N-CSR 1 a2163448zn-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: 1-617-426-3698 ---------------------- Date of fiscal year end: 07/31/05 ---------- Date of reporting period: 07/31/05 ---------- 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. ITEM 1. REPORTS TO STOCKHOLDERS. [COLUMBIA MANAGEMENT(R) LOGO] 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, 2005 NOT FDIC MAY LOSE VALUE INSURED NO BANK GUARANTEE Advised by Columbia Management Advisors, Inc. Columbia Management is the primary investment management division of Banc of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. Columbia Management Advisors, Inc. will combine with Banc of America Capital Management, LLC on or about September 30, 2005. At that time, the newly combined advisor will undergo a name change to Columbia Management Advisors, LLC and will continue to operate as a SEC-registered investment advisor, wholly owned subsidiary of Bank of America, N.A. and part of Columbia Management. TABLE OF CONTENTS Management Discussion of Fund Performance CMG Enhanced S&P 500(R) Index Fund 1 CMG Large Cap Growth Fund 6 CMG Large Cap Value Fund 12 CMG Mid Cap Growth Fund 18 CMG Mid Cap Value Fund 23 CMG Small Cap Growth Fund 29 CMG Small Cap Value Fund 34 CMG Small/Mid Cap Fund 39 CMG International Stock Fund 44 Financial Statements Financial Highlights 49 Schedule of Investments 58 Statements of Assets and Liabilities 122 Statements of Operations 124 Statements of Changes in Net Assets 126 Notes to Financial Statements 131 Report of Independent Registered Public Accounting Firm 140 Unaudited Information 141 Trustees 143 Officers 145
The views expressed in the Portfolio Commentaries reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a CMG Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Fund. References to specific company securities should not be constructed as a recommendation or investment advice. 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. 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 15.32% for the 12-month period ended July 31, 2005. The fund's return was better than that of the S&P 500 Index(1), which was 14.05% for the same period. The average return for the Lipper Large Cap Core Funds Category was 12.60%.(2) Despite rising energy prices, the US economy continued to grow at a steady pace and inflation remained relatively low during the 12-month period, providing an attractive backdrop for equity investors. In this environment, the best-performing S&P 500 Index sectors were energy and utilities, which advanced 43% and 39%, respectively. The financials, technology and telecommunications sectors were the worst performing areas. Each of these sectors returned approximately 10%. The fund's performance benefited from our decision to overweight companies in a range of industries. An above-index position in energy company TXU returned 125% for the fund during the period (0.4% of net assets). Rising energy prices boosted profits from the company's lower-cost nuclear and coal-fired generating operations. A position in First American, a provider of business information, also aided results (0.5% of net assets). The stock rose 65% for the fund as a strong housing market fueled profits from the company's real estate business information and services segments. An overweight in Monsanto returned almost 90% for the fund (0.7% of net assets). Monsanto saw prices and international sales of Roundup, its herbicide, increase substantially. The company also gained market share in branded corn seed, and it increased its acreage in genetically-modified crops. Above-index exposure to UnitedHealth Group was also helpful (1.4% of net assets). Recent acquisitions, disciplined cost management and strong pricing boosted profits. Stocks that disappointed included Wal-Mart Stores and ConocoPhillips (1.4% and 0.2% of net assets, respectively). Wal-Mart declined on poor sales growth, as higher gasoline prices took a meaningful bite out the average customer's disposable income. ConocoPhillips detracted from performance because the fund had less exposure to the stock than the index. Soaring energy prices powered the company's profits and drove the stock up 60%. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Exxon Mobil 3.8 General Electric 3.0 Pfizer 2.2 Microsoft 2.1 Johnson & Johnson 2.1 Intel 2.0 International Business Machines 1.7 JPMorgan Chase 1.6 Citigroup 1.6 ChevronTexaco 1.6
1 We appreciate your continued confidence in CMG Enhanced S&P 500(R) Index Fund. Vikram Kuriyan has managed the CMG Enhanced S&P 500(R) Index Fund since June 2005 and has been with the advisor or its predecessors or affiliate organizations since 2000. /s/ Vikram Kuriyan Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Investing in the fund also includes 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. ---------- (1) 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 the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Enhanced S&P 500(R) Index Fund 05/05/03 15.32 15.73 S&P 500 Index 14.05 15.68
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Enhanced S&P 500(R) Index Fund 05/05/03 8.14 14.50 S&P 500 Index 6.32 14.39
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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2005
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 $ 12,147 8/31/2004 $ 12,116 $ 12,196 9/30/2004 $ 12,237 $ 12,328 10/31/2004 $ 12,438 $ 12,516 11/30/2004 $ 12,961 $ 13,023 12/31/2004 $ 13,458 $ 13,466 1/31/2005 $ 13,139 $ 13,139 2/28/2005 $ 13,459 $ 13,415 3/31/2005 $ 13,243 $ 13,177 4/30/2005 $ 12,965 $ 12,927 5/31/2005 $ 13,366 $ 13,338 6/30/2005 $ 13,386 $ 13,357 7/31/2005 $ 13,869 $ 13,855
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from May 5, 2003. 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,055.59 1,023.55 1.27 1.25 0.25
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 365. 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 funds 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 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG LARGE CAP GROWTH FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Large Cap Growth Fund returned 14.55% for the 12-month period ended July 31, 2005. The fund performed better than both the Russell 1000 Growth Index(1) and the Lipper Large Cap Growth Funds Category average, which returned 13.04% and 14.20%, respectively, over the same period.(2) Stock selection in the consumer discretionary sector was particularly strong, helping the fund outpace the Russell index. We focused on large-cap companies with strong competitive positions, high sustainable profits, good balance sheets and above-average earnings growth prospects. The fund's emphasis on high-end retailers in the consumer discretionary sector contributed to its strong return. These companies tended to be less vulnerable to rising gas prices, which can curb the discretionary spending of lower-income consumers. Among the fund's biggest gainers were Chico's FAS, Nordstrom and Coach (0.4%, 0.5% and 1.4% of net assets, respectively). Chico's FAS, a niche women's clothing retailer, benefited from opening new stores and increasing sales. At Nordstrom, new management and a restructuring helped bolster earnings. Specialty retailer Coach saw strong sales from its fashion accessories. Consumer electronics retailer Best Buy also rallied nicely, aided by the redesign of its stores (0.7% of net assets). Elsewhere, hotels, such as Marriott International, saw revenues rise as industry occupancy rates increased while new room construction remained limited (1.1% of net assets). Stock selection in the consumer staples and financials sectors produced modest gains relative to the index. In consumer staples, the fund benefited from its stake in Altria Group, formerly Phillip Morris (1.0% of net assets). Solid revenue and earnings growth plus easing litigation concerns propelled the stock higher. The fund's technology stocks moved higher, but did not keep pace with the sector's gains in the index. The fund had a bias toward mega-cap stocks, which did not do nearly as well as relatively smaller companies. We also sold our position in Motorola, missing out on gains that came late in the period. Helping to offset these disappointments was Cognizant Technology Solutions, an Indian outsourcer of programming services (0.3% of net assets). The stock rallied nicely amid strong demand. Elsewhere, the fund lost ground relative to the index by not owning a few key industrial stocks when they posted their biggest gains. In addition, the fund had a lower stake than the index in energy stocks, which were among the year's best performers. Investments in better-performing, relatively smaller stocks, however, pushed the fund's energy gains ahead of the sector's return in the index. Gains from the fund's health care stocks kept pace with the sector's return in the index. We downplayed major branded pharmaceuticals, which declined amid concerns over patent expirations and a lack of new blockbuster drugs. Instead, we focused on product-related companies such as Alcon, which makes eye care products (0.5% of net assets). The stock 6 climbed quickly as investors began to recognize its attractive valuation and strong earnings growth. Gains like these far overshadowed losses from companies such as Biogen Idec (no longer in the portfolio), which fell sharply when reported side effects forced the company to pull its new multiple sclerosis drug from the market. Going forward, we expect continued improved performance from large-cap growth stocks. The excesses of the 1990s that created valuation differences between growth and value stocks have largely disappeared. The gap between small- and large-cap valuations has also closed. In addition, we believe many large-cap growth stocks continue to have strong earnings prospects as the economy heads into the later stages of the current expansion. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Microsoft 4.6 General Electric 4.2 Johnson & Johnson 4.0 American International Group 2.1 International Business Machines 2.1 Wal-Mart Stores 2.1 Dell 2.0 Intel 2.0 Cisco Systems 1.9 Procter & Gamble 1.9
Thank you for investing in CMG Large Cap Growth Fund. Paul J. Berlinguet, has managed or co-managed the CMG Large Cap Growth Fund since October 2003 and has been with the advisor or its predecessors or affiliate organizations since 2003. /s/ Paul J. Berlinguet Edward Hickey has co-managed the fund since June 2005 and has been with the advisor or its predecessors or affiliate organizations since 1998. /s/ Edward Hickey 7 Mary Ann Ward has co-managed the fund since June 2005 and has been with the advisor or its predecessors or affiliate organizations since 1997. /s/ Mary Ann Ward Roger Sullivan has co-managed the fund since June 2005 and has been with the advisor or its predecessors or affiliate organizations since January, 2005. /s/ Roger Sullivan Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Investing in growth stocks incurs the possibility of losses because their prices are sensitive to changes in current or expected earnings. ---------- (1) The Russell 1000 Growth Index is an unmanaged index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. Unlike the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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. 8 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Large Cap Growth Fund 09/10/03 14.55 8.89 Russell 1000 Growth Index 13.04 8.79
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Large Cap Growth Fund 09/10/03 3.64 7.23 Russell 1000 Growth Index 1.68 6.38
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 10, 2003 TO JULY 31, 2005
CMG LARGE CAP GROWTH FUND RUSSELL 1000 GROWTH INDEX 9/10/2003 $ 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 $ 10,377 8/31/2004 $ 10,127 $ 10,326 9/30/2004 $ 10,337 $ 10,424 10/31/2004 $ 10,557 $ 10,587 11/30/2004 $ 11,047 $ 10,951 12/31/2004 $ 11,507 $ 11,380 1/31/2005 $ 11,235 $ 11,000 2/28/2005 $ 11,346 $ 11,117 3/31/2005 $ 11,154 $ 10,914 4/30/2005 $ 10,872 $ 10,707 5/31/2005 $ 11,387 $ 11,225 6/30/2005 $ 11,347 $ 11,184 7/31/2005 $ 11,749 $ 11,730
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from September 10, 2003. 9 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,045.82 1,022.32 2.54 2.51 0.50
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 365. 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. 10 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 11 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG LARGE CAP VALUE FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Large Cap Value Fund returned 15.41% for the 12-month period ended July 31, 2005. The Russell 1000 Value Index(1) returned 19.04%, and the average return of the Lipper Multi-Cap Value Funds Category was 17.55%.(2) Investor sentiment was highly variable over much of the period, at times favoring smaller, more speculative issues, then tilting toward shares of larger, more stable companies. Fund results tracked the fortunes of larger companies, doing well when large-cap value stocks were in favor but failing to keep up during more speculative periods. Utilities were the period's strongest sector. Shares of TXU continued to move higher, reflecting the company's successful turnaround and restructuring efforts (0.8% of net assets). The fund also enjoyed outstanding gains from Exxon Mobil, ConocoPhillips and Marathon Oil, all beneficiaries of rising oil prices as vigorous demand collided with tight supply (4.2%. 3.2% and 0.8% of net assets, respectively). The fund benefited by having slightly less exposure than the index to consumer discretionary issues. We avoided the troubled auto sector and maintained low exposure to the poor-performing media segment. Retail issues with attractive valuations and compelling turnaround stories stood out during the period. A new CEO revitalized Office Depot (no longer in the portfolio) by, among other measures, closing unproductive stores. J.C. Penney continued to deliver on its commitment to broaden profit margins and Federated Department Stores also rose (0.7% and 1.4% of net assets, respectively). Consumer outlays got an added boost from lower mortgage rates that spawned a new wave of refinancing, freeing up extra cash. The fund had slightly less exposure to health care than the index, where stock selection also aided results. Aetna and CIGNA continued to move ahead during the period (1.0% and 0.6% of net assets, respectively). Both companies benefited from favorable pricing conditions in the industry as well as specific steps taken to increase profit margins. Weakness in capital markets hurt the performance of JPMorgan Chase and Merrill Lynch (2.0% and 0.7% of net assets, respectively). Ongoing investigations into questionable business practices weighed on shares of insurance broker Marsh & McLennan Companies (no longer in the portfolio). American International Group, a major casualty insurer whose longtime CEO was forced to resign, also declined (0.8% of net assets). Late in the period, sluggish mortgage conditions drove down mortgage insurer Ambac Financial Group (0.7% of net assets) and Freddie Mac (no longer in the portfolio), a major participant in the mortgage business. In technology, stock selection was unproductive. International Business Machines continued to fall short of earnings expectations (0.9% of net assets). Lexmark International, a maker of printers, faced an increasingly competitive environment as aggressive tactics from a major competitor signaled a fight to recapture market share lost to Lexmark International over recent years (0.6% of net assets). 12 The fund's exposure to consumer staples stocks, a sector that has historically held up well when the economy slows, remained higher than the index. However, Kraft Foods (0.8% of net assets) and ConAgra Foods (no longer in the portfolio) both declined on disappointing earnings reports: Kraft had led investor expectations higher, then failed to meet stated goals. Price competition among smokeless tobacco products hurt results at UST, whose well-established Skoal brand is under attack from generics (0.4% of net assets). The annualized rate of growth in the US economy remained above three percent and employment trends were favorable. While summer business activity received a boost from auto price promotions, consumer spending now appears vulnerable with the national savings rate at zero and energy prices carving ever-larger holes in budgets. Also threatening the recovery are higher interest rates--the Federal Reserve Board has increased short-term rates ten times since June 2004.(3) Against that background, we have structured the portfolio to reflect our expectations of an economic cool down, reflected in the fund's emphasis on consumer staples companies. In addition, as the period closed we were reexamining our commitments in the industrial sector. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Exxon Mobil 4.2 General Electric 3.9 Citigroup 3.8 ConocoPhillips 3.2 SBC Communications 2.1 BP PLC 2.0 Wells Fargo 2.0 U.S. Bancorp 2.0 JPMorgan Chase 2.0 United Technologies 1.9
Thank you for investing in CMG Large Cap Value Fund. Brian Cunningham has co-managed the CMG Large Cap Value Fund since November 2003 and has been with the advisor or its predecessors or affiliate organizations since 1987. /s/ Brian Cunningham Gregory M. Miller has co-managed the fund since May 2003 and has been with the advisor or its predecessors or affiliate organizations since 1985. /s/ Gregory M. Miller 13 Richard Dahlberg, CFA, has co-managed the fund since October 2003 and has been with the advisor or its predecessors or affiliate organizations since 2003. /s/ Richard Dahlberg Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Value stocks are stocks 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 and, in the advisor's opinion, undervalued. If the advisor's assessment of a company's prospects is wrong, the price of the company's stock may not approach the value the advisor has placed on it. ---------- (1) 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 the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. (3) The tenth increase occurred on August 9, 2005. 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. 14 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Large Cap Value Fund 09/10/03 15.41 14.06 Russell 1000 Value Index 19.04 17.75
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Large Cap Value Fund 09/10/03 10.56 13.19 Russell 1000 Value Index 14.06 16.80
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 10, 2003 TO JULY 31, 2005
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 $ 11,114 $ 11,444 8/31/2004 $ 11,244 $ 11,607 9/30/2004 $ 11,424 $ 11,787 10/31/2004 $ 11,544 $ 11,982 11/30/2004 $ 12,035 $ 12,589 12/31/2004 $ 12,375 $ 13,010 1/31/2005 $ 12,183 $ 12,781 2/28/2005 $ 12,581 $ 13,204 3/31/2005 $ 12,398 $ 13,023 4/30/2005 $ 12,234 $ 12,790 5/31/2005 $ 12,438 $ 13,098 6/30/2005 $ 12,510 $ 13,241 7/31/2005 $ 12,827 $ 13,624
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from September 10, 2003. 15 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,052.91 1,022.32 2.55 2.51 0.50
