-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JVmvNmCUdZ5jCi2Jrl6Xrjli3Yqu8LOTkX29H9EYbjpvPTZXByNRa1k4e221lz9i KMhB9xplt6oaxmhgD/mUUQ== 0001047469-04-030575.txt : 20041006 0001047469-04-030575.hdr.sgml : 20041006 20041006152019 ACCESSION NUMBER: 0001047469-04-030575 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040731 FILED AS OF DATE: 20041006 DATE AS OF CHANGE: 20041006 EFFECTIVENESS DATE: 20041006 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CMG FUND TRUST CENTRAL INDEX KEY: 0000854126 STATE OF INCORPORATION: OR FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05857 FILM NUMBER: 041068183 BUSINESS ADDRESS: STREET 1: 1300 SW SIXTH AVE STREET 2: P O BOX 1350 CITY: PORTLAND STATE: OR ZIP: 97207 BUSINESS PHONE: 5032223600 MAIL ADDRESS: STREET 1: 1300 SW SIXTH AVE STREET 2: P O BOX 1350 CITY: PORTLAND STATE: OR ZIP: 92707 FORMER COMPANY: FORMER CONFORMED NAME: CMC FUND TRUST DATE OF NAME CHANGE: 19920703 N-CSR 1 a2144236zn-csr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-5857 --------------------------------------------- CMG Fund Trust - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Vincent Pietropaolo, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-772-3698 ---------------------------- Date of fiscal year end: 7/31/04 -------------------------- Date of reporting period: 7/31/04 ------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. CMG FUND TRUST ITEM 1. REPORTS TO STOCKHOLDERS. COLUMBIA MANAGEMENT(R) CMG ENHANCED S&P 500(R) INDEX FUND CMG LARGE CAP GROWTH FUND CMG LARGE CAP VALUE FUND CMG MID CAP GROWTH FUND CMG MID CAP VALUE FUND CMG SMALL CAP GROWTH FUND CMG SMALL CAP VALUE FUND CMG SMALL/MID CAP FUND CMG INTERNATIONAL STOCK FUND PORTFOLIOS OF CMG FUND TRUST ANNUAL REPORT JULY 31, 2004 NOT FDIC MAY LOSE VALUE INSURED ----------------- ADVISED BY COLUMBIA MANAGEMENT ADVISORS, INC. NO BANK GUARANTEE CMG ENHANCED S&P 500(R) INDEX FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Enhanced S&P 500(R) Index Fund returned 12.08% for the 12-month period ended July 31, 2004. The fund's double-digit gain was slightly behind the return of the S&P 500 Index, which was 13.17% for the same period. However, the fund outperformed its peer group. The average return for the Lipper Large Cap Core Funds Category was 9.53%.(1) The fund's focus on large, high quality companies hurt performance against the index because investors tended to gravitate toward smaller, lower quality companies. In addition, we did not hold the stock of our current parent company, Bank of America, or the stock of our previous one, FleetBoston Financial, in order to avoid a conflict of interest. Both stocks performed better than most other financial companies, and their absence in the portfolio held back total return. While we manage the portfolio to reflect the characteristics of the S&P 500 Index in terms of sector weights and market capitalization, there were 200 stocks in the portfolio on July 31, 2004, compared with the 500 companies in the S&P 500 Index. In keeping with the mandate to remain broadly diversified, we generally limit our exposure to any one stock to the company's weight in the S&P 500 Index plus or minus one half of one percent. For example, if the weight of a stock in the S&P 500 Index is 3.00%, its position in the portfolio would typically not be greater than 3.50% or less than 2.50%. In general, we believe that good stock selection is the key to successful long-term performance. When looking for individual stocks, we use quantitative analysis to identify large, high quality companies with attractive valuations and proven records of earnings growth. We look at the financial, economic and operating factors that affect companies. We use this data to evaluate the relative attractiveness of each company in our selection universe. Examples of companies that met our investment criteria during the period included: Microsoft, Monsanto, an agricultural products company; and TXU, whose restructuring efforts have dramatically increased its growth potential (3.1%, 0.4% and 0.6% of net assets, respectively). In the energy area we focused on large oil companies, such as Exxon Mobil and ChevronTexaco, which benefited from higher oil prices (3.4% and 1.5% of net assets, respectively). In the consumer discretionary sector, we held Sears, Roebuck and Co. (0.3% of net assets), which underperformed during the period. Watson Pharmaceuticals (0.2% of net assets) performed poorly during this period. The company's stock declined when it reported weaker-than-expected earnings. We maintained our position because we believe that Watson Pharmaeuticals would be attractive to investors at its lower valuation. We were also disappointed by the performance of King Pharmaceuticals (0.3% of net assets).(2) Our outlook for high quality companies continues to be optimistic. We have already begun to see a more conservative attitude in the market, with investors moving away from lower quality companies toward more established companies with solid business prospects. We believe this shift in emphasis bodes well for the carefully chosen stocks that make up the portfolio. 1 The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Exxon Mobil 3.4 General Electric 3.2 Microsoft 3.1 Wal-Mart Stores 2.7 Pfizer 2.4 Johnson & Johnson 2.1 International Business Machines 1.9 Intel 1.8 JPMorgan Chase & Co. 1.8 Citigroup 1.7
We appreciate your continued confidence in CMG Enhanced S&P 500(R) Index Fund. The Columbia Investment Team July 31, 2004 The primary risks involved with investing in the fund includes equity risk, market risk and tracking error risk. Unlike the S&P 500 Index, the fund incurs administrative expenses and transaction costs in trading stocks. The composition of the S&P 500 Index and the stocks held by the fund will diverge. Holdings are calculated as a percentage of net assets and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. (2) Shortly after the end of this 12-month reporting period, we eliminated our position in King Pharmaceuticals. 2 [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
CMG ENHANCED S&P 500(R) INDEX FUND S&P 500 INDEX 5/5/2003 $ 10,000 $ 10,000 5/31/2003 $ 10,510 $ 10,415 6/30/2003 $ 10,540 $ 10,548 7/31/2003 $ 10,730 $ 10,734 8/31/2003 $ 10,930 $ 10,943 9/30/2003 $ 10,819 $ 10,827 10/31/2003 $ 11,399 $ 11,440 11/30/2003 $ 11,479 $ 11,541 12/31/2003 $ 12,085 $ 12,146 1/31/2004 $ 12,266 $ 12,369 2/29/2004 $ 12,408 $ 12,541 3/31/2004 $ 12,197 $ 12,352 4/30/2004 $ 12,005 $ 12,158 5/31/2004 $ 12,156 $ 12,324 6/30/2004 $ 12,378 $ 12,563 7/31/2004 $ 12,026 $ 12,148
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Enhanced S&P 500(R) Index Fund 05/05/03 12.08 16.06 S&P 500 Index 13.17 17.01
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Enhanced S&P 500(R) Index Fund 05/05/03 17.44 20.31 S&P 500 Index 19.11 21.88
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from May 5, 2003. The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization US stocks. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3 UNDERSTANDING YOUR EXPENSES - CMG ENHANCED S&P 500(R) INDEX FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 980.54 1,023.61 1.24 1.27
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.25%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 4 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 5 CMG LARGE CAP GROWTH FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Large Cap Growth Fund returned 2.57% from inception on September 10, 2003 through July 31, 2004. The fund trailed the 3.76% return of the Russell 1000 Growth Index for the same period. Using the closest available dates for comparison (August 31, 2003 through July 31, 2004), the fund also underperformed the Lipper Large Cap Growth Funds Category average, which gained 3.67%.(1) The shortfall can largely be attributed to the fund's start-up phase, when the timing of cash flows had a negative impact on performance. Once the fund was fully invested, fund performance picked up and tracked the index. The fund's focus on large profitable companies with strong competitive positions, healthy balance sheets and above-average sales growth led us to top performers in the industrial and consumer staples sectors. An above-average stake in industrials helped the fund as economic growth picked up worldwide. Tyco International (2.9% of net assets), an industrial conglomerate under new management, did particularly well. We added to consumer staples holdings, but kept exposure to the sector lower than the fund's benchmark because valuations have neared their historical peaks. The fund's strongest performers in consumer staples included Costco Wholesale (1.4% of net assets), a warehouse chain that sells consumer goods. The company trimmed costs to improve its bottom line and capitalized on growing demand from small businesses. Consumer discretionary stocks also aided performance once the fund was fully invested. Top performers included XM Satellite Radio Holdings and eBay (1.3% and 1.2% of net assets, respectively). XM benefited from enhanced product offerings and growing demand, while eBay rallied as more people used its online auction services. Niche retailers Chico's FAS and Coach (1.0% and 0.8% of net assets, respectively) also delivered strong results. By contrast, media stocks were disappointing. Fading expectations for sustainable long-term growth in advertising revenues put pressure on the sector. The fund's health care returns were mixed. Medical products and devices companies, such as Alcon and St. Jude Medical (1.8% and 1.3% of net assets, respectively), rallied nicely amid new product introductions. However, we lost some ground by not owning more shares of Johnson & Johnson (1.8% of net assets) early on when its stock price took off. Biotechnology stocks further detracted from performance. In particular, Amgen (0.8% of net assets) was hurt by concerns about Medicare reimbursement rates. Within technology, we owned a range of companies that we believed could benefit from an improving economy, increased corporate spending and the growing popularity of advanced communication devices. Our large position in Microsoft (4.9% of net assets) reflected its heavy weight in the index. Microsoft made a positive contribution to the fund's return although it did not perform as well as the technology sector overall. Other disappointments included Seagate Technology, which supplies parts, peripherals and other components to technology systems companies. We sold the stock after earnings shortfalls resulted in sharp declines. Paychex (0.6% of net assets), a payroll processor for small businesses, also hurt performance. It slid among concern that sporadic job growth and modestly higher interest rates would hinder 6 earnings prospects. The fund, however, benefited as QUALCOMM, which makes semiconductors for cell phones, and Yahoo! (1.7% and 1.1% of net assets, respectively) posted solid gains. We remain optimistic about the prospects for large-cap growth stocks, especially those with attractive valuations. We expect high quality companies with good strategic, competitive and product positioning to do better than companies whose fortunes are primarily dependent on the fortunes of the economy. With these factors in mind, we plan to maintain a diversified and balanced approach to sector exposure while picking what we believe are growth stocks with the potential to be market leaders. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Microsoft 4.9 Intel 3.1 Tyco International 2.9 Pfizer 2.8 Cisco Systems 2.7 General Electric 2.2 Praxair 2.2 Teva Pharmaceutical Industries 2.1 Zimmer Holdings 2.0 Alcon 1.8
Thank you for investing in CMG Large Cap Growth Fund. The Columbia Investment Team July 31, 2004 An investment in the fund offers the potential for long-term growth, but also involves certain risks, including stock market fluctuations due to economic and business development and the possibility of losses due to the sensitivity of growth stock prices to changes in current or expected earnings. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 7 [CHART] GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 10, 2003 TO JULY 31, 2004
CMG LARGE CAP GROWTH FUND RUSSELL 1000 GROWTH INDEX 9/9/2003 $ 10,000 $ 10,000 9/30/2003 $ 9,690 $ 9,695 10/31/2003 $ 10,230 $ 10,240 11/30/2003 $ 10,380 $ 10,347 12/31/2003 $ 10,627 $ 10,705 1/31/2004 $ 10,817 $ 10,924 2/29/2004 $ 10,888 $ 10,994 3/31/2004 $ 10,778 $ 10,789 4/30/2004 $ 10,488 $ 10,664 5/31/2004 $ 10,768 $ 10,862 6/30/2004 $ 10,948 $ 10,998 7/31/2004 $ 10,257 $ 10,376
CUMULATIVE RETURN AS OF JULY 31, 2004 (%)
INCEPTION LIFE CMG Large Cap Growth Fund 09/10/03 2.57 Russell 1000 Growth Index 3.76
CUMULATIVE RETURN AS OF JUNE 30, 2004 (%)
INCEPTION LIFE CMG Large Cap Growth Fund 09/10/03 9.47 Russell 1000 Growth Index 9.98
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from September 10, 2003. The Russell 1000 Growth Index is an unmanaged index that measures performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 8 UNDERSTANDING YOUR EXPENSES - CMG LARGE CAP GROWTH FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 949.40 1,022.35 2.45 2.54
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.50%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 9 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 10 CMG LARGE CAP VALUE FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Large Cap Value Fund returned 11.15% from its inception on September 10, 2003 through July 31, 2004. Although the fund's emphasis on energy stocks helped it generate a solid, double-digit return, it gained less than the Russell 1000 Value Index. The index returned 14.45% during the same period. Using the closest available dates for comparison (August 31, 2003, through July 31, 2004), the fund also underperformed the Lipper Multi-Cap Value Funds Category average, which was 13.62%.(1) The fund was held back in the early part of the period because of its emphasis on higher-quality securities, which trailed lower-quality securities. However, the fund's higher quality holdings held up better as market conditions declined and performance picked up in the second half. The fund was launched in September 2003 in the midst of a rising stock market and an improving economy. Its best performers were energy stocks, which represented a larger portion in the portfolio than their weight in the fund's benchmark, and utility stocks, which were a relatively small position. The steady rise in oil and natural gas prices during the period boosted the prices of Exxon Mobil, ConocoPhillips and BP PLC (3.3%, 2.7% and 2.5% of net assets, respectively). TXU (1.9% of net assets) benefited from its new management team's aggressive restructuring. The company's asset sales also worked out better than expected, enabling the company to retain its dividend. Financial holdings did well early in the reporting period, but lost ground as interest rates began to rise. Credit card company MBNA (1.0% of net assets) declined as concerns about a slowdown in consumer spending began to surface, and higher short-term interest rates created concerns about their profit margins. Citigroup, Bank of New York and Morgan Stanley (3.9%, 1.3% and 1.1% of net assets, respectively) were adversely affected by the steady slowdown in capital markets activity. In technology, we lost ground with Finnish cell phone manufacturer Nokia (0.8% of net assets). The company's market share declined, but we believe its plans to introduce a wide range of new phones with varying price points may help the stock recover in the coming year. In the consumer sector, Wendy's International and PepsiCo (1.5% and 1.7% of net assets, respectively) finished the period weak due to concerns about slowing consumer spending. Our decisions to emphasize higher quality stocks, broaden the fund's diversification and bring fund allocations in line with the Russell 1000 Value Index began to pay off as the year wore on. As the market declined from its peak, higher quality names pulled ahead of the more aggressive, lower quality companies that had led the earlier market rally. We believe this strategy will continue to be effective as the economic situation becomes clearer. Already there are signs that the economic recovery is maturing. Although the pace of growth remains solid, it has slowed. We expect profit growth to also slow. In this environment, we continue to favor high quality stocks with the potential to do well under a variety of market conditions. 11 The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Citigroup 3.9 Exxon Mobil 3.3 JPMorgan Chase & Co. 2.8 ConocoPhillips 2.7 BP PLC 2.5 Wells Fargo & Co. 2.3 U.S. Bancorp 2.2 American International Group 2.2 General Electric 2.0 TXU 1.9
Thank you for investing in CMG Large Cap Value Fund. The Columbia Investment Team July 31, 2004 An investment in the fund offers the potential for long-term growth, but also involves certain risks, including stock market fluctuations due to economic and business developments. Value stocks are securities of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor. If the advisor's assessment of a company's prospects is wrong, the price of its stock may not approach the value the advisor has placed on it. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 12 [CHART] GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 10, 2003 TO JULY 31, 2004
CMG LARGE CAP VALUE FUND RUSSELL 1000 VALUE INDEX 9/10/2003 $ 10,000 $ 10,000 9/30/2003 $ 9,820 $ 9,781 10/31/2003 $ 10,190 $ 10,380 11/30/2003 $ 10,230 $ 10,521 12/31/2003 $ 10,904 $ 11,169 1/31/2004 $ 11,045 $ 11,365 2/29/2004 $ 11,345 $ 11,609 3/31/2004 $ 11,265 $ 11,506 4/30/2004 $ 10,994 $ 11,226 5/31/2004 $ 11,004 $ 11,340 6/30/2004 $ 11,315 $ 11,608 7/31/2004 $ 11,115 $ 11,445
CUMULATIVE RETURN AS OF JULY 31, 2004 (%)
INCEPTION LIFE CMG Large Cap Value Fund 09/10/03 11.15 Russell 1000 Value Index 14.45
CUMULATIVE RETURN AS OF JUNE 30, 2004 (%)
INCEPTION LIFE CMG Large Cap Value Fund 09/10/03 13.15 Russell 1000 Value Index 16.09
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from September 10, 2003. The Russell 1000 Value Index is an unmanaged index that measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 13 UNDERSTANDING YOUR EXPENSES - CMG LARGE CAP VALUE FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,006.35 1,022.36 2.51 2.53
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.50%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 14 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 15 CMG MID CAP GROWTH FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Mid Cap Growth Fund returned 1.06% for the 12-month period ended July 31, 2004. The fund's performance was significantly lower than the 14.79% return of the Russell Midcap Growth Index and the 9.63% average of the Lipper Mid Cap Growth Funds Category for the same period.(1) Although the fund's energy holdings benefited from rising oil prices, in most other sectors, particularly technology, its lack of exposure to the better-performing segments of the market hurt performance during the overall period. With a new management team in place since the beginning of July, we have taken steps aimed at reducing volatility and improving performance going forward. Fueled by a strengthening US economy, the stock market moved higher during the first six months of this reporting period. Small company stocks were the greatest beneficiaries of this trend. Investors favored small and highly leveraged, speculative companies on the expectation that they had the most to gain in an improving economy. However, that sentiment changed dramatically as investors became concerned about the strength of the recovery early in 2004. Investors shifted their support to larger, more stable companies. The fund's technology holdings diminished performance during the period. We missed most of the major upward moves within the technology sector. In fact, the fund's relative performance was held back primarily by what it did not own. For example, it did not have exposure to Broadcom or Corning, both stocks that made significant gains during the period. The fund was helped by some of its energy and health care holdings. Rising oil prices boosted energy stocks and oil service stocks benefited most because companies have begun to explore for more energy sources after years of underinvestment. XTO Energy and National-Oilwell (1.2% and 1.7% of net assets, respectively), as well as exploration and production companies such as Apache (0.6% of net assets), were helped by this trend. In health care, a few high quality stocks made positive contributions to the fund, including DaVita, a dialysis services company, and Elan, an Irish biotechnology and drug company (1.6% and 0.8% of net assets, respectively). Although US stock markets have traded lower for the past few months, we see reasons for optimism--and attractive investment opportunities--going forward. In light of our expectation for modest but stable growth, we believe that stocks are more attractively priced. Given this outlook, we have begun adding stocks of emerging companies with favorable earnings prospects. For example, we added Advanced Micro Devices and Altera, two semiconductor manufacturers (0.6% and 0.6% of net assets, respectively). We also initiated a position in Juniper Networks, a communications equipment company (1.0% of net assets). We initiated positions in these stocks even though we reduced the fund's overall exposure to technology. At the same time, we increased the fund's financial services and industrial holdings. We believe these two industries have the potential to benefit from an improving economy. 16 As part of a major restructuring of the fund, we have also taken steps to limit exposure to any one industry in order to help manage exposure to risk. And, we have introduced a systematic process that places more emphasis on valuation relative to earnings growth in selecting individual stocks for the portfolio. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Medicis Pharmaceutical 1.9 Baker Hughes 1.8 Microchip Technology 1.8 National-Oilwell 1.7 Patterson-UTI Energy 1.7 DaVita 1.6 Yum! Brands 1.6 Univision Communications 1.4 Fisher Scientific International 1.4 Linear Technology 1.4
Thank you for investing in the CMG Mid Cap Growth Fund. The Columbia Investment Team July 31, 2004 Investing in mid-cap stocks may present special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Holdings are calculated as a percentage of net assets and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 17 [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
CMG MID CAP GROWTH FUND RUSSELL MIDCAP GROWTH INDEX 5/5/2003 $ 10,000 $ 10,000 5/31/2003 $ 10,580 $ 10,675 6/30/2003 $ 10,730 $ 10,828 7/31/2003 $ 10,930 $ 11,214 8/31/2003 $ 11,470 $ 11,832 9/30/2003 $ 10,849 $ 11,603 10/31/2003 $ 11,739 $ 12,538 11/30/2003 $ 12,059 $ 12,874 12/31/2003 $ 12,165 $ 13,014 1/31/2004 $ 12,445 $ 13,444 2/29/2004 $ 12,415 $ 13,669 3/31/2004 $ 12,265 $ 13,643 4/30/2004 $ 11,705 $ 13,259 5/31/2004 $ 11,865 $ 13,572 6/30/2004 $ 12,125 $ 13,787 7/31/2004 $ 11,046 $ 12,873
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Growth Fund 05/05/03 1.06 8.36 Russell Midcap Growth Index 14.79 22.62
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Growth Fund 05/05/03 13.01 18.19 Russell Midcap Growth Index 27.33 32.09
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from May 5, 2003. The Russell Midcap Growth Index is an unmanaged index that measures the performance of those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 18 UNDERSTANDING YOUR EXPENSES - CMG MID CAP GROWTH FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 893.38 1,020.35 3.30 3.53
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.70%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 19 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 20 CMG MID CAP VALUE FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Mid Cap Value Fund returned 17.91% for the 12-month period ended July 31, 2004. The fund benefited from a strong stock market, which was buoyed by a recovering economy and robust profit growth. However, its return was lower than the 23.43% return of the Russell Midcap Value Index for the same period. Sub-par returns in the consumer discretionary sector accounted for most of the fund's shortfall relative to the index. Auto parts supplier Superior Industries International (0.7% of net assets) was our largest disappointment in the sector. The company suffered from pricing pressure and manufacturing problems in its core aluminum wheels business. However, we continue to own the stock because the company has a leading market share, strong product offering and pristine balance sheet. Cable television operator Mediacom Communications (0.3% of net assets) was hurt by increased competition from satellite dish providers. These providers are increasingly offering local service in Mediacom's markets, often at promotional prices. We also had disappointing performance from certain health care and financial stocks. First Health Group (0.5% of net assets) lowered its earnings estimate because of continued pricing pressure in one of its key business segments. Janus Capital Group (1.3% of net assets), an asset management firm, also hindered the fund's return. One of the contributors to Janus' poor performance was the aggressive growth style that served it well during the 90s has been out of favor for some time, resulting in poor performance for many Janus funds. We continue to own the stock because we believe that improvements in investment performance and new management have the potential to turn the company around. Strong returns from the fund's energy and industrial holdings helped performance. The fund's exposure to energy stocks was higher than its benchmark, which proved beneficial when oil and natural gas prices moved higher. Our stock selection also had a positive impact on performance. Both XTO Energy and Amerada Hess (3.1% and 1.7% of net assets, respectively), posted significant stock price gains during the period. XTO continued to enjoy growth by acquiring and successfully exploiting new assets. Amerada appreciated as investors appeared confident that the company can execute its turnaround strategy. Our positions in industrials Brink's and Carlisle Companies (1.9% and 1.6% of net assets, respectively) also did well. Brink's consumer and business security businesses continued to post solid growth. Moreover, its troubled freight unit enjoyed a strong recovery, helped both by a better economy and internal initiatives. Carlisle's stock appreciated because of strong earnings gains, which resulted from new product introductions, market share gains and the improved economy. During the period, we sold positions in Ecolab, International Game Technology and Zebra Technologies. These were all long-term holdings, which had appreciated significantly and appeared fully valued. We used the proceeds to establish new positions in stocks that appeared attractively valued, including Willis Group Holdings (0.5% of net assets), an insurance broker with the number three position in its industry. A relatively new management team has rejuvenated the 21 company, leading to market share gains against the top two players. The company's stock price has been weighed down by several specific investor concerns that we believe could be resolved favorably in the near-term. We also believe that the company has the potential to gain even more market share going forward. Looking ahead, we see mixed signals on the economic front. We believe that the economy has demonstrated its ability to maintain a steady, if somewhat less vigorous, pace of growth. However, the likelihood of higher rates, record high oil prices, concerns about inflation and the upcoming presidential election are wild cards that could increase uncertainty in the coming months. As value managers, we will continue to seek to identify well-managed companies in good or improving businesses that we believe have the potential to do well under a variety of market conditions. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) XTO Energy 3.1 Golden West Financial 2.7 Dean Foods 2.7 Federated Department Stores 2.3 Brink's 1.9 Telephone & Data Systems 1.7 Amerada Hess 1.7 TJX Companies 1.7 International Flavors & Fragrances 1.6 Charter One Financial 1.6
We appreciate your continued confidence in CMG Mid Cap Value Fund. The Columbia Investment Team July 31, 2004 Investing in mid-cap stocks may present special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Value stocks are securities of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor. If the advisor's assessment of a company's prospects is wrong, the price of its stock may not approach the value the advisor has placed on it. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. 22 [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
CMG MID CAP VALUE FUND RUSSELL MIDCAP VALUE INDEX 5/5/2003 $ 10,000 $ 10,000 5/31/2003 $ 10,320 $ 10,719 6/30/2003 $ 10,370 $ 10,794 7/31/2003 $ 10,690 $ 11,130 8/31/2003 $ 10,970 $ 11,525 9/30/2003 $ 10,770 $ 11,435 10/31/2003 $ 11,491 $ 12,274 11/30/2003 $ 11,710 $ 12,630 12/31/2003 $ 12,214 $ 13,176 1/31/2004 $ 12,424 $ 13,524 2/29/2004 $ 12,804 $ 13,858 3/31/2004 $ 12,804 $ 13,880 4/30/2004 $ 12,563 $ 13,293 5/31/2004 $ 12,793 $ 13,633 6/30/2004 $ 13,164 $ 14,120 7/31/2004 $ 12,604 $ 13,737
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Value Fund 05/05/03 17.91 20.55 Russell Midcap Value Index 23.43 29.22
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Value Fund 05/05/03 26.96 26.92 Russell Midcap Value Index 30.81 34.86
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from May 5, 2003. The Russell Midcap Value Index is an unmanaged index that measures the performance of those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value Index. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 23 UNDERSTANDING YOUR EXPENSES - CMG MID CAP VALUE FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,014.67 1,021.39 3.50 3.51
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.70%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 24 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 25 CMG SMALL CAP GROWTH FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small Cap Growth Fund returned 10.74% for the 12-month period ended July 31, 2004. Small-cap stocks benefited from a favorable environment, especially during the first half of the period. The fund's return was slightly less than the 11.32% return of the Russell 2000 Growth Index. However, it outperformed the 9.62% average return for the Lipper Small Cap Growth Funds Category.(1) The fund benefited from an emphasis on semiconductor and biotechnology stocks, which rallied for the first nine months of the period. Strong gains from industrials, energy and financials further fueled returns. The fund's sizable stake in media as well as disappointing performance from selected technology stocks contributed to a modest shortfall in performance relative to the benchmark. We focused on what we believed were higher quality small-cap growth companies with healthy balance sheets, attractive business models and strong management teams. We favored innovative companies, which we found mostly in the consumer discretionary, technology and health care sectors. Jarden (2.1% of net assets), a diversified consumer products company, was the fund's largest holding and top performer. A smart acquisition strategy as well as innovative marketing and distribution drove strong earnings growth. Station Casinos also posted an outstanding gain. The company prospered from its unique focus on casinos for Las Vegas residents as well as collaborations with Native American tribes to build new casinos in other parts of the country. We took profits and sold our stake in the company. The fund enjoyed strong gains from specialty pharmaceutical and medical diagnostic stocks. Standouts included Salix Pharmaceuticals, Nektar Therapeutics and Cytyc (1.2%, 1.0% and 0.5% of net assets, respectively). Shares of Salix Pharmaceuticals shot up as it gained approval for a new gastrointestinal drug. Nektar Therapeutics rallied after filing in Europe for approval of its innovative inhaled insulin product. Cytyc, which makes the thin prep imaging system used for PAP smears, benefited from expansion overseas and a recent acquisition. Our investment in Taro Pharmaceuticals (0.4% of net assets) lost ground because of a major earnings disappointment. Within industrials, we emphasized transportation stocks. Freight companies, such as EGL (0.9% of net assets), benefited from favorable supply/demand dynamics. Energy stocks were driven higher by rising commodity prices. Standouts included Maverick Tube (0.6% of net assets), a company that makes metal tubing to transport gas and oil from offshore drilling sites. In the financial sector, we targeted banks that were well-positioned for rising interest rates. East-West Bancorp (1.4% of net assets), a West Coast bank targeting the Chinese-American community, did particularly well. Technology stocks came under pressure in the spring as investors worried about the likelihood that earnings growth would slow from its recent rapid pace. Within technology, our biggest disappointments included Cray, a supercomputer company, and Netopia, which makes smart modems for DSL (0.4% and 0.2% of net assets, respectively). An exception was Silicon Image (1.3% of net assets). The stock for this semiconductor company rallied as sales and earnings 26 exceeded expectations. Media stocks further detracted from performance, as advertising revenues trailed expectations and investors abandoned the sector. Although small-cap valuations have risen and investors have become more risk averse, we remain cautiously optimistic about the prospects for small-cap growth stocks. We think their earnings outlooks remain better than those for large-cap stocks, especially as the economy continues to improve. We expect our focus on higher quality, small-cap growth companies to help us in a potentially volatile market environment. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Jarden 2.1 East-West Bancorp 1.4 Silicon Image 1.3 Salix Pharmaceutical 1.2 Cost Plus 1.2 Corporate Executive Board 1.1 Artisan Components 1.1 Jefferies Group 1.1 Commercial Capital Bancorp 1.1 Infinity Property & Casualty 1.1
Thank you for investing in CMG Small Cap Growth Fund. The Columbia Investment Team July 31, 2004 Investments in small-cap companies may be subject to greater volatility and price fluctuations because small companies often have narrower markets and limited financial resources and their stocks tend to be thinly traded and less liquid than investments in larger companies. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 27 [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
CMG SMALL CAP GROWTH FUND RUSSELL 2000 GROWTH INDEX 5/5/2003 $ 10,000 $ 10,000 5/31/2003 $ 10,750 $ 10,776 6/30/2003 $ 11,010 $ 10,984 7/31/2003 $ 11,530 $ 11,814 8/31/2003 $ 12,060 $ 12,449 9/30/2003 $ 11,620 $ 12,134 10/31/2003 $ 12,851 $ 13,182 11/30/2003 $ 13,141 $ 13,612 12/31/2003 $ 13,483 $ 13,673 1/31/2004 $ 14,037 $ 14,391 2/29/2004 $ 14,197 $ 14,369 3/31/2004 $ 14,410 $ 14,437 4/30/2004 $ 13,760 $ 13,712 5/31/2004 $ 13,781 $ 13,985 6/30/2004 $ 14,100 $ 14,451 7/31/2004 $ 12,769 $ 13,152
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Growth Fund 05/05/03 10.74 21.82 Russell 2000 Growth Index 11.32 24.76
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Growth Fund 05/05/03 28.06 34.70 Russell 2000 Growth Index 31.55 37.58
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from May 5, 2003. The Russell 2000 Growth Index is an unmanaged index that measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 28 UNDERSTANDING YOUR EXPENSES -- CMG SMALL CAP GROWTH FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 913.37 1,020.88 3.81 4.02
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.80%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 29 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 30 CMG SMALL CAP VALUE FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small Cap Value Fund returned 25.79% for the 12-month period ended July 31, 2004. It outperformed both the Russell 2000 Value Index and Lipper Small Cap Value Funds Category average, which returned 22.83% and 22.48%, respectively.(1) We believe that strong stock selection in the health care, industrial and financial sectors helped performance relative to the Russell 2000 Value Index and its peer group. A below-average stake in financials also benefited the fund's return. We continued to focus our efforts on identifying companies with strong competitive and financial positions, good earnings growth prospects and reasonable stock valuations. This strategy worked especially well in the second half of 2003 as optimism about the economy and Iraq conflict propelled stocks sharply higher. As 2004 unfolded, the market's momentum slowed amid growing uncertainty on most fronts--geopolitical, political and economic. Investors became more risk averse, favoring value stocks over growth stocks. Although large-cap stocks gained ground late in the period, small-cap stocks came out ahead for the year. The fund's modest investment in health care produced outsized gains. Standouts included non-hospital and specialty facilities companies, such as nursing homes, an oncology practice that was bought out at a premium during the period and a funeral home chain. The fund also owned a contact lens manufacturer that was a strong performer. In addition, the performance was aided by our decision to avoid biotechnology and more expensive pharmaceutical stocks that did not meet our quality and valuation criteria. These industries turned in weak returns compared to the health care sector average. The fund's investments in industrial stocks also contributed to performance. The sector rallied as the economy improved. We owned shares of machinery and equipment, transportation, business services, construction and security services companies, all of which produced strong gains. A below-average stake in financial stocks also benefited performance. Financials came under pressure as rising interest rates dampened enthusiasm for the sector. Our exposure to thrifts was lower than their weight in the fund's index, and that was a particular benefit because thrifts lagged the sector. In addition, the fund benefited from favorable stock selection among banks, insurance firms and specialty financial companies. In both technology and consumer sectors, we maintained our focus on reasonably priced stocks, which ran counter to the market's preference early on for more expensively priced stocks with the best earnings and revenue growth. In technology, we owned a broad mix of software and hardware names. In the consumer discretionary sector, we focused on restaurants, specialty retailers and manufacturers of apparel, shoes, toys and leisure products. The fund's returns from both technology and consumer stocks were positive, but slightly behind the sector average for the Russell 2000 Value Index. Caught between positive earnings growth and worries about rising interest rates, inflation, the progress of the economic recovery and global tensions, the market is likely to remain choppy for the remainder of the year. Regardless of market conditions, our long-term focus remains on 31 reasonably valued small-cap stocks issued by companies with strong balance sheets and good management. We plan to maintain a bias toward economically sensitive companies as long as these sectors remain attractively valued relative to other opportunities. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Carpenter Technology 1.0 Consolidated Graphics 1.0 Corn Products International 0.9 PS Business Parks 0.8 Imagistics International 0.8 Cash America International 0.8 MFC Bancorp 0.8 Watsco 0.8 Kellwood 0.8 MPS Group 0.8
Thank you for investing in CMG Small Cap Value Fund. The Columbia Investment Team July 31, 2004 Investments in small-cap companies may be subject to greater volatility and price fluctuations because small companies often have narrower markets and limited financial resources and their stocks tend to be thinly traded and less liquid than investments in larger companies. Value stocks are securities of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor. If the advisor's assessment of a company's prospects is wrong, the price of its stock may not approach the value the advisor has placed on it. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 32 [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
CMG SMALL CAP VALUE FUND RUSSELL 2000 VALUE INDEX RUSSELL 2000 INDEX 5/5/2003 $ 10,000 $ 10,000 $ 10,000 5/31/2003 $ 10,510 $ 10,766 $ 10,771 6/30/2003 $ 10,720 $ 10,948 $ 10,966 7/31/2003 $ 11,291 $ 11,494 $ 11,652 8/31/2003 $ 11,820 $ 11,931 $ 12,186 9/30/2003 $ 11,710 $ 11,794 $ 11,961 10/31/2003 $ 12,660 $ 12,755 $ 12,965 11/30/2003 $ 13,160 $ 13,245 $ 13,426 12/31/2003 $ 13,619 $ 13,724 $ 13,698 1/31/2004 $ 14,119 $ 14,199 $ 14,293 2/29/2004 $ 14,353 $ 14,475 $ 14,421 3/31/2004 $ 14,619 $ 14,674 $ 14,555 4/30/2004 $ 14,017 $ 13,916 $ 13,813 5/31/2004 $ 14,109 $ 14,084 $ 14,033 6/30/2004 $ 14,885 $ 14,800 $ 14,623 7/31/2004 $ 14,201 $ 14,119 $ 13,640
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Value Fund 05/05/03 25.79 32.74 Russell 2000 Value Index 22.83 32.12 Russell 2000 Index 17.06 28.49
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Value Fund 05/05/03 38.85 41.18 Russell 2000 Value Index 35.17 40.47 Russell 2000 Index 33.37 39.04
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from May 5, 2003. The Russell 2000 Value Index is an unmanaged index that tracks the performance of those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index is an unmanaged index that tracks the performance of the 2,000 smallest of the 3,000 largest US companies based on market capitalization. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in indices. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 33 UNDERSTANDING YOUR EXPENSES -- CMG SMALL CAP VALUE FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,005.81 1,020.99 4.00 4.03
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.80%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 34 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 35 CMG SMALL/MID CAP FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small/Mid Cap Fund returned 5.66% for the 12-month period ended July 31, 2004. The fund underperformed the Russell 2500 Growth Index, which returned 12.45% for the same period. The fund also underperformed its peer group. The average return for the Lipper MidCap Growth Funds Category was 9.63%.(1) For the first several months of the period, the fund benefited from its technology holdings, particularly stocks of the most speculative companies. However, both above-average exposure and stock selection within the technology sector held back performance during the overall period. The fund benefited from some strong gains in its energy holdings. However, with a new management team in place, we have taken steps aimed at reducing volatility and improving performance going forward. Fueled by a strengthening US economy, the stock market moved higher during the first six months of the reporting period. In this environment, investors favored stocks of small and highly leveraged, speculative companies that had the most to gain in an improving economy. However, sentiment changed dramatically in the second half of the period as investors became concerned about the strength of the recovery. That concern resulted in a shift toward stocks of larger, more stable companies. While the fund's substantial exposure to technology helped performance in the first half of the reporting period, its emphasis on the technology services and software industries was out of step with the index. The fund also was underrepresented in specialty semiconductor stocks, which were the best performers in the sector. However, investments in Lexmark International, a computer printer and peripheral company, and Autodesk, a software company, made positive contributions to performance (1.0% and 1.4% of net assets, respectively). The fund delivered a solid return for the year on the strength of several energy and health care holdings. In energy, rising oil prices boosted oil services stocks XTO Energy and National-Oilwell (1.8% and 2.0% of net assets, respectively). The energy sector also benefited from the fact that companies have begun exploring for new energy sources after several years of underinvestment. In health care, the fund's investments in DaVita, a dialysis services company, and Renal Care Group, a medical equipment and supply company also helped performance (1.6% and 1.7% of net assets, respectively). Although US stock markets traded lower over the past few months, we see reasons for optimism-and attractive investment opportunities-ahead. We believe that stock prices have become more attractive recently, particularly in light of our expectation for modest but stable growth over the near term. As part of a major restructuring of the fund, we have also taken steps to limit the fund's exposure to any one industry in order to help manage risk. And, we have introduced a systematic process that places more emphasis on valuation relative to earnings growth in selecting individual stocks for the portfolio. With a new management team and a new, more disciplined investment approach in place, we believe that the fund is well positioned going forward. 36 The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Amphenol 2.5 Comverse Technology 2.1 National-Oilwell 2.0 Education Management 1.9 Caremark Rx 1.8 Medicis Pharmaceutical 1.8 XTO Energy 1.8 Mircochip Technology 1.8 Renal Care Group 1.7 United Defense Industries 1.7
We appreciate your investment in CMG Small/Mid Cap Fund. The Columbia Investment Team July 31, 2004 Investments in small- and mid-cap companies may be subject to greater volatility and price fluctuations because these companies often have narrower markets and limited financial resources and their stocks tend to be thinly traded and less liquid than investments in larger companies. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 37 [CHART] GROWTH OF A $10,000 INVESTMENT, DECEMBER 1, 2000 TO JULY 31, 2004
CMG SMALL/MID CAP FUND RUSSELL 2500 GROWTH INDEX RUSSELL 2500 INDEX 11/30/2000 $ 10,000 $ 10,000 $ 10,000 12/31/2000 $ 10,830 $ 10,620 $ 10,861 1/31/2001 $ 10,780 $ 11,308 $ 11,218 2/28/2001 $ 9,480 $ 9,563 $ 10,496 3/31/2001 $ 8,650 $ 8,506 $ 9,920 4/30/2001 $ 9,689 $ 9,802 $ 10,796 5/31/2001 $ 9,710 $ 10,086 $ 11,120 6/30/2001 $ 9,640 $ 10,314 $ 11,278 7/31/2001 $ 9,290 $ 9,554 $ 10,875 8/31/2001 $ 8,730 $ 8,919 $ 10,518 9/30/2001 $ 7,659 $ 7,522 $ 9,157 10/31/2001 $ 7,999 $ 8,264 $ 9,630 11/30/2001 $ 8,499 $ 8,978 $ 10,409 12/31/2001 $ 8,900 $ 9,470 $ 10,993 1/31/2002 $ 8,650 $ 9,065 $ 10,857 2/28/2002 $ 8,290 $ 8,505 $ 10,667 3/31/2002 $ 8,740 $ 9,190 $ 11,404 4/30/2002 $ 8,580 $ 8,885 $ 11,376 5/31/2002 $ 8,420 $ 8,438 $ 11,042 6/30/2002 $ 7,840 $ 7,662 $ 10,420 7/31/2002 $ 7,081 $ 6,710 $ 9,177 8/31/2002 $ 7,030 $ 6,709 $ 9,204 9/30/2002 $ 6,690 $ 6,202 $ 8,475 10/31/2002 $ 6,960 $ 6,559 $ 8,751 11/30/2002 $ 7,270 $ 7,168 $ 9,465 12/31/2002 $ 6,870 $ 6,715 $ 9,038 1/31/2003 $ 6,890 $ 6,569 $ 8,797 2/28/2003 $ 6,770 $ 6,416 $ 8,586 3/31/2003 $ 6,860 $ 6,501 $ 8,668 4/30/2003 $ 7,271 $ 7,068 $ 9,440 5/31/2003 $ 7,881 $ 7,817 $ 10,368 6/30/2003 $ 8,060 $ 7,978 $ 10,566 7/31/2003 $ 8,300 $ 8,509 $ 11,134 8/31/2003 $ 8,691 $ 8,965 $ 11,650 9/30/2003 $ 8,271 $ 8,772 $ 11,491 10/31/2003 $ 9,071 $ 9,493 $ 12,399 11/30/2003 $ 9,371 $ 9,814 $ 12,866 12/31/2003 $ 9,441 $ 9,825 $ 13,150 1/31/2004 $ 9,671 $ 10,235 $ 13,630 2/29/2004 $ 9,752 $ 10,330 $ 13,841 3/31/2004 $ 9,622 $ 10,366 $ 13,924 4/30/2004 $ 9,242 $ 9,927 $ 13,256 5/31/2004 $ 9,392 $ 10,133 $ 13,526 6/30/2004 $ 9,551 $ 10,380 $ 13,971 7/31/2004 $ 8,770 $ 9,567 $ 13,158
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Small/Mid Cap Fund 12/01/00 5.66 -3.52 Russell 2500 Growth Index 12.45 -1.20 Russell 2500 Index 18.17 7.77
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Small/Mid Cap Fund 12/01/00 18.49 -1.28 Russell 2500 Growth Index 30.12 1.04 Russell 2500 Index 32.21 9.79
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from December 1, 2000. The Russell 2500 Growth Index is an unmanaged index that measures the performance of those Russell 2500 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2500 Index is an unmanaged index that tracks the performance of the 2,500 smallest companies of the Russell 3000 Index. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 38 UNDERSTANDING YOUR EXPENSES -- CMG SMALL/MID CAP FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 910.99 1,021.13 3.56 3.77
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 39 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 40 CMG INTERNATIONAL STOCK FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE For the 12-month period ended July 31, 2004, CMG International Stock Fund returned 18.40%. A favorable global economic environment in the first half of the period helped the fund generate a double-digit return. The MSCI All Country World ex US Index posted a stronger return during the period. It gained 25.29%. The fund's return was slightly below the average for its peer group. The average return for the Lipper International Multi-Cap Growth Funds Category was 19.56%. (1) The portfolio's holdings within the technology sector and its exposure to certain telecommunications companies that did poorly during the second half of the period accounted for its shortfall relative to the index. There were two distinct market environments during the 12-month period. During the first six months of the period, low valuations, underestimated earnings growth and the global economic recovery provided a positive backdrop. During this period, the fund's 14% allocation to technology helped performance. However, in February the market environment began to change. As valuations began to look less attractive, fewer companies upgraded earnings estimates and concerns arose about slowing global growth. In this changed environment, the fund's relatively large technology weight detracted from the fund's return. The fund benefited from our regional allocation decisions. We reduced exposure to emerging markets from about 15% of net assets to approximately 5%. This reduction helped because emerging markets significantly underperformed developed markets. We used the proceeds from the sale of emerging market stocks to invest in Japan and the United Kingdom (UK), where the prospects for long-term economic growth appeared strong. In Japan, the economy continued to recover from a 10-year deflationary cycle. Companies have become more competitive on a global basis. The Japanese government has demonstrated a willingness to be more accommodative toward business, and we believe there is the potential for a significant amount of merger and acquisition activity. With these factors in mind, we invested heavily in banks, such as UFJ Holdings. The stock did well early in the period. However, when concerns arose about loan quality and some banks came under government investigation, Japanese financial stocks lost ground and had a negative impact on performance. We sold our position in UFJ Holdings. In the UK, we were drawn to the region's consistent GDP growth, relatively strong consumer spending and attractive housing sector. Our investments in BP PLC (2.1% of net assets), a large integrated-energy company, and in GlaxoSmithKline PLC (1.7% of net assets), a global pharmaceutical company, were positive for performance. We also invested in Austria. Here, we emphasized companies with exposure to the East European countries that have entered the European Union. We added Erste Bank der oesterreichischen Sparkassen AG (0.7% of net assets), which has had a significant pick-up in loan growth and Wienerberger AG (0.9% of net assets), the world's largest producer of bricks used in construction projects. Both companies aided total return. Overweighting the Scandinavian region-Norway, Denmark and Sweden-was also helpful. 41 At nearly 12% of net assets, the fund had more exposure to health care than the MSCI index, and that helped performance. In particular, our investment in medical technology companies such as Nobel Biocare Holding AG (0.5% of net assets) helped boost the fund's return. We believe that concerns about the rate of global economic growth and rising interest rates will continue to weigh on the market for several months. With this expectation, we have structured the portfolio more defensively by cutting back on our exposure to small companies and focusing on large, established companies with dividend-paying potential. We have also reduced the fund's risk exposure by cutting back on our technology holdings and emphasizing health care. Within health care, we have focused on the pharmaceuticals industry. We believe this more cautious positioning may help the fund weather this period of uncertainty. The fund's top ten holdings and countries (as a percentage of net assets) as of July 31, 2004 were:
