UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-00082
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CGM TRUST
(Exact name of registrant as specified in charter)
One International Place, Boston, Massachusetts 02110
----------------------------------------------------
(Address of principal executive offices) (Zip code)
T. John Holton, Esq.
Bingham McCutchen LLP
One Federal Street
Boston, MA 02110
----------------
(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, 2008
-----------------
Date of reporting period: June 30, 2008
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ITEM 1. REPORTS TO STOCKHOLDERS.
CGM
MUTUAL FUND
313th Quarterly Report
June 30, 2008
A No-Load Fund
[Graphic Omitted] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
TO OUR SHAREHOLDERS
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CGM Mutual Fund increased 14.2% during the second quarter of 2008 compared to
the unmanaged Standard and Poor's 500 Index which declined -2.7% and the
Merrill Lynch U.S. Corporate, Government and Mortgage Bond Index which fell
- -1.1%. For the first six months of the year, CGM Mutual Fund returned 4.7%, the
unmanaged S&P 500 Index, -11.9% and the Merrill Lynch U.S. Corporate,
Government and Mortgage Bond Index, 1.3%.
The first quarter of 2008 was marked by a consumer slowdown, a collapse in
housing sales and prices, financial losses in the banking industry as a result
of the continuing subprime mortgage crisis and rising commodity prices.
Fortunately, the bad news was somewhat offset by strength in trade, agriculture
and the manufacturing and oil industries which resulted in net economic growth
for the quarter, albeit modest growth. During the second quarter of the year,
consumers continued to suffer as they spent more and more disposable income on
transportation and many struggled to make ends meet without the mortgage equity
cushion enjoyed in years past. (Mortgage equity withdrawals or "MEWs", which
were running at an annualized rate of $800 billion in early 2006, fell to $200
billion annualized in June of this year.) So, it comes as no great surprise
that the Consumer Confidence Index fell to 50.4 in June, down from 58.1 in May
and the lowest reading since 1992.
In an effort to spur consumer spending, the Federal government earmarked a $140
billion payout to lower and middle income wage earners. The first installment
was released in May ($50 billion), another $50 billion in June, and the
remainder is to be disbursed in the third quarter. These "stimulus checks" are
intended to reinvigorate consumer purchasing power eroded by rising gasoline
prices. The Federal Reserve Board has been doing its part to address the
slowing economy by easing monetary policy and reducing the Federal Funds rate
from 5.25% one year ago to 2.0% today. While we believe the combination of
these efforts should help rev up the economy in the coming year, for now we
seem to be stuck in neutral.
A sputtering domestic economy notwithstanding, it is to a large extent world
market forces that determine rising commodity prices, not solely U.S. consumer
demand. Today, the industrial growth of countries such as Brazil, Russia, India
and China is driving many commodity prices up and, as a consequence, the Fed's
domestic policies have little influence on global commodity prices.
Nonetheless, recent statements suggest that the Fed may be shifting from its
more stimulative stance of the past year to thinking about containing inflation
at least on the domestic front. On June 25, the Board indicated that
"uncertainty about the inflation outlook remains high" and held the Federal
Funds rate at 2.0% rather than easing further.
The 10-year Treasury bond was yielding 5.05% one year ago and on June 30, 2008,
only 3.97%, an extremely low rate especially in light of the level of inflation
as measured by the nominal Consumer Price Index. Financial journalists have
resurrected the so-called "Misery Index" of 25 years ago, which is a
combination of the inflation rate (4.2% year over year through May 31, 2008)
and unemployment rate (5.5% today, July 1, 2008) for a total of 9.7%, still a
far cry from the 1980 high of 21.8%.
We believe the worst of the current financial ordeal is behind us though it is
still too early to expect a broad recovery in the economy. Fortunately, we
believe there are bright spots in the economy, areas of strength to provide
select investment opportunities in an otherwise difficult market.
On June 30, 2008, CGM Mutual Fund was approximately 27% invested in short-term
government securities. In the equity portion of the portfolio, the Fund held
significant positions in the oil service and independent oil production
industries as well as in money center banks. The three largest holdings were
Petroleo Brasileiro S.A.- Petrobras ADR (oil production), Schlumberger Limited
(oil service) and Arch Coal, Inc.
/s/ Robert L. Kemp
Robert L. Kemp
President
July 1, 2008
CGM MUTUAL FUND
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INVESTMENT PERFORMANCE
(unaudited)
- -------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 2008
THE FUND'S
CUMULATIVE THE FUND'S AVERAGE
TOTAL RETURN ANNUAL TOTAL RETURN
------------------ ------------------------
10 Years ................... +118.9% + 8.1%
5 Years ................... +140.0 +19.1
1 Year .................... + 26.1 +26.1
3 Months .................. + 14.2 --
The performance data contained in the 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. 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.
Commencing July 1, 2003 and ending June 30, 2004, Capital Growth Management
agreed to voluntarily waive a portion of the management fee, lowering the
annual rate to 0.72% of the Fund's average daily net assets. Otherwise, the
Fund's cumulative total return and average annual total return for the 10- and
5-year periods ended June 30, 2008 would have been lower.
- -------------------------------------------------------------------------------
See the Schedule of Investments on the next page for the percentage of net
assets of the Fund invested in particular industries as of June 30, 2008.
CGM MUTUAL FUND
- ------------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 2008
(unaudited)
COMMON STOCKS -- 73.1% OF TOTAL NET ASSETS
SHARES VALUE(a)
------ --------
AUTO AND RELATED -- 3.8%
Ford Motor Company (b) ................................... 5,650,000 $ 27,176,500
------------
BANKS - MONEY CENTER -- 9.5%
Banco Bradesco S.A. ADR (c)(d) ........................... 1,670,000 34,168,200
Banco Itau Holding Financeira S.A. ADR (c)(d) ............ 1,645,000 33,409,950
------------
67,578,150
------------
BASIC MATERIALS -- 5.8%
Arch Coal, Inc. .......................................... 550,000 41,266,500
------------
COPPER -- 5.4%
Freeport-McMoRan Copper & Gold Inc. ...................... 330,000 38,672,700
------------
ELECTRONIC AND COMMUNICATION EQUIPMENT -- 3.5%
Apple Inc. (b) ........................................... 150,000 25,116,000
------------
FERTILIZER -- 5.0%
The Mosaic Company (b) ................................... 250,000 36,175,000
------------
FINANCIAL SERVICES -- 3.9%
MasterCard Incorporated .................................. 105,000 27,879,600
------------
HEAVY CAPITAL GOODS -- 5.1%
Cummins Inc. ............................................. 560,000 36,691,200
------------
OIL - INDEPENDENT PRODUCTION -- 10.3%
Petroleo Brasileiro S.A. - Petrobras ADR (c)(d) .......... 1,040,000 73,663,200
------------
OIL REFINING -- 4.9%
Hess Corporation ......................................... 275,000 34,702,250
------------
OIL SERVICE -- 11.8%
Halliburton Company ...................................... 720,000 38,210,400
Schlumberger Limited ..................................... 430,000 46,194,900
------------
84,405,300
------------
STEEL -- 4.1%
United States Steel Corporation .......................... 160,000 29,564,800
------------
TOTAL COMMON STOCKS (Identified cost $425,345,054) ............................ 522,891,200
------------
BILLS -- 26.8% OF TOTAL NET ASSETS
FACE
AMOUNT VALUE(a)
------ --------
UNITED STATES TREASURY -- 26.8%
United States Treasury Bills, 0.900%, 07/03/08 ........... $ 13,000,000 $ 12,999,029
United States Treasury Bills, 1.074%, 07/17/08 ........... 10,000,000 9,994,933
United States Treasury Bills, 1.151%, 07/24/08 ........... 5,000,000 4,996,167
United States Treasury Bills, 1.532%, 08/07/08 ........... 8,000,000 7,987,091
United States Treasury Bills, 1.663%, 09/11/08 ........... 113,500,000 113,118,640
United States Treasury Bills, 1.712%, 09/25/08 ........... 2,000,000 1,991,758
United States Treasury Bills, 1.745%, 08/14/08 ........... 8,000,000 7,982,595
United States Treasury Bills, 1.834%, 08/28/08 ........... 29,400,000 29,311,898
United States Treasury Bills, 1.869%, 08/21/08 ........... 3,000,000 2,991,925
------------
TOTAL BILLS (Identified cost $191,321,946) .................................... 191,374,036
------------
SHORT-TERM INVESTMENT -- 1.0% OF TOTAL NET ASSETS
American Express Credit Corporation, 1.970%, 07/01/08
(Cost $7,240,000) ........................................ 7,240,000 7,240,000
------------
TOTAL INVESTMENTS -- 100.9% (Identified cost $623,907,000) .................... 721,505,236
Cash and receivables ........................................................ 1,340,259
Liabilities ................................................................. (7,623,208)
------------
TOTAL NET ASSETS -- 100.0% .................................................... $715,222,287
============
(a) See Note 1A.
(b) Non-income producing security.
(c) 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.
(d) The Fund has approximately 20% of its net assets at June 30, 2008 invested in
companies incorporated in Brazil.
See accompanying notes to financial statements.
CGM MUTUAL FUND
- -------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
June 30, 2008
(unaudited)
ASSETS
Investments at value (Identified cost -- $623,907,000) ....... $721,505,236
Cash ......................................................... 2,335
Receivable for:
Shares of the Fund sold ....................... $1,109,768
Dividends and interest ........................ 228,156 1,337,924
---------- ------------
Total assets ................................................. 722,845,495
------------
LIABILITIES
Payable for:
Securities purchased .......................... 5,393,753
Shares of the Fund redeemed ................... 1,571,612
Tax withholding liability...................... 497
Distributions declared ........................ 40 6,965,902
----------
Accrued expenses:
Management fees ............................... 512,606
Trustees' fees ................................ 12,741
Accounting, administration and compliance
expenses .................................... 9,019
Transfer agent fees ........................... 87,670
Other expenses ................................ 35,270 657,306
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Total liabilities ............................................ 7,623,208
------------
NET ASSETS ..................................................... $715,222,287
============
Net assets consist of:
Capital paid-in ............................................ $598,137,390
Undistributed net investment income ........................ 1,330,204
Accumulated net realized gains on investments .............. 18,156,457
Net unrealized appreciation on investments ................. 97,598,236
------------
NET ASSETS ..................................................... $715,222,287
============
Shares of beneficial interest
outstanding, no par value .................................. 21,527,633
============
Net asset value per share* ................................... $33.22
======
* Shares of the Fund are sold and redeemed at net asset value
($715,222,287 / 21,527,633).
See accompanying notes to financial statements.
CGM MUTUAL FUND
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STATEMENT OF
OPERATIONS
Six Months Ended June 30, 2008
(unaudited)
INVESTMENT INCOME
Income:
Dividends (net of withholding tax of $177,151) ........... $ 4,258,164
Interest ................................................. 1,860,836
------------
6,119,000
------------
Expenses:
Management fees .......................................... 2,849,429
Trustees' fees ........................................... 26,590
Accounting, administration and compliance expenses ....... 54,116
Custodian fees and expenses .............................. 59,013
Transfer agent fees ...................................... 253,413
Audit and tax services ................................... 18,650
Legal .................................................... 14,659
Printing ................................................. 39,864
Registration fees ........................................ 26,200
Miscellaneous expenses ................................... 1,140
------------
3,343,074
------------
Net investment income ...................................... 2,775,926
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gains on investments and
foreign currency transactions .......................... 21,963,580
Net unrealized appreciation .............................. 5,490,786
------------
Net realized and unrealized gains on investments and
foreign currency transactions .......................... 27,454,366
------------
CHANGE IN NET ASSETS FROM
OPERATIONS ................................................. $ 30,230,292
============
See accompanying notes to financial statements.