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 365. 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. 16 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 17 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG MID CAP GROWTH FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Mid Cap Growth Fund returned 28.17% for the 12-month period ended July 31, 2005. The fund's performance exceeded the 25.65% return of the Russell MidCap Growth Index(1) and the 22.58% average of the Lipper Mid Cap Growth Funds Category for the same period.(2) Strong stock selection drove the fund's outperformance. The consumer discretionary sector had the greatest positive impact on performance in the reporting period. Although the fund had less exposure to the sector than its benchmark, its holdings performed strongly. Chico's FAS, Coach and Urban Outfitters made the greatest contributions (1.9%, 1.4% and 1.6% of net assets, respectively). These three stocks have been a core part of the fund's retail holdings since July 2004 and we believe they represent good long-term growth vehicles because all have demonstrated the potential to open new stores, make efficient use of technology to reach customers and control costs. In addition, they serve an affluent demographic group that tends to be less sensitive to changes in the economic environment. Stock selection was strongest within the materials sector, helped by a favorable environment for commodities. Potash Corp. of Saskatchewan, Inc., which benefited from demand for fertilizer, and Phelps Dodge, a producer of copper took advantage of favorable pricing trends (1.7% and 0.8% of net assets, respectively). The energy sector was a top contributor to fund performance as oil and natural gas prices continued their strong rise. The fund's holdings slightly outperformed the index, and we maintained an overweight position in the sector. Stand-out performers included exploration and production companies XTO Energy and EOG Resources (1.0% and 1.1% of net assets, respectively). Peabody Energy also advanced as higher oil and gas prices made coal a relatively more attractive energy source (0.6% of net assets). Within the information technology sector, we restructured the portfolio last summer to eliminate commodity-type businesses in favor of those with greater intellectual property content, as reflected in companies with higher gross margins. These changes were key to the sector's strong performance relative to the index during this reporting period. Marvell Technology Group, which is levered to markets characterized by massive unit numbers, such as transceivers, power management and storage, was one of the fund's top performers (1.8% of net assets). NVIDIA, with its high-end graphics processing chips, and Broadcom, whose chips are used in the communications and networking markets, also performed well (0.3% and 1.0% of net assets, respectively). Cognizant Technology Solutions, an IT services provider and a long-time holding, continued to grow at an annual rate of 30% or more as corporations took advantage of the large, technically skilled, English speaking work force in India (1.0% of net assets). Although no sectors posted a loss in the period, the fund experienced relative weakness in the health care, financial and utilities sectors, where we were underweight and the fund's holdings underperformed. In health care, the fund could not overcome the loss sustained when Elan Pharmaceuticals pulled Tysabri, a new drug treating multiple sclerosis, off the market only a few weeks after launch. We sold the stock at a substantial loss. In financials, the fund was hurt by not owning--or not owning enough of--some of the sector's best performers. Finally, relative performance took a small hit in utilities, which is not an area where we typically seek growth stocks and where we failed to capitalize on strong performers. 18 We continue to believe that the economy has the potential to continue growing at a healthy rate, and the portfolio is positioned accordingly. We remain bullish longer term on energy. Earnings are currently very strong in the materials and industrials sectors, but we are watchful for signs of decelerating growth. At the margin, we took profits from the most cyclical parts of the portfolio and redeployed these into traditional growth segments, such as health care and technology. In addition, with interest rate increases likely winding down, we believe that traditional growth segments such as health care, technology and consumer discretionary sectors are poised to provide compelling returns. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Chico's FAS 1.9 XM Satellite Radio Holdings 1.8 Marvell Technology Group 1.8 Corporate Executive Board 1.7 Potash Corp. of Saskatchewan 1.7 Urban Outfitters 1.6 Tempur-Pedic International 1.4 Coach 1.4 Robert Half International 1.3 Corn Products International 1.2
Thank you for investing in the CMG Mid Cap Growth Fund. Kenneth A. Korngiebel has managed the CMG Mid Cap Growth Fund since June 2004 and has been with the advisor or its predecessors or affiliate organizations since 1996. /s/ Kenneth A. Korngiebel Investing in growth stocks incurs the possibility of losses because their prices are sensitive to changes in current or expected earnings. Investing in mid-cap stocks may present special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. ---------- (1) The Russell Midcap Growth Index is an unmanaged index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. Unlike the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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. 19 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Growth Fund 05/05/03 28.17 16.80 Russell Midcap Growth Index 25.65 23.97
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Growth Fund 05/05/03 9.74 14.19 Russell Midcap Growth Index 10.86 21.77
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2005
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 $ 11,045 $ 12,875 8/31/2004 $ 10,835 $ 12,716 9/30/2004 $ 11,295 $ 13,191 10/31/2004 $ 11,746 $ 13,638 11/30/2004 $ 12,456 $ 14,341 12/31/2004 $ 13,057 $ 15,028 1/31/2005 $ 12,847 $ 14,626 2/28/2005 $ 13,137 $ 14,996 3/31/2005 $ 12,736 $ 14,777 4/30/2005 $ 12,096 $ 14,192 5/31/2005 $ 13,066 $ 15,005 6/30/2005 $ 13,306 $ 15,284 7/31/2005 $ 14,158 $ 16,175
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from May 5, 2003. 20 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,102.00 1,021.32 3.65 3.51 0.70
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 365. 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. 21 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 22 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG MID CAP VALUE FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Mid Cap Value Fund returned 22.14% for the 12-month period ended July 31, 2005. The fund's return was less than the 31.15% return of the Russell Midcap Value Index(1) for the same period. Mid-cap value stocks were among the best-performing asset classes during the year ended July 31, 2005. They benefited from broadly improving business conditions and the positive impact of a strong economy on mid-capitalization companies. The fund's investments in energy and health care aided overall performance. Both sectors demonstrated strong business prospects. Investments in utility stocks, which benefited from increased investor interest in owning dividend-paying stocks, also made a positive contribution to performance. The fund's position in stocks that tend to be sensitive to economic activity, such as consumer discretionary and industrial companies, held back its performance versus its benchmark. Investor concerns about the impact of rising energy and raw materials costs on order trends and the impact of rising interest rates on consumer spending, appeared to hold back these sectors. However, these broad concerns have not changed our view that the economy remains strong, that pricing power is returning to the industrial sector, and that the consumer should continue to benefit from an overall benign interest rate environment. Oil prices approached $60 per barrel during the period. This price increase benefited many stocks in the energy sector. US-based off-shore drilling companies, such as Transocean and Noble, were the sector's strongest performers for the fund. Peabody Energy, a domestic coal mining company, also performed well as utilities drew down their inventories of coal to maintain electricity production levels. As with energy stocks, utilities experienced increased investor interest, presumably because of rising electricity prices and for their high dividend yields. The fund's investments in Exelon, Constellation Energy Group and Edison International, utilities that tend to do well when power prices rise, all performed very well. In health care, IVAX did well as the pharmaceutical manufacturer received a buyout offer. Wellpoint, a health care insurer, was one of the fund's strongest performers during the year as program enrollment and cost trends were both positive. We sold the stock and took profits. Finally, Community Health Systems, which owns and operates hospitals in smaller cities, also benefited from improved admissions and cost trends.(2) While stocks in the industrial sector did well overall, stock selection detracted from the fund's gains in the sector. Strong performance from investments in companies with exposure to the upturning aerospace cycle, such as Goodrich, were offset to some extent by negative performance from Ingersoll-Rand, Parker Hannifin, and American Standard, which lost ground relative to the sector as investors expressed their concerns over industrial order trends. 23 The fund also had mixed results from its investments in businesses tied more directly to the consumer. Federated Department Stores, a leading department store chain, did particularly well as management focused improving store operations. Also, Harrah's Entertainment, now the world's largest casino company, benefited from increased leisure spending and was the best-performing stock in the sector. By contrast, Lear and Superior Industries International, both suppliers of parts to major automobile makers, suffered from cost and competitive pressures and detracted from the fund's performance. Also, a weak advertising climate appeared to have hurt New York Times, and its share price declined during the period. All three stocks were eliminated from the portfolio. We believe that the fund is well positioned to take advantage of the opportunities in mid-cap stocks. We plan to continue the fund's focus on attractively-valued companies that offer earnings growth potential through sales growth and profit margin expansion. In addition, we continue to seek companies that produce rising returns on capital and that return a portion of earnings to shareholders in the form of dividend payments. Companies that repurchase their own shares are also attractive candidates for the portfolio. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Excelon 1.5 Edison International 1.4 PG&E 1.4 Golden West Financial 1.4 Entergy 1.3 Host Marriott 1.3 Marshall & Ilsley 1.2 XTO Energy 1.2 Constellation Energy Group 1.2 Amerada Hess 1.2
We appreciate your continued confidence in CMG Mid Cap Value Fund. Diane L. Sobin has co-managed the CMG Mid Cap Value Fund since September 2004 and has been with the advisor or its predecessors or affiliate organizations since 2001. /s/ Diane L. Sobin David I. Hoffman has co-managed the fund since September 2004 and has been with the advisor or its predecessors or affiliate organizations since 2001. /s/ David I. Hoffman 24 Lori J. Ensinger has co-managed the fund since September 2004 and has been with the advisor or its predecessors or affiliate organizations since 2001. /s/ Lori J. Ensinger Noah J. Petrucci has co-managed the fund since September 2004 and has been with the advisor or its predecessors or affiliate organizations since 2002. /s/ Noah J. Petrucci Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. 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 stocks 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 and, in the advisor's opinion, undervalued. If the advisor's assessment of a company's prospects is wrong, the price of the company's stock may not approach the value the advisor has placed on it. ---------- (1) 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 the fund, indices are not investments, they 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. (2) Holdings are disclosed as a percentage of net assets on July 31, 2005, and are subject to change: Transocean (0.8%), Noble (0.9%), Peabody Energy (1.0%), Exelon (1.5%), Constellation Energy Group (1.2%), Edison International (1.4%), IVAX (0.5%), Community Health Systems (0.7%), Goodrich (1.0%), Ingersoll-Rand (1.0%), Parker Hannifin (0.8%), American Standard (0.6%), Federated Department Stores (0.6%), Harrah's Entertainment (0.9%). 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. 25 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Value Fund 05/05/03 22.14 21.26 Russell Midcap Value Index 31.15 30.08
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Mid Cap Value Fund 05/05/03 11.77 19.65 Russell Midcap Value Index 21.80 28.63
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2005
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 8/31/2004 $ 12,523 $ 13,958 9/30/2004 $ 12,884 $ 14,364 10/31/2004 $ 13,003 $ 14,696 11/30/2004 $ 13,725 $ 15,690 12/31/2004 $ 14,155 $ 16,299 1/31/2005 $ 13,901 $ 15,919 2/28/2005 $ 14,399 $ 16,474 3/31/2005 $ 14,318 $ 16,425 4/30/2005 $ 13,832 $ 15,991 5/31/2005 $ 14,298 $ 16,652 6/30/2005 $ 14,714 $ 17,196 7/31/2005 $ 15,394 $ 18,016
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from May 5, 2003. 26 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,108.00 1,021.32 3.66 3.51 0.70
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 365. 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. 27 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 28 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG SMALL CAP GROWTH FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small Cap Growth Fund returned 19.47% for the 12-month period ended July 31, 2005. For the same period, the Russell 2000 Growth Index(1) and the Lipper Small Cap Growth Funds Category average, returned 22.58% and 22.12%, respectively.(2) The fund benefited as solid earnings growth fueled strong gains for small-cap stocks. In this environment, we focused on higher quality small-cap companies with healthy balance sheets, attractive business models and strong management teams. Although this strategy worked well, shortfalls in the health care, energy, consumer discretionary and industrials sectors hampered returns relative to the Russell index. Technology stocks were the biggest drivers of the fund's gains. We found some of the best opportunities in software and technology services companies. Standouts included Retek (no longer in the portfolio) and Itron (0.9% of net assets). Retek makes software that helps retailers with merchandise projections. The company was bought out at a nice premium during the period. Itron, which makes gas and electric meters that can be read wirelessly, benefited as utilities companies increased spending. Gains from these and other tech stocks more than offset losses from PalmSource (no longer in the portfolio) and Magma Design Automation (0.7% of net assets). PalmSource fell after it failed to sign up new customers for its smart phone operating system. Magma Design Automation, a company that helps automate semiconductor design, declined over an intellectual property dispute. Financials also were strong contributors to performance. The fund benefited from owning companies that would profit from an improving stock market. Investment banker Greenhill did especially well as merger and acquisition activity picked up (1.0% of net assets). Investments in specialty insurance companies and small entrepreneurial banks also boosted returns. Health care and energy stocks rallied, but the fund's holdings trailed the sector's respective returns in the index. In health care, we focused on medical products companies. Our biggest disappointments were biotechnology and specialty pharmaceutical stocks that fell sharply when new products did not roll out as expected. Detractors included QLT, a company with treatments for macular degeneration and prostate cancer (0.5% of net assets). Growing competitive pressures and insurance reimbursement issues hampered QLT's revenues, which caused a sharp drop in the stock price. Energy stocks produced sizeable gains, fueled by rising oil and gas prices. We focused on developing exploration and production companies with unproven reserves. While these stocks rallied nicely, they did not do nearly as well as companies with proven reserves. Consumer discretionary and industrial stock returns also hindered performance relative to the index. The fund owned media stocks that languished as advertisers shifted spending to alternative outlets, such as the Internet. In addition, certain retailing investments declined sharply when their earnings fell short of investor expectations. Most notable was Sharper Image (no longer in the portfolio), which suffered from weak execution and a lack of new product introductions. Offsetting these losses were strong gains from Jarden and Gaylord Entertainment (1.3% and 1.2% of net assets, respectively). Jarden is a consumer products conglomerate that seeks to increase its earnings through strategic acquisitions. Gaylord Entertainment develops and manages hotel and convention centers. In industrials, relocation firm Sirva (no longer in the portfolio) saw its stock price tumble as demand softened in Europe and accounting problems surfaced at its US insurance subsidiary. Going forward, we believe that small-cap stocks stand to benefit from a pickup in merger and acquisition activity as well as a stronger US dollar. Within the small cap sector, valuations on growth stocks also appear more attractive than those on value stocks. While we recognize that the gap between small- and large-cap stock valuations has narrowed, we believe small-cap stocks can continue to offer superior earnings growth prospects that will attract investors. 29 The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Advisory Board 1.3 Jarden 1.3 Global Imaging Systems 1.2 Gaylord Entertainment 1.2 Scientific Games 1.2 UAP Holding 1.1 Pinnacle Entertainment 1.1 Entegris 1.1 Foundry Networks 1.1 Ultratech 1.1
Thank you for investing in CMG Small Cap Growth Fund. Paul J. Berlinguet has managed or co-managed the CMG Small Cap Growth Fund since November 2003 and has been with the advisor since 2003. /s/ Paul J. Berlinguet Thomas P. Lettenberger has co-managed the fund since May 2004 and has been with the advisor or its predecessors or affiliate organizations since 2000. /s/ Thomas P. Lettenberger Steven R. Lilly has co-managed the fund since May 2004 and has been with the advisor or its predecessors or affiliate organizations since 1995. /s/ Steven R. Lilly Investing in growth stocks incurs the possibility of losses because their prices are sensitive to changes in current or expected earnings. Investments in small-cap stocks may be subject to greater volatility and price fluctuations because they may be thinly traded and less liquid than investments in larger companies. ---------- (1) 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 the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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. 30 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Growth Fund 05/05/03 19.47 20.76 Russell 2000 Growth Index 22.58 23.78
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Growth Fund 05/05/03 1.73 18.23 Russell 2000 Growth Index 4.29 20.97
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2005
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 $ 13,153 8/31/2004 $ 12,450 $ 12,870 9/30/2004 $ 13,163 $ 13,582 10/31/2004 $ 13,450 $ 13,912 11/30/2004 $ 14,399 $ 15,088 12/31/2004 $ 14,895 $ 15,629 1/31/2005 $ 14,085 $ 14,926 2/28/2005 $ 14,288 $ 15,131 3/31/2005 $ 13,771 $ 14,563 4/30/2005 $ 12,926 $ 13,637 5/31/2005 $ 13,826 $ 14,598 6/30/2005 $ 14,343 $ 15,070 7/31/2005 $ 15,255 $ 16,121
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from May 5, 2003. 31 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,083.11 1,020.83 4.13 4.01 0.80
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 365. 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. 32 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 33 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG SMALL CAP VALUE FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small Cap Value Fund returned 23.57% for the 12-month period ended July 31, 2005. The fund generated strong performance as small-cap value stocks continued to lead the markets. The Russell 2000 Value Index(1) returned 26.72% and the average return of the Lipper Small Cap Value Funds Category was 24.19% over the same period.(2) We continued to focus on companies with strong competitive and financial positions, good earnings growth prospects and reasonable valuations. The fund lost some ground relative to the Russell index because it did not own companies with high levels of debt on their balance sheets. These lower quality companies rallied sharply across most sectors. However, we believe that the fund's focus on higher quality companies is prudent for the longer term. In addition, for much of the period, the fund owned more stocks than the index at the smaller end of the small-cap range. The smallest small-cap stocks trailed larger small-cap stocks in the index during the first half of 2005. The fund's biggest gains came from strong stock selection in the financials and technology sectors. Financials stocks rose sharply during the year, buoyed by historically low interest rates and a rising stock market. The fund's financial stocks did even better than the average gain posted by financials in the Russell index. Winners included banks, specialty finance companies, insurers and real estate investment trusts (REITs). The fund had a more modest stake in financials than the index because it did not have as much of an emphasis on interest-rate sensitive REITs and thrifts. Overall, technology stocks posted solid gains, and our decision to focus on higher quality stocks produced returns that were well ahead of the sector's return in the index. The fund benefited both from avoiding major disappointments and from owning a broad array of standouts that included a tech distribution company, software firms, semiconductor and semiconductor equipment companies and an IT service and staffing enterprise. As strong global demand and improved pricing fueled a strong rally in materials stocks, the fund did well by investing in coal, titanium, steel and building materials companies. We cut back on steel stocks in early 2005, which helped performance as steel prices softened. Investments in the industrials and health care sectors were the main deterrents to relative performance. The higher quality stocks the fund owned did not perform as well as highly leveraged, lower quality companies during this period. In industrials, the fund also held a few smaller industrial stocks that lost ground when the companies reported moderately disappointing earnings. In health care, we avoided more speculative biotechnology and pharmaceutical companies, many of which rebounded from earlier lows. A few of the fund's health care investments also faltered for company-specific reasons. They included a funeral home, a contract service company and a specialty pharmaceutical firm. The fund also lost ground relative to the index from investments in higher quality consumer staples, utilities and energy stocks. Returns from the fund's utilities and energy stocks were quite strong, but trailed each sector's return in the index. The fund did not own highly leveraged refiners and more expensive exploration and production stocks, which were the sector leaders. But those missed opportunities were, in part, offset by having a larger stake in energy stocks than the index. 34 Late in the period, we trimmed economically-sensitive industrials and materials stocks and shifted toward health care and consumer staples names, which we believe had potential for more predictable earnings growth. Going forward, we expect to see less of a discrepancy between large-cap and small-cap stock performance. With that expectation in mind, we raised the fund's median market cap to bring it more in line with the index. We plan to maintain the fund's focus on companies with stronger balance sheets, which we believe have the potential to be long-term winners. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Lufkin Industries 1.3 Watsco 1.0 American Greetings 1.0 Precision Castparts 0.9 Eagle Materials 0.9 Kindred Healthcare 0.9 Corus Bankshares 0.9 Pediatrix Medical Group 0.9 GameStop 0.9 Building Material Holdings 0.9
