLEX
INTERESTED TRUSTEES LENGTH OF TIME SERVED OTHER DIRECTORSHIPS HELD OVERSEEN
- ------------------- --------------------- --------------------------- ------------
G. Kenneth Heebner* Trustee since 1993 Co-founder and Employee, CGM; 4
age 67 Controlling Owner, Kenbob, Inc.
(general partner of CGM)
Robert L. Kemp* Trustee since 1990 Co-founder and Employee, CGM; 4
age 75 Non-voting Owner, Kenbob, Inc.
(general partner of CGM)
DISINTERESTED TRUSTEES
Peter O. Brown Trustee since 1993 Counsel (formerly, Partner), 4
age 67 Harter, Secrest & Emery LLP (law
firm); formerly Executive Vice
President and Chief Operating
Officer, The Glenmeade Trust
Company (from 1990 to 1993);
formerly Senior Vice President,
J.P. Morgan Chase Bank (from
1981 to 1990); Trustee, TT
International U.S.A. Master and
Feeder Trusts (four mutual
funds) from 2000- 2005
Mark W. Holland Trustee since 2004 President, Wellesley Financial 4
age 58 Advisors, LLC; formerly Vice
President and Chief Operating
Officer, Fixed Income
Management, Loomis, Sayles &
Company, L.P.; formerly
Director, Loomis, Sayles &
Company, L.P.
James Van Dyke Quereau, Jr. Trustee since 1993 Managing Partner and Director, 4
age 59 Stratton Management Company
(investment management);
Director and Vice President,
Semper Trust Co. until 2006
J. Baur Whittlesey Trustee since 1990 Member, Ledgewood, P.C. 4
age 61 (law firm)
OFFICERS
G. Kenneth Heebner* Vice President since 1990 Co-founder and Employee, CGM; 4
age 67 Controlling Owner, Kenbob, Inc.
(general partner of CGM)
Robert L. Kemp* President since 1990 Co-founder and Employee, CGM; 4
age 75 Non- voting Owner, Kenbob, Inc.
(general partner of CGM)
David C. Fietze* Chief Compliance Officer Employee - Legal counsel, CGM; 4
age 38 since 2004 formerly counsel, Bartlett
address: Hackett Feinberg, P.C.
38 Newbury Street
Boston, Massachusetts
02116
Kathleen S. Haughton* Vice President since 1992 Employee - Investor Services 4
age 47 and Anti-Money Division, CGM
address: Laundering Compliance Officer
38 Newbury Street since 2002
Boston, Massachusetts
02116
Jem A. Hudgins* Treasurer since 2004 Employee - CGM 4
age 44
Leslie A. Lake* Vice President and Secretary Employee - Office Administrator, 4
age 62 since 1992 CGM
Martha I. Maguire* Vice President since 1994 Employee - Funds Marketing, CGM 4
age 52
Mary L. Stone* Assistant Vice President Employee - Portfolio Transactions, 4
age 63 since 1990 CGM
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 02111
SHAREHOLDER SERVICING AGENT
FOR STATE STREET BANK AND
TRUST COMPANY
BOSTON FINANCIAL DATA SERVICES, INC.
P.O. Box 8511
Boston, Massachusetts 02266-8511
- ------------------------------------------------------
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.
CAR 07 Printed in U.S.A.
ITEM 2. CODE OF ETHICS.
CGM Capital Development Fund has adopted a code of ethics that applies to the
registrant's principal executive officer and principal financial officer (the
"Code"). The Code is filed herewith as Exhibit 99.CODE ETH. There were no
amendments to the Code required to be disclosed in response to this Item 2
during the fiscal year ended December 31, 2007. There were no waivers or
implicit waivers from the Code granted by the registrant during the fiscal year
ended December 31, 2007.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
CGM Capital Development Fund's Board of Trustees has determined that it has at
least one audit committee financial expert serving on its audit committee. The
name of the audit committee financial expert is James Van Dyke Quereau, Jr.
James Van Dyke Quereau, Jr. is "independent" as defined in Item 3(a)(2) of Form
N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fee: The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal
accountant for the audit of CGM Capital Development Fund's annual
financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements are the following: 2006 - $30,600 and 2007 - $32,000.
(b) Audit-Related Fees: The aggregate fees billed in each of the
last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of CGM Capital Development Fund's financial statements
and are not reported under paragraph (a) of this Item are the
following: 2006 - $0 and 2007 - $0.
(c) Tax Fees: The aggregate fees billed in each of the last two
fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning are the
following: 2006 - $4,100 and 2007 - $4,300. The nature of the
services comprising the fees disclosed under this category is tax
compliance related to the preparation and review of federal income
and excise tax returns and review of excise tax distribution
requirements.
(d) All Other Fees: The aggregate fees billed in each of the last
two fiscal years for products and services provided by the
principal accountant, other than the services reported in
paragraphs (a) through (c) of this Item are the following: 2006 -
$0 and 2007 - $0.
(e) (1) The Trustees Committees of the Boards of Trustees of the
apital Development Fund and the CGM Trust (the "Trustees
Committees") are required to pre-approve (i) all audit
services, tax services and permitted non-audit services
provided by PricewaterhouseCoopers LLP or any other independent
public accountant engaged by the CGM Capital Development Fund
and CGM Trust (together, the "Trusts") and (ii) any engagement
of PricewaterhouseCoopers LLP to provide non-audit services to
(a) Capital Growth Management Limited Partnership ("CGM"), and
(b) any entity controlling, controlled by, or under common
control with CGM that provides ongoing services to the Trusts
if the engagement relates directly to the operations and
financial reporting of the Trusts. The Trustees Committees
generally review each necessary pre-approval on a case by case
basis. However, the Trustees Committees have authorized the
President or Treasurer of each of the CGM Capital Development
Fund and the CGM Trust, on behalf of its series (such series
collectively with the Capital Development Fund, the "Funds"),
to incur additional fees totaling in the aggregate not more
than $7,500.00 for services relating to the audit of the Funds
for the fiscal year ended December 31, 2007, the close-out of
the 2007 accounts, calculation of year-end dividends, and/or
related tax or accounting matters.
(2) 0% of services described in each of paragraphs (b)through(d) of
this Item were approved by the Trustees Committees pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by CGM Capital Development
Fund's accountant for services rendered to (i) CGM Capital
Development Fund, (ii) CGM, and (iii)any entity controlling,
controlled by, or under common control with CGM that provides
ongoing services to the CGM Capital Development Fund for each of
the last two fiscal years of the CGM Capital Development Fund are
the following: 2006 - $4,100 and 2007 - $4,300.
(h) There were no non-audit services that were rendered to CGM or any
entity controlling, controlled by, or under common control with CGM
that provides ongoing services to CGM Capital Development Fund that
were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01
of Regulation S-X, thus no consideration by the Trustees Committees
was necessary to determine if services were compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable. Investments in securities of unaffiliated issuers as
of December 31, 2007, as set forth in Section 210.12-12 of Regulation S-X, are
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 last fiscal quarter of the
period covered by this report.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics described in Item 2 is attached hereto as EX-99.CODE ETH.
(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.
(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: February 22, 2008
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: February 22, 2008
By: /S/ Jem A. Hudgins
Jem A. Hudgins
CFO & Treasurer
Principal Financial Officer
Date: February 22, 2008