CGM MUTUAL FUND
- -----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
------------- ------------
FROM OPERATIONS
Net investment income .................................... $ 2,775,926 $ 5,676,497
Net realized gains on investments and foreign currency
transactions ........................................... 21,963,580 105,202,070
Net unrealized appreciation .............................. 5,490,786 72,232,962
------------ ------------
Change in net assets from operations ................... 30,230,292 183,111,529
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................................... (1,445,722) (5,654,129)
Net short-term realized capital gains on investments ..... -- (107,051,605)
Net long-term realized capital gains on investments ...... -- (1,480,849)
------------ ------------
(1,445,722) (114,186,583)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ............................. 64,210,063 35,748,635
Net asset value of shares issued in connection with
reinvestment of:
Dividends from net investment income ................... 1,298,635 5,009,085
Distributions from net short-term realized capital gains
on investments ....................................... -- 97,226,898
Distributions from net long-term realized capital gains
on investments ....................................... -- 1,345,083
------------ ------------
65,508,698 139,329,701
Cost of shares redeemed .................................. (27,193,422) (64,706,440)
------------ ------------
Change in net assets derived from capital share
transactions ......................................... 38,315,276 74,623,261
------------ ------------
Total change in net assets ............................... 67,099,846 143,548,207
NET ASSETS
Beginning of period ...................................... 648,122,441 504,574,234
------------ ------------
End of period (including undistributed net investment
income of $1,330,204 and $0 at June 30, 2008 and
December 31, 2007, respectively) ....................... $715,222,287 $648,122,441
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ............................... 1,967,085 1,056,385
Issued in connection with reinvestment of:
Dividends from net investment income ................... 39,979 155,722
Distributions from net short-term realized capital gains
on investments ....................................... -- 3,055,528
Distributions from net long-term realized capital gains
on investments ....................................... -- 42,272
------------ ------------
2,007,064 4,309,907
Redeemed ................................................. (863,776) (2,088,140)
------------ ------------
Net change ............................................... 1,143,288 2,221,767
============ ============
See accompanying notes to financial statements.
CGM MUTUAL FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 2008 ------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
------------- ------ ------ ------ ------ ------
For a share of the Fund outstanding throughout each period:
Net asset value at beginning of period .................... $31.80 $27.78 $27.89 $25.33 $23.00 $16.65
------ ------ ------ ------ ------ ------
Net investment income (a)(b) .............................. 0.13 0.32 0.45 0.30 0.16 0.23
Net realized and unrealized gains on investments
and foreign currency transactions ....................... 1.36 10.33 1.09 3.40 2.33 6.35
------ ------ ------ ------ ------ ------
Total from investment operations .......................... 1.49 10.65 1.54 3.70 2.49 6.58
------ ------ ------ ------ ------ ------
Dividends from net investment income ...................... (0.07) (0.33) (0.45) (0.31) (0.16) (0.23)
Distribution from net short-term realized gains ........... -- (6.22) (1.20) -- -- --
Distribution from net long-term realized gains ............ -- (0.08) -- (0.83) -- --
------ ------ ------ ------ ------ ------
Total distributions ....................................... (0.07) (6.63) (1.65) (1.14) (0.16) (0.23)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net asset value ................ 1.42 4.02 (0.11) 2.56 2.33 6.35
------ ------ ------ ------ ------ ------
Net asset value at end of period .......................... $33.22 $31.80 $27.78 $27.89 $25.33 $23.00
====== ====== ------ ------ ------ ------
Total return (%) .......................................... 4.7 38.5 5.5 14.6 10.9(c) 39.7(c)
Ratios:
Operating expenses to average net assets (%) .............. 1.03* 1.05 1.07 1.09 1.02 1.07
Operating expenses to average net assets before management
fee waiver (%) .......................................... N/A N/A N/A N/A 1.11 1.17
Net investment income to average net assets (%) ........... 0.85* 1.03 1.55 1.09 0.68 1.23
Portfolio turnover (%) .................................... 404* 444 504 336 314 260
Net assets at end of period (in thousands) ($)............. 715,222 648,122 504,574 514,612 481,443 477,147
(a) Net of management fee waiver which
amounted to ($) ....................................... N/A N/A N/A N/A 0.02 0.02
(b) Per share net investment income has been calculated using the average shares outstanding during the period.
(c) The total return would have been lower had the management fee not been reduced during the period.
* Computed on an annualized basis.
See accompanying notes to financial statements.
CGM MUTUAL FUND
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NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008
(unaudited)
1. The Fund is a diversified series of CGM Trust which is organized as a
Massachusetts business trust under the laws of Massachusetts pursuant to an
Agreement and Declaration of Trust. The Trust is registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Trust has two other Funds whose financial statements are not presented
herein. The Fund commenced operations on November 5, 1929. The Fund's
objective is reasonable long-term capital appreciation with a prudent approach
to protection of capital from undue risks. Current income is a consideration
in the selection of the Fund's portfolio securities, but it is not a
controlling factor.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board of
Trustees. The pricing service provides the last reported sale price for
securities listed on a national securities exchange or in the case of the
NASDAQ national market system, the NASDAQ official closing price. For
securities with no sale reported and in the case of over-the-counter
securities not so listed, the last reported bid price is used. Corporate
debt securities are valued on the basis of valuations furnished by a
pricing service, authorized by the Board of Trustees, which determines
valuations for normal, institutional-size trading units of such securities
using market information, transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders. United States government debt securities are valued
at the current closing bid, as last reported by a pricing service approved
by the Board of Trustees. Short-term investments having a maturity of
sixty days or less are stated at amortized cost, which approximates value.
Other assets and securities which are not readily marketable will be
valued in good faith at fair value using methods determined by the Board
of Trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed) and dividend income is recorded on the ex-dividend date
net of applicable foreign taxes. Interest income is recorded on an accrual
basis and includes amortization of premium and discount. Net gain or loss
on securities sold is determined on the identified cost basis. Dividend
payments received by the Fund from its investment in REITs may be
comprised of ordinary income, capital gains, and return of capital and as
such are recorded as dividend income, capital gains or a reduction to
security cost, as appropriate.
C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies, and to distribute to its shareholders all of its
taxable income and net realized capital gains, within the prescribed time
period. Accordingly, no provision for federal income tax has been made.
The Fund adopted the provisions of the Financial Accounting Standards
Board (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, which included a review of
the Fund's tax return of each of the three open tax years, did not result
in any unrecognized tax benefits in the accompanying financial statements.
Management's conclusion regarding FIN 48 may be subject to review and
adjustment at a later date based on factors including, but not limited to,
further implementation guidance expected from FASB, and ongoing analysis
of tax laws, regulations and interpretations thereof.
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 NET UNREALIZED
ORDINARY LONG-TERM APPRECIATION/
INCOME CAPITAL GAINS (DEPRECIATION)
------------- ------------- --------------
$ -- $ -- $88,300,327
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 June 30, 2008 was as follows:
GROSS UNREALIZED GROSS UNREALIZED NET UNREALIZED
IDENTIFIED COST APPRECIATION DEPRECIATION APPRECIATION
--------------- ---------------- ---------------- --------------
$628,771,179 $117,754,874 $(25,020,817) $92,734,057
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. 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 period ended December
31, 2007 and 2006 were as follows:
LONG-TERM
YEAR ORDINARY INCOME CAPITAL GAINS TOTAL
---- --------------- ------------- -----
2007 $112,705,734 $1,480,849 $114,186,583
2006 $ 28,926,041 $ -- $ 28,926,041
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 Mutual Fund may enter
into contracts that provide indemnities to third parties for various
potential losses and claims. CGM Mutual Fund's maximum exposure under
these arrangements is unknown as this would depend on future claims that
may be made against CGM Mutual 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 June 30, 2008,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $992,409,815 and
$959,377,863, respectively. There were no purchases or sales of long-term
United States government obligations.
5. A. MANAGEMENT FEES -- During the period ended June 30, 2008, the Fund
incurred management fees of $2,849,429, paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership (CGM),
certain officers and directors of which are also officers and trustees
of the Fund. The management agreement provides for a fee at the annual
rate of 0.90% on the first $500 million of the Fund's average daily net
assets, 0.80% of the next $500 million and 0.75% of such assets in
excess of $1 billion.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting,
compliance and other services for the Fund. The expenses of those
services, which were paid to CGM by the Fund, include the following: (i)
expenses for personnel performing bookkeeping, accounting and financial
reporting functions and clerical functions relating to the Fund; (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, shareholder reports and
notices, proxy solicitation material furnished to shareholders of the
Fund or regulatory authorities and reports and questionnaires for SEC
compliance; (iii) registration, filing and other fees in connection with
requirements of regulatory authorities and (iv) compliance in connection
to the Investment Company Act of 1940 and the Sarbanes Oxley Act of
2002. The accounting, administration and compliance expense of $54,116,
for the period ended June 30, 2008, 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, $43,434 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 ending December 31, 2008, each disinterested
trustee will be compensated by the three CGM Funds with an annual fee of
$70,000 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 those
functions who receives an additional $30,000 annually. Of these amounts,
CGM Mutual Fund is responsible for $9,000 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. FASB 157 -- In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, (FAS 157) "Fair Value Measurements", effective
for fiscal years beginning after November 15, 2007. The Fund adopted the
provisions of FAS 157 on January 1, 2008. 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.
In accordance with FAS 157, CGM Mutual Fund may use valuation techniques
consistent with the market, income, and cost approach to measure fair value.
The market approach uses prices and other relevant information generated by
market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts (cash
flows, earnings) to a single present amount. The cost approach is based on the
amount that currently would be required to replace the service capacity of an
asset. To increase consistency and comparability in fair value measurements
and related disclosures, CGM Mutual Fund utilizes a fair value hierarchy which
prioritizes the various inputs to valuation techniques used to measure fair
value into three broad levels:
o Level 1 -- Prices determined using: quoted prices in active markets for
identical securities
o Level 2 -- Prices determined using: other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment spreads, credit risk, etc.)
o Level 3 -- Prices determined using: significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at
the end of the period), unobservable inputs may be used. Unobservable
inputs reflect CGM Mutual Fund's own assumptions about the factors market
participants would use in pricing an investment, and would be based
on the best information available in the circumstances.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. The
following is a summary of the inputs used to value CGM Mutual Fund's
investments as of June 30, 2008:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS
-------------- ---------------
Level 1 - Quoted Prices ..................... $638,001,598 N/A
Level 2 - Other Significant Observable
Inputs .................................... 83,503,638 N/A
Level 3 - Significant Unobservable Inputs ... none N/A
------------ ---
TOTAL $721,505,236 N/A
============ ===
When current market prices or quotations are not readily available or do not
accurately reflect fair value, valuations may be determined in accordance with
procedures adopted by the Board of Trustees. For example, when developments
occur between the close of a market and the close of the NYSE that may
materially affect the value of some or all the securities, or when trading in
a security is halted, these procedures may be used. The frequency with which
these procedures are used is unpredictable. These valuation procedures may
result in a change to a particular security's assigned level within the fair
value hierarchy described above. The value of securities used for NAV
calculation under these procedures may differ from published prices for the
same securities.