Thank you for investing in CMG Small Cap Value Fund. Stephen Barbaro has managed the CMG Small Cap Value Fund since the fund's inception and has been with the advisor or its predecessors or affiliate organizations since 1997. /s/ Stephen Barbaro Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Investments in small-cap stocks may be subject to greater volatility and price fluctuations because they may be thinly traded and less liquid than investments in larger companies. Value stocks are stocks 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 and, in the advisor's opinion, undervalued. If the advisor's assessment of a company's prospects is wrong, the price of the company's stock may not approach the value the advisor has placed on it. ---------- (1) 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 U.S. companies based on market capitalization. Unlike the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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. 35 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Value Fund 05/05/03 23.57 28.57 Russell 2000 Value Index 26.72 29.68 Russell 2000 Index 24.78 26.82
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Small Cap Value Fund 05/05/03 11.44 26.49 Russell 2000 Value Index 14.39 27.69 Russell 2000 Index 9.45 24.41
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2005
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 9/30/2004 $ 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 $ 14,200 $ 14,119 $ 13,639 8/31/2004 $ 14,139 $ 14,257 $ 13,570 9/30/2004 $ 14,722 $ 14,822 $ 14,206 10/31/2004 $ 14,926 $ 15,051 $ 14,486 11/30/2004 $ 16,285 $ 16,386 $ 15,742 12/31/2004 $ 16,741 $ 16,778 $ 16,208 1/31/2005 $ 16,151 $ 16,129 $ 15,532 2/28/2005 $ 16,523 $ 16,450 $ 15,795 3/31/2005 $ 16,250 $ 16,111 $ 15,343 4/30/2005 $ 15,288 $ 15,280 $ 14,464 5/31/2005 $ 15,923 $ 16,212 $ 15,411 6/30/2005 $ 16,590 $ 16,928 $ 16,006 7/31/2005 $ 17,549 $ 17,892 $ 17,021
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from May 5, 2003. 36 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,086.58 1,020.83 4.14 4.01 0.80
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 365. 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. 37 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 38 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG SMALL/MID CAP FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small/Mid Cap Fund returned 31.01% for the 12-month period ended July 31, 2005. The fund outpaced the Russell 2500 Growth Index(1), which returned 24.16% for the same period. The fund also outperformed its peer group. The average return for the Lipper Mid Cap Growth Funds Category was 22.58%.(2) The fund outperformed due to strong stock selection across a number of sectors. Last summer, we restructured the information technology sector to eliminate commodity-type businesses in favor of those with greater intellectual property content, as reflected in companies with higher gross margins. This led to strong performance through out the reporting period such that information technology made the greatest contribution to the fund's total return. Communications-related stocks led performance: F5 Networks rose 61% on the back of a new product cycle, and SiRF Technology Holdings, which makes chipsets for global positioning systems for consumer and business applications, performed strongly (1.0% and 1.8% of net assets, respectively). CACI International advanced on steady demand for systems integration services geared to the government marketplace (0.6% of net assets). Although the fund was underweight in health care, stocks selected for the portfolio outperformed their benchmark counterparts. Investors viewed DaVita's purchase of Gambro Healthcare's US dialysis service business favorably, Kinetic Concepts advanced with increased market penetration of its wound care product, and we took gains in IVAX when it was acquired (1.1% and 0.6% of net assets). Although Salix Pharmaceuticals experienced a slow start for new drug Xiphaxan, our patience was rewarded as the stock rebounded later in the period (1.4% of net assets). The fund's holdings in the materials sector outperformed considerably, helped by a favorable market for commodities. Potash Corp. of Saskatchewan benefited from continued strong pricing in the fertilizer market and was the leading contributor to performance (1.7% of net assets). We were disappointed by Lyondell Chemical, however, which was purchased too late in the cycle and was eventually sold. The consumer discretionary sector also made significant contributions to the fund's return. Urban Outfitters was a solid stock and one that we believe has good long-term growth prospects (2.0% of net assets). XM Satellite Radio Holdings performed well as it introduced new form factors for its radio satellite offering and as service subscribers increased (1.4% of net assets). The industrial sector also contributed to returns. United Defense Industries' stock price rose on news of its acquisition by BAE Systems, and the stock was sold from the portfolio. Joy Global reported significantly higher than expected earnings driven by demand for its mining equipment (1.2% of net assets). Dycom Industries was sold during the period, as delays in anticipated customer spending caused the stock to falter for several quarters. No sectors posted a loss in the reporting period, but the fund experienced some relative weakness in the energy and utilities sectors. The advantage of an overweight position in the energy sector was partially offset by lack of exposure to some of the best performing names. The fund was also slightly hurt by a lack of exposure to the utilities sector, as this sector typically is not a high growth area. 39 In general, we believe that the economy has the potential to continue growing at a healthy rate and the portfolio is positioned accordingly. We remain bullish longer term on energy. Earnings are currently very strong in the materials and industrials sectors, but we are watchful for signs of decelerating growth. At the margin, we took profits from the most cyclical parts of the portfolio and redeployed these into traditional growth segments, such as health care and technology. We believe the Federal Reserve Board is reaching the later innings of increasing the fed funds rate, traditional growth stocks should do well, and many of these are typically found in the health care, technology and consumer discretionary sectors. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Urban Outfitters 2.0 SiRF Technology Holdings 1.8 Affiliated Managers Group 1.7 Tempur-Pedic International 1.7 Potash Corp. of Saskatchewan 1.7 HealthExtras 1.6 XM Satellite Radio Holdings 1.4 Salix Pharmaceuticals 1.4 Terex 1.4 Huron Consulting Group 1.2
We appreciate your continued confidence in the CMG Small/Mid Cap Fund. Kenneth A. Korngiebel has managed the CMG Small/Mid Cap Fund since June 2004 and has been with the advisor or its predecessors or affiliate organizations since 1996. /s/ Kenneth A. Korngiebel Investing in growth stocks incurs the possibility of losses because their prices are sensitive to changes in current or expected earnings. Investments in small- and mid-cap stocks may present special risks. They tend to be more volatile and may be less liquid than the stocks of larger companies. Small-cap stocks often have narrower markets, limited financial resources and tend to be more thinly traded than stocks of larger companies. ---------- (1) 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 the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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. 40 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Small/Mid Cap Fund 12/01/00 31.01 3.02 Russell 2500 Growth Index 24.16 3.76 Russell 2500 Index 26.77 11.59
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Small/Mid Cap Fund 12/01/00 12.98 1.67 Russell 2500 Growth Index 7.46 2.41 Russell 2500 Index 12.73 10.42
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, DECEMBER 1, 2000 TO JULY 31, 2005
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 $ 8,771 $ 9,568 $ 13,158 8/31/2004 $ 8,491 $ 9,375 $ 13,124 9/30/2004 $ 8,951 $ 9,798 $ 13,619 10/31/2004 $ 9,342 $ 10,076 $ 13,929 11/30/2004 $ 9,992 $ 10,744 $ 14,970 12/31/2004 $ 10,481 $ 11,259 $ 15,556 1/31/2005 $ 10,191 $ 10,862 $ 15,034 2/28/2005 $ 10,571 $ 11,078 $ 15,374 3/31/2005 $ 10,291 $ 10,772 $ 15,068 4/30/2005 $ 9,651 $ 10,190 $ 14,390 5/31/2005 $ 10,461 $ 10,869 $ 15,260 6/30/2005 $ 10,790 $ 11,156 $ 15,748 7/31/2005 $ 11,490 $ 11,878 $ 16,680
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from December 1, 2000. 41 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,127.59 1,021.08 3.96 3.76 0.75
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 365. 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. 42 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 43 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG INTERNATIONAL STOCK FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE For the 12-month period ended July 31, 2005, CMG International Stock Fund returned 16.31%. The fund took advantage of rising energy prices and benefited from an overweight in the energy sector during the period. However, a concentration in consumer staples and health care detracted from performance relative to the MSCI EAFE(1), which posted a 21.06% return during the period. The average return for the Lipper International Multi-Cap Growth Funds Category was 21.05%.(2) Investments in Japan and the United Kingdom hurt the fund's performance. Early in the period we increased the fund's exposure to consumer stocks in Japan anticipating a turn in consumer spending. Unfortunately, Japanese consumers did not increase spending as we expected and these stocks underperformed. In the United Kingdom, investments in consumer staples stocks hurt as these companies suffered from increased input costs. Oil prices rose approximately 70% during the 12-month period, and energy was the best performing sector of the portfolio. The fund's relative return was enhanced because its exposure to energy was higher than the index. Among the top energy performers were OMV AG, an Austria-based oil and gas producer that gained access to central and eastern Europe through acquisitions, and Canada's EnCana, the largest oil and gas exploration company in North America (0.5% and 0.9% of net assets, respectively). We emphasized companies that we believed were likely to raise their dividend payouts and/or benefit from capital expenditures. As a result, the fund was overweight in industrials relative to the index. Vinci SA, a French construction company, was one of the top stocks in the portfolio (1.2% of net assets). We also added ABB in Switzerland, a manufacturer of equipment used by utilities (0.4% of net assets). For several years investors avoided ABB, as the company was under the strain of asbestos litigation. At the time we purchased the stock, it was selling at a significant discount to its peers. Over the past year, ABB has benefited from strong global trends, such as the building and upgrading of utilities around the world. We also invested in Veolia Environnement, a French utility that provides water and waste management services to the United States and Europe (0.9% of net assets). The company has reaped the rewards of a significant restructuring program, which has included cost cutting and debt reduction. Because Singapore's economy appeared to be more resilient than other developed economies, we significantly boosted investment in the country. We felt that consumers were poised to boost their spending and believed that many companies had the potential to increase their earnings and dividend payouts. In addition, valuations were attractive. Companies in Singapore were some of the best performers in the portfolio. We also raised exposure to Hong Kong, an area that benefited from a stronger economy and a particularly vibrant real estate sector. We sold long-term holdings Erste Bank der Oesterreichischen Sparkassen in Austria and Alpha Bank in Greece. Both had been portfolio leaders, but they face increased competition. We became concerned that they would not be able to sustain their high level of earnings growth. We plan to continue to seek large companies that we believe have the potential to increase their dividend payouts and to maintain our emphasis on companies that we expect can benefit from capital spending. Despite forecasts for a slower economy in Europe, we believe there are opportunities in several markets. We are also fairly optimistic about Japan. Some economic data, such as rising consumer confidence and higher bank loan demand, is positive for Japan. We intend to keep an index weight in the country. 44 The fund's top ten holdings and countries (as a percentage of net assets) as of July 31, 2005 were:
HOLDINGS (%) Nestle 2.3 Vodafone Group 2.2 BP 2.1 GlaxoSmithKline 2.1 Total 1.8 AstraZeneca 1.7 HSBC Holdings 1.6 Royal Bank of Scotland Group 1.4 Toyota Motor 1.4 Sanofi-Aventis 1.3 COUNTRIES (%) United Kingdom 25.8 Japan 20.9 France 8.8 Germany 6.7 Switzerland 6.6 Hong Kong 3.5 Netherlands 2.9 Singapore 2.6 Canada 2.2 Italy 2.1
We appreciate your continued confidence in the CMG International Stock Fund. Penelope L. Burgess has co-managed the CMG International Stock Fund since July 2004 and has been with the advisor or its predecessors or affiliate organizations since 1993. /s/ Penelope L. Burgess Deborah F. Snee has co-managed the fund since July 2004 and has been with the advisor or its predecessors or affiliate organizations since 1999. /s/ Deborah F. Snee Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency fluctuation, risks associated with possible differences in financial standards and other monetary and political risks. A concentration of investments in a specific sector, such as the technology sector, may cause the fund to experience increased volatility. ---------- (1) The Morgan Stanley Capital International (MSCI) Europe, Australasia, 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 Morgan Stanley Capital International (MSCI) All Country (AC) 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 the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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. 45 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG International Stock Fund 02/01/94 16.31 -0.29 6.85 MSCI EAFE Index 21.06 0.92 4.91 MSCI All Country World ex US Index 24.90 2.32 5.61
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG International Stock Fund 02/01/94 8.40 -1.96 7.18 MSCI EAFE Index 13.65 -0.55 5.22 MSCI All Country World ex US Index 16.95 0.76 5.82
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1995 TO JULY 31, 2005
CMG INTERNATIONAL STOCK FUND MSCI EAFE INDEX MSCI ALL COUNTRY WORLD EX US INDEX 8/1/1995 $ 10,000 $ 10,000 $ 10,000 8/31/1995 $ 9,859 $ 9,619 $ 9,653 9/30/1995 $ 10,073 $ 9,807 $ 9,818 10/31/1995 $ 9,945 $ 9,543 $ 9,556 11/30/1995 $ 10,141 $ 9,808 $ 9,780 12/31/1995 $ 10,412 $ 10,203 $ 10,168 1/31/1996 $ 10,594 $ 10,245 $ 10,307 2/29/1996 $ 10,594 $ 10,280 $ 10,307 3/31/1996 $ 11,005 $ 10,498 $ 10,500 4/30/1996 $ 11,376 $ 10,803 $ 10,818 5/31/1996 $ 11,542 $ 10,605 $ 10,656 6/30/1996 $ 11,783 $ 10,664 $ 10,710 7/31/1996 $ 11,258 $ 10,353 $ 10,354 8/31/1996 $ 11,434 $ 10,375 $ 10,416 9/30/1996 $ 11,689 $ 10,651 $ 10,674 10/31/1996 $ 11,603 $ 10,543 $ 10,567 11/30/1996 $ 12,002 $ 10,962 $ 10,975 12/31/1996 $ 12,158 $ 10,821 $ 10,848 1/31/1997 $ 12,156 $ 10,442 $ 10,648 2/28/1997 $ 12,451 $ 10,613 $ 10,843 3/31/1997 $ 12,547 $ 10,652 $ 10,820 4/30/1997 $ 12,828 $ 10,708 $ 10,912 5/31/1997 $ 13,563 $ 11,405 $ 11,585 6/30/1997 $ 14,199 $ 12,034 $ 12,225 7/31/1997 $ 14,615 $ 12,229 $ 12,472 8/31/1997 $ 13,574 $ 11,315 $ 11,490 9/30/1997 $ 14,497 $ 11,949 $ 12,112 10/31/1997 $ 13,399 $ 11,030 $ 11,080 11/30/1997 $ 13,345 $ 10,917 $ 10,942 12/31/1997 $ 13,396 $ 11,012 $ 11,067 1/31/1998 $ 13,484 $ 11,516 $ 11,398 2/28/1998 $ 14,064 $ 12,255 $ 12,159 3/31/1998 $ 14,711 $ 12,632 $ 12,579 4/30/1998 $ 15,121 $ 12,732 $ 12,670 5/31/1998 $ 15,366 $ 12,670 $ 12,439 6/30/1998 $ 15,294 $ 12,766 $ 12,393 7/31/1998 $ 15,332 $ 12,895 $ 12,511 8/31/1998 $ 13,491 $ 11,297 $ 10,747 9/30/1998 $ 12,506 $ 10,951 $ 10,520 10/31/1998 $ 13,234 $ 12,092 $ 11,623 11/30/1998 $ 14,278 $ 12,711 $ 12,247 12/31/1998 $ 15,028 $ 13,211 $ 12,668 1/31/1999 $ 15,735 $ 13,172 $ 12,654 2/28/1999 $ 15,345 $ 12,858 $ 12,371 3/31/1999 $ 15,609 $ 13,395 $ 12,968 4/30/1999 $ 16,052 $ 13,937 $ 13,617 5/31/1999 $ 15,683 $ 13,219 $ 12,977 6/30/1999 $ 16,643 $ 13,735 $ 13,574 7/31/1999 $ 17,192 $ 14,143 $ 13,891 8/31/1999 $ 17,583 $ 14,195 $ 13,940 9/30/1999 $ 18,005 $ 14,338 $ 14,033 10/31/1999 $ 18,851 $ 14,876 $ 14,555 11/30/1999 $ 21,109 $ 15,392 $ 15,137 12/31/1999 $ 23,898 $ 16,775 $ 16,582 1/31/2000 $ 22,652 $ 15,709 $ 15,681 2/29/2000 $ 24,234 $ 16,132 $ 16,105 3/31/2000 $ 23,640 $ 16,758 $ 16,710 4/30/2000 $ 21,496 $ 15,876 $ 15,778 5/31/2000 $ 19,645 $ 15,489 $ 15,374 6/30/2000 $ 20,755 $ 16,095 $ 16,029 7/31/2000 $ 19,678 $ 15,420 $ 15,396 8/31/2000 $ 20,172 $ 15,554 $ 15,586 9/30/2000 $ 18,937 $ 14,797 $ 14,721 10/31/2000 $ 18,174 $ 14,448 $ 14,253 11/30/2000 $ 17,367 $ 13,906 $ 13,615 12/31/2000 $ 18,202 $ 14,400 $ 14,079 1/31/2001 $ 18,013 $ 14,392 $ 14,290 2/28/2001 $ 17,026 $ 13,313 $ 13,158 3/31/2001 $ 15,890 $ 12,425 $ 12,228 4/30/2001 $ 16,864 $ 13,289 $ 13,060 5/31/2001 $ 16,527 $ 12,819 $ 12,699 6/30/2001 $ 15,945 $ 12,295 $ 12,213 7/31/2001 $ 15,445 $ 12,071 $ 11,940 8/31/2001 $ 15,161 $ 11,766 $ 11,644 9/30/2001 $ 13,726 $ 10,574 $ 10,409 10/31/2001 $ 14,091 $ 10,845 $ 10,700 11/30/2001 $ 14,389 $ 11,245 $ 11,189 12/31/2001 $ 14,731 $ 11,311 $ 11,334 1/31/2002 $ 14,135 $ 10,711 $ 10,849 2/28/2002 $ 14,229 $ 10,786 $ 10,927 3/31/2002 $ 14,921 $ 11,421 $ 11,507 4/30/2002 $ 14,988 $ 11,444 $ 11,595 5/31/2002 $ 15,165 $ 11,589 $ 11,722 6/30/2002 $ 14,798 $ 11,128 $ 11,215 7/31/2002 $ 13,590 $ 10,029 $ 10,122 8/31/2002 $ 13,522 $ 10,006 $ 10,123 9/30/2002 $ 12,166 $ 8,932 $ 9,050 10/31/2002 $ 12,641 $ 9,411 $ 9,535 11/30/2002 $ 13,129 $ 9,839 $ 9,994 12/31/2002 $ 12,622 $ 9,508 $ 9,672 1/31/2003 $ 12,090 $ 9,112 $ 9,332 2/28/2003 $ 11,940 $ 8,903 $ 9,143 3/31/2003 $ 11,859 $ 8,728 $ 8,966 4/30/2003 $ 12,745 $ 9,584 $ 9,830 5/31/2003 $ 13,440 $ 10,165 $ 10,456 6/30/2003 $ 13,699 $ 10,411 $ 10,746 7/31/2003 $ 14,081 $ 10,663 $ 11,031 8/31/2003 $ 14,422 $ 10,919 $ 11,360 9/30/2003 $ 14,817 $ 11,256 $ 11,678 10/31/2003 $ 15,717 $ 11,957 $ 12,435 11/30/2003 $ 15,839 $ 12,222 $ 12,706 12/31/2003 $ 16,891 $ 13,177 $ 13,676 1/31/2004 $ 17,261 $ 13,363 $ 13,896 2/29/2004 $ 17,494 $ 13,672 $ 14,249 3/31/2004 $ 17,644 $ 13,748 $ 14,337 4/30/2004 $ 17,164 $ 13,437 $ 13,891 5/31/2004 $ 17,013 $ 13,483 $ 13,936 6/30/2004 $ 17,342 $ 13,778 $ 14,238 7/31/2004 $ 16,671 $ 13,331 $ 13,824 8/31/2004 $ 16,671 $ 13,389 $ 13,934 9/30/2004 $ 16,959 $ 13,739 $ 14,383 10/31/2004 $ 17,507 $ 14,207 $ 14,884 11/30/2004 $ 18,603 $ 15,178 $ 15,916 12/31/2004 $ 19,263 $ 15,844 $ 16,599 1/31/2005 $ 18,784 $ 15,554 $ 16,314 2/28/2005 $ 19,531 $ 16,226 $ 17,118 3/31/2005 $ 19,053 $ 15,819 $ 16,654 4/30/2005 $ 18,729 $ 15,447 $ 16,243 5/31/2005 $ 18,644 $ 15,455 $ 16,345 6/30/2005 $ 18,799 $ 15,660 $ 16,652 7/31/2005 $ 19,391 $ 16,142 $ 17,268
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 46 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,032.28 1,021.08 3.78 3.76 0.75