HOLDINGS (%) COUNTRIES (%) ENI S.p.A. 2.5 United Kingdom 26.1 BP PLC 2.1 Japan 22.5 Nestle SA 1.9 France 10.6 Smith & Nephew PLC 1.9 Germany 6.2 Reckitt Benckiser PLC 1.8 Switzerland 5.4 Vodafone Group PLC 1.7 Sweden 3.5 GlaxoSmithKline PLC 1.7 Netherlands 3.2 Takeda Pharmaceutical Industries 1.6 Italy 3.1 Toyota Motor 1.5 Canada 2.3 E.ON AG 1.5 Austria 1.6
We appreciate your continued confidence in CMG International Stock Fund. The Columbia Investment Team July 31, 2004 There are also specific risks involved when investing in foreign stocks, such as currency exchange rate fluctuations, economic change, instability of emerging countries and political developments. A concentration of investments in a specific sector, such as the financials sector, may cause the fund to experience increased volatility. Holdings and country breakdowns are disclosed as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings and country breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 42 [CHART] GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1994 TO JULY 31, 2004
CMG INTERNATIONAL STOCK FUND MSCI EAFE INDEX MSCI ALL COUNTRY WORLD EX US INDEX 8/1/1994 $ 10,000 $ 10,000 $ 10,000 8/31/1994 $ 10,284 $ 10,237 $ 10,336 9/30/1994 $ 9,913 $ 9,915 $ 10,080 10/31/1994 $ 10,196 $ 10,245 $ 10,351 11/30/1994 $ 9,699 $ 9,752 $ 9,852 12/31/1994 $ 9,542 $ 9,813 $ 9,829 1/31/1995 $ 8,845 $ 9,437 $ 9,383 2/28/1995 $ 8,716 $ 9,409 $ 9,332 3/31/1995 $ 9,051 $ 9,996 $ 9,860 4/30/1995 $ 9,240 $ 10,372 $ 10,244 5/31/1995 $ 9,123 $ 10,249 $ 10,198 6/30/1995 $ 9,090 $ 10,069 $ 10,057 7/31/1995 $ 9,670 $ 10,697 $ 10,628 8/31/1995 $ 9,534 $ 10,289 $ 10,259 9/30/1995 $ 9,741 $ 10,490 $ 10,434 10/31/1995 $ 9,617 $ 10,208 $ 10,156 11/30/1995 $ 9,807 $ 10,491 $ 10,394 12/31/1995 $ 10,068 $ 10,914 $ 10,806 1/31/1996 $ 10,245 $ 10,959 $ 10,954 2/29/1996 $ 10,245 $ 10,996 $ 10,954 3/31/1996 $ 10,642 $ 11,229 $ 11,159 4/30/1996 $ 11,001 $ 11,556 $ 11,497 5/31/1996 $ 11,161 $ 11,343 $ 11,324 6/30/1996 $ 11,395 $ 11,407 $ 11,382 7/31/1996 $ 10,887 $ 11,074 $ 11,004 8/31/1996 $ 11,057 $ 11,098 $ 11,069 9/30/1996 $ 11,304 $ 11,393 $ 11,344 10/31/1996 $ 11,220 $ 11,277 $ 11,230 11/30/1996 $ 11,606 $ 11,726 $ 11,664 12/31/1996 $ 11,757 $ 11,575 $ 11,528 1/31/1997 $ 11,755 $ 11,170 $ 11,316 2/28/1997 $ 12,041 $ 11,353 $ 11,523 3/31/1997 $ 12,133 $ 11,394 $ 11,499 4/30/1997 $ 12,405 $ 11,454 $ 11,597 5/31/1997 $ 13,116 $ 12,200 $ 12,313 6/30/1997 $ 13,731 $ 12,872 $ 12,992 7/31/1997 $ 14,133 $ 13,081 $ 13,255 8/31/1997 $ 13,127 $ 12,103 $ 12,211 9/30/1997 $ 14,020 $ 12,781 $ 12,872 10/31/1997 $ 12,957 $ 11,798 $ 11,775 11/30/1997 $ 12,905 $ 11,678 $ 11,628 12/31/1997 $ 12,954 $ 11,780 $ 11,762 1/31/1998 $ 13,040 $ 12,318 $ 12,114 2/28/1998 $ 13,600 $ 13,109 $ 12,922 3/31/1998 $ 14,226 $ 13,512 $ 13,369 4/30/1998 $ 14,623 $ 13,619 $ 13,465 5/31/1998 $ 14,860 $ 13,553 $ 13,220 6/30/1998 $ 14,790 $ 13,656 $ 13,171 7/31/1998 $ 14,827 $ 13,793 $ 13,296 8/31/1998 $ 13,046 $ 12,084 $ 11,421 9/30/1998 $ 12,094 $ 11,713 $ 11,180 10/31/1998 $ 12,798 $ 12,934 $ 12,352 11/30/1998 $ 13,807 $ 13,596 $ 13,015 12/31/1998 $ 14,532 $ 14,132 $ 13,463 1/31/1999 $ 15,217 $ 14,089 $ 13,448 2/28/1999 $ 14,839 $ 13,754 $ 13,147 3/31/1999 $ 15,095 $ 14,328 $ 13,782 4/30/1999 $ 15,523 $ 14,908 $ 14,471 5/31/1999 $ 15,166 $ 14,140 $ 13,791 6/30/1999 $ 16,094 $ 14,692 $ 14,425 7/31/1999 $ 16,626 $ 15,128 $ 14,763 8/31/1999 $ 17,003 $ 15,184 $ 14,815 9/30/1999 $ 17,411 $ 15,337 $ 14,914 10/31/1999 $ 18,229 $ 15,913 $ 15,469 11/30/1999 $ 20,413 $ 16,465 $ 16,087 12/31/1999 $ 23,110 $ 17,943 $ 17,622 1/31/2000 $ 21,906 $ 16,804 $ 16,665 2/29/2000 $ 23,435 $ 17,256 $ 17,115 3/31/2000 $ 22,861 $ 17,925 $ 17,759 4/30/2000 $ 20,787 $ 16,982 $ 16,768 5/31/2000 $ 18,997 $ 16,568 $ 16,339 6/30/2000 $ 20,071 $ 17,216 $ 17,035 7/31/2000 $ 19,029 $ 16,495 $ 16,362 8/31/2000 $ 19,507 $ 16,638 $ 16,565 9/30/2000 $ 18,313 $ 15,828 $ 15,645 10/31/2000 $ 17,575 $ 15,454 $ 15,148 11/30/2000 $ 16,795 $ 14,875 $ 14,469 12/31/2000 $ 17,602 $ 15,403 $ 14,963 1/31/2001 $ 17,419 $ 15,395 $ 15,187 2/28/2001 $ 16,465 $ 14,240 $ 13,984 3/31/2001 $ 15,367 $ 13,291 $ 12,995 4/30/2001 $ 16,309 $ 14,214 $ 13,879 5/31/2001 $ 15,982 $ 13,713 $ 13,496 6/30/2001 $ 15,420 $ 13,152 $ 12,979 7/31/2001 $ 14,936 $ 12,912 $ 12,690 8/31/2001 $ 14,661 $ 12,586 $ 12,375 9/30/2001 $ 13,274 $ 11,311 $ 11,062 10/31/2001 $ 13,627 $ 11,600 $ 11,372 11/30/2001 $ 13,914 $ 12,028 $ 11,891 12/31/2001 $ 14,246 $ 12,099 $ 12,045 1/31/2002 $ 13,669 $ 11,457 $ 11,529 2/28/2002 $ 13,760 $ 11,537 $ 11,612 3/31/2002 $ 14,429 $ 12,217 $ 12,229 4/30/2002 $ 14,494 $ 12,241 $ 12,323 5/31/2002 $ 14,665 $ 12,396 $ 12,457 6/30/2002 $ 14,310 $ 11,903 $ 11,919 7/31/2002 $ 13,142 $ 10,728 $ 10,757 8/31/2002 $ 13,077 $ 10,704 $ 10,758 9/30/2002 $ 11,765 $ 9,554 $ 9,618 10/31/2002 $ 12,224 $ 10,067 $ 10,133 11/30/2002 $ 12,696 $ 10,524 $ 10,621 12/31/2002 $ 12,206 $ 10,170 $ 10,279 1/31/2003 $ 11,692 $ 9,746 $ 9,918 2/28/2003 $ 11,547 $ 9,523 $ 9,717 3/31/2003 $ 11,468 $ 9,337 $ 9,528 4/30/2003 $ 12,325 $ 10,252 $ 10,447 5/31/2003 $ 12,997 $ 10,873 $ 11,112 6/30/2003 $ 13,248 $ 11,136 $ 11,420 7/31/2003 $ 13,617 $ 11,405 $ 11,724 8/31/2003 $ 13,947 $ 11,680 $ 12,073 9/30/2003 $ 14,329 $ 12,040 $ 12,411 10/31/2003 $ 15,199 $ 12,790 $ 13,215 11/30/2003 $ 15,317 $ 13,074 $ 13,504 12/31/2003 $ 16,334 $ 14,095 $ 14,534 1/31/2004 $ 16,692 $ 14,294 $ 14,768 2/29/2004 $ 16,917 $ 14,624 $ 15,143 3/31/2004 $ 17,063 $ 14,706 $ 15,237 4/30/2004 $ 16,599 $ 14,374 $ 14,763 5/31/2004 $ 16,453 $ 14,422 $ 14,810 6/30/2004 $ 16,770 $ 14,738 $ 15,132 7/31/2004 $ 16,121 $ 14,261 $ 14,692
AVERAGE ANNUAL TOTAL RETURNS AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG International Stock Fund 02/01/94 18.40 -0.61 4.89 MSCI EAFE Index 25.05 -1.18 3.61 MSCI All Country World ex US Index 25.29 -0.10 3.92
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG International Stock Fund 02/01/94 26.60 0.83 5.30 MSCI EAFE Index 32.37 0.06 4.06 MSCI All Country World ex US Index 32.48 0.96 4.40
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. The Morgan Stanley Capital International (MSCI) Europe, Australia, Far East (EAFE) Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the US and Canada. The MSCI All Country World ex US Index is an unmanaged index of global stock market performance that includes developed and emerging markets but excludes the United States. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any reimbursement of fund expenses by the advisor or its affiliates. Absent these reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 43 UNDERSTANDING YOUR EXPENSES -- CMG INTERNATIONAL STOCK FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 967.14 1,021.14 3.66 3.76
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 44 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 45 CMG ENHANCED S&P 500(R) INDEX FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED JULY 31, JULY 31, 2004 2003 (a) -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.73 $ 10.00 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.17 0.04 Net realized and unrealized gain on investments 1.13 0.69 -------------- -------------- Total from investment operations 1.30 0.73 -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.05) - From net realized gains (0.01) - -------------- -------------- Total distributions declared to shareholders (0.06) - -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 11.97 $ 10.73 ============== ============== Total return (c)(d) 12.08% 7.30%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 98,247 $ 9,134 Ratio of net expenses to average net assets 0.25% 0.25%(f) Ratio of net investment income to average net assets 1.43% 1.50%(f) Reimbursement 0.05% 1.37%(f) Portfolio turnover rate 60% 2%(e)
(a) The Fund commenced investment operations on May 5, 2003. Per share data, total return and portfolio turnover rate reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) Annualized. See Accompanying Notes to Financial Statements. 46 CMG LARGE CAP GROWTH FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout the Period)
PERIOD ENDED JULY 31, 2004 (a) -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.03 Net realized and unrealized gain on investments 0.23 -------------- Total from investment operations 0.26 -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.01) -------------- NET ASSET VALUE, END OF PERIOD $ 10.25 ============== Total return (c)(d)(e) 2.57% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 40,684 Ratio of net expenses to average net assets (f) 0.50% Ratio of net investment income to average net assets (f) 0.31% Reimbursement (f) 0.14% Portfolio turnover rate (e) 114%
(a) The Fund commenced investment operations on September 10, 2003. Per share data, total return and portfolio turnover rate reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) Annualized. See Accompanying Notes to Financial Statements. 47 CMG LARGE CAP VALUE FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout the Period)
PERIOD ENDED JULY 31, 2004 (a) -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.18 Net realized and unrealized gain on investments 0.93 -------------- Total from investment operations 1.11 -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.02) -------------- NET ASSET VALUE, END OF PERIOD $ 11.09 ============== Total return (c)(d)(e) 11.15% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 47,855 Ratio of net expenses to average net assets (f) 0.50% Ratio of net investment income to average net assets (f) 1.86% Reimbursement (f) 0.14% Portfolio turnover rate (e) 46%
(a) The Fund commenced investment operations on September 10, 2003. Per share data, total return and portfolio turnover rate reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) Annualized. See Accompanying Notes to Financial Statements. 48 CMG MID CAP GROWTH FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED JULY 31, JULY 31, 2004 2003 (a) -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 10.00 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (b) (0.05) (0.01) Net realized and unrealized gain on investments 0.17 0.94 -------------- -------------- Total from investment operations 0.12 0.93 -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains (0.01) - -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 11.04 $ 10.93 ============== ============== Total return (c)(d) 1.06% 9.30%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 19,284 $ 2,161 Ratio of net expenses to average net assets 0.70% 0.70%(f) Ratio of net investment loss to average net assets (0.38)% (0.44)%(f) Reimbursement 0.22% 3.85%(f) Portfolio turnover rate 169% 23%(e)
(a) The Fund commenced investment operations on May 5, 2003. Per share data, total return and portfolio turnover rate reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) Annualized. See Accompanying Notes to Financial Statements. 49 CMG MID CAP VALUE FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED JULY 31, JULY 31, 2004 2003 (a) -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.69 $ 10.00 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.07 0.01 Net realized and unrealized gain on investments 1.84 0.68 -------------- -------------- Total from investment operations 1.91 0.69 -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.02) - From net realized gains -(c) - -------------- -------------- Total distributions declared to shareholders (0.02) - -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 12.58 $ 10.69 ============== ============== Total return (d)(e) 17.91% 6.90%(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 21,994 $ 2,651 Ratio of net expenses to average net assets 0.70% 0.70%(g) Ratio of net investment income to average net assets 0.54% 0.49%(g) Reimbursement 0.20% 3.61%(g) Portfolio turnover rate 9% 2%(f)
(a) The Fund commenced investment operations on May 5, 2003. Per share data, total return and portfolio turnover rate reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Rounds to less than $0.01 per share. (d) Total return at net asset value assuming all distributions reinvested. (e) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Not annualized. (g) Annualized. See Accompanying Notes to Financial Statements. 50 CMG SMALL CAP GROWTH FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED JULY 31, JULY 31, 2004 2003 (a) -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.53 $ 10.00 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (b) (0.08) (0.02) Net realized and unrealized gain on investments 1.35 1.55 -------------- -------------- Total from investment operations 1.27 1.53 -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains (0.81) - -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 11.99 $ 11.53 ============== ============== Total return (c)(d) 10.74% 15.30%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 35,727 $ 21,006 Ratio of net expenses to average net assets 0.80% 0.80%(f) Ratio of net investment loss to average net assets (0.60)% (0.62)%(f) Reimbursement 0.10% 0.35%(f) Portfolio turnover rate 66% 37%(e)
(a) The Fund commenced investment operations on May 5, 2003. Per share data, total return and portfolio turnover rate reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) Annualized. See Accompanying Notes to Financial Statements. 51 CMG SMALL CAP VALUE FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED JULY 31, JULY 31, 2004 2003 (a) -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.29 $ 10.00 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.11 0.02 Net realized and unrealized gain on investments 2.79 1.27 -------------- -------------- Total from investment operations 2.90 1.29 -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.06) - From net realized gains (0.22) - -------------- -------------- Total distributions declared to shareholders (0.28) - -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 13.91 $ 11.29 ============== ============== Total return (c)(d) 25.79% 12.90%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 40,356 $ 21,356 Ratio of net expenses to average net assets 0.80% 0.80%(f) Ratio of net investment income to average net assets 0.82% 0.66%(f) Reimbursement 0.09% 0.36%(f) Portfolio turnover rate 53% 5%(e)
(a) The Fund commenced investment operations on May 5, 2003. Per share data, total return and portfolio turnover rate reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) Annualized. See Accompanying Notes to Financial Statements. 52 CMG SMALL/MID CAP FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED JULY 31, JULY 31, OCTOBER 31, OCTOBER 31, 2004 2003 (a) 2002 2001 (b) ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 8.30 $ 6.96 $ 8.00 $ 10.00 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.05)(c) (0.03)(c) (0.04)(c) (0.02) Net realized and unrealized gain (loss) on investments 0.52 1.37 (1.00) (1.98) ----------- ----------- ----------- ----------- Total from investment operations 0.47 1.34 (1.04) (2.00) ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 8.77 $ 8.30 $ 6.96 $ 8.00 =========== =========== =========== =========== Total return (d)(e) 5.66% 19.25%(f) (13.00)% (20.00)%(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 50,662 $ 73,926 $ 54,769 $ 49,391 Ratio of net expenses to average net assets 0.75% 0.78%(g)(h) 0.80%(g) 0.80%(g)(h) Ratio of net investment loss to average net assets (0.49)% (0.50)%(g)(h) (0.45)%(g) (0.23)%(g)(h) Reimbursement 0.06% 0.06%(h) 0.06% 0.17%(h) Portfolio turnover rate 91% 84%(f) 125% 167%(f)
(a) The Fund changed its fiscal year end from October 31 to July 31. (b) The Fund commenced investment operations on December 1, 2000. Per share data, total return and portfolio turnover rate reflect activity from that date. (c) Per share data was calculated using average shares outstanding during the period. (d) Total return at net asset value. (e) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Not annualized. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. See Accompanying Notes to Financial Statements. 53 CMG INTERNATIONAL STOCK FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED JULY 31, JULY 31, 2004 2003 (a) ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 9.32 ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.14(b) 0.11(b) Net realized and unrealized gain (loss) on investments, foreign currency and foreign capital gains tax 1.76 0.95 ------------ ------------ Total from investment operations 1.90 1.06 ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.06) (0.05) From net realized gains - - ------------ ------------ Total distributions declared to shareholders (0.06) (0.05) ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 12.17 $ 10.33 ============ ============ Total return (d) 18.40%(e) 11.39%(e)(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 152,251 $ 58,488 Ratio of net expenses to average net assets 0.75% 0.93%(g)(h) Ratio of net investment income (loss) to average net assets 1.16% 1.50%(g)(h) Reimbursement 0.05% 0.06%(h) Portfolio turnover rate 91% 59%(f) YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------ 2002 2001 2000 1999 ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 10.42 $ 16.20 $ 17.86 $ 12.54 ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.02(b) 0.03 0.04 (0.02) Net realized and unrealized gain (loss) on investments, foreign currency and foreign capital gains tax (1.09) (3.09) (0.36) 5.34 ------------ ------------ ------------ ------------ Total from investment operations (1.07) (3.06) (0.32) 5.32 ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.03) - - - From net realized gains - (2.72) (1.34) -(c) ------------ ------------ ------------ ------------ Total distributions declared to shareholders (0.03) (2.72) (1.34) -(c) ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 9.32 $ 10.42 $ 16.20 $ 17.86 ============ ============ ============ ============ Total return (d) (10.28)% (22.46)% (3.58)% 42.44% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 20,616 $ 20,553 $ 22,975 $ 30,492 Ratio of net expenses to average net assets 1.31%(g) 1.26%(g) 1.11%(g) 1.31%(g) Ratio of net investment income (loss) to average net assets 0.21%(g) 0.29%(g) 0.12%(g) (0.14)%(g) Reimbursement - - - - Portfolio turnover rate 111% 117% 140% 96%
(a) The Fund changed its fiscal year end from October 31 to July 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Rounds to less than $0.01 per share. (d) Total return at net asset value assuming all distributions reinvested. (e) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (f) Not annualized. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. See Accompanying Notes to Financial Statements. 54 CMG ENHANCED S&P 500 (R) INDEX FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (98.1%) Consumer Discretionary (9.6%) Automobiles (0.5%) Ford Motor Co. 32,300 $ 475,456 --------------- Hotels, Restaurants & Leisure (1.4%) Carnival Corp. 9,900 461,439 McDonald's Corp. 27,200 748,000 Starwood Hotels & Resorts Worldwide, Inc. 2,800 126,000 --------------- 1,335,439 --------------- Household Durables (0.5%) Stanley Works 11,900 504,560 --------------- Internet & Catalog Retail (0.3%) Amazon.com, Inc. (a) 6,100 237,412 eBay, Inc. (a) 1,100 86,163 --------------- 323,575 --------------- Leisure Equipment & Products (0.2%) Hasbro, Inc. 6,000 109,020 Mattel, Inc. 5,600 98,112 --------------- 207,132 --------------- Media (3.5%) Clear Channel Communications, Inc. 2,800 99,960 Comcast Corp., Class A (a) 30,400 832,960 McGraw-Hill Companies, Inc. 6,800 510,408 Time Warner, Inc. (a) 70,600 1,175,490 UnitedGlobalCom, Inc., Class A (a) 65,100 412,734 Viacom, Inc., Class B 8,300 278,797 Walt Disney Co. 4,200 96,978 --------------- 3,407,327 --------------- Multiline Retail (0.4%) May Department Stores Co. 4,000 106,120 Sears, Roebuck and Co. 8,100 297,108 --------------- 403,228 --------------- Specialty Retail (2.1%) Abercrombie & Fitch Co. 2,600 95,888 Barnes & Noble, Inc. (a) 4,400 151,272 Best Buy Co., Inc. 2,800 134,848 Gap, Inc. 5,000 113,500 Home Depot, Inc. 28,800 971,136 Lowe's Companies, Inc. 2,500 121,800 RadioShack Corp. 17,300 483,535 --------------- 2,071,979 --------------- Textiles, Apparel & Luxury Goods (0.7%) Jones Apparel Group, Inc. 3,900 145,665 NIKE, Inc., Class B 8,000 581,680 --------------- 727,345 ---------------
See Accompanying Notes to Financial Statements. 55
SHARES VALUE --------------- --------------- Common Stocks (continued) Consumer Staples (11.2%) Beverages (2.3%) Adolph Coors Co., Class B 1,500 $ 103,140 Anheuser-Busch Companies, Inc. 6,700 347,730 Coca-Cola Co. 32,500 1,425,450 PepsiCo, Inc. 7,200 360,000 --------------- 2,236,320 --------------- Food & Staples Retailing (3.4%) Albertson's, Inc. 3,900 95,121 Costco Wholesale Corp. 16,100 654,626 Wal-Mart Stores, Inc. 49,300 2,613,393 --------------- 3,363,140 --------------- Food Products (1.7%) H.J. Heinz Co. 16,000 590,240 Hershey Foods Corp. 12,600 610,344 Kellogg Co. 2,400 99,984 Tyson Foods, Inc. 22,300 425,038 --------------- 1,725,606 --------------- Household Products (1.6%) Clorox Co. 1,900 94,563 Colgate-Palmolive Co. 2,600 138,320 Procter & Gamble Co. 25,200 1,314,180 --------------- 1,547,063 --------------- Personal Products (1.3%) Estee Lauder Companies, Inc., Class A 10,000 439,000 Gillette Co. 20,900 814,682 --------------- 1,253,682 --------------- Tobacco (0.9%) Altria Group, Inc. 9,400 447,440 Reynolds American, Inc. 5,900 424,505 --------------- 871,945 --------------- Energy (7.2%) Energy Equipment & Services (0.7%) Baker Hughes, Inc. 3,000 120,900 Halliburton Co. 4,400 139,700 Schlumberger Ltd. 5,400 347,328 Transocean, Inc. (a) 3,900 110,760 --------------- 718,688 --------------- Oil & Gas (6.5%) Amerada Hess Corp. 3,500 291,725 Apache Corp. 2,100 97,713 ChevronTexaco Corp. 15,300 1,463,445 ConocoPhillips 12,100 953,117 Exxon Mobil Corp. 71,500 3,310,450 Marathon Oil Corp. 4,100 154,447 Occidental Petroleum Corp. 2,000 98,540 --------------- 6,369,437 ---------------
See Accompanying Notes to Financial Statements. 56
SHARES VALUE --------------- --------------- Common Stocks (continued) Financials (19.4%) Capital Markets (3.0%) A.G. Edwards, Inc. 12,800 $ 416,000 Bank of New York Co., Inc. 12,800 367,744 Federated Investors, Inc., Class B 17,300 486,303 Franklin Resources, Inc. 11,200 540,400 Goldman Sachs Group, Inc. 4,400 388,036 Mellon Financial Corp. 3,700 101,676 Morgan Stanley 2,000 98,660 Northern Trust Corp. 11,700 469,521 State Street Corp. 2,100 89,901 --------------- 2,958,241 --------------- Commercial Banks (4.5%) Comerica, Inc. 4,000 233,880 Commerce Bancorp, Inc. 7,900 397,686 M&T Bank Corp. 1,200 111,876 National City Corp. 19,500 711,750 North Fork Bancorporation, Inc. 2,600 101,530 PNC Financial Services Group, Inc. 1,900 96,140 SouthTrust Corp. 3,000 116,370 UnionBanCal Corp. 8,300 481,815 U.S. Bancorp 23,200 656,560 Wachovia Corp. 23,300 1,032,423 Wells Fargo & Co. 7,800 447,798 --------------- 4,387,828 --------------- Consumer Finance (0.7%) American Express Co. 2,400 120,600 AmeriCredit Corp. (a) 10,500 200,550 Capital One Financial Corp. 1,400 97,048 MBNA Corp. 9,500 234,555 --------------- 652,753 --------------- Diversified Financial Services (3.7%) Chicago Mercantile Exchange 1,600 200,800 Citigroup, Inc. 37,700 1,662,193 JPMorgan Chase & Co. 46,636 1,740,922 --------------- 3,603,915 --------------- Insurance (5.2%) ACE Ltd. 2,400 97,416 AFLAC, Inc. 3,000 118,920 Allstate Corp. 6,800 320,144 Ambac Financial Group, Inc. 4,200 298,662 American International Group, Inc. 17,900 1,264,635 Aon Corp. 4,400 116,336 Chubb Corp. 9,000 619,020 First American Corp. 6,500 174,590 Hartford Financial Services Group, Inc. 10,000 651,000 Lincoln National Corp. 4,300 187,910 Loews Corp. 4,200 237,846
See Accompanying Notes to Financial Statements. 57
SHARES VALUE --------------- --------------- Common Stocks (continued) Insurance (continued) Marsh & McLennan Companies, Inc. 2,200 $ 97,636 MetLife, Inc. 21,000 749,070 Prudential Financial, Inc. 2,200 102,432 SAFECO Corp. 2,300 108,238 --------------- 5,143,855 --------------- Real Estate (0.8%) Apartment Investment & Management Co., Class A, REIT 15,800 505,126 Equity Residential, REIT 5,700 168,435 KB Home 1,800 115,290 --------------- 788,851 --------------- Thrifts & Mortgage Finance (1.5%) Countrywide Financial Corp. 1,700 122,570 Doral Financial Corp. 2,900 113,825 Fannie Mae 14,000 900,340 Freddie Mac 2,600 184,496 Washington Mutual, Inc. 4,300 166,840 --------------- 1,488,071 --------------- Health Care (13.9%) Biotechnology (0.7%) Amgen, Inc. (a) 12,300 699,624 --------------- Health Care Equipment & Supplies (1.5%) Becton, Dickinson & Co. 6,600 311,718 Medtronic, Inc. 21,300 1,057,971 PerkinElmer, Inc. 5,300 93,174 --------------- 1,462,863 --------------- Health Care Providers & Services (2.8%) Anthem, Inc. (a) 1,200 98,964 Caremark Rx, Inc. (a) 3,100 94,550 CIGNA Corp. 8,500 527,085 Humana, Inc. (a) 6,200 112,282 IMS Health, Inc. 21,300 516,312 Medco Health Solutions, Inc. (a) 16,710 506,313 UnitedHealth Group, Inc. 13,700 861,730 --------------- 2,717,236 --------------- Pharmaceuticals (8.9%) Abbott Laboratories 20,900 822,415 Andrx Corp. (a) 3,600 93,384 Bristol-Myers Squibb Co. 38,700 886,230 Eli Lilly & Co. 4,200 267,624 Johnson & Johnson 36,700 2,028,409 King Pharmaceuticals, Inc. (a) 25,400 286,766 Merck & Co., Inc. 31,400 1,423,990 Pfizer, Inc. 74,100 2,368,236
See Accompanying Notes to Financial Statements. 58
SHARES VALUE --------------- --------------- Common Stocks (continued) Pharmaceuticals (continued) Watson Pharmaceuticals, Inc. (a) 7,500 $ 189,075 Wyeth 10,700 378,780 --------------- 8,744,909 --------------- Industrials (11.5%) Aerospace & Defense (2.3%) Boeing Co. 17,800 903,350 General Dynamics Corp. 3,400 335,988 Raytheon Co. 2,800 93,940 United Technologies Corp. 10,300 963,050 --------------- 2,296,328 --------------- Air Freight & Logistics (1.4%) FedEx Corp. 1,400 114,632 United Parcel Service, Inc., Class B 17,200 1,237,712 --------------- 1,352,344 --------------- Building Products (0.1%) Masco Corp. 3,500 105,840 --------------- Commercial Services & Supplies (0.7%) Cendant Corp. 23,700 542,256 Equifax, Inc. 5,900 142,308 --------------- 684,564 --------------- Industrial Conglomerates (5.6%) 3M Co. 12,900 1,062,444 General Electric Co. 94,300 3,135,475 Textron, Inc. 4,100 251,330 Tyco International Ltd. 34,100 1,057,100 --------------- 5,506,349 --------------- Machinery (0.8%) Eaton Corp. 7,100 458,944 Illinois Tool Works, Inc. 1,100 99,572 Parker Hannifin Corp. 3,300 189,354 --------------- 747,870 --------------- Road & Rail (0.6%) Burlington Northern Santa Fe Corp. 3,100 109,988 Union Pacific Corp. 9,000 507,060 --------------- 617,048 --------------- Information Technology (16.3%) Communications Equipment (2.2%) Avaya, Inc. (a) 11,000 161,150 Cisco Systems, Inc. (a) 46,200 963,732 Motorola, Inc. 9,200 146,556 Polycom, Inc. (a) 5,400 104,112 QUALCOMM, Inc. 11,800 815,144 --------------- 2,190,694 ---------------
See Accompanying Notes to Financial Statements. 59
SHARES VALUE --------------- --------------- Common Stocks (continued) Computers & Peripherals (4.4%) Apple Computer, Inc. (a) 3,600 $ 116,424 Dell, Inc. (a) 9,700 344,059 EMC Corp. (a) 13,900 152,483 Hewlett-Packard Co. 43,400 874,510 International Business Machines Corp. 21,300 1,854,591 Lexmark International, Inc., Class A (a) 6,400 566,400 Storage Technology Corp. (a) 15,400 384,230 --------------- 4,292,697 --------------- Electronic Equipment & Instruments (0.3%) Agilent Technologies, Inc. (a) 3,800 90,478 Sanmina-SCI Corp. (a) 13,500 99,090 Symbol Technologies, Inc. 7,400 96,866 --------------- 286,434 --------------- Internet Software & Services (0.4%) VeriSign, Inc. (a) 11,100 194,361 Yahoo!, Inc. (a) 6,000 184,800 --------------- 379,161 --------------- IT Services (1.4%) Affiliated Computer Services, Inc., Class A (a) 1,900 98,610 Automatic Data Processing, Inc. 11,100 465,978 Computer Sciences Corp. (a) 12,600 595,350 Convergys Corp. (a) 16,100 213,164 --------------- 1,373,102 --------------- Office Electronics (0.1%) Xerox Corp. (a) 7,500 103,950 --------------- Semiconductors & Semiconductor Equipment (3.6%) Altera Corp. (a) 5,000 104,100 Intel Corp. 72,100 1,757,798 Linear Technology Corp. 15,700 613,870 Maxim Integrated Products, Inc. 5,400 259,740 Texas Instruments, Inc. 33,000 703,890 Xilinx, Inc. 3,300 97,119 --------------- 3,536,517 --------------- Software (3.9%) Adobe Systems, Inc. 8,500 358,530 Microsoft Corp. 107,900 3,070,834 Oracle Corp. (a) 29,300 307,943 VERITAS Software Corp. (a) 6,000 114,360 --------------- 3,851,667 --------------- Materials (2.6%) Chemicals (0.5%) Dow Chemical Co. 2,500 99,725 Monsanto Co. 11,600 420,616 --------------- 520,341 ---------------
See Accompanying Notes to Financial Statements. 60
SHARES VALUE --------------- --------------- Common Stocks (continued) Construction Materials (0.1%) Vulcan Materials Co. 2,200 $ 104,764 --------------- Containers & Packaging (0.5%) Temple-Inland, Inc. 7,700 525,525 --------------- Metals & Mining (0.9%) CONSOL Energy, Inc. 6,400 229,376 Peabody Energy Corp. 1,700 95,506 Phelps Dodge Corp. (a) 6,400 498,816 --------------- 823,698 --------------- Paper & Forest Products (0.6%) Louisiana-Pacific Corp. 4,200 99,456 Weyerhaeuser Co. 8,200 508,400 --------------- 607,856 --------------- Telecommunication Services (4.0%) Diversified Telecommunication Services (3.5%) ALLTEL Corp. 4,300 223,600 BellSouth Corp. 36,000 975,240 CenturyTel, Inc. 7,100 220,029 SBC Communications, Inc. 50,800 1,287,272 Verizon Communications, Inc. 18,100 697,574 --------------- 3,403,715 --------------- Wireless Telecommunication Services (0.5%) Nextel Communications, Inc., Class A (a) 21,100 480,236 --------------- Utilities (2.4%) Electric Utilities (2.2%) American Electric Power Co., Inc. 15,700 488,427 Edison International 3,800 101,840 Exelon Corp. 9,300 324,570 Southern Co. 6,100 178,608 TECO Energy, Inc. 35,000 451,500 TXU Corp. 15,000 594,900 --------------- 2,139,845 --------------- Multi-Utilities & Unregulated Power (0.2%) Duke Energy Corp. 5,100 109,650 Sempra Energy 3,900 139,425 --------------- 249,075 --------------- Total Common Stocks (Cost of $93,630,301) 96,369,688 --------------- Investment Management Company (1.4%) SPDR Trust Series 1 (Cost of $1,392,816) 12,400 1,374,168 ---------------
See Accompanying Notes to Financial Statements. 61
PAR VALUE --------------- --------------- Short-Term Obligation (0.4%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.240%, collateralized by a U.S. Treasury Bond maturing 11/15/27, market value of $440,919 (repurchase proceeds $431,045) (Cost of $431,000) $ 431,000 $ 431,000 --------------- Total Investments (99.9%) (Cost of $95,454,117) (b) 98,174,856 Other Assets & Liabilities, Net (0.1%) 72,427 --------------- Net Assets (100.0%) $ 98,247,283 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $95,747,601.
ACRONYM NAME ------------------ ---------------------------------- REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements. 62 CMG LARGE CAP GROWTH FUND A Portfolio of CMG Funds Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (97.9%) Consumer Discretionary (13.8%) Hotels, Restaurants & Leisure (1.8%) Carnival Corp. 5,200 $ 242,372 Marriot International, Inc., Class A 9,600 468,480 --------------- 710,852 --------------- Internet & Catalog Retail (1.2%) eBay, Inc. (a) 6,200 485,646 --------------- Media (2.8%) Omnicom Group, Inc. 5,200 374,504 Viacom, Inc., Class B 7,200 241,848 XM Satellite Radio Holdings, Inc., Class A (a) 20,500 540,995 --------------- 1,157,347 --------------- Specialty Retail (7.2%) Bed Bath & Beyond, Inc. (a) 10,900 385,751 Best Buy Co., Inc. 10,700 515,312 Chico's FAS, Inc. (a) 9,500 397,765 Home Depot, Inc. 9,800 330,456 Lowe's Companies, Inc. 13,970 680,618 Staples, Inc. 21,700 626,696 --------------- 2,936,598 --------------- Textiles, Apparel & Luxury Goods (0.8%) Coach, Inc. (a) 7,500 320,925 --------------- Consumer Staples (12.2%) Beverages (2.8%) Coca-Cola Co. 9,800 429,828 PepsiCo, Inc. 14,000 700,000 --------------- 1,129,828 --------------- Food & Staples Retailing (2.4%) Costco Wholesale Corp. 14,400 585,505 Sysco Corp. 11,300 389,285 --------------- 974,790 --------------- Food Products (1.9%) Bunge Ltd. 8,000 321,040 Hershey Foods Corp. 9,200 445,648 --------------- 766,688 --------------- Household Products (1.3%) Procter & Gamble Co. 10,500 547,575 --------------- Personal Products (2.8%) Alberto-Culver Co. 13,850 645,687 Avon Products, Inc. 11,500 494,615 --------------- 1,140,302 --------------- Tobacco (1.0%) Altria Group, Inc. 8,400 399,840 ---------------
See Accompanying Notes to Financial Statements. 63
SHARES VALUE --------------- --------------- Common Stocks (continued) Energy (0.8%) Energy Equipment & Services (0.3%) Smith International, Inc. (a) 2,100 $ 122,388 --------------- Oil & Gas (0.5%) EOG Resources, Inc. 3,400 216,070 --------------- Financials (6.2%) Consumer Finance (2.1%) American Express Co. 10,500 527,625 MBNA Corp. 13,200 325,908 --------------- 853,533 --------------- Diversified Financial Services (2.1%) Citigroup, Inc. 8,600 379,174 Merrill Lynch & Co., Inc. 9,700 482,284 --------------- 861,458 --------------- Insurance (2.0%) American International Group, Inc. 5,800 409,770 Chubb Corp. 3,100 213,218 Progressive Corp. 2,600 199,212 --------------- 822,200 --------------- Health Care (20.6%) Biotechnology (1.7%) Amgen, Inc. (a) 5,800 329,904 Biogen Idec, Inc. (a) 3,300 198,000 Genentech, Inc. (a) 3,800 184,984 --------------- 712,888 --------------- Health Care Equipment & Supplies (9.1%) Alcon, Inc. 9,700 743,020 Boston Scientific Corp. (a) 10,600 405,556 Kinetic Concepts, Inc. (a) 4,100 184,172 St. Jude Medical, Inc. (a) 7,700 524,601 Thermo Electron Corp. (a) 13,800 354,936 Varian Medical Systems, Inc. (a) 9,800 676,298 Zimmer Holdings, Inc. (a) 10,400 793,624 --------------- 3,682,207 --------------- Health Care Providers & Services (2.6%) Anthem, Inc. (a) 4,700 387,609 Caremark Rx, Inc. (a) 21,800 664,900 --------------- 1,052,509 --------------- Pharmaceuticals (7.2%) Eli Lilly & Co. 3,200 203,904 Johnson & Johnson 13,000 718,510 Pfizer, Inc. 36,100 1,153,756 Teva Pharmaceutical Industries Ltd., ADR 28,400 840,640 --------------- 2,916,810 ---------------
See Accompanying Notes to Financial Statements. 64
SHARES VALUE --------------- --------------- Common Stocks (continued) Industrials (10.7%) Commercial Services & Supplies (1.2%) Cendant Corp. 21,200 $ 485,056 --------------- Industrial Conglomerates (6.7%) 3M Co. 7,400 609,464 General Electric Co. 27,500 914,375 Tyco International Ltd. 38,120 1,181,720 --------------- 2,705,559 --------------- Machinery (2.8%) Ingersoll-Rand Co., Class A 6,500 446,485 ITT Industries, Inc. 8,700 695,565 --------------- 1,142,050 --------------- Information Technology (28.3%) Communications Equipment (5.8%) Avaya, Inc. (a) 14,800 216,820 Cisco Systems, Inc. (a) 53,000 1,105,580 Juniper Networks, Inc. (a) 9,500 218,120 Motorola, Inc. 7,700 122,661 QUALCOMM, Inc. 10,100 697,708 --------------- 2,360,889 --------------- Computers & Peripherals (4.0%) Dell, Inc. (a) 17,900 634,913 EMC Corp. (a) 15,900 174,423 International Business Machines Corp. 6,500 565,955 Lexmark International, Inc., Class A (a) 2,900 256,650 --------------- 1,631,941 --------------- Electronic Equipment & Instruments (0.8%) Broadcom Corp., Class A (a) 4,300 152,048 Flextronics International Ltd. (a) 15,300 192,321 --------------- 344,369 --------------- Internet Software & Services (1.1%) Yahoo!, Inc. (a) 13,900 428,120 --------------- IT Services (1.7%) Cognizant Technology Solutions Corp., Class A (a) 15,400 424,270 Paychex, Inc. 8,200 251,822 --------------- 676,092 --------------- Semiconductors & Semiconductor Equipment (6.7%) Intel Corp. 51,300 1,250,694 Linear Technology Corp. 5,600 218,960 Marvell Technology Group Ltd. (a) 6,800 157,896 Microchip Technology, Inc. 8,900 257,833 Samsung Electronics Co., Ltd., GDR (b) 2,829 506,391 Texas Instruments, Inc. 7,600 162,108 Xilinx, Inc. 6,500 191,295 --------------- 2,745,177 ---------------
See Accompanying Notes to Financial Statements. 65
SHARES VALUE --------------- --------------- Common Stocks (continued) Software (8.2%) Amdocs Ltd. (a) 13,100 $ 284,270 Mercury Interactive Corp. (a) 2,900 106,024 Microsoft Corp. 69,600 1,980,816 Oracle Corp. (a) 27,600 290,076 Red Hat, Inc. (a) 5,100 87,312 SAP AG, ADR 10,600 424,106 Symantec Corp. (a) 3,100 144,956 --------------- 3,317,560 --------------- Materials (4.5%) Chemicals (2.2%) Praxair, Inc. 22,700 895,515 --------------- Metals & Mining (2.3%) Alcoa, Inc. 15,800 506,074 Phelps Dodge Corp. (a) 5,480 427,111 --------------- 933,185 --------------- Telecommunication Services (0.8%) Wireless Telecommunication Services (0.8%) Crown Castle International Corp. (a) 8,300 117,196 Mobile Telesystems, ADR 1,000 117,050 Vimpel Communications, ADR (a) 1,200 104,940 --------------- 339,186 --------------- Total Common Stocks (Cost of $39,038,450) 39,815,153 --------------- Preferred Stock (1.0%) Consumer Discretionary (1.0%) Media (1.0%) News Corp., Ltd., ADR (Cost of $405,904) 12,300 390,771 --------------- PAR --------------- Short-Term Obligation (1.9%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.230%, collateralized by a U.S. Treasury Note maturing 02/15/12, market value of $811,413 (repurchase proceeds $793,081) (Cost of $793,000) $ 793,000 793,000 --------------- Total Investments (100.8%) (Cost of $40,237,354) (c) 40,998,924 Other Assets & Liabilities, Net (-0.8%) (315,347) --------------- Net Assets (100.0%) $ 40,683,577 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2004, the value of this security represents 1.2% of net assets. (c) Cost for federal income tax purposes is $40,504,495.
ACRONYM NAME ------------- ------------------------------- ADR American Depositary Receipt GDR Global Depositary Receipt
See Accompanying Notes to Financial Statements. 66 CMG LARGE CAP VALUE FUND A Portfolio of CMG Funds Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (94.7%) Consumer Discretionary (7.0%) Automobiles (0.7%) General Motors Corp. 8,539 $ 368,372 --------------- Hotels, Restaurants & Leisure (1.7%) Harrah's Entertainment, Inc. 2,469 114,784 Wendy's International, Inc. 19,482 696,871 --------------- 811,655 --------------- Media (3.7%) Clear Channel Communications, Inc. 9,300 332,010 Gannett Co., Inc. 2,861 237,863 McGraw-Hill Companies, Inc. 6,167 462,895 Time Warner, Inc. (a) 32,167 535,581 Viacom, Inc., Class A 5,611 191,055 --------------- 1,759,404 --------------- Specialty Retail (0.9%) Office Depot, Inc. (a) 26,684 437,618 --------------- Consumer Staples (9.2%) Beverages (1.7%) PepsiCo, Inc. 16,297 814,850 --------------- Food & Staples Retailing (1.0%) Costco Wholesale Corp. 11,623 472,591 --------------- Food Products (2.0%) ConAgra Foods, Inc. 19,720 512,720 Kraft Foods, Inc., Class A 15,589 476,244 --------------- 988,964 --------------- Household Products (3.6%) Clorox Co. 10,540 524,576 Kimberly-Clark Corp. 9,524 610,203 Procter & Gamble Co. 11,090 578,344 --------------- 1,713,123 --------------- Tobacco (0.9%) Altria Group, Inc. 9,198 437,825 --------------- Energy (13.4%) Energy Equipment & Services (1.9%) Halliburton Co. 28,099 892,143 --------------- Oil & Gas (11.5%) BP PLC, ADR 21,301 1,200,524 ConocoPhillips 16,101 1,268,276 Exxon Mobil Corp. 34,599 1,601,934
See Accompanying Notes to Financial Statements. 67
SHARES VALUE --------------- --------------- Common Stocks (continued) Oil & Gas (continued) Marathon Oil Corp. 23,812 $ 896,998 Royal Dutch Petroleum Co., N.Y. Registered Shares 10,691 537,757 --------------- 5,505,489 --------------- Financials (29.0%) Capital Markets (3.8%) Bank of New York Co., Inc. 21,909 629,445 Goldman Sachs Group, Inc. 4,221 372,250 Morgan Stanley 10,686 527,140 State Street Corp. 6,767 289,695 --------------- 1,818,530 --------------- Commercial Banks (6.2%) National City Corp. 10,201 372,337 U.S. Bancorp 37,018 1,047,609 Wachovia Corp. 10,546 467,293 Wells Fargo & Co. 19,118 1,097,564 --------------- 2,984,803 --------------- Consumer Finance (1.0%) MBNA Corp. 18,909 466,863 --------------- Diversified Financial Services (6.7%) Citigroup, Inc. 42,615 1,878,895 JPMorgan Chase & Co. 36,101 1,347,650 --------------- 3,226,545 --------------- Insurance (8.1%) AFLAC, Inc. 6,792 269,235 Ambac Financial Group, Inc. 6,745 479,637 American International Group, Inc. 14,588 1,030,642 Lincoln National Corp. 9,190 401,603 Marsh & McLennan Companies, Inc. 5,339 236,945 St. Paul Travelers Companies, Inc. 12,794 474,274 Willis Group Holdings Ltd. 13,541 471,227 XL Capital Ltd., Class A 6,945 490,873 --------------- 3,854,436 --------------- Real Estate (1.6%) Archstone-Smith Trust, REIT 8,554 251,744 Kimco Realty Corp., REIT 5,540 266,474 Vornado Realty Trust, REIT 4,496 261,173 --------------- 779,391 --------------- Thrifts & Mortgage Finance (1.6%) Countrywide Financial Corp. 4,371 315,149 Freddie Mac 6,796 437,051 --------------- 752,200 --------------- Health Care (4.4%) Health Care Providers & Services (1.9%) Aetna, Inc. 10,438 895,580 ---------------
See Accompanying Notes to Financial Statements. 68
SHARES VALUE --------------- --------------- Common Stocks (continued) Pharmaceuticals (2.5%) Bristol-Myers Squibb Co. 8,421 $ 192,841 Johnson & Johnson 4,485 247,886 Merck & Co., Inc. 5,294 240,083 Pfizer, Inc. 16,291 520,660 --------------- 1,201,470 --------------- Industrials (10.8%) Aerospace & Defense (3.0%) General Dynamics Corp. 5,773 570,488 Raytheon Co. 6,862 230,220 United Technologies Corp. 6,670 623,645 --------------- 1,424,353 --------------- Commercial Services & Supplies (1.4%) Waste Management, Inc. 23,937 673,587 --------------- Industrial Conglomerates (4.6%) General Electric Co. 29,299 974,192 Honeywell International, Inc. 13,320 500,965 Textron, Inc. 11,749 720,214 --------------- 2,195,371 --------------- Machinery (1.8%) Deere & Co. 8,143 511,462 Ingersoll-Rand Co., Class A 5,479 376,352 --------------- 887,814 --------------- Information Technology (6.4%) Communications Equipment (0.8%) Nokia Corp., ADR 33,962 394,638 --------------- Computers & Peripherals (1.9%) International Business Machines Corp. 5,241 456,334 Lexmark International, Inc., Class A (a) 4,893 433,030 --------------- 889,364 --------------- IT Services (1.1%) Accenture Ltd., Class A (a) 22,160 545,801 --------------- Office Electronics (1.1%) Xerox Corp. (a) 38,365 531,739 --------------- Software (1.5%) Electronic Arts, Inc. (a) 9,329 467,663 Microsoft Corp. 7,799 221,960 --------------- 689,623 --------------- Materials (3.5%) Chemicals (1.5%) Air Products & Chemicals, Inc. 13,728 710,424 ---------------
See Accompanying Notes to Financial Statements. 69
SHARES VALUE --------------- --------------- Common Stocks (continued) Paper & Forest Products (2.0%) MeadWestvaco Corp. 19,193 $ 573,103 Weyerhaeuser Co. 6,003 372,186 --------------- 945,289 --------------- Telecommunication Services (5.0%) Diversified Telecommunication Services (5.0%) BellSouth Corp. 29,685 804,167 SBC Communications, Inc. 31,193 790,431 Verizon Communications, Inc. 21,257 819,245 --------------- 2,413,843 --------------- Utilities (6.0%) Electric Utilities (6.0%) American Electric Power Co., Inc. 15,492 481,956 Consolidated Edison, Inc. 17,568 719,761 Entergy Corp. 6,703 385,422 Southern Co. 12,608 369,162 TXU Corp. 22,650 898,299 --------------- 2,854,600 --------------- Total Common Stocks (Cost of $42,697,379) 45,338,298 --------------- Investment Management Company (3.5%) iShares Russell 1000 Value Index (Cost of $1,651,233) 28,029 1,662,120 --------------- PAR --------------- Short-Term Obligation (1.6%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.240%, collateralized by a U.S. Treasury Bond maturing 08/15/26, market value of $780,800 (repurchase proceeds $761,079) (Cost of $761,000) $ 761,000 761,000 --------------- Total Investments (99.8%) (Cost of $45,109,612) (b) 47,761,418 Other Assets & Liabilities, Net (0.2%) 93,300 --------------- Net Assets (100.0%) $ 47,854,718 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $45,204,819.
ACRONYM NAME ------------- --------------------------------- ADR American Depositary Receipt REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements. 70 CMG MID CAP GROWTH FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (95.0%) Consumer Discretionary (14.4%) Auto Components (0.5%) Autoliv, Inc. 2,410 $ 101,437 --------------- Hotels, Restaurants & Leisure (5.3%) Applebee's International, Inc. 4,000 106,560 Cheesecake Factory, Inc. (a) 2,500 104,425 Four Seasons Hotels, Inc. 970 58,869 Harrah's Entertainment, Inc. 2,850 132,497 Hilton Hotels Corp. 7,270 129,624 International Game Technology 2,670 86,348 Marriott International, Inc., Class A 2,000 97,600 Yum! Brands, Inc. 7,800 299,442 --------------- 1,015,365 --------------- Household Durables (1.0%) Centex Corp. 2,200 93,324 D.R. Horton, Inc. 3,800 104,994 --------------- 198,318 --------------- Leisure Equipment & Products (0.5%) Brunswick Corp. 2,480 96,794 --------------- Media (3.0%) Lamar Advertising Co., Class A (a) 2,400 96,504 Univision Communications, Inc., Class A (a) 9,370 271,449 XM Satellite Radio Holdings, Inc., Class A (a) 7,600 200,564 --------------- 568,517 --------------- Specialty Retail (3.3%) Bed Bath & Beyond, Inc. (a) 2,195 77,681 Chico's FAS, Inc. (a) 1,400 58,618 PETCO Animal Supplies, Inc. (a) 3,200 95,584 PETsMART, Inc. 3,100 96,131 Staples, Inc. 8,140 235,083 Tiffany & Co. 2,200 78,650 --------------- 641,747 --------------- Textiles, Apparel & Luxury Goods (0.8%) Coach, Inc. (a) 3,400 145,486 --------------- Consumer Staples (2.5%) Food & Staples Retailing (0.5%) Whole Foods Market, Inc. 1,100 90,552 --------------- Food Products (1.5%) Dean Foods Co. (a) 5,070 187,489 Hershey Foods Corp. 2,100 101,724 --------------- 289,213 ---------------
See Accompanying Notes to Financial Statements. 71
SHARES VALUE --------------- --------------- Common Stocks (continued) Personal Products (0.5%) Alberto-Culver Co. 2,000 $ 93,240 --------------- Energy (10.1%) Energy Equipment & Services (7.4%) Baker Hughes, Inc. 8,800 354,640 BJ Services Co. (a) 4,635 230,174 Cooper Cameron Corp. (a) 1,900 97,071 Nabors Industries Ltd. (a) 1,820 84,630 National-Oilwell, Inc. (a) 9,890 330,821 Patterson-UTI Energy, Inc. 17,740 323,400 --------------- 1,420,736 --------------- Oil & Gas (2.7%) Apache Corp. 2,660 123,770 EOG Resources, Inc. 1,660 105,493 Murphy Oil Corp. 1,030 79,660 XTO Energy, Inc. 7,486 223,831 --------------- 532,754 --------------- Financials (4.7%) Capital Markets (0.6%) E*Trade Financial Corp. (a) 9,800 108,486 --------------- Commercial Banks (2.3%) North Fork Bancorporation, Inc. 2,500 97,625 TCF Financial Corp. 2,600 157,040 UCBH Holdings, Inc. 2,500 97,725 Zions Bancorporation 1,600 96,800 --------------- 449,190 --------------- Insurance (1.0%) Ambac Financial Group, Inc. 2,685 190,930 --------------- Real Estate (0.8%) St. Joe Company 3,600 154,872 --------------- Health Care (20.1%) Biotechnology (3.0%) Amylin Pharmaceuticals, Inc. (a) 6,210 127,926 Gen-Probe, Inc. (a) 3,000 112,260 Genzyme Corp. (a) 3,300 169,224 ImClone Systems, Inc. (a) 1,200 70,704 Martek Biosciences Corp. (a) 1,900 89,908 --------------- 570,022 --------------- Health Care Equipment & Supplies (6.3%) Beckman Coulter, Inc. 2,300 126,891 Biomet, Inc. 4,200 184,758 Boston Scientific Corp. (a) 1,950 74,607
See Accompanying Notes to Financial Statements. 72
SHARES VALUE --------------- --------------- Common Stocks (continued) Health Care Equipment & Supplies (continued) Fisher Scientific International, Inc. (a) 4,640 $ 270,048 Kinetic Concepts, Inc. (a) 5,010 225,049 Thermo Electron Corp. (a) 6,850 176,182 Varian Medical Systems, Inc. (a) 2,210 152,512 --------------- 1,210,047 --------------- Health Care Providers & Services (5.0%) Accredo Health, Inc. (a) 5,400 174,960 Anthem, Inc. (a) 1,200 98,964 Community Health Systems, Inc. (a) 3,535 86,996 DaVita, Inc. (a) 9,868 299,676 McKesson Corp. 7,230 232,589 UnitedHealth Group, Inc. 1,271 79,971 --------------- 973,156 --------------- Pharmaceuticals (5.8%) Barr Pharmaceuticals, Inc. (a) 2,715 93,260 Elan Corp. PLC, ADR (a) 7,770 159,674 Endo Pharmaceuticals Holdings, Inc. (a) 7,580 145,536 IVAX Corp. (a) 4,310 102,794 Medicis Pharmaceutical Corp., Class A 10,000 357,700 Nektar Therapeutics (a) 7,100 124,534 Teva Pharmaceutical Industries Ltd., ADR 4,740 140,304 --------------- 1,123,802 --------------- Industrials (11.5%) Aerospace & Defense (1.0%) L-3 Communications Holdings, Inc. 1,670 102,120 United Defense Industries, Inc. (a) 2,800 97,020 --------------- 199,140 --------------- Air Freight & Logistics (1.0%) C.H. Robinson Worldwide, Inc. 2,200 96,206 Expeditors International of Washington, Inc. 2,000 92,820 --------------- 189,026 --------------- Airlines (0.8%) JetBlue Airways Corp. (a) 6,400 152,384 --------------- Building Products (0.5%) Masco Corp. 3,150 95,256 --------------- Commercial Services & Supplies (7.5%) Avery Dennison Corp. 1,800 109,026 Career Education Corp. (a) 2,000 67,620 ChoicePoint, Inc. (a) 5,935 249,270 Cintas Corp. 2,200 92,312 Corporate Executive Board Co. 4,255 241,259 Education Management Corp. (a) 4,500 124,920 Iron Mountain, Inc. (a) 6,100 196,847
See Accompanying Notes to Financial Statements. 73
SHARES VALUE --------------- --------------- Common Stocks (continued) Commercial Services & Supplies (continued) Manpower, Inc. 5,940 $ 258,687 Robert Half International, Inc. 3,730 103,769 --------------- 1,443,710 --------------- Construction & Engineering (0.7%) Jacobs Engineering Group, Inc. (a) 3,640 145,527 --------------- Information Technology (24.8%) Communications Equipment (3.1%) Avaya, Inc. (a) 6,880 100,792 Comverse Technology, Inc. (a) 11,830 201,819 Juniper Networks, Inc. (a) 8,340 191,486 Polycom, Inc. (a) 5,850 112,788 --------------- 606,885 --------------- Computers & Peripherals (0.4%) Lexmark International, Inc., Class A (a) 800 70,800 --------------- Electronic Equipment & Instruments (3.0%) Agilent Technologies, Inc. (a) 3,820 90,954 CDW Corp. 2,955 190,007 National Instruments Corp. 3,600 104,580 Solectron Corp. (a) 17,400 95,700 Vishay Intertechnology, Inc. (a) 6,110 94,705 --------------- 575,946 --------------- Internet Software & Services (2.3%) Ask Jeeves, Inc. (a) 5,100 148,308 Check Point Software Technologies Ltd. (a) 8,000 159,120 SINA Corp. (a) 5,000 141,750 --------------- 449,178 --------------- IT Services (2.1%) Cognizant Technology Solutions Corp., Class A (a) 8,000 220,400 Fiserv, Inc. (a) 3,300 113,058 SunGard Data Systems, Inc. (a) 3,300 76,923 --------------- 410,381 --------------- Office Electronics (0.9%) Zebra Technologies Corp., Class A (a) 2,100 173,523 --------------- Semiconductors & Semiconductor Equipment (8.0%) Advanced Micro Devices (a) 9,000 112,410 Altera Corp. (a) 5,100 106,182 Linear Technology Corp. 6,800 265,880 Marvell Technology Group Ltd. (a) 4,000 92,880 Microchip Technology, Inc. 11,745 340,253 National Semiconductor Corp. (a) 6,800 116,620 NVIDIA Corp. (a) 8,600 132,440
See Accompanying Notes to Financial Statements. 74
SHARES VALUE --------------- --------------- Common Stocks (continued) Semiconductors & Semiconductor Equipment (continued) PMC-Sierra, Inc. (a) 14,910 $ 177,131 Silicon Laboratories, Inc. (a) 5,290 186,684 United Microelectronics Corp., ADR (a) 4,067 15,046 --------------- 1,545,526 --------------- Software (5.0%) Amdocs Ltd. (a) 4,120 89,404 BMC Software, Inc. (a) 8,845 138,690 Citrix Systems, Inc. (a) 7,900 139,198 Hyperion Solutions Corp. (a) 4,760 195,255 Mercury Interactive Corp. (a) 5,295 193,585 Novell, Inc. (a) 14,200 97,128 VERITAS Software Corp. (a) 5,625 107,213 --------------- 960,473 --------------- Materials (3.8%) Chemicals (1.2%) Potash Corp. of Saskatchewan, Inc. 2,420 233,990 --------------- Metals & Mining (2.6%) Freeport-McMoRan Copper & Gold, Inc., Class B 2,800 97,580 Inco Ltd. (a) 2,800 93,436 Peabody Energy Corp. 3,830 215,169 Phelps Dodge Corp. (a) 1,200 93,528 --------------- 499,713 --------------- Telecommunication Services (3.1%) Wireless Telecommunication Services (3.1%) Crown Castle International Corp. (a) 11,000 155,320 Millicom International Cellular SA (a) 6,700 113,029 Nextel Partners, Inc., Class A (a) 9,560 153,629 Western Wireless Corp., Class A (a) 6,400 168,896 --------------- 590,874 --------------- Total Common Stocks (Cost of $18,053,883) 18,316,996 ---------------
See Accompanying Notes to Financial Statements. 75
PAR VALUE --------------- --------------- Short-Term Obligation (5.9%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.230%, collateralized by a U.S. Treasury Note maturing 02/15/12, market value of $1,172,040 (repurchase proceeds $1,141,117) (Cost of $1,141,000) $ 1,141,000 $ 1,141,000 --------------- Total Investments (100.9%) (Cost of $19,194,883) (b) 19,457,996 Other Assets & Liabilities, Net (-0.9%) (174,482) --------------- Net Assets (100.0%) $ 19,283,514 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $19,341,766.