CGM MUTUAL FUND
- --------------------------------------------------------------------------------
FUND EXPENSES
As a shareholder of CGM Mutual 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 January 1, 2008 to June 30, 2008.
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*
1/01/08 6/30/08 1/01/08 - 6/30/08
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,046.90 $5.24
- --------------------------------------------------------------------------------
Hypothetical
(5% return
before expenses) $1,000.00 $1,019.74 $5.17
- --------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.03%,
multiplied by the average account value over the period, multiplied by
182/366 (to reflect the one-half year period).
CGM MUTUAL FUND
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
25 YEAR INVESTMENT RECORD
DECEMBER 31, 1982 -- JUNE 30, 2008 (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 $18.16 100.0
1983 18.81 -- $ 1.09 $ 19.96 + 9.9% 109.9
1984 17.01 $ 1.86 0.95 21.22 + 6.3 116.8
1985 21.53 -- 1.08 28.54 + 34.5 157.1
1986 22.86 2.75 0.94 35.70 + 25.1 196.5
1987 20.40 4.52 1.06 40.59 + 13.7 223.4
1988 19.94 -- 1.10 41.89 + 3.2 230.5
1989 22.34 0.95 0.93 50.98 + 21.7 280.5
1990 21.64 -- 0.93* 51.54 + 1.1 283.6
1991 26.80 2.64 0.97 72.62 + 40.9 399.6
1992 26.02 1.42 0.93 77.05 + 6.1 424.0
1993 28.88 1.93 0.86 93.85 + 21.8 516.4
1994 25.05 -- 1.04 84.75 - 9.7 466.3
1995 29.43 0.89 0.77 105.34 + 24.3 579.6
1996 31.42 4.15 0.74 130.31 + 23.7 717.0
1997 25.52 7.81 0.67 141.00 + 8.2 775.8
1998 26.36 0.25 0.98 152.56 + 8.2 839.4
1999 27.28 3.54 0.84 183.83 + 20.5 1011.5
2000 23.38 -- 0.73 162.51 - 11.6 894.2
2001 20.47 -- 0.20 143.66 - 11.6 790.5
2002 16.65 -- 0.41 119.38 - 16.9 656.9
2003 23.00 -- 0.23 166.77 + 39.7 917.7
2004 25.33 -- 0.16 184.95 + 10.9 1017.7
2005 27.89 0.83 0.31 211.95 + 14.6 1166.3
2006 27.78 1.20 0.45 223.61 + 5.5 1230.4
2007 31.80 6.30 0.33 309.70 + 38.5 1704.1
2008 (6/30) 33.22 -- 0.07 324.26 + 4.7 1784.2
------ ------ -------
Totals $41.04 $18.77 +1684.2
- -----------------------------------------------------------------------------------------------------------------------------------
* Includes $0.05 per share distributed from paid-in capital.
Shares were first offered on November 5, 1929; the net asset value per share, adjusted for stock splits and dividends, was $8.33.
- -----------------------------------------------------------------------------------------------------------------------------------
The performance data contained in this report represent past performance, which is no guarantee of future results. The table above
does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The
investment return 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. The adviser waived $0.02 and $0.02 per share of management fee in 2003 and 2004, respectively. Otherwise, the annual total
return for 2003 and 2004 and the cumulative 25-year return would have been lower.
CGM MUTUAL 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,
2008 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.
ADVISORY AGREEMENT APPROVAL:
In considering renewal of the advisory agreement, during meetings held in
March and April 2008, the Board of Trustees of the Fund (the "Board")
considered the following factors and came to the following conclusions:
1. The Board considered the nature, extent, quality and scope of the
investment advisory and administrative services provided by CGM to the Fund.
The Board agreed that the nature, extent, quality and scope of the CGM
professional team working on the Fund was very high, and was satisfied with
the quality of CGM's advisory and administrative services.
2. The Board considered the investment performance of the Fund and CGM and
reviewed information regarding the performance of the Fund as compared to
market indices and a peer group of other balanced funds selected and provided
by Lipper, Inc., an independent provider of investment company data. The Board
noted the strong performance of the Fund for the one-year, three-year, five-
year and ten-year periods ended December 31, 2007 and that for such time
period the Fund (a) exceeded the median performance for the other mutual funds
included in the Lipper reports, and (b) outperformed the S&P 500 Index. The
Board agreed that this performance reflected in large measure the focus of CGM
on long-term performance in managing the Fund's assets, including taking
advantage of strategic trends in the economy that might take some time to
develop. The Board acknowledged that, while for some periods this focus on
long-term performance might cause the Fund to lag other comparable mutual
funds with a more short-term focus, over the longer term CGM's approach had
proven its worth.
3. The Board discussed the costs of the services provided and profits
realized by CGM from the relationship with the mutual funds advised by CGM and
each of the separate accounts managed by CGM, and found that the profit
margins were reasonable and not excessive.
4. The Board discussed with CGM whether economies of scale might be realized
with growth in the Fund. Given the relatively small size of the Fund and CGM's
investment style, the Board determined that it would not be advisable at this
time to seek to make adjustments to the break point structure of the advisory
fees paid by the Fund.
5. The Board received and considered information comparing the advisory fees
paid by the Fund and the overall expenses borne by the Fund with those of
funds in the relevant expense universe as selected and provided by Lipper,
Inc. The Board noted that the overall expense ratio of the Fund was above the
median overall expense ratios of other mutual funds included in the Lipper
reports, but concluded that this was reasonable due to the fact that the Fund
maintained a higher percentage of equities in its portfolio and had a more
active investment style than many other balanced mutual funds. The Board also
reviewed information regarding fees charged by CGM to its other clients,
including its separate account clients. CGM reviewed with the Board the
significant differences in scope of services provided to the Fund and to those
other clients, noting that the Fund required a greater allocation of
management's time as a result of its differing investment mandate and the fact
that it is a publicly offered investment vehicle. The Board discussed the fee
comparisons in light of the differences required to manage these different
types of accounts. Based on these comparisons, the Board concluded that the
advisory fees paid by the Fund and the overall expenses borne by the Fund were
reasonable and competitive.
In addition to the foregoing, in light of the fact that CGM could potentially
benefit from soft dollar arrangements of the Fund, the Board of Trustees
reviewed the brokerage commissions of the Fund and concluded that the
brokerage commissions were reasonable, particularly given the Fund's
relatively small size and focus on best execution.
CGM MUTUAL FUND
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
PETER O. BROWN
G. KENNETH HEEBNER
MARK W. HOLLAND
ROBERT L. KEMP
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
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
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
- --------------------------------------------------
WEBSITE
http://www.cgmfunds.com
- --------------------------------------------------
This report has been prepared for the
shareholders of the Fund and is not authorized
for distribution to current or prospective
investors in the Fund unless it is accompanied
or preceded by a prospectus.
MQR2 08 Printed in U.S.A.
CGM
REALTY FUND
57th Quarterly Report
June 30, 2008
A No-Load Fund
[Graphic Omitted] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------
CGM Realty Fund increased 9.8% during the second quarter of 2008 compared to
the unmanaged Standard and Poor's 500 Index which declined -2.7% and the FTSE
NAREIT Equity REITs Index which fell -4.9% over the same period. For the first
six months of the year, CGM Realty Fund returned 4.3%, the unmanaged S&P 500
Index, -11.9% and the FTSE NAREIT Equity REITs Index, -3.6%.
The first quarter of 2008 was marked by a consumer slowdown, a collapse in
housing sales and prices, financial losses in the banking industry as a result
of the continuing subprime mortgage crisis and rising commodity prices.
Fortunately, the bad news was somewhat offset by strength in trade,
agriculture and the manufacturing and oil industries which resulted in net
economic growth for the quarter, albeit modest growth. During the second
quarter of the year, consumers continued to suffer as they spent more and more
disposable income on transportation and many struggled to make ends meet
without the mortgage equity cushion enjoyed in years past. (Mortgage equity
withdrawals or "MEWs", which were running at an annualized rate of $800
billion in early 2006, fell to $200 billion annualized in June of this year.)
So, it comes as no great surprise that the Consumer Confidence Index fell to
50.4 in June, down from 58.1 in May and the lowest reading since 1992.
In an effort to spur consumer spending, the Federal government earmarked a
$140 billion payout to lower and middle income wage earners. The first
installment was released in May ($50 billion), another $50 billion in June,
and the remainder is to be disbursed in the third quarter. These "stimulus
checks" are intended to reinvigorate consumer purchasing power eroded by
rising gasoline prices. The Federal Reserve Board has been doing its part to
address the slowing economy by easing monetary policy and reducing the Federal
Funds rate from 5.25% one year ago to 2.0% today. While we believe the
combination of these efforts should help rev up the economy in the coming
year, for now we seem to be stuck in neutral.
A sputtering domestic economy notwithstanding, it is to a large extent world
market forces that determine rising commodity prices, not solely U.S. consumer
demand. Today, the industrial growth of countries such as Brazil, Russia,
India and China is driving many commodity prices up and, as a consequence, the
Fed's domestic policies have little influence on global commodity prices.
Nonetheless, recent statements suggest that the Fed may be shifting from its
more stimulative stance of the past year to thinking about containing
inflation at least on the domestic front. On June 25, the Board indicated that
"uncertainty about the inflation outlook remains high" and held the Federal
Funds rate at 2.0% rather than easing further.
The 10-year Treasury bond was yielding 5.05% one year ago and on June 30,
2008, only 3.97%, an extremely low rate especially in light of the level of
inflation as measured by the nominal Consumer Price Index. Financial
journalists have resurrected the so-called "Misery Index" of 25 years ago,
which is a combination of the inflation rate (4.2% year over year through May
31, 2008) and unemployment rate (5.5% today, July 1, 2008) for a total of
9.7%, still a far cry from the 1980 high of 21.8%.
We believe the worst of the current financial ordeal is behind us though it is
still too early to expect a broad recovery in the economy. Fortunately, we
believe there are bright spots in the economy, areas of strength to provide
select investment opportunities in an otherwise difficult market.
On June 30, 2008, CGM Realty Fund was approximately 66% invested in real
estate investment trusts with smaller concentrations in the basic materials
and metals and mining industries. The Fund's largest holdings were Arch Coal,
Inc., Peabody Energy Corporation and CONSOL Energy Inc.
/s/ Robert L. Kemp
Robert L. Kemp
President
July 1, 2008
CGM REALTY FUND
- -------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
- ------------------------------------------------
Total Return for Periods Ended June 30, 2008
THE FUND'S
THE FUND'S AVERAGE
CUMULATIVE ANNUAL
TOTAL RETURN TOTAL RETURN
------------ ------------
10 Years ................... +641.8% +22.2%
5 Years ................... +317.6 +33.1
1 Year .................... + 22.3 +22.3
3 Months .................. + 9.8 --
The performance data contained in the 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. The investment return and the principal value of an investment
in the Fund will fluctuate so that investors' shares, when redeemed, may be
worth more or less than their original cost. Current performance may be lower
or higher than the performance data quoted.