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 365. 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. 47 COMPARE WITH OTHER FUNDS Since all mutual funds 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. 48 CMG ENHANCED S&P 500(R) INDEX FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR ENDED JULY 31, ENDED ---------------------------------- JULY 31, 2005 2004 2003 (a) -------------- -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.97 $ 10.73 $ 10.00 -------------- -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.24(c) 0.17 0.04 Net realized and unrealized gain on investments 1.58 1.13 0.69 -------------- -------------- -------------- Total from investment operations 1.82 1.30 0.73 -------------- -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.20) (0.05) - From net realized gains (0.10) (0.01) - -------------- -------------- -------------- Total distributions declared to shareholders (0.30) (0.06) - -------------- -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 13.49 $ 11.97 $ 10.73 ============== ============== ============== Total return (d)(e) 15.32% 12.08% 7.30%(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 91,633 $ 98,247 $ 9,134 Ratio of net expenses to average net assets 0.25% 0.25% 0.25%(g) Ratio of net investment income to average net assets 1.91% 1.43% 1.50%(g) Reimbursement 0.04% 0.05% 1.37%(g) Portfolio turnover rate 49% 60% 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) Net investment income per share reflects a special dividend. The effect of this dividend amounted to $0.04 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. 49 CMG LARGE 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, 2005 2004 (a) -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 10.00 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.12(c) 0.03 Net realized and unrealized gain on investments 1.37 0.23 -------------- -------------- Total from investment operations 1.49 0.26 -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.09) (0.01) -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 11.65 $ 10.25 ============== ============== Total return (d)(e) 14.55% 2.57%(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 40,312 $ 40,684 Ratio of net expenses to average net assets 0.50% 0.50%(g) Ratio of net investment income to average net assets 1.07% 0.31%(g) Reimbursement 0.07% 0.14%(g) Portfolio turnover rate 120% 114%(f)
(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) Net investment income per share reflects a special dividend. The effect of this dividend amounted to $0.05 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 LARGE 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, 2005 2004 (a) -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.09 $ 10.00 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.24 0.18 Net realized and unrealized gain on investments 1.46 0.93 -------------- -------------- Total from investment operations 1.70 1.11 -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.22) (0.02) From net realized gains (0.03) - -------------- -------------- Total distributions declared to shareholders (0.25) (0.02) -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 12.54 $ 11.09 ============== ============== Total return (c)(d) 15.41%(e) 11.15%(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 38,731 $ 47,855 Ratio of net expenses to average net assets 0.50% 0.50%(g) Ratio of net investment income to average net assets 1.99% 1.86%(g) Reimbursement 0.07% 0.14%(g) Portfolio turnover rate 45% 46%(f)
(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) Total return includes a reimbursement of loss experienced by the Fund due to compliance violation. The reimbursement had an impact of less than 0.01% on the total return. (f) Not annualized. (g) Annualized. See Accompanying Notes to Financial Statements. 51 CMG MID CAP GROWTH FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR ENDED JULY 31, ENDED ---------------------------------- JULY 31, 2005 2004 2003 (a) -------------- -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.04 $ 10.93 $ 10.00 -------------- -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (b) (0.03) (0.05) (0.01) Net realized and unrealized gain on investments 3.14 0.17 0.94 -------------- -------------- -------------- Total from investment operations 3.11 0.12 0.93 -------------- -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains - (0.01) - -------------- -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 14.15 $ 11.04 $ 10.93 ============== ============== ============== Total return (c)(d) 28.17% 1.06% 9.30%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 24,881 $ 19,284 $ 2,161 Ratio of net expenses to average net assets 0.70% 0.70% 0.70%(f) Ratio of net investment loss to average net assets (0.21)% (0.38)% (0.44)%(f) Reimbursement 0.21% 0.22% 3.85%(f) Portfolio turnover rate 141% 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. 52 CMG MID CAP VALUE FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR ENDED JULY 31, ENDED ---------------------------------- JULY 31, 2005 2004 2003 (a) -------------- -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 12.58 $ 10.69 $ 10.00 -------------- -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.11 0.07 0.01 Net realized and unrealized gain on investments and foreign currency 2.66 1.84 0.68 -------------- -------------- -------------- Total from investment operations 2.77 1.91 0.69 -------------- -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.09) (0.02) - From net realized gains (0.09) -(c) - -------------- -------------- -------------- Total distributions declared to shareholders (0.18) (0.02) - -------------- -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 15.17 $ 12.58 $ 10.69 ============== ============== ============== Total return (d)(e) 22.14% 17.91% 6.90%(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 21,277 $ 21,994 $ 2,651 Ratio of net expenses to average net assets 0.70% 0.70% 0.70%(g) Ratio of net investment income to average net assets 0.78% 0.54% 0.49%(g) Reimbursement 0.19% 0.20% 3.61%(g) Portfolio turnover rate 59% 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. 53 CMG SMALL CAP GROWTH FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR ENDED JULY 31, ENDED ---------------------------------- JULY 31, 2005 2004 2003 (a) -------------- -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.99 $ 11.53 $ 10.00 -------------- -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (b) (0.07) (0.08) (0.02) Net realized and unrealized gain on investments 2.38 1.35 1.55 -------------- -------------- -------------- Total from investment operations 2.31 1.27 1.53 -------------- -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains (0.74) (0.81) - -------------- -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 13.56 $ 11.99 $ 11.53 ============== ============== ============== Total return (c)(d) 19.47% 10.74% 15.30%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 38,645 $ 35,727 $ 21,006 Ratio of net expenses to average net assets 0.80% 0.80% 0.80%(f) Ratio of net investment loss to average net assets (0.56)% (0.60)% (0.62)%(f) Reimbursement 0.12% 0.10% 0.35%(f) Portfolio turnover rate 48% 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. 54 CMG SMALL CAP VALUE FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR ENDED JULY 31, ENDED ---------------------------------- JULY 31, 2005 2004 2003 (a) -------------- -------------- -------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 13.91 $ 11.29 $ 10.00 -------------- -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.11 0.11 0.02 Net realized and unrealized gain on investments 3.11 2.79 1.27 -------------- -------------- -------------- Total from investment operations 3.22 2.90 1.29 -------------- -------------- -------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.10) (0.06) - From net realized gains (0.97) (0.22) - -------------- -------------- -------------- Total distributions declared to shareholders (1.07) (0.28) - -------------- -------------- -------------- NET ASSET VALUE, END OF PERIOD $ 16.06 $ 13.91 $ 11.29 ============== ============== ============== Total return (c)(d) 23.57% 25.79% 12.90%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 36,989 $ 40,356 $ 21,356 Ratio of net expenses to average net assets 0.80% 0.80% 0.80%(f) Ratio of net investment income to average net assets 0.77% 0.82% 0.66%(f) Reimbursement 0.12% 0.09% 0.36%(f) Portfolio turnover rate 41% 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. 55 CMG SMALL/MID CAP FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR PERIOD YEAR ENDED JULY 31, ENDED ENDED ENDED --------------------- JULY 31, OCTOBER 31, OCTOBER 31, 2005 2004 2003 (a) 2002 2001 (b) -------- -------- --------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 8.77 $ 8.30 $ 6.96 $ 8.00 $ 10.00 -------- -------- --------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.04)(c) (0.05)(c) (0.03)(c) (0.04)(c) (0.02) Net realized and unrealized gain (loss) on investments 2.76 0.52 1.37 (1.00) (1.98) -------- -------- --------- ----------- ----------- Total from investment operations 2.72 0.47 1.34 (1.04) (2.00) -------- -------- --------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 11.49 $ 8.77 $ 8.30 $ 6.96 $ 8.00 ======== ======== ========= =========== =========== Total return (d)(e) 31.01% 5.66% 19.25%(f) (13.00)% (20.00)%(f) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 38,755 $ 50,662 $ 73,926 $ 54,769 $ 49,391 Ratio of net expenses to average net assets 0.75% 0.75% 0.78%(g)(h) 0.80%(g) 0.80%(g)(h) Ratio of net investment loss to average net assets (0.37)% (0.49)% (0.50)%(g)(h) (0.45)%(g) (0.23)%(g)(h) Reimbursement 0.09% 0.06% 0.06%(h) 0.06% 0.17%(h) Portfolio turnover rate 170% 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. 56 CMG INTERNATIONAL STOCK FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR ENDED JULY 31, ENDED YEAR ENDED OCTOBER 31, ------------------------ JULY 31, ------------------------------------ 2005 2004 2003 (a) 2002 2001 2000 --------- --------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 12.17 $ 10.33 $ 9.32 $ 10.42 $ 16.20 $ 17.86 --------- --------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.19(b) 0.14(b) 0.11(b) 0.02(b) 0.03 0.04 Net realized and unrealized gain (loss) on investments, foreign currency and foreign capital gains tax 1.79 1.76 0.95 (1.09) (3.09) (0.36) --------- --------- -------- -------- -------- -------- Total from investment operations 1.98 1.90 1.06 (1.07) (3.06) (0.32) --------- --------- -------- -------- -------- -------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.10) (0.06) (0.05) (0.03) - - From net realized gains (0.29) - - - (2.72) (1.34) --------- --------- -------- -------- -------- -------- Total distributions declared to shareholders (0.39) (0.06) (0.05) (0.03) (2.72) (1.34) --------- --------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 13.76 $ 12.17 $ 10.33 $ 9.32 $ 10.42 $ 16.20 ========= ========= ======== ======== ======== ======== Total return (c) 16.31%(d) 18.40%(d) 11.39%(d)(e) (10.28)% (22.46)% (3.58)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 136,144 $ 152,251 $ 58,488 $ 20,616 $ 20,553 $ 22,975 Ratio of net expenses to average net assets 0.75% 0.75% 0.93%(f)(g) 1.31%(f) 1.26%(f) 1.11%(f) Ratio of net investment income to average net assets 1.47% 1.16% 1.50%(f)(g) 0.21%(f) 0.29%(f) 0.12%(f) Reimbursement 0.03% 0.05% 0.06%(g) - - - Portfolio turnover rate 68% 91% 59%(e) 111% 117% 140%
(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) 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) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g) Annualized. See Accompanying Notes to Financial Statements. 57 CMG ENHANCED S&P 500(R) INDEX FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (99.4%) Consumer Discretionary (11.5%) Automobiles (0.4%) Ford Motor Co. 33,100 $ 355,494 ------------- Distributors (0.1%) Genuine Parts Co. 2,300 105,317 ------------- Hotels, Restaurants & Leisure (2.2%) Carnival Corp. 12,700 665,480 Darden Restaurants, Inc. 3,600 124,920 Hilton Hotels Corp. 3,800 94,050 International Game Technology 3,600 98,496 McDonald's Corp. 29,600 922,632 Starwood Hotels & Resorts Worldwide, Inc. 1,800 113,976 ------------- 2,019,554 ------------- Household Durables (0.7%) Black & Decker Corp. 1,300 117,403 Stanley Works 10,300 503,979 ------------- 621,382 ------------- Internet & Catalog Retail (0.2%) Amazon.com, Inc. (a) 500 22,585 eBay, Inc. (a) 4,300 179,654 ------------- 202,239 ------------- Leisure Equipment & Products (0.2%) Hasbro, Inc. 5,900 129,446 Mattel, Inc. 5,200 96,980 ------------- 226,426 ------------- Media (3.1%) Comcast Corp., Class A (a) 29,100 894,243 Discovery Holding Co., Class A (a) 1,100 15,697 Liberty Media Corp., Class A (a) 10,600 93,174 McGraw-Hill Companies, Inc. 12,800 588,928 Time Warner, Inc. 62,200 1,058,644 Viacom, Inc., Class B 2,600 87,074 Walt Disney Co. 4,300 110,252 ------------- 2,848,012 ------------- Multiline Retail (1.0%) Dillard's, Inc., Class A 7,300 166,878 Federated Department Stores, Inc. 3,700 280,719 Target Corp. 8,100 475,875 ------------- 923,472 ------------- Specialty Retail (2.7%) Barnes & Noble, Inc. (a) 7,300 299,446 Best Buy Co., Inc. 5,500 421,300 Gap, Inc. 5,000 105,550 Home Depot, Inc. 28,800 1,253,088
See Accompanying Notes to Financial Statements. 58
SHARES VALUE ------------- ------------- Common Stocks (continued) Specialty Retail (continued) Limited Brands, Inc. 8,200 $ 199,916 Lowe's Companies, Inc. 2,300 152,306 ------------- 2,431,606 ------------- Textiles, Apparel & Luxury Goods (0.9%) NIKE, Inc., Class B 8,500 712,300 V.F. Corp. 1,800 106,272 ------------- 818,572 ------------- Consumer Staples (9.9%) Beverages (2.0%) Anheuser-Busch Companies, Inc. 2,000 88,700 Coca-Cola Co. 27,800 1,216,528 Molson Coors Brewing Co., Class B 2,500 156,750 PepsiCo, Inc. 6,900 376,257 ------------- 1,838,235 ------------- Food & Staples Retailing (2.6%) Albertson's, Inc. 5,000 106,550 Costco Wholesale Corp. 13,500 620,595 Safeway, Inc. 8,500 206,550 SUPERVALU, Inc. 3,600 127,440 Wal-Mart Stores, Inc. 26,400 1,302,840 ------------- 2,363,975 ------------- Food Products (1.8%) Archer-Daniels-Midland Co. 17,200 394,568 ConAgra Foods, Inc. 3,700 84,027 H.J. Heinz Co. 14,500 533,310 Hershey Co. 2,000 127,740 Kellogg Co. 2,300 104,213 Tyson Foods, Inc., Class A 22,800 424,992 ------------- 1,668,850 ------------- Household Products (1.7%) Clorox Co. 3,700 206,645 Colgate-Palmolive Co. 2,200 116,468 Kimberly-Clark Corp. 1,500 95,640 Procter & Gamble Co. 21,300 1,184,919 ------------- 1,603,672 ------------- Personal Products (0.5%) Avon Products, Inc. 300 9,813 Gillette Co. 7,900 423,993 ------------- 433,806 ------------- Tobacco (1.3%) Altria Group, Inc. 10,100 676,296 UST, Inc. 11,100 510,822 ------------- 1,187,118 -------------
See Accompanying Notes to Financial Statements. 59
SHARES VALUE ------------- ------------- Common Stocks (continued) Energy (8.9%) Energy Equipment & Services (1.1%) Baker Hughes, Inc. 2,000 $ 113,080 Schlumberger Ltd. 9,400 787,156 Transocean, Inc. (a) 1,900 107,217 ------------- 1,007,453 ------------- Oil, Gas & Consumable Fuels (7.8%) Amerada Hess Corp. 3,600 424,296 Apache Corp. 2,300 157,320 Burlington Resources, Inc. 5,200 333,372 ChevronTexaco Corp. 24,600 1,427,046 ConocoPhillips 3,600 225,324 El Paso Corp. 5,200 62,400 Exxon Mobil Corp. 58,800 3,454,500 Kerr-McGee Corp. 1,400 112,294 Marathon Oil Corp. 4,200 245,112 Sunoco, Inc. 1,600 201,168 Valero Energy Corp. 3,900 322,842 Williams Companies, Inc. 6,700 142,308 ------------- 7,107,982 ------------- Financials (19.8%) Capital Markets (3.4%) Bank of New York Co., Inc. 12,400 381,672 Federated Investors, Inc., Class B 13,900 443,966 Franklin Resources, Inc. 7,700 622,314 Mellon Financial Corp. 4,900 149,254 Merrill Lynch & Co., Inc. 1,700 99,926 Morgan Stanley 4,800 254,640 Northern Trust Corp. 11,000 558,800 State Street Corp. 11,700 581,958 ------------- 3,092,530 ------------- Commercial Banks (4.3%) BB&T Corp. 2,400 100,368 Commerce Bancorp, Inc. 15,100 512,343 KeyCorp 2,900 99,296 M&T Bank Corp. 1,000 108,510 National City Corp. 4,400 162,404 North Fork Bancorporation, Inc. 3,600 98,604 SunTrust Banks, Inc. 5,900 429,048 U.S. Bancorp 22,400 673,344 UnionBanCal Corp. 3,400 242,556 Wachovia Corp. 21,100 1,063,018 Wells Fargo & Co. 7,000 429,380 ------------- 3,918,871 -------------
See Accompanying Notes to Financial Statements. 60
SHARES VALUE ------------- ------------- Common Stocks (continued) Consumer Finance (1.3%) American Express Co. 5,200 $ 286,000 Capital One Financial Corp. 7,900 651,750 MBNA Corp. 8,900 223,924 ------------- 1,161,674 ------------- Diversified Financial Services (3.8%) Citigroup, Inc. 32,900 1,431,150 JPMorgan Chase & Co. 40,800 1,433,712 Principal Financial Group, Inc. 13,400 588,930 ------------- 3,453,792 ------------- Insurance (5.9%) AFLAC, Inc. 5,500 248,050 American International Group, Inc. 21,000 1,264,200 Aon Corp. 4,900 124,656 Chubb Corp. 6,700 595,094 First American Corp. 10,800 474,660 Hartford Financial Services Group, Inc. 8,300 668,731 Lincoln National Corp. 4,200 202,860 MBIA, Inc. 3,600 218,664 MetLife, Inc. 6,700 329,238 Prudential Financial, Inc. 11,100 742,590 SAFECO Corp. 9,100 499,954 XL Capital Ltd., Class A 1,300 93,366 ------------- 5,462,063 ------------- Thrifts & Mortgage Finance (1.1%) Countrywide Financial Corp. 16,100 579,600 Fannie Mae 3,900 217,854 Freddie Mac 2,100 132,888 Washington Mutual, Inc. 2,300 97,704 ------------- 1,028,046 ------------- Health Care (13.2%) Biotechnology (1.0%) Amgen, Inc. (a) 11,500 917,125 ------------- Health Care Equipment & Supplies (1.3%) Becton, Dickinson & Co. 1,700 94,129 Hospira, Inc. (a) 2,400 91,800 Medtronic, Inc. 17,900 965,526 Millipore Corp. (a) 500 30,635 ------------- 1,182,090 ------------- Health Care Providers & Services (3.9%) AmerisourceBergen Corp. 3,200 229,728 Cardinal Health, Inc. 10,800 643,464 Caremark Rx, Inc. (a) 8,500 378,930 CIGNA Corp. 1,200 128,100 Express Scripts, Inc. (a) 1,800 94,140
See Accompanying Notes to Financial Statements. 61
SHARES VALUE ------------- ------------- Common Stocks (continued) Health Care Providers & Services (continued) HCA, Inc. 3,400 $ 167,450 Humana, Inc. (a) 2,600 103,610 Medco Health Solutions, Inc. (a) 10,600 513,464 UnitedHealth Group, Inc. 23,900 1,249,970 WellPoint, Inc. (a) 1,100 77,814 ------------- 3,586,670 ------------- Pharmaceuticals (7.0%) Abbott Laboratories 20,300 946,589 Allergan, Inc. 1,200 107,244 Bristol-Myers Squibb Co. 3,500 87,430 Eli Lilly & Co. 1,900 107,008 Johnson & Johnson 30,200 1,931,592 Merck & Co., Inc. 24,700 767,182 Pfizer, Inc. 75,100 1,990,150 Wyeth 10,200 466,650 ------------- 6,403,845 ------------- Industrials (11.1%) Aerospace & Defense (3.0%) Boeing Co. 13,700 904,337 General Dynamics Corp. 3,500 403,165 Lockheed Martin Corp. 6,400 399,360 Raytheon Co. 7,200 283,176 United Technologies Corp. 15,800 801,060 ------------- 2,791,098 ------------- Air Freight & Logistics (1.0%) FedEx Corp. 1,200 100,908 United Parcel Service, Inc., Class B 11,800 861,046 ------------- 961,954 ------------- Building Products (0.1%) Masco Corp. 3,300 111,903 ------------- Commercial Services & Supplies (1.2%) Cendant Corp. 35,600 760,416 Equifax, Inc. 3,600 131,040 R.R. Donnelley & Sons Co. 2,700 97,335 Waste Management, Inc. 3,400 95,608 ------------- 1,084,399 ------------- Industrial Conglomerates (4.2%) 3M Co. 11,800 885,000 General Electric Co. 79,700 2,749,650 Textron, Inc. 1,200 89,004 Tyco International Ltd. 2,900 88,363 ------------- 3,812,017 -------------
See Accompanying Notes to Financial Statements. 62
SHARES VALUE ------------- ------------- Common Stocks (continued) Machinery (0.8%) Cummins, Inc. 500 $ 42,720 Deere & Co. 1,500 110,295 Eaton Corp. 5,200 339,768 Ingersoll-Rand Co., Ltd., Class A 1,200 93,804 Parker Hannifin Corp. 1,600 105,152 ------------- 691,739 ------------- Road & Rail (0.7%) Norfolk Southern Corp. 2,800 104,188 Union Pacific Corp. 7,800 548,418 ------------- 652,606 ------------- Trading Companies & Distributors (0.1%) W.W. Grainger, Inc. 1,600 99,712 ------------- Information Technology (15.4%) Communications Equipment (2.5%) Avaya, Inc. (a) 17,800 183,874 Cisco Systems, Inc. (a) 54,200 1,037,930 Motorola, Inc. 8,600 182,148 QUALCOMM, Inc. 22,800 900,372 ------------- 2,304,324 ------------- Computers & Peripherals (4.1%) Apple Computer, Inc. (a) 14,000 597,100 Dell, Inc. (a) 15,700 635,379 EMC Corp. (a) 13,300 182,077 Hewlett-Packard Co. 33,000 812,460 International Business Machines Corp. 18,800 1,569,048 Storage Technology Corp. (a) 300 11,019 ------------- 3,807,083 ------------- Electronic Equipment & Instruments (0.3%) Agilent Technologies, Inc. (a) 4,400 115,456 Jabil Circuit, Inc. (a) 4,400 137,236 ------------- 252,692 ------------- Internet Software & Services (0.3%) Yahoo!, Inc. (a) 7,800 260,052 ------------- IT Services (0.7%) Affiliated Computer Services, Inc., Class A (a) 1,800 89,946 Computer Sciences Corp. (a) 10,700 489,846 Fiserv, Inc. (a) 2,100 93,177 ------------- 672,969 ------------- Office Electronics (0.1%) Xerox Corp. (a) 7,100 93,791 -------------
See Accompanying Notes to Financial Statements. 63
SHARES VALUE ------------- ------------- Common Stocks (continued) Semiconductors & Semiconductor Equipment (3.7%) Broadcom Corp., Class A (a) 2,500 $ 106,925 Freescale Semiconductor, Inc., Class B (a) 6,100 157,075 Intel Corp. 66,500 1,804,810 Linear Technology Corp. 14,100 547,926 Texas Instruments, Inc. 24,500 778,120 ------------- 3,394,856 ------------- Software (3.7%) Adobe Systems, Inc. 16,000 474,240 Autodesk, Inc. 3,700 126,503 Citrix Systems, Inc. (a) 4,700 112,001 Computer Associates International, Inc. 4,700 129,015 Microsoft Corp. 76,500 1,959,165 Oracle Corp. (a) 34,000 461,720 Symantec Corp. (a) 4,800 105,456 ------------- 3,368,100 ------------- Materials (3.1%) Chemicals (1.1%) Dow Chemical Co. 2,100 100,695 E.I. du Pont de Nemours & Co. 2,200 93,896 Eastman Chemical Co. 2,400 132,936 Monsanto Co. 8,900 599,593 PPG Industries, Inc. 1,500 97,545 ------------- 1,024,665 ------------- Metals & Mining (1.3%) Freeport-McMoRan Copper & Gold, Inc., Class B 13,200 531,696 Phelps Dodge Corp. 5,400 574,830 United States Steel Corp. 1,500 63,975 ------------- 1,170,501 ------------- Paper & Forest Products (0.7%) Georgia-Pacific Corp. 15,000 512,250 Weyerhaeuser Co. 1,400 96,572 ------------- 608,822 ------------- Telecommunication Services (3.1%) Diversified Telecommunication Services (2.8%) ALLTEL Corp. 2,300 152,950 AT&T Corp. 6,400 126,720 BellSouth Corp. 31,100 858,360 SBC Communications, Inc. 26,500 647,925 Sprint Corp. 4,600 123,740 Verizon Communications, Inc. 18,600 636,678 ------------- 2,546,373 ------------- Wireless Telecommunication Services (0.3%) Nextel Communications, Inc., Class A (a) 8,800 306,240 -------------
