NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 1997
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 four other
funds whose financial statements are not presented herein. The Fund commenced operations on May 13, 1994.
The Fund's investment objective is to earn above-average 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 generally accepted
accounting principles 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, which provides the last reported sale price for securities listed on a
national securities exchange or on the NASDAQ national market system or, if no sale was reported and in the
case of over-the-counter securities not so listed, the last reported bid price. Short-term investments having a
maturity of sixty days or less are stated at amortized cost, which approximates value.
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. Interest income is recorded on the accrual basis. Net gain or loss on securities sold is
determined on the identified cost basis. Dividend income receiv