- -------------------------------------------------------------------------------
See the Schedule of Investments on the next page for the percentage of net
assets of the Fund invested in particular industries as of June 30, 2008.
CGM REALTY FUND
- -----------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 2008
(unaudited)
COMMON STOCKS -- 99.6% OF TOTAL NET ASSETS
REAL ESTATE INVESTMENT TRUSTS -- 65.8%
SHARES VALUE(a)
----------- --------------
APARTMENTS -- 1.2%
Essex Property Trust, Inc. ............................... 270,000 $ 28,755,000
--------------
HEALTHCARE -- 4.8%
Ventas, Inc. ............................................. 2,705,000 115,151,850
--------------
MISCELLANEOUS -- 2.9%
Entertainment Properties Trust ........................... 1,395,000 68,968,800
--------------
MORTGAGE -- 4.9%
Annaly Capital Management, Inc............................ 7,520,000 116,635,200
--------------
OFFICE AND INDUSTRIAL -- 28.6%
Alexandria Real Estate Equities, Inc. .................... 1,148,500 111,794,990
AMB Property Corporation ................................. 2,140,000 107,813,200
Boston Properties, Inc. .................................. 1,300,000 117,286,000
Digital Realty Trust, Inc. ............................... 3,005,400 122,950,914
ProLogis ................................................. 2,110,000 114,678,500
SL Green Realty Corp. .................................... 1,300,000 107,536,000
--------------
682,059,604
--------------
RETAIL -- 23.4%
Federal Realty Investment Trust .......................... 1,675,000 115,575,000
General Growth Properties, Inc. .......................... 3,050,000 106,841,500
Kimco Realty Corporation ................................. 3,160,000 109,083,200
Simon Property Group, Inc. ............................... 1,270,000 114,160,300
Taubman Centers, Inc. .................................... 2,320,000 112,868,000
--------------
558,528,000
--------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Identified cost $1,665,710,251) ..... 1,570,098,454
--------------
OTHER COMMON STOCKS -- 33.8%
BASIC MATERIALS -- 18.5%
Arch Coal, Inc. .......................................... 2,000,000 150,060,000
CONSOL Energy Inc. ....................................... 1,280,000 143,833,600
Peabody Energy Corporation ............................... 1,690,000 148,804,500
--------------
442,698,100
--------------
COPPER -- 5.3%
Freeport-McMoRan Copper & Gold Inc. ...................... 1,070,000 125,393,300
--------------
METALS AND MINING -- 10.0%
Anglo American plc ADR (b) ............................... 2,750,000 97,487,500
Cleveland-Cliffs Inc. .................................... 1,180,000 140,644,200
--------------
238,131,700
--------------
TOTAL OTHER COMMON STOCKS (Identified cost $650,743,406) ................. 806,223,100
--------------
TOTAL COMMON STOCKS (Identified cost $2,316,453,657) ..................... 2,376,321,554
--------------
FACE
SHORT-TERM INVESTMENT -- 0.7% OF TOTAL NET ASSETS AMOUNT
-----------
American Express Credit Corporation, 1.970%, 7/01/08
(Cost $15,960,000) ..................................... $15,960,000 15,960,000
--------------
TOTAL INVESTMENTS -- 100.3% (Identified cost $2,332,413,657) ............... 2,392,281,554
Cash and receivables ..................................................... 16,369,995
Liabilities .............................................................. (21,977,710)
--------------
TOTAL NET ASSETS -- 100.0% ................................................. $2,386,673,839
==============
(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.
See accompanying notes to financial statements.
CGM REALTY FUND
- -------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
June 30, 2008
(unaudited)
ASSETS
Investments at value (Identified cost -- $2,332,413,657) $2,392,281,554
Cash .................................................... 1,924
Receivable for:
Shares of the Fund sold ............... $ 6,047,097
Dividends and interest ................ 10,320,974 16,368,071
----------- --------------
Total assets ............................................ 2,408,651,549
--------------
LIABILITIES
Payable for:
Securities purchased .................. 6,184,222
Shares of the Fund redeemed ........... 14,113,655
Distributions declared ................ 4,734 20,302,611
-----------
Accrued expenses:
Management fees ....................... 1,522,746
Trustees' fees ........................ 19,201
Accounting, administration and
compliance expenses ................. 20,522
Transfer agent fees ................... 68,926
Other expenses ........................ 43,704 1,675,099
----------- --------------
Total liabilities ....................................... 21,977,710
--------------
NET ASSETS ................................................ $2,386,673,839
==============
Net assets consist of:
Capital paid-in ....................................... $1,840,378,030
Undistributed net investment income ................... 13,391,450
Accumulated net realized gains on investments ......... 473,036,462
Net unrealized appreciation on investments ............ 59,867,897
--------------
NET ASSETS ................................................ $2,386,673,839
==============
Shares of beneficial interest outstanding, no par value . 72,953,494
==============
Net asset value per share* .............................. $32.72
==============
* Shares of the Fund are sold and redeemed at net asset value
($2,386,673,839 / 72,953,494).
See accompanying notes to financial statements.
CGM REALTY FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2008
(unaudited)
INVESTMENT INCOME
Income:
Dividends (net of withholding tax of $146,801) .......... $ 28,089,436
Interest ................................................ 274,990
------------
28,364,426
------------
Expenses:
Management fees ......................................... 8,140,004
Trustees' fees .......................................... 39,511
Accounting, administration and compliance expenses ...... 123,128
Custodian fees and expenses ............................. 130,902
Transfer agent fees ..................................... 276,743
Audit and tax services .................................. 18,750
Legal ................................................... 43,818
Printing ................................................ 47,451
Registration fees ....................................... 87,219
Line of credit commitment fee ........................... 10,168
Miscellaneous expenses .................................. 3,015
------------
8,920,709
------------
Net investment income ..................................... 19,443,717
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gains on investments ......................... 473,036,462
Net unrealized depreciation ............................... (410,676,424)
------------
Net realized and unrealized gains on investments .......... 62,360,038
------------
CHANGE IN NET ASSETS FROM OPERATIONS ........................ $ 81,803,755
============
See accompanying notes to financial statements.
CGM REALTY FUND
- ---------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
-------------- --------------
FROM OPERATIONS
Net investment income ..................................................... $ 19,443,717 $ 15,062,683
Net realized gains on investments ......................................... 473,036,462 269,987,939
Net unrealized appreciation (depreciation) ................................ (410,676,424) 216,018,781
-------------- --------------
Change in net assets from operations .................................... 81,803,755 501,069,403
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ..................................................... (6,052,267) (13,939,899)
Net short-term realized capital gains on investments....................... -- (117,024,618)
Net long-term realized capital gains on investments........................ -- (147,041,038)
-------------- --------------
(6,052,267) (278,005,555)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares .............................................. 527,228,701 574,783,411
Net asset value of shares issued in connection with reinvestment of:
Dividends from net investment income .................................... 4,766,207 11,065,084
Distributions from net short-term realized capital gains on investments . -- 94,353,620
Distributions from net long-term realized capital gains on investments .. -- 118,556,947
-------------- --------------
531,994,908 798,759,062
Cost of shares redeemed ................................................... (219,533,331) (498,107,852)
-------------- --------------
Change in net assets derived from capital share transactions ............ 312,461,577 300,651,210
-------------- --------------
Total change in net assets ................................................ 388,213,065 523,715,058
NET ASSETS
Beginning of period ....................................................... 1,998,460,774 1,474,745,716
-------------- --------------
End of period (including undistributed net investment income of $13,391,450
and $0 at June 30, 2008 and December 31, 2007, respectively) ............ $2,386,673,839 $1,998,460,774
============== ==============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ................................................ 16,379,869 18,339,803
Issued in connection with reinvestment of:
Dividends from net investment income .................................... 140,772 345,179
Distributions from net short-term realized capital gains on investments . -- 2,981,157
Distributions from net long-term realized capital gains on investments .. -- 3,745,875
-------------- --------------
16,520,641 25,412,014
Redeemed .................................................................. (7,113,226) (16,365,379)
-------------- --------------
Net change ................................................................ 9,407,415 9,046,635
============== ==============
See accompanying notes to financial statements.
CGM REALTY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 2008 ----------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
------------ ------ ------ ------ ------ ------
For a share of the Fund outstanding throughout
each period:
Net asset value at beginning of period ........... $31.45 $27.06 $27.19 $29.56 $24.75 $13.39
------ ------ ------ ------ ------ ------
Net investment income (a) ........................ 0.29 0.27 0.45 0.43 0.19 0.03
Net realized and unrealized gains on investments . 1.07 9.06 7.37 7.51 8.55 11.93
------ ------ ------ ------ ------ ------
Total from investment operations ................. 1.36 9.33 7.82 7.94 8.74 11.96
------ ------ ------ ------ ------ ------
Dividends from net investment income ............. (0.09) (0.25) (0.45) (0.43) (0.18) (0.04)
Distribution from net short-term realized gains .. -- (2.08) (0.42) -- (0.16) --
Distribution from net long-term realized gains ... -- (2.61) (7.08) (9.88) (3.59) (0.56)
------ ------ ------ ------ ------ ------
Total distributions .............................. (0.09) (4.94) (7.95) (10.31) (3.93) (0.60)
------ ------ ------ ------ ------ ------
Net increase (decrease) in net asset value ....... 1.27 4.39 (0.13) (2.37) 4.81 11.36
------ ------ ------ ------ ------ ------
Net asset value at end of period ................. $32.72 $31.45 $27.06 $27.19 $29.56 $24.75
====== ====== ====== ====== ====== ======
Total return (%) ................................. 4.3 34.4 29.0 27.0 35.5 89.7
Ratios:
Operating expenses to average net assets (%) ..... 0.85* 0.86 0.88 0.92 0.96 1.02
Net investment income to average net assets (%) .. 1.85* 0.86 1.49 1.34 0.73 0.16
Portfolio turnover (%) ........................... 186* 200 160 136 43 68
Net assets at end of period
(in thousands) ($) ............................. 2,386,674 1,998,461 1,474,746 1,031,966 785,399 644,420
(a) Per share net investment income has been calculated using the average shares outstanding during the period.
* Computed on an annualized basis.
See accompanying notes to financial statements.
CGM REALTY FUND
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008
(unaudited)
1. The Fund is a diversified series of CGM Trust which is organized as a
Massachusetts business trust under the laws of Massachusetts pursuant to an
Agreement and Declaration of Trust. The Trust is registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Trust has two other funds whose financial statements are not presented
herein. The Fund commenced operations on May 13, 1994. The Fund's investment
objective is to provide a combination of income and long-term growth of
capital. The Fund intends to pursue its objective by investing primarily in
equity securities of companies in the real estate industry.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board of
Trustees. The pricing service provides the last reported sale price for
securities listed on a national securities exchange or in the case of the
NASDAQ national market system, the NASDAQ official closing price. For
securities with no sale reported and in the case of over-the-counter
securities not so listed, the last reported bid price is used. Short-term
investments having a maturity of sixty days or less are stated at
amortized cost, which approximates value. Other assets and securities
which are not readily marketable will be valued in good faith at fair
value using methods determined by the Board of Trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed) and dividend income is recorded on the ex-dividend date
net of applicable foreign taxes, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable based upon
its current interpretations of the tax rules and regulations that exist in
the markets in which it invests. Interest income is recorded on the
accrual basis and includes amortization of premium and discount. Net gain
or loss on securities sold is determined on the identified cost basis.