See Accompanying Notes to Financial Statements. 64
SHARES VALUE ------------- ------------- Common Stocks (continued) Utilities (3.4%) Electric Utilities (0.8%) American Electric Power Co., Inc. 14,900 $ 576,630 Exelon Corp. 1,900 101,688 FirstEnergy Corp. 1,600 79,648 ------------- 757,966 ------------- Independent Power Producers & Energy Traders (1.7%) Constellation Energy Group, Inc. 8,700 523,827 Duke Energy Corp. 23,000 679,420 TXU Corp. 3,900 337,896 ------------- 1,541,143 ------------- Multi-Utilities (0.9%) Dominion Resources, Inc. 5,100 376,686 PG&E Corp. 11,400 428,982 ------------- 805,668 ------------- Total Common Stocks (Cost of $78,990,915) 91,090,544 ------------- PAR ------------- Short-Term Obligation (0.5%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Bond maturing 08/15/21, market value of $480,150 (repurchase proceeds $467,123) $ 467,000 467,000 ------------- Total Short-Term Obligation (Cost of $467,000) 467,000 ------------- Total Investments (99.9%) (Cost of $79,457,915) (b) 91,557,544 Other Assets & Liabilities, Net (0.1%) 75,523 ------------- Net Assets (100.0%) $ 91,633,067 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $80,115,208. See Accompanying Notes to Financial Statements. 65 At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ----------- Financials 19.8% Information Technology 15.4 Health Care 13.2 Consumer Discretionary 11.5 Industrials 11.1 Consumer Staples 9.9 Energy 8.9 Utilities 3.4 Telecommunication Services 3.1 Materials 3.1 Short-Term Obligation 0.5 Other Assets & Liabilities, Net 0.1 ----------- 100.0% ===========
See Accompanying Notes to Financial Statements. 66 CMG LARGE CAP GROWTH FUND A Portfolio of CMG Funds Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (95.2%) Consumer Discretionary (16.7%) Hotels, Restaurants & Leisure (3.0%) Carnival Corp. 7,350 $ 385,140 Marriott International, Inc., Class A 6,230 426,568 Starbucks Corp. (a) 3,200 168,160 Starwood Hotels & Resorts Worldwide, Inc. 3,500 221,620 ------------- 1,201,488 ------------- Internet & Catalog Retail (1.2%) eBay, Inc. (a) 11,700 488,826 ------------- Multiline Retail (1.8%) Kohl's Corp. (a) 3,600 202,860 Nordstrom, Inc. 5,560 205,776 Target Corp. 5,600 329,000 ------------- 737,636 ------------- Specialty Retail (8.3%) Bed Bath & Beyond, Inc. (a) 16,200 743,579 Best Buy Co., Inc. 3,800 291,080 Chico's FAS, Inc. (a) 4,150 166,457 Home Depot, Inc. 15,870 690,504 Lowe's Companies, Inc. 9,470 627,103 Sherwin-Williams Co. 4,200 199,962 Staples, Inc. 26,740 608,870 ------------- 3,327,555 ------------- Textiles, Apparel & Luxury Goods (2.4%) Coach, Inc. (a) 16,260 570,889 NIKE, Inc., Class B 4,670 391,346 ------------- 962,235 ------------- Consumer Staples (13.4%) Beverages (2.9%) Coca-Cola Co. 13,290 581,570 PepsiCo, Inc. 10,660 581,290 ------------- 1,162,860 ------------- Food & Staples Retailing (4.4%) CVS Corp. 19,500 605,085 Wal-Mart Stores, Inc. 17,160 846,846 Walgreen Co. 6,800 325,448 ------------- 1,777,379 ------------- Food Products (0.5%) Kellogg Co. 4,500 203,895 ------------- Household Products (2.9%) Colgate-Palmolive Co. 7,800 412,932 Procter & Gamble Co. 13,560 754,343 ------------- 1,167,275 -------------
See Accompanying Notes to Financial Statements. 67
SHARES VALUE ------------- ------------- Common Stocks (continued) Personal Products (1.7%) Gillette Co. 12,860 $ 690,196 ------------- Tobacco (1.0%) Altria Group, Inc. 5,730 383,681 ------------- Energy (1.2%) Energy Equipment & Services (1.2%) National-Oilwell Varco, Inc. (a) 6,100 319,335 Smith International, Inc. 2,470 167,812 ------------- 487,147 ------------- Financials (6.9%) Capital Markets (1.0%) Goldman Sachs Group, Inc. 1,800 193,464 Merrill Lynch & Co., Inc. 4,100 240,998 ------------- 434,462 ------------- Commercial Banks (1.7%) Wells Fargo & Co. 6,790 416,498 Zions Bancorporation 3,700 264,476 ------------- 680,974 ------------- Consumer Finance (0.4%) MBNA Corp. 6,270 157,753 ------------- Diversified Financial Services (0.9%) Citigroup, Inc. 8,390 364,965 ------------- Insurance (2.9%) American International Group, Inc. 14,280 859,656 Prudential Financial, Inc. 4,530 303,057 ------------- 1,162,713 ------------- Health Care (20.8%) Biotechnology (2.7%) Amgen, Inc. (a) 8,310 662,723 Amylin Pharmaceuticals, Inc. (a) 10,200 190,332 Protein Design Labs, Inc. (a) 9,900 225,621 ------------- 1,078,676 ------------- Health Care Equipment & Supplies (4.6%) Alcon, Inc. 1,820 208,481 Baxter International, Inc. 7,300 286,671 Medtronic, Inc. 7,500 404,550 Thermo Electron Corp. (a) 16,030 478,656 Varian Medical Systems, Inc. (a) 12,030 472,298 ------------- 1,850,656 -------------
See Accompanying Notes to Financial Statements. 68
SHARES VALUE ------------- ------------- Common Stocks (continued) Health Care Providers & Services (2.6%) Caremark Rx, Inc. (a) 8,510 $ 379,376 UnitedHealth Group, Inc. 13,000 679,900 ------------- 1,059,276 ------------- Pharmaceuticals (10.9%) Abbott Laboratories 15,940 743,282 Eli Lilly & Co. 6,800 382,976 IVAX Corp. (a) 10,090 257,093 Johnson & Johnson 25,040 1,601,558 Novartis AG, ADR 12,980 632,256 Pfizer, Inc. 7,600 201,400 Teva Pharmaceutical Industries Ltd., ADR 11,750 368,950 Wyeth 4,300 196,725 ------------- 4,384,240 ------------- Industrials (9.6%) Aerospace & Defense (1.1%) Honeywell International, Inc. 10,830 425,402 ------------- Building Products (1.0%) American Standard Companies, Inc. 9,260 410,033 ------------- Electrical Equipment (1.1%) Rockwell Automation, Inc. 8,680 447,107 ------------- Industrial Conglomerates (5.1%) 3M Co. 5,200 390,000 General Electric Co. 48,800 1,683,600 ------------- 2,073,600 ------------- Machinery (1.3%) ITT Industries, Inc. 2,770 294,728 Pentair, Inc. 5,820 233,789 ------------- 528,517 ------------- Information Technology (24.9%) Communications Equipment (2.8%) Cisco Systems, Inc. (a) 40,580 777,107 Juniper Networks, Inc. (a) 8,000 191,920 Nokia Oyj, ADR 9,130 145,624 ------------- 1,114,651 ------------- Computers & Peripherals (5.6%) Dell, Inc. (a) 20,040 811,019 EMC Corp. (a) 11,260 154,149 Hewlett-Packard Co. 16,700 411,154 International Business Machines Corp. 10,300 859,638 ------------- 2,235,960 ------------- Internet Software & Services (0.9%) Yahoo!, Inc. (a) 11,220 374,075 -------------
See Accompanying Notes to Financial Statements. 69
SHARES VALUE ------------- ------------- Common Stocks (continued) IT Services (0.3%) Cognizant Technology Solutions Corp., Class A (a) 2,560 $ 125,645 ------------- Semiconductors & Semiconductor Equipment (6.2%) Altera Corp. (a) 10,030 219,355 Fairchild Semiconductor International, Inc. (a) 10,100 170,286 Intel Corp. 29,010 787,331 MEMC Electronic Materials, Inc. (a) 12,300 208,977 Microchip Technology, Inc. 7,550 234,579 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 25,158 216,107 Texas Instruments, Inc. 20,610 654,574 ------------- 2,491,209 ------------- Software (9.1%) Autodesk, Inc. 6,320 216,081 Electronic Arts, Inc. (a) 5,200 299,520 Microsoft Corp. 71,920 1,841,871 NAVTEQ Corp. (a) 3,960 174,121 Oracle Corp. (a) 15,300 207,774 SAP AG, ADR 14,500 620,890 Symantec Corp. (a) 14,820 325,595 ------------- 3,685,852 ------------- Materials (1.7%) Chemicals (1.7%) Air Products & Chemicals, Inc. 4,900 292,824 Praxair, Inc. 8,400 414,876 ------------- 707,700 ------------- Total Common Stocks (Cost of $34,630,489) 38,383,639 -------------
See Accompanying Notes to Financial Statements. 70
PAR VALUE ------------- ------------- Short-Term Obligation (4.1%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Note maturing 08/15/22, market value of $1,665,300 (repurchase proceeds $1,628,430) $ 1,628,000 $ 1,628,000 ------------- Total Short-Term Obligation (Cost of $1,628,000) 1,628,000 ------------- Total Investments (99.3%) (Cost of $36,258,489) (b) 40,011,639 Other Assets & Liabilities, Net (0.7%) 299,882 ------------- Net Assets (100.0%) $ 40,311,521 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $36,507,709. At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ---------- Information Technology 24.9% Health Care 20.8 Consumer Discretionary 16.7 Consumer Staples 13.4 Industrials 9.6 Financials 6.9 Materials 1.7 Energy 1.2 Short-Term Obligation 4.1 Other Assets & Liabilities, Net 0.7 ---------- 100.0% ==========
ACRONYM NAME ------------------ --------------------------- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 71 CMG LARGE CAP VALUE FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (96.4%) Consumer Discretionary (9.2%) Hotels, Restaurants & Leisure (1.5%) Harrah's Entertainment, Inc. 1,976 $ 155,590 McDonald's Corp. 13,066 407,267 ------------- 562,857 ------------- Media (3.3%) Clear Channel Communications, Inc. 2,863 93,448 Comcast Corp., Class A (a) 5,767 177,220 McGraw-Hill Companies, Inc. 9,816 451,634 Time Warner, Inc. (a) 24,632 419,237 Viacom, Inc., Class A 4,435 149,149 ------------- 1,290,688 ------------- Multiline Retail (2.1%) Federated Department Stores, Inc. 7,016 532,304 J.C. Penney Co., Inc. 5,176 290,581 ------------- 822,885 ------------- Specialty Retail (2.3%) Home Depot, Inc. 11,362 494,361 Limited Brands 9,275 226,124 Sherwin-Williams Co. 3,096 147,401 ------------- 867,886 ------------- Consumer Staples (9.8%) Beverages (2.3%) Diageo PLC, ADR 4,199 233,758 PepsiCo, Inc. 11,658 635,711 ------------- 869,469 ------------- Food Products (1.7%) Hershey Co. 5,355 342,024 Kraft Foods, Inc., Class A 10,380 317,109 ------------- 659,133 ------------- Household Products (2.4%) Clorox Co. 6,633 370,453 Kimberly-Clark Corp. 5,810 370,446 Procter & Gamble Co. 3,496 194,482 ------------- 935,381 ------------- Personal Products (1.2%) Gillette Co. 8,658 464,675 ------------- Tobacco (2.2%) Altria Group, Inc. 10,329 691,630 UST, Inc. 3,615 166,362 ------------- 857,992 -------------
See Accompanying Notes to Financial Statements. 72
SHARES VALUE ------------- ------------- Common Stocks (continued) Energy (12.8%) Energy Equipment & Services (1.2%) Halliburton Co. 4,177 $ 234,121 Schlumberger Ltd. 2,725 228,191 ------------- 462,312 ------------- Oil, Gas & Consumable Fuels (11.6%) BP PLC, ADR 12,041 793,261 Chevron Corp. 5,685 329,787 ConocoPhillips 20,032 1,253,803 Exxon Mobil Corp. 27,435 1,611,806 Marathon Oil Corp. 5,064 295,535 Royal Dutch Petroleum Co., N.Y. Registered Shares 26 1,595 Royal Dutch Shell PLC, Class A, ADR (a) 3,085 189,049 ------------- 4,474,836 ------------- Financials (28.0%) Capital Markets (4.9%) A.G. Edwards, Inc. 2,202 97,549 Bank of New York Co., Inc. 15,695 483,092 Franklin Resources, Inc. 2,719 219,750 Goldman Sachs Group, Inc. 4,355 468,075 Janus Capital Group, Inc. 11,786 177,026 Merrill Lynch & Co., Inc. 4,780 280,968 Morgan Stanley 3,480 184,614 ------------- 1,911,074 ------------- Commercial Banks (7.4%) Marshall & Ilsley Corp. 2,320 106,534 National City Corp. 5,509 203,337 North Fork Bancorporation, Inc. 3,322 90,990 PNC Financial Services Group, Inc. 3,400 186,388 U.S. Bancorp 25,646 770,919 Wachovia Corp. 14,186 714,691 Wells Fargo & Co. 12,628 774,601 ------------- 2,847,460 ------------- Consumer Finance (0.8%) MBNA Corp. 11,844 297,995 ------------- Diversified Financial Services (5.7%) Citigroup, Inc. 33,785 1,469,647 JPMorgan Chase & Co. 21,500 755,510 ------------- 2,225,157 ------------- Insurance (6.5%) Allstate Corp. 3,714 227,520 Ambac Financial Group, Inc. 3,835 275,506 American International Group, Inc. 4,951 298,050 Chubb Corp. 2,801 248,785 Hartford Financial Services Group, Inc. 4,955 399,224 Lincoln National Corp. 10,376 501,161
See Accompanying Notes to Financial Statements. 73
SHARES VALUE ------------- ------------- Common Stocks (continued) Insurance (continued) Willis Group Holdings Ltd. 5,232 $ 173,493 XL Capital Ltd., Class A 5,491 394,364 ------------- 2,518,103 ------------- Real Estate (2.2%) Archstone-Smith Trust, REIT 6,755 287,087 AvalonBay Communities, Inc., REIT 3,251 284,658 Kimco Realty Corp., REIT 4,418 290,086 ------------- 861,831 ------------- Thrifts & Mortgage Finance (0.5%) Countrywide Financial Corp. 5,294 190,584 ------------- Health Care (5.8%) Health Care Equipment & Supplies (0.3%) Bausch & Lomb, Inc. 1,345 113,854 ------------- Health Care Providers & Services (1.6%) Aetna, Inc. 5,172 400,313 CIGNA Corp. 2,252 240,401 ------------- 640,714 ------------- Pharmaceuticals (3.9%) GlaxoSmithKline PLC, ADR 3,865 183,355 Johnson & Johnson 4,634 296,391 Merck & Co., Inc. 10,127 314,545 Novartis AG, ADR 4,748 231,275 Pfizer, Inc. 17,862 473,343 ------------- 1,498,909 ------------- Industrials (12.2%) Aerospace & Defense (3.2%) General Dynamics Corp. 4,587 528,377 United Technologies Corp. 14,196 719,737 ------------- 1,248,114 ------------- Commercial Services & Supplies (1.8%) Cendant Corp. 8,692 185,661 Republic Services, Inc. 3,469 125,751 Waste Management, Inc. 13,763 387,016 ------------- 698,428 ------------- Industrial Conglomerates (5.7%) General Electric Co. 43,655 1,506,097 Textron, Inc. 9,315 690,894 ------------- 2,196,991 ------------- Machinery (1.5%) Deere & Co. 4,047 297,576 Eaton Corp. 4,391 286,908 ------------- 584,484 -------------
See Accompanying Notes to Financial Statements. 74
SHARES VALUE ------------- ------------- Common Stocks (continued) Information Technology (5.6%) Communications Equipment (0.8%) Cisco Systems, Inc. (a) 5,459 $ 104,540 Nokia Oyj, ADR 12,624 201,353 ------------- 305,893 ------------- Computers & Peripherals (1.5%) International Business Machines Corp. 4,136 345,190 Lexmark International, Inc., Class A (a) 3,908 245,032 ------------- 590,222 ------------- IT Services (1.6%) Accenture Ltd., Class A (a) 17,569 439,928 Automatic Data Processing, Inc. 4,442 197,269 ------------- 637,197 ------------- Office Electronics (0.6%) Xerox Corp. (a) 17,753 234,517 ------------- Semiconductors & Semiconductor Equipment (0.3%) Intel Corp. 4,153 112,712 ------------- Software (0.8%) Microsoft Corp. 11,645 298,229 ------------- Materials (4.0%) Chemicals (2.0%) Air Products & Chemicals, Inc. 10,879 650,129 PPG Industries, Inc. 2,156 140,205 ------------- 790,334 ------------- Paper & Forest Products (2.0%) MeadWestvaco Corp. 15,226 444,903 Weyerhaeuser Co. 4,754 327,931 ------------- 772,834 ------------- Telecommunication Services (4.4%) Diversified Telecommunication Services (4.4%) BellSouth Corp. 10,895 300,702 SBC Communications, Inc. 33,157 810,689 Verizon Communications, Inc. 16,870 577,460 ------------- 1,688,851 ------------- Utilities (4.6%) Electric Utilities (2.7%) American Electric Power Co., Inc. 4,983 192,842 Entergy Corp. 3,773 294,068 Exelon Corp. 6,751 361,313 FPL Group, Inc. 4,982 214,824 ------------- 1,063,047 -------------
See Accompanying Notes to Financial Statements. 75
SHARES VALUE ------------- ------------- Common Stocks (continued) Independent Power Producers & Energy Traders (0.8%) TXU Corp. 3,386 $ 293,363 ------------- Multi-Utilities (1.1%) Dominion Resources, Inc. 2,647 195,507 PG&E Corp. 6,433 242,074 ------------- 437,581 ------------- Total Common Stocks (Cost of $32,045,097) 37,326,592 ------------- Investment Company (2.6%) iShares Russell 1000 Value Index Fund 14,943 1,026,584 ------------- Total Investment Company (Cost of $963,228) 1,026,584 ------------- PAR ------------- Short-Term Obligation (0.9%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Bond maturing 08/15/19, market value of $347,807 (repurchase proceeds $338,089) $ 338,000 338,000 ------------- Total Short-Term Obligation (Cost of $338,000) 338,000 ------------- Total Investments (99.9%) (Cost of $33,346,325) (b) 38,691,176 Other Assets & Liabilities, Net (0.1%) 40,049 ------------- Net Assets (100.0%) $ 38,731,225 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $33,449,797. See Accompanying Notes to Financial Statements. 76 At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ----------- Financials 28.0% Energy 12.8 Industrials 12.2 Consumer Staples 9.8 Consumer Discretionary 9.2 Health Care 5.8 Information Technology 5.6 Utilities 4.6 Telecommunication Services 4.4 Materials 4.0 Investment Company 2.6 Short-Term Obligation 0.9 Other Assets & Liabilities, Net 0.1 ----------- 100.0% ===========
ACRONYM NAME ------------------ ---------------------------- ADR American Depositary Receipt REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements. 77 CMG MID CAP GROWTH FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (99.3%) Consumer Discretionary (22.0%) Auto Components (0.5%) Autoliv, Inc. 2,800 $ 124,740 ------------- Diversified Consumer Services (0.8%) Career Education Corp. (a) 2,790 108,224 Education Management Corp. (a) 2,920 101,470 ------------- 209,694 ------------- Hotels, Restaurants & Leisure (6.3%) Applebee's International, Inc. 6,790 180,003 Brinker International, Inc. (a) 2,620 107,158 Cheesecake Factory, Inc. (a) 6,320 226,003 Four Seasons Hotels, Inc. 910 60,515 Harrah's Entertainment, Inc. 1,695 133,464 Hilton Hotels Corp. 8,190 202,703 International Game Technology 5,090 139,262 Marriott International, Inc., Class A 2,170 148,580 Wendy's International, Inc. 2,020 104,434 Yum! Brands, Inc. 4,860 254,421 ------------- 1,556,543 ------------- Household Durables (2.8%) Centex Corp. 860 63,623 D.R. Horton, Inc. 2,873 118,023 Fortune Brands, Inc. 1,650 156,007 Tempur-Pedic International, Inc. (a) 20,620 354,870 ------------- 692,523 ------------- Internet & Catalog Retail (0.3%) Netflix, Inc. (a) 4,370 81,107 ------------- Leisure Equipment & Products (1.0%) Marvel Enterprises, Inc. (a) 7,020 136,118 SCP Pool Corp. 2,850 103,854 ------------- 239,972 ------------- Media (3.3%) Getty Images, Inc. (a) 1,570 126,778 Grupo Televisa SA, ADR 2,350 155,029 Lamar Advertising Co., Class A (a) 2,040 89,780 XM Satellite Radio Holdings, Inc., Class A (a) 12,720 453,214 ------------- 824,801 ------------- Specialty Retail (5.6%) Abercrombie & Fitch Co., Class A 3,200 230,560 Chico's FAS, Inc. (a) 12,030 482,523 Children's Place Retail Stores, Inc. (a) 2,060 94,142 PETCO Animal Supplies, Inc. (a) 2,180 60,757 PETsMART, Inc. 4,960 147,560 Urban Outfitters, Inc. (a) 6,420 389,758 ------------- 1,405,300 -------------
See Accompanying Notes to Financial Statements. 78
SHARES VALUE ------------- ------------- Common Stocks (continued) Textiles, Apparel & Luxury Goods (1.4%) Coach, Inc. (a) 9,870 $ 346,536 ------------- Consumer Staples (4.2%) Food & Staples Retailing (0.9%) Rite Aid Corp. (a) 20,190 90,653 Whole Foods Market, Inc. 1,010 137,875 ------------- 228,528 ------------- Food Products (2.2%) Bunge Ltd. 1,000 61,390 Corn Products International, Inc. 12,230 294,376 H.J. Heinz Co. 2,740 100,778 Tyson Foods, Inc., Class A 5,130 95,623 ------------- 552,167 ------------- Personal Products (0.7%) Alberto-Culver Co. 1,940 87,533 Estee Lauder Companies, Inc., Class A 1,870 73,192 ------------- 160,725 ------------- Tobacco (0.4%) UST, Inc. 2,170 99,863 ------------- Energy (10.0%) Energy Equipment & Services (3.5%) Diamond Offshore Drilling, Inc. 2,000 114,120 FMC Technologies, Inc. (a) 5,160 187,050 Grant Prideco, Inc. (a) 1,900 60,990 Nabors Industries Ltd. (a) 2,010 131,555 National-Oilwell Varco, Inc. (a) 3,230 169,090 Smith International, Inc. 2,870 194,988 ------------- 857,793 ------------- Oil, Gas & Consumable Fuels (6.5%) Chesapeake Energy Corp. 5,280 137,861 EOG Resources, Inc. 4,290 262,119 Massey Energy Co. 4,650 201,112 Peabody Energy Corp. 2,440 160,406 Southwestern Energy Co. (a) 3,910 215,480 Teekay Shipping Corp. 5,230 240,632 Ultra Petroleum Corp. (a) 4,470 169,502 XTO Energy, Inc. 6,884 241,560 ------------- 1,628,672 ------------- Financials (6.0%) Capital Markets (3.5%) Affiliated Managers Group, Inc. (a) 2,690 191,797 E*TRADE Financial Corp. (a) 8,280 128,423 Lazard Ltd., Class A (a) 8,070 192,550
See Accompanying Notes to Financial Statements. 79
SHARES VALUE ------------- ------------- Common Stocks (continued) Capital Markets (continued) Legg Mason, Inc. 1,520 $ 155,268 T. Rowe Price Group, Inc. 2,900 192,415 ------------- 860,453 ------------- Commercial Banks (1.8%) East West Bancorp, Inc. 2,960 102,120 North Fork Bancorporation, Inc. 6,440 176,392 Zions Bancorporation 2,540 181,559 ------------- 460,071 ------------- Insurance (0.5%) Ambac Financial Group, Inc. 1,735 124,642 ------------- Real Estate (0.2%) St. Joe Co. 620 50,462 ------------- Health Care (17.0%) Biotechnology (1.4%) Amylin Pharmaceuticals, Inc. (a) 11,220 209,365 Neurocrine Biosciences, Inc. (a) 2,590 128,412 ------------- 337,777 ------------- Health Care Equipment & Supplies (5.4%) Beckman Coulter, Inc. 1,720 93,465 Biomet, Inc. 3,230 123,160 DENTSPLY International, Inc. 1,770 98,677 Gen-Probe, Inc. (a) 4,130 182,092 Kinetic Concepts, Inc. (a) 2,090 125,337 Nektar Therapeutics (a) 6,120 114,811 ResMed, Inc. (a) 1,930 129,310 Thermo Electron Corp. (a) 5,920 176,771 Varian Medical Systems, Inc. (a) 4,860 190,804 Waters Corp. (a) 2,600 117,728 ------------- 1,352,155 ------------- Health Care Providers & Services (6.7%) Cerner Corp. (a) 1,690 127,460 Community Health Systems, Inc. (a) 3,465 133,784 Coventry Health Care, Inc. (a) 2,440 172,581 DaVita, Inc. (a) 6,197 292,746 Health Management Associates, Inc., Class A 4,670 111,146 Henry Schein, Inc. (a) 2,450 105,767 Laboratory Corp. of America Holdings (a) 3,650 184,945 Medco Health Solutions, Inc. (a) 1,890 91,552 Quest Diagnostics, Inc. 2,050 105,247 United Surgical Partners International, Inc. (a) 2,390 86,064 WellPoint, Inc. (a) 3,600 254,664 ------------- 1,665,956 -------------