ACRONYM NAME ------------- ------------------------------- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 76 CMG MID CAP VALUE FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (96.9%) Consumer Discretionary (17.6%) Auto Components (3.9%) BorgWarner, Inc. 2,500 $ 117,975 Gentex Corp. 2,000 71,600 Johnson Controls, Inc. 4,300 242,735 Lear Corp. 4,800 264,624 Superior Industries International, Inc. 4,800 156,912 --------------- 853,846 --------------- Hotels, Restaurants & Leisure (3.1%) Brinker International, Inc. (a) 9,200 329,452 Darden Restaurants, Inc. 3,900 83,187 Harrah's Entertainment, Inc. 3,600 167,364 Six Flags, Inc. (a) 20,500 96,760 --------------- 676,763 --------------- Household Durables (0.7%) Newell Rubbermaid, Inc. 6,800 146,880 --------------- Leisure Equipment & Products (0.7%) Mattel, Inc. 8,650 151,548 --------------- Media (2.2%) Knight-Ridder, Inc. 2,900 190,791 Mediacom Communications Corp., Class A (a) 10,900 71,613 New York Times Co., Class A 5,400 224,640 --------------- 487,044 --------------- Multiline Retail (2.3%) Federated Department Stores, Inc. 10,700 512,744 --------------- Specialty Retail (4.2%) Boise Cascade Corp. 5,050 162,863 Borders Group, Inc. 9,900 226,413 Ross Stores, Inc. 7,400 171,310 TJX Companies, Inc. 15,700 368,479 --------------- 929,065 --------------- Textiles, Apparel & Luxury Goods (0.5%) Wolverine World Wide, Inc. 4,800 112,224 --------------- Consumer Staples (5.0%) Beverages (1.1%) Pepsi Bottling Group, Inc. 8,700 242,295 --------------- Food Products (3.4%) Dean Foods Co. (a) 16,100 595,378 Hormel Foods Corp. 5,400 160,272 --------------- 755,650 ---------------
See Accompanying Notes to Financial Statements. 77
SHARES VALUE --------------- --------------- Common Stocks (continued) Personal Products (0.5%) Avon Products, Inc. 2,600 $ 111,826 --------------- Energy (6.9%) Energy Equipment & Services (2.1%) BJ Services Co. (a) 2,850 141,531 Noble Corp. (a) 3,550 137,456 Transocean, Inc. (a) 3,900 110,760 Weatherford International Ltd. (a) 1,650 77,187 --------------- 466,934 --------------- Oil & Gas (4.8%) Amerada Hess Corp. 4,500 375,075 XTO Energy, Inc. 22,775 680,972 --------------- 1,056,047 --------------- Financials (22.5%) Capital Markets (2.5%) Bear Stearns Companies, Inc. 2,300 191,866 Janus Capital Group, Inc. 21,600 286,416 Lehman Brothers Holdings, Inc. 950 66,595 --------------- 544,877 --------------- Commercial Banks (5.9%) Banknorth Group, Inc. 8,700 277,617 Charter One Financial, Inc. 7,900 350,839 City National Corp. 4,650 299,925 Cullen/Frost Bankers, Inc. 2,750 118,305 North Fork Bancorporation, Inc. 6,500 253,825 --------------- 1,300,511 --------------- Insurance (5.1%) Ambac Financial Group, Inc. 4,750 337,772 Cincinnati Financial Corp. 3,412 136,070 Loews Corp. 3,400 192,542 Nationwide Financial Services, Inc., Class A 4,750 168,483 Old Republic International Corp. 3,100 72,199 St. Paul Travelers Companies, Inc. 3,200 118,624 Willis Group Holdings Ltd. 3,100 107,880 --------------- 1,133,570 --------------- Thrifts & Mortgage Finance (9.0%) Golden West Financial Corp. 5,600 598,696 GreenPoint Financial Corp. 5,200 211,276 PMI Group, Inc. 7,900 325,717 Radian Group, Inc. 5,900 271,518 Sovereign Bancorp, Inc. 15,300 333,081 Webster Financial Corp. 5,050 236,946 --------------- 1,977,234 ---------------
See Accompanying Notes to Financial Statements. 78
SHARES VALUE --------------- --------------- Common Stocks (continued) Health Care (4.2%) Health Care Equipment & Supplies (2.1%) Biomet, Inc. 3,600 $ 158,364 Millipore Corp. (a) 2,500 131,725 Varian, Inc. (a) 4,800 181,920 --------------- 472,009 --------------- Health Care Providers & Services (2.1%) Anthem, Inc. (a) 250 20,618 First Health Group Corp. (a) 8,300 116,366 HCA, Inc. 3,800 146,870 WellPoint Health Networks, Inc. (a) 1,650 166,815 --------------- 450,669 --------------- Industrials (13.6%) Aerospace & Defense (1.1%) Alliant Techsystems, Inc. (a) 3,050 192,028 Northrop Grumman Corp. 700 36,820 --------------- 228,848 --------------- Air Freight & Logistics (0.7%) CNF, Inc. 3,750 154,725 --------------- Airlines (0.4%) AMR Corp. (a) 9,600 80,928 --------------- Commercial Services & Supplies (3.6%) Brink's Co. 13,000 420,550 Cendant Corp. 7,200 164,736 Manpower, Inc. 4,800 209,040 --------------- 794,326 --------------- Electrical Equipment (1.2%) AMETEK, Inc. 5,600 172,704 Hubbell, Inc., Class B 2,200 99,440 --------------- 272,144 --------------- Industrial Conglomerates (2.2%) ALLETE, Inc. 5,300 146,916 Carlisle Companies, Inc. 5,400 342,846 --------------- 489,762 --------------- Machinery (4.4%) AGCO Corp. (a) 4,400 92,048 Dover Corp. 4,650 184,512 Ingersoll-Rand Co., Class A 3,300 226,677 Navistar International Corp. (a) 8,600 309,170 Parker Hannifin Corp. 2,650 152,057 --------------- 964,464 --------------- Information Technology (6.8%) Communications Equipment (0.9%) Andrew Corp. (a) 17,100 185,535 ---------------
See Accompanying Notes to Financial Statements. 79
SHARES VALUE --------------- --------------- Common Stocks (continued) Electronic Equipment & Instruments (3.5%) Amphenol Corp., Class A (a) 11,000 $ 345,730 Arrow Electronics, Inc. (a) 7,900 186,914 AVX Corp. 9,000 112,230 Littelfuse, Inc. (a) 700 27,160 Vishay Intertechnology, Inc. (a) 6,800 105,400 --------------- 777,434 --------------- IT Services (1.5%) Affiliated Computer Services, Inc., Class A (a) 4,400 228,360 DST Systems, Inc. (a) 2,350 107,066 --------------- 335,426 --------------- Software (0.9%) Reynolds & Reynolds Co., Class A 8,700 192,270 --------------- Materials (12.6%) Chemicals (8.4%) Air Products & Chemicals, Inc. 4,800 248,400 Eastman Chemical Co. 5,400 241,272 Engelhard Corp. 6,500 191,100 International Flavors & Fragrances, Inc. 9,900 361,746 Lubrizol Corp. 5,200 180,076 OM Group, Inc. (a) 4,000 128,080 PPG Industries, Inc. 2,750 162,113 Praxair, Inc. 8,600 339,270 --------------- 1,852,057 --------------- Containers & Packaging (2.4%) Crown Holdings, Inc. (a) 14,200 143,988 Packaging Corp. of America 9,500 221,920 Pactiv Corp. (a) 6,400 150,912 --------------- 516,820 --------------- Paper & Forest Products (1.8%) Georgia-Pacific Corp. 6,900 231,840 MeadWestvaco Corp. 5,500 164,230 --------------- 396,070 --------------- Telecommunication Services (1.7%) Wireless Telecommunication Services (1.7%) Telephone & Data Systems, Inc. 5,000 379,500 --------------- Utilities (6.0%) Electric Utilities (5.1%) Entergy Corp. 4,350 250,125 Exelon Corp. 9,200 321,080 PPL Corp. 4,250 196,988 Progress Energy, Inc. 6,400 269,696 Reliant Energy, Inc. (a) 8,200 81,016 --------------- 1,118,905 ---------------
See Accompanying Notes to Financial Statements. 80
SHARES VALUE --------------- --------------- Common Stocks (continued) Multi-Utilities & Unregulated Power (0.9%) Energy East Corp. 7,700 $ 187,572 --------------- Total Common Stocks (Cost of $19,688,482) 21,308,522 --------------- PAR --------------- Short-Term Obligation (3.1%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.240%, collateralized by a U.S. Treasury Bond maturing 08/15/26, market value of $707,600 (repurchase proceeds $693,072) (Cost of $693,000) $ 693,000 693,000 --------------- Total Investments (100.0%) (Cost of $20,381,482) (b) 22,001,522 Other Assets & Liabilities, Net (-0.0%) (7,323) --------------- Net Assets (100.0%) $ 21,994,199 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $20,398,677. See Accompanying Notes to Financial Statements. 81 CMG SMALL CAP GROWTH FUND A Portfolio of CMG Funds Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (96.8%) Consumer Discretionary (16.4%) Hotels, Restaurants & Leisure (3.1%) Alliance Gaming Corp. (a) 12,400 $ 176,452 Gaylord Entertainment Co. (a) 12,400 361,584 Pinnacle Entertainment, Inc. (a) 17,500 197,575 Scientific Games Corp., Class A (a) 20,900 372,229 --------------- 1,107,840 --------------- Media (5.7%) Arbitron, Inc. (a) 8,000 275,440 Cumulus Media, Inc., Class A (a) 20,700 303,876 Journal Communications, Inc., Class A 5,000 89,200 Lin TV Corp., Class A (a) 18,500 335,775 MDC Partners, Inc., Class A (a) 26,300 290,878 Radio One, Inc., Class D (a) 16,900 257,049 Sinclair Broadcast Group, Inc., Class A 32,600 323,066 TiVo, Inc. (a) 25,900 146,335 --------------- 2,021,619 --------------- Multiline Retail (0.5%) Fred's Inc. 10,800 194,940 --------------- Specialty Retail (7.1%) Bombay Co., Inc. (a) 37,800 223,398 Cost Plus, Inc. (a) 12,600 421,596 Design Within Reach, Inc. (a) 3,000 48,483 Jarden Corp. (a) 20,450 739,063 Pacific Sunwear of California, Inc. (a) 12,400 252,960 Party City Corp. (a) 13,600 187,952 PETCO Animal Supplies, Inc. (a) 9,200 274,804 Sharper Image Corp. (a) 14,000 373,800 --------------- 2,522,056 --------------- Consumer Staples (0.5%) Food & Staples Retailing (0.5%) Performance Food Group Co. (a) 6,600 163,548 --------------- Energy (3.4%) Energy Equipment & Services (2.0%) Key Energy Services, Inc. (a) 20,000 201,600 Maverick Tube Corp. (a) 7,600 219,184 Unit Corp. (a) 8,700 280,575 --------------- 701,359 --------------- Oil & Gas (1.4%) Edge Petroleum Corp. (a) 7,000 119,700 Energy Partners Ltd. (a) 2,600 40,664 Mission Resources Corp. (a) 24,100 132,791 Western Gas Resources, Inc. 6,700 225,723 --------------- 518,878 ---------------
See Accompanying Notes to Financial Statements. 82
SHARES VALUE --------------- --------------- Common Stocks (continued) Financials (11.1%) Capital Markets (1.6%) Investors Financial Services Corp. 3,957 $ 180,756 Jefferies Group, Inc. 12,600 394,884 --------------- 575,640 --------------- Commercial Banks (3.9%) Boston Private Financial Holdings, Inc. 11,500 266,915 East-West Bancorp, Inc. 15,000 505,800 Mercantile Bank Corp. 8,280 285,329 Prosperity Bancshares, Inc. 13,400 324,682 --------------- 1,382,726 --------------- Diversified Financial Services (3.7%) ACE Cash Express, Inc. (a) 8,500 196,520 Commercial Capital Bancorp, Inc. (a) 17,633 387,397 Greenhill & Co., Inc. (a) 10,800 220,860 MTC Technologies, Inc. (a) 12,400 310,000 National Financial Partners Corp. 6,400 215,552 --------------- 1,330,329 --------------- Insurance (1.9%) Infinity Property & Casualty Corp. 13,400 385,652 Philadelphia Consolidated Holding Co. (a) 5,700 311,619 --------------- 697,271 --------------- Health Care (22.3%) Biotechnology (5.6%) BioMarin Pharmaceuticals, Inc. (a) 29,300 167,596 Cell Therapeutics, Inc. (a) 31,300 170,585 Cytogen Corp. (a) 13,800 167,532 Exact Sciences Corp. (a) 24,000 115,920 ILEX Oncology, Inc. (a) 7,300 183,887 Isolagen, Inc. (a) 20,300 162,197 NeoPharm, Inc. (a) 27,721 174,642 Neurocrine Biosciences, Inc. (a) 6,800 316,676 Protein Design Labs, Inc. (a) 17,100 277,020 Telik, Inc. (a) 13,400 264,784 --------------- 2,000,839 --------------- Health Care Equipment & Supplies (7.5%) Bio-Rad Laboratories, Inc., Class A (a) 6,700 351,080 Cardiac Science, Inc. (a) 53,800 107,600 Conceptus (a) 19,900 194,025 Cytyc Corp. (a) 8,000 193,360 Integra LifeSciences Holdings Corp. (a) 9,600 303,312 LCA-Vision, Inc. (a) 11,500 300,035 Medical Action Industries, Inc. (a) 18,800 311,140 Noven Pharmaceuticals, Inc. (a) 16,600 335,486 Palomar Medical Technologies, Inc. (a) 5,400 80,136 SonoSite, Inc. (a) 12,700 289,306 SurModics, Inc. (a) 9,300 222,456 --------------- 2,687,936 ---------------
See Accompanying Notes to Financial Statements. 83
SHARES VALUE --------------- --------------- Common Stocks (continued) Health Care Providers & Services (2.5%) Advisory Board Co. (a) 9,500 $ 303,240 America Service Group, Inc. (a) 6,111 216,513 LifePoint Hospitals, Inc. (a) 7,800 260,598 U.S. Physical Therapy, Inc. (a) 8,600 113,004 --------------- 893,355 --------------- Pharmaceuticals (6.7%) Advancis Pharmaceutical Corp. (a) 20,800 168,064 Atrix Laboratories, Inc. (a) 8,800 283,448 Bone Care International, Inc. (a) 13,900 348,751 Caraco Pharmaceutical Laboratories Ltd. (a) 7,200 52,416 DepoMed, Inc. (a) 44,800 214,592 DOV Pharmaceutical, Inc. (a) 17,100 222,300 Nektar Therapeutics (a) 20,800 364,832 Renovis, Inc. (a) 17,600 135,696 Salix Pharmaceuticals Ltd. (a) 20,250 431,730 Taro Pharmaceuticals Industries Ltd. (a) 7,100 158,543 --------------- 2,380,372 --------------- Industrials (12.0%) Aerospace & Defense (1.1%) DRS Technologies, Inc. (a) 10,500 375,060 --------------- Air Freight & Logistics (1.6%) EGL, Inc. (a) 12,700 322,707 UTI Worldwide, Inc. 5,100 262,599 --------------- 585,306 --------------- Commercial Services & Supplies (3.3%) Corporate Executive Board Co. 7,200 408,240 Laureate Education, Inc. (a) 7,000 247,100 Navigant Consulting, Inc. (a) 13,300 278,635 NCO Group, Inc. (a) 10,100 252,197 --------------- 1,186,172 --------------- Construction & Engineering (0.8%) Chicago Bridge & Iron Co. NV, N.Y. Registered Shares 9,700 283,143 --------------- Electrical Equipment (0.6%) Plug Power, Inc. (a) 36,000 224,460 --------------- Machinery (1.5%) Bucyrus International, Inc., Class A (a) 4,000 96,000 CUNO, Inc. (a) 5,100 268,566 RAE Systems, Inc. (a) 32,800 164,000 --------------- 528,566 --------------- Road & Rail (2.6%) Genesee & Wyoming, Inc., Class A (a) 13,382 310,462 Heartland Express, Inc. 10,300 278,203
See Accompanying Notes to Financial Statements. 84
SHARES VALUE --------------- --------------- Common Stocks (continued) Road & Rail (continued) Sirva, Inc. (a) 14,500 $ 339,010 --------------- 927,675 --------------- Trading Companies & Distributors (0.5%) Aceto Corp. 11,700 191,763 --------------- Information Technology (29.3%) Communications Equipment (2.4%) F5 Networks, Inc. (a) 10,700 280,233 Finisar Corp. (a) 63,200 95,748 Inter-Tel, Inc. 11,021 239,046 Netopia, Inc. (a) 22,200 81,030 NMS Communications Corp. (a) 27,600 164,496 --------------- 860,553 --------------- Computers & Peripherals (2.2%) Applied Films Corp. (a) 11,200 208,880 Cray, Inc. (a) 49,900 159,181 PalmSource, Inc. (a) 15,900 322,134 Pinnacle Systems, Inc. (a) 28,300 111,785 --------------- 801,980 --------------- Electronic Equipment & Instruments (3.1%) Anixter International, Inc. 7,300 244,404 Global Imaging Systems, Inc. (a) 10,900 330,597 Itron, Inc. (a) 14,000 267,260 OSI Systems, Inc. (a) 13,800 257,094 --------------- 1,099,355 --------------- Internet Software & Services (4.1%) Corillian Corp. (a) 53,800 266,310 Digital River, Inc. (a) 9,400 264,140 Digitas, Inc. (a) 32,400 216,756 Equinix, Inc. (a) 6,700 217,750 Kanbay International, Inc. (a) 11,000 170,610 PEC Solutions, Inc. (a) 2,200 24,024 Retek, Inc. (a) 32,300 131,138 Telecommunication Systems, Inc., Class A (a) 30,600 165,240 --------------- 1,455,968 --------------- IT Services (0.7%) MAXIMUS, Inc. (a) 8,400 268,548 --------------- Semiconductors & Semiconductor Equipment (10.3%) Artisan Components, Inc. (a) 16,700 406,311 August Technology Corp. (a) 15,800 163,530 Brooks Automation, Inc. (a) 23,700 341,517 DSP Group, Inc. (a) 7,100 139,941
See Accompanying Notes to Financial Statements. 85
SHARES VALUE --------------- --------------- Common Stocks (continued) Semiconductors & Semiconductor Equipment (continued) Entegris, Inc. (a) 38,300 $ 340,870 FEI Co. (a) 13,800 277,518 Integrated Circuit Systems, Inc. (a) 6,400 153,088 IXYS Corp. (a) 35,400 258,774 Lattice Semiconductor Corp. (a) 19,300 94,570 Leadis Technology, Inc. (a) 17,800 195,800 Mykrolis Corp. (a) 18,100 181,000 Silicon Image, Inc. (a) 38,800 465,212 Silicon Storage Technology, Inc. (a) 34,600 229,744 Ultratech, Inc. (a) 18,800 234,248 Zoran Corp. (a) 10,400 183,976 --------------- 3,666,099 --------------- Software (6.5%) Activision, Inc. (a) 16,811 246,281 Captiva Software Corp. (a) 24,800 209,808 Epicor Software Corp. (a) 17,800 220,364 Magma Design Automation, Inc. (a) 19,000 337,250 Manhattan Associates, Inc. (a) 9,000 233,640 Micromuse, Inc. (a) 66,800 300,600 OpenTV Corp. (a) 78,200 216,614 ScanSoft, Inc. (a) 35,800 146,064 Take-Two Interactive Software, Inc. (a) 9,300 291,276 Verity, Inc. (a) 11,800 131,334 --------------- 2,333,231 --------------- Materials (1.8%) Chemicals (0.4%) Landec Corp. (a) 24,700 139,036 --------------- Metals & Mining (1.4%) AMCOL International Corp. 10,600 213,060 Steel Technologies, Inc. 12,200 281,942 --------------- 495,002 --------------- Total Common Stocks (Cost of $34,213,620) 34,600,625 ---------------
See Accompanying Notes to Financial Statements. 86
PAR VALUE --------------- --------------- Short-Term Obligation (3.7%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.240%, collateralized by a U.S. Treasury Bond maturing 08/15/26, market value of $1,342,575 (repurchase proceeds $1,315,136) (Cost of $1,315,000) $ 1,315,000 $ 1,315,000 --------------- Total Investments (100.5%) (Cost of $35,528,620) (b) 35,915,625 Other Assets & Liabilities, Net (-0.5%) (188,163) --------------- Net Assets (100.0%) $ 35,727,462 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $35,533,493. See Accompanying Notes to Financial Statements. 87 CMG SMALL CAP VALUE FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (99.7%) Consumer Discretionary (15.0%) Auto Components (1.2%) BorgWarner, Inc. 5,200 $ 245,388 Modine Manufacturing Co. 3,800 112,708 Standard Motor Products, Inc. 8,900 127,270 --------------- 485,366 --------------- Hotels, Restaurants & Leisure (4.0%) Bally Total Fitness Holding Corp. (a) 16,500 85,140 Bob Evans Farms, Inc. 4,961 132,062 Buca, Inc. (a) 20,900 108,471 Dave & Buster's, Inc. (a) 10,200 173,808 Landry's Restaurants, Inc. 8,500 256,955 Lone Star Steakhouse & Saloon, Inc. 11,600 281,184 Marcus Corp. 10,600 186,454 Prime Hospitality Corp. (a) 14,200 130,356 Scientific Games Corp., Class A (a) 15,600 277,836 --------------- 1,632,266 --------------- Household Durables (1.4%) American Greetings Corp., Class A (a) 6,200 144,584 CSS Industries, Inc. 5,300 168,328 Kimball International, Inc., Class B 11,700 160,992 Russ Berrie & Co., Inc. 3,700 70,448 --------------- 544,352 --------------- Leisure Equipment & Products (0.9%) Action Performance Companies, Inc. 13,100 141,480 JAKKS Pacific, Inc. (a) 11,200 224,784 Travis Boats & Motors, Inc. (a) 300 180 --------------- 366,444 --------------- Media (2.4%) 4Kids Entertainment, Inc. (a) 10,100 219,978 Alliance Atlantis Communications, Inc., Class B (a) 4,000 75,880 Catalina Marketing Corp. (a) 7,600 151,772 Journal Communications, Inc., Class A 6,700 119,528 Liberty Corp. 5,000 219,500 Media General, Inc., Class A 2,900 173,304 --------------- 959,962 --------------- Multiline Retail (0.3%) ShopKo Stores, Inc. (a) 7,600 118,180 --------------- Specialty Retail (2.6%) Building Materials Holding Corp. 5,200 104,130 GameStop Corp., Class A (a) 12,400 190,960 Goody's Family Clothing, Inc. 15,000 130,800 Monro Muffler Brake, Inc. (a) 11,420 252,496 Movie Gallery, Inc. 3,500 60,865 Pier 1 Imports, Inc. 8,400 150,612
See Accompanying Notes to Financial Statements. 88
SHARES VALUE --------------- --------------- Common Stocks (continued) Specialty Retail (continued) Rent-Way, Inc. (a) 12,100 $ 90,992 TBC Corp. (a) 3,100 74,183 --------------- 1,055,038 --------------- Textiles, Apparel & Luxury Goods (2.2%) Culp, Inc. (a) 1,400 10,920 Delta Apparel, Inc. 3,100 68,107 Hampshire Group Ltd. (a) 5,800 163,038 Kellwood Co. 7,600 305,140 Russell Corp. 8,400 148,596 Stride Rite Corp. 10,700 111,280 Tandy Brands Accessories, Inc. 5,200 70,824 --------------- 877,905 --------------- Consumer Staples (2.5%) Food & Staples Retailing (0.9%) BJ's Wholesale Club, Inc. (a) 4,700 109,557 Chronimed, Inc. (a) 12,600 98,910 John B. Sanfilippo & Son, Inc. (a) 2,500 66,375 Winn-Dixie Stores, Inc. 11,900 75,208 --------------- 350,050 --------------- Food Products (1.6%) Central Garden & Pet Co. (a) 2,400 68,112 Corn Products International, Inc. 8,400 362,208 M&F Worldwide Corp. (a) 8,900 116,234 Omega Protein Corp. (a) 12,100 109,142 --------------- 655,696 --------------- Energy (6.0%) Energy Equipment & Services (1.7%) Lufkin Industries, Inc. 6,700 220,095 Universal Compression Holdings, Inc. (a) 5,900 193,579 Willbros Group, Inc. (a) 18,200 267,722 --------------- 681,396 --------------- Oil & Gas (4.3%) Atlas America, Inc. (a) 2,100 42,168 Carrizo Oil & Gas, Inc. (a) 18,700 184,943 Cimarex Energy Co. (a) 3,200 104,096 Energy Partners Ltd. (a) 10,200 159,528 Harvest Natural Resources, Inc. (a) 15,100 208,078 Magnum Hunter Resources, Inc. (a) 16,700 179,024 Range Resources Corp. 10,500 175,875 Stone Energy Corp. (a) 5,800 262,392 Western Gas Resources, Inc. 8,900 299,841 Whiting Petroleum Corp. (a) 4,700 111,296 --------------- 1,727,241 ---------------
See Accompanying Notes to Financial Statements. 89
SHARES VALUE --------------- --------------- Common Stocks (continued) Financials (26.1%) Capital Markets (0.2%) LaBranche & Co., Inc. 9,900 $ 81,081 --------------- Commercial Banks (10.6%) BancFirst Corp. 1,000 59,450 BancorpSouth, Inc. 7,900 166,848 BancTrust Financial Group, Inc. 5,300 93,174 Bank of Granite Corp. 7,600 145,540 Bryn Mawr Bank Corp. 9,600 209,472 Capitol Bancorp Ltd. 8,200 211,970 Chemical Financial Corp. 7,400 255,596 Chittenden Corp. 8,700 295,539 Columbia Banking System, Inc. 5,500 119,735 Community Trust Bancorp, Inc. 4,660 140,592 First Citizens BancShares, Inc., Class A 1,200 142,800 First Financial Bankshares, Inc. 3,850 154,077 Greater Bay Bancorp 6,100 160,735 Hancock Holding Co. 3,600 108,108 MainSource Financial Group, Inc. 2,195 41,266 Merchants Bancshares, Inc. 6,100 161,644 Mid-State Bancshares 11,100 270,507 Northrim BanCorp, Inc. 5,700 114,855 Omega Financial Corp. 1,300 40,170 Riggs National Corp. 12,300 274,167 S.Y. Bancorp, Inc. 1,200 26,280 Sterling Bancshares, Inc. 17,400 226,896 TriCo Bancshares 15,400 277,662 UMB Financial Corp. 4,500 225,540 Whitney Holding Corp. 4,400 179,784 Wintrust Financial Corp. 3,300 174,999 --------------- 4,277,406 --------------- Consumer Finance (0.8%) Cash America International, Inc. 14,300 321,035 --------------- Diversified Financial Services (1.4%) Metris Companies, Inc. (a) 23,200 154,280 MFC Bancorp Ltd. (a) 18,800 319,600 QC Holdings, Inc. (a) 5,500 82,225 --------------- 556,105 --------------- Insurance (5.3%) AmerUs Group Co. 3,100 119,350 CNA Surety Corp. (a) 11,800 120,478 Commerce Group, Inc. 3,800 183,958 Delphi Financial Group, Inc., Class A 6,800 275,740 Harleysville Group, Inc. 9,200 173,880 Horace Mann Educators Corp. 9,400 157,544 Kansas City Life Insurance Co. 900 40,140
See Accompanying Notes to Financial Statements. 90
SHARES VALUE --------------- --------------- Common Stocks (continued) Insurance (continued) Navigators Group, Inc. (a) 3,700 $ 111,000 Phoenix Companies, Inc. 19,400 201,178 ProCentury Corp. (a) 12,700 124,333 Quanta Capital Holdings Ltd. (a) 15,600 156,780 RLI Corp. 5,700 209,760 UICI (a) 3,200 76,544 United National Group Ltd., Class A (a) 8,000 117,520 Universal American Financial Corp. (a) 7,900 85,715 --------------- 2,153,920 --------------- Real Estate (6.6%) Alexandria Real Estate Equities, REIT 3,900 234,351 American Financial Realty Trust, REIT 9,000 119,250 Boykin Lodging Co., REIT (a) 15,700 132,194 Brandywine Realty Trust, REIT 5,900 161,070 EastGroup Properties, Inc., REIT 7,000 227,010 Equity One, Inc., REIT 9,200 166,060 First Potomac Realty Trust, REIT 8,300 164,340 Getty Realty Corp., REIT 6,100 142,496 Gladstone Commercial Corp., REIT 7,200 117,720 Mid-America Apartment Communities, Inc., REIT 7,100 254,535 Nationwide Health Properties, Inc., REIT 11,900 227,290 PS Business Parks, Inc., REIT 8,200 329,640 Tanger Factory Outlet Centers, Inc., REIT 4,200 166,530 Universal Health Realty Income Trust, REIT 4,200 119,448 Urstadt Biddle Properties, Inc., Class A, REIT 9,000 122,040 --------------- 2,683,974 --------------- Thrifts & Mortage Finance (1.2%) Corus Bankshares, Inc. 7,100 285,065 ITLA Capital Corp. (a) 2,500 100,475 MASSBANK Corp. 2,500 85,625 --------------- 471,165 --------------- Health Care (5.0%) Health Care Equipment & Supplies (1.3%) Analogic Corp. 4,200 174,468 Ocular Sciences, Inc. (a) 5,800 255,954 Sola International, Inc. (a) 5,500 89,430 --------------- 519,852 --------------- Health Care Providers & Services (3.7%) Capital Senior Living Corp. (a) 4,200 18,900 Cross Country Healthcare, Inc. (a) 8,800 131,296 Genesis HealthCare Corp. (a) 4,800 128,880 Hooper Holmes, Inc. 16,700 77,321 Kindred Healthcare, Inc. (a) 10,400 252,200 Orthodontic Centers of America, Inc. (a) 18,000 121,680 PAREXEL International Corp. (a) 11,000 211,310 Pediatrix Medical Group, Inc. (a) 4,400 278,256
See Accompanying Notes to Financial Statements. 91
SHARES VALUE --------------- --------------- Common Stocks (continued) Health Care Providers & Services (continued) Province Healthcare Co. (a) 6,000 $ 87,180 Stewart Enterprises, Inc., Class A (a) 29,000 201,840 --------------- 1,508,863 --------------- Industrials (20.1%) Aerospace & Defense (2.0%) AAR Corp. (a) 13,135 136,604 Herley Industries, Inc. (a) 6,500 122,200 Kaman Corp., Class A 11,100 138,084 Ladish Co., Inc. (a) 14,000 125,440 Precision Castparts Corp. 5,400 304,182 --------------- 826,510 --------------- Air Freight & Logistics (1.0%) Hub Group, Inc., Class A (a) 6,411 209,255 Ryder System, Inc. 4,100 175,890 --------------- 385,145 --------------- Airlines (0.6%) FLYi, Inc. (a) 8,000 29,360 MAIR Holdings, Inc. (a) 6,900 64,032 SkyWest, Inc. 9,800 138,474 --------------- 231,866 --------------- Building Products (1.5%) Jacuzzi Brands, Inc. (a) 10,700 82,604 NCI Building Systems, Inc. (a) 6,800 209,508 Watsco, Inc. 10,800 315,792 --------------- 607,904 --------------- Commercial Services & Supplies (5.4%) ABM Industries, Inc. 9,400 169,106 Angelica Corp. 5,000 120,350 Casella Waste Systems, Inc., Class A (a) 20,200 246,440 Century Business Services, Inc. (a) 11,942 50,395 Consolidated Graphics, Inc. (a) 9,100 395,941 Danka Business Systems PLC, ADR (a) 13,000 54,860 Electro Rent Corp. 3,900 37,908 First Consulting Group, Inc. (a) 1,229 6,649 Healthcare Services Group, Inc. 11,750 197,753 Imagistics International, Inc. (a) 10,100 328,250 NCO Group, Inc. (a) 6,000 149,820 SOURCECORP, Inc. (a) 6,000 141,060 TeleTech Holdings, Inc. (a) 14,800 129,500 United Rentals, Inc. (a) 8,200 162,688 --------------- 2,190,720 --------------- Construction & Engineering (1.3%) Comfort Systems USA, Inc. (a) 20,800 124,592 EMCOR Group, Inc. (a) 2,900 125,483 MasTec, Inc. (a) 3,600 22,464
See Accompanying Notes to Financial Statements. 92
SHARES VALUE --------------- --------------- Common Stocks (continued) Construction & Engineering (continued) Quanta Services, Inc. (a) 6,000 $ 37,680 Washington Group International, Inc. (a) 5,800 193,836 --------------- 504,055 --------------- Electrical Equipment (1.8%) C&D Technologies, Inc. 8,900 139,730 Genlyte Group, Inc. (a) 3,300 205,590 Powell Industries, Inc. (a) 1,200 20,532 Tecumseh Products Co., Class A 4,100 167,403 Woodward Governor Co. 3,400 208,658 --------------- 741,913 --------------- Machinery (4.4%) Alamo Group, Inc. 4,300 69,832 Briggs & Stratton Corp. 3,100 258,850 EnPro Industries, Inc. (a) 9,700 240,172 Esterline Technologies Corp. (a) 9,000 282,510 Harsco Corp. 6,700 300,696 Kadant, Inc. (a) 9,100 182,910 Robbins & Myers, Inc. 8,519 161,094 Stewart & Stevenson Services, Inc. 12,500 196,875 UNOVA, Inc. (a) 5,200 87,932 --------------- 1,780,871 --------------- Road & Rail (1.4%) Covenant Transport, Inc., Class A (a) 6,900 121,854 Dollar Thrifty Automotive Group, Inc. (a) 6,100 146,949 U.S. Xpress Enterprises, Inc., Class A (a) 4,200 77,154 Werner Enterprises, Inc. 10,000 199,300 --------------- 545,257 --------------- Trading Companies & Distributors (0.7%) Hughes Supply, Inc. 4,805 292,721 --------------- Information Technology (11.8%) Communications Equipment (0.9%) Anaren, Inc. (a) 12,600 151,074 Black Box Corp. 3,700 140,600 Tollgrade Communications, Inc. (a) 9,400 78,208 --------------- 369,882 --------------- Computers & Peripherals (1.3%) Advanced Digital Information Corp. (a) 2,700 24,084 Electronics for Imaging, Inc. (a) 3,100 62,217 Hutchinson Technology, Inc. (a) 5,500 122,485 Hypercom Corp. (a) 17,600 119,680 Imation Corp. 1,700 56,355 Innovex, Inc. (a) 11,900 43,435 Intergraph Corp. (a) 3,456 91,204 --------------- 519,460 ---------------
See Accompanying Notes to Financial Statements. 93
SHARES VALUE --------------- --------------- Common Stocks (continued) Electronic Equipment & Instruments (3.0%) Anixter International, Inc. 3,700 $ 123,876 Belden CDT, Inc. (a) 5,950 115,727 Benchmark Electronics, Inc. (a) 5,000 142,900 Checkpoint Systems, Inc. (a) 9,600 165,216 Identix, Inc. (a) 18,000 97,020 MTS Systems Corp. 6,700 143,849 Nu Horizons Electronics Corp. (a) 15,700 120,890 OSI Systems, Inc. (a) 6,000 111,780 Planar Systems, Inc. (a) 7,100 98,051 Vishay Intertechnology, Inc. (a) 5,800 89,900 --------------- 1,209,209 --------------- Internet Software & Services (1.5%) ActivCard Corp. (a) 15,100 100,113 Keynote Systems, Inc. (a) 12,000 158,040 Modem Media, Inc. (a) 11,300 51,867 MPS Group, Inc. (a) 33,900 304,422 --------------- 614,442 --------------- IT Services (2.3%) Acxiom Corp. 9,100 200,200 Agilysys, Inc. (a) 7,400 110,260 Brightpoint, Inc. (a) 14,100 187,530 CompuCom Systems, Inc. (a) 24,800 113,088 Computer Horizons Corp. (a) 17,200 66,908 Inforte Corp. (a) 11,900 97,580 Lightbridge, Inc. (a) 14,200 61,060 MAXIMUS, Inc. (a) 3,100 99,107 --------------- 935,733 --------------- Semiconductors & Semiconductor Equipment (0.6%) Exar Corp. (a) 9,700 130,659 Pericom Semiconductor Corp. (a) 9,500 94,905 --------------- 225,564 --------------- Software (2.2%) Captaris, Inc. (a) 24,300 134,136 Internet Security Systems, Inc. (a) 9,000 137,880 Lawson Software, Inc. (a) 11,900 84,490 MSC.Software Corp. (a) 15,600 114,972 PLATO Learning, Inc. (a) 20,300 178,031 SeaChange International, Inc. (a) 10,100 148,369 Sybase, Inc. (a) 7,200 104,904 --------------- 902,782 --------------- Materials (8.8%) Chemicals (2.7%) A. Schulman, Inc. 6,900 143,658 Cytec Industries, Inc. 4,600 214,360 H.B. Fuller Co. 5,500 147,015 Lubrizol Corp. 3,200 110,816 Minerals Technologies, Inc. 3,300 184,371
See Accompanying Notes to Financial Statements. 94
SHARES VALUE --------------- --------------- Common Stocks (continued) Chemicals (continued) Sensient Technologies Corp. 6,900 $ 142,416 Stepan Co. 5,700 138,168 --------------- 1,080,804 --------------- Construction Materials (0.7%) Eagle Materials, Inc. 4,400 290,312 --------------- Containers & Packaging (1.0%) AptarGroup, Inc. 3,900 165,009 Greif, Inc., Class A 6,600 245,256 --------------- 410,265 --------------- Metals & Mining (3.5%) AMCOL International Corp. 6,200 124,620 Carpenter Technology Corp. 9,800 421,400 Metal Management, Inc. (a) 11,200 217,168 Peabody Energy Corp. 4,100 230,338 RTI International Metals, Inc. (a) 12,400 185,876 Steel Technologies, Inc. 9,900 228,789 --------------- 1,408,191 --------------- Paper & Forest Products (0.9%) Glatfelter 8,700 115,971 Mercer International, Inc. (a) 16,000 156,800 Schweitzer-Mauduit International, Inc. 2,500 70,625 --------------- 343,396 --------------- Telecommunication Services (0.7%) Diversified Telecommunication Services (0.3%) North Pittsburgh Systems, Inc. 7,100 135,965 --------------- Wireless Telecommunication Services (0.4%) Price Communications Corp. (a) 9,230 137,527 --------------- Utilities (3.7%) Electric Utilities (3.0%) Central Vermont Public Service Corp. 10,200 198,186 CH Energy Group, Inc. 6,800 299,200 El Paso Electric Co. (a) 11,700 176,085 Maine & Maritimes Corp. 2,200 69,080 MGE Energy, Inc. 3,900 122,967 Otter Tail Corp. 5,900 146,556 Puget Energy, Inc. 9,800 211,680 --------------- 1,223,754 --------------- Gas Utilities (0.7%) Cascade Natural Gas Corp. 4,400 88,396 Northwest Natural Gas Co. 3,200 94,016 WGL Holdings, Inc. 3,400 93,296 --------------- 275,708 --------------- Total Common Stocks (Cost of $34,383,425) 40,217,253 ---------------
See Accompanying Notes to Financial Statements. 95
PAR VALUE --------------- --------------- Short-Term Obligation (0.4%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.240%, collateralized by a U.S. Treasury Bond maturing 11/15/27, market value of $173,019 (repurchase proceeds $166,017) (Cost of $166,000) $ 166,000 $ 166,000 --------------- Total Investments (100.1%) (Cost of $34,549,425) (b) 40,383,253 Other Assets & Liabilities, Net (-0.1%) (26,894) --------------- Net Assets (100.0%) $ 40,356,359 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $34,765,143.
ACRONYM NAME ------------- -------------------------------- ADR American Depositary Receipt REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements. 96 CMG SMALL/MID CAP FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (97.4%) Consumer Discretionary (14.7%) Auto Components (2.0%) Autoliv, Inc. 17,130 $ 721,002 Gentex Corp. 8,335 298,393 --------------- 1,019,395 --------------- Hotels, Restaurants & Leisure (3.0%) Applebee's International, Inc. 9,900 263,736 Cheesecake Factory, Inc. (a) 4,300 179,611 Four Seasons Hotels, Inc. 2,670 162,042 Harrah's Entertainment, Inc. 7,540 350,535 Hilton Hotels Corp. 17,620 314,165 P.F. Chang's China Bistro, Inc. (a) 5,800 257,694 --------------- 1,527,783 --------------- Household Durables (1.3%) Garmin Ltd. 8,510 319,125 Harman International Industries, Inc. 3,740 320,630 --------------- 639,755 --------------- Leisure Equipment & Products (0.4%) Brunswick Corp. 5,710 222,861 --------------- Media (3.9%) Entercom Communications Corp. (a) 9,415 362,007 Getty Images, Inc. (a) 7,380 403,096 Univision Communications, Inc., Class A (a) 26,480 767,126 XM Satellite Radio Holdings, Inc., Class A (a) 16,900 445,991 --------------- 1,978,220 --------------- Multiline Retail (0.6%) Dollar General Corp. 14,400 277,920 --------------- Specialty Retail (2.7%) Advance Auto Parts, Inc. (a) 4,090 151,821 Bed Bath & Beyond, Inc. (a) 5,280 186,859 Chico's FAS, Inc. (a) 4,700 196,789 PETCO Animal Supplies, Inc. (a) 13,100 391,297 Williams-Sonoma, Inc. (a) 13,960 453,560 --------------- 1,380,326 --------------- Textiles, Apparel & Luxury Goods (0.8%) Columbia Sportswear Co. (a) 6,950 380,512 --------------- Consumer Staples (0.5%) Personal Products (0.5%) NBTY, Inc. (a) 10,340 224,998 ---------------
See Accompanying Notes to Financial Statements. 97
SHARES VALUE --------------- --------------- Common Stocks (continued) Energy (13.3%) Energy Equipment & Services (7.5%) BJ Services Co. (a) 8,750 $ 434,525 Key Energy Services, Inc. (a) 35,120 354,010 Nabors Industries Ltd. (a) 12,400 576,600 National-Oilwell, Inc. (a) 30,480 1,019,556 Patterson-UTI Energy, Inc. 35,620 649,353 Precision Drilling Corp. (a) 9,280 461,494 Rowan Companies, Inc. (a) 12,710 310,378 --------------- 3,805,916 --------------- Oil & Gas (5.8%) Apache Corp. 10,630 494,614 Ashland, Inc. 7,880 411,888 EOG Resources, Inc. 7,890 501,410 Murphy Oil Corp. 8,160 631,094 XTO Energy, Inc. 30,678 917,272 --------------- 2,956,278 --------------- Financials (2.9%) Capital Markets (1.2%) Affiliated Managers Group, Inc. (a) 13,450 617,490 --------------- Insurance (1.7%) Allmerica Financial Corp. (a) 10,540 314,197 Ambac Financial Group, Inc. 7,770 552,525 --------------- 866,722 --------------- Health Care (16.4%) Biotechnology (1.9%) Affymetrix, Inc. (a) 8,410 227,154 Amylin Pharmaceuticals, Inc. (a) 35,030 721,618 --------------- 948,772 --------------- Health Care Equipment & Supplies (1.8%) Boston Scientific Corp. (a) 5,230 200,100 Kinetic Concepts, Inc. (a) 7,240 325,221 Varian Medical Systems, Inc. (a) 5,590 385,766 --------------- 911,087 --------------- Health Care Providers & Services (7.6%) Caremark Rx, Inc. (a) 30,415 927,657 Community Health Systems, Inc. (a) 22,820 561,600 DaVita, Inc. (a) 27,338 830,240 Manor Care, Inc. 21,630 675,937 Renal Care Group, Inc. (a) 27,170 865,636 --------------- 3,861,070 --------------- Pharmaceuticals (5.1%) Barr Pharmaceuticals, Inc. (a) 11,460 393,651 Endo Pharmaceuticals Holdings, Inc. (a) 19,810 380,352 IVAX Corp. (a) 11,440 272,844
See Accompanying Notes to Financial Statements. 98
SHARES VALUE --------------- --------------- Common Stocks (continued) Pharmaceuticals (continued) Medicis Pharmaceutical Corp., Class A 25,830 $ 923,939 Nektar Therapeutics (a) 13,250 232,405 Teva Pharmaceutical Industries Ltd., ADR 12,510 370,296 --------------- 2,573,487 --------------- Industrials (12.5%) Aerospace & Defense (1.7%) United Defense Industries, Inc. (a) 24,100 835,065 --------------- Commercial Services & Supplies (4.0%) ChoicePoint, Inc. (a) 11,596 487,032 Education Management Corp. (a) 34,290 951,890 ITT Educational Services, Inc. (a) 4,670 148,740 Manpower, Inc. 10,600 461,630 --------------- 2,049,292 --------------- Construction & Engineering (0.7%) Jacobs Engineering Group, Inc. (a) 9,290 371,414 --------------- Electrical Equipment (1.4%) American Power Conversion Corp. 27,320 412,532 Roper Industries, Inc. 5,220 292,320 --------------- 704,852 --------------- Machinery (4.1%) Donaldson Co., Inc. 31,220 831,389 IDEX Corp. 11,580 371,602 Joy Global, Inc. 10,480 311,151 Kennametal, Inc. 12,910 568,040 --------------- 2,082,182 --------------- Road & Rail (0.6%) Sirva, Inc. (a) 12,110 283,132 --------------- Information Technology (32.2%) Communications Equipment (5.8%) 3Com Corp. (a) 42,760 210,807 ADTRAN, Inc. 9,590 256,149 Andrew Corp. (a) 8,280 89,838 Comverse Technology, Inc. (a) 62,020 1,058,061 F5 Networks, Inc. (a) 15,810 414,064 Foundry Networks, Inc. (a) 11,160 114,502 Polycom, Inc. (a) 40,570 782,190 --------------- 2,925,611 --------------- Computers & Peripherals (2.4%) Electronics for Imaging, Inc. (a) 35,645 715,395 Lexmark International, Inc., Class A (a) 5,730 507,105 --------------- 1,222,500 ---------------
See Accompanying Notes to Financial Statements. 99
SHARES VALUE --------------- --------------- Common Stocks (continued) Electronic Equipment & Instruments (6.6%) Amphenol Corp., Class A (a) 40,050 $ 1,258,772 AVX Corp. 28,860 359,884 CDW Corp. 10,520 676,436 National Instruments Corp. 14,100 409,605 Sanmina-SCI Corp. (a) 29,160 214,034 Vishay Intertechnology, Inc. (a) 27,200 421,600 --------------- 3,340,331 --------------- Internet Software & Services (1.1%) Ask Jeeves, Inc. (a) 11,020 320,462 SINA Corp. (a) 9,000 255,150 --------------- 575,612 --------------- IT Services (2.0%) Anteon International Corp. (a) 5,060 157,568 CACI International, Inc., Class A (a) 6,100 250,771 DST Systems, Inc. (a) 6,150 280,194 Global Payments, Inc. 6,870 313,615 --------------- 1,002,148 --------------- Semiconductors & Semiconductor Equipment (7.8%) Altera Corp. (a) 23,790 495,308 Fairchild Semiconductor International, Inc., Class A (a) 15,610 229,311 Integrated Device Technology, Inc. (a) 46,490 531,381 Lattice Semiconductor Corp. (a) 23,500 115,150 Marvell Technology Group Ltd. (a) 14,060 326,473 Microchip Technology, Inc. 31,450 911,106 National Semiconductor Corp. (a) 12,870 220,720 NVIDIA Corp. (a) 24,170 372,218 PMC-Sierra, Inc. (a) 22,100 262,548 Silicon Laboratories, Inc. (a) 14,150 499,353 --------------- 3,963,568 --------------- Software (6.5%) Amdocs Ltd. (a) 11,130 241,521 Autodesk, Inc. 17,680 710,736 BEA Systems, Inc. (a) 15,220 98,778 BMC Software, Inc. (a) 22,100 346,528 Hyperion Solutions Corp. (a) 7,090 290,832 Macromedia, Inc. (a) 28,680 579,336 Mercury Interactive Corp. (a) 13,990 511,474 Siebel Systems, Inc. (a) 32,720 263,723 VERITAS Software Corp. (a) 13,450 256,357 --------------- 3,299,285 --------------- Materials (3.8%) Chemicals (1.6%) Airgas, Inc. 6,430 139,853 Potash Corp. of Saskatchewan, Inc. 7,240 700,036 --------------- 839,889 ---------------
See Accompanying Notes to Financial Statements. 100
SHARES VALUE --------------- --------------- Common Stocks (continued) Metals & Mining (2.2%) Arch Coal, Inc. 7,630 $ 257,665 Massey Energy Co. 6,600 182,490 Peabody Energy Corp. 11,910 669,104 --------------- 1,109,259 --------------- Telecommunication Services (1.1%) Wireless Telecommunication Services (1.1%) Nextel Partners, Inc., Class A (a) 33,770 542,684 --------------- Total Common Stocks (Cost of $42,374,623) 49,339,416 --------------- PAR --------------- Short-Term Obligation (4.6%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.230%, collateralized by a U.S. Treasury Note maturing 05/15/10, market value of $2,376,088 (repurchase proceeds $2,326,238) (Cost of $2,326,000) $ 2,326,000 2,326,000 --------------- Total Investments (102.0%) (Cost of $44,700,623) (b) 51,665,416 Other Assets & Liabilities, Net (-2.0%) (1,003,833) --------------- Net Assets (100.0%) $ 50,661,583 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $45,131,836.
ACRONYM NAME ------------------- --------------------------- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 101 CMG INTERNATIONAL STOCK FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE --------------- --------------- Common Stocks (96.0%) Consumer Discretionary (15.3%) Auto Components (0.8%) Denso Corp. 47,500 $ 1,165,775 --------------- Automobiles (3.0%) Renault SA 29,070 2,290,933 Toyota Motor Corp. 57,800 2,327,900 --------------- 4,618,833 --------------- Hotels, Restaurants & Leisure (2.2%) Accor SA 27,100 1,149,456 Carnival Corp. 20,300 946,183 Compass Group PLC 119,104 692,853 InterContinental Hotels Group PLC 54,399 578,468 --------------- 3,366,960 --------------- Household Durables (2.7%) Funai Electric Co., Ltd. 5,100 715,242 Koninklijke (Royal) Philips Electronics NV 77,700 1,881,374 Matsushita Electric Industrial Co., Ltd. 107,000 1,427,500 --------------- 4,024,116 --------------- Media (3.6%) Dentsu, Inc. 300 765,946 JC Decaux SA (a) 42,600 905,496 News Corp., Ltd. 106,800 915,068 Pearson PLC 103,220 1,157,714 Reuters Group PLC 148,500 879,390 WPP Group PLC 96,400 891,810 --------------- 5,515,424 --------------- Multiline Retail (2.3%) Aeon Co., Ltd. 18,100 621,585 Big C Supercenter Public Co., Ltd. 515,600 234,704 Isetan Co., Ltd. 77,000 882,591 Seiyu Ltd. (a) 157,000 427,662 Takashimaya Co., Ltd. 67,000 624,012 Wal-Mart de Mexico SA de CV, Series V 231,500 705,941 --------------- 3,496,495 --------------- Specialty Retail (0.7%) Aoyama Trading Co., Ltd. 17,300 390,372 Nitori Co., Ltd. 11,350 700,989 --------------- 1,091,361 --------------- Consumer Staples (11.0%) Beverages (1.5%) Diageo PLC 144,310 1,789,232 ITO EN Ltd. 11,400 532,926 --------------- 2,322,158 ---------------
See Accompanying Notes to Financial Statements. 102
SHARES VALUE --------------- --------------- Common Stocks (continued) Food & Staples Retailing (1.2%) C.P. Seven-Eleven Public Co., Ltd., Foreign Shares 149,700 $ 228,356 Metro AG 23,972 1,098,919 William Morrison Supermarkets PLC 155,478 511,979 --------------- 1,839,254 --------------- Food Products (4.2%) Ajinomoto Co., Inc. 64,000 745,089 Cadbury Schweppes PLC 89,978 737,046 Nestle SA, Registered Shares 11,462 2,925,897 Unilever PLC 229,320 2,025,515 --------------- 6,433,547 --------------- Household Products (2.8%) Kao Corp. 61,000 1,513,552 Reckitt Benckiser PLC 101,540 2,778,365 --------------- 4,291,917 --------------- Personal Products (0.3%) Oriflame Cosmetics SA, SDR (a) 13,000 431,674 --------------- Tobacco (1.0%) Imperial Tobacco Group PLC 69,496 1,512,151 --------------- Energy (8.7%) Oil & Gas (8.7%) BP PLC, ADR 55,880 3,149,397 EnCana Corp. 44,100 1,951,020 ENI S.p.A 185,130 3,805,989 Norsk Hydro ASA 10,120 639,046 PTT Public Co., Ltd. 175,300 649,416 Shell Transport & Trading Co., PLC 145,300 1,053,412 Total SA 10,030 1,945,046 --------------- 13,193,326 --------------- Financials (21.0%) Capital Markets (0.6%) Credit Suisse Group 29,590 948,220 --------------- Commercial Banks (13.1%) Alpha Bank AE 34,080 807,162 Anglo Irish Bank Corp., PLC 45,160 714,504 Banco Popolare di Verona e Novara 52,800 879,816 Banco Popular Espanol SA 15,560 836,951 Bank of Ireland 58,734 768,269 Barclays PLC 274,690 2,298,820 Credit Agricole SA 72,000 1,696,615 Danske Bank SA 42,000 966,029 Erste Bank der oesterreichischen Sparkassen AG 29,000 1,124,404 Hansabank Ltd. 60,072 496,884
See Accompanying Notes to Financial Statements. 103
SHARES VALUE --------------- --------------- Common Stocks (continued) Commercial Banks (continued) HBOS PLC 56,150 $ 727,845 Kookmin Bank (a) 31,230 857,791 Lloyds TSB Group PLC 93,610 702,081 Mitsubishi Tokyo Financial Group, Inc. 124 1,111,413 Mizuho Financial Group, Inc. 193 732,198 National Bank of Greece SA 32,487 691,317 Royal Bank of Scotland Group PLC 81,360 2,288,362 Siam Commercial Bank Public Co., Ltd., Registered Shares 82,300 89,673 Skandinaviska Enskilda Banken AB, Class A 51,000 687,358 Societe Generale 9,900 811,735 Sumitomo Mitsui Financial Group, Inc. 118 711,808 --------------- 20,001,035 --------------- Diversified Financial Services (1.3%) ING Groep NV 81,650 1,892,596 --------------- Insurance (4.0%) Allianz AG, Registered Shares 10,872 1,049,590 AXA 59,800 1,227,240 Irish Life & Permanent PLC 11,100 167,746 Irish Life & Permanent PLC 37,500 568,965 Millea Holdings, Inc. 107 1,577,561 Mitsui Sumitomo Insurance Co., Ltd. 82,000 759,293 T&D Holdings, Inc. 16,000 743,651 --------------- 6,094,046 --------------- Real Estate (2.0%) Mitsubishi Estate Co., Ltd. 122,000 1,389,617 Sun Hung Kai Properties Ltd. 190,000 1,607,734 --------------- 2,997,351 --------------- Health Care (11.9%) Health Care Equipment & Supplies (2.4%) Nobel Biocare Holding AG 5,600 765,027 Smith & Nephew PLC 282,900 2,856,474 --------------- 3,621,501 --------------- Pharmaceuticals (9.5%) AstraZeneca PLC 45,300 2,028,216 Chugai Pharmaceutical Co., Ltd. 143,000 2,248,456 GlaxoSmithKline PLC 125,700 2,554,423 Novartis AG, Registered Shares 40,970 1,831,017 Sanofi-Synthelabo SA 31,010 2,054,225 Takeda Pharmaceutical Co., Ltd. 52,900 2,477,718 Teva Pharmaceutical Industries Ltd., ADR 44,600 1,320,160 --------------- 14,514,215 --------------- Industrials (10.7%) Building Products (0.9%) Wienerberger AG 38,300 1,372,176 ---------------
See Accompanying Notes to Financial Statements. 104
SHARES VALUE --------------- --------------- Common Stocks (continued) Commercial Services & Supplies (1.2%) Capita Group PLC 131,000 $ 729,285 Randstad Holding NV 41,600 1,137,309 --------------- 1,866,594 --------------- Construction & Engineering (2.8%) JGC Corp. 101,000 944,307 Shimizu Corp. 206,000 857,446 Taisei Corp. 275,000 872,702 Vinci SA 15,078 1,532,682 --------------- 4,207,137 --------------- Industrial Conglomerates (1.7%) Aeon Mall Co., Ltd. 3,100 158,296 Burberry Group PLC 130,186 888,178 Siemens AG, Registered Shares 10,945 767,279 Smith Group PLC 58,425 775,936 --------------- 2,589,689 --------------- Machinery (2.5%) Atlas Copco AB, Class B 53,400 1,759,278 Heidelberger Druckmaschinen AG 23,900 740,756 Volvo AB, Class B 35,100 1,256,934 --------------- 3,756,968 --------------- Road & Rail (0.5%) Canadian National Railway Co. 17,945 803,606 --------------- Trading Companies & Distributors (0.6%) Mitsubishi Corp. 103,000 992,637 --------------- Transportation Infrastructure (0.5%) BAA PLC 75,140 764,849 --------------- Information Technology (5.0%) Electronic Equipment & Instruments (2.3%) Celestica, Inc. (a) 44,400 755,702 Keyence Corp. 3,500 741,313 Tandberg ASA 77,300 694,173 TDK Corp. 19,600 1,356,767 --------------- 3,547,955 --------------- IT Services (0.7%) NIWS Co., Ltd. 125 322,515 TIS, Inc. 18,000 689,351 --------------- 1,011,866 --------------- Office Electronics (1.0%) Canon, Inc. 31,000 1,516,070 ---------------
See Accompanying Notes to Financial Statements. 105
SHARES VALUE --------------- --------------- Common Stocks (continued) Semiconductors & Semiconductor Equipment (1.0%) ARM Holdings PLC 235,691 $ 451,304 Samsung Electronics Co., Ltd. 2,920 1,040,273 --------------- 1,491,577 --------------- Materials (4.7%) Chemicals (3.6%) BASF AG 26,870 1,430,441 L'Air Liquide SA 9,240 1,494,132 Linde AG 14,100 764,523 Sygenta AG 21,330 1,760,849 --------------- 5,449,945 --------------- Construction Materials (0.7%) Cemex SA de CV, ADR 38,000 1,070,840 --------------- Paper & Forest Products (0.4%) UPM-Kymmene Oyj 32,700 634,521 --------------- Telecommunication Services (4.7%) Diversified Telecommunication Services (2.7%) Bharti Tele-Ventures Ltd. (a) 204,080 668,898 France Telecom SA 42,320 1,047,094 Nippon Telegraph & Telephone Corp. 140 698,521 Telefonaktiebolaget LM Ericsson, ADR (a) 62,400 1,666,704 --------------- 4,081,217 --------------- Wireless Telecommunication Services (2.0%) NTT DoCoMo, Inc. 313 545,889 Vodafone Group PLC 1,190,050 2,581,831 --------------- 3,127,720 --------------- Utilities (3.0%) Electric Utilities (2.0%) E.ON AG 32,498 2,310,251 Scottish Power PLC 103,531 742,115 --------------- 3,052,366 --------------- Multi-Utilities & Unregulated Power (1.0%) National Grid Transco PLC 192,100 1,521,144 --------------- Total Common Stocks (Cost of $138,195,734) 146,230,832 --------------- Preferred Stock (0.9%) Consumer Discretionary (0.9%) Automobiles (0.9%) Porsche AG (Cost of $1,338,250) 2,081 1,345,137 --------------- Rights (0.0%) Accor SA (a) (Cost of $0) 27,100 -(b) ---------------
See Accompanying Notes to Financial Statements. 106
PAR VALUE --------------- --------------- Short-Term Obligation (3.7%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.230%, collateralized by a U.S. Treasury Note maturing 11/15/10, market value of $5,692,228 (repurchase proceeds $5,576,572) (Cost of $5,576,000) $ 5,576,000 $ 5,576,000 --------------- Total Investments (100.6%) (Cost of $145,109,984)(c) 153,151,969 Other Assets & Liabilities, Net (-0.6%) (901,044) --------------- Net Assets (100.0%) $ 152,250,925 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Security has no value. (c) Cost for federal income tax purposes is $145,625,608.