Dividend payments received by the Fund from its investment in REITs may
consist of ordinary income, capital gains and return of capital and as
such are recorded as dividend income, capital gains or a reduction to
security cost, as appropriate. Non-cash dividend payments, if any, are
recorded at the fair market value of the securities received.
C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies, and to distribute to its shareholders all of its
taxable income and net realized capital gains, within the prescribed time
period. Accordingly, no provision for federal income tax has been made.
The Fund adopted the provisions of the Financial Accounting Standards
Board (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, which included a review of
the Fund's tax return of each of the three open tax years, did not result
in any unrecognized tax benefits in the accompanying financial statements.
Management's conclusion regarding FIN 48 may be subject to review and
adjustment at a later date based on factors including, but not limited to,
further implementation guidance expected from FASB, and ongoing analysis
of tax laws, regulations and interpretations thereof.
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 NET UNREALIZED
ORDINARY LONG-TERM APPRECIATION/
INCOME CAPITAL GAINS (DEPRECIATION)
------------- ------------- --------------
$ -- $ -- $470,544,321
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 June 30, 2008 was as follows:
GROSS UNREALIZED GROSS UNREALIZED NET UNREALIZED
IDENTIFIED COST APPRECIATION DEPRECIATION APPRECIATION
--------------- ---------------- ---------------- --------------
$2,332,413,657 $163,997,345 $(104,129,448) $59,867,897
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
are recorded by the Fund on the ex-dividend date. The classification of
income and capital gains distributions is determined in accordance with
income tax regulations. Distributions from net investment income and
short-term capital gains are treated as ordinary income for income tax
purposes. Permanent book and tax differences relating to shareholder
distributions may result in reclassifications to paid-in capital or
accumulated realized gain/loss. The Fund also utilized earnings and
profits distributed to shareholders on redemption of shares as a part of
the dividend deduction for income tax purposes. Undistributed net
investment income or accumulated net investment loss may include temporary
book and tax differences such as tax deferral of losses on wash sales,
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year. The tax
character of distributions paid during the period ended December 31, 2007
and 2006 were as follows:
LONG-TERM
YEAR ORDINARY INCOME CAPITAL GAINS TOTAL
---- --------------- ------------- -----
2007 $130,964,517 $147,041,038 $278,005,555
2006 $ 38,101,637 $317,224,877 $355,326,514
E. INDEMNITIES -- In the normal course of business, CGM Realty Fund may enter
into contracts that provide indemnities to third parties for various
potential losses and claims. CGM Realty Fund's maximum exposure under
these arrangements is unknown as this would depend on future claims that
may be made against CGM Realty 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 June 30, 2008,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $2,291,336,288 and
$1,953,486,126, respectively. There were no purchases or sales of long-term
United States government obligations.
5. A. MANAGEMENT FEES -- During the period ended June 30, 2008, the Fund
incurred management fees of $8,140,004, paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership (CGM),
certain officers and directors of which are also officers and trustees of
the Fund. The management agreement provides for a fee at the annual rate
of 0.85% on the first $500 million of the Fund's average daily net assets
and 0.75% on amounts in excess of $500 million.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting,
compliance and other services for the Fund. The expenses of those
services, which are paid to CGM by the Fund, include the following: (i)
expenses for personnel performing bookkeeping, accounting and financial
reporting functions and clerical functions relating to the Fund; (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, shareholder reports and
notices, proxy solicitation material furnished to shareholders of the
Fund or regulatory authorities and reports and questionnaires for SEC
compliance; (iii) registration, filing and other fees in connection with
requirements of regulatory authorities; and (iv) compliance in connection
to the Investment Company Act of 1940 and the Sarbanes Oxley Act of 2002.
The accounting, administration and compliance expense of $123,128, for
the period ended June 30, 2008, 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, $90,299 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 ending December 31, 2008, each disinterested trustee will be
compensated by the three CGM Funds with an annual fee of $70,000 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 those functions who receives an
additional $30,000 annually. Of these amounts, CGM Realty Fund is
responsible for $9,000 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. LINE OF CREDIT -- The Fund has a $20,000,000 committed unsecured line of
credit with State Street Bank and Trust Company. Borrowings under the line
will be charged interest at 0.75% over the current Overnight Federal Funds
Rate. The Fund will incur a commitment fee of 0.10% per annum on the unused
portion of the line of credit, payable quarterly. There were no borrowings
under the line of credit during the period ended June 30, 2008.
7. FASB 157 -- In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, (FAS 157) "Fair Value Measurements", effective
for fiscal years beginning after November 15, 2007. The Fund adopted the
provisions of FAS 157 on January 1, 2008. 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.
In accordance with FAS 157, CGM Realty Fund may use valuation techniques
consistent with the market, income, and cost approach to measure fair value.
The market approach uses prices and other relevant information generated by
market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts (cash
flows, earnings) to a single present amount. The cost approach is based on the
amount that currently would be required to replace the service capacity of an
asset. To increase consistency and comparability in fair value measurements
and related disclosure, CGM Realty Fund utilizes a fair value hierarchy which
prioritizes the various inputs to valuation techniques used to measure fair
value into three broad levels:
o Level 1 -- Prices determined using: quoted prices in active markets for
identical securities
o Level 2 -- Prices determined using: other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment spreads, credit risk, etc.)
o Level 3 -- Prices determined using: significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable, (for
example, when there is little or no market activity for an investment at
the end of the period), unobservable inputs may be used. Unobservable
inputs reflect CGM Realty Fund's own assumptions about the factors market
participants would use in pricing an investment, and would be based on
the best information available in the circumstances.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. The
following is a summary of the inputs used to value CGM Realty Fund's
investments as of June 30, 2008:
INVESTMENTS OTHER FINANCIAL
VALUATION INPUTS IN SECURITIES INSTRUMENTS
-------------- ---------------
Level 1 - Quoted Prices ..................... $2,376,321,554 N/A
Level 2 - Other Significant Observable
Inputs .................................... 15,960,000 N/A
Level 3 - Significant Unobservable Inputs ... none N/A
-------------- ---
TOTAL $2,392,281,554 N/A
============== ===
When current market prices or quotations are not readily available or do not
accurately reflect fair value, valuations may be determined in accordance with
procedures adopted by the Board of Trustees. For example, when developments
occur between the close of a market and the close of the NYSE that may
materially affect the value of some or all the securities, or when trading in
a security is halted, these procedures may be used. The frequency with which
these procedures are used is unpredictable. These valuation procedures may
result in a change to a particular security's assigned level within the fair
value hierarchy described above. The value of securities used for NAV
calculation under these procedures may differ from published prices for the
same securities.
CGM REALTY FUND
- -------------------------------------------------------------------------------
FUND EXPENSES
As a shareholder of CGM Realty 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 January 1, 2008 to June 30, 2008.
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*
1/01/08 6/30/08 1/01/08 - 6/30/08
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,043.20 $4.32
- --------------------------------------------------------------------------------
Hypothetical
(5% return
before expenses) $1,000.00 $1,020.64 $4.27
- --------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 0.85%,
multiplied by the average account value over the period, multiplied by 182/
366 (to reflect the one-half year period).
CGM REALTY FUND
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
AVAILABILITY OF PROXY VOTING INFORMATION:
Proxy voting policies and information regarding how the Fund voted proxies
relating to portfolio securities during the twelve month period ended June 30,
2008 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.
ADVISORY AGREEMENT APPROVAL:
In considering renewal of the advisory agreement, during meetings held in
March and April 2008, the Board of Trustees of the Fund (the "Board")
considered the following factors and came to the following conclusions:
1. The Board considered the nature, extent, quality and scope of the
investment advisory and administrative services provided by CGM to the Fund.
The Board agreed that the nature, extent, quality and scope of the CGM
professional team working on the Fund was very high, and was satisfied with
the quality of CGM's advisory and administrative services.
2. The Board considered the investment performance of the Fund and CGM and
reviewed information regarding the performance of the Fund as compared to
market indices and a peer group of other real estate funds selected and
provided by Lipper, Inc., an independent provider of investment company data.
The Board noted the strong performance of the Fund for the one-year, three-
year, five-year and ten-year periods ended December 31, 2007 and that for such
time period the Fund (a) exceeded the median performance for the other mutual
funds included in the Lipper reports, and (b) outperformed the S&P 500 Index.
The Board agreed that this performance reflected in large measure the focus of
CGM on long-term performance in managing the Fund's assets, including taking
advantage of strategic trends in the economy that might take some time to
develop. The Board acknowledged that, while for some periods this focus on
long-term performance might cause the Fund to lag other comparable mutual
funds with a more short-term focus, over the longer term CGM's approach had
proven its worth.
3. The Board discussed the costs of the services provided and profits
realized by CGM from the relationship with the mutual funds advised by CGM and
each of the separate accounts managed by CGM, and found that the profit
margins were reasonable and not excessive.
4. The Board discussed with CGM whether economies of scale might be realized
with growth in the Fund. Given CGM's investment style and performance, the
Board determined that it would not be advisable at this time to seek to make
adjustments to the break point structure of the advisory fees paid by the
Fund.
5. The Board received and considered information comparing the advisory fees
paid by the Fund and the overall expenses borne by the Fund with those of
funds in the relevant expense universe as selected and provided by Lipper,
Inc. The Board noted that the overall expense ratio of the Fund was below the
median overall expense ratios of other mutual funds included in the Lipper
reports. The Board also reviewed information regarding fees charged by CGM to
its other clients, including its separate account clients. CGM reviewed with
the Board the significant differences in scope of services provided to the
Fund and to those other clients, noting that the Fund required a greater
allocation of management's time as a result of its differing investment
mandate and the fact that it is a publicly offered investment vehicle. The
Board discussed the fee comparisons in light of the differences required to
manage these different types of accounts. Based on these comparisons, the
Board concluded that the advisory fees paid by the Fund and the overall
expenses borne by the Fund were reasonable and competitive.
In addition to the foregoing, in light of the fact that CGM could potentially
benefit from soft dollar arrangements of the Fund, the Board of Trustees
reviewed the brokerage commissions of the Fund and concluded that the
brokerage commissions were reasonable, particularly given the Fund's focus on
best execution.
CGM REALTY FUND
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
PETER O. BROWN
G. KENNETH HEEBNER
MARK W. HOLLAND
ROBERT L. KEMP
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
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
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
- --------------------------------------------------
WEBSITE
http://www.cgmfunds.com
- --------------------------------------------------
This report has been prepared for the
shareholders of the Fund and is not authorized
for distribution to current or prospective
investors in the Fund unless it is accompanied
or preceded by a prospectus.
RQR2 08 Printed in U.S.A.
CGM
FOCUS FUND
43rd Quarterly Report
June 30, 2008
A No-Load Fund
[Graphic Omitted] Investment Adviser
CAPITAL GROWTH MANAGEMENT
Limited Partnership
TO OUR SHAREHOLDERS:
- -------------------------------------------------------------------------------
CGM Focus Fund increased 27.0% during the second quarter of 2008 compared to
the unmanaged Standard and Poor's 500 Index which declined -2.7% over the same
period. For the first six months of the year, CGM Focus Fund returned 17.1%
while the unmanaged S&P 500 Index fell -11.9%.