See Accompanying Notes to Financial Statements. 80
SHARES VALUE ------------- ------------- Common Stocks (continued) Pharmaceuticals (3.5%) Allergan, Inc. 2,460 $ 219,850 Endo Pharmaceuticals Holdings, Inc. (a) 4,220 120,101 Forest Laboratories, Inc. (a) 3,430 136,926 Medicis Pharmaceutical Corp., Class A 8,230 279,162 Teva Pharmaceutical Industries Ltd., ADR 3,860 121,204 ------------- 877,243 ------------- Industrials (12.4%) Aerospace & Defense (1.9%) Armor Holdings, Inc. (a) 2,710 110,785 L-3 Communications Holdings, Inc. 2,880 225,302 Rockwell Collins, Inc. 2,660 129,808 ------------- 465,895 ------------- Air Freight & Logistics (1.3%) C.H. Robinson Worldwide, Inc. 3,110 194,593 UTI Worldwide, Inc. 1,780 127,021 ------------- 321,614 ------------- Airlines (0.4%) Southwest Airlines Co. 7,990 113,378 ------------- Commercial Services & Supplies (4.4%) ChoicePoint, Inc. (a) 5,405 235,658 Cintas Corp. 2,220 98,412 Corporate Executive Board Co. 5,375 433,655 Robert Half International, Inc. 9,820 332,800 ------------- 1,100,525 ------------- Construction & Engineering (1.2%) Jacobs Engineering Group, Inc. (a) 4,940 290,867 ------------- Electrical Equipment (0.6%) Rockwell Automation, Inc. 2,940 151,439 ------------- Machinery (2.1%) Joy Global, Inc. 5,570 228,760 Terex Corp. (a) 6,010 291,004 ------------- 519,764 ------------- Road & Rail (0.5%) Landstar System, Inc. 3,730 124,284 ------------- Information Technology (19.5%) Communications Equipment (1.7%) Comverse Technology, Inc. (a) 10,080 254,923 F5 Networks, Inc. (a) 1,200 50,616 Harris Corp. 3,110 115,288 ------------- 420,827 -------------
See Accompanying Notes to Financial Statements. 81
SHARES VALUE ------------- ------------- Common Stocks (continued) Computers & Peripherals (1.4%) Network Appliance, Inc. (a) 4,020 $ 102,550 SanDisk Corp. (a) 7,290 246,548 ------------- 349,098 ------------- Internet Software & Services (0.4%) VeriSign, Inc. (a) 3,310 87,086 ------------- IT Services (3.8%) Affiliated Computer Services, Inc., Class A (a) 2,390 119,428 Alliance Data Systems Corp. (a) 5,370 228,601 Cognizant Technology Solutions Corp., Class A (a) 5,230 256,688 Fiserv, Inc. (a) 2,800 124,236 Global Payments, Inc. 1,900 125,856 Paychex, Inc. 2,290 79,944 ------------- 934,753 ------------- Semiconductors & Semiconductor Equipment (6.5%) Advanced Micro Devices, Inc. (a) 3,520 70,682 Altera Corp. (a) 5,710 124,878 Broadcom Corp., Class A (a) 5,690 243,361 KLA-Tencor Corp. 2,150 111,155 Lam Research Corp. (a) 2,210 62,875 Linear Technology Corp. 4,930 191,580 Marvell Technology Group Ltd. (a) 10,360 452,628 MEMC Electronic Materials, Inc. (a) 7,660 130,143 Microchip Technology, Inc. 2,140 66,490 National Semiconductor Corp. 3,610 89,203 NVIDIA Corp. (a) 3,140 84,968 ------------- 1,627,963 ------------- Software (5.7%) Amdocs Ltd. (a) 4,550 135,090 Check Point Software Technologies Ltd. (a) 6,080 136,982 Citrix Systems, Inc. (a) 7,680 183,015 Hyperion Solutions Corp. (a) 3,190 150,121 Macromedia, Inc. (a) 1,580 63,437 McAfee, Inc. (a) 2,750 86,350 Mercury Interactive Corp. (a) 4,375 172,244 NAVTEQ Corp. (a) 6,300 277,011 Symantec Corp. (a) 9,993 219,549 ------------- 1,423,799 ------------- Materials (3.9%) Chemicals (2.0%) Airgas, Inc. 2,670 78,765 Potash Corp. of Saskatchewan, Inc. 4,010 427,306 ------------- 506,071 -------------
See Accompanying Notes to Financial Statements. 82
SHARES VALUE ------------- ------------- Common Stocks (continued) Metals & Mining (1.9%) Freeport-McMoRan Copper & Gold, Inc., Class B 3,290 $ 132,521 Inco Ltd. 3,020 123,760 Phelps Dodge Corp. 1,970 209,706 ------------- 465,987 ------------- Telecommunication Services (3.4%) Wireless Telecommunication Services (3.4%) American Tower Corp., Class A (a) 7,890 181,312 Crown Castle International Corp. (a) 9,500 206,720 Millicom International Cellular SA (a) 10,100 214,524 SpectraSite, Inc. (a) 2,090 170,753 VimpelCom, ADR (a) 2,030 77,912 ------------- 851,221 ------------- Utilities (0.9%) Independent Power Producers & Energy Traders (0.9%) AES Corp. (a) 13,600 218,280 ------------- Total Common Stocks (Cost of $20,605,084) 24,710,574 ------------- PAR ------------- Short-Term Obligation (0.5%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Note maturing 02/15/10, market value of $128,863 (repurchase proceeds $124,033) $ 124,000 124,000 ------------- Total Short-Term Obligation (Cost of $124,000) 124,000 ------------- Total Investments (99.8%) (Cost of $20,729,084) (b) 24,834,574 Other Assets & Liabilities, Net (0.2%) 46,134 ------------- Net Assets (100.0%) $ 24,880,708 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $20,951,508. See Accompanying Notes to Financial Statements. 83 At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ----------- Consumer Discretionary 22.0% Information Technology 19.5 Health Care 17.0 Industrials 12.4 Energy 10.0 Financials 6.0 Consumer Staples 4.2 Materials 3.9 Telecommunication Services 3.4 Utilities 0.9 Short-Term Obligation 0.5 Other Assets & Liabilities, Net 0.2 ----------- 100.0% ===========
ACRONYM NAME ------------------ --------------------------- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 84 CMG MID CAP VALUE FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (97.9%) Consumer Discretionary (10.5%) Auto Components (1.5%) BorgWarner, Inc. 2,200 $ 127,974 Johnson Controls, Inc. 3,200 183,808 ------------- 311,782 ------------- Hotels, Restaurants & Leisure (2.2%) Brinker International, Inc. (a) 4,100 167,690 Harrah's Entertainment, Inc. 2,400 188,976 Outback Steakhouse, Inc. 2,500 116,450 ------------- 473,116 ------------- Media (0.8%) Dow Jones & Co., Inc. 4,400 165,132 ------------- Multiline Retail (3.2%) Dollar General Corp. 9,000 182,880 Federated Department Stores, Inc. 1,800 136,566 J.C. Penney Co., Inc. 3,200 179,648 May Department Stores Co. 4,200 172,410 ------------- 671,504 ------------- Specialty Retail (2.3%) Office Depot, Inc. (a) 4,200 119,196 Sherwin-Williams Co. 3,600 171,396 TJX Companies, Inc. 8,900 209,239 ------------- 499,831 ------------- Textiles, Apparel & Luxury Goods (0.5%) Reebok International Ltd. 2,500 105,750 ------------- Consumer Staples (4.5%) Beverages (1.0%) Pepsi Bottling Group, Inc. 7,100 207,036 ------------- Food & Staples Retailing (1.8%) Kroger Co. (a) 8,900 176,665 SUPERVALU, Inc. 5,900 208,860 ------------- 385,525 ------------- Food Products (1.4%) Dean Foods Co. (a) 6,800 242,760 Tyson Foods, Inc., Class A 3,500 65,240 ------------- 308,000 ------------- Tobacco (0.3%) UST, Inc. 1,400 64,428 -------------
See Accompanying Notes to Financial Statements. 85
SHARES VALUE ------------- ------------- Common Stocks (continued) Energy (9.7%) Energy Equipment & Services (4.4%) BJ Services Co. 2,350 $ 143,327 National-Oilwell Varco, Inc. (a) 3,100 162,285 Noble Corp. 2,850 191,463 Technip SA, ADR 3,100 166,315 Transocean, Inc. (a) 3,200 180,576 Weatherford International Ltd. (a) 1,550 98,084 ------------- 942,050 ------------- Oil, Gas & Consumable Fuels (5.3%) Amerada Hess Corp. 2,100 247,506 EOG Resources, Inc. 1,900 116,090 Marathon Oil Corp. 615 35,870 Murphy Oil Corp. 1,300 68,952 Peabody Energy Corp. 3,100 203,794 Williams Companies, Inc. 9,200 195,408 XTO Energy, Inc. 7,266 254,964 ------------- 1,122,584 ------------- Financials (23.7%) Capital Markets (1.8%) Bear Stearns Companies, Inc. 1,800 183,798 Janus Capital Group, Inc. 13,600 204,272 ------------- 388,070 ------------- Commercial Banks (6.5%) City National Corp. 2,950 215,556 Cullen/Frost Bankers, Inc. 4,650 232,965 Marshall & Ilsley Corp. 5,600 257,152 Mercantile Bankshares Corp. 3,200 178,048 North Fork Bancorporation, Inc. 7,750 212,273 UnionBanCal Corp. 2,600 185,484 Zions Bancorporation 1,400 100,072 ------------- 1,381,550 ------------- Diversified Financial Services (0.9%) CIT Group, Inc. 4,200 185,388 ------------- Insurance (6.4%) Ace Ltd. 3,200 147,872 Ambac Financial Group, Inc. 3,250 233,480 Endurance Specialty Holdings Ltd. 5,000 195,000 Genworth Financial, Inc., Class A 3,500 109,760 Hartford Financial Services Group, Inc. 1,300 104,741 Lincoln National Corp. 3,600 173,880 Loews Corp. 2,700 225,801 Old Republic International Corp. 6,800 178,568 ------------- 1,369,102 -------------
See Accompanying Notes to Financial Statements. 86
SHARES VALUE ------------- ------------- Common Stocks (continued) Real Estate (4.5%) Archstone-Smith Trust, REIT 3,200 $ 136,000 Boston Properties, Inc., REIT 1,600 121,840 Equity Office Properties Trust, REIT 5,100 180,795 Host Marriott Corp., REIT 14,400 268,560 ProLogis, REIT 5,300 241,468 ------------- 948,663 ------------- Thrifts & Mortgage Finance (3.6%) Golden West Financial Corp. 4,500 293,040 PMI Group, Inc. 5,800 237,510 Sovereign Bancorp, Inc. 10,100 242,299 ------------- 772,849 ------------- Health Care (3.9%) Health Care Equipment & Supplies (1.2%) Millipore Corp. (a) 2,300 140,921 Varian, Inc. (a) 2,800 104,916 ------------- 245,837 ------------- Health Care Providers & Services (1.7%) CIGNA Corp. 1,500 160,125 Community Health Systems, Inc. (a) 3,800 146,718 Universal Health Services, Inc., Class B 900 46,836 ------------- 353,679 ------------- Pharmaceuticals (1.0%) IVAX Corp. (a) 4,500 114,660 Shire Pharmaceuticals Group PLC, ADR 3,100 108,500 ------------- 223,160 ------------- Industrials (13.4%) Aerospace & Defense (1.9%) Goodrich Corp. 5,000 221,200 Northrop Grumman Corp. 3,200 177,440 ------------- 398,640 ------------- Building Products (0.6%) American Standard Companies, Inc. 2,900 128,412 ------------- Commercial Services & Supplies (1.7%) Avery Dennison Corp. 2,700 153,009 Manpower, Inc. 2,400 114,720 Pitney Bowes, Inc. 2,400 106,992 ------------- 374,721 ------------- Construction & Engineering (1.3%) Fluor Corp. 1,900 121,220 Jacobs Engineering Group, Inc. (a) 2,600 153,088 ------------- 274,308 ------------- Electrical Equipment (1.3%) AMETEK, Inc. 4,600 189,520 Hubbell, Inc., Class B 2,000 90,800 ------------- 280,320 -------------
See Accompanying Notes to Financial Statements. 87
SHARES VALUE ------------- ------------- Common Stocks (continued) Machinery (4.5%) AGCO Corp. (a) 5,800 $ 120,002 Dover Corp. 3,850 158,851 Eaton Corp. 2,600 169,884 Ingersoll-Rand Co., Ltd., Class A 2,700 211,059 Kennametal, Inc. 2,700 128,331 Parker Hannifin Corp. 2,550 167,586 ------------- 955,713 ------------- Road & Rail (1.6%) Burlington Northern Santa Fe Corp. 1,800 97,650 Norfolk Southern Corp. 6,600 245,586 ------------- 343,236 ------------- Trading Companies & Distributors (0.5%) United Rentals, Inc. (a) 5,300 98,580 ------------- Information Technology (7.6%) Communications Equipment (0.6%) Andrew Corp. (a) 12,600 138,474 ------------- Computers & Peripherals (0.3%) ATI Technologies, Inc. (a) 5,300 66,727 ------------- Electronic Equipment & Instruments (5.1%) Agilent Technologies, Inc. (a) 4,600 120,704 Amphenol Corp., Class A 1,700 75,718 Arrow Electronics, Inc. (a) 7,300 219,146 AVX Corp. 8,400 114,744 Flextronics International Ltd. (a) 8,300 112,382 Ingram Micro, Inc., Class A (a) 7,600 141,664 Mettler-Toledo International, Inc. (a) 3,400 178,500 Tektronix, Inc. 4,700 117,782 ------------- 1,080,640 ------------- IT Services (0.4%) Affiliated Computer Services, Inc., Class A (a) 1,500 74,955 ------------- Semiconductors & Semiconductor Equipment (0.4%) MEMC Electronic Materials, Inc. (a) 5,000 84,950 ------------- Software (0.8%) Activision, Inc. (a) 3,100 63,054 Cadence Design Systems, Inc. (a) 3,900 62,751 Electronic Arts, Inc. (a) 900 51,840 ------------- 177,645 -------------
See Accompanying Notes to Financial Statements. 88
SHARES VALUE ------------- ------------- Common Stocks (continued) Materials (11.9%) Chemicals (7.1%) Agrium, Inc. 7,600 $ 173,812 Air Products & Chemicals, Inc. 3,000 179,280 Ashland, Inc. 2,400 147,480 Celanese Corp., Series A 5,800 109,156 Eastman Chemical Co. 1,800 99,702 Engelhard Corp. 3,500 100,415 Lubrizol Corp. 4,500 198,000 Nalco Holding Co. (a) 7,800 167,310 PPG Industries, Inc. 2,250 146,317 Rohm and Haas Co. 4,100 188,846 ------------- 1,510,318 ------------- Construction Materials (1.1%) Martin Marietta Materials, Inc. 3,000 218,070 ------------- Containers & Packaging (1.2%) Bemis Co. 6,100 164,700 Crown Holdings, Inc. (a) 5,400 85,266 ------------- 249,966 ------------- Metals & Mining (1.2%) Freeport-McMoRan Copper & Gold, Inc., Class B 2,300 92,644 Nucor Corp. 3,000 166,350 ------------- 258,994 ------------- Paper & Forest Products (1.3%) Georgia-Pacific Corp. 6,700 228,805 MeadWestvaco Corp. 1,800 52,596 ------------- 281,401 ------------- Telecommunication Services (1.5%) Wireless Telecommunication Services (1.5%) Telephone & Data Systems, Inc. 4,000 159,400 Telephone & Data Systems, Inc., Special Shares 4,000 152,800 ------------- 312,200 ------------- Utilities (11.2%) Electric Utilities (6.1%) Edison International 7,200 294,336 Entergy Corp. 3,650 284,481 Exelon Corp. 6,000 321,120 FPL Group, Inc. 2,700 116,424 PPL Corp. 2,650 163,187 Reliant Energy, Inc. (a) 8,800 116,688 ------------- 1,296,236 ------------- Gas Utilities (0.5%) AGL Resources, Inc. 3,000 115,350 -------------
See Accompanying Notes to Financial Statements. 89
SHARES VALUE ------------- ------------- Common Stocks (continued) Independent Power Producers & Energy Traders (1.7%) AES Corp. (a) 7,100 $ 113,955 Constellation Energy Group, Inc. 4,200 252,882 ------------- 366,837 ------------- Multi-Utilities (2.9%) Energy East Corp. 7,100 197,877 PG&E Corp. 7,800 293,514 Sempra Energy 2,700 114,750 ------------- 606,141 ------------- Total Common Stocks (Cost of $16,853,452) 20,817,870 ------------- PAR ------------- Convertible Bond (0.4%) Communications (0.4%) Telecommunications (0.4%) Lucent Technologies, Inc., 2.750% 06/15/25 $ 81,164 91,343 ------------- Total Convertible Bond (Cost of $92,737) 91,343 ------------- SHARES ------------- Convertible Preferred Stock (0.1%) Materials (0.1%) Chemicals (0.1%) Celanese Corp., 4.250% 800 22,280 ------------- Total Convertible Preferred Stock (Cost of $20,000) 22,280 ------------- Total Investments (98.4%) (Cost of $16,966,189) (b) 20,931,493 Other Assets & Liabilities, Net (1.6%) 345,802 ------------- Net Assets (100.0%) $ 21,277,295 =============
See Accompanying Notes to Financial Statements. 90 Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $16,973,941. At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ---------- Financials 23.7% Industrials 13.4 Materials 12.0 Utilities 11.2 Consumer Discretionary 10.5 Energy 9.7 Information Technology 8.0 Consumer Staples 4.5 Health Care 3.9 Telecommunication Services 1.5 Other Assets & Liabilities, Net 1.6 ---------- 100.0% ==========
ACRONYM NAME ------------------ ---------------------------- ADR American Depositary Receipt REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements. 91 CMG SMALL CAP GROWTH FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (96.1%) Consumer Discretionary (16.2%) Hotels, Restaurants & Leisure (3.7%) Benihana, Inc., Class A (a) 3,133 $ 62,221 Gaylord Entertainment Co. (a) 9,600 460,224 Pinnacle Entertainment, Inc. (a) 20,500 442,800 Scientific Games Corp., Class A (a) 16,600 454,508 ------------- 1,419,753 ------------- Leisure Equipment & Products (1.0%) Marvel Enterprises, Inc. (a) 19,500 378,105 ------------- Media (4.8%) Citadel Broadcasting Co. (a) 18,000 221,040 Cumulus Media, Inc., Class A (a) 21,800 275,116 Harris Interactive, Inc. (a) 49,400 199,082 Lin TV Corp., Class A (a) 15,800 224,676 Lions Gate Entertainment Corp. (a) 41,700 427,425 Radio One, Inc., Class D (a) 19,800 261,558 TiVo, Inc. (a) 37,600 235,000 ------------- 1,843,897 ------------- Multiline Retail (0.8%) Fred's, Inc. 16,400 316,520 ------------- Specialty Retail (4.5%) Bombay Co., Inc. (a) 41,000 205,000 Cost Plus, Inc. (a) 10,500 236,565 Design Within Reach, Inc. (a) 14,800 276,020 Golf Galaxy, Inc. (a) 1,100 20,471 Jarden Corp. (a) 12,625 484,295 Pacific Sunwear of California, Inc. (a) 13,600 331,704 Party City Corp. (a) 13,200 192,192 ------------- 1,746,247 ------------- Textiles, Apparel & Luxury Goods (1.4%) Ashworth, Inc. (a) 36,400 302,484 Jos. A. Bank Clothiers, Inc. (a) 4,100 187,370 Maidenform Brands, Inc. (a) 3,800 69,350 ------------- 559,204 ------------- Energy (7.4%) Energy Equipment & Services (2.1%) Dawson Geophysical Co. (a) 9,300 239,289 Maverick Tube Corp. (a) 7,400 245,458 Unit Corp. (a) 6,800 323,000 ------------- 807,747 ------------- Oil, Gas & Consumable Fuels (5.3%) Bois d'Arc Energy, Inc. (a) 16,895 257,818 Edge Petroleum Corp. (a) 13,400 235,036 Energy Partners Ltd. (a) 8,900 235,494
See Accompanying Notes to Financial Statements. 92
SHARES VALUE ------------- ------------- Common Stocks (continued) Oil, Gas & Consumable Fuels (continued) InterOil Corp. (a) 9,100 $ 223,860 Petrohawk Energy Corp. (a) 25,111 276,221 Pioneer Drilling Co. (a) 17,200 259,376 Spinnaker Exploration Co. (a) 5,800 227,592 Western Gas Resources, Inc. 8,400 336,336 ------------- 2,051,733 ------------- Financials (8.0%) Capital Markets (1.0%) Jefferies Group, Inc. 9,100 376,103 ------------- Commercial Banks (2.3%) Boston Private Financial Holdings, Inc. 9,800 280,770 East West Bancorp, Inc. 8,000 276,000 Prosperity Bancshares, Inc. 11,400 351,120 ------------- 907,890 ------------- Diversified Financial Services (2.1%) ACE Cash Express, Inc. (a) 8,200 192,946 Greenhill & Co., Inc. 9,700 372,092 National Financial Partners Corp. 5,400 244,350 ------------- 809,388 ------------- Insurance (1.7%) Infinity Property & Casualty Corp. 10,900 386,296 Philadelphia Consolidated Holding Co. (a) 3,100 257,362 ------------- 643,658 ------------- Real Estate (0.9%) HouseValues, Inc. (a) 20,100 355,971 ------------- Health Care (19.5%) Biotechnology (4.2%) Cytogen Corp. (a) 20,700 101,430 Enzo Biochem, Inc. (a) 13,600 228,208 Isolagen, Inc. (a) 21,800 121,862 NeoPharm, Inc. (a) 18,221 213,003 Neurocrine Biosciences, Inc. (a) 6,600 327,228 Protein Design Labs, Inc. (a) 16,600 378,314 QLT, Inc. (a) 22,000 187,660 Telik, Inc. (a) 3,808 64,736 ------------- 1,622,441 ------------- Health Care Equipment & Supplies (5.9%) Conceptus, Inc. (a) 19,300 154,207 I-Flow Corp. (a) 13,500 201,150 Immucor, Inc. (a) 7,100 195,037 Integra LifeSciences Holdings Corp. (a) 9,900 300,960 Medical Action Industries, Inc. (a) 19,200 363,072 Nektar Therapeutics (a) 16,500 309,540 Palomar Medical Technologies, Inc. (a) 5,300 155,873
See Accompanying Notes to Financial Statements. 93
SHARES VALUE ------------- ------------- Common Stocks (continued) Health Care Equipment & Supplies (continued) SonoSite, Inc. (a) 11,600 $ 388,600 Syneron Medical Ltd. (a) 5,100 196,605 ------------- 2,265,044 ------------- Health Care Providers & Services (4.1%) Advisory Board Co. (a) 9,500 495,710 America Service Group, Inc. (a) 8,916 192,407 Hythiam, Inc. (a) 52,300 307,524 LHC Group, Inc. (a) 7,408 130,233 LifePoint Hospitals, Inc. (a) 6,800 317,968 U.S. Physical Therapy, Inc. (a) 8,300 151,558 ------------- 1,595,400 ------------- Pharmaceuticals (5.3%) Adams Respiratory Therapeutics, Inc. (a) 7,215 212,843 BioSante Pharmaceuticals, Inc. (a) 16,300 66,015 Caraco Pharmaceutical Laboratories Ltd. (a) 6,900 57,960 Cardiome Pharma Corp. (a) 28,000 197,400 DepoMed, Inc. (a) 43,500 225,765 DOV Pharmaceutical, Inc. (a) 16,700 353,205 Neurochem, Inc. (a) 17,600 196,064 Noven Pharmaceuticals, Inc. (a) 14,500 245,195 Salix Pharmaceuticals Ltd. (a) 18,050 348,365 Taro Pharmaceuticals Industries Ltd. (a) 6,800 159,732 ------------- 2,062,544 ------------- Industrials (9.3%) Aerospace & Defense (0.6%) DRS Technologies, Inc. 4,500 234,000 ------------- Air Freight & Logistics (1.5%) EGL, Inc. (a) 12,300 247,599 UTI Worldwide, Inc. 4,800 342,528 ------------- 590,127 ------------- Commercial Services & Supplies (3.6%) Educate, Inc. (a) 21,800 336,919 Intersections, Inc. (a) 11,800 147,500 Laureate Education, Inc. (a) 6,800 308,040 MDC Partners, Inc., Class A (a) 21,800 189,224 Navigant Consulting, Inc. (a) 10,700 214,000 NCO Group, Inc. (a) 9,900 201,762 ------------- 1,397,445 ------------- Electrical Equipment (0.8%) Plug Power, Inc. (a) 43,000 307,450 ------------- Machinery (0.7%) Wabash National Corp. 12,300 264,573 -------------
See Accompanying Notes to Financial Statements. 94