ACRONYM NAME ---------------- ------------------------------ ADR American Depositary Receipt SDR Swedish Depositary Receipt
See Accompanying Notes to Financial Statements. 107
SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE INVESTMENTS - ---------------------------------- --------------- --------------- United Kingdom $ 39,668,195 25.9% Japan 34,288,670 22.4 France 16,154,654 10.5 Germany 9,506,896 6.2 Switzerland 8,231,010 5.4 United States* 5,576,000 3.6 Sweden 5,370,274 3.5 Netherlands 4,911,279 3.2 Italy 4,685,805 3.1 Canada 3,510,328 2.3 Austria 2,496,580 1.6 Ireland 2,219,484 1.5 South Korea 1,898,064 1.2 Mexico 1,776,781 1.2 Hong Kong 1,607,734 1.1 Greece 1,498,479 1.0 Norway 1,333,219 0.9 Israel 1,320,160 0.9 Thailand 1,202,149 0.8 Denmark 966,029 0.6 Panama 946,183 0.6 Australia 915,068 0.6 Spain 836,951 0.5 India 668,898 0.4 Finland 634,521 0.4 Estonia 496,884 0.3 Luxembourg 431,674 0.3 --------------- --------------- $ 153,151,969 100.0% =============== ===============
* Represents short-term obligation. See Accompanying Notes to Financial Statements. 108 This page is intentionally left blank CMG ENHANCED S&P 500(R) INDEX FUND CMG LARGE CAP GROWTH FUND CMG LARGE CAP VALUE FUND Portfolios of CMG Fund Trust STATEMENTS OF ASSETS AND LIABILITIES July 31, 2004
CMG ENHANCED CMG CMG S&P 500(R) LARGE CAP LARGE CAP INDEX FUND GROWTH FUND VALUE FUND --------------- --------------- --------------- ASSETS: Investments, at identified cost $ 95,454,117 $ 40,237,354 $ 45,109,612 --------------- --------------- --------------- Investments, at value $ 98,174,856 $ 40,998,924 $ 47,761,418 Cash 761 766 193 Cash denominated in foreign currency (cost of $1,039,454) - - - Receivable for: Investments sold - 226,644 - Capital stock sold - 75,000 25,000 Interest 30 54 52 Dividends and foreign tax reclaims 124,926 15,080 122,292 Expense reimbursement due from Investment Advisor 6,565 19,125 17,983 Reimbursement due from Investment Advisor (See Note 8) - - - Deferred Trustees' compensation plan 446 495 428 --------------- --------------- --------------- Total Assets 98,307,584 41,336,088 47,927,366 --------------- --------------- --------------- LIABILITIES: Payable for: Investments purchased - 572,818 - Fund shares repurchased 20,000 - - Investment advisory fee 20,112 17,302 19,900 Trustees' fees 1,774 503 502 Audit fee 17,272 34,050 34,050 Foreign capital gains tax accrued - - - Deferred Trustees' fees 446 495 428 Other liabilities 697 27,343 17,768 --------------- --------------- --------------- Total liabilities 60,301 652,511 72,648 --------------- --------------- --------------- NET ASSETS $ 98,247,283 $ 40,683,577 $ 47,854,718 =============== =============== =============== NET ASSETS consists of: Paid-in-capital $ 94,313,772 $ 40,855,194 $ 44,669,574 Undistributed net investment income 665,116 65,201 489,677 Accumulated net investment loss - - - Accumulated net realized gain (loss) 547,656 (998,388) 43,661 Net unrealized appreciation (depreciation) on: Investments 2,720,739 761,570 2,651,806 Foreign currency translations - - - Foreign capital gains tax - - - --------------- --------------- --------------- NET ASSETS $ 98,247,283 $ 40,683,577 $ 47,854,718 =============== =============== =============== Shares of capital stock outstanding 8,210,306 3,969,029 4,314,262 =============== =============== =============== Net asset value, offering and redemption price per share $ 11.97 $ 10.25 $ 11.09 =============== =============== ===============
See Accompanying Notes to Financial Statements. 110 CMG MID CAP GROWTH FUND CMG MID CAP VALUE FUND CMG SMALL CAP GROWTH FUND CMG SMALL CAP VALUE FUND CMG SMALL/MID CAP FUND CMG INTERNATIONAL STOCK FUND
CMG CMG CMG MID CAP MID CAP SMALL CAP GROWTH FUND VALUE FUND GROWTH FUND --------------- --------------- --------------- ASSETS: Investments, at identified cost $ 19,194,883 $ 20,381,482 $ 35,528,620 --------------- --------------- --------------- Investments, at value $ 19,457,996 $ 22,001,522 $ 35,915,625 Cash 60 453 380 Cash denominated in foreign currency (cost of $1,039,454) - - - Receivable for: Investments sold 55,794 - 70,851 Capital stock sold - - - Interest 78 48 91 Dividends and foreign tax reclaims 3,399 14,268 2,009 Expense reimbursement due from Investment Advisor 9,626 11,422 11,095 Reimbursement due from Investment Advisor (See Note 8) - - - Deferred Trustees' compensation plan 431 417 466 --------------- --------------- --------------- Total Assets 19,527,384 22,028,130 36,000,517 --------------- --------------- --------------- LIABILITIES: Payable for: Investments purchased 211,510 - 228,480 Fund shares repurchased - - - Investment advisory fee 11,659 13,278 23,834 Trustees' fees 499 500 504 Audit fee 19,373 19,373 19,373 Foreign capital gains tax accrued - - - Deferred Trustees' fees 431 417 466 Other liabilities 398 363 398 --------------- --------------- --------------- Total liabilities 243,870 33,931 273,055 --------------- --------------- --------------- NET ASSETS $ 19,283,514 $ 21,994,199 $ 35,727,462 =============== =============== =============== NET ASSETS consists of: Paid-in-capital $ 20,197,907 $ 20,241,224 $ 33,345,526 Undistributed net investment income - 57,377 - Accumulated net investment loss (2,391) - (510) Accumulated net realized gain (loss) (1,175,115) 75,558 1,995,441 Net unrealized appreciation (depreciation) on: Investments 263,113 1,620,040 387,005 Foreign currency translations - - - Foreign capital gains tax - - - --------------- --------------- --------------- NET ASSETS $ 19,283,514 $ 21,994,199 $ 35,727,462 =============== =============== =============== Shares of capital stock outstanding 1,745,930 1,748,421 2,979,490 =============== =============== =============== Net asset value, offering and redemption price per share $ 11.04 $ 12.58 $ 11.99 =============== =============== =============== CMG CMG CMG SMALL CAP SMALL/MID INTERNATIONAL VALUE FUND CAP FUND STOCK FUND --------------- --------------- --------------- ASSETS: Investments, at identified cost $ 34,549,425 $ 44,700,623 $ 145,109,984 --------------- --------------- --------------- Investments, at value $ 40,383,253 $ 51,665,416 $ 153,151,969 Cash 684 9 639 Cash denominated in foreign currency (cost of $1,039,454) - - 1,034,253 Receivable for: Investments sold 3,771 353,551 1,348,865 Capital stock sold - 159 30,000 Interest 11 4,026 381 Dividends and foreign tax reclaims 35,573 - 204,325 Expense reimbursement due from Investment Advisor 7,736 12,450 18,079 Reimbursement due from Investment Advisor (See Note 8) - - 47,741 Deferred Trustees' compensation plan 456 544 761 --------------- --------------- --------------- Total Assets 40,431,484 52,036,155 155,837,013 --------------- --------------- --------------- LIABILITIES: Payable for: Investments purchased 27,515 1,311,263 3,402,677 Fund shares repurchased - - - Investment advisory fee 26,813 34,681 96,710 Trustees' fees 470 559 2,022 Audit fee 19,373 25,000 28,499 Foreign capital gains tax accrued - - 53,956 Deferred Trustees' fees 456 544 761 Other liabilities 498 2,525 1,463 --------------- --------------- --------------- Total liabilities 75,125 1,374,572 3,586,088 --------------- --------------- --------------- NET ASSETS $ 40,356,359 $ 50,661,583 $ 152,250,925 =============== =============== =============== NET ASSETS consists of: Paid-in-capital $ 32,074,244 $ 55,402,242 $ 144,565,843 Undistributed net investment income 148,785 - 706,196 Accumulated net investment loss - (597) - Accumulated net realized gain (loss) 2,299,502 (11,704,855) (1,012,288) Net unrealized appreciation (depreciation) on: Investments 5,833,828 6,964,793 8,041,985 Foreign currency translations - - 3,145 Foreign capital gains tax - - (53,956) --------------- --------------- --------------- NET ASSETS $ 40,356,359 $ 50,661,583 $ 152,250,925 =============== =============== =============== Shares of capital stock outstanding 2,901,143 5,774,903 12,506,278 =============== =============== =============== Net asset value, offering and redemption price per share $ 13.91 $ 8.77 $ 12.17 =============== =============== ===============
See Accompanying Notes to Financial Statements. 111 CMG ENHANCED S&P 500(R) INDEX FUND CMG LARGE CAP GROWTH FUND CMG LARGE CAP VALUE FUND Portfolios of CMG Fund Trust STATEMENTS OF OPERATIONS For the Year Ended July 31, 2004
CMG ENHANCED CMG CMG S&P 500(R) LARGE CAP LARGE CAP INDEX FUND GROWTH FUND (a) VALUE FUND (a) --------------- --------------- --------------- NET INVESTMENT INCOME: Income: Dividends $ 1,033,576 $ 234,300 $ 721,283 Interest 6,285 7,567 11,886 Foreign withholding tax - (2,430) (6,786) --------------- --------------- --------------- Total income 1,039,861 239,437 726,383 --------------- --------------- --------------- Expenses: Investment advisory fee 154,552 148,272 153,985 Trustees' fees 5,615 4,233 4,241 Audit fee 22,691 37,769 37,769 Trustee legal counsel fees 727 611 604 Non-recurring costs (See Note 9) 4,268 1,854 2,045 --------------- --------------- --------------- Total expenses 187,853 192,739 198,644 Expense reimbursement from Investment Advisor (29,033) (42,613) (42,614) Non-recurring costs assumed by Investment Advisor (See Note 9) (4,268) (1,854) (2,045) --------------- --------------- --------------- Net expenses 154,552 148,272 153,985 --------------- --------------- --------------- Net investment income (loss) 885,309 91,165 572,398 --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 582,070 (998,388) 43,501 Foreign currency transactions - - - Foreign capital gains tax - - - Net realized loss on the disposal of investments purchased/sold in error (See Note 8) - - - --------------- --------------- --------------- Net realized gain (loss) 582,070 (998,388) 43,501 --------------- --------------- --------------- Net change in unrealized appreciation/depreciation on: Investments 2,619,440 761,570 2,651,806 Foreign currency translations - - - Foreign capital gains tax - - - --------------- --------------- --------------- Net change in unrealized appreciation/depreciation 2,619,440 761,570 2,651,806 --------------- --------------- --------------- Net gain (loss) 3,201,510 (236,818) 2,695,307 --------------- --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 4,086,819 $ (145,653) $ 3,267,705 --------------- --------------- ---------------
(a) The Fund commenced investment operations on September 10, 2003. See Accompanying Notes to Financial Statements. 112 CMG MID CAP GROWTH FUND CMG MID CAP VALUE FUND CMG SMALL CAP GROWTH FUND CMG SMALL CAP VALUE FUND CMG SMALL/MID CAP FUND CMG INTERNATIONAL STOCK FUND
CMG CMG CMG MID CAP MID CAP SMALL CAP GROWTH FUND VALUE FUND GROWTH FUND --------------- --------------- --------------- NET INVESTMENT INCOME: Income: Dividends $ 36,887 $ 177,858 $ 50,705 Interest 6,184 7,754 10,517 Foreign withholding tax (397) - (196) --------------- --------------- --------------- Total income 42,674 185,612 61,026 --------------- --------------- --------------- Expenses: Investment advisory fee 94,471 104,971 247,119 Trustees' fees 4,348 3,958 4,460 Audit fee 24,792 24,792 24,792 Trustee legal counsel fees 576 1,082 1,092 Non-recurring costs (See Note 9) 889 986 1,657 --------------- --------------- --------------- Total expenses 125,076 135,789 279,120 Expense reimbursement from Investment Advisor (29,716) (29,832) (30,344) Non-recurring costs assumed by Investment Advisor (See Note 9) (889) (986) (1,657) --------------- --------------- --------------- Net expenses 94,471 104,971 247,119 --------------- --------------- --------------- Net investment income (loss) (51,797) 80,641 (186,093) --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments (1,170,829) 75,700 3,236,594 Foreign currency transactions (1,920) - - Foreign capital gains tax - - - Net realized loss on the disposal of investments purchased/sold in error (See Note 8) - - - --------------- --------------- --------------- Net realized gain (loss) (1,172,749) 75,700 3,236,594 --------------- --------------- --------------- Net change in unrealized appreciation/depreciation on: Investments 146,764 1,512,473 (1,228,396) Foreign currency translations - - - Foreign capital gains tax - - - --------------- --------------- --------------- Net change in unrealized appreciation/depreciation 146,764 1,512,473 (1,228,396) --------------- --------------- --------------- Net gain (loss) (1,025,985) 1,588,173 2,008,198 --------------- --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (1,077,782) $ 1,668,814 $ 1,822,105 --------------- --------------- --------------- CMG CMG CMG SMALL CAP SMALL/MID INTERNATIONAL VALUE FUND CAP FUND STOCK FUND --------------- --------------- --------------- NET INVESTMENT INCOME: Income: Dividends $ 554,329 $ 180,203 $ 2,425,658 Interest 4,040 17,446 47,821 Foreign withholding tax - (1,433) (281,785) --------------- --------------- --------------- Total income 558,369 196,216 2,191,694 --------------- --------------- --------------- Expenses: Investment advisory fee 275,569 565,283 861,837 Trustees' fees 4,375 5,244 8,656 Audit fee 24,792 35,886 44,021 Trustee legal counsel fees 1,421 5,775 3,756 Non-recurring costs (See Note 9) 1,799 3,385 6,643 --------------- --------------- --------------- Total expenses 307,956 615,573 924,913 Expense reimbursement from Investment Advisor (30,588) (46,905) (56,433) Non-recurring costs assumed by Investment Advisor (See Note 9) (1,799) (3,385) (6,643) --------------- --------------- --------------- Net expenses 275,569 565,283 861,837 --------------- --------------- --------------- Net investment income (loss) 282,800 (369,067) 1,329,857 --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 2,739,432 12,174,435 7,991,443 Foreign currency transactions - - (265,407) Foreign capital gains tax - - (179,871) Net realized loss on the disposal of investments purchased/sold in error (See Note 8) - - - --------------- --------------- --------------- Net realized gain (loss) 2,739,432 12,174,435 7,546,165 --------------- --------------- --------------- Net change in unrealized appreciation/depreciation on: Investments 3,889,062 (6,374,728) 3,822,302 Foreign currency translations - - 2,935 Foreign capital gains tax - - (8,299) --------------- --------------- --------------- Net change in unrealized appreciation/depreciation 3,889,062 (6,374,728) 3,816,938 --------------- --------------- --------------- Net gain (loss) 6,628,494 5,799,707 11,363,103 --------------- --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 6,911,294 $ 5,430,640 $ 12,692,960 --------------- --------------- ---------------
See Accompanying Notes to Financial Statements. 113 CMG ENHANCED S&P 500(R) INDEX FUND Portfolio of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
CMG ENHANCED S&P 500(R) INDEX FUND ------------------------------------- YEAR ENDED PERIOD ENDED JULY 31, JULY 31, 2004 2003 (a) --------------- --------------- Operations: Net investment income $ 885,309 $ 14,758 Net realized gain on investments 582,070 3,535 Net change in unrealized appreciation/depreciation on investments 2,619,440 101,175 --------------- --------------- Net increase from operations 4,086,819 119,468 Distributions declared to shareholders: From net investment income (232,474) - From net realized gains (40,302) - --------------- --------------- Total distributions declared to shareholders (272,776) - Share transactions: Subscriptions 94,353,306 9,015,000 Distributions reinvested 29,758 - Redemptions (9,084,292) - --------------- --------------- Net increase in shares transactions 85,298,772 9,015,000 --------------- --------------- Net increase in net assets 89,112,815 9,134,468 NET ASSETS: Beginning of period 9,134,468 - --------------- --------------- End of period $ 98,247,283 $ 9,134,468 =============== =============== Undistributed net investment income $ 665,116 $ 14,758 =============== =============== Change in Shares: Subscriptions 8,102,596 851,673 Issued for distributions reinvested 2,509 - Redemptions (746,472) - --------------- --------------- Net increase 7,358,633 851,673 --------------- ---------------
(a) The Fund commenced investment operations on May 5, 2003. See Accompanying Notes to Financial Statements. 114 CMG LARGE CAP GROWTH FUND CMG LARGE CAP VALUE FUND Portfolios of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG LARGE CAP LARGE CAP GROWTH FUND VALUE FUND --------------- --------------- PERIOD ENDED PERIOD ENDED JULY 31, JULY 31, 2004 (a) 2004 (a) --------------- --------------- Operations: Net investment income $ 91,165 $ 572,398 Net realized gain (loss) on investments (998,388) 43,501 Net change in unrealized appreciation/depreciation on investments 761,570 2,651,806 --------------- --------------- Net increase (decrease) from operations (145,653) 3,267,705 Distributions declared to shareholders: From net investment income (25,964) (82,818) --------------- --------------- Share transactions: Subscriptions 45,852,862 49,285,154 Distributions reinvested 4,175 14,274 Redemptions (5,001,843) (4,629,597) --------------- --------------- Net increase in shares transactions 40,855,194 44,669,831 --------------- --------------- Net increase in net assets 40,683,577 47,854,718 NET ASSETS: Beginning of period - - --------------- --------------- End of period $ 40,683,577 $ 47,854,718 =============== =============== Undistributed net investment income $ 65,201 $ 489,677 =============== =============== Change in Shares: Subscriptions 4,440,392 4,742,377 Issued for distributions reinvested 399 1,333 Redemptions (471,762) (429,448) --------------- --------------- Net increase 3,969,029 4,314,262 --------------- ---------------
(a) The Fund commenced investment operations on September 10, 2003. See Accompanying Notes to Financial Statements. 115 CMG MID CAP GROWTH FUND CMG MID CAP VALUE FUND Portfolios of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG MID CAP MID CAP GROWTH FUND VALUE FUND ---------------------------------- --------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED JULY 31, JULY 31, JULY 31, JULY 31, 2004 2003 (a) 2004 2003 (a) --------------- --------------- --------------- --------------- Operations: Net investment income (loss) $ (51,797) $ (1,676) $ 80,641 $ 1,986 Net realized gain (loss) on investments (1,172,749) 4,190 75,700 2,240 Net change in unrealized appreciation/depreciation on investments 146,764 116,349 1,512,473 107,567 --------------- --------------- --------------- --------------- Net increase (decrease) from operations (1,077,782) 118,863 1,668,814 111,793 Distributions declared to shareholders: From net investment income - - (25,250) - From net realized gains (6,844) - (2,382) - --------------- --------------- --------------- --------------- Total distributions declared to shareholders (6,844) - (27,632) - Share transactions: Subscriptions 20,789,926 2,042,300 21,123,853 2,539,150 Distributions reinvested 2,911 - 4,042 - Redemptions (2,585,860) - (3,425,821) - --------------- --------------- --------------- --------------- Net increase in shares transactions 18,206,977 2,042,300 17,702,074 2,539,150 --------------- --------------- --------------- --------------- Net increase in net assets 17,122,351 2,161,163 19,343,256 2,650,943 NET ASSETS: Beginning of period 2,161,163 - 2,650,943 - --------------- --------------- --------------- --------------- End of period $ 19,283,514 $ 2,161,163 $ 21,994,199 $ 2,650,943 =============== =============== =============== =============== Undistributed net investment income $ - $ - $ 57,377 $ 1,986 =============== =============== =============== =============== Accumulated net investment loss $ (2,391) $ - $ - $ - =============== =============== =============== =============== Change in Shares: Subscriptions 1,764,371 197,710 1,773,133 248,038 Issued for distributions reinvested 241 - 336 - Redemptions (216,392) - (273,086) - --------------- --------------- --------------- --------------- Net increase 1,548,220 197,710 1,500,383 248,038 --------------- --------------- --------------- ---------------
(a) The Fund commenced investment operations on May 5, 2003. See Accompanying Notes to Financial Statements. 116 CMG SMALL CAP GROWTH FUND CMG SMALL CAP VALUE FUND Portfolios of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG SMALL CAP SMALL CAP GROWTH FUND VALUE FUND ---------------------------------- --------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED JULY 31, JULY 31, JULY 31, JULY 31, 2004 2003 (a) 2004 2003 (a) --------------- --------------- --------------- --------------- Operations: Net investment income (loss) $ (186,093) $ (25,882) $ 282,800 $ 26,809 Net realized gain on investments 3,236,594 823,948 2,739,432 115,873 Net change in unrealized appreciation/depreciation on investments (1,228,396) 1,615,401 3,889,062 1,931,846 --------------- --------------- --------------- --------------- Net increase from operations 1,822,105 2,413,467 6,911,294 2,074,528 Distributions declared to shareholders: From net investment income - - (146,373) - From net realized gains (1,853,636) - (557,335) - --------------- --------------- --------------- --------------- Total distributions declared to shareholders (1,853,636) - (703,708) - Share transactions: Subscriptions 20,340,250 19,177,304 22,163,080 19,724,518 Distributions reinvested 1,248,755 - 445,442 - Redemptions (6,836,214) (584,569) (9,816,077) (442,718) --------------- --------------- --------------- --------------- Net increase in shares transactions 14,752,791 18,592,735 12,792,445 19,281,800 --------------- --------------- --------------- --------------- Net increase in net assets 14,721,260 21,006,202 19,000,031 21,356,328 NET ASSETS: Beginning of period 21,006,202 - 21,356,328 - --------------- --------------- --------------- --------------- End of period $ 35,727,462 $ 21,006,202 $ 40,356,359 $ 21,356,328 =============== =============== =============== =============== Undistributed net investment income $ - $ - $ 148,785 $ 26,809 =============== =============== =============== =============== Accumulated net investment loss $ (510) $ - $ - $ - =============== =============== =============== =============== Change in Shares: Subscriptions 1,583,555 1,873,343 1,716,774 1,931,086 Issued for distributions reinvested 100,382 - 33,618 - Redemptions (526,058) (51,732) (740,106) (40,229) --------------- --------------- --------------- --------------- Net increase 1,157,879 1,821,611 1,010,286 1,890,857 --------------- --------------- --------------- ---------------
(a) The Fund commenced investment operations on May 5, 2003. See Accompanying Notes to Financial Statements. 117 CMG SMALL/MID CAP FUND CMG INTERNATIONAL STOCK FUND Portfolios of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG SMALL/MID INTERNATIONAL CAP FUND STOCK FUND -------------------------------------------- ------------------------------------------ YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED JULY 31, JULY 31, OCTOBER 31, JULY 31, JULY 31, OCTOBER 31, 2004 2003 (a) 2002 2004 2003 (a) 2002 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) $ (369,067) $ (234,660) $ (287,809) $ 1,329,857 $ 403,458 $ 48,664 Net realized gain (loss) on investments, foreign currency transactions and foreign capital gains tax 12,174,435 98,697 (11,733,008) 7,546,165 (1,950,231) (3,433,114) Net change in unrealized appreciation/depreciation on investments, foreign currency translations and foreign capital gains tax (6,374,728) 12,048,506 1,504,894 3,816,938 5,770,512 68,234 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) from operations 5,430,640 11,912,543 (10,515,923) 12,692,960 4,223,739 (3,316,216) Distributions declared to shareholders: From net investment income - - - (529,435) (92,056) (69,418) ------------ ------------ ------------ ------------ ------------ ------------ Share transactions: Subscriptions 4,155,162 9,106,124 23,551,961 89,977,364 36,683,376 10,312,316 Distributions reinvested - - - 330,247 86,707 69,418 Redemptions (32,850,066) (1,861,599) (7,658,216) (8,707,904) (3,029,686) (6,933,677) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares transactions (28,694,904) 7,244,525 15,893,745 81,599,707 33,740,397 3,448,057 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets (23,264,264) 19,157,068 5,377,822 93,763,232 37,872,080 62,423 NET ASSETS: Beginning of period 73,925,847 54,768,779 49,390,957 58,487,693 20,615,613 20,553,190 ------------ ------------ ------------ ------------ ------------ ------------ End of period $ 50,661,583 $ 73,925,847 $ 54,768,779 $152,250,925 $ 58,487,693 $ 20,615,613 ============ ============ ============ ============ ============ ============ Undistributed net investment income $ - $ 25,825 $ 21,326 $ 706,196 $ 352,135 $ 84,225 ============ ============ ============ ============ ============ ============ Accumulated net investment loss $ (597) $ - $ - $ - $ - $ - ============ ============ ============ ============ ============ ============ Change in Shares: Subscriptions 455,080 1,296,527 2,797,021 7,516,797 3,755,927 944,395 Issued for distributions reinvested - - - 27,705 9,466 6,392 Redemptions (3,586,319) (262,053) (1,096,189) (698,471) (317,061) (710,896) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) (3,131,239) 1,034,474 1,700,832 6,846,031 3,448,332 239,891 ------------ ------------ ------------ ------------ ------------ ------------
(a) The Fund changed its fiscal year end from October 31 to July 31. See Accompanying Notes to Financial Statements. 118 CMG ENHANCED S&P 500(R) INDEX FUND CMG LARGE CAP GROWTH FUND CMG LARGE CAP VALUE FUND CMG MID CAP GROWTH FUND CMG MID CAP VALUE FUND CMG SMALL CAP GROWTH FUND CMG SMALL CAP VALUE FUND CMG SMALL/MID CAP FUND CMG INTERNATIONAL STOCK FUND Portfolios of CMG Fund Trust NOTES TO FINANCIAL STATEMENTS July 31, 2004 NOTE 1. ORGANIZATION: CMG Fund Trust (the "Trust") is an Oregon business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Information presented in these financial statements pertains to the following diversified funds (individually referred to as a "Fund", collectively referred to as the "Funds"): CMG Enhanced S&P 500(R) Index Fund CMG Large Cap Growth Fund CMG Large Cap Value Fund CMG Mid Cap Growth Fund CMG Mid Cap Value Fund CMG Small Cap Growth Fund CMG Small Cap Value Fund CMG Small/Mid Cap Fund CMG International Stock Fund INVESTMENT GOALS. The CMG Enhanced S&P 500(R) Index Fund seeks to outperform the total return, over the long run, of the Standard & Poor's 500 Composite Stock Index (the "S&P 500(R)"). The CMG Large Cap Growth Fund and CMG Large Cap Value Fund seek long-term growth by investing primarily in large capitalization equities. The CMG Mid Cap Growth Fund and CMG Mid Cap Value Fund seek long-term growth by investing primarily in middle capitalization equities. The CMG Small Cap Growth Fund and CMG Small Cap Value Fund seek long-term growth by investing primarily in small capitalization equities. The CMG Small/Mid Cap Fund seeks long-term capital appreciation by investing in small and middle capitalization equities. The CMG International Stock Fund seeks long-term capital appreciation. FUND SHARES. Each Fund may issue 100 million shares of no par value capital stock, which are offered continuously at net asset value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES: USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. 119 SECURITY VALUATION. Equity securities and exchange traded funds are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net asset value of the Funds' shares are determined as of such times. Foreign currency exchange rates are generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign securities and such exchange rates may occur between the times at which they are determined and the close of the customary trading session of the NYSE, which would not be reflected in the computation of the Funds' net asset value. If events materially affecting the values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS. Each Fund may engage in repurchase agreement transactions with institutions that the Funds' investment advisor has determined are creditworthy. Each Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon each Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. INCOME RECOGNITION. Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date, except for certain foreign securities which are recorded as soon after ex-date as the Funds become aware of such, net of non-reclaimable tax withholdings. The Funds estimate components of distributions from real estate investment trusts (REITs). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. If the Funds no longer own the applicable securities, any distributions received in excess of income are recorded as realized gains. Effective February 1, 2004, the Funds adopted the policy to reduce cost of investments for financial statement purposes by the distributions received in excess of income from REITs. The cumulative effect of this accounting change did not impact the net assets of the Funds, but resulted in reclassifications as follows:
DECREASE IN DECREASE IN UNDISTRIBUTED COST NET INVESTMENT INCOME ----------- ------------------------- CMG Enhanced S&P 500(R) Index Fund $ 124 $ 124 CMG Small Cap Value Fund 12,920 12,920
The effect of the change for the year ended July 31, 2004 is as follows:
INCREASE IN INCREASE IN UNREALIZED DECREASE IN NET NET REALIZED APPRECIATION INVESTMENT INCOME GAIN ------------ ----------------- ------------ CMG Enhanced S&P 500(R) Index Fund $ 266 $ 266 $ - CMG Small Cap Value Fund 13,123 14,124 1,001
120 FOREIGN CURRENCY TRANSACTIONS. The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. For financial statement purposes, the Funds do not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. FEDERAL INCOME TAX STATUS. Each Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, each Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that each Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. FOREIGN CAPITAL GAINS TAXES. Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 30%. The Funds accrue for such foreign taxes on net realized and unrealized gains at the appropriate rate for each jurisdiction. DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on ex-date. Net realized capital gains, if any, are distributed at least annually. NOTE 3. FEDERAL TAX INFORMATION: The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended July 31, 2004, permanent differences resulting primarily from differing treatments for section 988 reclassification of foreign currency, foreign capital gains tax, net operating loss reclassifications, non-deductible excise tax paid and REIT adjustments were identified and reclassified among the components of the Funds' net assets as follows:
UNDISTRIBUTED OR ACCUMULATED ACCUMULATED NET INVESTMENT NET REALIZED INCOME (LOSS) GAIN (LOSS) PAID-IN CAPITAL -------------- ------------ --------------- CMG Enhanced S&P 500(R) Index Fund $ (2,353) $ 2,353 $ - CMG Large Cap Growth Fund - - - CMG Large Cap Value Fund 97 160 (257) CMG Mid Cap Growth Fund 49,406 1,964 (51,370) CMG Mid Cap Value Fund - - - CMG Small Cap Growth Fund 185,583 (185,583) - CMG Small Cap Value Fund (1,531) 1,532 (1) CMG Small/Mid Cap Fund 342,645 25,823 (368,468) CMG International Stock Fund (446,361) 446,361 -
Net investment income and net realized gains (losses), as disclosed on the Statements of Operations, and net assets were not affected by these reclassifications. 121 The tax character of distributions paid during the year ended July 31, 2004, the period ended July 31, 2003 and the year ended October 31, 2002 was as follows:
JULY 31, 2004 ------------------------------ ORDINARY LONG-TERM INCOME* CAPITAL GAINS -------------- ------------- CMG Enhanced S&P 500(R) Index Fund $ 272,776 $ - CMG Large Cap Growth Fund 25,964 - CMG Large Cap Value Fund 82,818 - CMG Mid Cap Growth Fund 6,844 - CMG Mid Cap Value Fund 27,632 - CMG Small Cap Growth Fund 1,853,636 - CMG Small Cap Value Fund 703,708 - CMG Small/Mid Cap Fund - - CMG International Stock Fund 529,435 - JULY 31, 2003 ------------------------------ ORDINARY LONG-TERM INCOME* CAPITAL GAINS -------------- ------------- CMG International Stock Fund $ 92,056 $ - OCTOBER 31, 2002 ------------------------------ ORDINARY LONG-TERM INCOME* CAPITAL GAINS -------------- ------------- CMG International Stock Fund $ 69,418 $ -
* For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of July 31, 2004, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- CMG Enhanced S&P 500(R) Index Fund $ 1,482,394 $ 24,353 $ 2,427,255 CMG Large Cap Growth Fund 65,665 - 494,429 CMG Large Cap Value Fund 628,855 160 2,556,599 CMG Mid Cap Growth Fund - - 116,230 CMG Mid Cap Value Fund 144,632 5,955 1,602,845 CMG Small Cap Growth Fund 1,736,189 264,126 382,132 CMG Small Cap Value Fund 2,384,315 280,191 5,618,110 CMG Small/Mid Cap Fund - - 6,533,580 CMG International Stock Fund 1,033,476 3,661,470 7,522,674
* The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales. 122 Unrealized appreciation and depreciation at July 31, 2004, based on cost of investments for federal income tax purposes, excluding any unrealized appreciation and depreciation from changes in the value of other assets and liabilities resulting from changes in exchange rates, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION DEPRECIATION APPRECIATION ------------ ------------ ------------ CMG Enhanced S&P 500(R) Index Fund $ 6,057,121 $ (3,629,866) $ 2,427,255 CMG Large Cap Growth Fund 2,294,331 (1,799,902) 494,429 CMG Large Cap Value Fund 3,736,738 (1,180,139) 2,556,599 CMG Mid Cap Growth Fund 874,790 (758,560) 116,230 CMG Mid Cap Value Fund 2,358,543 (755,698) 1,602,845 CMG Small Cap Growth Fund 4,630,800 (4,248,668) 382,132 CMG Small Cap Value Fund 6,892,182 (1,274,072) 5,618,110 CMG Small/Mid Cap Fund 8,682,193 (2,148,613) 6,533,580 CMG International Stock Fund 12,555,242 (5,028,881) 7,526,361
The following capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF EXPIRATION ------------------------------------------------------------------- 2009 2010 2011 2012 TOTAL ---------- ----------- ---------- ---------- ---------- CMG Large Cap Growth Fund $ - $ - $ - $ 67,035 $ 67,035 CMG Mid Cap Growth Fund - - - 49,708 49,708 CMG Small/Mid Cap Fund - 11,217,812 55,830 - 11,273,642 CMG International Stock Fund 616,859 3,440,479 420,427 - 4,477,765
Capital loss carryforwards of $11,911,256 and $4,090,680 of the CMG Small/Mid Cap Fund and CMG International Stock Fund, respectively, were utilized during the year ended July 31, 2004. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. The capital loss carryforward of $4,477,765 of CMG International Stock Fund is subject to limitations under the Internal Revenue Code and may not be utilized for the year ended July 31, 2004. As a result, the Fund has $3,661,470 of undistributed long-term capital gains after the utilization of $4,090,680 of capital losses for the year ended July 31, 2004. Under current tax rules, certain currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of July 31, 2004, post-October currency losses and capital losses attributed to security transactions were deferred to August 1, 2004 as follows:
POST-OCTOBER POST-OCTOBER CURRENCY LOSSES CAPITAL LOSSES --------------- -------------- CMG Large Cap Growth Fund $ - $ 664,212 CMG Mid Cap Growth Fund 1,920 978,524
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES: Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Funds. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Funds' investment advisor and transfer agent, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Funds are managed, the investment personnel assigned to manage the Funds or the fees paid by the Funds. 123 INVESTMENT ADVISORY FEE. Each Fund's investment advisory fee is a unified fee. Columbia, out of the unified fee it receives from the Funds, pays all accounting fees, legal fees, transfer agent fees, custody fees and miscellaneous expenses of the Funds. The unified fee does not include brokerage fees, taxes, Trustees' fees, Trustee legal counsel fees, audit fees, interest expenses associated with any borrowings by the Funds or extraordinary expenses, if any. The unified fees are paid monthly to Columbia at the following annual rates based on average daily net assets: CMG Enhanced S&P 500(R) Index Fund 0.25% CMG Large Cap Growth Fund 0.50% CMG Large Cap Value Fund 0.50% CMG Mid Cap Growth Fund 0.70% CMG Mid Cap Value Fund 0.70% CMG Small Cap Growth Fund 0.80% CMG Small Cap Value Fund 0.80% CMG Small/Mid Cap Fund 0.75% CMG International Stock Fund 0.75%
PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and bookkeeping services to each Fund under a pricing, bookkeeping and fund administration agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated certain of those functions to State Street Corporation ("State Street"). As a result, Columbia pays fees to State Street under the Outsourcing Agreement. The pricing and bookkeeping fees for the Funds are included in the unified fee. TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Funds. The transfer agent fees for the Funds are included in the unified fee. Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia Funds Services, Inc. EXPENSE LIMITS AND FEE WAIVERS. Columbia has contractually agreed to reimburse the Funds through March 1, 2009 for certain expenses so that the expenses incurred by the Funds, including the investment advisory fees, would not exceed the following annual rates based on each Fund's average daily net assets: CMG Enhanced S&P 500(R) Index Fund 0.25% CMG Large Cap Growth Fund 0.50% CMG Large Cap Value Fund 0.50% CMG Mid Cap Growth Fund 0.70% CMG Mid Cap Value Fund 0.70% CMG Small Cap Growth Fund 0.80% CMG Small Cap Value Fund 0.80% CMG Small/Mid Cap Fund 0.75% CMG International Stock Fund 0.75%
FEES PAID TO OFFICERS AND TRUSTEES. The Funds pay no compensation to their officers, all of whom are employees of Columbia or its affiliates. The Funds' trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Funds' assets. OTHER. Columbia provides certain services to the Funds related to Sarbanes-Oxley compliance. The fees for such services are included in the unified fee. 124 NOTE 5. PORTFOLIO INFORMATION: For the year ended July 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were as follows:
PURCHASES SALES --------------- --------------- CMG Enhanced S&P 500 (R) Index Fund $ 122,728,927 $ 36,880,787 CMG Large Cap Growth Fund 79,070,049 38,627,216 CMG Large Cap Value Fund 59,895,121 15,590,010 CMG Mid Cap Growth Fund 38,711,378 21,457,115 CMG Mid Cap Value Fund 18,404,129 1,194,709 CMG Small Cap Growth Fund 31,832,572 19,589,823 CMG Small Cap Value Fund 30,855,166 18,198,654 CMG Small/Mid Cap Fund 65,877,649 95,513,154 CMG International Stock Fund 179,268,224 99,786,425
NOTE 6. LINE OF CREDIT: Effective July 23, 2004, the Funds and other affiliated funds began participating in a $350,000,000 credit facility, which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each Fund based on its borrowings. In addition, each Fund has agreed to pay commitment fees on its pro-rata portion of the unutilized line of credit. The commitment fee is included in the unified fee. Prior to July 23, 2004, the Funds participated in a $100,000,000 uncommitted line of credit along with the other funds of the Trust and several of the Columbia Funds, an affiliated group of funds managed by the investment advisor. The uncommitted line of credit, which was scheduled to expire on July 2, 2004, was extended by the Trust and expired on July 23, 2004. For the year ended July 31, 2004, the Funds did not borrow under these arrangements. NOTE 7. SHARES OF BENEFICIAL INTEREST: As of July 31, 2004, the Funds had shareholders that held greater than 5% of the shares outstanding. Subscription and redemption activity of these shareholders may have a material effect on the Funds. The numbers of shareholders greater than 5% and the aggregate percentage of shares outstanding held were as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD --------------- ---------------- CMG Enhanced S&P 500(R) Index Fund 3 100.00% CMG Large Cap Growth Fund 3 100.00% CMG Large Cap Value Fund 3 100.00% CMG Mid Cap Growth Fund 3 100.00% CMG Mid Cap Value Fund 3 99.92% CMG Small Cap Growth Fund 3 100.00% CMG Small Cap Value Fund 3 100.00% CMG Small/Mid Cap Fund 9 87.92% CMG International Stock Fund 3 85.18%
125 NOTE 8. OTHER During the year ended July 31, 2004, the CMG Mid Cap Value Fund received a reimbursement of $4,842 from Columbia. This reimbursement was due to a trading error that resulted in a loss to the Fund. During the year ended July 31, 2004, the CMG International Stock Fund purchased shares of Compass Group PLC in error. This position was subsequently sold off at a loss of $47,741 and the Fund was reimbursed by Columbia. NOTE 9. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES: FOREIGN SECURITIES. There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. INDUSTRY FOCUS. The Funds may focus their investments in certain industries, subjecting them to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or CFDI were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and CFDI, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and CFDI alleging that Columbia and CFDI had violated certain New York antifraud statutes. If either Columbia or CFDI is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, CFDI or any company that is an affiliated person of Columbia and CFDI from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia that, if these results occur, it will seek exemptive relief from the SEC to permit it to continue to serve as your fund's investment advisor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and CFDI entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and CFDI agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and CFDI to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and CFDI's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. 126 In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended July 31, 2004, Columbia has assumed legal, consulting services and Trustees' fees incurred by the Funds in connection with these matters as follows: CMG Enhanced S&P 500(R) Index Fund $ 4,268 CMG Large Cap Growth Fund 1,854 CMG Large Cap Value Fund 2,045 CMG Mid Cap Growth Fund 889 CMG Mid Cap Value Fund 986 CMG Small Cap Growth Fund 1,657 CMG Small Cap Value Fund 1,799 CMG Small/Mid Cap Fund 3,385 CMG International Stock Fund 6,643
127 Report of Independent Registered Public Accounting Firm TO THE TRUSTEES OF CMG FUND TRUST AND SHAREHOLDERS OF CMG ENHANCED S&P 500(R) INDEX FUND, CMG LARGE CAP GROWTH FUND, CMG LARGE CAP VALUE FUND, CMG MID CAP GROWTH FUND, CMG MID CAP VALUE FUND, CMG SMALL CAP GROWTH FUND, CMG SMALL CAP VALUE FUND, CMG SMALL/MID CAP FUND AND CMG INTERNATIONAL STOCK FUND In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of CMG Enhanced S&P 500(R) Index Fund, CMG Large Cap Growth Fund, CMG Large Cap Value Fund, CMG Mid Cap Growth Fund, CMG Mid Cap Value Fund, CMG Small Cap Growth Fund, CMG Small Cap Value Fund, CMG Small/Mid Cap Fund and CMG International Stock Fund (the "Funds")(each a series of CMG Fund Trust), at July 31, 2004, and the results of their operations, the changes in their net assets, and their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 16, 2004 128 Unaudited Information FEDERAL INCOME TAX INFORMATION CMG ENHANCED S&P 500(R) INDEX FUND For the fiscal year ended July 31, 2004, the Fund designates long-term capital gains of $24,353. 48.83% of the ordinary income distributed by the Fund, for the year ended July 31, 2004, qualifies for the corporate dividends received deduction. For non-corporate shareholders 58.71%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. CMG LARGE CAP GROWTH FUND 100.00% of the ordinary income distributed by the Fund, for the period ended July 31, 2004, qualifies for the corporate dividends received deduction. For non-corporate shareholders 100.00%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period September 10, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. CMG LARGE CAP VALUE FUND For the period ended July 31, 2004, the Fund designates long-term capital gains of $160. 88.65% of the ordinary income distributed by the Fund, for the period ended July 31, 2004, qualifies for the corporate dividends received deduction. For non-corporate shareholders 94.46%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period September 10, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. CMG MID CAP GROWTH FUND 7.75% of the ordinary income distributed by the Fund, for the year ended July 31, 2004, qualifies for the corporate dividends received deduction. For non-corporate shareholders 7.75%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. CMG MID CAP VALUE FUND For the fiscal year ended July 31, 2004, the Fund designates long-term capital gains of $5,955. 100.00% of the ordinary income distributed by the Fund, for the year ended July 31, 2004, qualifies for the corporate dividends received deduction. 129 For non-corporate shareholders 100.00%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. CMG SMALL CAP GROWTH FUND For the fiscal year ended July 31, 2004, the Fund designates long-term capital gains of $264,126. CMG SMALL CAP VALUE FUND For the fiscal year ended July 31, 2004, the Fund designates long-term capital gains of $280,191. 18.91% of the ordinary income distributed by the Fund, for the year ended July 31, 2004, qualifies for the corporate dividends received deduction. For non-corporate shareholders 18.82%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. CMG INTERNATIONAL STOCK FUND For the fiscal year ended July 31, 2004, the Fund designates long-term capital gains of $3,661,470. Foreign taxes paid during the fiscal year ended July 31, 2004, amounting to $462,739 ($0.04 per share) are expected to be passed through to shareholders as 100% allowable foreign tax credits on Form 1099-DIV for the year ending December 31, 2004. For non-corporate shareholders 100.00%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. Gross income derived from sources within foreign countries amounted to $2,236,775 ($0.18 per share) for the fiscal year ended July 31, 2004. 130 Trustees The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and Officers of the CMG Fund Trust, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios in the fund complex overseen by the Trustee, and other directorships they hold are shown below. Each Officer listed below serves as an Officer of the CMG Fund Trust. Each Officer listed below held such office for the period ended July 31, 2004. The Statement of Additional Information (SAI) contains additional information about the Trustees and is available without charge upon request by calling the fund's distributor at 800-345-6611.
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------- -------------------------------------------------------------- DISINTERESTED TRUSTEES Douglas A. Hacker (age 48) Executive Vice President-Strategy of United Airlines P.O. Box 66100 (airline) since December 2002 (formerly President of UAL Chicago, IL 60666 Loyalty Services (airline) from September 2001 to December Trustee (since 2003) 2002; Executive Vice President and Chief Financial Officer of United Airlines from July 1999 to September 2001; Senior Vice President-Finance of United Airlines from March 1993 to July 1999). Oversees 118, Orbitz, Inc. (on-line travel company) Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since 9534 W. Gull Lake Drive September 2004; Private Investor since March 2004 (formerly Richland, MI 49083-8530 Chief Administrative Officer and Senior Vice President, Kmart Trustee (since 2003) Holding Corporation (consumer goods) from September 2003 to March 2004; Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September 1999). Oversees 118, None Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and 10701 Charleston Drive Chief Executive Officer, U.S. Plywood Corporation (building Vero Beach, FL 32963 products manufacturer)). Oversees 120(3), None Trustee (since 2003) Charles R. Nelson (age 62) Professor of Economics, University of Washington, since Department of Economics January 1976; Ford and Louisa Van Voorhis Professor of University of Washington Political Economy, University of Washington, since September Seattle, WA 98195 1993; (formerly Director, Institute for Economic Research, Trustee (since 2003) University of Washington from September 2001 to June 2003) Adjunct Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August 84 College Road 1999, Boston College (formerly Dean, Boston College School of Chestnut Hill, MA 02467-3838 Management from September 1977 to September 1999). Oversees Trustee (since 2003) 121(3),(4), Saucony, Inc. (athletic footwear and apparel) Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
131
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------- -------------------------------------------------------------- DISINTERESTED TRUSTEES Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance 2208 Tawny Woods Place from 1975 to 1999, College of Business, Boise State Boise, ID 83706 University); Chartered Financial Analyst. Oversees 118, None Trustee (since 2003) Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private 227 West Monroe Street, equity investing) since September 1994. Oversees 118, Anixter Suite 3500 International (network support equipment distributor), Jones Chicago, IL 60606 Lang LaSalle (real estate management services) and Ventas, Trustee and Chairman of the Board(5) (since 2003) Inc (real estate investment trust) and MONY Group (life insurance). Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global 359 Stickney Hill Road Education Industry, IBM Corporation (computer and technology) Hopkinton, NH 03229 from 1994 to 1997). Oversees 119(4), Chairman of the Board of Trustee (since 2003) Directors, Enesco Group, Inc. (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief 100 S.W. Market Street #1500 Executive Officer, The Regence Group (regional health Portland, OR 97207 insurer); Chairman and Chief Executive Officer, BlueCross Trustee (since 1992) BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company. Oversees 118, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEES William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private 399 Park Avenue equity) since February 1999 (formerly Founding Partner, Suite 3204 Development Capital LLC from November 1996 to February 1999). New York, NY 10022 Oversees 120(3), Lee Enterprises (print media), WR Hambrecht + Trustee (since 2003) Co. (financial service provider), First Health (healthcare), Reader's Digest (publishing) and OPENFIELD Solutions (retail industry technology provider)
- --------------- (1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. Each Trustee serves for an indefinite term in accordance with the current Bylaws of the Trust until the date a Trustee resigns, retires or is removed in accordance with the Bylaws of the Trust. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. (5) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. 132 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ------------------------------------------------------- -------------------------------------------------------------- Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty One Financial Center All-Star Funds since June 2001; Assistant Treasurer of Boston, MA 02111 Columbia Acorn and Wanger Funds since June 2004 (formerly Chief Accounting Officer Controller of the Columbia Funds and of the Liberty All-Star Funds from May 2002 to May 2004); Controller and Chief Accounting Officer of the Galaxy Funds since September 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001). Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star One Financial Center Funds since 2004; Assistant Treasurer of Columbia Acorn and Boston, MA 02111 Wanger Funds since June 2004 (formerly Assistant Treasurer of Controller (since 2004) the Columbia Funds and of the Liberty All-Star Funds from June 2002 to May 2004; Vice President, Product Strategy & Development of Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999). J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004; One Financial Center Treasurer of the Columbia Funds and of the Liberty All-Star Boston, MA 02111 Funds since December 2000; Vice President of the Advisor Treasurer (since 2000) and since April 2003 (formerly Chief Accounting Officer and President (since 2004) Controller of the Liberty Funds and Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December 2002 (formerly Vice President of Colonial from February 1998 to October 2000). David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star One Financial Center Funds since December 2003; Senior Counsel, Bank of America Boston, MA 02111 Corporation (formerly FleetBoston Financial Corporation) Secretary (since 2003) since January 1996; Associate General Counsel, Columbia Management Group since November 2002.