The first quarter of 2008 was marked by a consumer slowdown, a collapse in
housing sales and prices, financial losses in the banking industry as a result
of the continuing subprime mortgage crisis and rising commodity prices.
Fortunately, the bad news was somewhat offset by strength in trade,
agriculture and the manufacturing and oil industries which resulted in net
economic growth for the quarter, albeit modest growth. During the second
quarter of the year, consumers continued to suffer as they spent more and more
disposable income on transportation and many struggled to make ends meet
without the mortgage equity cushion enjoyed in years past. (Mortgage equity
withdrawals or "MEWs", which were running at an annualized rate of $800
billion in early 2006, fell to $200 billion annualized in June of this year.)
So, it comes as no great surprise that the Consumer Confidence Index fell to
50.4 in June, down from 58.1 in May and the lowest reading since 1992.
In an effort to spur consumer spending, the Federal government earmarked a
$140 billion payout to lower and middle income wage earners. The first
installment was released in May ($50 billion), another $50 billion in June,
and the remainder is to be disbursed in the third quarter. These "stimulus
checks" are intended to reinvigorate consumer purchasing power eroded by
rising gasoline prices. The Federal Reserve Board has been doing its part to
address the slowing economy by easing monetary policy and reducing the Federal
Funds rate from 5.25% one year ago to 2.0% today. While we believe the
combination of these efforts should help rev up the economy in the coming
year, for now we seem to be stuck in neutral.
A sputtering domestic economy notwithstanding, it is to a large extent world
market forces that determine rising commodity prices, not solely U.S. consumer
demand. Today, the industrial growth of countries such as Brazil, Russia,
India and China is driving many commodity prices up and, as a consequence, the
Fed's domestic policies have little influence on global commodity prices.
Nonetheless, recent statements suggest that the Fed may be shifting from its
more stimulative stance of the past year to thinking about containing
inflation at least on the domestic front. On June 25, the Board indicated that
"uncertainty about the inflation outlook remains high" and held the Federal
Funds rate at 2.0% rather than easing further.
The 10-year Treasury bond was yielding 5.05% one year ago and on June 30,
2008, only 3.97%, an extremely low rate especially in light of the level of
inflation as measured by the nominal Consumer Price Index. Financial
journalists have resurrected the so-called "Misery Index" of 25 years ago,
which is a combination of the inflation rate (4.2% year over year through May
31, 2008) and unemployment rate (5.5% today, July 1, 2008) for a total of
9.7%, still a far cry from the 1980 high of 21.8%.
We believe the worst of the current financial ordeal is behind us though it is
still too early to expect a broad recovery in the economy. Fortunately, we
believe there are bright spots in the economy, areas of strength to provide
select investment opportunities in an otherwise difficult market.
On June 30, 2008, CGM Focus Fund held significant long positions in the oil
service, steel and independent oil production industries. The Fund's three
largest long holdings were Weatherford International Ltd. (oil service),
Schlumberger Limited (oil service) and United States Steel Corporation. The
Fund was also approximately 14% (percentage of total net assets) invested in
stocks sold short at the end of the second quarter. The largest short
positions were in Wachovia Corporation (financial services) and Washington
Mutual, Inc. (financial services).
On June 27, 2008, CGM Focus Fund acquired all of the assets and liabilities of
CGM Capital Development Fund in a "tax-free" reorganization of that Fund, and
shareholders of CGM Capital Development Fund became shareholders of CGM Focus
Fund.
/s/ Robert L. Kemp
Robert L. Kemp
President
July 1, 2008
CGM FOCUS FUND
- -------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
(unaudited)
- -------------------------------------------------------------------------------
Total Return for Periods Ended June 30, 2008
THE FUND'S
CUMULATIVE THE FUND'S AVERAGE
TOTAL RETURN ANNUAL TOTAL RETURN
------------ -----------------------
10 Years ................... +936.1% +26.3%
5 Years ................... +355.2 +35.4
1 Year .................... + 70.7 +70.7
3 Months .................. + 27.0 --
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. The investment return and 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.
The adviser limited the Fund's total operating expenses to 1.20% of its average
net assets exclusive of any dividend expense incurred on short sales through
December 31, 2001. Otherwise, the Fund's cumulative total return and average
annual total return for the ten year period would have been lower.
- -------------------------------------------------------------------------------
See the Schedule of Investments beginning on the next page for the percentage
of net assets of the Fund invested in particular industries as of
June 30, 2008.
CGM FOCUS FUND
- -----------------------------------------------------------------------------------------------
INVESTMENTS AS OF JUNE 30, 2008
(unaudited)
COMMON STOCKS -- 94.0% OF TOTAL NET ASSETS
SHARES VALUE(a)
------ --------
ALUMINUM -- 0.2%
Century Aluminum Company (b) ............................. 380,000 $ 25,266,200
--------------
AUTO AND RELATED -- 2.7%
Ford Motor Company (b) ................................... 58,883,000 283,227,230
--------------
BASIC MATERIALS -- 10.1%
CONSOL Energy Inc. ....................................... 4,600,000 516,902,000
Peabody Energy Corporation ............................... 6,000,000 528,300,000
--------------
1,045,202,000
--------------
COPPER -- 8.1%
Freeport-McMoRan Copper & Gold Inc. (c) .................. 4,453,700 521,929,103
Southern Copper Corporation .............................. 2,963,700 316,019,331
--------------
837,948,434
--------------
FERTILIZER -- 2.0%
Potash Corporation of Saskatchewan Inc. .................. 890,000 203,427,300
--------------
HEAVY CAPITAL GOODS -- 4.6%
Cummins Inc. ............................................. 7,350,000 481,572,000
--------------
METALS AND MINING -- 0.2%
Teck Cominco Limited ..................................... 550,000 26,372,500
--------------
MISCELLANEOUS -- 4.0%
Tenaris S.A. ADR (d) ..................................... 5,550,000 413,475,000
--------------
OFFSHORE DRILLING -- 5.3%
Atwood Oceanics, Inc. (b) ................................ 230,000 28,598,200
Nabors Industries Ltd. (b)(e) ............................ 10,550,000 519,376,500
--------------
547,974,700
--------------
OIL - INDEPENDENT PRODUCTION -- 10.5%
Berry Petroleum Company .................................. 430,000 25,318,400
Canadian Natural Resources Limited ....................... 550,000 55,137,500
Devon Energy Corporation ................................. 4,050,000 486,648,000
Petroleo Brasileiro S.A. -- Petrobras ADR (c)(d) ......... 7,414,700 525,183,201
--------------
1,092,287,101
--------------
OIL REFINING -- 9.7%
Hess Corporation ......................................... 4,020,000 507,283,800
Suncor Energy Inc. (c) ................................... 8,550,000 496,926,000
--------------
1,004,209,800
--------------
OIL SERVICE -- 18.6%
Halliburton Company ...................................... 9,270,000 491,958,900
National Oilwell Varco, Inc. (b) ......................... 4,130,000 366,413,600
Schlumberger Limited (c) ................................. 4,950,000 531,778,500
Weatherford International Ltd. (b)(c)(e) ................. 11,000,000 545,490,000
--------------
1,935,641,000
--------------
ON-LINE SERVICES -- 0.4%
Priceline.com Incorporated (b) ........................... 330,000 38,101,800
--------------
RETAIL -- 0.7%
The Gymboree Corporation (b) ............................. 560,000 22,439,200
Tupperware Brands Corporation ............................ 670,000 22,927,400
Urban Outfitters, Inc. (b) ............................... 790,000 24,640,100
--------------
70,006,700
--------------
STEEL -- 16.9%
ArcelorMittal ............................................ 4,920,000 487,424,400
Commercial Metals Company ................................ 440,000 16,588,000
Mechel OAO ADR (d) ....................................... 4,690,000 232,342,600
Nucor Corporation (c) .................................... 6,442,500 481,061,475
United States Steel Corporation (c) ...................... 2,875,000 531,242,500
--------------
1,748,658,975
--------------
TOTAL COMMON STOCKS (Identified cost $8,490,315,234) ....... 9,753,370,740
--------------
SHORT-TERM INVESTMENT -- 1.7% OF TOTAL NET ASSETS
FACE
AMOUNT
------
American Express Credit Corporation, 1.970%, 7/01/08
(Cost $181,620,000) .................................... $181,620,000 181,620,000
---------------
TOTAL INVESTMENTS -- 95.7% (Identified cost $8,671,935,234) ................ 9,934,990,740
Cash and receivables .................................................... 2,299,286,932
Liabilities ............................................................. (1,857,343,509)
---------------
TOTAL NET ASSETS -- 100.0% ................................................ $10,376,934,163
===============
(a) See Note 1A.
(b) Non-income producing security.
(c) A portion of this security has been segregated as collateral in connection with short sale
investments. (See Note 1E)
(d) 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.
(e) The Fund has approximately 10% of its net assets at June 30, 2008 invested in companies
incorporated in Bermuda.
SECURITIES SOLD SHORT (PROCEEDS $1,964,148,903)
SHARES VALUE(a)
----------- --------------
Garmin Ltd. ................................................ 4,950,000 $ 212,058,000
General Motors Corporation ................................. 21,500,000 247,250,000
Wachovia Corporation ....................................... 32,000,000 496,960,000
Washington Mutual, Inc. .................................... 100,000,000 493,000,000
--------------
$1,449,268,000
==============
See accompanying notes to financial statements.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
STATEMENT OF
ASSETS AND LIABILITIES
June 30, 2008
(unaudited)
ASSETS
Investments at value (Identified cost -- $8,671,935,234) $9,934,990,740
Cash .................................................... 2,478
Deposits with brokers for short sales ................... 1,930,678,945
Receivable for:
Securities sold ........................ $254,181,931
Shares of the Fund sold ................ 103,703,566
Dividends and interest ................. 10,720,012 368,605,509
------------ ---------------
Total assets ............................................. 12,234,277,672
---------------
LIABILITIES
Securities sold short at current market
value (Proceeds $1,964,148,903) ....................... 1,449,268,000
Payable for:
Securities purchased ................... 364,251,010
Shares of the Fund redeemed ............ 32,907,014
Interest payable ....................... 2,556,683
Tax withholding liability . 730,721 400,445,428
-----------
Accrued expenses:
Management fees ........................ 7,160,171
Trustees' fees ......................... 53,738
Accounting, administration and
compliance expenses .................. 58,284
Transfer agent fees .................... 98,766
Other expenses ......................... 259,122 7,630,081
------------ ---------------
Total liabilities ....................................... 1,857,343,509
---------------
NET ASSETS ................................................ $10,376,934,163
===============
Net assets consist of:
Capital paid-in ....................................... $ 7,625,429,930
Undistributed net investment income 12,058,376
Accumulated net realized gains on investments ......... 961,508,484
Net unrealized appreciation on investments:
Long positions ...................................... 1,263,056,470
Short positions ..................................... 514,880,903
---------------
NET ASSETS ................................................ $10,376,934,163
===============
Shares of beneficial interest
outstanding, no par value ............................. 168,877,904
===============
Net asset value per share* .............................. $61.45
===============
* Shares of the Fund are sold and redeemed at net asset value
($10,376,934,163 / 168,877,904).