SHARES VALUE ------------- ------------- Common Stocks (continued) Road & Rail (1.6%) Genesee & Wyoming, Inc., Class A (a) 10,082 $ 305,182 Heartland Express, Inc. 14,350 298,624 ------------- 603,806 ------------- Trading Companies & Distributors (0.5%) Aceto Corp. 25,800 206,400 ------------- Information Technology (32.3%) Communications Equipment (4.2%) Audiovox Corp., Class A (a) 12,600 226,989 Finisar Corp. (a) 61,600 67,144 Foundry Networks, Inc. (a) 36,800 435,712 Inter-Tel, Inc. 12,821 319,243 NICE Systems Ltd., ADR (a) 9,900 416,493 NMS Communications Corp. (a) 51,600 173,892 ------------- 1,639,473 ------------- Computers & Peripherals (1.3%) Applied Films Corp. (a) 10,900 286,343 SimpleTech, Inc. (a) 48,000 203,520 ------------- 489,863 ------------- Electronic Equipment & Instruments (3.3%) Anixter International, Inc. (a) 7,000 290,920 Global Imaging Systems, Inc. (a) 13,459 466,489 Itron, Inc. (a) 7,100 343,995 Photon Dynamics, Inc. (a) 9,500 179,882 ------------- 1,281,286 ------------- Internet Software & Services (3.8%) Corillian Corp. (a) 87,600 288,204 Digital River, Inc. (a) 8,800 351,780 Digitas, Inc. (a) 36,800 415,104 Equinix, Inc. (a) 7,000 310,590 TeleCommunication Systems, Inc., Class A (a) 29,800 87,612 ------------- 1,453,290 ------------- IT Services (1.8%) MAXIMUS, Inc. 8,100 309,258 MTC Technologies, Inc. (a) 12,000 375,599 ------------- 684,857 ------------- Semiconductors & Semiconductor Equipment (9.7%) Brooks Automation, Inc. (a) 23,000 381,800 Cypress Semiconductor Corp. (a) 24,100 346,076 DSP Group, Inc. (a) 7,500 187,125 Entegris, Inc. (a) 37,200 437,844 FEI Co. (a) 13,500 306,315 Integrated Circuit Systems, Inc. (a) 10,200 223,176 IXYS Corp. (a) 28,600 334,906 Leadis Technology, Inc. (a) 17,200 108,790 Mykrolis Corp. (a) 17,600 286,880
See Accompanying Notes to Financial Statements. 95
SHARES VALUE ------------- ------------- Common Stocks (continued) Semiconductors & Semiconductor Equipment (continued) Silicon Image, Inc. (a) 17,100 $ 202,122 Silicon Storage Technology, Inc. (a) 33,600 158,592 Ultratech, Inc. (a) 19,800 431,838 Zoran Corp. (a) 22,600 325,440 ------------- 3,730,904 ------------- Software (8.2%) Captiva Software Corp. (a) 23,200 374,912 Epicor Software Corp. (a) 21,000 311,430 FileNET Corp. (a) 8,100 228,987 Magma Design Automation, Inc. (a) 27,500 264,000 Manhattan Associates, Inc. (a) 13,700 283,590 Micromuse, Inc. (a) 55,100 311,315 OpenTV Corp., Class A (a) 76,100 252,652 Phoenix Technologies Ltd. (a) 33,176 225,597 Quest Software, Inc. (a) 15,700 223,725 ScanSoft, Inc. (a) 40,500 166,455 SeaChange International, Inc. (a) 13,897 105,339 Verint Systems, Inc. (a) 7,300 284,554 Verity, Inc. (a) 14,900 150,043 ------------- 3,182,599 ------------- Materials (3.4%) Chemicals (2.2%) Landec Corp. (a) 32,400 197,316 UAP Holding Corp. 22,900 444,260 Zoltek Companies, Inc. (a) 16,600 178,948 ------------- 820,524 ------------- Metals & Mining (1.2%) AMCOL International Corp. 13,000 258,050 Steel Technologies, Inc. 10,000 214,300 ------------- 472,350 ------------- Total Common Stocks (Cost of $32,017,737) 37,120,592 -------------
See Accompanying Notes to Financial Statements. 96
PAR VALUE ------------- ------------- Short-Term Obligation (3.5%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Bond maturing 11/15/21, market value of $1,391,807 (repurchase proceeds $1,361,360) $ 1,361,000 $ 1,361,000 ------------- Total Short-Term Obligation (Cost of $1,361,000) 1,361,000 ------------- Total Investments (99.6%) (Cost of $33,378,737) (b) 38,481,592 Other Assets & Liabilities, Net (0.4%) 163,240 ------------- Net Assets (100.0%) $ 38,644,832 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $33,393,378. At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ----------- Information Technology 32.3% Health Care 19.5 Consumer Discretionary 16.2 Industrials 9.3 Financials 8.0 Energy 7.4 Materials 3.4 Short-Term Obligation 3.5 Other Assets & Liabilities, Net 0.4 ----------- 100.0% ===========
ACRONYM NAME ------------------ --------------------------- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 97 CMG SMALL CAP VALUE FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (99.8%) Consumer Discretionary (13.3%) Auto Components (0.9%) BorgWarner, Inc. 3,800 $ 221,046 Modine Manufacturing Co. 2,900 104,603 ------------- 325,649 ------------- Distributors (0.8%) Building Material Holding Corp. 3,800 315,780 ------------- Hotels, Restaurants & Leisure (3.3%) Bob Evans Farms, Inc. 3,561 90,307 Dave & Buster's, Inc. (a) 7,700 145,376 Landry's Restaurants, Inc. 6,300 196,245 Lone Star Steakhouse & Saloon, Inc. 8,500 255,510 Marcus Corp. 8,000 171,840 Scientific Games Corp., Class A (a) 11,500 314,870 Vail Resorts, Inc. (a) 2,500 71,025 ------------- 1,245,173 ------------- Household Durables (1.7%) American Greetings Corp., Class A 13,900 353,616 CSS Industries, Inc. 4,000 150,960 Kimball International, Inc., Class B 8,500 114,580 ------------- 619,156 ------------- Media (2.2%) 4Kids Entertainment, Inc. (a) 7,500 150,750 Journal Communications, Inc., Class A 6,960 111,360 Liberty Corp. 3,600 139,140 Media General, Inc., Class A 2,200 150,700 Reader's Digest Association, Inc. 5,300 86,072 Scholastic Corp. (a) 4,600 170,062 ------------- 808,084 ------------- Specialty Retail (2.6%) GameStop Corp., Class A (a) 9,200 316,020 Monro Muffler, Inc. (a) 8,320 240,448 Movie Gallery, Inc. 5,800 145,464 Pier 1 Imports, Inc. 6,200 88,164 TBC Corp. (a) 2,400 68,088 Zale Corp. (a) 3,000 102,000 ------------- 960,184 ------------- Textiles, Apparel & Luxury Goods (1.8%) Delta Apparel, Inc. 4,800 66,240 Hampshire Group Ltd. (a) 8,900 200,695 Kellwood Co. 2,850 69,284 Russell Corp. 6,200 117,304 Stride Rite Corp. 7,800 109,200 Wolverine World Wide, Inc. 4,600 101,200 ------------- 663,923 -------------
See Accompanying Notes to Financial Statements. 98
SHARES VALUE ------------- ------------- Common Stocks (continued) Consumer Staples (3.7%) Food & Staples Retailing (1.4%) BJ's Wholesale Club, Inc. (a) 3,400 $ 108,426 Performance Food Group Co. (a) 3,200 96,096 Weis Markets, Inc. 7,670 312,936 ------------- 517,458 ------------- Food Products (2.3%) Central Garden & Pet Co. (a) 1,800 90,306 Corn Products International, Inc. 7,112 171,186 Flowers Foods, Inc. 9,739 245,325 J&J Snack Foods Corp. 2,095 123,270 Lancaster Colony Corp. 2,240 99,075 Lance, Inc. 6,200 112,096 ------------- 841,258 ------------- Energy (7.0%) Energy Equipment & Services (1.9%) Lufkin Industries, Inc. 10,200 492,660 Superior Well Services, Inc. (a) 1,800 32,976 Universal Compression Holdings, Inc. (a) 4,500 182,475 ------------- 708,111 ------------- Oil, Gas & Consumable Fuels (5.1%) Bill Barrett Corp. (a) 1,513 48,401 Bois d'Arc Energy, Inc. (a) 5,298 80,847 Cimarex Energy Co. (a) 6,918 290,141 Energy Partners Ltd. (a) 7,500 198,450 Harvest Natural Resources, Inc. (a) 11,100 101,343 Houston Exploration Co. (a) 2,310 133,495 InterOil Corp. (a) 3,200 78,720 Peabody Energy Corp. 3,290 216,285 Range Resources Corp. 7,800 238,212 Stone Energy Corp. (a) 4,400 234,124 Western Gas Resources, Inc. 6,400 256,256 ------------- 1,876,274 ------------- Financials (27.3%) Capital Markets (0.4%) Piper Jaffray Companies, Inc. (a) 3,640 125,253 ------------- Commercial Banks (11.8%) BancFirst Corp. 990 84,437 BancorpSouth, Inc. 7,700 179,256 BancTrust Financial Group, Inc. 4,000 84,320 Bank of Granite Corp. 5,700 119,415 Bryn Mawr Bank Corp. 6,676 141,731 Capitol Bancorp Ltd. 6,000 212,760 Chemical Financial Corp. 5,875 196,225 Chittenden Corp. 8,050 235,785
See Accompanying Notes to Financial Statements. 99
SHARES VALUE ------------- ------------- Common Stocks (continued) Commercial Banks (continued) Citizens Banking Corp. 3,390 $ 107,327 City Holding Co. 2,150 82,453 Columbia Banking System, Inc. 4,500 124,560 Community Trust Bancorp, Inc. 3,836 128,544 Corus Bankshares, Inc. 5,300 332,522 First Citizens BancShares, Inc., Class A 900 151,200 First Financial Bankshares, Inc. 3,766 135,124 First Financial Corp. 4,100 127,100 Greater Bay Bancorp 5,790 151,872 Hancock Holding Co. 3,373 126,724 ITLA Capital Corp. (a) 2,800 162,372 Merchants Bancshares, Inc. 4,600 126,914 Mid-State Bancshares 8,100 250,128 Northrim BanCorp, Inc. 4,200 101,514 Sterling Bancshares, Inc. 13,600 213,656 TriCo Bancshares 9,182 222,939 TrustCo Bank Corp. 10,390 138,499 UMB Financial Corp. 3,700 237,725 Whitney Holding Corp. 6,100 202,032 ------------- 4,377,134 ------------- Consumer Finance (0.6%) Cash America International, Inc. 10,500 218,610 ------------- Diversified Financial Services (1.8%) Advance America Cash Advance Centers, Inc. 10,000 157,300 Metris Companies, Inc. (a) 17,200 255,420 MFC Bancorp Ltd. (a) 13,900 258,401 ------------- 671,121 ------------- Insurance (6.3%) AmerUs Group Co. 3,100 159,898 Argonaut Group, Inc. (a) 5,156 123,899 Baldwin & Lyons, Inc., Class B 4,800 130,800 CNA Surety Corp. (a) 10,420 151,090 Commerce Group, Inc. 1,600 99,760 Delphi Financial Group, Inc., Class A 5,100 247,401 Harleysville Group, Inc. 6,900 152,145 Horace Mann Educators Corp. 6,800 135,864 Navigators Group, Inc. (a) 6,244 230,279 Phoenix Companies, Inc. 14,400 181,440 ProCentury Corp. 10,500 105,105 Quanta Capital Holdings Ltd. (a) 14,830 98,619 RLI Corp. 3,722 177,167 UICI 6,120 188,802 United America Indemnity Ltd., Class A (a) 7,900 144,807 ------------- 2,327,076 -------------
See Accompanying Notes to Financial Statements. 100
SHARES VALUE ------------- ------------- Common Stocks (continued) Real Estate (6.4%) Alexandria Real Estate Equities, Inc., REIT 2,130 $ 171,359 BioMed Realty Trust, Inc., REIT 4,750 120,793 Brandywine Realty Trust, REIT 5,530 179,172 Cousins Properties, Inc., REIT 4,590 149,634 EastGroup Properties, Inc., REIT 5,200 225,680 Equity One, Inc., REIT 6,800 161,840 Getty Realty Corp., REIT 5,500 165,165 Mid-America Apartment Communities, Inc., REIT 5,800 279,270 Nationwide Health Properties, Inc., REIT 9,000 225,720 PS Business Parks, Inc., REIT 6,000 278,580 Tanger Factory Outlet Centers, Inc., REIT 6,300 181,440 Universal Health Realty Income Trust, REIT 3,000 105,660 Urstadt Biddle Properties, Inc., Class A, REIT 6,600 123,420 ------------- 2,367,733 ------------- Health Care (9.2%) Health Care Equipment & Supplies (3.2%) Bio-Rad Laboratories, Inc., Class A (a) 2,700 162,081 Greatbatch, Inc. (a) 6,100 147,681 Haemonetics Corp. (a) 3,900 164,697 Invacare Corp. 3,850 162,278 STERIS Corp. 7,850 213,284 Sybron Dental Specialties, Inc. (a) 4,450 163,538 Varian, Inc. (a) 2,310 86,556 Viasys Healthcare, Inc. (a) 3,700 91,908 ------------- 1,192,023 ------------- Health Care Providers & Services (5.7%) Cross Country Healthcare, Inc. (a) 6,500 128,310 Genesis HealthCare Corp. (a) 5,100 229,347 Gentiva Health Services, Inc. (a) 9,000 173,610 Hooper Holmes, Inc. 17,100 71,820 Kindred Healthcare, Inc. (a) 9,200 338,008 OCA, Inc. (a) 13,400 22,244 Owens & Minor, Inc. 4,600 136,344 PAREXEL International Corp. (a) 8,400 166,908 Pediatrix Medical Group, Inc. (a) 4,200 329,364 RehabCare Group, Inc. (a) 4,000 93,200 Res-Care, Inc. (a) 8,016 118,877 Symbion, Inc. (a) 5,900 142,839 United Surgical Partners International, Inc. (a) 4,550 163,845 ------------- 2,114,716 ------------- Pharmaceuticals (0.3%) Perrigo Co. 6,606 91,823 -------------
See Accompanying Notes to Financial Statements. 101
SHARES VALUE ------------- ------------- Common Stocks (continued) Industrials (15.2%) Aerospace & Defense (2.6%) AAR Corp. (a) 9,635 $ 173,141 Esterline Technologies Corp. (a) 6,600 282,084 Kaman Corp., Class A 4,050 78,975 Moog, Inc., Class A (a) 2,240 70,717 Precision Castparts Corp. 3,900 350,922 ------------- 955,839 ------------- Air Freight & Logistics (0.3%) Ryder System, Inc. 3,100 120,869 ------------- Airlines (0.5%) MAIR Holdings, Inc. (a) 4,997 45,173 Skywest, Inc. 7,200 149,400 ------------- 194,573 ------------- Building Products (0.5%) NCI Building Systems, Inc. (a) 5,200 200,824 ------------- Commercial Services & Supplies (4.3%) ABM Industries, Inc. 7,100 139,160 Angelica Corp. 3,700 93,462 Casella Waste Systems, Inc., Class A (a) 15,000 202,650 CBIZ, Inc. (a) 9,042 41,141 Consolidated Graphics, Inc. (a) 6,700 285,420 Healthcare Services Group, Inc. 12,875 235,870 Imagistics International, Inc. (a) 7,400 222,888 NCO Group, Inc. (a) 4,600 93,748 Sourcecorp, Inc. (a) 4,600 101,154 TeleTech Holdings, Inc. (a) 11,100 90,465 United Stationers, Inc. (a) 1,570 81,405 ------------- 1,587,363 ------------- Construction & Engineering (1.4%) Dycom Industries, Inc. (a) 6,700 163,480 EMCOR Group, Inc. (a) 2,200 113,300 Washington Group International, Inc. (a) 4,300 231,942 ------------- 508,722 ------------- Electrical Equipment (1.3%) Genlyte Group, Inc. (a) 5,100 262,038 Woodward Governor Co. 2,500 224,275 ------------- 486,313 ------------- Machinery (2.1%) Briggs & Stratton Corp. 4,800 179,376 EnPro Industries, Inc. (a) 7,200 218,880 Harsco Corp. 5,100 307,275 Kadant, Inc. (a) 3,163 72,274 ------------- 777,805 -------------
See Accompanying Notes to Financial Statements. 102
SHARES VALUE ------------- ------------- Common Stocks (continued) Road & Rail (0.6%) Dollar Thrifty Automotive Group, Inc. (a) 2,200 $ 68,860 Werner Enterprises, Inc. 7,600 144,172 ------------- 213,032 ------------- Trading Companies & Distributors (1.6%) Hughes Supply, Inc. 7,110 202,066 Watsco, Inc. 7,900 374,144 ------------- 576,210 ------------- Information Technology (12.1%) Communications Equipment (1.1%) Anaren, Inc. (a) 9,100 131,495 Belden CDT, Inc. 4,350 96,570 Black Box Corp. 2,800 122,640 Tollgrade Communications, Inc. (a) 7,300 72,343 ------------- 423,048 ------------- Computers & Peripherals (1.0%) Electronics for Imaging, Inc. (a) 4,990 105,139 Imation Corp. 3,600 156,060 Intergraph Corp. (a) 2,656 101,008 ------------- 362,207 ------------- Electronic Equipment & Instruments (2.8%) Agilysys, Inc. 5,600 108,304 Anixter International, Inc. (a) 2,800 116,368 Benchmark Electronics, Inc. (a) 4,950 158,400 Brightpoint, Inc. (a) 10,500 254,625 MTS Systems Corp. 5,100 202,215 Vishay Intertechnology, Inc. (a) 15,200 213,104 ------------- 1,053,016 ------------- Internet Software & Services (0.5%) Digitas, Inc. (a) 5,720 64,522 Keynote Systems, Inc. (a) 8,800 116,248 ------------- 180,770 ------------- IT Services (1.5%) Acxiom Corp. 6,700 135,072 MAXIMUS, Inc. 3,110 118,740 MPS Group, Inc. (a) 25,000 296,500 ------------- 550,312 ------------- Semiconductors & Semiconductor Equipment (1.9%) ATMI, Inc. (a) 3,100 98,673 Exar Corp. (a) 8,600 136,955 Fairchild Semiconductor International, Inc. (a) 5,630 94,922 MEMC Electronic Materials, Inc. (a) 10,800 183,492 Standard Microsystems Corp. (a) 7,700 196,042 ------------- 710,084 -------------
See Accompanying Notes to Financial Statements. 103
SHARES VALUE ------------- ------------- Common Stocks (continued) Software (3.3%) Captaris, Inc. (a) 17,700 $ 64,959 Internet Security Systems, Inc. (a) 6,500 148,005 Lawson Software, Inc. (a) 8,700 47,937 MSC.Software Corp. (a) 11,300 164,415 Phoenix Technologies Ltd. (a) 7,490 50,932 PLATO Learning, Inc. (a) 13,100 106,765 SeaChange International, Inc. (a) 3,500 26,530 Sybase, Inc. (a) 7,200 153,216 Take-Two Interactive Software, Inc. (a) 4,650 114,436 THQ, Inc. (a) 3,100 108,438 Transaction Systems Architects, Inc. (a) 8,400 224,700 ------------- 1,210,333 ------------- Materials (7.3%) Chemicals (2.5%) Cytec Industries, Inc. 4,000 181,520 H.B. Fuller Co. 6,000 207,180 Minerals Technologies, Inc. 3,000 186,720 Schulman (A.), Inc. 8,000 151,040 Sensient Technologies Corp. 5,200 98,852 Stepan Co. 4,300 114,165 ------------- 939,477 ------------- Construction Materials (0.9%) Eagle Materials, Inc. 3,300 338,910 ------------- Containers & Packaging (1.3%) AptarGroup, Inc. 3,000 149,550 Greif, Inc., Class A 5,000 315,000 ------------- 464,550 ------------- Metals & Mining (1.9%) Alpha Natural Resources, Inc. (a) 5,730 160,440 AMCOL International Corp. 4,700 93,295 Carpenter Technology Corp. 1,800 112,752 Metal Management, Inc. 5,000 117,950 RTI International Metals, Inc. (a) 4,500 154,890 Worthington Industries, Inc. 4,620 81,682 ------------- 721,009 ------------- Paper & Forest Products (0.7%) Glatfelter 10,800 137,700 Mercer International, Inc. (a) 15,400 113,960 ------------- 251,660 ------------- Telecommunication Services (0.8%) Diversified Telecommunication Services (0.5%) North Pittsburgh Systems, Inc. 5,400 113,184 TALK America Holdings, Inc. (a) 5,354 46,794 ------------- 159,978 -------------
See Accompanying Notes to Financial Statements. 104
SHARES VALUE ------------- ------------- Common Stocks (continued) Wireless Telecommunication Services (0.3%) Price Communications Corp. (a) 6,930 $ 122,176 ------------- Utilities (3.9%) Electric Utilities (3.2%) ALLETE, Inc. 3,100 149,792 Central Vermont Public Service Corp. 7,500 139,500 CH Energy Group, Inc. 5,100 250,665 El Paso Electric Co. (a) 8,500 183,940 Maine & Maritimes Corp. 1,700 41,395 MGE Energy, Inc. 3,000 111,090 Otter Tail Corp. 4,300 124,270 Puget Energy, Inc. 7,400 173,012 ------------- 1,173,664 ------------- Gas Utilities (0.7%) Cascade Natural Gas Corp. 3,200 69,856 Northwest Natural Gas Co. 2,500 96,475 WGL Holdings, Inc. 2,600 89,570 ------------- 255,901 ------------- Total Investments (99.8%) (Cost of $25,832,071) (b) 36,905,184 Other Assets & Liabilities, Net (0.2%) 84,093 ------------- Net Assets (100.0%) $ 36,989,277 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $25,931,888. At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ---------- Financials 27.3% Industrials 15.2 Consumer Discretionary 13.3 Information Technology 12.1 Health Care 9.2 Materials 7.3 Energy 7.0 Utilities 3.9 Consumer Staples 3.7 Telecommunication Services 0.8 Other Assets & Liabilities, Net 0.2 ---------- 100.0% ==========
ACRONYM NAME -------------- ------------------------------------- REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements. 105 CMG SMALL/MID CAP FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (99.2%) Consumer Discretionary (17.4%) Auto Components (0.5%) Autoliv, Inc. 4,170 $ 185,773 ------------- Diversified Consumer Services (0.9%) Career Education Corp. (a) 4,200 162,918 Education Management Corp. (a) 5,590 194,252 ------------- 357,170 ------------- Hotels, Restaurants & Leisure (4.4%) Applebee's International, Inc. 10,760 285,247 Brinker International, Inc. (a) 5,600 229,040 Harrah's Entertainment, Inc. 2,530 199,212 Hilton Hotels Corp. 10,640 263,340 P.F. Chang's China Bistro, Inc. (a) 5,870 334,531 RARE Hospitality International, Inc. (a) 7,910 246,476 Scientific Games Corp., Class A (a) 5,020 137,448 ------------- 1,695,294 ------------- Household Durables (1.7%) Tempur-Pedic International, Inc. (a) 37,980 653,636 ------------- Internet & Catalog Retail (0.5%) Netflix, Inc. (a) 6,290 116,742 Provide Commerce, Inc. (a) 2,990 70,714 ------------- 187,456 ------------- Leisure Equipment & Products (0.9%) Marvel Enterprises, Inc. (a) 6,940 134,567 SCP Pool Corp. 6,280 228,843 ------------- 363,410 ------------- Media (2.7%) Getty Images, Inc. (a) 2,570 207,528 Grupo Televisa SA, ADR 4,330 285,650 XM Satellite Radio Holdings, Inc., Class A (a) 15,600 555,828 ------------- 1,049,006 ------------- Specialty Retail (5.8%) Abercrombie & Fitch Co., Class A 4,250 306,212 Aeropostale, Inc. (a) 5,670 169,250 Chico's FAS, Inc. (a) 5,230 209,775 Children's Place Retail Stores, Inc. (a) 4,660 212,962 Maidenform Brands, Inc. (a) 4,000 73,000 PETCO Animal Supplies, Inc. (a) 4,810 134,055 PETsMART, Inc. 7,770 231,158 Ross Stores, Inc. 5,370 142,305 Urban Outfitters, Inc. (a) 12,803 777,270 ------------- 2,255,987 -------------
See Accompanying Notes to Financial Statements. 106
SHARES VALUE ------------- ------------- Common Stocks (continued) Consumer Staples (3.3%) Food & Staples Retailing (0.3%) Rite Aid Corp. (a) 24,810 $ 111,397 ------------- Food Products (1.6%) Corn Products International, Inc. 19,200 462,144 Tyson Foods, Inc., Class A 7,800 145,392 ------------- 607,536 ------------- Household Products (0.4%) Central Garden & Pet Co. (a) 3,110 156,029 ------------- Personal Products (0.5%) Elizabeth Arden, Inc. (a) 9,110 219,460 ------------- Tobacco (0.5%) UST, Inc. 4,050 186,381 ------------- Energy (8.6%) Energy Equipment & Services (3.2%) Atwood Oceanics, Inc. (a) 1,710 116,571 FMC Technologies, Inc. (a) 5,880 213,150 Grant Prideco, Inc. (a) 3,000 96,300 Nabors Industries Ltd. (a) 4,500 294,525 National-Oilwell Varco, Inc. (a) 5,840 305,724 Tetra Technologies, Inc. (a) 5,570 222,076 ------------- 1,248,346 ------------- Oil, Gas & Consumable Fuels (5.4%) Arch Coal, Inc. 5,500 313,060 Cheniere Energy, Inc. (a) 7,870 267,501 EOG Resources, Inc. 3,200 195,520 KFx, Inc. (a) 7,650 132,116 Massey Energy Co. 4,610 199,382 Peabody Energy Corp. 5,480 360,255 Southwestern Energy Co. (a) 4,500 247,995 Teekay Shipping Corp. 7,910 363,939 ------------- 2,079,768 ------------- Financials (6.2%) Capital Markets (3.0%) Affiliated Managers Group, Inc. (a) 9,200 655,960 E*TRADE Financial Corp. (a) 12,410 192,479 Lazard Ltd., Class A (a) 12,290 293,239 ------------- 1,141,678 ------------- Commercial Banks (0.7%) Signature Bank (a) 8,960 269,069 -------------
See Accompanying Notes to Financial Statements. 107
SHARES VALUE ------------- ------------- Common Stocks (continued) Consumer Finance (0.3%) First Cash Financial Services, Inc. (a) 5,560 $ 132,606 ------------- Insurance (2.2%) Allmerica Financial Corp. (a) 7,370 287,430 Ambac Financial Group, Inc. 2,660 191,094 ProAssurance Corp. (a) 8,690 373,323 ------------- 851,847 ------------- Health Care (19.2%) Biotechnology (3.3%) Alexion Pharmaceuticals, Inc. (a) 6,870 178,895 Amylin Pharmaceuticals, Inc. (a) 24,880 464,261 Digene Corp. (a) 11,010 320,281 Neurocrine Biosciences, Inc. (a) 3,830 189,891 Rigel Pharmaceuticals, Inc. (a) 6,140 132,900 ------------- 1,286,228 ------------- Health Care Equipment & Supplies (5.2%) Gen-Probe, Inc. (a) 7,030 309,953 Haemonetics Corp. (a) 5,530 233,532 Kinetic Concepts, Inc. (a) 3,890 233,283 Nektar Therapeutics (a) 11,210 210,300 Possis Medical, Inc. (a) 12,800 149,760 ResMed, Inc. (a) 5,610 375,870 Thermo Electron Corp. (a) 8,300 247,838 Varian Medical Systems, Inc. 6,000 235,560 ------------- 1,996,096 ------------- Health Care Providers & Services (7.0%) AMERIGROUP Corp. (a) 1,730 59,945 AmSurg Corp. (a) 7,000 196,070 Centene Corp. (a) 2,160 63,288 Cerner Corp. (a) 2,530 190,813 Community Health Systems, Inc. (a) 4,090 157,915 DaVita, Inc. (a) 9,247 436,828 HealthExtras, Inc. (a) 31,160 619,772 IDX Systems Corp. (a) 8,830 282,560 Laboratory Corp. of America Holdings (a) 4,420 223,961 LHC Group, Inc. (a) 13,100 230,298 Matria Healthcare, Inc. (a) 3,200 113,088 United Surgical Partners International, Inc. (a) 3,705 133,417 ------------- 2,707,955 ------------- Pharmaceuticals (3.7%) Endo Pharmaceuticals Holdings, Inc. (a) 4,740 134,900 First Horizon Pharmaceutical Corp. (a) 6,940 147,683 Medicis Pharmaceutical Corp., Class A 13,420 455,207 NitroMed, Inc. (a) 6,510 151,292 Salix Pharmaceuticals Ltd. (a) 28,190 544,067 ------------- 1,433,149 -------------