133 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - TRUSTEES - DOUGLAS A. HACKER JANET LANGFORD KELLY RICHARD W. LOWRY WILLIAM E. MAYER CHARLES R. NELSON JOHN J. NEUHAUSER PATRICK J. SIMPSON THOMAS E. STITZEL THOMAS C. THEOBALD ANNE-LEE VERVILLE RICHARD L. WOOLWORTH - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, INC. 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02266-8081 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110-2624 - TRANSFER AGENT - COLUMBIA FUNDS SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 CMC-02/529S-0804 (09/04) 2576 A description of the policies and procedures that the fund uses to determine how to vote proxies relating to its portfolio securities and a copy of a fund's voting record are available (i) at www.columbiamanagement.com; and (ii) on the Securities and Exchange Commission's website at www.sec.gov. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER, INC. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA MANAGEMENT REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS, WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT CAREFULLY BEFORE YOU INVEST. The manager's views contained in this report are subject to change at any time, based on market and other considerations. Portfolio changes should not be considered recommendations for action by individual investors. Funds distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth Avenue, Portland, Oregon 97201 COLUMBIA MANAGEMENT(R) CMG SMALL CAP FUND A PORTFOLIO OF CMG FUND TRUST ANNUAL REPORT JULY 31, 2004 NOT FDIC MAY LOSE VALUE INSURED ----------------- ADVISED BY COLUMBIA MANAGEMENT ADVISORS, INC. NO BANK GUARANTEE CMG SMALL CAP FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small Cap Fund returned 9.74% for the 12-month period ended July 31, 2004. Fund performance was lower than the Russell 2000 Growth Index and the Russell 2000 Index, which returned 11.32% and 17.06%, respectively, for the same period. However, the fund outperformed the Lipper Small Cap Growth Funds Category average, which returned 9.62% for the period.(1) The fund benefited from its emphasis on health care and technology stocks. However, it lacked significant exposure to specialty semiconductor stocks, which were among the best technology performers during the year. With a new management team in place, we have taken steps aimed at reducing volatility and improving performance going forward. Fueled by a strengthening US economy, the stock market moved higher during the first six months of this reporting period. In this environment, investors favored small and highly leveraged, speculative companies that have the most to gain in an improving economy. Because the fund focuses on small-cap stocks, it was the beneficiary of this trend early in the reporting period. However, sentiment changed dramatically as investors reacted to a sluggish employment picture, the threat of higher interest rates and concerns about national security. The market's focus shifted from small companies to larger, more stable companies, and that shift hurt small-cap stocks as the year wore on. While the fund's substantial exposure to technology helped performance in the first half of the reporting period, its emphasis on the technology services and software industry was out of step with its benchmarks. Within technology, the fund was underrepresented in specialty semiconductor stocks, which were the best performers for the benchmarks. The fund delivered a solid return for the year on the strength of many of its energy and health care holdings. In energy, rising oil prices boosted oil service stocks XTO Energy and National-Oilwell (1.8% and 2.0% of net assets, respectively). The energy sector also benefited from the fact that companies have begun exploring for new energy sources after several years of under investment. In health care, the fund's investments in DaVita, a dialysis services company, and Kyphon, a medical equipment and supply company, also helped performance (1.6% and 0.6% of net assets, respectively). Although US stock markets have traded lower during the past few months, we see reasons for optimism--and attractive investment opportunities-ahead. In light of our expectation for modest but stable growth over the near term, we believe that stock prices have become more attractive. As part of a restructuring of the fund, we have taken steps to limit the fund's exposure to any one industry in order to help manage risk. We have also introduced a - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 1 systematic process that places more emphasis on valuations relative to earnings growth in selecting individual stocks for the portfolio. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) Amphenol 2.5 Renal Care Group 2.0 National-Oilwell 2.0 Education Management 1.9 XTO Energy 1.8 United Defense Industries 1.6 DaVita 1.6 Polycom 1.6 ArthroCare 1.6 Manhattan Associates 1.5
We appreciate your continued confidence in the CMG Small Cap Fund. The Columbia Investment Team July 31, 2004 Investments in small-cap companies may be subject to greater volatility and price fluctuations because small companies often have narrower markets and limited financial resources and their stocks tend to be thinly traded and less liquid than investments in larger companies. Holdings are calculated as a percentage of net assets and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weights within the portfolio may change as market conditions change. 2 [CHART] GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1994 TO JULY 31, 2004
CMG SMALL CAP FUND RUSSELL 2000 INDEX RUSSELL 2000 GROWTH INDEX 7/31/94 $ 10,000 $ 10,000 $ 10,000 8/31/94 $ 10,422 $ 10,557 $ 10,735 9/30/94 $ 10,542 $ 10,522 $ 10,781 10/31/94 $ 10,668 $ 10,481 $ 10,898 11/30/94 $ 10,205 $ 10,058 $ 10,456 12/31/94 $ 10,532 $ 10,328 $ 10,704 1/31/95 $ 10,277 $ 10,198 $ 10,487 2/28/95 $ 10,738 $ 10,622 $ 10,970 3/31/95 $ 11,035 $ 10,805 $ 11,292 4/30/95 $ 11,147 $ 11,045 $ 11,462 5/31/95 $ 11,320 $ 11,235 $ 11,612 6/30/95 $ 11,992 $ 11,818 $ 12,412 7/31/95 $ 12,723 $ 12,499 $ 13,379 8/31/95 $ 12,905 $ 12,757 $ 13,544 9/30/95 $ 13,353 $ 12,986 $ 13,823 10/31/95 $ 13,074 $ 12,405 $ 13,143 11/30/95 $ 13,799 $ 12,926 $ 13,722 12/31/95 $ 14,364 $ 13,268 $ 14,027 1/31/96 $ 14,356 $ 13,253 $ 13,911 2/29/96 $ 15,015 $ 13,667 $ 14,545 3/31/96 $ 15,256 $ 13,945 $ 14,833 4/30/96 $ 16,713 $ 14,691 $ 15,972 5/31/96 $ 17,732 $ 15,270 $ 16,791 6/30/96 $ 16,657 $ 14,643 $ 15,700 7/31/96 $ 15,245 $ 13,364 $ 13,783 8/31/96 $ 16,338 $ 14,141 $ 14,803 9/30/96 $ 17,351 $ 14,694 $ 15,565 10/31/96 $ 17,033 $ 14,467 $ 14,894 11/30/96 $ 17,456 $ 15,063 $ 15,309 12/31/96 $ 17,498 $ 15,458 $ 15,607 1/31/97 $ 18,215 $ 15,767 $ 15,997 2/28/97 $ 17,221 $ 15,386 $ 15,031 3/31/97 $ 16,058 $ 14,660 $ 13,970 4/30/97 $ 16,143 $ 14,701 $ 13,808 5/31/97 $ 17,934 $ 16,335 $ 15,883 6/30/97 $ 18,830 $ 17,036 $ 16,421 7/31/97 $ 20,267 $ 17,828 $ 17,262 8/31/97 $ 21,114 $ 18,236 $ 17,780 9/30/97 $ 22,852 $ 19,571 $ 19,199 10/31/97 $ 21,627 $ 18,712 $ 18,045 11/30/97 $ 21,125 $ 18,591 $ 17,616 12/31/97 $ 21,332 $ 18,916 $ 17,626 1/31/98 $ 20,509 $ 18,617 $ 17,392 2/28/98 $ 21,885 $ 19,993 $ 18,927 3/31/98 $ 23,546 $ 20,817 $ 19,721 4/30/98 $ 23,742 $ 20,931 $ 19,841 5/31/98 $ 21,738 $ 19,803 $ 18,398 6/30/98 $ 22,218 $ 19,844 $ 18,586 7/31/98 $ 21,276 $ 18,237 $ 17,034 8/31/98 $ 16,429 $ 14,695 $ 13,103 9/30/98 $ 17,740 $ 15,846 $ 14,431 10/31/98 $ 18,058 $ 16,493 $ 15,185 11/30/98 $ 19,105 $ 17,357 $ 16,363 12/31/98 $ 21,106 $ 18,431 $ 17,844 1/31/99 $ 20,880 $ 18,676 $ 18,647 2/28/99 $ 18,546 $ 17,164 $ 16,941 3/31/99 $ 18,913 $ 17,431 $ 17,544 4/30/99 $ 19,526 $ 18,993 $ 19,093 5/31/99 $ 19,971 $ 19,270 $ 19,123 6/30/99 $ 21,834 $ 20,141 $ 20,131 7/31/99 $ 22,410 $ 19,590 $ 19,509 8/31/99 $ 21,902 $ 18,865 $ 18,779 9/30/99 $ 22,292 $ 18,869 $ 19,142 10/31/99 $ 24,690 $ 18,946 $ 19,632 11/30/99 $ 28,124 $ 20,077 $ 21,707 12/31/99 $ 33,775 $ 22,350 $ 25,534 1/31/2000 $ 33,991 $ 21,990 $ 25,296 2/29/2000 $ 43,230 $ 25,620 $ 31,183 3/31/2000 $ 41,764 $ 23,932 $ 27,906 4/30/2000 $ 36,640 $ 22,491 $ 25,087 5/31/2000 $ 34,778 $ 21,180 $ 22,889 6/30/2000 $ 39,884 $ 23,027 $ 25,847 7/31/2000 $ 36,601 $ 22,285 $ 23,632 8/31/2000 $ 40,895 $ 23,986 $ 26,118 9/30/2000 $ 39,095 $ 23,281 $ 24,820 10/31/2000 $ 37,156 $ 22,242 $ 22,804 11/30/2000 $ 32,627 $ 19,958 $ 18,663 12/31/2000 $ 35,133 $ 21,672 $ 19,805 1/31/2001 $ 35,614 $ 22,802 $ 21,408 2/28/2001 $ 31,718 $ 21,306 $ 18,473 3/31/2001 $ 29,139 $ 20,264 $ 16,793 4/30/2001 $ 32,438 $ 21,849 $ 18,849 5/31/2001 $ 32,678 $ 22,386 $ 19,286 6/30/2001 $ 33,397 $ 23,158 $ 19,813 7/31/2001 $ 31,657 $ 21,906 $ 18,123 8/31/2001 $ 29,317 $ 21,198 $ 16,990 9/30/2001 $ 24,700 $ 18,345 $ 14,248 10/31/2001 $ 26,439 $ 19,418 $ 15,618 11/30/2001 $ 28,297 $ 20,921 $ 16,923 12/31/2001 $ 30,284 $ 22,212 $ 17,977 1/31/2002 $ 29,324 $ 21,981 $ 17,337 2/28/2002 $ 27,705 $ 21,378 $ 16,215 3/31/2002 $ 29,625 $ 23,095 $ 17,624 4/30/2002 $ 28,665 $ 23,305 $ 17,244 5/31/2002 $ 27,584 $ 22,270 $ 16,235 6/30/2002 $ 25,786 $ 21,166 $ 14,858 7/31/2002 $ 22,127 $ 17,970 $ 12,574 8/31/2002 $ 22,607 $ 17,925 $ 12,568 9/30/2002 $ 21,587 $ 16,638 $ 11,661 10/31/2002 $ 22,006 $ 17,172 $ 12,251 11/30/2002 $ 23,324 $ 18,704 $ 13,465 12/31/2002 $ 22,126 $ 17,662 $ 12,536 1/31/2003 $ 22,066 $ 17,173 $ 12,195 2/28/2003 $ 21,766 $ 16,654 $ 11,869 3/31/2003 $ 22,186 $ 16,869 $ 12,048 4/30/2003 $ 23,925 $ 18,468 $ 13,188 5/31/2003 $ 26,083 $ 20,450 $ 14,675 6/30/2003 $ 26,743 $ 20,820 $ 14,958 7/31/2003 $ 27,703 $ 22,123 $ 16,089 8/31/2003 $ 29,321 $ 23,136 $ 16,953 9/30/2003 $ 28,483 $ 22,708 $ 16,524 10/31/2003 $ 31,299 $ 24,616 $ 17,951 11/30/2003 $ 32,019 $ 25,490 $ 18,536 12/31/2003 $ 31,959 $ 26,007 $ 18,620 1/31/2004 $ 33,937 $ 27,136 $ 19,597 2/29/2004 $ 33,818 $ 27,380 $ 19,568 3/31/2004 $ 33,459 $ 27,635 $ 19,660 4/30/2004 $ 31,780 $ 26,225 $ 18,673 5/31/2004 $ 32,380 $ 26,642 $ 19,045 6/30/2004 $ 33,400 $ 27,764 $ 19,679 7/31/2004 $ 30,409 $ 25,894 $ 17,913
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG Small Cap Fund 08/30/89 9.74 6.29 11.76 Russell 2000 Index 17.06 5.74 9.98 Russell 2000 Growth Index 11.32 -1.69 6.00
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG Small Cap Fund 08/30/89 24.89 8.87 12.90 Russell 2000 Index 33.37 6.63 10.93 Russell 2000 Growth Index 31.55 -0.45 7.16
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. The Russell 2000 Index is an unmanaged index that tracks the performance of the 2,000 smallest of the 3,000 largest U.S. companies based on market capitalization. The Russell 2000 Growth Index is also an unmanaged index that measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3 UNDERSTANDING YOUR EXPENSES - CMG SMALL CAP FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 899.25 1,020.98 3.68 3.92
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.78%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 4 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 5 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED YEAR ENDED OCTOBER 31, JULY 31, JULY 31, ------------------------------ 2004 2003(a) 2002 2001 ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 4.62 $ 3.67 $ 4.41 $ 18.78 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.03)(c) (0.02)(c) (0.02)(c) (0.01) Net realized and unrealized gain (loss) on investments 0.48 0.97 (0.72) (2.18) ----------- ----------- ----------- ----------- Total from investment operations 0.45 0.95 (0.74) (2.19) ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains - - -(d) (12.18) ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 5.07 $ 4.62 $ 3.67 $ 4.41 =========== =========== =========== =========== Total return (e) 9.74% 25.89%(f) (16.76)% (28.84)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 292,028 $ 293,924 $ 227,874 $ 283,521 Ratio of net expenses to average net assets (g) 0.79% 0.81%(h) 0.79% 0.82% Ratio of net investment loss to average net assets (g) (0.62)% (0.55)%(h) (0.49)% (0.22)% Portfolio turnover rate 123% 89%(f) 120% 160% YEAR ENDED OCTOBER 31, ---------------------------- 2000 1999(b) ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 13.59 $ 9.96 ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.09) (0.04) Net realized and unrealized gain (loss) on investments 6.80 3.69 ----------- ----------- Total from investment operations 6.71 3.65 ----------- ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains (1.52) (0.02) ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 18.78 $ 13.59 =========== =========== Total return (e) 50.49% 36.70% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 258,480 $ 240,129 Ratio of net expenses to average net assets (g) 0.79% 0.79% Ratio of net investment loss to average net assets (g) (0.39)% (0.33)% Portfolio turnover rate 163% 186%
(a) The Fund changed its fiscal year end from October 31 to July 31. (b) Per share amounts have been adjusted to retroactively reflect a 4 for 1 share split effective September 1, 1999. (c) Per share data was calculated using average shares outstanding during the period. (d) Rounds to less than $0.01 per share. (e) Total return at net asset value assuming all distributions reinvested. (f) Not annualized. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. See Accompanying Notes to Financial Statements. 6 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE ---------- -------------- Common Stocks (98.5%) Consumer Discretionary (13.6%) Auto Components (3.2%) Autoliv, Inc. 98,732 $ 4,155,630 Gentex Corp. 48,055 1,720,369 Wabtec Corp. 186,200 3,388,840 -------------- 9,264,839 -------------- Hotels, Restaurants & Leisure (3.2%) Applebee's International, Inc. 57,500 1,531,800 CBRL Group, Inc. 54,080 1,796,538 Cheesecake Factory, Inc. (a) 25,100 1,048,427 P.F. Chang's China Bistro, Inc. (a) 33,400 1,483,962 Scientific Games Corp., Class A (a) 104,330 1,858,117 WMS Industries, Inc. (a) 58,930 1,605,253 -------------- 9,324,097 -------------- Internet & Catalog Retail (0.7%) Insight Enterprises, Inc. (a) 132,940 2,132,358 -------------- Leisure Equipment & Products (1.1%) Nautilus Group, Inc. 167,400 3,100,248 -------------- Media (2.7%) Entercom Communications Corp. (a) 41,689 1,602,942 Entravision Communications Corp., Class A (a) 120,890 854,692 Getty Images, Inc. (a) 57,120 3,119,894 Radio One, Inc., Class D (a) 161,732 2,459,944 -------------- 8,037,472 -------------- Specialty Retail (2.0%) Advance Auto Parts, Inc. (a) 23,370 867,494 Aeropostale, Inc. (a) 85,110 2,594,153 PETCO Animal Supplies, Inc. (a) 76,770 2,293,120 -------------- 5,754,767 -------------- Textiles, Apparel & Luxury Goods (0.7%) Columbia Sportswear Co. (a) 39,770 2,177,407 -------------- Consumer Staples (0.3%) Personal Products (0.3%) NBTY, Inc. (a) 35,450 771,392 -------------- Energy (9.9%) Energy Equipment & Services (7.1%) Atwood Oceanics, Inc. (a) 33,570 1,297,816 CAL Dive International, Inc. (a) 66,747 2,069,157 Input/Output, Inc. (a) 68,200 656,766 Key Energy Services, Inc. (a) 258,240 2,603,059 Lone Star Technologies, Inc. (a) 38,430 1,280,488 Maverick Tube Corp. (a) 35,570 1,025,839 National-Oilwell, Inc. (a) 171,688 5,742,964
See Accompanying Notes to Financial Statements. 7
SHARES VALUE ---------- -------------- Common Stocks (continued) Energy Equipment & Services (continued) Patterson-UTI Energy, Inc. 222,760 $ 4,060,915 Precision Drilling Corp. (a) 29,156 1,449,928 Veritas DGC, Inc. (a) 21,650 533,240 -------------- 20,720,172 -------------- Oil & Gas (2.8%) Global Industries Ltd. (a) 172,970 873,499 Quicksilver Resources, Inc. (a) 65,620 2,078,185 XTO Energy, Inc. 178,325 5,331,917 -------------- 8,283,601 -------------- Financials (3.5%) Capital Markets (1.3%) Affiliated Managers Group, Inc. (a) 79,340 3,642,499 -------------- Commercial Banks (0.3%) Umpqua Holdings Corp. 34,500 780,045 -------------- Diversified Financial Services (0.4%) Euronet Worldwide, Inc. (a) 69,600 1,252,800 -------------- Insurance (1.5%) Allmerica Financial Corp. (a) 71,730 2,138,271 ProAssurance Corp. (a) 72,670 2,302,912 -------------- 4,441,183 -------------- Health Care (15.5%) Biotechnology (1.1%) Connetics Corp. (a) 113,660 3,129,060 Isolagen, Inc. (a) 12,990 103,790 -------------- 3,232,850 -------------- Health Care Equipment & Supplies (3.4%) ArthroCare Corp. (a) 175,560 4,675,163 Kyphon, Inc. (a) 67,022 1,811,605 Regeneration Technologies, Inc. (a) 83,330 809,968 ResMed, Inc. (a) 53,980 2,645,020 -------------- 9,941,756 -------------- Health Care Providers & Services (9.2%) Chemed Corp. 29,470 1,379,196 DaVita, Inc. (a) 156,559 4,754,697 Dendrite International, Inc. (a) 45,200 673,932 Henry Schein, Inc. (a) 62,075 4,165,232 ICON PLC, ADR (a) 104,970 3,878,642 Kindred Healthcare, Inc. (a) 94,310 2,287,018 Pharmaceutical Product Development, Inc. (a) 41,600 1,458,496 Renal Care Group, Inc. (a) 186,250 5,933,925 United Surgical Partners International, Inc. (a) 68,470 2,412,883 -------------- 26,944,021 --------------
See Accompanying Notes to Financial Statements. 8
SHARES VALUE ---------- -------------- Common Stocks (continued) Pharmaceuticals (1.8%) MGI Pharma, Inc. (a) 53,840 $ 1,508,058 Nektar Therapeutics (a) 117,300 2,057,442 Salix Pharmaceuticals Ltd. (a) 76,965 1,640,894 -------------- 5,206,394 -------------- Industrials (15.1%) Aerospace & Defense (2.1%) Armor Holdings, Inc. (a) 41,010 1,496,865 United Defense Industries, Inc. (a) 138,750 4,807,687 -------------- 6,304,552 -------------- Air Freight & Logistics (0.7%) UTI Worldwide, Inc. 39,670 2,042,608 -------------- Commercial Services & Supplies (6.3%) Corinthian Colleges, Inc. (a) 149,724 2,802,833 Corporate Executive Board Co. 68,503 3,884,120 Education Management Corp. (a) 201,492 5,593,418 Ionics, Inc. (a) 32,040 866,362 Resources Connection, Inc. (a) 72,670 2,818,143 Tetra Tech, Inc. (a) 160,500 2,590,470 -------------- 18,555,346 -------------- Construction & Engineering (0.9%) URS Corp. (a) 110,050 2,657,707 -------------- Electrical Equipment (1.2%) Power-One, Inc. (a) 188,340 1,651,742 Roper Industries, Inc. 30,710 1,719,760 -------------- 3,371,502 -------------- Machinery (3.3%) IDEX Corp. 66,410 2,131,097 Joy Global, Inc. 76,270 2,264,456 Kennametal, Inc. 73,530 3,235,320 Terex Corp. (a) 49,110 1,910,870 -------------- 9,541,743 -------------- Road & Rail (0.6%) Sirva, Inc. (a) 71,620 1,674,476 -------------- Information Technology (34.6%) Communications Equipment (4.2%) Aspect Communications Corp. (a) 191,590 1,622,767 F5 Networks, Inc. (a) 131,790 3,451,580 Ixia (a) 303,070 2,363,946 Polycom, Inc. (a) 244,800 4,719,744 -------------- 12,158,037 --------------
See Accompanying Notes to Financial Statements. 9
SHARES VALUE ---------- -------------- Common Stocks (continued) Computers & Peripherals (1.7%) Electronics for Imaging, Inc. (a) 210,434 $ 4,223,410 Stratasys, Inc. (a) 33,900 889,536 -------------- 5,112,946 -------------- Electronic Equipment & Instruments (7.4%) Amphenol Corp., Class A (a) 232,446 7,305,778 Artesyn Technologies, Inc. (a) 206,940 1,543,772 AVX Corp. 166,830 2,080,370 Benchmark Electronics, Inc. (a) 117,530 3,359,007 Electro Scientific Industries, Inc. (a) 121,200 3,120,900 KEMET Corp. (a) 179,950 1,815,696 National Instruments Corp. 80,919 2,350,697 -------------- 21,576,220 -------------- Internet Software & Services (3.3%) Ask Jeeves, Inc. (a) 50,530 1,469,412 Equinix, Inc. (a) 56,460 1,834,950 FindWhat.com (a) 71,740 1,169,362 Packeteer, Inc. (a) 264,610 2,482,042 Sapient Corp. (a) 162,400 1,135,176 SINA Corp. (a) 51,700 1,465,695 -------------- 9,556,637 -------------- IT Services (4.4%) Anteon International Corp. (a) 57,700 1,796,778 CACI International, Inc., Class A (a) 70,090 2,881,400 Cognizant Technology Solutions Corp., Class A (a) 103,370 2,847,844 Global Payments, Inc. 51,744 2,362,114 IDX Systems Corp. (a) 49,590 1,489,188 MPS Group, Inc. (a) 167,650 1,505,497 -------------- 12,882,821 -------------- Semiconductors & Semiconductor Equipment (5.7%) Axcelis Technologies, Inc. (a) 203,440 1,898,095 Credence Systems Corp. (a) 423,320 3,792,947 Integrated Device Technology, Inc. (a) 273,980 3,131,591 LTX Corp. (a) 84,700 688,611 PLX Technology, Inc. (a) 160,960 1,429,325 Power Integrations, Inc. (a) 51,200 1,033,216 Sigmatel, Inc. (a) 116,000 1,771,320 Silicon Laboratories, Inc. (a) 81,300 2,869,077 -------------- 16,614,182 -------------- Software (7.9%) Agile Software Corp. (a) 109,670 815,945 Altiris, Inc. (a) 69,810 1,752,929 Autodesk, Inc. 62,650 2,518,530 Cerner Corp. (a) 59,700 2,686,500 Citrix Systems, Inc. (a) 87,740 1,545,979 Embarcadero Technologies, Inc. (a) 151,820 1,153,832 Macromedia, Inc. (a) 159,160 3,215,032 Manhattan Associates, Inc. (a) 173,410 4,501,724
See Accompanying Notes to Financial Statements. 10
SHARES VALUE ---------- -------------- Common Stocks (continued) Software (continued) Parametric Technology Corp. (a) 459,460 $ 2,085,948 Quest Software, Inc. (a) 125,690 1,515,821 RadiSys Corp. (a) 102,130 1,267,433 -------------- 23,059,673 -------------- Materials (4.3%) Chemicals (1.6%) Airgas, Inc. 74,280 1,615,590 OM Group, Inc. (a) 88,690 2,839,854 -------------- 4,455,444 -------------- Metals & Mining (2.7%) Arch Coal, Inc. 46,090 1,556,459 GrafTech International Ltd. (a) 206,650 2,279,350 Massey Energy Co. 58,880 1,628,032 Steel Dynamics, Inc. 75,910 2,486,052 -------------- 7,949,893 -------------- Telecommunication Services (1.7%) Diversified Telecommunication Services (1.0%) PTEK Holdings, Inc. (a) 268,450 3,084,491 -------------- Wireless Telecommunication Services (0.7%) Wireless Facilities, Inc. (a) 261,110 1,953,103 -------------- Total Common Stocks (Cost of $255,418,562) 287,559,282 --------------
See Accompanying Notes to Financial Statements. 11
PAR VALUE ------------- -------------- Short-Term Obligation (2.4%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/04, due 08/02/04 at 1.230%, collateralized by a U.S. Treasury Bond maturing 11/15/09, market value of $7,188,953 (repurchase proceeds $7,044,722) (Cost of $7,044,000) $ 7,044,000 $ 7,044,000 -------------- Total Investments (100.9%) (Cost of $262,462,562) (b) 294,603,282 Other Assets & Liabilities, Net (-0.9%) (2,575,016) -------------- Net Assets (100.0%) $ 292,028,266 ==============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $263,609,314.
ACRONYM NAME ------- ---- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 12 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust STATEMENT OF ASSETS AND LIABILITIES July 31, 2004
ASSETS: Investments, at identified cost $ 262,462,562 -------------- Investments, at value $ 294,603,282 Cash 17 Receivable for: Investments sold 2,737,246 Interest 481 Dividends 11,949 Foreign tax reclaim 683 Deferred Trustees' compensation plan 2,175 -------------- Total assets 297,355,833 -------------- LIABILITIES: Payable for: Investments purchased 5,087,815 Investment advisory fee 194,238 Transfer agent fee 136 Trustees' fees 89 Audit fee 24,000 Custody fee 2,191 Deferred Trustees' fee 2,175 Other liabilities 16,923 -------------- Total liabilities 5,327,567 -------------- NET ASSETS $ 292,028,266 ============== NET ASSETS consist of: Paid-in capital $ 299,480,093 Accumulated net investment loss (2,269) Accumulated net realized loss (39,590,278) Net unrealized appreciation on investments 32,140,720 -------------- NET ASSETS $ 292,028,266 ============== Shares of capital stock outstanding 57,649,295 ============== Net asset value, offering and redemption price per share $ 5.07 ==============
See Accompanying Notes to Financial Statements. 13 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust STATEMENT OF OPERATIONS For the Year Ended July 31, 2004
NET INVESTMENT INCOME: Income: Dividends $ 462,451 Interest 93,135 Foreign withholding tax (1,425) -------------- Total income 554,161 -------------- Expenses: Investment advisory fee 2,528,059 Transfer agent fee 4,752 Trustees' fees 4,329 Custody fee 25,474 Non-recurring costs (See Note 8) 15,278 Other expenses 85,114 -------------- Total expenses 2,663,006 Non-recurring costs assumed by Investment Advisor (See Note 8) (15,278) Custody earnings credit (269) -------------- Net expenses 2,647,459 -------------- Net investment loss (2,093,298) -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 59,673,743 Net change in unrealized appreciation/depreciation on investments (26,262,756) -------------- Net gain 33,410,987 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 31,317,689 --------------
See Accompanying Notes to Financial Statements. 14 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED YEAR ENDED JULY 31, 2004 JULY 31, 2003(a) OCTOBER 31, 2002 --------------- ---------------- ---------------- Operations: Net investment loss $ (2,093,298) $ (1,028,938) $ (1,466,876) Net realized gain (loss) on investments 59,673,743 7,809,978 (50,084,055) Net change in unrealized appreciation/depreciation on investments (26,262,756) 52,680,821 (2,348,752) --------------- ---------------- ---------------- Net increase (decrease) from operations 31,317,689 59,461,861 (53,899,683) --------------- ---------------- ---------------- Distributions declared to shareholders: From net realized gains - - (74,803) --------------- ---------------- ---------------- Share Transactions: Subscriptions 36,596,397 26,844,551 122,231,939 Distributions reinvested - - 74,656 Redemptions (69,810,079) (20,255,831) (123,979,565) --------------- ---------------- ---------------- Net increase (decrease) from share transactions (33,213,682) 6,588,720 (1,672,970) --------------- ---------------- ---------------- Total increase (decrease) in net assets (1,895,993) 66,050,581 (55,647,456) --------------- ---------------- ---------------- NET ASSETS: Beginning of period 293,924,259 227,873,678 283,521,134 --------------- ---------------- ---------------- End of period $ 292,028,266 $ 293,924,259 $ 227,873,678 =============== ================ ================ Undistributed net investment income (accumulated net investment loss) $ (2,269) $ 79,879 $ 72,143 =============== ================ ================ Changes in shares: Subscriptions 7,088,643 6,868,955 28,006,875 Issued for distributions reinvested -- -- 15,143 Redemptions (13,033,571) (5,286,942) (30,327,298) --------------- ---------------- ---------------- Net increase (decrease) (5,944,928) 1,582,013 (2,305,280) =============== ================ ================
(a) The Fund changed its fiscal year end from October 31 to July 31. See Accompanying Notes to Financial Statements. 15 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust NOTES TO FINANCIAL STATEMENTS July 31, 2004 NOTE 1. ORGANIZATION: CMG Small Cap Fund (the "Fund"), a series of CMG Fund Trust (the "Trust"), is a diversified portfolio. The Trust is an Oregon business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL. The Fund seeks to provide investors with long-term capital appreciation, by investing primarily in smaller capitalization companies. FUND SHARES. The Fund may issue 100 million shares of no par value capital stock, which are offered continuously at net asset value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES: USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. 16 INCOME RECOGNITION. Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date, except for certain foreign securities which are recorded as soon after ex-date as the Fund becomes aware of such, net of non-reclaimable tax withholdings. Awards from class action litigation are recorded as a reduction of cost if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities, the proceeds are recorded as realized gains. The Fund estimates components of distributions from real estate investment trusts (REITs). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. FOREIGN CURRENCY TRANSACTIONS. The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. For financial statement purposes, the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. FEDERAL INCOME TAX STATUS. The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on ex-date. Net realized capital gains, if any, are distributed at least annually. NOTE 3. FEDERAL TAX INFORMATION: The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended July 31, 2004, permanent differences resulting primarily from differing treatments for net operating loss reclassifications and REIT adjustments were identified and reclassified among the components of the Fund's net assets as follows:
ACCUMULATED ACCUMULATED NET INVESTMENT LOSS NET REALIZED LOSS PAID-IN CAPITAL ------------------- ----------------- --------------- $ 2,011,150 $ 89,073 $ (2,100,223)
Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. 17 The tax character of distributions paid during the year ended July 31, 2004, period ended July 31, 2003 and year ended October 31, 2002 was as follows:
JULY 31, 2004 JULY 31, 2003 OCTOBER 31, 2002 ------------- ------------- ---------------- Distributions paid from: Ordinary income* $ - $ - $ 74,803
*For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of July 31, 2004, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ - $ - $ 30,993,968
*The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales. Unrealized appreciation and depreciation at July 31, 2004, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 49,486,209 Unrealized depreciation (18,492,241) ------------- Net unrealized appreciation $ 30,993,968 =============
The following capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
CAPITAL LOSS CARRYFORWARD ------------ YEAR OF EXPIRATION 2010 $ 38,443,526
Capital loss carryforwards of $58,484,878 were utilized during the year ended July 31, 2004 for the Fund. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES: Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor and transfer agent, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. 18 INVESTMENT ADVISORY FEE. Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee at the annual rate of 0.75% of the Fund's average daily net assets. PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing, bookkeeping and fund administration agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated certain of those functions to State Street Corporation ("State Street"). As a result, Columbia pays fees to State Street under the Outsourcing Agreement. The Fund is not charged a fee for these services. TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $28.00 per open account. Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly transfer agent fee based on a per account fee or a minimum of $1,500 per month. For the year ended July 31, 2004, the Fund's effective transfer agent fee rate was 0.001%. Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia Funds Services, Inc. CUSTODY CREDITS. The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. FEES PAID TO OFFICERS AND TRUSTEES. The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. OTHER. Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended July 31, 2004, the Fund paid $1,794 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PORTFOLIO INFORMATION: For the year ended July 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $398,860,583 and $428,037,553, respectively. NOTE 6. LINE OF CREDIT: Effective July 23, 2004, the Fund and other affiliated funds began participating in a $350,000,000 credit facility, which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to the Fund based on its borrowings. In addition, the Fund has agreed to pay commitment fees on its pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. 19 Prior to July 23, 2004, the Fund participated in a $100,000,000 uncommitted line of credit along with the other funds of the Trust and several other Columbia Funds, an affiliated group of funds managed by the investment advisor. The uncommitted line of credit, which was scheduled to expire on July 2, 2004, was extended by the Trust and expired on July 23, 2004. For the year ended July 31, 2004, the Fund did not borrow under these arrangements. NOTE 7. SHARES OF BENEFICIAL INTEREST: As of July 31, 2004, 52.6% of the outstanding shares of the Fund were held by 6 shareholders, each of which represents in excess of 5% of the Fund's shares outstanding. Subscription and redemption activity of these shareholders may have a material effect on the Fund. NOTE 8. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES: INDUSTRY FOCUS. The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their affiliates (collectively, "the Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or CFDI were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and CFDI, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and CFDI alleging that Columbia and CFDI had violated certain New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, CFDI or any company that is an affiliated person of Columbia and CFDI from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia that, if these results occur, it will seek exemptive relief from the SEC to permit it to continue to serve as your fund's investment advisor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and CFDI entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and CFDI agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and CFDI to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and CFDI's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. 20 As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended July 31, 2004, Columbia has assumed $15,278 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 21 Report of Independent Registered Public Accounting Firm TO THE TRUSTEES OF CMG FUND TRUST AND SHAREHOLDERS OF CMG SMALL CAP FUND In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of CMG Small Cap Fund (the "Fund"), a portfolio of CMG Fund Trust, at July 31, 2004, and the results of its operations, the changes in its net assets, and its financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 16, 2004 22 Trustees The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and Officers of the CMG Fund Trust, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios in the fund complex overseen by the Trustee, and other directorships they hold are shown below. Each Officer listed below serves as an Officer of the CMG Fund Trust. Each Officer listed below held such office for the period ended July 31, 2004. The Statement of Additional Information (SAI) contains additional information about the Trustees and is available without charge upon request by calling the fund's distributor at 800-345-6611.
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------ ------------------------------------------------------------------------ DISINTERESTED TRUSTEES Douglas A. Hacker (age 48) Executive Vice President-Strategy of United Airlines (airline) since P.O. Box 66100 December 2002 (formerly President of UAL Loyalty Services (airline) Chicago, IL 60666 from September 2001 to December 2002; Executive Vice President Trustee (since 2003) and Chief Financial Officer of United Airlines from July 1999 to September 2001; Senior Vice President-Finance of United Airlines from March 1993 to July 1999). Oversees 118, Orbitz, Inc. (on-line travel company) Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since September 9534 W. Gull Lake Drive 2004; Private Investor since March 2004 (formerly Chief Richland, MI 49083-8530 Administrative Officer and Senior Vice President, Kmart Holding Trustee (since 2003) Corporation (consumer goods) from September 2003 to March 2004; Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September 1999). Oversees 118, None Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and Chief 10701 Charleston Drive Executive Officer, U.S. Plywood Corporation (building products Vero Beach, FL 32963 manufacturer)). Oversees 120(3), None Trustee (since 2003) Charles R. Nelson (age 62) Professor of Economics, University of Washington, since January Department of Economics 1976; Ford and Louisa Van Voorhis Professor of Political Economy, University of Washington University of Washington, since September 1993; (formerly Director, Seattle, WA 98195 Institute for Economic Research, University of Washington from Trustee (since 2003) September 2001 to June 2003) Adjunct Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August 1999, 84 College Road Boston College (formerly Dean, Boston College School of Chestnut Hill, MA 02467-3838 Management from September 1977 to September 1999). Oversees 121(3),(4), Trustee (since 2003) Saucony, Inc. (athletic footwear and apparel) Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
23
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------ ------------------------------------------------------------------------ DISINTERESTED TRUSTEES Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance from 2208 Tawny Woods Place 1975 to 1999, College of Business, Boise State University); Chartered Boise, ID 83706 Financial Analyst. Oversees 118, None Trustee (since 2003) Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private equity 227 West Monroe Street, investing) since September 1994. Oversees 118, Anixter International Suite 3500 (network support equipment distributor), Jones Lang LaSalle (real Chicago, IL 60606 estate management services) and Ventas, Inc (real estate investment trust) Trustee and Chairman of the Board(5) (since 2003) and MONY Group (life insurance). Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global Education 359 Stickney Hill Road Industry, IBM Corporation (computer and technology) from 1994 to Hopkinton, NH 03229 1997). Oversees 119(4), Chairman of the Board of Directors, Enesco Trustee (since 2003) Group, Inc. (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief Executive 100 S.W. Market Street #1500 Officer, The Regence Group (regional health insurer); Chairman and Portland, OR 97207 Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Trustee (since 1992) Public Accountant, Arthur Young & Company. Oversees 118, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEES William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since 399 Park Avenue February 1999 (formerly Founding Partner, Development Capital LLC Suite 3204 from November 1996 to February 1999). Oversees 120(3), New York, NY 10022 Lee Enterprises (print media), WR Hambrecht + Co. (financial Trustee (since 2003) service provider), First Health (healthcare), Reader's Digest (publishing) and OPENFIELD Solutions (retail industry technology provider)
- ---------- (1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. Each Trustee serves for an indefinite term in accordance with the current Bylaws of the Trust until the date a Trustee resigns, retires or is removed in accordance with the Bylaws of the Trust. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. (5) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. 24 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ------------------------------------------------------ ------------------------------------------------------------------------ Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty One Financial Center All-Star Funds since June 2001; Assistant Treasurer of Columbia Boston, MA 02111 Acorn and Wanger Funds since June 2004 (formerly Controller of the Chief Accounting Officer Columbia Funds and of the Liberty All-Star Funds from May 2002 to May 2004); Controller and Chief Accounting Officer of the Galaxy Funds since September 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001). Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds One Financial Center since 2004; Assistant Treasurer of Columbia Acorn and Wanger Boston, MA 02111 Funds since June 2004 (formerly Assistant Treasurer of the Columbia Controller (since 2004) Funds and of the Liberty All-Star Funds from June 2002 to May 2004; Vice President, Product Strategy & Development of Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999). J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer One Financial Center of the Columbia Funds and of the Liberty All-Star Funds since Boston, MA 02111 December 2000; Vice President of the Advisor since April 2003 Treasurer (since 2000) and (formerly Chief Accounting Officer and Controller of the Liberty President (since 2004) Funds and Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December 2002 (formerly Vice President of Colonial from February 1998 to October 2000). David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds One Financial Center since December 2003; Senior Counsel, Bank of America Corporation Boston, MA 02111 (formerly FleetBoston Financial Corporation) since January 1996; Secretary (since 2003) Associate General Counsel, Columbia Management Group since November 2002.
25 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - TRUSTEES - DOUGLAS A. HACKER JANET LANGFORD KELLY RICHARD W. LOWRY WILLIAM E. MAYER CHARLES R. NELSON JOHN J. NEUHAUSER PATRICK J. SIMPSON THOMAS E. STITZEL THOMAS C. THEOBALD ANNE-LEE VERVILLE RICHARD L. WOOLWORTH - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, INC. 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MA 02110-2624 - TRANSFER AGENT - COLUMBIA FUNDS SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 CMC-02/527S-0804 (09/04) 2544 A description of the policies and procedures that the fund uses to determine how to vote proxies relating to its portfolio securities and a copy of a fund's voting record are available (i) at www.columbiamanagement.com; and (ii) on the Securities and Exchange Commission's website at www.sec.gov. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER, INCORPORATED. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA MANAGEMENT REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS, WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT CAREFULLY BEFORE YOU INVEST. Fund distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth Avenue, Portland, Oregon 97201 COLUMBIA MANAGEMENT(R) CMG STRATEGIC EQUITY FUND A PORTFOLIO OF CMG FUND TRUST ANNUAL REPORT JULY 31, 2004 Not FDIC May Lose Value Insured No Bank Guarantee Advised by Columbia Management Advisors, Inc. CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Strategic Equity Fund returned 16.58% for the 12-month period ended July 31, 2004. The fund outperformed both the S&P 500 Index and the Lipper Multi-Cap Core Funds average, which returned 13.17% and 12.43%, respectively.(1) Our decision to emphasize sectors that could benefit from the economic recovery helped boost performance in the first half of the fiscal year, while energy stocks have been key to the fund's strong return thus far in 2004. Caterpillar, CNH Global, Timken, Eaton, Georgia Pacific (which was sold during the period) and Dow Chemical all had a favorable impact. Later, soaring prices for oil and gas boosted energy company earnings, including those of oil services firms Halliburton and Transocean, in which we held good-sized positions. Prices for shares of Texas-based Input/Output and Norway's TGS Nopec Geophysical, two recent additions to the portfolio, also rose. These seismic exploration companies are poised to benefit as large oil companies seek new deposits of oil and gas. Our cautious approach to the lackluster consumer sector also helped relative returns, while higher interest rates led us to underweight financial services companies.(2) Fading prospects for sustained global economic growth caused emerging and other international markets to weaken after several consecutive quarters of positive returns. In Korea, Samsung Electronics fell sharply as its earnings outlook clouded over. Millicom International Cellular, which provides cellular phone services in more than a dozen developing countries, recorded a strong gain for the period despite recent profit-taking. Questions about the company's licensing in Pakistan made investors uneasy, as did concerns that arose in other emerging markets where the company operates. Based on the uncertain growth outlook for next year and an oversupply in semiconductors, we reduced the fund's overall exposure to technology issues. However, we increased holdings among software makers, including Check Point Software Technologies, which makes internet security systems, and networking specialist Novell. In health care, shares of large pharmaceutical companies remained under pressure from patent expirations and anemic new product flows. In biotechnology, where patent expirations are not a factor, Biogen Idec contributed to the fund's return. Cardinal Health, which develops and markets products and services for the health care industry, slumped sharply under the weight - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. (2) Holdings are disclosed as a percentage of net assets on July 31, 2004, and are subject to change: Caterpillar (0.5%), CNH Global (0.0%), Timken (0.5%), Eaton (0.6%), Dow Chemical (0.3%), Halliburton (0.6%), Transocean (0.6%), Input/Output (0.5%), TGS Nopec Geophysical (0.4%), Samsung Electronics (0.7%), Millicom International Cellular (0.3%), Check Point Software Technologies (0.2%), Novell (0.1%), Biogen Idec (1.0%), Cardinal Health (0.3%), AmerisourceBergen (0.2%), Microsoft (1.2%), Nestle (0.8%), and Unilever (0.4%). 1 of investigations into its accounting practices and a diminished earnings outlook. Shares of drug distribution firm AmerisourceBergen also declined. Beginning in April, larger-capitalization companies reversed a long-standing trend and began to outperform small- and mid-sized issues. That shift worked well with our desire to place the portfolio on a more conservative footing, given our doubts about the economic recovery's sustainability into next year. To capitalize on the change in investor focus, we have adjusted holdings to emphasize stocks of larger, higher quality companies. We added to our position in Microsoft. We also broadened exposure to consumer staples companies, by adding Nestle and Unilever. Consistent with our cautious approach, we increased the fund's cash position to approximately 18% at the end of the period. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were:
(%) 3M 1.5 Microsoft 1.2 Berkshire Hathaway 1.2 Schlumberger 1.0 Biogen Idec 1.0 JPMorgan Chase & Co. 0.9 Nestle 0.8 DST Systems 0.8 Walgreen 0.8 Pfizer 0.7
We appreciate your continued confidence in CMG Strategic Equity Fund. The Columbia Investment Team July 31, 2004 An investment in CMG Strategic Equity Fund offers the potential for long-term growth, but also involves certain risks, including stock market fluctuations due to economic and business developments. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weighting within the portfolio may change as market conditions change. 2 [CHART] GROWTH OF A $10,000 INVESTMENT, OCTOBER 9, 2001 TO JULY 31, 2004
CMG STRATEGIC EQUITY FUND S&P 500 INDEX 10/9/2001 $ 10,000 $ 10,000 10/31/2001 $ 10,100 $ 10,033 11/30/2001 $ 11,040 $ 10,803 12/31/2001 $ 11,386 $ 10,898 1/31/2002 $ 11,315 $ 10,738 2/28/2002 $ 11,295 $ 10,531 3/31/2002 $ 11,956 $ 10,927 4/30/2002 $ 11,816 $ 10,265 5/31/2002 $ 11,836 $ 10,189 6/30/2002 $ 11,286 $ 9,464 7/31/2002 $ 10,494 $ 8,726 8/31/2002 $ 10,565 $ 8,783 9/30/2002 $ 9,633 $ 7,828 10/31/2002 $ 10,154 $ 8,517 11/30/2002 $ 11,025 $ 9,019 12/31/2002 $ 10,357 $ 8,490 1/31/2003 $ 10,105 $ 8,267 2/28/2003 $ 9,954 $ 8,143 3/31/2003 $ 9,924 $ 8,222 4/30/2003 $ 10,800 $ 8,900 5/31/2003 $ 11,606 $ 9,369 6/30/2003 $ 11,757 $ 9,489 7/31/2003 $ 12,150 $ 9,656 8/31/2003 $ 12,603 $ 9,844 9/30/2003 $ 12,462 $ 9,739 10/31/2003 $ 13,137 $ 10,291 11/30/2003 $ 13,398 $ 10,381 12/31/2003 $ 14,009 $ 10,925 1/31/2004 $ 14,256 $ 11,126 2/29/2004 $ 14,513 $ 11,281 3/31/2004 $ 14,543 $ 11,111 4/30/2004 $ 14,338 $ 10,936 5/31/2004 $ 14,430 $ 11,086 6/30/2004 $ 14,799 $ 11,301 7/31/2004 $ 14,164 $ 10,926
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Strategic Equity Fund 10/09/01 16.58 13.20 S&P 500 Index 13.17 3.21
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Strategic Equity Fund 10/09/01 25.88 15.48 S&P 500 Index 19.11 4.59
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. The index performance is from October 9, 2001. The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization U.S. stocks. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3 UNDERSTANDING YOUR EXPENSES - CMG STRATEGIC EQUITY FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 993.54 1,022.87 1.98 2.01
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.40%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 4 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 5 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD YEAR PERIOD ENDED ENDED ENDED ENDED JULY 31, JULY 31, OCTOBER 31, OCTOBER 31, 2004 2003(a) 2002 2001(b) --------- --------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 12.06 $ 10.14 $ 10.10 $ 10.00 --------- --------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.12(c) 0.10(c) 0.11(c) -(d) Net realized and unrealized gain (loss) on investments and foreign currency 1.87 1.88 (0.05) 0.10 --------- --------- ----------- ----------- Total from investment operations 1.99 1.98 0.06 0.10 --------- --------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.09) (0.06) (0.02) - From net realized gains (0.16) - - - --------- --------- ----------- ----------- Total distributions declared to shareholders (0.25) (0.06) (0.02) - --------- --------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 13.80 $ 12.06 $ 10.14 $ 10.10 ========= ========= =========== =========== Total return (e)(f) 16.58% 19.66%(g) 0.53% 1.00%(g) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 618,714 $ 370,620 $ 188,179 $ 36,942 Ratio of net expenses to average net assets (h) 0.40% 0.40%(i) 0.40% 0.40%(i) Ratio of net investment income to average net assets (h) 0.88% 1.22%(i) 1.01% 0.04%(i) Waiver/reimbursement 0.05% 0.05%(i) 0.07% 0.80%(i) Portfolio turnover rate 81% 78%(g) 172% 14%(g)
(a) The Fund changed its fiscal year end from October 31 to July 31. (b) The Fund commenced investment operations on October 9, 2001. Per share data, total return and portfolio turnover rate reflect activity from that date. (c) Per share data was calculated using average shares outstanding during the period. (d) Rounds to less than $0.01 per share. (e) Total return at net asset value assuming all distributions reinvested. (f) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. See Accompanying Notes to Financial Statements. 6 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
SHARES VALUE ------------- ------------- Common Stocks (81.3%) Consumer Discretionary (8.9%) Auto Components (0.9%) Modine Manufacturing Co. 85,350 $ 2,531,481 Nokian Renkaat Oyj 30,360 2,876,224 ------------- 5,407,705 ------------- Hotels, Restaurants & Leisure (0.2%) Fairmont Hotels & Resorts, Inc. 50,000 1,287,500 ------------- Household Durables (1.3%) Ekornes ASA 130,000 2,473,843 Matsushita Electric Industrial Co., Ltd., ADR 100,000 1,346,000 Newell Rubbermaid, Inc. 75,000 1,620,000 Pioneer Corp., ADR 40,000 864,000 Sony Corp., ADR 57,500 1,992,375 ------------- 8,296,218 ------------- Internet & Catalog Retail (0.8%) eBay, Inc. (a) 42,500 3,329,025 IAC/InterActiveCorp (a) 62,500 1,706,250 ------------- 5,035,275 ------------- Media (3.9%) Comcast Corp., Class A (a) 75,000 2,010,000 DIRECTV Group, Inc. (a) 150,000 2,431,500 Entravision Communications Corp., Class A (a) 90,000 636,300 Fox Entertainment Group, Inc. (a) 42,000 1,135,260 Gemstar-TV Guide International, Inc. (a) 50,000 232,000 Grupo Televisa SA, ADR (a) 75,000 3,525,000 John Wiley & Sons, Inc., Class A 30,000 970,800 Liberty Media Corp. (a) 150,000 1,272,000 Liberty Media International, Inc., Class A (a) 7,500 233,850 Media General, Inc., Class A 45,000 2,689,200 Pixar, Inc. (a) 20,000 1,364,800 Pulitzer, Inc. 30,000 1,387,500 Time Warner, Inc. (a) 150,815 2,511,070 Viacom, Inc., Class B 80,310 2,697,613 Vivendi Universal SA, ADR (a) 40,000 995,200 ------------- 24,092,093 ------------- Multiline Retail (1.3%) Dillard's, Inc., Class A 100,000 2,279,000 Dollar General Corp. 40,000 772,000 Ito-Yokado Co., Ltd. 75,000 2,919,495 Stockmann Oyj ABP, Class B 90,000 2,083,979 ------------- 8,054,474 ------------- Specialty Retail (0.5%) Carmax, Inc. (a) 87,996 1,830,317 PETsMART, Inc. 40,000 1,240,400 ------------- 3,070,717 -------------
See Accompanying Notes to Financial Statements. 7
SHARES VALUE ------------- ------------- Common Stocks (continued) Consumer Staples (8.4%) Beverages (1.3%) Coca-Cola Co. 80,000 $ 3,508,800 Coca-Cola Femsa, SA de CV, ADR 137,500 2,818,750 PepsiCo, Inc. 40,000 2,000,000 ------------- 8,327,550 ------------- Food & Staples Retailing (2.1%) Albertson's, Inc. 147,500 3,597,525 Costco Wholesale Corp. 30,000 1,219,800 United Natural Foods, Inc. (a) 80,000 1,733,600 Walgreen Co. 127,500 4,641,000 Wal-Mart Stores, Inc. 30,000 1,590,300 ------------- 12,782,225 ------------- Food Products (2.1%) General Mills, Inc. 30,000 1,347,000 Hain Celestial Group, Inc. (a) 40,000 661,200 Kellogg Co. 47,500 1,978,850 Nestle SA, Registered Shares 20,000 5,105,386 Tyson Foods, Inc. 75,000 1,429,500 Unilever NV, N.Y. Registered Shares 40,000 2,453,200 ------------- 12,975,136 ------------- Household Products (0.9%) Kimberly-Clark Corp. 42,500 2,722,975 Procter & Gamble Co. 60,000 3,129,000 ------------- 5,851,975 ------------- Personal Products (1.8%) Estee Lauder Companies, Inc., Class A 57,500 2,524,250 Gillette Co. 108,050 4,211,789 L'Oreal SA 32,500 2,326,804 Natura Cosmeticos SA (a) 17,800 304,975 Oriflame Cosmetics SA, SDR (a) 50,000 1,660,286 ------------- 11,028,104 ------------- Tobacco (0.2%) Altria Group, Inc. 20,000 952,000 ------------- Energy (9.0%) Energy Equipment & Services (5.5%) BJ Services Co. (a) 30,000 1,489,800 Cooper Cameron Corp. (a) 32,500 1,660,425 Core Laboratories NV (a) 67,500 1,485,000 GlobalSantaFe Corp. 40,275 1,103,535 Halliburton Co. 115,000 3,651,250 Helmerich & Payne, Inc. 27,500 696,300 Input/Output, Inc. (a) 300,000 2,889,000 Rowan Companies, Inc. (a) 75,000 1,831,500 Schlumberger Ltd. 100,000 6,432,000 TGS Nopec Geophysical Co., ASA (a) 150,000 2,501,639
See Accompanying Notes to Financial Statements. 8
SHARES VALUE ------------- ------------- Common Stocks (continued) Energy Equipment & Services (continued) Transocean, Inc. (a) 137,500 $ 3,905,000 Varco International, Inc. (a) 122,500 2,960,825 Weatherford International Ltd. (a) 37,500 1,754,250 Willbros Group, Inc. (a) 100,000 1,471,000 ------------- 33,831,524 ------------- Oil & Gas (3.5%) Anadarko Petroleum Corp. 30,000 1,793,700 BP PLC, ADR 75,000 4,227,000 ConocoPhillips 40,000 3,150,800 Devon Energy Corp. 42,500 2,953,325 Exxon Mobil Corp. 57,500 2,662,250 Newfield Exploration Co. (a) 57,500 3,396,525 Unocal Corp. 52,500 2,034,900 Williams Companies, Inc. 125,000 1,518,750 ------------- 21,737,250 ------------- Financials (9.4%) Capital Markets (1.5%) Bank of New York Co., Inc. 75,000 2,154,750 Charles Schwab Corp. 125,000 1,097,500 Morgan Stanley 25,000 1,233,250 Nikko Cordial Corp. 200,000 907,988 Nomura Holdings, Inc., ADR 125,000 1,725,000 Piper Jaffray Companies, Inc. (a) 49,950 2,035,462 ------------- 9,153,950 ------------- Commercial Banks (2.0%) Allied Irish Banks PLC, ADR 30,000 922,500 Fifth Third Bancorp 32,500 1,604,200 HSBC Holdings PLC, ADR 22,500 1,661,400 Kookmin Bank, ADR 5,000 137,900 Mitsubishi Tokyo Financial Group, Inc., ADR 300,000 2,718,000 SunTrust Banks, Inc. 32,500 2,143,375 U.S. Bancorp 72,500 2,051,750 Wachovia Corp. 25,000 1,107,750 ------------- 12,346,875 ------------- Consumer Finance (0.7%) American Express Co. 76,700 3,854,175 MBNA Corp. 30,000 740,700 ------------- 4,594,875 ------------- Diversified Financial Services (1.8%) Citigroup, Inc. 60,783 2,679,922 GATX Corp. 82,500 2,102,100 Instinet Group, Inc. (a) 175,000 782,250 JPMorgan Chase & Co. 157,026 5,861,781 ------------- 11,426,053 ------------- Insurance (2.4%) American International Group, Inc. 52,724 3,724,951 Berkshire Hathaway, Inc., Class B (a) 2,500 7,235,000
See Accompanying Notes to Financial Statements. 9
SHARES VALUE ------------- ------------- Common Stocks (continued) Insurance (continued) Cincinnati Financial Corp. 31,500 $ 1,256,220 St. Paul Travelers Companies, Inc. 62,510 2,317,246 ------------- 14,533,417 ------------- Real Estate (0.3%) Mitsubishi Estate Co., Ltd. 100,000 1,139,030 Post Properties, Inc., REIT 30,000 839,700 ------------- 1,978,730 ------------- Thrifts & Mortgage Finance (0.7%) Freddie Mac 32,500 2,090,075 Radian Group, Inc. 47,500 2,185,950 ------------- 4,276,025 ------------- Health Care (13.4%) Biotechnology (2.1%) Abgenix, Inc. (a) 100,000 977,500 Amgen, Inc. (a) 72,500 4,123,800 Biogen Idec, Inc. (a) 100,000 6,000,000 MedImmune, Inc. (a) 80,000 1,843,200 ------------- 12,944,500 ------------- Health Care Equipment & Supplies (3.6%) Alcon, Inc. 52,500 4,021,500 Applera Corp. - Applied Biosystems Group 125,000 2,586,250 Baxter International, Inc. 92,500 2,781,475 Cytyc Corp. (a) 70,000 1,691,900 Haemonetics Corp. (a) 62,500 1,875,000 Hospira, Inc. (a) 100,350 2,600,069 Kinetic Concepts, Inc. (a) 20,000 898,400 Medtronic, Inc. 35,000 1,738,450 Millipore Corp. (a) 32,500 1,712,425 Zimmer Holdings, Inc. (a) 30,000 2,289,300 ------------- 22,194,769 ------------- Health Care Providers & Services (2.6%) Accredo Health, Inc. (a) 62,500 2,025,000 AmerisourceBergen Corp. 25,000 1,351,500 Cardinal Health, Inc. 47,500 2,113,750 Laboratory Corp. of America Holdings (a) 20,000 783,200 McKesson Corp. 125,000 4,021,250 Quest Diagnostics, Inc. 45,000 3,693,600 Tenet Healthcare Corp. (a) 77,500 866,450 UnitedHealth Group, Inc. 20,000 1,258,000 ------------- 16,112,750 ------------- Pharmaceuticals (5.1%) Abbott Laboratories 98,500 3,875,975 Bristol-Myers Squibb Co. 67,080 1,536,132 Dr. Reddy's Laboratories Ltd., ADR 17,500 296,450 Elan Corp. PLC, ADR (a) 152,500 3,133,875 Eli Lilly & Co. 67,500 4,301,100
See Accompanying Notes to Financial Statements. 10
SHARES VALUE ------------- ------------- Common Stocks (continued) Pharmaceuticals (continued) Nektar Therapeutics (a) 42,500 $ 745,450 Novartis AG, ADR 75,000 3,349,500 Pfizer, Inc. 140,092 4,477,340 Richter Gedeon Ltd. 20,000 1,973,337 Schering-Plough Corp. 100,000 1,946,000 Shire Pharmaceuticals Group PLC, ADR (a) 52,500 1,395,450 Valeant Pharmaceuticals International 100,000 1,751,000 Wyeth 75,000 2,655,000 ------------- 31,436,609 ------------- Industrials (11.7%) Aerospace & Defense (0.1%) Raytheon Co. 20,000 671,000 ------------- Air Freight & Logistics (0.6%) United Parcel Service, Inc., Class B 50,000 3,598,000 ------------- Building Products (0.3%) TOTO Ltd. 200,000 1,947,229 ------------- Commercial Services & Supplies (2.8%) Allied Waste Industries, Inc. (a) 100,000 924,000 Aramark Corp., Class B 45,000 1,206,900 Avery Dennison Corp. 67,500 4,088,475 Cendant Corp. 137,500 3,146,000 Central Parking Corp. 50,000 796,500 ChoicePoint, Inc. (a) 47,500 1,995,000 G & K Services, Inc., Class A 52,500 2,022,300 Ionics, Inc. (a) 47,500 1,284,400 Waste Management, Inc. 75,000 2,110,500 ------------- 17,574,075 ------------- Construction & Engineering (0.4%) Insituform Technologies, Inc., Class A (a) 95,000 1,707,150 Shaw Group, Inc. (a) 72,500 719,200 ------------- 2,426,350 ------------- Electrical Equipment (0.8%) Emerson Electric Co. 27,500 1,669,250 Thomas & Betts Corp. (a) 112,500 2,958,750 ------------- 4,628,000 ------------- Industrial Conglomerates (2.5%) 3M Co. 112,500 9,265,500 General Electric Co. 112,550 3,742,289 Siemens AG, ADR 30,000 2,107,200 ------------- 15,114,989 -------------
See Accompanying Notes to Financial Statements. 11
SHARES VALUE ------------- ------------- Common Stocks (continued) Machinery (3.2%) AGCO Corp. (a) 60,000 $ 1,255,200 Bucyrus International, Inc., Class A (a) 72,500 1,740,000 Caterpillar, Inc. 42,500 3,123,325 CNH Global NV 10,000 197,000 Eaton Corp. 60,000 3,878,400 Federal Signal Corp. 100,000 1,701,000 Flowserve Corp. (a) 40,000 958,000 Joy Global, Inc. 30,000 890,700 Kaydon Corp. 62,500 1,820,625 Timken Co. 125,000 3,105,000 Tomra Systems ASA 350,000 1,287,168 ------------- 19,956,418 ------------- Marine (0.4%) A.P. Moller - Maersk 250 1,738,188 Finnlines Oyj 34,400 947,084 ------------- 2,685,272 ------------- Road & Rail (0.2%) Kansas City Southern (a) 60,000 877,200 ------------- Trading Companies & Distributors (0.4%) Fastenal Co. 40,000 2,495,200 ------------- Information Technology (11.0%) Communications Equipment (1.5%) 3Com Corp. (a) 100,000 493,000 Cisco Systems, Inc. (a) 125,680 2,621,685 Motorola, Inc. 75,400 1,201,122 QUALCOMM, Inc. 27,500 1,899,700 Polycom, Inc. (a) 100,000 1,928,000 Tellabs, Inc. (a) 125,000 1,113,750 ------------- 9,257,257 ------------- Computers & Peripherals (1.2%) EMC Corp. (a) 101,650 1,115,100 Gateway, Inc. (a) 100,000 450,000 Hypercom Corp. (a) 240,000 1,632,000 International Business Machines Corp. 25,000 2,176,750 Sun Microsystems, Inc. (a) 200,000 790,000 Synaptics, Inc. (a) 65,000 961,350 ------------- 7,125,200 ------------- Electronic Equipment & Instruments (0.7%) Celestica, Inc. (a) 75,000 1,286,250 Murata Manufacturing Co., Ltd. 30,000 1,491,437 OKI Electric Industry Co., Ltd. (a) 125,000 449,499 Solectron Corp. (a) 100,000 550,000 Symbol Technologies, Inc. 50,000 654,500 ------------- 4,431,686 -------------
See Accompanying Notes to Financial Statements. 12
SHARES VALUE ------------- ------------- Common Stocks (continued) IT Services (2.0%) Automatic Data Processing, Inc. 50,000 $ 2,099,000 DST Systems, Inc. (a) 110,000 5,011,600 Electronic Data Systems Corp. 75,000 1,386,000 First Data Corp. 50,000 2,230,500 Paychex, Inc. 52,500 1,612,275 ------------- 12,339,375 ------------- Internet Software & Services (0.8%) Check Point Software Technologies Ltd. (a) 75,000 1,491,750 webMethods, Inc. (a) 40,000 190,800 Yahoo!, Inc. (a) 115,000 3,542,000 ------------- 5,224,550 ------------- Office Electronics (0.1%) Canon, Inc., ADR 15,000 735,000 ------------- Semiconductors & Semiconductor Equipment (2.5%) Analog Devices, Inc. 20,000 794,000 FEI Co. (a) 100,000 2,011,000 Intel Corp. 85,300 2,079,614 Micron Technology, Inc. (a) 125,575 1,699,030 NVIDIA Corp. (a) 100,000 1,540,000 Samsung Electronics Co. Ltd., GDR (b) 25,000 4,475,000 Taiwan Semiconductor Manufacturing Co. Ltd., ADR (a) 100,000 712,002 Texas Instruments, Inc. 89,150 1,901,569 ------------- 15,212,215 ------------- Software (2.2%) Activision, Inc. (a) 100,000 1,465,000 McAfee, Inc. (a) 50,000 899,000 Microsoft Corp. 255,620 7,274,945 Novell, Inc. (a) 120,000 820,800 Oracle Corp. (a) 124,230 1,305,657 PeopleSoft, Inc. (a) 30,000 540,600 SAP AG, ADR 30,000 1,200,300 Verity, Inc. (a) 30,000 333,900 ------------- 13,840,202 ------------- Materials (5.2%) Chemicals (2.8%) Air Products & Chemicals, Inc. 47,500 2,458,125 Dow Chemical Co. 50,000 1,994,500 E.I. du Pont de Nemours & Co. 67,500 2,893,725 International Flavors & Fragrances, Inc. 62,500 2,283,750 Landec Corp. (a) 30,000 168,870 Millennium Chemicals, Inc. (a) 30,000 529,500 Nippon Zeon Co. 125,000 795,613 Potash Corp. of Saskatchewan, Inc. 42,500 4,109,325 Rohm & Haas Co. 50,000 1,960,000 ------------- 17,193,408 ------------- Construction Materials (0.2%) Vulcan Materials Co. 30,000 1,428,600 -------------
See Accompanying Notes to Financial Statements. 13
SHARES VALUE ------------- ------------- Common Stocks (continued) Containers & Packaging (0.2%) Smurfit-Stone Container Corp. (a) 75,800 $ 1,410,638 ------------- Metals & Mining (1.5%) Alcoa, Inc. 30,000 960,900 Barrick Gold Corp. 75,000 1,434,000 Companhia Vale do Rio Doce, ADR 42,500 2,290,750 CONSOL Energy, Inc. 40,000 1,433,600 Inco Ltd. (a) 40,000 1,334,800 Placer Dome, Inc. 75,000 1,201,500 Wolfden Resources, Inc. (a) 75,000 250,685 ------------- 8,906,235 ------------- Paper & Forest Products (0.5%) Bowater, Inc. 32,500 1,212,250 Votorantim Celulose e Papel SA, ADR 57,500 2,056,200 ------------- 3,268,450 ------------- Telecommunication Services (2.4%) Diversified Telecommunication Services (1.7%) Citizens Communications Co. 75,000 1,080,000 Compania Anonima Nacional Telefonos de Venezuela, ADR 112,500 2,246,625 Covad Communications Group, Inc. (a) 200,000 380,000 PT Perusahaan Telekomunikiasi 100,000 1,701,000 Phillippine Long Distance Telephone Co., ADR 36,800 824,688 SBC Communications, Inc. 50,000 1,267,000 Telefonaktiebolaget LM Ericsson, ADR (a) 40,000 1,068,400 Verizon Communications, Inc. 50,000 1,927,000 ------------- 10,494,713 ------------- Wireless Telecommunication Services (0.7%) Millicom International Cellular SA (a) 122,500 2,066,575 Mobile Telesystems, ADR (a) 20,000 2,341,000 ------------- 4,407,575 ------------- Utilities (1.9%) Electric Utilities (1.1%) Edison International 87,500 2,345,000 TECO Energy, Inc. 137,500 1,773,750 TXU Corp. 50,000 1,983,000 Westar Energy, Inc. 37,000 746,290 ------------- 6,848,040 ------------- Gas Utilities (0.3%) NiSource, Inc. 100,000 2,070,000 ------------- Multi-Utilities & Unregulated Power (0.5%) Calpine Corp. (a) 75,000 289,500 Duke Energy Corp. 60,000 1,290,000 Dynegy Inc., Class A (a) 100,000 420,000 Oneok, Inc. 57,500 1,207,500 ------------- 3,207,000 ------------- Total Common Stocks (Cost of $421,895,669) 503,102,176 -------------
See Accompanying Notes to Financial Statements. 14
SHARES VALUE ------------- ------------- Investment Company (0.4%) iShares MSCI Japan Index Fund (Cost of $1,773,500) 225,000 $ 2,214,000 ------------- Preferred Stock (0.3%) Consumer Discretionary (0.3%) Media (0.3%) News Corp., Ltd., ADR (Cost of $1,663,106) 68,414 2,173,513 ------------- Rights (0.0%) Liberty Media International, Inc., Class A, Expires 08/23/04 (Cost of $0) 1,500 9,015 ------------- PAR ------------- Short-Term Obligation (18.2%) Repurchase agreement with State Street Bank & Trust, dated 07/30/04, due 08/02/04 at 1.230% collateralized by U.S. Treasury Bonds with various maturities to 11/15/10, market value of $114,591,629 (repurchase proceeds $112,347,514) (Cost of $112,336,000) $ 112,336,000 112,336,000 ------------- Total Investments (100.2%) (Cost of $537,668,275) (c) 619,834,704 Other Assets and Liabilities, Net (-0.2%) (1,120,456) ------------- Net Assets (100.0%) $ 618,714,248 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2004, the value of this security represents 0.7% of net assets. (c) Cost for federal income tax purposes is $541,401,370.