See accompanying notes to financial statements.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2008
(unaudited)
INVESTMENT INCOME
Income:
Dividends (net of withholding tax of $3,312,438) ........ $ 47,441,093
Interest on restricted cash ............................. 4,081,891
Interest ................................................ 1,312,603
--------------
52,835,587
--------------
Expenses:
Management fees ......................................... 31,152,071
Trustees' fees .......................................... 72,854
Accounting, administration and compliance expenses ...... 301,322
Custodian fees and expenses ............................. 353,430
Transfer agent fees ..................................... 573,389
Audit and tax services .................................. 18,750
Legal ................................................... 139,756
Printing ................................................ 94,066
Registration fees ....................................... 248,251
Line of credit commitment fee ........................... 20,332
Dividend on short sales ................................. 4,182,000
Interest related to short sales ......................... 3,615,980
Miscellaneous expenses .................................. 5,010
--------------
40,777,211
--------------
Net investment income ...................................... 12,058,376
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments and foreign currency
transactions:
Long transactions ......................................... 649,747,237
Short transactions ........................................ 360,847,873
Net unrealized appreciation on investments and foreign
currency transactions:
Long transactions ......................................... 9,123,300
Short transactions ........................................ 276,356,798
--------------
Net realized and unrealized gains on investments and
foreign currency transactions .............................. 1,296,075,208
--------------
CHANGE IN NET ASSETS FROM OPERATIONS ........................ $1,308,133,584
==============
See accompanying notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
CGM FOCUS FUND
- -------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
--------------- --------------
FROM OPERATIONS
Net investment income ................................ $ 12,058,376 $ 4,578,837
Net realized gains on investments and foreign
currency transactions .............................. 1,010,595,110 861,947,842
Net unrealized appreciation .......................... 285,480,098 1,197,002,190
--------------- --------------
Change in net assets from operations ............... 1,308,133,584 2,063,528,869
--------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ................................ -- (4,608,973)
Net short-term realized capital gains on investments . -- (727,774,379)
Net long-term realized capital gains on investments .. -- (150,234,755)
--------------- --------------
-- (882,618,107)
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares ......................... 3,827,623,073 2,144,201,168
Net asset value of shares issued in connection with
the acquisition of assets from CGM Capital
Development Fund (Note 8) .......................... 531,703,625 --
Net asset value of shares issued in connection with
reinvestment of:
Dividends from net investment income ............... -- 3,733,219
Distributions from net short-term realized capital
gains on investments ............................. -- 610,369,415
Distributions from net long-term realized capital
gains on investments ............................. -- 126,003,069
--------------- --------------
4,359,326,698 2,884,306,871
Cost of shares redeemed .............................. (826,639,685) (801,142,829)
--------------- --------------
Change in net assets derived from capital share
transactions ..................................... 3,532,687,013 2,083,164,042
--------------- --------------
Total change in net assets ........................... 4,840,820,597 3,264,074,804
NET ASSETS
Beginning of period .................................. 5,536,113,566 2,272,038,762
--------------- --------------
End of period (including undistributed net
investment income of $12,058,376 and $0 at June
30, 2008 and December 31, 2007, respectively) ...... $10,376,934,163 $5,536,113,566
=============== ==============
NUMBER OF SHARES OF THE FUND:
Issued from sale of shares ........................... 70,860,692 43,255,062
Issued in connection with the acquisition of assets
from CGM Capital Development Fund (Note 8) ......... 8,723,604 --
Issued in connection with reinvestment of:
Dividends from net investment income ............... -- 70,845
Distributions from net short-term realized capital
gains on investments ............................. -- 11,588,559
Distributions from net long-term realized capital
gains on investments ............................. -- 2,392,312
--------------- --------------
79,584,296 57,306,778
Redeemed ............................................. (16,177,420) (17,341,601)
--------------- --------------
Net change ......................................... 63,406,876 39,965,177
=============== ==============
See accompanying notes to financial statements.
CGM FOCUS FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2008 ---------------------------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
------------- ----------- ----------- --------- --------- ---------
For a share of the Fund
outstanding
throughout the period:
Net asset value at beginning
of period ..................... $52.49 $34.68 $33.40 $29.51 $29.93 $17.98
------ ------ ------ ------ ------ ------
Net investment income (loss) (a) 0.09(b) 0.06(b) 0.82(b) 0.52(b) 0.04(b) (0.21)
Net realized and unrealized
gains on investments and
foreign currency transactions . 8.87 27.71 4.19 6.93 3.65 12.16
------ ------ ------ ------ ------ ------
Total from investment operations 8.96 27.77 5.01 7.45 3.69 11.95
------ ------ ------ ------ ------ ------
Dividends from net investment
income ........................ -- (0.05) (0.81) (0.44) (0.04) --
Distribution from net short-
term realized gains ........... -- (8.21) -- (1.80) -- --
Distribution from net long-
term realized gains ........... -- (1.70) (2.92) (1.32) (4.07) --
------ ------ ------ ------ ------ ------
Total distributions ............. -- (9.96) (3.73) (3.56) (4.11) --
------ ------ ------ ------ ------ ------
Net increase (decrease) in
net asset value ............... 8.96 17.81 1.28 3.89 (0.42) 11.95
------ ------ ------ ------ ------ ------
Net asset value at end of
period ........................ $61.45 $52.49 $34.68 $33.40 $29.51 $29.93
====== ====== ====== ====== ====== ======
Total return (%) ................ 17.1 80.0 15.0(c) 25.2 12.4 66.5
Ratios:
Operating expenses to
average net assets (%) ........ 0.96* 0.99 1.02 1.07 1.12 1.18
Dividends and interest on
short positions to average
net assets (%) ................ 0.23* 0.28 0.18 0.15 0.09 --
------ ------ ------ ------ ------ ------
Total expenses to average
net assets (%) ................ 1.19* 1.27 1.20 1.22 1.21 1.18
====== ====== ====== ====== ====== ======
Net investment income (loss)
to average net assets (%) ..... 0.35* 0.14 2.23 1.55 0.14 (0.92)
Portfolio turnover (%) .......... 354*(d) 384 333 282 327 204
Net assets at end of period
(in thousands) ($) .............. 10,376,934 5,536,114 2,272,039 1,641,143 918,837 775,499
(a) Per share net investment income (loss) has been calculated using the average shares outstanding during the period.
(b) Net investment income (loss) per share excluding all related short sale income and expenses for the period ended December 31,
2004 was $0.06, for the period ended December 31, 2005 was $0.23, for the period ended December 31, 2006 was $0.36, for
the period ended December 31, 2007 was ($0.02) and for the period ended June 30, 2008 was $0.12.
(c) In 2006, the Fund's total return includes a voluntary reimbursement by the adviser for a realized investment loss.
Excluding this item, the total return would have been 0.01% less.
(d) Portfolio turnover excludes the impact of assets resulting from a merger with another fund. (See Note 8 of Notes to the
Financial Statements.)
* Computed on an annualized basis.
See accompanying notes to financial statements.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2008
(unaudited)
1. The Fund is a non-diversified series of CGM Trust which is organized as a
Massachusetts business trust under the laws of Massachusetts pursuant to an
Agreement and Declaration of Trust. The Trust is registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Trust has two other funds whose financial statements are not presented
herein. The Fund commenced operations on September 3, 1997. The Fund's
investment objective is long-term growth of capital. The Fund intends to
pursue its objective by investing in a smaller number of companies, and/or in
a more limited number of sectors than diversified mutual funds. In addition,
should the investment outlook of the Fund's investment manager so warrant, the
Fund may engage in a variety of investment techniques including short sales
designed to capitalize on declines in the market price of specific equity
securities of one or more companies or declines in market indexes.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities are valued on the basis of
valuations furnished by a pricing service, authorized by the Board of
Trustees. The pricing service provides the last reported sale price for
securities listed on a national securities exchange or, in the case of the
NASDAQ national market system, the NASDAQ official closing price. For
securities with no sale reported and in the case of over-the-counter
securities not so listed, the last reported bid price is used for long
positions and the last reported ask price for short positions. 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 and includes amortization of premium and discount. Net gain
or loss on securities sold is determined on the identified cost basis.
C. FEDERAL INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies, and to distribute to its shareholders all of its
taxable income and net realized capital gains, within the prescribed time
period. Accordingly, no provision for federal income tax has been made.
The Fund adopted the provisions of the Financial Accounting Standards
Board (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, which included a review of
the Fund's tax return of each of the three open tax years, did not result
in any unrecognized tax benefits in the accompanying financial statements.
Management's conclusion regarding FIN 48 may be subject to review and
adjustment at a later date based on factors including, but not limited to,
further implementation guidance expected from FASB, and ongoing analysis
of tax laws, regulations and interpretations thereof.
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 NET UNREALIZED
ORDINARY LONG-TERM APPRECIATION/
INCOME CAPITAL GAINS (DEPRECIATION)
------------- ------------- --------------
$ -- $ -- $1,410,622,895
The identified cost of investments in securities, held long by the Fund for
federal income tax purposes and their respective gross unrealized
appreciation and depreciation at June 30, 2008 was as follows:
GROSS UNREALIZED GROSS UNREALIZED NET UNREALIZED
IDENTIFIED COST APPRECIATION DEPRECIATION APPRECIATION
--------------- ---------------- ---------------- --------------
$8,735,692,145 $1,470,919,696 $(271,621,101) $1,199,298,595
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
dividends on short positions which were held less than forty-five days.
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 $732,383,352 $150,234,755 $882,618,107
2006 $ 48,763,442 $175,789,197 $224,552,639
E. SHORT SALES -- The Fund may sell securities short. A short sale is a
transaction in which the Fund sells a security it does not own in
anticipation that the market price of that security will decline. When the
Fund makes a short sale, it must borrow the security sold short to make
delivery to the buyer. The Fund then is obligated to replace the security
borrowed by purchasing the security at the market price at the time of
replacement. The Fund is liable for any dividends or interest paid on
securities sold short. While the short sale is outstanding, the Fund is
required to collateralize its obligations, which has the practical effect
of limiting the extent to which the Fund may engage in short sales. The
market value of securities held in a segregated account at June 30, 2008
was $1,821,322,000 and the value of cash held in a segregated account was
$1,930,678,945, a portion of which may have been restricted at
June 30, 2008.
F. INDEMNITIES -- In the normal course of business, CGM Focus Fund may enter
into contracts that provide indemnities to third parties for various
potential losses and claims. CGM Focus Fund's maximum exposure under these
arrangements is unknown as this would depend on future claims that may be
made against CGM Focus Fund. The risk of material loss from such claims is
considered remote.
G. FOREIGN CURRENCY TRANSLATION -- All assets and liabilities initially
expressed in terms of foreign currencies are translated into U.S. dollars.
Transactions affecting statement of operations accounts and net realized
gain/(loss) on investments are translated at the rates prevailing at the
dates of the transactions. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Reported net realized foreign
exchange gains or losses arise from sales of foreign currency, currency
gains or losses realized between the trade and settlement dates on
securities transactions and the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes
in the value of assets and liabilities other than investments in
securities at the end of the period, resulting from changes in the
exchange rate.