ACRONYM NAME - ----------------- ----------------------------- ADR American Depositary Receipt GDR Global Depositary Receipt REIT Real Estate Investment Trust SDR Swedish Depositary Receipt
See Accompanying Notes to Financial Statements. 15 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust STATEMENT OF ASSETS AND LIABILITIES July 31, 2004 ASSETS: Investments, at identified cost (including repurchase agreement) $ 537,668,275 -------------- Investments, at value $ 507,498,704 Repurchase agreement 112,336,000 Cash 748 Receivable for: Investments sold 3,256,402 Capital stock sold 635,542 Dividends 439,084 Interest 7,676 Foreign tax reclaim 30,477 Expense reimbursement due from Investment Advisor 12,994 Deferred Trustees' compensation plan 1,106 -------------- Total assets 624,218,733 -------------- LIABILITIES: Payable for: Investments purchased 5,199,284 Capital stock redeemed 21,506 Investment advisory fee 213,076 Transfer agent fee 407 Trustees' fee 2,095 Custody fee 12,693 Deferred Trustees' fees 1,106 Other liabilities 54,318 -------------- Total liabilities 5,504,485 -------------- NET ASSETS $ 618,714,248 ============== NET ASSETS consist of: Paid-in capital $ 505,842,489 Undistributed net investment income 2,983,567 Accumulated net realized gain 27,721,304 Net unrealized appreciation on: Investments 82,166,429 Foreign currency translations 459 -------------- NET ASSETS $ 618,714,248 ============== Shares of capital stock outstanding 44,830,076 ============== Net asset value, offering and redemption price per share $ 13.80 ==============
See Accompanying Notes to Financial Statements. 16 STATEMENT OF OPERATIONS For the Year Ended July 31, 2004 NET INVESTMENT INCOME: Income: Dividends $ 6,604,901 Interest 864,375 Foreign withholding tax (167,098) -------------- Total income 7,302,178 -------------- Expenses: Investment advisory fee 2,280,557 Transfer agent fee 5,490 Trustees' fees 15,697 Custody fee 74,447 Non-recurring costs (See Note 8) 28,731 Other expenses 190,390 -------------- Total expenses 2,595,312 Expense reimbursements by Investment Advisor (284,273) Non-recurring costs assumed by Investment Advisor (See Note 8) (28,731) Custody earnings credit (1,751) -------------- Net expenses 2,280,557 -------------- Net investment income 5,021,621 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments 42,363,217 Foreign currency transactions (144,464) -------------- Net realized gain 42,218,753 -------------- Net change in unrealized appreciation/depreciation on: Investments 30,946,381 Foreign currency translations 459 -------------- Net change in unrealized appreciation/depreciation 30,946,840 -------------- Net gain 73,165,593 -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 78,187,214 ==============
See Accompanying Notes to Financial Statements. 17 STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED YEAR ENDED JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002 ------------- ----------------- ---------------- Operations: Net investment income $ 5,021,621 $ 2,657,828 $ 1,070,922 Net realized gain (loss) on investments and foreign currency transactions 42,218,753 1,504,435 (9,099,006) Net change in unrealized appreciation/depreciation on investments and foreign currency translations 30,946,840 54,067,910 (3,343,013) ------------- ----------------- ---------------- Net increase (decrease) from operations 78,187,214 58,230,173 (11,371,097) Distributions declared to shareholders: From net investment income (3,979,500) (1,463,038) (63,470) From net realized gains (6,937,177) - - ------------- ----------------- ---------------- Total distributions declared to shareholders (10,916,677) (1,463,038) (63,470) ------------- ----------------- ---------------- Share transactions: Subscriptions 236,903,542 141,164,376 174,100,499 Distributions reinvested 10,729,185 1,438,209 63,245 Redemptions (66,809,077) (16,928,805) (11,491,615) ------------- ----------------- ---------------- Net increase in share transactions 180,823,650 125,673,780 162,672,129 ------------- ----------------- ---------------- Net increase in net assets 248,094,187 182,440,915 151,237,562 NET ASSETS: Beginning of period 370,620,061 188,179,146 36,941,584 ------------- ----------------- ---------------- End of period $ 618,714,248 $ 370,620,061 $ 188,179,146 ============= ================= ================ Undistributed net investment income $ 2,983,567 $ 2,200,131 $ 1,009,924 ============= ================= ================ Changes in Shares: Subscriptions 18,201,135 13,628,484 15,932,938 Issued for distributions reinvested 795,344 140,587 5,562 Redemptions (4,903,233) (1,583,795) (1,045,757) ------------- ----------------- ---------------- Net increase 14,093,246 12,185,276 14,892,743 ------------- ----------------- ----------------
(a) The Fund changed its fiscal year end from October 31 to July 31. See Accompanying Notes to Financial Statements. 18 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust NOTES TO FINANCIAL STATEMENTS July 31, 2004 NOTE 1. ORGANIZATION: CMG Strategic Equity Fund (the "Fund"), a series of CMG Fund Trust (the "Trust"), is a diversified portfolio. The Trust is an Oregon business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL. The Fund seeks long-term growth of capital and total returns greater than those of the market over time. FUND SHARES. The Fund may issue 100 million shares of no par value capital stock, which are offered continuously at net asset value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES: USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. Equity securities and exchange traded funds are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net asset value of the Fund's (Funds') shares are determined as of such times. Foreign currency exchange rates are generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign securities and such exchange rates may occur between the times at which they are determined and the close of the customary trading session of the NYSE, which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value under procedures approved by the Board of Trustees. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. 19 REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION. Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date, except for certain foreign securities which are recorded as soon after ex-date as the Fund becomes aware of such, net of non-reclaimable tax withholdings. The Fund estimates components of distributions from real estate investment trusts (REITs). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. Effective February 1, 2004, the Fund adopted the policy to reduce cost of investments for financial statement purposes by the distributions received in excess of income from REITs. The cumulative effect of this accounting change did not impact the net assets of the Fund, but resulted in reclassifications as follows:
DECREASE IN DECREASE IN UNDISTRIBUTED COST NET INVESTMENT INCOME ----------- ------------------------- $ 42,856 $ 42,856
The effect of the change for the year ended July 31, 2004 is as follows:
INCREASE IN INCREASE IN UNREALIZED DECREASE IN NET NET REALIZED APPRECIATION INVESTMENT INCOME GAIN ------------ ----------------- ------------ $ 8,608 $ 24,717 $ 16,109
FOREIGN CURRENCY TRANSACTIONS. The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. For financial statement purposes, the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. FEDERAL INCOME TAX STATUS. The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on ex-date. Net realized capital gains, if any, are distributed at least annually. 20 NOTE 3. FEDERAL TAX INFORMATION: The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended July 31, 2004, permanent differences resulting primarily from differing treatments for foreign currency transactions and REIT adjustments were identified and reclassified among the components of the Fund's net assets as follows:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME GAIN CAPITAL -------------- ------------ ------- $ (215,829) $ 215,831 $ (2)
Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the year ended July 31, 2004, the period ended July 31, 2003 and the year ended October 31, 2002 was as follows:
JULY 31, 2004 JULY 31, 2003 OCTOBER 31, 2002 ------------- ------------- ---------------- Distributions paid from: Ordinary income* $ 8,312,541 $ 1,463,038 $ 63,470 Long-term capital gains 2,604,136 - -
*For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of July 31, 2004, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* -------------- -------------- -------------- $ 16,664,310 $ 17,774,912 $ 78,433,793
*The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and changes in the value of assets and liabilities resulting from changes in exchange rates. Unrealized appreciation and depreciation at July 31, 2004, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 89,881,655 Unrealized depreciation (11,448,321) -------------- Net unrealized appreciation $ 78,433,334 ==============
21 Capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. Capital loss carryforwards of $4,679,207 were utilized during the year ended July 31, 2004. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES: Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor and transfer agent, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE. Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee at the annual rate of 0.40% of the Fund's average daily net assets. In addition to the investment advisory fee, each shareholder pays an annual fee calculated as a percentage of the shareholder's net assets in the Fund. The annual fee ranges between 0.20% on the first $25 million of the shareholder's net assets in the Fund, to 0.00% on the shareholder's net assets in the Fund in excess of $25 million. PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing, bookkeeping and fund administration agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated certain of those functions to State Street Corporation ("State Street"). As a result, Columbia pays fees to State Street under the Outsourcing Agreement. The Fund is not charged a fee for these services. TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $28.00 per open account. Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly transfer agent fee based on a per account fee or a minimum of $1,500 per month. For the year ended July 31, 2004, the Fund's effective transfer agent fee rate was less than 0.01%. Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia Funds Services, Inc. EXPENSE LIMITS AND FEE REIMBURSEMENTS. Columbia has contractually agreed, through October 31, 2004, to reimburse the Fund for certain expenses so that the expenses incurred by the Fund, including the investment advisory fee, would not exceed 0.40% of the Fund's average daily net assets. CUSTODY CREDITS. The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. FEES PAID TO OFFICERS AND TRUSTEES. The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. 22 The Fund's trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. OTHER. Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended July 31, 2004, the Fund paid $1,994 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PORTFOLIO INFORMATION: For the year ended July 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $489,350,638 and $382,748,659, respectively. NOTE 6. LINE OF CREDIT: Effective July 23, 2004, the Fund and other affiliated funds began participating in a $350,000,000 credit facility, which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to the Fund based on its borrowings. In addition, the Fund has agreed to pay commitment fees on its pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. Prior to July 23, 2004, the Fund participated in a $100,000,000 uncommitted line of credit along with the other funds of the Trust and several of the Columbia Funds, an affiliated group of funds managed by the investment advisor. The uncommitted line of credit, which was scheduled to expire on July 2, 2004, was extended by the Trust and expired on July 23, 2004. For the year ended July 31, 2004, the Fund did not borrow under these arrangements. NOTE 7. SHARES OF BENEFICIAL INTEREST: As of July 31, 2004, 40.5% of the outstanding shares of the Fund were held by 5 shareholders, each of which represents in excess of 5% of the Fund's shares outstanding. Subscription and redemption activity of these shareholders may have a material effect on the Fund. NOTE 8. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES: INDUSTRY FOCUS. The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. FOREIGN SECURITIES. There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their affiliates (collectively, "the Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or CFDI were knowingly involved in late trading of mutual fund shares. 23 On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and CFDI, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and CFDI alleging that Columbia and CFDI had violated certain New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, CFDI or any company that is an affiliated person of Columbia and CFDI from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia that, if these results occur, it will seek exemptive relief from the SEC to permit it to continue to serve as your fund's investment advisor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and CFDI entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and CFDI agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and CFDI to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and CFDI's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended July 31, 2004, Columbia has assumed $28,731 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 24 Report of Independent Registered Public Accounting Firm TO THE TRUSTEES OF CMG FUND TRUST AND SHAREHOLDERS OF CMG STRATEGIC EQUITY FUND In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of CMG Strategic Equity Fund (the "Fund"), one of the portfolios of CMG Fund Trust, at July 31, 2004, and the results of its operations, changes in its net assets and financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 16, 2004 25 Unaudited Information FEDERAL INCOME TAX INFORMATION 38.21% of the ordinary income distributed by the Fund, in the period ended July 31, 2004, qualifies for the corporate dividends received deduction. For non-corporate shareholders 45.14%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified dividend income. Final information will be provided in your 2004 1099-Div Form. For the fiscal year ended July 31, 2004, the Fund designates long-term capital gains of $20,379,048. 26 Trustees The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and Officers of the CMG Fund Trust, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios in the fund complex overseen by the Trustee, and other directorships they hold are shown below. Each Officer listed below serves as an Officer of the CMG Fund Trust. Each Officer listed below held such office for the period ended July 31, 2004. The Statement of Additional Information (SAI) contains additional information about the Trustees and is available without charge upon request by calling the fund's distributor at 800-345-6611.
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------ ----------------------------------------------------------------------- DISINTERESTED TRUSTEES Douglas A. Hacker (age 48) Executive Vice President--Strategy of United Airlines (airline) since P.O. Box 66100 December 2002 (formerly President of UAL Loyalty Services (airline) Chicago, IL 60666 from September 2001 to December 2002; Executive Vice President and Trustee (since 2003) Chief Financial Officer of United Airlines from July 1999 to September 2001; Senior Vice President-Finance of United Airlines from March 1993 to July 1999). Oversees 118, Orbitz, Inc. (on-line travel company) Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since September 2004; 9534 W. Gull Lake Drive Private Investor since March 2004 (formerly Chief Administrative Richland, MI 49083-8530 Officer and Senior Vice President, Kmart Holding Corporation (consumer Trustee (since 2003) goods) from September 2003 to March 2004; Executive Vice President--Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September 1999). Oversees 118, None Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and Chief 10701 Charleston Drive Executive Officer, U.S. Plywood Corporation (building products Vero Beach, FL 32963 manufacturer)). Oversees 120(3), None Trustee (since 2003) Charles R. Nelson (age 62) Professor of Economics, University of Washington, since January 1976; Department of Economics Ford and Louisa Van Voorhis Professor of Political Economy, University University of Washington of Washington, since September 1993; (formerly Director, Institute for Seattle, WA 98195 Economic Research, University of Washington from September 2001 to June Trustee (since 2003) 2003) Adjunct Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston 84 College Road College (formerly Dean, Boston College School of Management from Chestnut Hill, MA 02467-3838 September 1977 to September 1999). Oversees 121(3),(4), Saucony, Inc. Trustee (since 2003) (athletic footwear and apparel)
27
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------ ----------------------------------------------------------------------- DISINTERESTED TRUSTEES Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000) Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance from 2208 Tawny Woods Place 1975 to 1999, College of Business, Boise State University); Chartered Boise, ID 83706 Financial Analyst. Oversees 118, None Trustee (since 2003) Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private equity 227 West Monroe Street, investing) since September 1994. Oversees 118, Anixter International Suite 3500 (network support equipment distributor), Jones Lang LaSalle (real Chicago, IL 60606 estate management services) and Ventas, Inc (real estate investment Trustee and Chairman of the Board(5) (since 2003) trust) and MONY Group (life insurance). Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global Education 359 Stickney Hill Road Industry, IBM Corporation (computer and technology) from 1994 to 1997). Hopkinton, NH 03229 Oversees 119(4), Chairman of the Board of Directors, Enesco Group, Inc. Trustee (since 2003) (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief Executive 100 S.W. Market Street #1500 Officer, The Regence Group (regional health insurer); Chairman and Portland, OR 97207 Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Trustee (since 1992) Public Accountant, Arthur Young & Company. Oversees 118, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEES William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since 399 Park Avenue February 1999 (formerly Founding Partner, Development Capital LLC from Suite 3204 November 1996 to February 1999). Oversees 120(3), Lee Enterprises New York, NY 10022 (print media), WR Hambrecht + Co. (financial service provider), First Trustee (since 2003) Health (healthcare), Reader's Digest (publishing) and OPENFIELD Solutions (retail industry technology provider)
- ---------------- (1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. Each Trustee serves for an indefinite term in accordance with the current Bylaws of the Trust until the date a Trustee resigns, retires or is removed in accordance with the Bylaws of the Trust. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. (5) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. 28 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ------------------------------------------------------ ----------------------------------------------------------------------- Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty All-Star One Financial Center Funds since June 2001; Assistant Treasurer of Columbia Acorn and Wanger Boston, MA 02111 Funds since June 2004 (formerly Controller of the Columbia Funds and of Chief Accounting Officer the Liberty All-Star Funds from May 2002 to May 2004); Controller and Chief Accounting Officer of the Galaxy Funds since September 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001). Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds One Financial Center since 2004; Assistant Treasurer of Columbia Acorn and Wanger Funds Boston, MA 02111 since June 2004 (formerly Assistant Treasurer of the Columbia Funds and Controller (since 2004) of the Liberty All-Star Funds from June 2002 to May 2004; Vice President, Product Strategy & Development of Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999). J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer of One Financial Center the Columbia Funds and of the Liberty All-Star Funds since December Boston, MA 02111 2000; Vice President of the Advisor since April 2003 (formerly Chief Treasurer (since 2000) and Accounting Officer and Controller of the Liberty Funds and Liberty President (since 2004) All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December 2002 (formerly Vice President of Colonial from February 1998 to October 2000). David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds since One Financial Center December 2003; Senior Counsel, Bank of America Corporation (formerly Boston, MA 02111 FleetBoston Financial Corporation) since January 1996; Associate Secretary (since 2003) General Counsel, Columbia Management Group since November 2002.
29 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - TRUSTEES - DOUGLAS A. HACKER JANET LANGFORD KELLY RICHARD W. LOWRY WILLIAM E. MAYER CHARLES R. NELSON JOHN J. NEUHAUSER PATRICK J. SIMPSON THOMAS E. STILZEL THOMAS C. THEOBALD ANNE-LEE VERVILLE RICHARD L. WOOLWORTH - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, INC. 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110-2624 - TRANSFER AGENT - COLUMBIA FUNDS SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 941-02/528S-0804 (09/04) 2577 A description of the policies and procedures that the fund uses to determine how to vote proxies relating to its portfolio securities and a copy of a fund's voting record are available (i) at www.columbiamanagement.com; and (ii) on the Securities and Exchange Commission's website at www.sec.gov. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER, INCORPORATED. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA MANAGEMENT REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS, WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT CAREFULLY BEFORE YOU INVEST. Fund distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth Avenue, Portland, Oregon 97201 COLUMBIA MANAGEMENT(R) CMG CORE BOND FUND CMG SHORT TERM BOND FUND CMG ULTRA SHORT TERM BOND FUND CMG HIGH YIELD FUND PORTFOLIOS OF CMG FUND TRUST ANNUAL REPORT JULY 31, 2004 NOT FDIC MAY LOSE VALUE ADVISED BY COLUMBIA MANAGEMENT ADVISORS, INC. INSURED NO BANK GUARANTEE CMG CORE BOND FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE For the 12-month period ended July 31, 2004, the CMG Core Bond Fund returned 4.67%. The fund's performance slightly trailed the Lehman Brothers Aggregate Bond Index, which returned 4.84%, and the Lipper Corporate Debt Funds A-Rated Category, which averaged 4.75% over the same period.(1) The fund was positioned conservatively at a time when risk-taking was rewarded. For most of the 12-month period, corporate bonds outperformed Treasury securities. As the economic recovery progressed, investors gained confidence in the corporate sector and were attracted to the higher yields it offered. For the full year, corporate bonds returned 6.52%, well above the 3.87% return of Treasury securities. Among corporate bond issues, securities with lower credit ratings tended to outperform those with higher ratings. Although we increased the fund's commitment to corporate bonds during the period, the portfolio's above-average credit quality caused a slight performance shortfall relative to its index and peer group. The fund devoted only 7% of its assets to the high-yield sector, which was by far the best performing sector within the fixed-income market during the period. Short-term interest rates rose relative to longer-term rates during the period. Bonds with maturities of 10 years or longer performed better than was expected during a time of sustained economic growth and tended to outperform shorter-term securities. This trend was slightly negative for the fund, whose average maturity was slightly less than that of its index and peer group. As fixed income markets struggled in the last quarter of the reporting period, the fund benefited from its substantial allocation to the mortgage sector, which lost only 1.2% for the quarter. Among our mortgage investments, we emphasized collateralized mortgage obligations, or CMOs, which offer a yield advantage and are less sensitive to changes in interest rates than conventional mortgage securities. Higher rates hurt conventional mortgage securities because fewer homeowners refinance their mortgages when interest rates rise, thus delaying the return of principal to bond holders. In a widely anticipated move, policymakers at the Federal Reserve Board raised the federal funds rate--a key overnight bank lending rate--from 1.00% to 1.25% on June 30, 2004.(2) The fund's bias toward higher quality securities helped the fund after the Fed's action. Our minimal exposure to high-yield securities aided performance when low quality bonds declined sharply in July, erasing much of their earlier gains. Now that the Fed has signaled its intentions to raise short-term interest rates at a "measured" pace, we see every reason to maintain our defensive positioning. Overall, we expect to keep the fund's average maturity relatively short and its average credit quality relatively high. In addition, - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. (2) In August, the federal funds rate was increased to 1.50%. 1 we continue to emphasize floating rate securities and to maintain a small allocation to Treasury Inflation Protected Securities, or TIPs, which provide price protection against rising inflation. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were (%): Structured Asset Securities Corp., 5.500% 07/25/2033 3.5 U.S. Treasury Bonds, 7.250% 05/15/2016 3.4 New Century Home Equity Loan Trust, 2.940% 11/25/2033 3.1 Federal Home Loan Mortgage Corp., 4.500% 08/15/2028 3.1 Federal Home Loan Mortgage Corp., TBA, 5.000% 12/01/2099 3.1 Government National Mortgage Association, 4.500% 04/16/2028 3.0 Federal Home Loan Mortgage Corp., 5.000% 05/01/2034 2.9 U.S. Treasury Notes, 4.875% 02/15/2012 2.9 Federal Home Loan Mortgage Corp., 4.000% 10/15/2026 2.8 U.S. Treasury Inflation Index Bonds, 3.625% 01/15/2008 2.8
We appreciate your continued confidence in the CMG Core Bond Fund. The Columbia Investment Team July 31, 2004 Investing in fixed-income securities offers the potential for attractive current income and total returns, but also involves certain risks. The value and return of your investment may fluctuate as a result of changes in interest rates, the financial strength of issuers of lower-rated bonds or political and economic developments. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weightings within the portfolio may change as market conditions change. 2 [CHART] GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 1, 2000 TO JULY 31, 2004
CMG CORE BOND FUND LEHMAN BROTHERS AGGREGATE BOND INDEX 8/31/2000 $ 10,000 $ 10,000 9/30/2000 $ 10,075 $ 10,063 10/31/2000 $ 10,130 $ 10,129 11/30/2000 $ 10,309 $ 10,296 12/31/2000 $ 10,522 $ 10,487 1/31/2001 $ 10,681 $ 10,659 2/28/2001 $ 10,786 $ 10,752 3/31/2001 $ 10,844 $ 10,806 4/30/2001 $ 10,784 $ 10,760 5/31/2001 $ 10,850 $ 10,825 6/30/2001 $ 10,897 $ 10,866 7/31/2001 $ 11,144 $ 11,109 8/31/2001 $ 11,264 $ 11,237 9/30/2001 $ 11,424 $ 11,368 10/31/2001 $ 11,651 $ 11,606 11/30/2001 $ 11,503 $ 11,446 12/31/2001 $ 11,445 $ 11,373 1/31/2002 $ 11,499 $ 11,465 2/28/2002 $ 11,605 $ 11,576 3/31/2002 $ 11,426 $ 11,384 4/30/2002 $ 11,636 $ 11,605 5/31/2002 $ 11,736 $ 11,703 6/30/2002 $ 11,823 $ 11,804 7/31/2002 $ 11,911 $ 11,947 8/31/2002 $ 12,114 $ 12,149 9/30/2002 $ 12,295 $ 12,345 10/31/2002 $ 12,114 $ 12,289 11/30/2002 $ 12,093 $ 12,285 12/31/2002 $ 12,281 $ 12,539 1/31/2003 $ 12,292 $ 12,551 2/28/2003 $ 12,473 $ 12,724 3/31/2003 $ 12,458 $ 12,714 4/30/2003 $ 12,554 $ 12,819 5/31/2003 $ 12,776 $ 13,058 6/30/2003 $ 12,731 $ 13,031 7/31/2003 $ 12,330 $ 12,594 8/31/2003 $ 12,399 $ 12,677 9/30/2003 $ 12,730 $ 13,013 10/31/2003 $ 12,609 $ 12,892 11/30/2003 $ 12,633 $ 12,923 12/31/2003 $ 12,741 $ 13,054 1/31/2004 $ 12,846 $ 13,159 2/29/2004 $ 12,988 $ 13,301 3/31/2004 $ 13,090 $ 13,401 4/30/2004 $ 12,767 $ 13,052 5/31/2004 $ 12,699 $ 13,000 6/30/2004 $ 12,773 $ 13,074 7/31/2004 $ 12,907 $ 13,201
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Core Bond 9/1/00 4.67 6.73 Lehman Brothers Aggregate Bond Index 4.84 7.35
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR LIFE CMG Core Bond 9/1/00 0.32 6.60 Lehman Brothers Aggregate Bond Index 0.32 7.24
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. Index performance is from September 1, 2000. The Lehman Brothers Aggregate Bond Index is a market value-weighted index that tracks the daily price, coupon, pay-downs, and total return performance of fixed-rate, publicly placed, dollar-denominated, and non-convertible investment grade debt issues with at least $100 million par amount outstanding and with at least one year to final maturity. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 3 UNDERSTANDING YOUR EXPENSES - CMG CORE BOND FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,004.13 1,023.32 1.54 1.56
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.31%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 4 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 5 CMG SHORT TERM BOND FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Short Term Bond Fund returned 2.72% for the 12-month period ended July 31, 2004. The fund outperformed both the Merrill Lynch 1-3 Year Treasury Index and the Merrill Lynch 1-5 Year Government/Corporate Bond Index, which returned 1.42% and 2.29%, respectively, during the period. The fund also outperformed its peer group, the Lipper Short Investment Grade Debt Funds Category, whose average return was 1.74%.(1) The fund's "barbell" structure, which combines short-term floating rate instruments with securities at the longer end of its maturity spectrum, was chiefly responsible for the strong showing. For most of the 12-month period, the fixed-income market rewarded investors who were willing to take on risk by investing in bonds with longer maturities or lower credit quality. This environment was slightly negative for the fund, which concentrates on higher quality short-term bonds. In addition, the fund sacrificed some performance by maintaining a shorter duration than its benchmarks. Duration is a measure of interest-rate sensitivity. However, the fund was able to generate a competitive return because of its barbell structure. We owned short-term floating rate notes, which carried higher yields than Treasury securities of comparable maturities. We also owned longer-term securities--in this context, those with maturities of about five years--which increased in value as long-term interest rates declined. On June 30, the Federal Reserve Board raised the federal funds rate--the key overnight bank lending rate--from 1.00% to 1.25%.(2) In anticipation of the Fed's action, fixed income markets were weak during the spring and early summer. Lower quality bonds were especially weak, reversing a trend that had been in place for over a year. In this changed environment, the fund's relatively defensive positioning was helpful. The fund also was aided by its emphasis on the mortgage sector. During the first part of the period, we shifted investments from conventional passthrough securities into structured instruments such as CMOs (collateralized mortgage obligations). This was a defensive move in advance of rising interest rates. Refinancing activity tends to slow when interest rates rise, delaying the return of principal to holders of conventional mortgage bonds. The benefit of our strategy emerged when rates ticked higher toward the end of the period and bond prices fell across all sectors. The loss sustained by Treasury and corporate bonds was twice that suffered by mortgage bonds. Because we had expected higher interest rates for some time, we did not have to make significant adjustments to the fund after the Fed declared that a series of incremental rate hikes may be in store. In particular, our emphasis on floating rate securities, whose interest payments are adjusted with market rates, helped to position the fund for a rising-rate environment. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. (2) In August, the federal funds rate was increased to 1.50%. 6 The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were (%): Federal Home Loan Mortgage Corp., 3.000% 06/15/2009 3.1 SLM Student Loan Trust, 2.260% 01/25/2013 2.7 Federal Home Loan Mortgage Corp., 4.000% 2026 (various pools) 2.5 KeyCorp Student Loan Trust, 1.970% 10/25/2025 2.2 New Century Home Equity Loan Trust, 1.820% 01/25/2034 2.1 Countrywide Home Loans, 1.500% 08/25/2018 2.1 U.S. Treasury Inflation Index Bond, 3.625% 01/15/2008 2.0 Residential Asset Securitization Trust, 1.900% 02/25/2034 1.9 Countrywide Home Loans, 1.950% 03/25/2034 1.6 Residential Asset Securitization Trust, 5.500% 07/25/2033 1.3
We appreciate your continued confidence in the CMG Short Term Bond Fund. The Columbia Investment Team July 31, 2004 Investing in fixed-income securities offers the potential for attractive current income and total returns, but also involves certain risks. The value and return of your investment may fluctuate as a result of changes in interest rates, the financial strength of issuers of lower-rated bonds or political and economic developments. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weightings within the portfolio may change as market conditions change. 7 [CHART] GROWTH OF A $10,000 INVESTMENT, FEBRUARY 2, 1998 TO JULY 31, 2004
MERRILL LYNCH 1-5 YEAR CMG SHORT TERM BOND FUND GOVERNMENT/CORPORATE BOND INDEX MERRILL LYNCH 1-3 YEAR TREASURY INDEX 2/2/98 $ 10,000 $ 10,000 $ 10,000 2/28/98 $ 10,005 $ 10,002 $ 10,010 3/31/98 $ 10,040 $ 10,041 $ 10,051 4/30/98 $ 10,099 $ 10,088 $ 10,098 5/31/98 $ 10,168 $ 10,150 $ 10,152 6/30/98 $ 10,236 $ 10,209 $ 10,205 7/31/98 $ 10,279 $ 10,255 $ 10,253 8/31/98 $ 10,425 $ 10,403 $ 10,382 9/30/98 $ 10,563 $ 10,589 $ 10,519 10/31/98 $ 10,536 $ 10,623 $ 10,570 11/30/98 $ 10,561 $ 10,608 $ 10,561 12/31/98 $ 10,612 $ 10,648 $ 10,598 1/31/99 $ 10,691 $ 10,701 $ 10,640 2/28/99 $ 10,608 $ 10,605 $ 10,588 3/31/99 $ 10,688 $ 10,692 $ 10,661 4/30/99 $ 10,723 $ 10,727 $ 10,695 5/31/99 $ 10,687 $ 10,685 $ 10,689 6/30/99 $ 10,704 $ 10,716 $ 10,722 7/31/99 $ 10,695 $ 10,728 $ 10,756 8/31/99 $ 10,705 $ 10,749 $ 10,787 9/30/99 $ 10,815 $ 10,836 $ 10,858 10/31/99 $ 10,847 $ 10,861 $ 10,887 11/30/99 $ 10,875 $ 10,879 $ 10,908 12/31/99 $ 10,886 $ 10,881 $ 10,923 1/31/2000 $ 10,879 $ 10,857 $ 10,918 2/29/2000 $ 10,956 $ 10,934 $ 10,992 3/31/2000 $ 11,046 $ 11,019 $ 11,060 4/30/2000 $ 11,040 $ 11,027 $ 11,088 5/31/2000 $ 11,075 $ 11,059 $ 11,134 6/30/2000 $ 11,233 $ 11,205 $ 11,250 7/31/2000 $ 11,316 $ 11,284 $ 11,321 8/31/2000 $ 11,431 $ 11,389 $ 11,404 9/30/2000 $ 11,543 $ 11,492 $ 11,487 10/31/2000 $ 11,598 $ 11,544 $ 11,549 11/30/2000 $ 11,743 $ 11,676 $ 11,658 12/31/2000 $ 11,929 $ 11,846 $ 11,797 1/31/2001 $ 12,094 $ 12,017 $ 11,944 2/28/2001 $ 12,197 $ 12,111 $ 12,022 3/31/2001 $ 12,295 $ 12,221 $ 12,122 4/30/2001 $ 12,301 $ 12,229 $ 12,155 5/31/2001 $ 12,386 $ 12,301 $ 12,223 6/30/2001 $ 12,440 $ 12,346 $ 12,264 7/31/2001 $ 12,639 $ 12,544 $ 12,402 8/31/2001 $ 12,734 $ 12,636 $ 12,473 9/30/2001 $ 12,918 $ 12,862 $ 12,679 10/31/2001 $ 13,064 $ 13,013 $ 12,800 11/30/2001 $ 12,973 $ 12,935 $ 12,772 12/31/2001 $ 12,945 $ 12,908 $ 12,777 1/31/2002 $ 13,010 $ 12,946 $ 12,802 2/28/2002 $ 13,080 $ 13,026 $ 12,864 3/31/2002 $ 12,995 $ 12,896 $ 12,776 4/30/2002 $ 13,104 $ 13,074 $ 12,919 5/31/2002 $ 13,205 $ 13,174 $ 12,971 6/30/2002 $ 13,284 $ 13,289 $ 13,080 7/31/2002 $ 13,352 $ 13,459 $ 13,240 8/31/2002 $ 13,464 $ 13,573 $ 13,285 9/30/2002 $ 13,588 $ 13,746 $ 13,395 10/31/2002 $ 13,456 $ 13,744 $ 13,426 11/30/2002 $ 13,452 $ 13,720 $ 13,384 12/31/2002 $ 13,581 $ 13,930 $ 13,511 1/31/2003 $ 13,599 $ 13,937 $ 13,510 2/28/2003 $ 13,699 $ 14,059 $ 13,567 3/31/2003 $ 13,724 $ 14,087 $ 13,591 4/30/2003 $ 13,774 $ 14,151 $ 13,617 5/31/2003 $ 13,888 $ 14,302 $ 13,669 6/30/2003 $ 13,900 $ 14,321 $ 13,689 7/31/2003 $ 13,713 $ 14,136 $ 13,615 8/31/2003 $ 13,743 $ 14,144 $ 13,625 9/30/2003 $ 13,919 $ 14,369 $ 13,749 10/31/2003 $ 13,863 $ 14,282 $ 13,698 11/30/2003 $ 13,866 $ 14,280 $ 13,691 12/31/2003 $ 13,949 $ 14,389 $ 13,770 1/31/2004 $ 14,008 $ 14,442 $ 13,798 2/29/2004 $ 14,082 $ 14,546 $ 13,864 3/31/2004 $ 14,133 $ 14,627 $ 13,907 4/30/2004 $ 14,018 $ 14,399 $ 13,774 5/31/2004 $ 13,997 $ 14,362 $ 13,761 6/30/2004 $ 14,022 $ 14,378 $ 13,760 7/31/2004 $ 14,087 $ 14,464 $ 13,806
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR 5-YEAR LIFE CMG Short Term Bond 2/2/98 2.72 5.66 5.42 Merrill Lynch 1-5 Year Government/Corporate Bond Index 2.29 6.16 5.85 Merrill Lynch 1-3 Year Treasury Index 1.42 5.12 5.09
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR 5-YEAR LIFE CMG Short Term Bond 2/2/98 0.89 5.55 5.42 Merrill Lynch 1-5 Year Government/Corporate Bond Index 0.40 6.06 5.84 Merrill Lynch 1-3 Year Treasury Index 0.50 5.11 5.10
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. The index performance is from February 2, 1998. The Merrill Lynch 1-5 Year Government/Corporate Index is an unmanaged index that includes all US government debt with at least $100 million face value outstanding, and investment-grade rated corporate debt with at least $100 million face value outstanding, with a maturity between 1-5 years. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index that measures the return of Treasury bills with maturities of 1-3 years. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 8 UNDERSTANDING YOUR EXPENSES - CMG SHORT TERM BOND FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,005.67 1,023.62 1.25 1.26
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.25%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 9 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 10 CMG ULTRA SHORT TERM BOND FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Ultra Short Term Bond Fund returned negative 0.08% from its inception on March 8, 2004 through July 31, 2004. The fund's performance reflected a challenging environment for bonds as interest rates rose during the period. The return was slightly lower than the return of the Citigroup One-Year U.S. Treasury Bill Index, which was negative 0.05% for the period. The fund outperformed the Lipper Short Investment Grade Debt Funds Category average, which was negative 0.38% from February 29, 2004 through July 31, 2004.(1) We believe our decision to emphasize short-term floating rate notes and asset-backed bonds helped the fund do better than its peer group. The fund's sizable cash position (primarily in short-term corporate paper) also helped performance as interest rates headed higher. Going forward we plan to put more cash to work in other sectors. However, the fund will continue to maintain a sizeable cash position because of its short-term focus. The fund launched during a period of increased economic momentum. A substantial increase in the number of new jobs added to the workforce was reported from March through May, an indication that the US labor market had finally turned the corner. The Federal Reserve Board responded to these and other signs of economic strength by announcing its intention to begin raising short-term interest rates at a measured pace. The Fed made good on its intentions by raising the federal funds rate from 1.00% to 1.25% on June 30, 2004.(2) Yields on one- and two-year Treasury notes rose sharply and prices fell in response to higher short-term rates, because yield and price move in opposite directions. In an environment of rising interest rates, the fund benefited from its substantial position in floating rate bonds. These bonds, which typically adjust their yields quarterly, have less exposure to interest rate risk than fixed-rate securities. We also took advantage of the abilities of our asset-backed research team, which identified good values in securities issued by selected companies. Asset-backed bonds are secured by income-producing assets, such as equipment, automobiles or credit card receivables. Together floating rate and asset-backed securities accounted for nearly 30% of the fund's investments. Both positions aided the fund's performance during the quarter. Despite recent weakness in several key economic indicators, we believe the economy will show improvement in the third quarter of 2004. We expect a stronger economy will lead to even higher short-term interest rates by year end, although the timing and extent of future rate increases are impossible to predict. An escalation in geopolitical risks as well as the outcome of the forthcoming presidential election could also have an impact on interest rates. We continue to pay close attention to interest rates and the economy as we continue to put new money to work in the portfolio. More importantly, we will seek to take advantage of opportunities to invest in attractively valued bonds while adhering to the fund's conservative risk profile. - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. Performance as of February 29, 2004 was the closest available date to the fund's inception. (2) In August, the federal funds rate was increased to 1.50%. 11 The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004 were (%): CIT Group, Inc., 1.409% 11/04/2005 3.0 U.S. Treasury Bills, 1.625% 04/30/2005 2.6 U.S. Treasury Bills, 1.500% 07/31/2005 2.1 Federal Home Loan Bank, 3.625% 10/15/2004 1.5 Federal Home Loan Mortgage Corp., 2.810% 02/02/2006 1.5 General Electric Capital Corp., 1.410% 05/12/2006 1.5 Federal Home Loan Bank, 1.625% 04/15/2005 1.5 Federal National Mortgage Association, zero coupon 03/04/2005 1.5 Federal National Mortgage Association, zero coupon 04/29/2005 1.5 Federal Home Loan Mortgage Corp., zero coupon 05/03/2005 1.5
We appreciate your continued confidence in the CMG Ultra Short Term Bond Fund. The Columbia Investment Team July 31, 2004 Investing in fixed-income securities offers the potential for attractive current income and total returns, but also involves certain risks. The value and return of your investment may fluctuate as a result of changes in interest rates, the financial strength of issuers of lower-rated bonds or political and economic developments. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weightings within the portfolio may change as market conditions change. 12 [CHART] GROWTH OF A $10,000 INVESTMENT, MARCH 8, 2004 TO JULY 31, 2004
CMG ULTRA SHORT TERM BOND FUND CITIGROUP ONE-YEAR U.S. TREASURY BILL INDEX 3/8/2004 $ 10,000 $ 10,000 3/31/2004 $ 9,999 $ 10,006 4/30/2004 $ 9,977 $ 9,979 5/31/2004 $ 9,972 $ 9,977 6/30/2004 $ 9,972 $ 9,974 7/31/2004 $ 9,992 $ 9,995
CUMULATIVE TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION LIFE CMG Ultra Short Term Bond Fund 3/8/04 -0.08 Citigroup One-Year U.S. Treasury Bill Index -0.05
CUMULATIVE TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION LIFE CMG Ultra Short Term Bond Fund 3/8/04 -0.27 Citigroup One-Year U.S. Treasury Bill Index -0.27
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. The index performance is from March 8, 2004. The Citigroup One-Year U.S. Treasury Bill Index consists of a single 1-year U.S. Treasury Bill whose return is tracked until its maturity. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance results reflect any waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 13 UNDERSTANDING YOUR EXPENSES - CMG ULTRA SHORT TERM BOND FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. MARCH 8, 2004 (COMMENCEMENT OF OPERATIONS) - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 999.26 1,018.96 0.98 0.99
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.25%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 14 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 15 CMG HIGH YIELD FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE For the 12-month period ended July 31, 2004, the CMG High Yield Fund returned 8.60%. That was less than both the Merrill Lynch Intermediate BB Index, which returned 10.47%, and the average return of the Lipper High Current Yields Category, which was 11.91% for the period.(1) The fund's investment performance was held back because it did not own lower quality securities, which did especially well during the latter months of 2003. However, as the period wore on, the performance gap between higher and lower quality securities narrowed, and the fund's relative performance improved. As the economic recovery unfolded in 2003, fixed-income investors became increasingly willing to assume the risks of lower quality securities in return for their higher yields. The market's preference for lower quality securities created a striking performance gap: BB-rated securities returned 11.44% during the 12 months ended July 31, 2004, while CCC-rated issues returned 18.03%. The fund's strategy to generally not own CCC-rated bonds, which carry a significantly higher bankruptcy risk than higher rated securities, placed it at a disadvantage to its peer group. However, CCC-rated securities lost ground in the second half of the period. In July, they suffered a sharp decline, mirroring a sell-off in the small-cap stock market. The fund's returns were aided by favorable sector allocation decisions. In part, the fund benefited because of what it DIDN'T own. For example, the fund had no exposure to the airline sector, which suffered from increased competition and higher fuel prices. Similarly, we avoided the electric utility industry, where bonds issued by Calpine and others posted heavy losses during the second half of the period. The fund also had minimal exposure to the telecommunications sector, an industry in which many companies continued to struggle. The fund's only holding in this sector, Nextel (2.0% of net assets), improved its competitive standing during the past 12 months and was a positive performer for the fund. Energy was the fund's single biggest sector position, and it benefited from the steady increase in oil prices during the period. At the end of the period, energy represented 13% of the fund's assets. Holdings in the cable television industry also made a positive contribution to performance. Satellite companies continued to take market share from traditional cable companies, a trend that favored fund holdings such as DirecTV and Echostar (1.8% and 2.1% of net assets, respectively). Several issuers of securities that the fund holds were bought out or upgraded by rating agencies during the period. Among the fund's health care holdings, Apogent Technologies (1.7% of net assets) was bought by Fisher Scientific and its bonds appreciated sharply as a result. Within the automotive sector, American Axle and Lear were both raised to investment grade status, and the fund's bonds were sold or tendered. The fund also made several new purchases during the period. The biggest addition to the portfolio was cruise operator Royal Caribbean (2.1% of net assets), which recently completed a major - ---------- (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 16 program to augment its fleet. With capital spending now sharply down and the travel business showing increasing strength, the company offered an attractive risk/reward profile. We also added to our health care position by purchasing bonds of hospital company HCA (1.0% of net assets). HCA has been on our focus list for some time, and we purchased bonds when they became available at favorable yield levels. On the sell side, the fund eliminated its position in entertainment company Six Flags, in anticipation of lower earnings. We also sold Canadian paper company Cascades because of valuation concerns. Overall, the fundamentals of the high yield bond market remain attractive as default rates have continued to move down. At the end of June, the Moody's trailing 12-month default rate was 3.3%, versus 5.2% at the beginning of the year. We believe the high yield market is capable of holding its ground even if interest rates tick higher. High-yield securities have historically outperformed investment grade securities in rising-rate environments. The yield advantage once enjoyed by the lowest-quality issuers has shrunk considerably. We believe that this may raise the relative performance potential of BB-rated securities in the months ahead. The fund's top ten issuers (as a percentage of net assets) as of July 31, 2004 were (%): Peabody Energy Corp. 2.2 Iron Mountain, Inc. 2.1 Caesars Entertainment 2.1 Royal Caribbean Cruises Ltd. 2.1 Echostar DBS 2.1 Station Casinos, Inc. 2.1 Cott Beverages, Inc. 2.1 R.H. Donnelley Financial Corp. 2.1 Grant Prideco, Inc. 2.0 Nextel Communications, Inc. 2.0
We appreciate your continued confidence in the CMG High Yield Fund. The Columbia Investment Team July 31, 2004 Investing in high yield securities (commonly known as "junk bonds") offers the potential for high current income and attractive total return, but involves certain risks. Changes in economic conditions or other circumstances may adversely affect a junk bond issuer's ability to make principal and interest payments. Rising interest rates tend to lower the value of all bonds. Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee the fund will continue to maintain the holdings breakdown listed. The fund's holdings and their weightings within the portfolio may change as market conditions change. 17 [CHART] GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1994 TO JULY 31, 2004
CMG HIGH YIELD FUND MERRILL LYNCH INTERMEDIATE BB INDEX MERRILL LYNCH U.S. HIGH YIELD, CASH PAY INDEX 8/1/94 $ 10,000 $ 10,000 $ 10,000 8/31/94 $ 10,074 $ 10,079 $ 10,069 9/30/94 $ 10,116 $ 10,068 $ 10,065 10/31/94 $ 10,130 $ 10,089 $ 10,090 11/30/94 $ 10,001 $ 10,024 $ 10,004 12/31/94 $ 10,129 $ 10,119 $ 10,115 1/31/95 $ 10,273 $ 10,284 $ 10,258 2/28/95 $ 10,582 $ 10,564 $ 10,578 3/31/95 $ 10,672 $ 10,689 $ 10,725 4/30/95 $ 10,908 $ 10,889 $ 10,976 5/31/95 $ 11,188 $ 11,236 $ 11,319 6/30/95 $ 11,283 $ 11,336 $ 11,405 7/31/95 $ 11,430 $ 11,390 $ 11,535 8/31/95 $ 11,459 $ 11,477 $ 11,605 9/30/95 $ 11,626 $ 11,604 $ 11,737 10/31/95 $ 11,800 $ 11,715 $ 11,821 11/30/95 $ 11,938 $ 11,874 $ 11,936 12/31/95 $ 12,139 $ 12,045 $ 12,129 1/31/96 $ 12,317 $ 12,214 $ 12,320 2/29/96 $ 12,382 $ 12,176 $ 12,339 3/31/96 $ 12,225 $ 12,097 $ 12,305 4/30/96 $ 12,202 $ 12,042 $ 12,312 5/31/96 $ 12,218 $ 12,075 $ 12,400 6/30/96 $ 12,235 $ 12,190 $ 12,475 7/31/96 $ 12,338 $ 12,257 $ 12,559 8/31/96 $ 12,571 $ 12,356 $ 12,689 9/30/96 $ 12,792 $ 12,566 $ 12,962 10/31/96 $ 12,934 $ 12,763 $ 13,104 11/30/96 $ 13,225 $ 13,012 $ 13,369 12/31/96 $ 13,315 $ 13,034 $ 13,472 1/31/97 $ 13,421 $ 13,141 $ 13,576 2/28/97 $ 13,601 $ 13,280 $ 13,766 3/31/97 $ 13,399 $ 13,156 $ 13,613 4/30/97 $ 13,530 $ 13,298 $ 13,768 5/31/97 $ 13,875 $ 13,511 $ 14,046 6/30/97 $ 14,046 $ 13,700 $ 14,260 7/31/97 $ 14,425 $ 14,028 $ 14,602 8/31/97 $ 14,402 $ 13,985 $ 14,577 9/30/97 $ 14,609 $ 14,185 $ 14,819 10/31/97 $ 14,600 $ 14,273 $ 14,917 11/30/97 $ 14,757 $ 14,366 $ 15,059 12/31/97 $ 14,929 $ 14,498 $ 15,202 1/31/98 $ 15,182 $ 14,675 $ 15,428 2/28/98 $ 15,259 $ 14,707 $ 15,491 3/31/98 $ 15,351 $ 14,788 $ 15,625 4/30/98 $ 15,407 $ 14,881 $ 15,698 5/31/98 $ 15,489 $ 14,999 $ 15,808 6/30/98 $ 15,602 $ 15,099 $ 15,887 7/31/98 $ 15,799 $ 15,197 $ 15,977 8/31/98 $ 15,266 $ 14,878 $ 15,287 9/30/98 $ 15,562 $ 15,153 $ 15,318 10/31/98 $ 15,477 $ 14,984 $ 15,067 11/30/98 $ 16,005 $ 15,307 $ 15,752 12/31/98 $ 16,022 $ 15,414 $ 15,757 1/31/99 $ 16,205 $ 15,515 $ 15,913 2/28/99 $ 16,117 $ 15,443 $ 15,792 3/31/99 $ 16,264 $ 15,605 $ 15,928 4/30/99 $ 16,389 $ 15,774 $ 16,176 5/31/99 $ 16,202 $ 15,615 $ 16,065 6/30/99 $ 16,172 $ 15,605 $ 16,034 7/31/99 $ 16,180 $ 15,640 $ 16,058 8/31/99 $ 16,039 $ 15,574 $ 15,894 9/30/99 $ 16,041 $ 15,636 $ 15,834 10/31/99 $ 16,065 $ 15,564 $ 15,740 11/30/99 $ 16,310 $ 15,712 $ 15,920 12/31/99 $ 16,407 $ 15,799 $ 16,003 1/31/2000 $ 16,333 $ 15,723 $ 15,923 2/29/2000 $ 16,369 $ 15,699 $ 15,937 3/31/2000 $ 16,261 $ 15,594 $ 15,714 4/30/2000 $ 16,376 $ 15,574 $ 15,719 5/31/2000 $ 16,360 $ 15,457 $ 15,546 6/30/2000 $ 16,733 $ 15,797 $ 15,812 7/31/2000 $ 16,875 $ 15,988 $ 15,925 8/31/2000 $ 17,184 $ 16,217 $ 16,120 9/30/2000 $ 17,165 $ 16,124 $ 16,026 10/31/2000 $ 17,028 $ 15,792 $ 15,557 11/30/2000 $ 16,805 $ 15,770 $ 15,070 12/31/2000 $ 17,285 $ 16,073 $ 15,397 1/31/2001 $ 17,952 $ 16,706 $ 16,314 2/28/2001 $ 18,118 $ 16,958 $ 16,572 3/31/2001 $ 18,020 $ 17,099 $ 16,353 4/30/2001 $ 17,976 $ 17,214 $ 16,175 5/31/2001 $ 18,066 $ 17,496 $ 16,486 6/30/2001 $ 17,831 $ 17,368 $ 16,146 7/31/2001 $ 18,003 $ 17,667 $ 16,396 8/31/2001 $ 18,282 $ 17,868 $ 16,555 9/30/2001 $ 17,527 $ 16,977 $ 15,494 10/31/2001 $ 18,207 $ 17,391 $ 15,950 11/30/2001 $ 18,733 $ 17,838 $ 16,468 12/31/2001 $ 18,549 $ 17,679 $ 16,351 1/31/2002 $ 18,677 $ 17,672 $ 16,443 2/28/2002 $ 18,522 $ 17,555 $ 16,285 3/31/2002 $ 18,763 $ 17,924 $ 16,672 4/30/2002 $ 18,908 $ 18,261 $ 16,938 5/31/2002 $ 18,872 $ 18,279 $ 16,846 6/30/2002 $ 18,379 $ 16,901 $ 15,648 7/31/2002 $ 18,079 $ 16,215 $ 15,026 8/31/2002 $ 18,421 $ 16,521 $ 15,401 9/30/2002 $ 18,335 $ 16,455 $ 15,155 10/31/2002 $ 18,316 $ 16,421 $ 15,027 11/30/2002 $ 18,921 $ 17,020 $ 15,923 12/31/2002 $ 19,068 $ 17,257 $ 16,165 1/31/2003 $ 19,267 $ 17,571 $ 16,631 2/28/2003 $ 19,463 $ 17,720 $ 16,845 3/31/2003 $ 19,810 $ 17,936 $ 17,281 4/30/2003 $ 20,311 $ 18,555 $ 18,253 5/31/2003 $ 20,337 $ 18,713 $ 18,450 6/30/2003 $ 20,614 $ 19,074 $ 18,954 7/31/2003 $ 20,269 $ 18,753 $ 18,682 8/31/2003 $ 20,417 $ 18,892 $ 18,927 9/30/2003 $ 20,873 $ 19,389 $ 19,433 10/31/2003 $ 21,104 $ 19,670 $ 19,829 11/30/2003 $ 21,278 $ 19,891 $ 20,103 12/31/2003 $ 21,529 $ 20,191 $ 20,569 1/31/2004 $ 21,733 $ 20,413 $ 20,890 2/29/2004 $ 21,829 $ 20,554 $ 20,882 3/31/2004 $ 22,064 $ 20,803 $ 21,028 4/30/2004 $ 21,864 $ 20,486 $ 20,876 5/31/2004 $ 21,437 $ 20,197 $ 20,542 6/30/2004 $ 21,669 $ 20,418 $ 20,842 7/31/2004 $ 22,027 $ 20,722 $ 21,128
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG High Yield Fund 7/6/94 8.60 6.36 8.22 Merrill Lynch Intermediate BB Index 10.47 5.79 7.56 Merrill Lynch U.S High Yield, Cash Pay Index 13.08 5.64 7.77
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
INCEPTION 1-YEAR 5-YEAR LIFE CMG High Yield Fund 7/6/94 5.13 6.03 8.05 Merrill Lynch Intermediate BB Index 7.04 5.52 7.51(1) Merrill Lynch U.S High Yield, Cash Pay Index 9.97 5.38 7.71(1)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. The Merrill Lynch Intermediate BB Index is a market-weighted index, consisting of BB cash pay bonds, which are U.S. dollar denominated bonds issued in the U.S. domestic market with maturities between 1 and 10 years. The Merrill Lynch U.S. High Yield, Cash Pay Index is an unmanaged index that tracks the performance of non-investment-grade corporate bonds. Unlike mutual funds, indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. (1) Merrill Lynch Intermediate BB Index performance is from June 30, 1994. Merrill Lynch U.S. High Yield, Cash Pay Index performance is from July 6, 1994. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. All results shown assume reinvestment of distributions. The graph and table do not reflect the deduction of taxes that the shareholder would pay on fund distributions or redemption of fund shares. 18 UNDERSTANDING YOUR EXPENSES - CMG HIGH YIELD FUND As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also ongoing costs, which generally include investment advisory fees and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the reporting period. The information in the following table is based on an initial investment of $1,000, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using the fund's actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the fund's actual expense ratio. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000. For example, if an account balance was $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during this period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2004 - JULY 31, 2004
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,013.00 1,022.90 1.98 1.99
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.40%, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees. Therefore, the hypothetical examples provided may not help you determine the relative total costs of owning shares of different funds. If these transactional costs were included, your costs would have been higher. 19 COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing costs of investing in a fund and do not reflect any transactional costs, such as sales charges or redemption or exchange fees. 20 CMG CORE BOND FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD PERIOD ENDED ENDED YEAR ENDED OCTOBER 31, ENDED JULY 31, JULY 31, ---------------------------- OCTOBER 31, 2004 2003 (a) 2002 2001 2000 (b) ---------- ---------- ---------- ---------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.38 $ 10.52 $ 10.83 $ 10.02 $ 10.00 ---------- ---------- ---------- ---------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.37(c) 0.31(c) 0.56(c)(d) 0.65 0.11 Net realized and unrealized gain (loss) on investments and futures contracts 0.11 (0.12) (0.15)(d) 0.81 0.02 ---------- ---------- ---------- ---------- ----------- Total from investment operations 0.48 0.19 0.41 1.46 0.13 ---------- ---------- ---------- ---------- ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.41) (0.33) (0.58) (0.65) (0.11) From net realized gains (0.09) - (0.14) -(e) - ---------- ---------- ---------- ---------- ----------- Total distributions (0.50) (0.33) (0.72) (0.65) (0.11) ---------- ---------- ---------- ---------- ----------- NET ASSET VALUE, END OF PERIOD $ 10.36 $ 10.38 $ 10.52 $ 10.83 $ 10.02 ========== ========== ========== ========== =========== TOTAL RETURN (f)(g) 4.67% 1.76%(h) 3.97% 15.01% 1.31%(h) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 32,810 $ 30,512 $ 27,412 $ 28,774 $ 10,866 Ratio of net expenses to average net assets (i) 0.35% 0.40%(j) 0.40% 0.40% 0.40%(j) Ratio of net investment income to average net assets (i) 3.54% 3.95%(j) 5.34%(d) 6.14% 6.57%(j) Waiver/reimbursement 0.25% 0.29%(j) 0.16% 0.25% 1.06%(j) Portfolio turnover rate 231% 181%(h) 147% 140% 103%(h)
(a) The Fund changed its fiscal year end from October 31 to July 31. (b) The Fund commenced investment operations on September 1, 2000. Per share data, total return and portfolio turnover rate reflect activity from that date. (c) Per share data was calculated using average shares outstanding during the period. (d) Effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended October 31, 2002, was to decrease net investment income per share by $0.02, decrease net realized and unrealized loss per share data by $0.02 and decrease the ratio of net investment income to average net assets from 5.53% to 5.34%. Per share data and ratios for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (e) Rounds to less than $0.01 per share. (f) Total return at net asset value assuming all distributions reinvested. (g) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (h) Not annualized. (i) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (j) Annualized. See Accompanying Notes to Financial Statements. 21 CMG SHORT TERM BOND FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED YEAR ENDED OCTOBER 31, JULY 31, JULY 31, ------------------------------------------------------ 2004 2003 (a) 2002 2001 2000 1999 ---------- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, BEGINNING OF PERIOD $ 12.01 $ 12.15 $ 12.41 $ 11.73 $ 11.72 $ 12.09 ---------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.35(b) 0.34(b) 0.59(b)(c) 0.76 0.77 0.72 Net realized and unrealized gain (loss) on investments (0.03) (0.11) (0.22)(c) 0.68 0.01 (0.37) ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations 0.32 0.23 0.37 1.44 0.78 0.35 ---------- ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.38) (0.37) (0.63) (0.76) (0.77) (0.72) From net realized gains - - - - - -(d) ---------- ---------- ---------- ---------- ---------- ---------- Total distributions (0.38) (0.37) (0.63) (0.76) (0.77) (0.72) ---------- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 11.95 $ 12.01 $ 12.15 $ 12.41 $ 11.73 $ 11.72 ========== ========== ========== ========== ========== ========== TOTAL RETURN (e)(f) 2.72% 1.91%(g) 3.12% 12.62% 6.92% 2.96% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 119,125 $ 113,193 $ 140,757 $ 89,791 $ 82,809 $ 144,821 Ratio of net expenses to average net assets (h) 0.25% 0.25%(i) 0.25% 0.25% 0.25% 0.25% Ratio of interest expense to average net assets - -(i)(j) - - - - Ratio of net investment income to average net assets (h) 2.91% 3.79%(i) 4.73%(c) 6.27% 6.56% 6.22% Waiver/reimbursement 0.10% 0.08%(i) 0.05% 0.08% 0.08% 0.07% Portfolio turnover rate 79% 93%(g) 132% 82% 86% 128%
(a) The Fund changed its fiscal year end from October 31 to July 31. (b) Per share data was calculated using average shares outstanding during the period. (c) Effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the period ended October 31, 2002, was to decrease net investment income per share by $0.04, decrease net realized and unrealized loss per share by $0.04 and decrease the ratio of net investment income to average net assets from 5.08% to 4.73%. Per share data and ratios for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (d) Rounds to less than $0.01 per share. (e) Total return at net asset value assuming all distributions reinvested. (f) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage agreements, if applicable, had an impact of less than 0.01%. (i) Annualized. (j) Rounds to less than 0.01%. See Accompanying Notes to Financial Statements. 22
PERIOD ENDED JULY 31, 2004 (a) ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.07 Net realized and unrealized loss on investments (0.08) ------------ Total from investment operations (0.01) ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.11) ------------ NET ASSET VALUE, END OF PERIOD $ 9.88 ============ TOTAL RETURN (c)(d)(e) (0.08)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 67,235 Ratio of net expenses to average net assets (f) 0.25% Ratio of net investment income to average net assets (f) 1.69% Waiver/reimbursement (f) 0.22% Portfolio turnover rate (e) 12%
(a) The Fund commenced investment operations on March 8, 2004. Per share data, total return and portfolio turnover reflect activity from that date. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (e) Not annualized. (f) Annualized. See Accompanying Notes to Financial Statements. 23 CMG HIGH YIELD FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
YEAR PERIOD ENDED ENDED YEAR ENDED OCTOBER 31, JULY 31, JULY 31, ------------------------------------------------------- 2004 2003 (a) 2002 2001 2000 1999 (b) ----------- ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 7.90 $ 7.55 $ 8.14 $ 8.30 $ 8.54 $ 8.95 ----------- ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.53(c) 0.43(c) 0.64(c)(d) 0.72 0.73 0.74 Net realized and unrealized gain (loss) on investments 0.14 0.37 (0.58)(d) (0.16) (0.24) (0.41) ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations 0.67 0.80 0.06 0.56 0.49 0.33 ----------- ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.57) (0.45) (0.65) (0.72) (0.73) (0.74) From net realized gains - - - - - -(e) ----------- ----------- ----------- ----------- ----------- ----------- Total distributions declared to shareholders (0.57) (0.45) (0.65) (0.72) (0.73) (0.74) ----------- ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 8.00 $ 7.90 $ 7.55 $ 8.14 $ 8.30 $ 8.54 =========== =========== =========== =========== =========== =========== TOTAL RETURN (f) 8.60%(g) 10.67%(g)(h) 0.60% 6.92% 6.01% 3.75% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 382,157 $ 429,042 $ 286,228 $ 348,979 $ 319,985 $ 271,551 Ratio of net expenses to average net assets (i) 0.40% 0.42%(j) 0.42% 0.44% 0.43% 0.43% Ratio of net investment income to average net assets (i) 6.64% 7.32%(j) 7.98%(d) 8.63% 8.70% 8.39% Waiver/reimbursement 0.02% 0.01%(j) - - - - Portfolio turnover rate 47% 47%(h) 62% 59% 56% 62%
(a) The Fund changed its fiscal year end from October 31 to July 31. (b) Per share amounts have been adjusted to retroactively reflect a 4 for 1 share split effective September 1, 1999. (c) Per share data was calculated using average shares outstanding during the period. (d) Effective November 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change for the year ended October 31, 2002, was to decrease net investment income per share by $0.01, decrease net realized and unrealized loss per share data by $0.01 and decrease the ratio of net investment income to average net assets from 8.11% to 7.98%. Per share data and ratios for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (e) Rounds to less than $0.01 per share. (f) Total return at net asset value assuming all distributions reinvested. (g) Had the Investment Advisor not reimbursed a portion of expenses, total return would have been reduced. (h) Not annualized. (i) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (j) Annualized. See Accompanying Notes to Financial Statements. 24 CMG CORE BOND FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
PRINCIPAL AMOUNT VALUE --------------- --------------- U.S. Government & Agency Securities (41.4%) U.S. Treasury Notes & Bonds (9.1%) U.S. Treasury Bonds 7.250% 05/15/2016 $ 925,000 $ 1,130,379 U.S. Treasury Inflation Index Bonds 3.625% 01/15/2008 825,047 903,071 U.S. Treasury Notes 4.875% 02/15/2012 900,000 937,687 --------------- 2,971,137 --------------- U.S. Agency Bonds (1.6%) Federal Home Loan Bank 2.125% 12/15/2004 (a) 50,000 50,097 3.625% 10/15/2004 480,000 481,958 --------------- 532,055 --------------- Government National Mortgage Association (GNMA) (0.3%) 7.000% 01/15/2032 - 03/15/2032 99,416 105,635 --------------- Federal Home Loan Mortgage Corp. (FHLMC) (10.8%) 3.500% 10/01/2018 356,367 331,985 5.000% 04/01/2019 299,970 302,034 5.000% 05/01/2034 974,828 950,500 6.000% 05/01/2017 258,074 269,818 To Be Announced 5.000% 01/01/2019 (b) 1,000,000 1,006,250 5.500% 11/01/2017 - 03/01/2018 (b) 660,000 668,811 --------------- 3,529,398 --------------- Federal National Mortgage Association (FNMA) (0.9%) 4.000% 03/01/2019 308,035 295,713 --------------- Agency Collateralized Mortgage Obligations (18.7%) FHLMC GNMA Gtd. Multiclass Mtg. Partn. Ctfs. Series 1602 Cl. PJ 6.500% 10/15/2023 100,000 106,658 Series 2113 Cl. MU 6.500% 08/15/2027 25,707 25,798 Series 2687 Cl. MQ 4.500% 10/15/2018 220,000 221,579 Series 2689 Cl. PC 4.000% 09/15/2015 360,000 352,686 Series 2695 Cl. AT 4.000% 10/15/2026 925,000 923,702 Series 2695 Cl. BO 4.500% 08/15/2028 1,030,000 1,011,432 Series 2695 Cl. DG 4.000% 10/15/2018 600,000 541,810 Series 2700 Cl. PD 4.500% 02/15/2027 900,000 894,128
See Accompanying Notes to Financial Statements. 25
PRINCIPAL AMOUNT VALUE --------------- --------------- U.S. Government & Agency Securities (continued) Agency Collateralized Mortgage Obligations (continued) FNMA Gtd. Remic Pass Thru Ctfs. Remic Tr. 2001-34 Cl. AE 6.000% 07/25/2029 $ 68,935 $ 69,040 Remic Tr. 2001-56 Cl. KD 6.500% 07/25/2030 33,551 33,874 Remic Tr. 2002-8 Cl. PD 6.500% 07/25/2030 73,975 75,909 Remic Tr. 2003-87 Cl. TG 4.500% 11/25/2014 900,000 899,036 GNMA Gtd. Remic Pass Thru Secs. Remic Tr. 2003-97 Cl. NC 4.500% 04/16/2028 1,000,000 995,665 --------------- 6,151,317 --------------- Total U.S. Government & Agency Securities (Cost of $13,597,894) 13,585,255 --------------- Corporate Notes & Bonds (31.9%) Financials (10.7%) Allstate Financial Global Funding II 2.625% 10/22/2006 (c) 150,000 148,146 American Express Credit Corp. 3.000% 05/16/2008 275,000 266,544 American General Finance 5.375% 09/01/2009 50,000 52,100 Capital One Bank 4.875% 05/15/2008 100,000 101,977 CIT Group, Inc. 4.125% 02/21/2006 150,000 152,699 Citigroup, Inc. 7.250% 10/01/2010 215,000 243,408 Countrywide Home Loans 2.875% 02/15/2007 225,000 221,213 Genworth Financial, Inc. 4.750% 06/15/2009 200,000 202,668 Goldman Sachs Capital 1 6.345% 02/15/2034 150,000 143,619 Health Care Property Investors, Inc. 6.875% 06/08/2015 125,000 129,161 Household Finance Corp. 6.400% 06/17/2008 230,000 248,559 JPMorgan Chase & Co. 5.750% 01/02/2013 250,000 256,883 Merrill Lynch & Co. 4.125% 01/15/2009 150,000 149,120 Morgan Stanley & Co. 4.750% 04/01/2014 175,000 163,404 SLM Corp. 5.125% 08/27/2012 200,000 198,254
See Accompanying Notes to Financial Statements. 26
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Financials (continued) U.S. Bank N.A. 6.375% 08/01/2011 $ 200,000 $ 218,044 Wachovia Corp. 3.500% 08/15/2008 250,000 245,287 Washington Mutual, Inc. 5.625% 01/15/2007 125,000 131,637 Wells Fargo Financial, Inc. 5.900% 05/21/2006 225,000 236,176 --------------- 3,508,899 --------------- Industrial (18.7%) Alcan, Inc. 7.250% 03/15/2031 125,000 143,129 Anheuser-Busch Companies, Inc. 5.750% 04/01/2010 50,000 53,137 Anthem, Inc. 6.800% 08/01/2012 200,000 221,002 AT&T Wireless Services, Inc. 8.750% 03/01/2031 125,000 155,379 Boeing Co. 6.125% 02/15/2033 175,000 173,329 Canadian National Railway Co. 7.195% 01/02/2016 74,295 85,408 Coca-Cola Enterprises, Inc. 6.950% 11/15/2026 125,000 139,531 ConocoPhillips 8.500% 05/25/2005 100,000 105,041 Cox Enterprises, Inc. 8.000% 02/15/2007 (c) 130,000 143,264 DaimlerChrysler N.A. Holding Corp. 8.500% 01/18/2031 140,000 164,247 Deutsche Telekom International Finance BV 8.500% 06/15/2010 150,000 176,793 Devon Financing Corp. 6.875% 09/30/2011 100,000 117,246 Diageo Capital PLC 3.375% 03/20/2008 250,000 245,750 Ford Motor Credit Co. 7.375% 10/28/2009 285,000 305,229 General Electric Co. 5.000% 02/01/2013 350,000 349,314 General Mills, Inc. 2.625% 10/24/2006 200,000 196,368 General Motors Acceptance Corp. 7.750% 01/19/2010 250,000 272,025 International Business Machines Corp. 5.875% 11/29/2032 250,000 246,865
See Accompanying Notes to Financial Statements. 27
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Industrial (continued) International Paper Co. 4.250% 01/15/2009 $ 175,000 $ 173,175 Jones Intercable, Inc. 7.625% 04/15/2008 175,000 193,707 Kroger Co. 6.200% 06/15/2012 160,000 168,640 Lockheed Martin Corp. 8.500% 12/01/2029 85,000 107,902 Lowe's Companies, Inc. 6.500% 03/15/2029 175,000 186,013 Marathon Oil Corp. 6.800% 03/15/2032 125,000 132,160 Newell Rubbermaid, Inc. 4.000% 05/01/2010 110,000 105,037 Pepsi Americas, Inc. 3.875% 09/12/2007 125,000 125,675 Sprint Capital Corp. 6.875% 11/15/2028 100,000 99,152 Target Corp. 7.000% 07/15/2031 150,000 169,331 Time Warner, Inc. 6.625% 05/15/2029 200,000 195,888 Union Pacific Corp. 3.875% 02/15/2009 135,000 132,274 United Technologies Corp. 7.125% 11/15/2010 100,000 114,090 Verizon Global 7.250% 12/01/2010 150,000 169,037 Vodafone Group PLC 7.750% 02/15/2010 200,000 230,662 Wal-Mart Stores, Inc. 4.125% 02/15/2011 250,000 242,960 Waste Management, Inc. 7.375% 08/01/2010 150,000 169,480 Wyeth 5.500% 02/01/2014 125,000 120,714 --------------- 6,128,954 --------------- Utilities (2.5%) CenterPoint Energy Houston 5.750% 01/15/2014 150,000 155,768 Exelon Generation Co. LLC 6.950% 06/15/2011 150,000 165,445 Kinder Morgan Energy Partners LP 6.750% 03/15/2011 175,000 189,408 PSEG Power LLC 6.950% 06/01/2012 125,000 136,981
See Accompanying Notes to Financial Statements. 28
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Utilities (continued) Sempra Energy 4.750% 05/15/2009 $ 175,000 $ 176,473 --------------- 824,075 --------------- Total Corporate Notes & Bonds (Cost of $10,674,450) 10,461,928 --------------- International Notes & Bonds (2.5%) Quebec Province 6.500% 01/17/2006 275,000 289,679 Republic of Italy 2.500% 03/31/2006 300,000 298,659 United Mexican States 7.500% 04/04/2033 230,000 228,275 --------------- Total International Notes & Bonds (Cost of $817,703) 816,613 --------------- Other Securitized Loans (18.6%) Asset-Backed Securities (6.9%) ABSF Mortgage Loan Trust Series 2002-4 Cl. A 4.428% 12/15/2033 752,071 729,524 Honda Auto Receivables Owner Trust Series 2000-3 Cl. A3 3.000% 05/18/2006 262,630 263,778 IMC Home Equity Loan Trust Series 1997-3 Cl. A6 7.520% 08/20/2028 34,617 34,672 Series 1997-5 Cl. A9 7.310% 11/20/2028 72,433 72,605 New Century Home Equity Loan Trust Series 1999-NCA Cl. A7 7.320% 07/25/2029 33,568 34,624 Series 2003-5 Cl. AI2 2.940% 11/25/2033 1,020,000 1,013,054 Wilshire Mortgage Loan Trust Series 1997-2 Cl. A5 7.255% 05/25/2028 92,864 97,414 --------------- 2,245,671 --------------- Collateralized Mortgage Obligations (11.3%) Bear Stearns Asset Backed Securities, Inc. Series 2003-AC7 Cl. A1 5.000% 01/25/2034 584,744 590,609 Countrywide Alternative Loan Trust Series 2004-2CB Cl. 1A4 1.850% 03/25/2034 271,319 271,246
See Accompanying Notes to Financial Statements. 29
PRINCIPAL AMOUNT VALUE --------------- --------------- Other Securitized Loans (continued) Collateralized Mortgage Obligations (continued) Countrywide Home Loans Series 2003-49 Cl. A9 4.629% 12/19/2033 (d) $ 322,326 $ 318,687 First Nationwide Trust Series 2000-1 Cl. IIA3 8.000% 10/25/2030 29,610 29,643 GMAC Mortgage Corporation Loan Trust Series 2003-GH2 Cl. A4 5.000% 10/25/2033 680,000 644,205 IMPAC Secured Assets Corp. Series 2002-3 Cl. A3 6.360% 08/25/2032 229,079 231,477 Residential Funding Mortgage Securities I, Inc., Mtg. Pass Thru Secs. Series 2003-S14 Cl. A5 1.850% 07/25/2018 (d) 476,015 474,325 Structured Asset Securities Corp. Series 2003-21 Cl. 1A3 5.500% 07/25/2033 1,150,495 1,158,721 --------------- 3,718,913 --------------- Commercial Mortgage-Backed Securities (0.4%) GMAC Commercial Mortgage Asset Corp. Series 2001-FLAA Cl. B1 1.880% 6/15/2013 (c)(d) 42,893 42,898 NationsLink Funding Corp. Series 1999-Sl Cl. A5 6.888% 11/10/2030 90,000 97,495 --------------- 140,393 --------------- Total Other Securitized Loans (Cost of $5,880,346) 6,104,977 --------------- Short-Term Obligation (10.2%) U.S. Treasury Bill (0.5%) 1.110% 08/05/2004 175,000 174,978 --------------- Repurchase Agreement (9.7%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/2004, due 08/02/2004 at 1.230%, collateralized by a U.S. Treasury Note maturing 02/15/2012, market value of $3,245,650 (repurchase proceeds $3,180,326) 3,180,000 3,180,000 --------------- Total Short-Term Obligations (Cost of $3,355,000) 3,354,978 --------------- Total Investments (104.6%) (Cost of $34,325,393) (e) 34,323,751 Other Assets & Liabilities, Net (-4.6%) (1,513,716) --------------- Net Assets (100.0%) $ 32,810,035 ===============
See Accompanying Notes to Financial Statements. 30 At July 31, 2004, the fund held the following open short futures contracts:
AGGREGATE FACE EXPIRATION UNREALIZED TYPE VALUE VALUE DATE DEPRECIATION - ----------------------------------------------------------------------------------------------- 2 Year U.S. Treasury Note $ 3,378,000 $ 3,365,250 Sept-04 $ (12,750)
Notes to Schedule of Investments: (a) Security pledged as collateral for open futures contracts. (b) This security has been purchased on a delayed delivery basis. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2004, these securities amounted to $334,308, which represents 1.0% of net assets. (d) Variable rate security. The interest rate shown reflects the rate as of July 31, 2004. (e) Cost for federal income tax purposes is $34,446,818. See Accompanying Notes to Financial Statements. 31 CMG SHORT TERM BOND FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
PRINCIPAL AMOUNT VALUE --------------- --------------- U.S. Government & Agency Securities (14.3%) U.S. Treasury Note & Bond (2.5%) U.S. Treasury Inflation Index Bond 3.625% 01/15/2008 $ 2,170,869 $ 2,376,168 U.S. Treasury Notes 3.500% 11/15/2006 600,000 608,813 --------------- 2,984,981 --------------- U.S. Agency Bonds (8.1%) Federal Home Loan Mortgage Corp. (FHLMC) 3.000% 06/15/2009 3,737,320 3,749,583 4.000% 09/15/2015 - 10/15/2026 2,970,000 2,961,067 4.500% 11/01/2007 1,095,808 1,108,933 5.500% 12/01/2017 867,263 892,102 6.500% 11/15/2030 484,408 496,608 To be announced 5.500% TBA (a) 450,000 461,529 --------------- 9,669,822 --------------- Federal National Mortgage Association (FNMA) (2.5%) 2.000% 09/25/2018 717,927 720,081 5.500% 02/01/2018 1,509,780 1,553,519 6.000% 03/01/2009 - 05/01/2009 746,522 763,631 --------------- 3,037,231 --------------- Other Government Agencies (1.2%) A.I.D., Morocco 1.980% 05/01/2023 (b) 380,000 372,780 Small Business Administration 1.875% 10/25/2021 - 06/25/2022 (b) 596,432 603,293 2.000% 07/25/2021 - 11/25/2021 (b) 117,716 119,028 2.375% 01/25/2017 (b) 286,339 291,390 --------------- 1,386,491 --------------- Total U.S. Government & Agency Securities (Cost of $17,139,705) 17,078,525 --------------- Corporate Notes & Bonds (36.1%) Financials (15.0%) Allstate Financial Global Funding II 2.625% 10/22/2006 (c) 600,000 592,584 American Express Credit Corp. 3.000% 05/16/2008 1,000,000 969,250 American General Finance Corp. 3.000% 11/15/2006 250,000 248,000 American International Group, Inc. 2.875% 05/15/2008 650,000 631,130 Bear Stearns Co., Inc. 6.500% 05/01/2006 600,000 634,962 Capital One Bank 4.875% 05/15/2008 350,000 356,920
See Accompanying Notes to Financial Statements. 32
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Financials (continued) CIT Group, Inc. 4.125% 02/21/2006 $ 350,000 $ 356,296 Citigroup, Inc. 6.750% 12/01/2005 950,000 1,000,131 Countrywide Home Loans 2.875% 02/15/2007 500,000 491,585 Credit Suisse First Boston (USA), Inc. 5.750% 04/15/2007 600,000 633,378 Fifth Third Bank 2.700% 01/30/2007 700,000 692,580 General Electric Capital Corp. 4.250% 01/15/2008 1,450,000 1,473,649 Genworth Financial, Inc. 4.750% 06/15/2009 500,000 506,670 Goldman Sachs Group, Inc. 4.125% 01/15/2008 325,000 327,324 Health Care Property Investors, Inc. 6.875% 06/08/2005 500,000 516,645 Household Finance Corp. 6.400% 06/17/2008 475,000 513,328 JPMorgan Chase & Co. 3.125% 12/11/2006 1,000,000 995,900 Lehman Brothers Holdings, Inc. 4.000% 01/22/2008 550,000 552,101 Marshall & Isley Corp. 4.375% 08/01/2009 600,000 600,906 Merrill Lynch & Co., Inc. 2.470% 03/10/2006 700,000 694,057 Morgan Stanley 6.100% 04/15/2006 650,000 683,768 US Bancorp 3.125% 03/15/2008 1,000,000 975,370 USA Education 5.625% 04/10/2007 800,000 843,216 Wachovia Corp. 3.500% 08/15/2008 850,000 833,978 Washington Mutual, Inc. 5.625% 01/15/2007 600,000 631,860 Wells Fargo & Co. 5.900% 05/21/2006 1,100,000 1,154,637 --------------- 17,910,225 --------------- Industrial (18.3%) Alcan, Inc. 1.774% 12/08/2005 (b)(c) 850,000 850,000 Anthem, Inc. 4.875% 08/01/2005 475,000 485,968
See Accompanying Notes to Financial Statements. 33
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Industrial (continued) AOL Time Warner, Inc. 6.125% 04/15/2006 $ 565,000 $ 591,804 Bell Atlantic Financial Services, Inc. 7.600% 03/15/2007 825,000 904,711 Boeing Co. 8.100% 11/15/2006 525,000 578,592 Bottling Group LLC 2.450% 10/16/2006 1,000,000 983,540 ChevronTexaco Capital Co. 3.500% 09/17/2007 500,000 500,270 Coca-Cola Enterprises, Inc. 8.000% 01/04/2005 925,000 948,042 Costco Wholesale Corp. 5.500% 03/15/2007 975,000 1,027,357 Cox Enterprises, Inc. 8.000% 02/15/2007 (c) 475,000 523,464 CSX Corp. 6.460% 06/22/2005 525,000 543,569 DaimlerChrysler N.A. Holding Corp. 4.750% 01/15/2008 300,000 304,941 Deutsche Telekom International Finance BV 8.500% 06/15/2010 350,000 412,517 Devon Energy Corp. 2.750% 08/01/2006 550,000 544,043 Ford Motor Credit Co. 7.375% 10/28/2009 1,085,000 1,162,013 Fortune Brands, Inc. 2.875% 12/01/2006 725,000 719,642 General Mills, Inc. 2.625% 10/24/2006 625,000 613,650 General Motors Acceptance Corp. 7.750% 01/19/2010 500,000 544,050 Honeywell International, Inc. 5.125% 11/01/2006 800,000 832,912 International Business Machines Corp. 4.250% 09/15/2009 580,000 581,792 International Paper Co. 4.250% 01/15/2009 550,000 544,264 Jones Intercable, Inc. 7.625% 04/15/2008 500,000 553,450 Kroger Co. 7.650% 04/15/2007 275,000 301,166 Lockheed Martin Corp. 7.700% 06/15/2008 475,000 537,838 Lowe's Companies, Inc. 7.500% 12/15/2005 500,000 531,650
See Accompanying Notes to Financial Statements. 34
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Industrial (continued) Marathon Oil Corp. 5.375% 06/01/2007 $ 500,000 $ 522,570 Newell Rubbermaid, Inc. 2.000% 05/01/2005 600,000 596,916 Occidental Petroleum Corp. 4.250% 03/15/2010 425,000 419,348 Pitney Bowes Credit Corp. 5.750% 08/15/2008 350,000 373,517 Procter & Gamble Co. 4.750% 06/15/2007 675,000 699,341 Sprint Capital Corp. 6.375% 05/01/2009 345,000 368,356 Union Pacific Corp. 3.875% 02/15/2009 325,000 318,438 United Technologies Corp. 4.875% 11/01/2006 700,000 724,983 Vodaphone Group PLC 7.750% 02/15/2010 475,000 547,822 Waste Management, Inc. 7.125% 10/01/2007 525,000 575,951 Wyeth 4.375% 03/01/2008 500,000 501,500 --------------- 21,769,987 --------------- Utilities (2.8%) Alabama Power Co. 3.125% 05/01/2008 725,000 705,070 Dominion Resources, Inc. 2.800% 02/15/2005 700,000 702,401 Exelon Generation Co. LLC 6.950% 06/15/2011 475,000 523,911 Kinder Morgan Energy Partners L.P. 8.000% 03/15/2005 585,000 605,019 PSEG Power LLC 6.875% 04/15/2006 325,000 344,243 Sempra Energy 4.750% 05/15/2009 475,000 479,000 --------------- 3,359,644 --------------- Total Corporate Notes & Bonds (Cost of $42,425,418) 43,039,856 --------------- International Notes & Bonds (2.2%) Ontario Province 6.000% 02/21/2006 350,000 366,856 Quebec Province 6.500% 01/17/2006 600,000 632,028 7.000% 01/30/2007 85,000 92,570
See Accompanying Notes to Financial Statements. 35
PRINCIPAL AMOUNT VALUE --------------- --------------- International Notes & Bonds (continued) Republic of Italy 2.500% 03/31/2006 $ 750,000 $ 746,648 United Mexican States 4.625% 10/08/2008 780,000 776,880 --------------- Total International Notes & Bonds (Cost of $2,600,062) 2,614,982 --------------- Other Securitized Loans (37.7%) Asset Backed Securities (18.0%) ABFS Mortgage Loan Trust Series 1997-2 Cl. A5 7.125% 01/15/2029 175,633 182,363 AmeriCredit Automobile Receivables Trust Series 2002-EM Cl. A3A 2.970% 03/06/2007 947,661 949,935 Ameriquest Mortgage Securities, Inc. Series 2003-AR2 Cl. A4 1.880% 05/25/2033 (b) 1,299,273 1,300,078 CIT Equipment Collateral Trust Series 2004-VT1 Cl. A3 2.200% 03/20/2008 150,000 148,336 Cityscape Home Equity Loan Trust Series 1996-3 Cl. A8 7.650% 09/25/2025 826,658 825,847 Series 1997-3 Cl. A5 7.890% 07/25/2018 258,477 258,166 Series 1997-4 Cl. A4 7.440% 10/25/2018 125,310 125,186 Series 1997-B Cl. A7 7.410% 05/25/2028 124,216 124,406 ContiMortgage Home Equity Loan Trust Series 1997-3 Cl. A8 7.580% 08/15/2028 567,616 580,109 IMC Home Equity Loan Trust Series 1995-3 Cl. A5 7.500% 04/25/2026 984,637 994,484 Series 1997-3 Cl. A6 7.520% 08/20/2028 82,549 82,680 KeyCorp Student Loan Trust Series 1996-A Cl. A2 1.630% 08/27/2025 (b) 1,231,230 1,239,162 Series 1997-1, Cl. A2 2.090% 01/27/2023 (b)(c) 1,265,130 1,282,923 Series 2003-A, Cl. 2A2 1.970% 10/25/2025 (b) 2,600,000 2,620,462
See Accompanying Notes to Financial Statements. 36
PRINCIPAL AMOUNT VALUE --------------- --------------- Other Securitized Loans (continued) Asset Backed Securities (continued) Lehman Home Equity Loan Trust Series 1996-3 Cl. A2 1.469% 12/15/2027 (b) $ 197,373 $ 205,187 New Century Home Equity Loan Trust Series 2003-6, Cl. A2 1.820% 01/25/2034 (b) 2,539,291 2,546,909 SLM Student Loan Trust Series 1996-1 Cl. CTFS 2.190% 07/25/2011 (b) 1,300,000 1,313,559 Series 1996-4 Cl. CTFS 2.140% 07/25/2011 (b) 1,400,000 1,400,910 Series 1997-2 Cl. A2 1.810% 01/25/2010 (b) 1,563,478 1,567,704 Series 1997-4 Cl. A2 2.260% 01/25/2013 (b) 3,140,000 3,176,966 Series 2001-2 Cl. A1T 1.970% 07/27/2009 (b) 239,137 239,668 UCFC Home Equity Loan Trust Series 1998-D Cl. AF7 6.315% 04/15/2030 296,692 315,852 --------------- 21,480,892 --------------- Collateralized Mortgage Obligations (18.5%) Bear Stearns Adjustable Rate Mortgage Trust Series 2004-4 Cl. A6 3.517% 06/25/2034 (b) 1,000,000 980,650 Bear Stearns Asset Backed Securities, Inc. Series 2003-AC2 Cl. A3 3.500% 06/25/2033 221,387 220,679 Series 2003-AC7 Cl. A1 5.000% 01/25/2034 1,463,876 1,478,559 Countrywide Alternative Loan Trust Series 2004-2CB 1.850% 03/25/2034 1,515,644 1,515,237 Countrywide Home Loans Series 2002-5 Cl. 2A1 6.000% 04/25/2017 156,104 157,117 Series 2003-J7 Cl. 4A2 1.500% 08/25/2018 2,541,252 2,526,309 Series 2004-J7 Cl. A2 1.950% 03/25/2034 1,846,628 1,849,177 First Horizon Mortgage Pass-Through Trust Series 2003-2 Cl. 2A1 1.600% 03/25/2018 1,450,948 1,458,638 Series 2003-4 Cl. 2A2 1.550% 06/25/2018 1,293,078 1,298,677
See Accompanying Notes to Financial Statements. 37
PRINCIPAL AMOUNT VALUE --------------- --------------- Other Securitized Loans (continued) Collateralized Mortgage Obligations (continued) First Nationwide Trust Series 2000-1 Cl. 2A3 8.000% 10/25/2030 $ 67,929 $ 68,005 IMPAC CMB Trust Series 2003-12 Cl. A1 1.680% 12/25/2033 888,146 890,518 IMPAC Secured Assets CMN Owner Trust Series 2002-3 Cl. A3 6.360% 08/25/2032 523,608 529,090 Ocwen Residential MBS Corp. Series 1998-R1 Cl. A1 7.000% 10/25/2040 (c) 312,410 319,421 PNC Mortgage Securities Corp. Series 1996-PR1 Cl. A 0.000% 4/28/2027 (b)(c) 18,000 17,838 Residential Asset Credit Loans, Inc. Series 2004-QS8 Cl. A4 1.850% 06/25/2034 1,187,082 1,187,082 Residential Asset Securitization Trust Series 2003-A7 Cl. A1 5.500% 07/25/2033 1,598,426 1,606,546 Series 2003-A15 Cl. 1A2 1.900% 02/25/2034 (b) 2,259,119 2,258,871 Saco I, Inc. Series 1997-2 Cl. 1A5 7.000% 08/25/2036 515,428 525,505 Structured Asset Securities Corp. Series 2003-8 Cl. 2A7 5.750% 04/25/2033 1,500,749 1,523,921 Washington Mutual Mortgage Securities Corp. Series 2003-MS5 Cl. 1A4 1.950% 03/25/2018 (b) 945,372 950,534 Series 2003-S4 Cl. 1A3 1.950% 06/25/2018 (b) 644,708 648,279 --------------- 22,010,653 --------------- Commercial Mortgage Backed Securities (1.2%) GMAC Commercial Mortgage Asset Corp. Series 2001-FLAA Cl. B1 1.880% 06/15/2013 (b)(c) 260,420 260,454 NationsLink Funding Corp. Series 1999-Sl Cl. A5 6.888% 05/10/2007 500,000 541,640 Nomura Asset Securities Corp. Series 1996-MD5 Cl. A1B 7.120% 04/13/2039 530,000 561,683 --------------- 1,363,777 --------------- Total Other Securitized Loans (Cost of $45,032,719) 44,855,322 ---------------
See Accompanying Notes to Financial Statements. 38
PRINCIPAL AMOUNT VALUE --------------- --------------- Short-Term Obligations (9.6%) U.S. Treasury Bill (3.4%) 1.170% 08/05/2004 $ 4,000,000 $ 3,999,500 --------------- Repurchase Agreement (6.2%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/2004, due 08/02/2004 at 1.230%, collateralized by a U.S. Treasury Note maturing 02/15/2012, market value of $7,557,274 (repurchase proceeds $7,408,759) 7,408,000 7,408,000 --------------- Total Short-Term Obligations (Cost of $11,407,500) 11,407,500 --------------- Total Investments (99.9%) (Cost of $118,605,404) (d) 118,996,185 Other Assets & Liabilities, Net (0.1%) 128,935 --------------- Net Assets (100.0%) $ 119,125,120 ===============
Notes to Schedule of Investments: (a) This security has been purchased on a delayed delivery basis. (b) Variable rate security. The interest rate shown reflects the rate as of July 31, 2004. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2004, these securities amounted to $3,846,684, which represents 3.2% of net assets. (d) Cost for federal income tax purposes is $119,066,707. See Accompanying Notes to Financial Statements. 39 CMG ULTRA SHORT TERM BOND FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
PRINCIPAL AMOUNT VALUE --------------- --------------- U.S. Government & Agency Securities (10.5%) U.S. Agency Bonds (10.5%) Federal Home Loan Bank 1.625% 04/15/2005 $ 1,000,000 $ 996,309 2.125% 12/15/2004 500,000 500,974 2.500% 11/15/2005 500,000 499,924 3.625% 10/15/2004 1,000,000 1,004,079 --------------- 3,001,286 --------------- Federal Home Loan Mortgage Corp. (FHLMC) (a) 05/03/2005 1,000,000 984,321 2.810% 02/02/2006 1,000,000 1,002,410 4.000% 05/15/2014 100,000 99,554 --------------- 2,086,285 --------------- Federal National Mortgage Association (FNMA) (a) 03/04/2005 1,000,000 988,468 (a) 04/29/2005 1,000,000 985,075 --------------- 1,973,543 --------------- Total U.S. Government & Agency Securities (Cost of $7,077,425) 7,061,114 --------------- Corporate Notes & Bonds (26.7%) Financials (14.9%) Allstate Corp. 7.875% 05/01/2005 500,000 520,460 CIT Group, Inc. 1.409% 11/04/2005 (b) 2,000,000 2,000,500 1.450% 02/15/2007 (b) 400,000 399,940 6.625% 06/15/2015 448,000 463,138 General Electric Capital Corp. 1.410% 05/12/2006 (b) 1,000,000 1,000,250 5.350% 03/30/2006 500,000 519,755 Genworth Financial, Inc. 1.670% 06/15/2007 (b) 500,000 499,895 Goldman Sachs Group LP 6.625% 12/01/2004 (c) 500,000 507,215 Hewlett-Packard Co. 7.150% 06/15/2005 500,000 520,000 Household Finance Corp. 6.500% 01/24/2006 400,000 420,980 International Lease Finance Corp. 5.120% 06/01/2005 400,000 408,640 John Deere Capital Corp. 1.560% 05/20/2005 (b) 250,000 249,950 4.125% 07/15/2005 360,000 365,630 JPMorgan Chase & Co., Inc. 6.250% 12/15/2005 500,000 521,805 MBNA America Bank NA 7.750% 09/15/2005 (c) 280,000 294,829
See Accompanying Notes to Financial Statements. 40
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Financials (continued) SLM Corp. 1.720% 09/15/2006 (b) $ 750,000 $ 750,292 Verizon Global Funding Corp. 6.750% 12/01/2005 536,000 564,210 --------------- 10,007,489 --------------- Industrial (7.4%) Altria Group, Inc. 6.375% 02/01/2006 200,000 206,646 AT&T Corp. 7.000% 05/15/2005 300,000 309,660 Coca-Cola Co. 4.000% 06/01/2005 500,000 506,860 Ford Motor Credit Co. 6.875% 02/01/2006 250,000 262,358 General Motors Acceptance Corp. 5.750% 11/05/2004 250,000 252,102 Nabisco, Inc. 6.375% 02/01/2005 500,000 510,215 Raytheon Co. 6.500% 07/15/2005 250,000 258,683 Sprint Capital Corp. 7.900% 03/15/2005 300,000 310,386 Target Corp. 7.500% 02/15/2005 560,000 575,999 Time Warner, Inc. 5.625% 05/01/2005 275,000 281,094 United Technologies Corp. 6.625% 11/15/2004 300,000 303,984 Vodafone Group PLC 7.625% 02/15/2005 500,000 513,725 Wal-Mart Stores 6.550% 08/10/2004 420,000 420,349 Waste Management, Inc. 7.000% 05/15/2005 245,000 252,570 --------------- 4,964,631 --------------- Utilities (4.4%) Consolidated Natural Gas 7.250% 10/01/2004 500,000 504,275 Duke Energy Field Services LLC 7.500% 08/16/2005 300,000 313,275 Kinder Morgan Inc. 6.650% 03/01/2005 250,000 255,740 National Rural Utilities 1.580% 02/07/2005 (b) 690,000 689,952 5.500% 01/15/2005 150,000 152,094 6.650% 10/01/2005 325,000 339,940
See Accompanying Notes to Financial Statements. 41
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Utilities (continued) Ocean Energy, Inc. 7.625% 07/01/2005 $ 150,000 $ 156,720 Sempra Energy 6.950% 12/01/2005 300,000 315,864 Wisconsin Electric Power 7.250% 08/01/2004 250,000 249,987 --------------- 2,977,847 --------------- Total Corporate Notes & Bonds (Cost of $19,599,460) 17,949,967 --------------- Other Securitized Loans (12.0%) Asset Backed Securities (8.9%) Citibank Credit Card Issuance Trust Series 2001-A8 4.100% 12/07/2006 860,000 866,639 Series 2003-A2 2.700% 01/15/2008 310,000 309,845 Credit-Based Asset Servicing & Securities Series 2004-CB4 1.620% 05/25/2035 (b) 190,112 190,138 DaimlerChrysler Auto Trust Series 2002-C 3.090% 01/08/2008 300,000 301,290 Harley-Davidson Motorcycle Trust Series 2003-1 2.630% 11/15/2010 275,000 273,463 Long Beach Mortgage Loan Trust Series 2004-3 4.500% 12/25/2006 7,108,665 452,040 MBNA Credit Card Master Note Trust Series 2001-A1 5.750% 10/15/2008 439,000 460,542 Nissan Auto Lease Trust Series 2003-A 2.570% 06/15/2009 750,000 746,178 Onyx Acceptance Auto Trust Series 2003-D 2.400% 12/15/2007 285,000 284,085 Series 2004-B 3.090% 09/15/2008 500,000 499,560 Triad Auto Receivables Owner Trust Series 2004-A 1.400% 09/12/2007 250,000 248,515 USAA Auto Owner Trust Series 2002-1 2.930% 07/16/2007 300,000 299,982
See Accompanying Notes to Financial Statements. 42
PRINCIPAL AMOUNT VALUE --------------- --------------- Other Securitized Loans (continued) Asset Backed Securities (continued) Volkswagen Auto Loan Enhanced Trust Series 2003-2 2.270% 10/22/2007 $ 203,000 $ 202,091 WFS Financial Owner Trust Series 2003-2 1.760% 01/21/2008 350,000 348,380 Series 2004-2 2.850% 09/22/2008 500,000 498,145 --------------- 5,980,893 --------------- Collateralized Mortgage Obligations (3.1%) Countrywide Home Loan 1.400% 02/17/2006 (b) 400,000 399,936 1.795% 06/02/2006 (b) 680,000 683,862 3.500% 12/19/2005 500,000 504,835 Residential Asset Mortgage Products, Inc. Series 2003-RS7 2.920% 07/25/2022 475,000 474,544 --------------- 2,063,177 --------------- Total Other Securitized Loans (Cost of $6,528,611) 8,044,070 --------------- Variable Rate Demand Notes (d) (5.2%) AZ School Facilities Board Series 2003 A-1 1.490% 07/01/2018 500,000 500,000 CA El Dorado District Certificates of Participation Series 2004 B 2.950% 03/01/2034 500,000 499,885 FL Educational Loan Marketing Corp. Series 2003 A-3 1.540% 12/01/2036 500,000 500,000 MD State Health & Higher Educational Faciliites Authority Series 2004 C 1.500% 07/01/2029 500,000 500,000 MO Higher Education Loan Authority Series 1995 D 1.580% 02/15/2025 500,000 500,000 OH Knowledge Works Foundation Student Loan Series 2000 A-3 1.600% 11/01/2035 500,000 500,000 OK State Student Loan Authority Series 2000 A-1 1.580% 06/01/2030 500,000 500,000 --------------- Total Variable Rate Demand Notes (Cost of $3,500,000) 3,499,885 ---------------
See Accompanying Notes to Financial Statements. 43
PRINCIPAL AMOUNT VALUE --------------- --------------- Commercial Paper (1.2%) Merrill Lynch & Co., Inc. 1.680% 05/22/2006 (b) (Cost of $804,971) $ 800,000 $ 804,971 --------------- Short-Term Obligations (30.8%) U.S. Government & Agency Securities (6.0%) Federal Home Loan Mortgage Corp. Discount Note (a) 11/04/2004 900,000 897,221 U.S. Treasury Bills 1.500% 07/31/2005 1,400,000 1,392,180 1.625% 04/30/2005 1,750,000 1,746,309 --------------- 4,035,710 --------------- Repurchase Agreement (24.8%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/2004, due 08/02/2004 at 1.240%, collateralized by a U.S. Treasury Bond maturing 11/15/2028, market value of $17,038,342 (repurchase proceeds $16,701,726) 16,700,000 16,700,000 --------------- Total Short-Term Obligations (Cost of $20,752,951) 20,735,710 --------------- Total Investments (86.4%) (Cost of $58,263,418) (e) 58,095,717 Other Assets & Liabilities, Net (13.6%) 9,139,526 --------------- Net Assets (100.0%) $ 67,235,243 ===============
Notes to Schedule of Investments: (a) Zero coupon bond. (b) Variable rate security. The interest rate shown reflects the rate as of July 31, 2004. (c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2004, these securities amounted to $802,044, which represents 1.2% of net assets. (d) Variable rate demand note. This security is payable upon demand and is secured by letters of credit or other credit support agreements from banks. The interest rate changes periodically and the interest rate shown reflects the rate as of July 31, 2004. (e) Cost for federal income tax purposes is $58,433,228. See Accompanying Notes to Financial Statements. 44 CMG HIGH YIELD FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2004
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (96.3%) Aerospace (4.3%) K & F Industries, Inc. Senior Subordinated Notes, Series B 9.625% 12/15/2010 $ 3,625,000 $ 3,951,250 L-3 Communications Corp. Senior Subordinated Notes 7.625% 06/15/2012 7,225,000 7,730,750 TD Funding Corp. Senior Subordinated Notes 8.375% 07/15/2011 4,500,000 4,702,500 --------------- 16,384,500 --------------- Broadcasting (2.4%) LIN Television Corp. Senior Subordinated Notes 6.500% 05/15/2013 3,700,000 3,570,500 Sinclair Broadcast Group, Inc. Senior Subordinated Notes 8.000% 03/15/2012 695,000 715,850 8.750% 12/15/2011 4,360,000 4,687,000 --------------- 8,973,350 --------------- Cable TV (5.7%) DirecTV Holdings Senior Notes 8.375% 03/15/2013 6,190,000 6,932,800 Echostar DBS Senior Notes 5.750% 10/01/2008 7,975,000 7,915,188 Rogers Cable, Inc. Notes 6.250% 06/15/2013 4,000,000 3,847,560 7.875% 05/01/2012 2,990,000 3,193,739 --------------- 21,889,287 --------------- Capital Goods (2.6%) Kennametal, Inc. Senior Notes 7.200% 06/15/2012 5,460,000 5,837,723 Westinghouse Air Brake Co. Senior Notes 6.875% 07/31/2013 3,860,000 3,888,950 --------------- 9,726,673 --------------- Chemicals (4.9%) Acetex Corp. Senior Notes 10.875% 08/01/2009 2,645,000 2,889,662 Airgas, Inc. Senior Subordinated Notes 9.125% 10/01/2011 4,245,000 4,765,012
See Accompanying Notes to Financial Statements. 45
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Chemicals (continued) Equistar Chemical LP Senior Notes 10.125% 09/01/2008 $ 1,100,000 $ 1,199,000 10.625% 05/01/2011 675,000 742,500 Ethyl Corp. Senior Notes 8.875% 05/01/2010 2,750,000 2,942,500 MacDermid, Inc. Senior Subordinated Notes 9.125% 07/15/2011 2,960,000 3,307,800 Nalco Co. Senior Notes 7.750% 11/15/2011 (a) 2,590,000 2,706,550 --------------- 18,553,024 --------------- Consumer Products (3.1%) Hasbro, Inc. Notes 6.150% 07/15/2008 4,450,000 4,583,500 K2, Inc. Senior Notes 7.375% 07/01/2014 (a) 1,910,000 1,956,470 Scotts Co. Senior Subordinated Notes 6.625% 11/15/2013 5,135,000 5,186,350 --------------- 11,726,320 --------------- Diversified Media (2.4%) Lamar Media Corp. Senior Subordinated Notes 7.250% 01/01/2013 7,260,000 7,495,950 Warner Music Group Senior Subordinated Notes 7.375% 04/15/2014 (a) 1,940,000 1,862,400 --------------- 9,358,350 --------------- Energy (13.2%) Chesapeake Energy Corp. 8.375% 11/01/2008 125,000 136,562 9.000% 08/15/2012 3,775,000 4,312,938 Senior Notes 7.500% 09/15/2013 2,725,000 2,888,500 Grant Prideco, Inc. Senior Notes 9.000% 12/15/2009 4,730,000 5,226,650 Grant Prideco, Inc. Senior Notes, Series B 9.625% 12/01/2007 2,270,000 2,519,700
See Accompanying Notes to Financial Statements. 46
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Energy (continued) Key Energy Services, Inc. Senior Notes, Series C 8.375% 03/01/2008 $ 1,750,000 $ 1,828,750 Offshore Logistic, Inc. Senior Notes 6.125% 06/15/2013 5,305,000 5,145,850 Plains E&P Co. Senior Notes 7.125% 06/15/2014 (a) 2,775,000 2,858,250 Pogo Producing Co. Senior Subordinated Notes, Series B 8.250% 04/15/2011 1,120,000 1,229,200 Pride International, Inc. Senior Notes 7.375% 07/15/2014 (a) 3,280,000 3,362,000 9.375% 05/01/2007 1,215,000 1,233,225 10.000% 06/01/2009 2,125,000 2,237,625 Suburban Propane Partners Senior Notes 6.875% 12/15/2013 2,405,000 2,392,975 Universal Compression, Inc. Senior Notes 7.875% 05/15/2011 3,350,000 3,484,000 Vintage Petroleum, Inc. Senior Subordinated Notes 9.750% 06/30/2009 4,125,000 4,269,375 Westport Resources Corp. Senior Subordinated Notes 8.250% 11/01/2011 6,555,000 7,439,925 --------------- 50,565,525 --------------- Entertainment/Film (1.2%) Cinemark USA, Inc. Senior Subordinated Notes 9.000% 02/01/2013 4,275,000 4,681,125 --------------- Environmental (2.5%) Allied Waste North America, Inc. Senior Notes 6.375% 04/15/2011 2,700,000 2,632,500 6.500% 11/15/2010 1,525,000 1,502,125 Allied Waste North America, Inc. Senior Notes, Series B 7.375% 04/15/2014 3,625,000 3,489,062 Synagro Technologies, Inc. Senior Subordinated Notes 9.500% 04/01/2009 1,760,000 1,852,400 --------------- 9,476,087 ---------------
See Accompanying Notes to Financial Statements. 47
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Food/Beverage/Tobacco (3.7%) Constellation Brands, Inc. Senior Notes, Series B 8.000% 02/15/2008 $ 1,698,000 $ 1,855,065 Constellation Brands, Inc. Senior Subordinated Notes, Series B 8.125% 01/15/2012 3,995,000 4,304,613 Cott Beverages, Inc. Senior Subordinated Notes 8.000% 12/15/2011 7,275,000 7,802,437 --------------- 13,962,115 --------------- Food & Drug Retail (1.0%) Couche-Tard US Senior Subordinated Notes 7.500% 12/15/2013 3,690,000 3,754,575 --------------- Gaming (6.8%) Kerzner International Senior Subordinated Notes 8.875% 08/15/2011 2,360,000 2,542,900 MGM MIRAGE, Inc. Senior Notes 6.000% 10/01/2009 1,600,000 1,584,000 9.750% 06/01/2007 5,450,000 6,015,437 Park Place Entertainment Corp. Senior Subordinated Notes 9.375% 02/15/2007 7,100,000 7,810,000 Station Casinos, Inc. Senior Subordinated Notes 6.500% 02/01/2014 4,920,000 4,784,700 6.875% 03/01/2016 3,150,000 3,063,375 --------------- 25,800,412 --------------- Health Care (9.7%) AmerisourceBergen Corp. Senior Notes 8.125% 09/01/2008 4,350,000 4,719,750 Apogent Technologies, Inc. Senior Subordinated Notes 6.500% 05/15/2013 5,825,000 6,458,469 HCA, Inc. Notes 6.950% 05/01/2012 3,700,000 3,896,285 Omnicare, Inc. Senior Subordinated Notes, Series B 8.125% 03/15/2011 5,750,000 6,152,500
See Accompanying Notes to Financial Statements. 48
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Health Care (continued) Province Healthcare Co. Senior Subordinated Notes 7.500% 06/01/2013 $ 3,400,000 $ 3,306,500 Select Medical Corp. Senior Subordinated Notes 7.500% 08/01/2013 1,775,000 1,766,125 9.500% 06/15/2009 3,625,000 3,896,875 Triad Hospitals, Inc. Senior Notes 7.000% 05/15/2012 6,800,000 6,936,000 --------------- 37,132,504 --------------- Homebuilders (3.3%) KB Home Senior Subordinated Notes 7.750% 02/01/2010 260,000 271,700 8.625% 12/15/2008 5,250,000 5,722,500 9.500% 02/15/2011 630,000 699,300 Toll Corp. Senior Subordinated Notes 8.250% 02/01/2011 150,000 162,000 8.250% 12/01/2011 5,485,000 5,937,513 --------------- 12,793,013 --------------- Hotels (1.1%) ITT Corp. Notes 6.750% 11/15/2005 2,750,000 2,849,688 Starwood Hotels & Resorts Worldwide, Inc. Senior Notes 7.375% 05/01/2007 1,305,000 1,376,775 --------------- 4,226,463 --------------- Leisure (3.0%) Royal Caribbean Cruises Ltd. Senior Notes 6.750% 03/15/2008 1,185,000 1,229,438 6.875% 12/01/2013 1,500,000 1,513,125 8.000% 05/15/2010 610,000 661,850 8.750% 02/02/2011 4,085,000 4,595,625 Speedway Motorsports, Inc. Senior Subordinated Notes 6.750% 06/01/2013 3,580,000 3,580,000 --------------- 11,580,038 --------------- Metals & Mining (3.7%) Arch Western Finance Senior Notes 6.750% 07/01/2013 (a) 4,480,000 4,592,000
See Accompanying Notes to Financial Statements. 49
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Metals & Mining (continued) Peabody Energy Corp. Senior Notes 6.875% 03/15/2013 $ 7,325,000 $ 7,508,125 Russel Metals, Inc. Senior Notes 6.375% 03/01/2014 2,035,000 1,953,600 --------------- 14,053,725 --------------- Non Food and Drug Retail (0.3%) Finlay Fine Jewelry Corp. Senior Notes 8.375% 06/01/2012 (a) 1,050,000 1,102,500 --------------- Packaging (2.8%) Ball Corp. Senior Notes 6.875% 12/15/2012 2,460,000 2,524,575 7.750% 08/01/2006 1,250,000 1,337,500 Owens-Brockway Glass Container 8.875% 02/15/2009 1,290,000 1,399,650 Silgan Holdings, Inc. Senior Subordinated Notes 6.750% 11/15/2013 5,550,000 5,466,750 --------------- 10,728,475 --------------- Paper & Forest Products (1.7%) Stone Container Corp. Senior Notes 8.250% 10/01/2012 625,000 664,062 8.375% 07/01/2012 2,665,000 2,844,887 9.750% 02/01/2011 2,810,000 3,105,050 --------------- 6,613,999 --------------- Printing & Publishing (3.4%) Dex Media East LLC Senior Subordinated Notes 12.125% 11/15/2012 2,870,000 3,400,950 Houghton Mifflin Co. Senior Subordinated Notes 9.875% 02/01/2013 1,990,000 2,044,725 R.H. Donnelley Financial Corp. Senior Notes 8.875% 12/15/2010 (a) 45,000 49,050 R.H. Donnelley Financial Corp. Senior Subordinated Notes 10.875% 12/15/2012 (a) 6,585,000 7,655,063 --------------- 13,149,788 ---------------
See Accompanying Notes to Financial Statements. 50
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Real Estate Investment Trust (1.5%) iStar Financial, Inc. Senior Notes 5.125% 04/01/2011 (a) $ 1,475,000 $ 1,412,312 6.000% 12/15/2010 450,000 451,125 7.000% 03/15/2008 2,350,000 2,491,000 8.750% 08/15/2008 1,343,000 1,510,875 --------------- 5,865,312 --------------- Restaurants (0.5%) Yum! Brands, Inc. Senior Notes 8.500% 04/15/2006 1,750,000 1,900,798 --------------- Services (5.5%) Corrections Corp. of America Senior Notes 7.500% 05/01/2011 5,475,000 5,646,094 Iron Mountain, Inc. Senior Subordinated Notes 7.750% 01/15/2015 2,140,000 2,198,850 8.625% 04/01/2013 5,350,000 5,751,250 United Rentals, Inc. Senior Subordinated Notes 7.000% 02/15/2014 1,200,000 1,086,000 7.750% 11/15/2013 6,480,000 6,253,200 --------------- 20,935,394 --------------- Shipping (1.7%) Teekay Shipping Corp. Senior Notes 8.875% 07/15/2011 5,840,000 6,424,000 --------------- Specialty Retail (1.3%) AutoNation, Inc. Senior Notes 9.000% 08/01/2008 3,275,000 3,668,000 Group 1 Automotive Senior Subordinated Notes 8.250% 08/15/2013 1,375,000 1,423,125 --------------- 5,091,125 --------------- Technology (1.0%) Freescale Semiconductor, Inc. Senior Notes 6.875% 07/15/2011 (a) 3,720,000 3,747,900 ---------------
See Accompanying Notes to Financial Statements. 51
PRINCIPAL AMOUNT VALUE --------------- --------------- Corporate Notes & Bonds (continued) Telecommunications (2.0%) Nextel Communications, Inc. Senior Notes 9.375% 11/15/2009 $ 2,050,000 $ 2,188,375 9.500% 02/01/2011 1,300,000 1,456,000 Nextel Communications, Inc. Serial Redeemable Note 7.375% 08/01/2015 3,950,000 4,137,625 --------------- 7,782,000 --------------- Total Corporate Notes & Bonds (Cost of $361,043,965) 367,978,377 --------------- Short-Term Obligation (3.3%) Repurchase agreement with State Street Bank & Trust Co., dated 07/30/2004, due 08/02/2004 at 1.230%, collateralized by a U.S. Treasury Bond maturing 02/15/2012, market value of $12,865,827 (repurchase proceeds $12,611,293) (Cost of $12,610,000) 12,610,000 12,610,000 --------------- Total Investments (99.6%) (Cost of $373,653,965) (b) 380,588,377 Other Assets & Liabilities, Net (0.4%) 1,568,973 --------------- Net Assets (100.0%) $ 382,157,350 ===============
Notes to Schedule of Investments: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At July 31, 2004, these securities amounted to $31,304,495, which represents 8.2% of net assets. (b) Cost for federal income tax purposes is $375,102,828. See Accompanying Notes to Financial Statements. 52 CMG CORE BOND FUND CMG SHORT TERM BOND FUND CMG ULTRA SHORT TERM BOND FUND CMG HIGH YIELD FUND Portfolios of CMG Fund Trust STATEMENTS OF ASSETS AND LIABILITIES July 31, 2004
CMG CMG CMG CMG CORE BOND SHORT TERM ULTRA SHORT TERM HIGH YIELD FUND BOND FUND BOND FUND (a) FUND --------------- --------------- ---------------- --------------- ASSETS: Investments, at identified cost (including repurchase agreement) $ 34,325,393 $ 118,605,404 $ 58,263,418 $ 373,653,965 --------------- --------------- ---------------- --------------- Investments, at value $ 31,143,751 $ 111,588,185 $ 41,395,717 $ 367,978,377 Repurchase agreement 3,180,000 7,408,000 16,700,000 12,610,000 Cash 180 10,721 12,321,934 438 Receivable for: Investments sold - - 996,467 - Capital stock sold 16,080 39,480 500,000 65,612 Interest 270,237 672,105 330,243 7,001,877 Expense reimbursement due from Investment Advisor 4,850 5,484 10,064 115 Deferred Trustees' compensation plan 502 886 - 1,107 Other assets - - 2,359 - --------------- --------------- ---------------- --------------- Total Assets 34,615,600 119,724,861 72,256,784 387,657,526 --------------- --------------- ---------------- --------------- LIABILITIES: Payable for: Investments purchased - - 4,702,700 4,584,927 Investments purchased on a delayed delivery basis 1,670,510 461,647 - - Fund shares repurchased - - 199,746 298,613 Futures variation margin 4,250 - - - Distributions 93,833 80,563 83,111 453,216 Investment advisory fee 8,300 27,930 8,999 129,093 Trustees' fees 767 1,032 1,685 - Audit fee 27,000 27,000 25,300 27,779 Deferred Trustees' fees 502 886 - 1,107 Other liabilities 403 683 - 5,441 --------------- --------------- ---------------- --------------- Total Liabilities 1,805,565 599,741 5,021,541 5,500,176 --------------- --------------- ---------------- --------------- NET ASSETS $ 32,810,035 $ 119,125,120 $ 67,235,243 $ 382,157,350 =============== =============== ================ =============== NET ASSETS consist of: Paid-in capital $ 33,001,550 $ 122,087,606 $ 67,602,394 $ 428,427,123 Overdistributed net investment income (75,858) (426,314) (169,810) (1,401,331) Accumulated net realized loss (101,265) (2,926,953) (29,640) (51,802,854) Net unrealized appreciation (depreciation) on: Investments (1,642) 390,781 (167,701) 6,934,412 Futures contracts (12,750) - - - --------------- --------------- ---------------- --------------- NET ASSETS $ 32,810,035 $ 119,125,120 $ 67,235,243 $ 382,157,350 =============== =============== ================ =============== Shares of capital stock outstanding 3,168,111 9,970,093 6,805,921 47,786,016 =============== =============== ================ =============== Net asset value, offering and redemption price per share $ 10.36 $ 11.95 $ 9.88 $ 8.00 =============== =============== ================ ===============
(a) The Fund commenced investment operations on March 8, 2004. See Accompanying Notes to Financial Statements. 53 CMG CORE BOND FUND CMG SHORT TERM BOND FUND CMG ULTRA SHORT TERM BOND FUND CMG HIGH YIELD FUND Portfolios of CMG Fund Trust STATEMENTS OF OPERATIONS For the Year Ended July 31, 2004