2. 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 is non-diversified, meaning it may invest a
significant portion of its investments within a single industry, sector of the
economy or fewer individual holdings than a diversified fund. 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 diversified fund.
4. PURCHASES AND SALES OF SECURITIES -- For the period ended June 30, 2008,
purchases and sales of securities other than United States government
obligations and short-term investments aggregated $15,934,525,849 and
$12,535,863,843, respectively. There were no purchases or sales of long-term
United States government obligations for the period ended June 30, 2008.
5. A. MANAGEMENT FEES -- During the period ended June 30, 2008, the Fund
incurred management fees of $31,152,071, paid or payable to the Fund's
investment adviser, Capital Growth Management Limited Partnership (CGM),
certain officers and directors of which are also officers and trustees of
the Fund. The management agreement provides for a fee at the annual rate
of 1.00% on the first $500 million of the Fund's average daily net
assets, 0.95% of the next $500 million and 0.90% on amounts in excess of
$1 billion.
B. OTHER EXPENSES -- CGM performs certain administrative, accounting,
compliance and other services for the Fund. The expenses of those
services, which are paid to CGM by the Fund, include the following: (i)
expenses for personnel performing bookkeeping, accounting and financial
reporting functions and clerical functions relating to the Fund; (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, shareholder reports and
notices, proxy solicitation material furnished to shareholders of the
Fund or regulatory authorities and reports and questionnaires for SEC
compliance; (iii) registration, filing and other fees in connection with
requirements of regulatory authorities; and (iv) compliance in connection
to the Investment Company Act of 1940 and the Sarbanes Oxley Act of 2002.
The accounting, administration and compliance expense of $301,322, for
the period ended June 30, 2008, 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, $211,306 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 ending December 31, 2008, each disinterested trustee will be
compensated by the three CGM Funds with an annual fee of $70,000 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 those functions who receives an
additional $30,000 annually. Of these amounts, CGM Focus Fund is
responsible for $18,000 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. LINE OF CREDIT -- The Fund has a $40,000,000 committed, secured line of
credit with State Street Bank and Trust Company. Borrowings under the line
will be charged interest at 0.75% over the current Overnight Federal Funds
Rate. The Fund will incur a commitment fee of 0.1% per annum on the unused
portion of the line of credit, payable quarterly. There were no borrowings
under the line of credit during the period ended June 30, 2008.
7. FASB 157 -- In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, (FAS 157) "Fair Value Measurements", effective
for fiscal years beginning after November 15, 2007. The Fund adopted the
provisions of FAS 157 on January 1, 2008. 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.
In accordance with FAS 157, CGM Focus Fund may use valuation techniques
consistent with the market, income, and cost approach to measure fair value.
The market approach uses prices and other relevant information generated by
market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts (cash
flows, earnings) to a single present amount. The cost approach is based on the
amount that currently would be required to replace the service capacity of an
asset. To increase consistency and comparability in fair value measurements
and related disclosure, CGM Focus Fund utilizes a fair value hierarchy which
prioritizes the various inputs to valuation techniques used to measure fair
value into three broad levels:
o Level 1 -- Prices determined using: quoted prices in active markets for
identical securities
o Level 2 -- Prices determined using: other significant observable inputs
(including quoted prices for similar securities, interest rates,
prepayment spreads, credit risk, etc.)
o Level 3 -- Prices determined using: significant unobservable inputs. In
situations where quoted prices or observable inputs are unavailable (for
example, when there is little or no market activity for an investment at
the end of the period), unobservable inputs may be used. Unobservable
inputs reflect CGM Focus Fund's own assumptions about the factors market
participants would use in pricing an investment, and would be based on
the best information available in the circumstances.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. The
following is a summary of the inputs used to value CGM Focus Fund's investments
and securities sold short as of June 30, 2008:
ASSETS -- LIABILITIES --
INVESTMENTS SECURITIES OTHER FINANCIAL
VALUATION INPUTS IN SECURITIES SOLD SHORT INSTRUMENTS
-------------- ---------------- ---------------
Level 1 - Quoted Prices ... $9,753,370,740 $(1,449,268,000) N/A
Level 2 - Other Significant
Observable Inputs ......... 181,620,000 none N/A
Level 3 - Significant
Unobservable Inputs ....... none none N/A
-------------- --------------- ---
TOTAL $9,934,990,740 $(1,449,268,000) N/A
============== =============== ===
When current market prices or quotations are not readily available or do not
accurately reflect fair value, valuations may be determined in accordance with
procedures adopted by the Board of Trustees. For example, when developments
occur between the close of a market and the close of the NYSE that may
materially affect the value of some or all the securities, or when trading in
a security is halted, these procedures may be used. The frequency with which
these procedures are used is unpredictable. These valuation procedures may
result in a change to a particular security's assigned level within the fair
value hierarchy described above. The value of securities used for NAV
calculation under these procedures may differ from published prices for the
same securities.
8. ACQUISITION OF FUND -- On June 27, 2008, CGM Focus Fund acquired all the
net assets of CGM Capital Development Fund pursuant to a Plan of
Reorganization approved by CGM Capital Development Fund shareholders on June
20, 2008. The acquisition was accomplished by a tax-free exchange of 8,723,604
shares of CGM Focus Fund (valued at $60.95 per share) for the 20,485,043
shares of CGM Capital Development Fund outstanding on June 27, 2008 (an
exchange ratio of 0.42585234). CGM Capital Development Fund's net assets at
that date ($531,703,625), including $32,747,755 of unrealized appreciation,
were combined with those of CGM Focus Fund. The aggregate net assets of CGM
Focus Fund immediately before the acquisition were $9,656,099,353. The
combined net assets of CGM Focus Fund immediately following the acquisition
were $10,187,802,978.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
FUND EXPENSES
As a shareholder of CGM Focus Fund, you incur two types of costs: (1)
transaction costs, which could include, among other charges, wire fees and
custodial maintenance fees for certain kinds 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, 2008 to June 30, 2008.
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*
1/01/08 6/30/08 1/01/08 - 6/30/08
- --------------------------------------------------------------------------------
Actual $1,000.00 $1,170.70 $6.42
- --------------------------------------------------------------------------------
Hypothetical
(5% return
before expenses) $1,000.00 $1,018.95 $5.97
- --------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.19%, which
includes expenses related to short sales activity, multiplied by the average
account value over the period, multiplied by 182/366 (to reflect the one-
half year period).
CGM FOCUS FUND
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
AVAILABILITY OF PROXY VOTING INFORMATION:
Proxy voting policies and information regarding how the Fund voted proxies
relating to portfolio securities during the twelve month period ended June 30,
2008 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.
ADVISORY AGREEMENT APPROVAL:
In considering renewal of the advisory agreement, during meetings held in
March and April 2008, the Board of Trustees of the Fund (the "Board")
considered the following factors and came to the following conclusions:
1. The Board considered the nature, extent, quality and scope of the
investment advisory and administrative services provided by CGM to the Fund.
The Board agreed that the nature, extent, quality and scope of the CGM
professional team working on the Fund was very high, and was satisfied with
the quality of CGM's advisory and administrative services.
2. The Board considered the investment performance of the Fund and CGM and
reviewed information regarding the performance of the Fund as compared to
market indices and a peer group of other capital appreciation funds selected
and provided by Lipper, Inc., an independent provider of investment company
data. The Board noted the strong performance of the Fund for the one-year,
three-year, five-year and ten-year periods ended December 31, 2007 and that
for such time period the Fund (a) exceeded the median performance for the
other mutual funds included in the Lipper reports, and (b) outperformed the
S&P 500 Index. The Board agreed that this performance reflected in large
measure the focus of CGM on long-term performance in managing the Fund's
assets, including taking advantage of strategic trends in the economy that
might take some time to develop. The Board acknowledged that, while for some
periods this focus on long-term performance might cause the Fund to lag other
comparable mutual funds with a more short-term focus, over the longer term
CGM's approach had proven its worth.
3. The Board discussed the costs of the services provided and profits
realized by CGM from the relationship with the mutual funds advised by CGM and
each of the separate accounts managed by CGM, and found that the profit
margins were reasonable and not excessive.
4. The Board discussed with CGM whether economies of scale might be realized
with growth in the Fund. The Board considered the Fund's ability to sell
securities short and the increased efforts on the part of CGM required to
carry out these activities as Fund assets increase. Given the Fund's
investment style and performance, the Board determined that it would not be
advisable at this time to seek to make adjustments to the break point
structure of the advisory fees paid by the Fund.
5. The Board received and considered information comparing the advisory fees
paid by the Fund and the overall expenses borne by the Fund with those of
funds in the relevant expense universe as selected and provided by Lipper,
Inc. The Board noted that the overall expense ratio of the Fund was below the
median overall expense ratios of other mutual funds included in the Lipper
reports. The Board also reviewed information regarding fees charged by CGM to
its other clients, including its separate account clients. CGM reviewed with
the Board the significant differences in scope of services provided to the
Fund and to those other clients, noting that the Fund required a greater
allocation of management's time as a result of its differing investment
mandate and the fact that it is a publicly offered investment vehicle. The
Board discussed the fee comparisons in light of the differences required to
manage these different types of accounts. Based on these comparisons, the
Board concluded that the advisory fees paid by the Fund and the overall
expenses borne by the Fund were reasonable and competitive.
In addition to the foregoing, in light of the fact that CGM could potentially
benefit from soft dollar arrangements of the Fund, the Board of Trustees
reviewed the brokerage commissions of the Fund and concluded that the
brokerage commissions were reasonable, particularly given the Fund's focus on
best execution.
CGM FOCUS FUND
- -------------------------------------------------------------------------------
BOARD OF TRUSTEES
PETER O. BROWN
G. KENNETH HEEBNER
MARK W. HOLLAND
ROBERT L. KEMP
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
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
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
- --------------------------------------------------
WEBSITE
http://www.cgmfunds.com
- --------------------------------------------------
This report has been prepared for the
shareholders of the Fund and is not authorized
for distribution to current or prospective
investors in the Fund unless it is accompanied
or preceded by a prospectus.
FFQR2 08 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, 2008, 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 Trust's proxy statement on Schedule 14A filed on
September 24, 2004, the CGM Trust does not have a formal policy for considering
any trustee candidates recommended by shareholders.
ITEM 11. CONTROLS AND PROCEDURES.
a) Based on their evaluation of the CGM Trust's disclosure controls and
procedures within 90 days of the filing of this Form N-CSR, the principal
executive officer and principal financial officer of CGM Trust have concluded
that the CGM Trust's disclosure controls and procedures are effective to
provide reasonable assurance that information required to be disclosed by the
CGM Trust on Form N-CSR and Form N-Q is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commission rules and forms.
(b) There were no changes in CGM Trust's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the
CGM Trust's second fiscal quarter of the period covered by this report.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2(a) under the
Investment Company Act of 1940 are attached hereto as EX-99.CERT.
(a)(3) Not applicable.
(b) Certifications for each principal executive officer and principal financial
officer of the registrant as required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CGM Trust
By: /S/Robert L. Kemp
Robert L. Kemp
President
Principal Executive Officer
Date: August 15, 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: August 15, 2008
By: /S/ Jem A. Hudgins
Jem A. Hudgins
CFO & Treasurer
Principal Financial Officer
Date: August 15, 2008