CMG CMG CMG CMG CORE BOND SHORT TERM ULTRA SHORT TERM HIGH YIELD FUND BOND FUND BOND FUND (a) FUND --------------- --------------- ---------------- --------------- NET INVESTMENT INCOME: Income: Interest $ 1,624,014 $ 3,925,138 $ 237,321 $ 30,358,398 Foreign withholding tax - - - (4,533) --------------- --------------- ---------------- --------------- Total income 1,624,014 3,925,138 237,321 30,353,865 --------------- --------------- ---------------- --------------- Expenses: Investment advisory fee 128,332 311,532 30,181 1,724,791 Transfer agent fee 3,961 4,482 - - Trustees' fees 7,608 8,957 1,685 13,638 Custody fee 5,567 6,701 - - Audit fee 38,989 35,989 25,300 38,618 Registration fee 49,164 51,471 - - Reports to shareholders 12,641 9,587 - - Non-recurring costs (See Note 8) 1,934 5,531 - 18,229 Other expenses 3,582 9,495 249 13,393 --------------- --------------- ---------------- --------------- Total expenses 251,778 443,745 57,415 1,808,669 Expense reimbursement from Investment Advisor (102,451) (126,222) (27,234) (65,649) Non-recurring costs assumed by Investment Advisor (See Note 8) (1,934) (5,531) - (18,229) Custody earnings credit (326) (460) - - --------------- --------------- ---------------- --------------- Net expenses 147,067 311,532 30,181 1,724,791 --------------- --------------- ---------------- --------------- Net investment income 1,476,947 3,613,606 207,140 28,629,074 --------------- --------------- ---------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS: Net realized gain (loss) on: Investments 19,892 141,676 (19,498) 11,465,251 Futures contracts 38,880 - - - --------------- --------------- ---------------- --------------- Net realized gain (loss) 58,772 141,676 (19,498) 11,465,251 --------------- --------------- ---------------- --------------- Net change in unrealized appreciation/ depreciation on: Investments (44,567) (513,208) (167,701) (3,719,002) Futures contracts 16,281 - - - --------------- --------------- ---------------- --------------- Net change in unrealized appreciation/depreciation (28,286) (513,208) (167,701) (3,719,002) --------------- --------------- ---------------- --------------- Net gain (loss) 30,486 (371,532) (187,199) 7,746,249 --------------- --------------- ---------------- --------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,507,433 $ 3,242,074 $ 19,941 $ 36,375,323 =============== =============== ================ ===============
(a) The Fund commenced investment operations on March 8, 2004. See Accompanying Notes to Financial Statements. 54 CMG CORE BOND FUND A Portfolio of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED YEAR ENDED JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002 --------------- ----------------- ---------------- Operations: Net investment income $ 1,476,947 $ 804,361 $ 1,502,637 Net realized gain (loss) on investments and futures contracts 58,772 451,945 22,974 Net change in unrealized appreciation/depreciation on investments and futures contracts (28,286) (884,129) (441,733) --------------- ----------------- ---------------- Net increase from operations 1,507,433 372,177 1,083,878 --------------- ----------------- ---------------- Distributions declared to shareholders: From net investment income (1,618,453) (845,766) (1,555,680) From net realized gains (424,522) - (361,418) --------------- ----------------- ---------------- Total distributions declared to shareholders (2,042,975) (845,766) (1,917,098) Share transactions: Subscriptions 45,285,510 13,544,369 2,380,359 Distributions reinvested 1,214,069 712,005 1,909,849 Redemptions (43,666,147) (10,682,420) (4,819,536) --------------- ----------------- ---------------- Net increase (decrease) in share transactions 2,833,432 3,573,954 (529,328) --------------- ----------------- ---------------- Net increase (decrease) in net assets 2,297,890 3,100,365 (1,362,548) NET ASSETS: Beginning of period 30,512,145 27,411,780 28,774,328 --------------- ----------------- ---------------- End of period $ 32,810,035 $ 30,512,145 $ 27,411,780 =============== ================= ================ Overdistributed net investment income $ (75,858) $ (55,614) $ (41,336) =============== ================= ================ Changes in shares: Subscriptions 4,306,892 1,265,332 226,168 Issued for distributions reinvested 115,771 67,108 182,889 Redemptions (4,193,418) (1,000,170) (458,196) --------------- ----------------- ---------------- Net increase (decrease) 229,245 332,270 (49,139)
(a) The Fund changed its fiscal year end from October 31 to July 31. See Accompanying Notes to Financial Statements. 55 CMG SHORT TERM BOND FUND A Portfolio of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED YEAR ENDED JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002 --------------- ----------------- ---------------- Operations: Net investment income $ 3,613,606 $ 3,700,095 $ 6,621,939 Net realized gain (loss) on investments and futures contracts 141,676 2,198,748 (2,162,083) Net change in unrealized appreciation/depreciation on investments and futures contracts (513,208) (2,821,216) 67,269 --------------- ----------------- ---------------- Net increase from operations 3,242,074 3,077,627 4,527,125 --------------- ----------------- ---------------- Distributions declared to shareholders: From net investment income (3,965,886) (4,009,769) (7,115,313) --------------- ----------------- ---------------- Share transactions: Subscriptions 59,951,561 53,909,699 93,097,391 Distributions reinvested 3,016,948 3,872,033 7,003,463 Redemptions (56,312,517) (84,413,234) (46,547,089) --------------- ----------------- ---------------- Net increase (decrease) in share transactions 6,655,992 (26,631,502) 53,553,765 --------------- ----------------- ---------------- Net increase (decrease) in net assets 5,932,180 (27,563,644) 50,965,577 NET ASSETS: Beginning of period 113,192,940 140,756,584 89,791,007 --------------- ----------------- ---------------- End of period $ 119,125,120 $ 113,192,940 $ 140,756,584 =============== ================= ================ Overdistributed net investment income $ (426,314) $ (226,765) $ (339,254) =============== ================= ================ Changes in shares: Subscriptions 4,971,382 4,425,228 7,604,040 Issued for distributions reinvested 250,706 318,466 574,008 Redemptions (4,673,216) (6,910,326) (3,823,461) --------------- ----------------- ---------------- Net increase (decrease) 548,872 (2,166,632) 4,354,587
(a) The Fund changed its fiscal year end from October 31 to July 31. See Accompanying Notes to Financial Statements. 56 CMG ULTRA SHORT TERM BOND FUND A Portfolio of CMG Fund Trust STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED JULY 31, 2004 (a) ----------------- Operations: Net investment income $ 207,140 Net realized gain (loss) on investments (19,498) Net change in unrealized appreciation/depreciation on investments (167,701) ----------------- Net increase from operations 19,941 Distributions declared to shareholders: From net investment income (387,092) ----------------- Share transactions: Subscriptions 72,925,807 Distributions reinvested 110,468 Redemptions (5,433,881) ----------------- Net increase in share transactions 67,602,394 ----------------- Net increase in net assets 67,235,243 NET ASSETS: Beginning of period - ----------------- End of period $ 67,235,243 ================= Overdistributed net investment income $ (169,810) ================= Changes in shares: Subscriptions 7,343,456 Issued for distributions reinvested 11,162 Redemptions (548,697) ----------------- Net increase 6,805,921
(a) The Fund commenced investment operations on March 8, 2004. See Accompanying Notes to Financial Statements. 57 CMG HIGH YIELD FUND A Portfolio of CMG Fund Trust STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED YEAR ENDED JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002 --------------- ----------------- ---------------- Operations: Net investment income $ 28,629,074 $ 19,360,784 $ 28,534,687 Net realized gain (loss) on investments 11,465,251 1,182,628 (24,532,571) Net change in unrealized appreciation/depreciation on investments (3,719,002) 11,692,827 (3,668,160) --------------- ----------------- ---------------- Net increase from operations 36,375,323 32,236,239 333,956 Distributions declared to shareholders: From net investment income (30,204,485) (19,919,406) (28,989,392) --------------- ----------------- ---------------- Share transactions: Subscriptions 118,229,818 274,845,721 131,994,303 Distributions reinvested 24,159,735 16,684,887 25,255,040 Redemptions (195,444,715) (161,034,205) (191,344,858) --------------- ----------------- ---------------- Net increase (decrease) in share transactions (53,055,162) 130,496,403 (34,095,515) --------------- ----------------- ---------------- Net increase (decrease) in net assets (46,884,324) 142,813,236 (62,750,951) NET ASSETS: Beginning of period 429,041,674 286,228,438 348,979,389 --------------- ----------------- ---------------- End of period $ 382,157,350 $ 429,041,674 $ 286,228,438 =============== ================= ================ Overdistributed net investment income $ (1,401,331) $ (482,515) $ (370,235) =============== ================= ================ Changes in shares: Subscriptions 14,671,669 34,794,784 16,446,956 Issued for distributions reinvested 2,996,559 2,111,371 3,176,244 Redemptions (24,196,101) (20,522,378) (24,583,292) --------------- ----------------- ---------------- Net increase (decrease) (6,527,873) 16,383,777 (4,960,092)
(a) The Fund changed its fiscal year end from October 31 to July 31. See Accompanying Notes to Financial Statements. 58 CMG CORE BOND FUND CMG SHORT TERM BOND FUND CMG ULTRA SHORT TERM BOND FUND CMG HIGH YIELD FUND Portfolios of CMG Fund Trust NOTES TO FINANCIAL STATEMENTS July 31, 2004 NOTE 1. ORGANIZATION: CMG Fund Trust (the "Trust") is an Oregon business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Information presented in these financial statements pertains to the following diversified funds (individually referred to as a "Fund", collectively referred to as the "Funds"): CMG Core Bond Fund CMG Short Term Bond Fund CMG Ultra Short Term Bond Fund CMG High Yield Fund INVESTMENT GOALS. The CMG Core Bond Fund seeks a high level of current income consistent with capital preservation. The CMG Short Term Bond Fund seeks a high level of current income consistent with a high degree of stability of principle. The CMG Ultra Short Term Bond Fund seeks a high level of current income consistent with the maintenance of liquidity and the preservation of principle. The CMG High Yield Fund seeks a high level of current income. Capital appreciation is a secondary objective when consistent with a high level of current income. FUND SHARES. Each Fund may issue 100 million shares of no par value capital stock, which are offered continuously at net asset value. Effective February 27, 2004, the CMG Fixed Income Securities Fund name was changed to the CMG Core Bond Fund. The CMG Ultra Short Term Bond Fund commenced operations on March 8, 2004. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES: USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. SECURITY VALUATION. Debt securities generally are valued by a pricing service approved by the Trust's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. 59 Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments in other investment companies are valued at net asset value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS. Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FUTURES CONTRACTS. Each Fund may invest in municipal and U.S. Treasury futures contracts. The Funds may invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Funds and not for trading purposes. The use of futures contracts involves certain risks, which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to differing trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities, or (3) an inaccurate prediction by Columbia Management Advisors, Inc. of the future direction of interest rates. Any of these risks may involve amounts exceeding the variation margin recorded in the Funds' Statement of Assets and Liabilities at any given time. Upon entering into a futures contract, each Fund deposits cash or securities with the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Funds equal to the daily change in the contract value and are recorded as variation margin payable or receivable and offset in unrealized gains or losses. Each Fund also identifies portfolio securities as segregated with the custodian in a separate account in an amount equal to the futures contract. The Funds recognize a realized gain or loss when the contract is closed or expires. REPURCHASE AGREEMENTS. Each Fund may engage in repurchase agreement transactions with institutions that the Funds' investment advisor has determined are creditworthy. Each Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon each Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. DELAYED DELIVERY SECURITIES. The Funds may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. This may increase the risk if the other party to the transaction fails to deliver and causes the Funds to subsequently invest at less advantageous prices. The Funds identify cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. INCOME RECOGNITION. Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. 60 FEDERAL INCOME TAX STATUS. Each Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, each Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that each Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment income are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually. NOTE 3. FEDERAL TAX INFORMATION: The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to a Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended July 31, 2004, permanent differences resulting primarily from differing treatments for amortization/accretion adjustments and distribution reclasses were identified and reclassified among the components of the Funds' net assets as follows:
OVERDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED INCOME LOSS PAID-IN CAPITAL --------------- ------------ --------------- CMG Core Bond Fund $ 121,262 $ (121,262) $ - CMG Short Term Bond Fund 152,731 (152,731) - CMG Ultra Short Term Bond Fund 10,142 (10,142) - CMG High Yield Fund 656,595 (656,595) -
Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications. 61 The tax character of distributions paid during the year ended July 31, 2004, the period ended July 31, 2003 and the year ended October 31, 2002 was as follows:
JULY 31, 2004 ----------------------------------------------- TAX ORDINARY LONG-TERM RETURN INCOME* CAPITAL GAINS OF CAPITAL ------------ ------------- ---------- CMG Core Bond Fund $ 1,801,868 $ 241,107 $ - CMG Short Term Bond Fund 3,965,886 - - CMG Ultra Short Term Bond Fund 387,092 - - CMG High Yield Fund 30,204,485 - - JULY 31, 2003 ----------------------------------------------- TAX ORDINARY LONG-TERM RETURN INCOME* CAPITAL GAINS OF CAPITAL ------------ ------------- ---------- CMG Core Bond Fund $ 845,766 $ - $ - CMG Short Term Bond Fund 4,009,769 - - CMG High Yield Fund 19,919,406 - - OCTOBER 31, 2002 ----------------------------------------------- TAX ORDINARY LONG-TERM RETURN INCOME* CAPITAL GAINS OF CAPITAL ------------ ------------- ---------- CMG Core Bond Fund $ 1,881,625 $ 35,473 $ - CMG Short Term Bond Fund 7,115,313 - - CMG High Yield Fund 28,989,392 - -
* For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 62 As of July 31, 2004, the components of distributable earnings on a tax basis were as follows:
NET UNDISTRIBUTED UNDISTRIBUTED UNREALIZED ORDINARY LONG-TERM APPRECIATION INCOME CAPITAL GAINS (DEPRECIATION)* ------------- ------------- --------------- CMG Core Bond Fund $ 93,984 $ - $ (123,067) CMG Short Term Bond Fund 111,556 - (70,522) CMG Ultra Short Term Bond Fund 83,111 - (337,511) CMG High Yield Fund 454,455 - $ 5,485,549
* The differences between book-basis and tax-basis net unrealized appreciation/depreciation are primarily due to deferral of losses from wash sales and amortization/accretion adjustments. Unrealized appreciation and depreciation at July 31, 2004, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION) ------------- ------------- --------------- CMG Core Bond Fund $ 289,808 $ (412,875) $ (123,067) CMG Short Term Bond Fund 718,412 (788,934) (70,522) CMG Ultra Short Term Bond Fund 10,850 (348,361) (337,511) CMG High Yield Fund 9,101,565 (3,616,016) 5,485,549
The following capital loss carryforwards may be available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF EXPIRATION --------------------------------------------------------------------------------------- 2008 2009 2010 2011 2012 TOTAL ------------ ------------ ------------ ------------ ------------ ------------ CMG Short Term Bond Fund $ 537,548 $ - $ 2,365,257 $ - $ 19,156 $ 2,921,961 CMG Ultra Short Term Bond Fund - - - - 29,640 29,640 CMG High Yield Fund 2,316,195 24,244,763 25,194,365 - - 51,755,323
Capital loss carryforwards of $10,079,147 were utilized and $684,212 expired during the year ended July 31, 2004 for the CMG High Yield Fund. Any capital loss carryforwards acquired as part of a merger that are permanently lost due to provisions under Internal Revenue Code are included as being expired. Expired capital loss carryforwards are recorded as a reduction of paid-in capital. Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of July 31, 2004, post-October capital losses of $66,169 attributed to security transactions were deferred to August 1, 2004 for the CMG Core Bond Fund. 63 NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES: Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Funds. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Funds' investment advisor and transfer agent, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Funds are managed, the investment personnel assigned to manage the Funds or the fees paid by the Funds. INVESTMENT ADVISORY FEE. Each Fund's investment advisory fee is a unified fee. Columbia, out of the unified fee it receives from the Funds, pays all accounting fees, legal fees, transfer agent fees, custody fees and miscellaneous expenses of the Funds. The unified fee does not include brokerage fees, taxes, Trustees' fees, Trustee legal counsel fees, audit fees, interest expenses associated with any borrowings by the Funds or extraordinary expenses, if any. The unified fees are paid monthly to Columbia at the following annual rates based on average daily net assets: CMG Core Bond Fund 0.25% CMG Short Term Bond Fund 0.25% CMG Ultra Short Term Bond Fund 0.25% CMG High Yield Fund 0.40%
Effective February 27, 2004, the investment advisory fee for the CMG Core Bond Fund and the CMG Short Term Bond Fund became a unified fee. Prior to this date, Columbia received a monthly investment advisory fee based on each Fund's average daily net assets at the following annual rates: CMG Core Bond Fund 0.35% CMG Short Term Bond Fund 0.25%
PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and bookkeeping services to each Fund under a pricing, bookkeeping and fund administration agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated certain of those functions to State Street Corporation ("State Street"). As a result, Columbia pays fees to State Street under the Outsourcing Agreement. The pricing and bookkeeping fees for the Funds are included in the unified fee. TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Funds. The transfer agent fees for the Funds are included in the unified fee. Prior to February 27, 2004, the Transfer Agent received a fee from the CMG Core Bond Fund and the CMG Short Term Bond Fund at the annual rate of $34.00 per open account. Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly transfer agent fee from the CMG Core Bond Fund and the CMG Short Term Bond Fund based on a per account fee or a minimum of $1,500 per month. For the year ended July 31, 2004, the effective transfer agent fee rates for the CMG Core Bond Fund and the CMG Short Term Bond Fund were 0.010% and 0.004%, respectively. Effective October 13, 2003, Liberty Fund Services, Inc. was renamed Columbia Fund Services, Inc. 64 FEE WAIVERS. Columbia has contractually agreed to reimburse the Funds through March 1, 2009 for certain expenses so that the expenses incurred by the Funds, including the investment advisory fees, would not exceed the following annual rates based on each Fund's average daily net assets: CMG Core Bond Fund 0.25% CMG Short Term Bond Fund 0.25% CMG Ultra Short Term Bond Fund 0.25% CMG High Yield Fund 0.40%
Prior to February 27, 2004, Columbia reimbursed the CMG Core Bond Fund so that the expenses incurred by the Fund, including the investment advisory fees, did not exceed 0.40% of the Fund's average daily net assets. CUSTODY CREDITS. The CMG Core Bond Fund and CMG Short Term Bond Fund had an agreement with their custodian bank through February 26, 2004, under which custody fees may be reduced by balance credits. A Fund could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. FEES PAID TO OFFICERS AND TRUSTEES. The Funds pay no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Funds' trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Funds' assets. OTHER. Columbia provides certain services to the Funds related to Sarbanes-Oxley compliance. The fees for such services are included in the unified fee. NOTE 5. PORTFOLIO INFORMATION: For the year ended July 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were as follows:
U.S. GOVERNMENT SECURITIES OTHER INVESTMENT SECURITIES ------------------------------- ------------------------------- PURCHASES SALES PURCHASES SALES -------------- -------------- -------------- -------------- CMG Core Bond Fund $ 63,561,312 $ 64,787,209 $ 26,893,465 $ 22,683,056 CMG Short Term Bond Fund 28,371,167 34,005,914 71,422,910 52,243,901 CMG Ultra Short Term Bond Fund 12,327,771 2,077,239 31,066,874 1,259,889 CMG High Yield Fund - - 187,970,209 226,809,088
NOTE 6. LINE OF CREDIT: Effective July 23, 2004, the Funds and other affiliated funds began participating in a $350,000,000 credit facility, which is used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each Fund based on its borrowings. In addition, each Fund has agreed to pay commitment fees on its pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. 65 Prior to July 23, 2004, the Funds participated in a $100,000,000 uncommitted line of credit along with the Columbia Funds, an affiliated group of funds managed by the investment advisor. The uncommitted line of credit, which was scheduled to expire on July 2, 2004, was extended by the Trust and expired on July 23, 2004. For the year ended July 31, 2004, the Funds did not borrow under these arrangements. NOTE 7. SHARES OF BENEFICIAL INTEREST: As of July 31, 2004, the Funds had shareholders that held greater than 5% of the shares outstanding. Subscription and redemption activity of these shareholders may have a material effect on the Funds. The numbers of shareholders greater than 5% and the aggregate percentage of shares outstanding held were as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD ------------ ---------------- CMG Core Bond Fund 3 88.5% CMG Short Term Bond Fund 5 65.2% CMG Ultra Short Term Bond Fund 2 94.9% CMG High Yield Fund 5 54.5%
NOTE 8. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES: HIGH-YIELD SECURITIES. Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid due to the extent that there is no established retail secondary market and because of a decline in the value of such securities. INDUSTRY FOCUS. The Funds may focus their investments in certain industries, subjecting them to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or CFDI were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and CFDI, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and CFDI alleging that Columbia and CFDI had violated certain New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment 66 Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, CFDI or any company that is an affiliated person of Columbia and CFDI from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia that, if these results occur, it will seek exemptive relief from the SEC to permit it to continue to serve as your fund's investment advisor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and CFDI entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and CFDI agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and CFDI to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and CFDI's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group and its affiliate Banc of America Capital Management, LLC have agreed to collectively reduce mutual fund fees by $160 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. The funds and the other defendants to these actions, including Columbia and various affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These suits and certain regulatory investigations are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended July 31, 2004, Columbia has assumed legal, consulting services and Trustees' fees incurred by the Funds in connection with these matters as follows: CMG Core Bond Fund $ 1,934 CMG Short Term Bond Fund 5,531 CMG Ultra Short Term Bond Fund - CMG High Yield Fund 18,229
67 Report of Independent Registered Public Accounting Firm TO THE TRUSTEES OF THE CMG FUND TRUST AND THE SHAREHOLDERS OF CMG CORE BOND FUND, CMG SHORT TERM BOND FUND, CMG ULTRA SHORT TERM BOND FUND AND CMG HIGH YIELD FUND In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of CMG Core Bond Fund, (formerly CMG Fixed Income Securities Fund), CMG Short Term Bond Fund, CMG Ultra Short Term Bond Fund and CMG High Yield Fund (the "Funds") (each a series of CMG Fund Trust), at July 31, 2004, and the results of their operations, the changes in their net assets, and their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 16, 2004 68 Unaudited Information For the fiscal year ended July 31, 2004, the CMG Core Bond Fund designates long-term capital gains of $48,252. 69 Trustees The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and Officers of the CMG Fund Trust, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios in the fund complex overseen by the Trustee, and other directorships they hold are shown below. Each Officer listed below serves as an Officer of the CMG Fund Trust. Each Officer listed below held such office for the period ended July 31, 2004. The Statement of Additional Information (SAI) contains additional information about the Trustees and is available without charge upon request by calling the fund's distributor at 800-345-6611.
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------ ------------------------------------------------------------------------- DISINTERESTED TRUSTEES Douglas A. Hacker (age 48) Executive Vice President-Strategy of United Airlines (airline) since P.O. Box 66100 December 2002 (formerly President of UAL Loyalty Services (airline) Chicago, IL 60666 from September 2001 to December 2002; Executive Vice President Trustee (since 2003) and Chief Financial Officer of United Airlines from July 1999 to September 2001; Senior Vice President-Finance of United Airlines from March 1993 to July 1999). Oversees 118, Orbitz, Inc. (on-line travel company) Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since September 2004; 9534 W. Gull Lake Drive Private Investor since March 2004 (formerly Chief Administrative Officer Richland, MI 49083-8530 and Senior Vice President, Kmart Holding Corporation (consumer goods) Trustee (since 2003) from September 2003 to March 2004; Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September 1999). Oversees 118, None Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive 10701 Charleston Drive Officer, U.S. Plywood Corporation (building products manufacturer)). Vero Beach, FL 32963 Oversees 120(3), None Trustee (since 2003) Charles R. Nelson (age 62) Professor of Economics, University of Washington, since January 1976; Department of Economics Ford and Louisa Van Voorhis Professor of Political Economy, University of University of Washington Washington, since September 1993; (formerly Director, Institute for Seattle, WA 98195 Economic Research, University of Washington from September 2001 to June Trustee (since 2003) 2003) Adjunct Professor of Statistics, University of Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 118, None John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston 84 College Road College (formerly Dean, Boston College School of Management from Chestnut Hill, MA 02467-3838 September 1977 to September 1999). Oversees 121(3),(4), Saucony, Inc. Trustee (since 2003) (athletic footwear and apparel) Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm) Oversees 118, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
70
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD - ------------------------------------------------------ ------------------------------------------------------------------------- DISINTERESTED TRUSTEES Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 2208 Tawny Woods Place to 1999, College of Business, Boise State University); Chartered Boise, ID 83706 Financial Analyst. Oversees 118, None Trustee (since 2003) Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private equity 227 West Monroe Street, investing) since September 1994. Oversees 118, Anixter International Suite 3500 (network support equipment distributor), Jones Lang LaSalle (real estate Chicago, IL 60606 management services) and Ventas, Inc (real estate investment trust) and Trustee and Chairman of the Board(5) (since 2003) MONY Group (life insurance) Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, 359 Stickney Hill Road IBM Corporation (computer and technology) from 1994 to 1997). Oversees Hopkinton, NH 03229 119(4), Chairman of the Board of Directors, Enesco Group, Inc. (designer, Trustee (since 2003) importer and distributor of giftware and collectibles) Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief Executive 100 S.W. Market Street #1500 Officer, The Regence Group (regional health insurer); Chairman and Chief Portland, OR 97207 Executive Officer, BlueCross BlueShield of Oregon; Certified Public Trustee (since 1992) Accountant, Arthur Young & Company. Oversees 118, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEES William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since 399 Park Avenue February 1999 (formerly Founding Partner, Development Capital LLC from Suite 3204 November 1996 to February 1999). Oversees 120(3), Lee Enterprises (print New York, NY 10022 media), WR Hambrecht + Co. (financial service provider), First Health Trustee (since 2003) (healthcare), Reader's Digest (publishing) and OPENFIELD Solutions (retail industry technology provider)
- ---------- (1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds complex. Each Trustee serves for an indefinite term in accordance with the current Bylaws of the Trust until the date a Trustee resigns, retires or is removed in accordance with the Bylaws of the Trust. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. (5) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. 71 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ------------------------------------------------------ ------------------------------------------------------------------------- Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty All-Star Funds One Financial Center since June 2001; Assistant Treasurer of Columbia Acorn and Wanger Funds Boston, MA 02111 since June 2004 (formerly Controller of the Columbia Funds and of the Chief Accounting Officer Liberty All-Star Funds from May 2002 to May 2004); Controller and Chief Accounting Officer of the Galaxy Funds since September 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May 1998 to April 2001). Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds since One Financial Center 2004; Assistant Treasurer of Columbia Acorn and Wanger Funds since June Boston, MA 02111 2004 (formerly Assistant Treasurer of the Columbia Funds and of the Controller (since 2004) Liberty All-Star Funds from June 2002 to May 2004; Vice President, Product Strategy & Development of Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999). J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer of the One Financial Center Columbia Funds and of the Liberty All-Star Funds since December 2000; Boston, MA 02111 Vice President of the Advisor since April 2003 (formerly Chief Accounting Treasurer (since 2000) and Officer and Controller of the Liberty Funds and Liberty All-Star Funds President (since 2004) from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December 2002 (formerly Vice President of Colonial from February 1998 to October 2000). David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds since One Financial Center December 2003; Senior Counsel, Bank of America Corporation (formerly Boston, MA 02111 FleetBoston Financial Corporation) since January 1996; Associate General Secretary (since 2003) Counsel, Columbia Management Group since November 2002.
72 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - TRUSTEES - DOUGLAS A. HACKER JANET LANGFORD KELLY RICHARD W. LOWRY WILLIAM E. MAYER CHARLES R. NELSON JOHN J. NEUHAUSER PATRICK J. SIMPSON THOMAS E. STITZEL THOMAS C. THEOBALD ANNE-LEE VERVILLE RICHARD L. WOOLWORTH - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, INC. 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110-2624 - TRANSFER AGENT - COLUMBIA FUNDS SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 CMC-02/526S-0804 (09/04) 2575 A description of the policies and procedures that the fund uses to determine how to vote proxies relating to its portfolio securities is available (i) at www.columbiamanagement.com and (ii) on the Securities and Exchange Commission's website at http://www.sec.gov. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER, INCORPORATED. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA MANAGEMENT REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS, WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT CAREFULLY BEFORE YOU INVEST. Fund distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth Avenue, Portland, Oregon 97201 ITEM 2. CODE OF ETHICS. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr. Woolworth are each independent trustees, as defined in paragraph (a)(2) of this item's instructions and collectively constitute the entire Audit Committee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fee information below is disclosed in aggregate for the series of the registrant whose reports to stockholders are included in this annual filing. (a) Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended July 31, 2004 and July 31, 2003 are approximately as follows:
2004 2003 $ 357,600 $ 211,900
Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. Audit fees during the fiscal year ended July 31, 2004 include the audit of 15 series of the registrant. Audit fees during the fiscal year ended July 31, 2003 include the audit of 12 series of the registrant, five of which had commenced operations on May 5, 2003. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years ended July 31, 2004 and July 31, 2003 are approximately as follows:
2004 2003 $ 49,000 $ 24,500
Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. In both fiscal years 2004 and 2003, Audit-Related Fees include certain agreed-upon procedures performed for semi-annual shareholder reports. Fiscal year 2004 represents 14 series of the registrant, while fiscal year 2003 includes seven series of the registrant. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. For the registrant, the percentage of Audit-Related services that were approved under the "de minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003 was zero. The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal years ended July 31, 2004 and July 31, 2003, there were no Audit-Related Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Audit-Related fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003 was zero. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years ended July 31, 2004 and July 31, 2003 are approximately as follows:
2004 2003 $ 43,500 $ 10,300
Tax Fees include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. Tax Fees in both fiscal years 2004 and 2003 primarily consist of the review of annual tax returns (12 series in fiscal year 2004 and seven series in fiscal year 2003), while fiscal year 2004 also includes the review of calculations of required shareholder distributions for seven series, tax research and consultation and assistance with foreign tax filings. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. For the registrant, the percentage of Tax Fees that were approved under the "de minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003 was zero. The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal years ended July 31, 2004 and July 31, 2003, there were no Tax Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The percentage of Tax fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003 was zero. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years ended July 31, 2004 and July 31, 2003 are as follows:
2004 2003 $ 0 $ 0
All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in (a)-(c) above. The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. For the registrant, the percentage of All Other Fees that were approved under the "de minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003 was zero. The pre-approval requirements for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal year ended July 31, 2004, All Other Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $95,000. During the fiscal year ended July 31, 2003, All Other Fees that would have been subject to pre-approval had paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X been applicable at the time the services were provided, were approximately $95,000. For both fiscal years, All Other Fees relate to internal controls reviews of the registrant's transfer agent. The percentage of All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003 was zero. (e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES I. GENERAL OVERVIEW The Audit Committee of the registrant has adopted a formal policy (the "Policy") which sets forth the procedures and the conditions pursuant to which the Audit Committee will pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant's independent auditor to the registrant and individual funds (collectively "Fund Services"), and (ii) all non-audit services provided by the registrant's independent auditor to the funds' adviser or a control affiliate of the adviser, that relate directly to the funds' operations and financial reporting (collectively "Fund-related Adviser Services"). A "control affiliate" is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser. The adviser and control affiliates are collectively referred to as "Adviser Entities." The Audit Committee uses a combination of specific (on a case-by-case basis as potential services are contemplated) and general (pre-determined list of permitted services) pre-approvals. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. The Policy does not delegate the Audit Committee's responsibilities to pre-approve services performed by the independent auditor to management. II. GENERAL PROCEDURES On an annual basis, the Fund Treasurer and/or Director of Trustee Administration shall submit to the Audit Committee a schedule of the types of Fund Services and Fund-related Adviser Services that are subject to general pre-approval. These schedules will provide a description of each type of service that is subject to general pre-approval and, where possible, will provide estimated fees for each instance of providing each service. This general pre-approval and related fees (where provided) will generally cover a one-year period (for example, from July 1 through July 31 of the following year). The Audit Committee will review and approve the types of services and review the projected fees for the next one-year period and may add to, or subtract from, the list of general pre-approved services from time to time, based on subsequent determinations. This approval acknowledges that the Audit Committee is in agreement with the specific types of services that the independent auditor will be permitted to perform. The fee amounts will be updated to the extent necessary at other regularly scheduled meetings of the Audit Committee. In addition to the fees for each individual service, the Audit Committee has the authority to implement a fee cap on the aggregate amount of non-audit services provided to an individual fund. If, subsequent to general pre-approval, a fund, its investment adviser or a control affiliate determines that it would like to engage the independent auditor to perform a service that requires pre-approval and that is not included in the general pre-approval list, the specific pre-approval procedure shall be as follows: - A brief written request shall be prepared by management detailing the proposed engagement with explanation as to why the work is proposed to be performed by the independent auditor; - The request should be addressed to the Audit Committee with copies to the Fund Treasurer and/or Director of Trustee Administration; - The Fund Treasurer and/or Director of Trustee Administration will arrange for a discussion of the service to be included on the agenda for the next regularly scheduled Audit Committee meeting, when the Committee will discuss the proposed engagement and approve or deny the request. - If the timing of the project is critical and the project needs to commence before the next regularly scheduled meeting, the Chairperson of the Audit Committee may approve or deny the request on behalf of the Audit Committee, or, in the Chairperson's discretion, determine to call a special meeting of the Audit Committee for the purpose of considering the proposal. Should the Chairperson of the Audit Committee be unavailable, any other member of the Audit Committee may serve as an alternate for the purpose of approving or denying the request. Discussion with the Chairperson (or alternate, if necessary) will be arranged by the Fund Treasurer and/or Director of Trustee Administration. The independent auditor will not commence any such project unless and until specific approval has been given. III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES The Audit Committee recognizes that there are cases where services proposed to be provided by the independent auditor to the adviser or control affiliates are not Fund-related Adviser Services within the meaning of the Policy, but nonetheless may be relevant to the Audit Committee's ongoing evaluation of the auditor's independence and objectivity with respect to its audit services to the funds. As a result, in all cases where an Adviser Entity engages the independent auditor to provide audit or non-audit services that are not Fund Services or Fund-related Adviser Services, were not subject to pre-approval by the Audit Committee, and the projected fees for any such engagement (or the aggregate of all such engagements during the period covered by the Policy) exceeds a pre-determined threshold established by the Audit Committee; the independent auditor, Fund Treasurer and/or Director of Trustee Administration will notify the Audit Committee not later than its next meeting. Such notification shall include a general description of the services provided, the entity that is to be the recipient of such services, the timing of the engagement, the entity's reasons for selecting the independent auditor, and the projected fees. Such information will allow the Audit Committee to consider whether non-audit services provided to the adviser and Adviser Entities, which were not subject to Audit Committee pre-approval, are compatible with maintaining the auditor's independence with respect to the Funds. IV. REPORTING TO THE AUDIT COMMITTEE The Fund Treasurer or Director of Trustee Administration shall report to the Audit Committee at each of its regular meetings regarding all Fund Services or Fund-related Adviser Services initiated since the last such report was rendered, including: - A general description of the services, and - Actual billed and projected fees, and - The means by which such Fund Services or Fund-related Adviser Services were pre-approved by the Audit Committee. In addition, the independent auditor shall report to the Audit Committee annually, and no more than 90 days prior to the filing of audit reports with the SEC, all non-audit services provided to entities in the funds' "investment company complex," as defined by SEC rules, that did not require pre-approval under the Policy. V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE The Policy may be amended from time to time by the Audit Committee. Prompt notice of any amendments will be provided to the independent auditor, Fund Treasurer and Director of Trustee Administration. The Policy shall be reviewed and approved at least annually by the Audit Committee. ***** (e)(2) This information has been included in items (b)-(d) above. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years ended July 31, 2004 and July 31, 2003 are disclosed in (b)-(d) above. All non-audit fees billed by the registrant's accountant for services rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal years ended July 31, 2004 and July 31, 2003 are also disclosed in (b)-(d) above. Such fees were approximately $95,000 and $95,000, respectively. (h) The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The registrant has not filed Schedule 14A subsequent to the effective date of that Schedule's Item 7(d)(2)(ii)(G). However, it is the registrant's policy to consider candidates for the Board of Trustees/Directors who are recommended by shareholders. A Fund shareholder who wishes to nominate a candidate to the Board may send information regarding prospective candidates to the Fund's Governance Committee, care of the Fund's Secretary. The information should include evidence of the shareholder's Fund ownership, a full listing of the proposed candidate's education, experience, current employment, date of birth, names and addresses of at least three professional references, information as to whether the candidate is not an "interested person" under the 1940 Act and "independent" under NYSE Listing Standards in relation to the Fund, and such other information as may be helpful to the independent trustees/directors in evaluating the candidate. All satisfactorily completed information packages regarding a candidate will be forwarded to an independent trustee/director for consideration. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer, based on his evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, has concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 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. (registrant) CMG Fund Trust ------------------------------------------------------------ By (Signature and Title) /s/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date September 27, 2004 -------------------------------------------------------------------- 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 (Signature and Title) /s/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date September 27, 2004 -------------------------------------------------------------------- EX-99.CODEETH 2 a2144236zex-99_codeeth.txt EXHIBIT 99.CODEETH Exhibit 99.Code Eth COLUMBIA MANAGEMENT GROUP FAMILY OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (the "Code") for the investment companies within the Columbia Management Group fund complex (collectively the "Funds" and each, a "Fund") applies to the Funds' Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director of Trustee Administration (the "Covered Officers") for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC"), and in other public communications made by a Fund; - compliance with applicable laws and governmental rules and regulations; - the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer shall adhere to a high standard of business ethics and shall be sensitive to situations that may give rise to actual or apparent conflicts of interest. II. ADMINISTRATION OF THE CODE . The Boards of Trustees and Boards of Directors of the Funds (collectively, the "Board") shall designate an individual to be primarily responsible for the administration of the Code (the "Code Officer"). The Code shall be administered by the Columbia Management Group Compliance Department. In the absence of the Code Officer, his or her designee shall serve as the Code Officer, but only on a temporary basis. Each Fund has designated a chief legal officer (the "Chief Legal Officer") for purposes of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Chief Legal Officer of a Fund shall assist the Fund's Code Officer in administration of this Code. The Chief Legal Officer shall be responsible for applying this Code to specific situations in which questions are presented under it (in consultation with Fund counsel, where appropriate) and has the authority to interpret this Code in any particular situation. However, any waivers sought by a Covered Officer must be approved by each Audit Committee of the Funds (collectively, the "Audit Committee"). III. MANAGING CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a family member, receives improper personal benefits as a result of the Covered Officer's position with a Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (the "Company Act") and the Investment Advisers Act of 1940 (the "Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as "affiliated persons" of the Fund. A Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of those provisions. This Code does not, and is not intended to, repeat or replace those programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Fund and its investment adviser, administrator, principal underwriter, pricing and bookkeeping agent and/or transfer agent (each, a "Service Provider") of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Provider and a Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of a Fund. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions of the Company Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund. Each Covered Officer must: - not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer or an immediate family member would benefit personally to the detriment of a Fund; and - not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer or an immediate family member rather than the benefit of the Fund.(1). There are some conflict of interest situations that must be approved by the Code Officer, after consultation with the Chief Legal Officer. Those situations include, but are not limited to,: - service as director on the board of any public or private company; - the receipt of any gifts in excess of $100 in the aggregate from a third party that does or seeks to do business with the Funds during any 12-month period; - the receipt of any entertainment from any company with which a Fund has current or prospective business dealings, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - any material ownership interest in, or any consulting or employment relationship with, any Fund service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; - a direct or indirect material financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. IV. DISCLOSURE AND COMPLIANCE Each Covered Officer shall: - be familiar with the disclosure requirements generally applicable to the Funds; - ---------- (1) For purposes of this Code, personal trading activity of the Covered Officers shall be monitored in accordance with the Columbia Management Group Code of Ethics. Each Covered Officer shall be considered an "Access Person" under such Code. The term "immediate family" shall have the same meaning as provided in such Code. - not knowingly misrepresent, or cause others to misrepresent, facts about any Fund to others, whether within or outside the Fund, including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; - to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (or after becoming a Covered Officer), affirm in writing to the Board that he/she has received, read and understands the Code; - annually affirm to the Board compliance with the requirements of the Code; - not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; - notify the Chief Legal Officer and the Code Officer promptly if he/she knows of any violation of this Code; and - respond to the trustee and officer questionnaires circulated periodically in connection with the preparation of disclosure documents for the Funds. The Code Officer shall maintain records of all activities related to this Code. The Funds will follow the procedures set forth below in investigating and enforcing this Code: - The Chief Legal Officer and/or the Code Officer will take all appropriate action to investigate any potential violation reported to him/her; - If, after such investigation, the Chief Legal Officer and the Code Officer believes that no violation has occurred, the Code Officer will notify the person(s) reporting the potential violation, and no further action is required; - Any matter that the Chief Legal Officer and/or the Code Officer believes is a violation will be reported to the Audit Committee; - If the Audit Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to the Chief Executive Officer of Columbia Management Group; or a recommendation to sanction or dismiss the Covered Officer; - The Audit Committee will be responsible for granting waivers in its sole discretion; - Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. The Chief Legal Officer shall: - report to the Audit Committee quarterly any approvals provided in accordance with Section III of this Code; and - report to the Audit Committee quarterly any violations of, or material issues arising under, this Code. VI. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other polices or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities (including, but not limited to, personal trading activities) of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Company Act and any policies and procedures of the Service Providers are separate requirements applicable to the Covered Officers and are not part of this Code. VII. AMENDMENTS All material amendments to this Code must be approved or ratified by the Board, including a majority of independent directors. VIII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Covered Officers, the Chief Legal Officer, the Code Officer, outside audit firms and legal counsel to the Funds, and senior management of Columbia Management Group. IX. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. EX-99.CERT 3 a2144236zex-99_cert.txt EXHIBIT 99.CERT Exhibit 99.302CERT I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of CMG Fund Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 27, 2004 /s/ J. Kevin Connaughton ---------------------------------------------- J. Kevin Connaughton, President and Treasurer EX-99.906CERT 4 a2144236zex-99_906cert.txt EXHIBIT 99.906CERT Exhibit 99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of CMG Fund Trust (the "Trust") on Form N-CSR for the period ending July 31, 2004, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), the undersigned hereby certifies that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Date: September 27, 2004 /s/ J. Kevin Connaughton ---------------------------------------------- J. Kevin Connaughton, President and Treasurer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----