See Accompanying Notes to Financial Statements. 108
SHARES VALUE ------------- ------------- Common Stocks (continued) Industrials (14.2%) Aerospace & Defense (2.6%) Armor Holdings, Inc. (a) 4,650 $ 190,092 BE Aerospace, Inc. (a) 18,100 317,293 Engineered Support Systems, Inc. 7,850 290,293 Rockwell Collins, Inc. 3,990 194,712 ------------- 992,390 ------------- Air Freight & Logistics (1.2%) C.H. Robinson Worldwide, Inc. 2,140 133,900 UTI Worldwide, Inc. 4,950 353,232 ------------- 487,132 ------------- Commercial Services & Supplies (3.2%) ChoicePoint, Inc. (a) 5,266 229,598 Huron Consulting Group, Inc. (a) 16,960 471,488 Resources Connection, Inc. (a) 9,880 296,400 Robert Half International, Inc. 7,200 244,008 ------------- 1,241,494 ------------- Construction & Engineering (0.5%) Jacobs Engineering Group, Inc. (a) 3,320 195,482 ------------- Electrical Equipment (0.8%) Rockwell Automation, Inc. 2,860 147,319 Roper Industries, Inc. 2,070 158,872 ------------- 306,191 ------------- Industrial Conglomerates (0.4%) Raven Industries, Inc. 6,000 158,520 ------------- Machinery (5.0%) Donaldson Co., Inc. 11,950 389,331 ESCO Technologies, Inc. (a) 720 78,926 IDEX Corp. 4,560 199,181 Joy Global, Inc. 11,090 455,466 Terex Corp. (a) 11,150 539,883 Wabtec Corp. 11,160 272,639 ------------- 1,935,426 ------------- Road & Rail (0.5%) Landstar System, Inc. 5,610 186,925 ------------- Information Technology (23.0%) Communications Equipment (5.3%) Comverse Technology, Inc. (a) 11,920 301,457 F5 Networks, Inc. (a) 9,370 395,226 Ixia (a) 15,440 304,786 Packeteer, Inc. (a) 28,960 350,705 SiRF Technology Holdings, Inc. (a) 32,440 708,814 ------------- 2,060,988 -------------
See Accompanying Notes to Financial Statements. 109
SHARES VALUE ------------- ------------- Common Stocks (continued) Computers & Peripherals (0.6%) Komag, Inc. (a) 7,000 $ 248,360 ------------- Electronic Equipment & Instruments (0.7%) Amphenol Corp., Class A 4,250 189,295 Itron, Inc. (a) 1,970 95,446 ------------- 284,741 ------------- Internet Software & Services (1.1%) Digital River, Inc. (a) 6,500 259,838 Equinix, Inc. (a) 3,420 151,745 ------------- 411,583 ------------- IT Services (5.3%) Affiliated Computer Services, Inc., Class A (a) 2,920 145,913 Alliance Data Systems Corp. (a) 8,030 341,837 Anteon International Corp. (a) 6,600 309,870 CACI International, Inc., Class A (a) 3,670 241,449 Cognizant Technology Solutions Corp., Class A (a) 6,620 324,910 DST Systems, Inc. (a) 2,340 118,778 Euronet Worldwide, Inc. (a) 13,270 390,337 Global Payments, Inc. 2,620 173,549 ------------- 2,046,643 ------------- Semiconductors & Semiconductor Equipment (3.6%) Broadcom Corp., Class A (a) 4,330 185,194 ChipMOS Technologies (Bermuda) Ltd. (a) 14,210 98,902 Hittite Microwave Corp. (a) 15,500 300,390 Marvell Technology Group Ltd. (a) 7,590 331,607 MEMC Electronic Materials, Inc. (a) 9,630 163,614 Microchip Technology, Inc. 3,710 115,270 PortalPlayer, Inc. (a) 5,910 141,840 Volterra Semiconductor Corp. (a) 4,240 49,226 ------------- 1,386,043 ------------- Software (6.4%) Amdocs Ltd. (a) 6,850 203,377 Autodesk, Inc. 3,530 120,691 Check Point Software Technologies Ltd. (a) 8,130 183,169 Epicor Software Corp. (a) 22,700 336,641 Hyperion Solutions Corp. (a) 2,520 118,591 Macromedia, Inc. (a) 5,480 220,022 Mercury Interactive Corp. (a) 5,250 206,692 Micromuse, Inc. (a) 30,000 169,500 NAVTEQ Corp. (a) 9,990 439,260 Parametric Technology Corp. (a) 46,870 323,403 Serena Software, Inc. (a) 7,810 160,269 ------------- 2,481,615 -------------
See Accompanying Notes to Financial Statements. 110
SHARES VALUE ------------- ------------- Common Stocks (continued) Materials (4.2%) Chemicals (3.0%) Airgas, Inc. 5,460 $ 161,070 OM Group, Inc. (a) 15,490 362,930 Potash Corp. of Saskatchewan, Inc. 6,130 653,213 ------------- 1,177,213 ------------- Metals & Mining (1.2%) Century Aluminum Co. (a) 4,830 118,190 Freeport-McMoRan Copper & Gold, Inc., Class B 3,890 156,689 Inco Ltd. 4,480 183,591 ------------- 458,470 ------------- Telecommunication Services (3.1%) Wireless Telecommunication Services (3.1%) Crown Castle International Corp. (a) 7,060 153,626 Dobson Communications Corp., Class A (a) 18,210 128,380 Millicom International Cellular SA (a) 15,000 318,600 NII Holdings, Inc. (a) 1,700 126,548 SBA Communications Corp., Class A (a) 9,900 164,241 SpectraSite, Inc. (a) 1,930 157,681 VimpelCom, ADR (a) 3,850 147,763 ------------- 1,196,839 ------------- Total Common Stocks (Cost of $32,203,525) 38,431,332 ------------- PAR ------------- Short-Term Obligation (0.0%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Note maturing 02/15/10, market value of $14,869 (repurchase proceeds $10,003) $ 10,000 10,000 ------------- Total Short-Term Obligation (Cost of $10,000) 10,000 ------------- Total Investments (99.2%) (Cost of $32,213,525) (b) 38,441,332 Other Assets & Liabilities, Net (0.8%) 313,547 ------------- Net Assets (100.0%) $ 38,754,879 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $32,387,362. See Accompanying Notes to Financial Statements. 111 At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ ---------- Information Technology 23.0% Health Care 19.2 Consumer Discretionary 17.4 Industrials 14.2 Energy 8.6 Financials 6.2 Materials 4.2 Consumer Staples 3.3 Telecommunication Services 3.1 Short-Term Obligation 0.0 Other Assets & Liabilities, Net 0.8 ---------- 100.0% ==========
ACRONYM NAME ---------------- ------------------------------ ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 112 CMG INTERNATIONAL STOCK FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE ------------- ------------- Common Stocks (96.6%) Consumer Discretionary (11.9%) Auto Components (1.3%) Compagnie Generale des Etablissements Michelin, Class B 7,800 $ 480,051 Continental AG 7,200 557,874 Denso Corp. 27,900 674,262 ------------- 1,712,187 ------------- Automobiles (2.2%) Nissan Motor Co., Ltd. 33,800 351,353 Renault SA 7,970 729,100 Toyota Motor Corp. 50,400 1,912,030 ------------- 2,992,483 ------------- Hotels, Restaurants & Leisure (1.0%) Accor SA 11,200 569,381 Carnival Corp. 9,600 503,040 Compass Group PLC 61,800 267,101 ------------- 1,339,522 ------------- Household Durables (2.7%) Daiwa House Industry Co., Ltd. 42,000 472,143 Koninklijke (Royal) Phillips Electronics NV 39,300 1,064,533 Matsushita Electric Industrial Co., Ltd. 49,000 796,156 Pioneer Corp. 13,100 191,648 Sekisui Chemical Co., Ltd. 60,000 387,187 Sharp Corp. 31,000 469,212 Sony Corp. 7,500 245,220 ------------- 3,626,099 ------------- Leisure Equipment & Products (0.9%) Fuji Photo Film Co., Ltd. 28,000 873,098 Sega Sammy Holdings, Inc. 6,200 383,554 ------------- 1,256,652 ------------- Media (2.6%) British Sky Broadcasting Group PLC 70,000 656,615 JC Decaux SA (a) 18,000 420,150 News Corp., Class B 20,800 360,672 Pearson PLC 124,220 1,483,755 Reed Elsevier PLC 27,800 256,644 Vivendi Universal SA 10,900 345,976 ------------- 3,523,812 ------------- Specialty Retail (0.4%) Kingfisher PLC 44,400 200,531 Yamada Denki Co., Ltd. 6,500 367,359 ------------- 567,890 ------------- Textiles, Apparel & Luxury Goods (0.8%) Burberry Group PLC 75,986 563,991 Swatch Group AG, Registered Shares 19,900 586,661 ------------- 1,150,652 -------------
See Accompanying Notes to Financial Statements. 113
SHARES VALUE ------------- ------------- Common Stocks (continued) Consumer Staples (9.6%) Beverages (1.5%) Diageo PLC 93,626 $ 1,291,406 SABMiller PLC 18,089 315,148 Scottish & Newcastle PLC 55,211 443,932 ------------- 2,050,486 ------------- Food & Staples Retailing (0.9%) FamilyMart Co., Ltd. 6,800 198,092 Lawson, Inc. 5,400 193,815 Tesco PLC 143,626 820,732 ------------- 1,212,639 ------------- Food Products (3.9%) Cadbury Schweppes PLC 33,900 326,051 Nestle SA, Registered Shares 11,304 3,098,212 Royal Numico NV (a) 17,234 726,356 Unilever PLC 113,520 1,096,699 ------------- 5,247,318 ------------- Household Products (1.4%) Kao Corp. 38,000 869,323 Reckitt Benckiser PLC 34,768 1,043,279 ------------- 1,912,602 ------------- Tobacco (1.9%) British American Tobacco PLC 42,453 847,624 Imperial Tobacco Group PLC 49,596 1,273,515 Japan Tobacco, Inc. 37 527,064 ------------- 2,648,203 ------------- Energy (9.3%) Energy Equipment & Services (1.0%) Saipem S.p.A. 50,400 748,225 Stolt Offshore SA (a) 56,200 647,146 ------------- 1,395,371 ------------- Oil, Gas & Consumable Fuels (8.3%) BG Group PLC 120,001 991,239 BP PLC, ADR 44,380 2,923,754 CNOOC Ltd. 1,087,000 754,811 EnCana Corp. 30,600 1,262,214 ENI S.p.A. 53,530 1,519,027 OMV AG 14,000 652,185 Royal Dutch Shell PLC, Class B 23,762 754,832 Total SA 9,730 2,433,716 ------------- 11,291,778 ------------- Financials (23.7%) Capital Markets (2.2%) Credit Suisse Group, Registered Shares 22,100 923,254 Deutsche Bank AG, Registered Shares 8,629 746,545 Nomura Holdings, Inc. 38,500 456,358 UBS AG, Registered Shares 10,100 828,498 ------------- 2,954,655 -------------
See Accompanying Notes to Financial Statements. 114
SHARES VALUE ------------- ------------- Common Stocks (continued) Commercial Banks (14.5%) ABN AMRO Holding NV 16,976 $ 423,892 Anglo Irish Bank Corp., PLC 63,520 855,412 Australia & New Zealand Banking Group Ltd. 56,700 919,506 Banco Bilbao Vizcaya Argentaria SA 54,900 924,045 Banco de Sabadell SA 30,915 788,478 Banco Popolare di Verona e Novara 31,300 559,784 Banco Popular Espanol SA 77,800 928,612 Bank of Ireland 46,073 763,695 Barclays PLC 109,790 1,072,891 BNP Paribas SA 13,037 940,800 DNB NOR ASA 99,000 1,032,894 HBOS PLC 38,300 582,290 HSBC Holdings PLC 131,600 2,134,198 KBC Groep NV 4,335 345,107 Mitsubishi Tokyo Financial Group, Inc. 96 806,610 Mitsui Trust Holdings, Inc. 20,000 201,389 Mizuho Financial Group, Inc. 201 902,074 National Bank of Greece SA 16,687 610,881 Resona Holdings, Inc. (a)(b) 142,000 249,101 Royal Bank of Scotland Group PLC 64,460 1,916,729 Skandinaviska Enskilda Banken AB, Class A 33,800 599,981 Sumitomo Mitsui Financial Group, Inc. 138 910,265 UFJ Holdings, Inc. (a) 51 261,894 United Overseas Bank Ltd. 113,000 1,025,348 ------------- 19,755,876 ------------- Consumer Finance (0.9%) Aiful Corp. 6,250 451,125 ORIX Corp. 2,800 414,257 Takefuji Corp. 5,200 337,018 ------------- 1,202,400 ------------- Diversified Financial Services (1.3%) Fortis 15,553 454,307 ING Groep NV 30,150 911,306 Suncorp-Metway Ltd. 25,500 394,690 ------------- 1,760,303 ------------- Insurance (3.0%) Aegon NV 22,173 317,048 Allianz AG, Registered Shares 5,032 637,758 AXA 22,100 602,194 Irish Life & Permanent PLC 24,311 439,410 Mitsui Sumitomo Insurance Co., Ltd. 82,000 725,096 Muenchener Rueckversicherungs-Gesellschaft AG, Registered Shares 3,600 419,405 QBE Insurance Group Ltd. 31,400 401,571 Sampo Oyj, Class A 31,000 474,633 ------------- 4,017,115 ------------- Real Estate (1.8%) CapitaLand Ltd. 127,000 215,885 Sun Hung Kai Properties Ltd. 65,000 669,884
See Accompanying Notes to Financial Statements. 115
SHARES VALUE ------------- ------------- Common Stocks (continued) Real Estate (continued) Swire Pacific Ltd., Class A 126,500 $ 1,206,023 Wharf Holdings Ltd. 114,000 425,279 ------------- 2,517,071 ------------- Health Care (10.7%) Health Care Equipment & Supplies (1.4%) GN Store Nord A/S 41,000 455,817 Smith & Nephew PLC 116,454 1,105,260 Terumo Corp. 12,500 350,470 ------------- 1,911,547 ------------- Pharmaceuticals (9.3%) Astellas Pharma, Inc. 9,700 315,355 AstraZeneca PLC 51,148 2,315,737 Eisai Co., Ltd. 12,400 421,015 GlaxoSmithKline PLC 120,454 2,836,341 Novartis AG, Registered Shares 25,357 1,231,902 Roche Holding AG, Genusschein 6,961 945,180 Sanofi-Aventis 19,762 1,707,752 Schering AG 4,500 282,774 Shire Pharmaceuticals Group PLC 52,700 610,843 Takeda Pharmaceutical Co., Ltd. 22,600 1,156,791 Teva Pharmaceutical Industries Ltd., ADR 28,700 901,180 ------------- 12,724,870 ------------- Industrials (10.7%) Aerospace & Defense (0.4%) Singapore Technologies Engineering Ltd. 307,000 485,218 ------------- Air Freight & Logistics (0.3%) Deutsche Post AG, Registered Shares 16,700 413,958 ------------- Building Products (0.7%) Nippon Sheet Glass Co., Ltd. 111,000 458,472 Wienerberger AG 12,266 569,187 ------------- 1,027,659 ------------- Commercial Services & Supplies (0.4%) Randstad Holding NV 6,600 268,687 Securitas AB, Class B 20,600 348,185 ------------- 616,872 ------------- Construction & Engineering (1.7%) Shimizu Corp. 128,000 610,594 Vinci SA 20,556 1,665,841 ------------- 2,276,435 ------------- Electrical Equipment (0.9%) ABB Ltd. (a) 79,100 537,152 Mitsubishi Electric Corp. 141,000 740,095 ------------- 1,277,247 -------------
See Accompanying Notes to Financial Statements. 116
SHARES VALUE ------------- ------------- Common Stocks (continued) Industrial Conglomerates (2.4%) Hutchison Whampoa Ltd. 97,000 $ 944,609 Keppel Corp., Ltd. 47,000 354,609 SembCorp Industries Ltd. 250,040 412,826 Siemens AG, Registered Shares 6,845 527,705 Smiths Group PLC 58,425 982,590 ------------- 3,222,339 ------------- Machinery (1.2%) Atlas Copco AB, Class B 39,300 603,772 Komatsu Ltd. 110,000 1,038,623 ------------- 1,642,395 ------------- Marine (0.2%) Kawasaki Kisen Kaisha Ltd. 44,000 270,172 ------------- Road & Rail (1.6%) Canadian National Railway Co. 5,245 347,866 Canadian Pacific Railway Ltd. 16,900 656,083 ComfortDelGro Corp., Ltd. 594,000 559,405 East Japan Railway Co. 121 592,646 ------------- 2,156,000 ------------- Trading Companies & Distributors (0.6%) Mitsubishi Corp. 54,300 776,179 ------------- Transportation Infrastructure (0.3%) BAA PLC 34,040 360,683 ------------- Information Technology (7.0%) Communications Equipment (1.6%) Nokia Oyj 64,050 1,022,198 Tandberg ASA 27,100 307,116 Telefonaktiebolaget LM Ericsson, ADR 23,900 821,204 ------------- 2,150,518 ------------- Computers & Peripherals (0.5%) Toshiba Corp. 164,000 637,852 ------------- Electronic Equipment & Instruments (0.7%) HOYA Corp. 4,200 518,180 TDK Corp. 6,200 426,336 ------------- 944,516 ------------- Internet Software & Services (0.2%) NIWS Co., Ltd. 250 318,200 ------------- Office Electronics (0.4%) Canon, Inc. 11,500 566,153 -------------
See Accompanying Notes to Financial Statements. 117
SHARES VALUE ------------- ------------- Common Stocks (continued) Semiconductors & Semiconductor Equipment (1.7%) Advantest Corp. 4,400 $ 350,451 ARM Holdings PLC 178,200 371,932 Marvell Technology Group Ltd. (a) 10,500 458,745 Samsung Electronics Co., Ltd. 1,520 835,561 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 41,265 354,465 ------------- 2,371,154 ------------- Software (1.9%) Cognos, Inc. (a) 17,600 688,512 Sage Group PLC 224,300 910,963 SAP AG 5,761 991,093 ------------- 2,590,568 ------------- Materials (3.2%) Chemicals (3.2%) BASF AG 6,102 432,699 Bayer AG 13,200 471,195 Novozymes A/S, Class B 8,650 441,248 Shin-Etsu Chemical Co., Ltd. 15,400 583,944 Solvay SA, Class A 3,600 388,680 Sumitomo Chemical Co., Ltd. 146,000 741,518 Syngenta AG (a) 8,230 857,397 Teijin Ltd. 103,000 470,387 ------------- 4,387,068 ------------- Telecommunication Services (6.0%) Diversified Telecommunication Services (2.7%) Deutsche Telekom AG, Registered Shares 63,009 1,250,006 France Telecom SA 27,920 860,280 Koninklijke (Royal) KPN NV 33,594 292,090 Nippon Telegraph & Telephone Corp. 101 444,062 Portugal Telecom, SGPS, SA, Registered Shares 27,400 261,642 Singapore Telecommunications Ltd. 296,000 492,605 ------------- 3,600,685 ------------- Wireless Telecommunication Services (3.3%) China Mobile (Hong Kong) Ltd. 195,000 785,512 NTT DoCoMo, Inc. 267 413,479 O2 PLC (a) 138,900 339,582 Vodafone Group PLC 1,161,350 2,986,587 ------------- 4,525,160 ------------- Utilities (4.5%) Electric Utilities (2.1%) E.ON AG 10,198 944,746 Fortum Oyj 39,800 727,471 Scottish & Southern Energy PLC 19,500 335,016 Tokyo Electric Power Co., Inc. 38,400 919,054 ------------- 2,926,287 -------------
See Accompanying Notes to Financial Statements. 118
SHARES VALUE ------------- ------------- Common Stocks (continued) Gas Utilities (0.5%) Tokyo Gas Co., Ltd. 176,000 $ 640,872 ------------- Multi-Utilities (1.9%) National Grid PLC 80,800 742,811 RWE AG 10,000 668,236 Veolia Environnement 31,500 1,219,976 ------------- 2,631,023 ------------- Total Common Stocks (Cost of $114,712,230) 131,586,744 ------------- Investment Companies (0.8%) iShares MSCI Malaysia Index Fund 48,500 360,840 iShares MSCI Taiwan Index Fund 59,400 727,650 ------------- Total Investment Companies (Cost of $1,056,486) 1,088,490 ------------- Preferred Stock (0.6%) Consumer Discretionary (0.6%) Automobiles (0.6%) Porsche AG 1,054 834,073 ------------- Total Preferred Stock (Cost of $672,317) 834,073 ------------- PAR ------------- Short-Term Obligation (1.8%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Note maturing 02/15/10, market value of $2,448,388 (repurchase proceeds $2,400,634) $ 2,400,000 2,400,000 ------------- Total Short-Term Obligation (Cost of $2,400,000) 2,400,000 ------------- Total Investments (99.8%) (Cost of $118,841,033) (c) 135,909,307 Other Assets & Liabilities, Net (0.2%) 234,921 ------------- Net Assets (100.0%) $ 136,144,228 =============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (c) Cost for federal income tax purposes is $118,955,011. See Accompanying Notes to Financial Statements. 119 The Fund invested in the following countries at July 31, 2005:
SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY (UNAUDITED) VALUE INVESTMENTS -------------------------- ------------- ------------- United Kingdom $ 35,161,302 25.8% Japan 28,387,600 20.9 France 11,975,217 8.8 Germany 9,178,069 6.7 Switzerland 9,008,257 6.6 Hong Kong 4,786,118 3.5 United States** 4,307,907 3.2 Netherlands 4,003,911 2.9 Singapore 3,545,895 2.6 Canada 2,954,675 2.2 Italy 2,827,036 2.1 Spain 2,641,135 1.9 Sweden 2,373,142 1.7 Finland 2,224,302 1.6 Ireland 2,058,517 1.5 Australia 1,715,767 1.3 Norway 1,340,010 1.0 Austria 1,221,372 0.9 Belgium 1,188,095 0.9 Israel 901,180 0.7 Denmark 897,065 0.7 South Korea 835,561 0.6 Luxembourg 647,146 0.5 Greece 610,881 0.5 Panama 503,040 0.4 Taiwan 354,465 0.3 Portugal 261,642 0.2 ------------- ------------- $ 135,909,307 100.0% ============= =============
** Includes short-term obligation. Certain securities are listed by country of underlying exposure but may trade predominantly on other exchanges.
ACRONYM NAME ---------------- --------------------------------- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 120 This page is intentionally left blank. STATEMENTS OF ASSETS AND LIABILITIES July 31, 2005
CMG ENHANCED CMG CMG S&P 500(R) LARGE CAP LARGE CAP INDEX FUND GROWTH FUND VALUE FUND -------------- -------------- -------------- ASSETS: Investments, at identified cost $ 79,457,915 $ 36,258,489 $ 33,346,325 -------------- -------------- -------------- Investments, at value $ 91,557,544 $ 40,011,639 $ 38,691,176 Cash 633 258 192 Foreign currency (cost of $83 and $41,792, respectively) - - - Receivable for: Investments sold - 820,841 - Interest 123 430 89 Dividends 104,590 19,403 71,472 Foreign tax reclaims - 1,243 - Expense reimbursement due from Investment Advisor 8,799 8,337 8,468 Reimbursements due from Investment Advisor - - 1,054 Deferred Trustees' compensation plan 1,715 1,464 1,500 Other assets 1,761 911 732 -------------- -------------- -------------- Total assets 91,675,165 40,864,526 38,774,683 -------------- -------------- -------------- LIABILITIES: Payable to custodian bank - - - Payable for: Investments purchased - 508,724 - Fund shares repurchased - - - Investment advisory fee 18,585 16,809 16,160 Trustees' fees - - - Audit fee 21,388 25,798 25,798 Trustee legal counsel fees 410 210 - Deferred Trustees' fees 1,715 1,464 1,500 -------------- -------------- -------------- Total liabilities 42,098 553,005 43,458 -------------- -------------- -------------- NET ASSETS $ 91,633,067 $ 40,311,521 $ 38,731,225 ============== ============== ============== NET ASSETS consist of: Paid-in-capital $ 76,296,892 $ 35,236,737 $ 30,163,829 Undistributed net investment income 821,661 140,220 482,730 Accumulated net investment loss - - - Accumulated net realized gain 2,414,885 1,181,414 2,739,815 Net unrealized appreciation (depreciation) on: Investments 12,099,629 3,753,150 5,344,851 Foreign currency translations - - - -------------- -------------- -------------- NET ASSETS $ 91,633,067 $ 40,311,521 $ 38,731,225 ============== ============== ============== Shares of capital stock outstanding 6,790,910 3,458,931 3,088,670 ============== ============== ============== Net asset value, offering and redemption price per share $ 13.49 $ 11.65 $ 12.54 ============== ============== ==============
See Accompanying Notes to Financial Statements. 122
CMG CMG CMG MID CAP MID CAP SMALL CAP GROWTH FUND VALUE FUND GROWTH FUND -------------- -------------- -------------- ASSETS: Investments, at identified cost $ 20,729,084 $ 16,966,189 $ 33,378,737 -------------- -------------- -------------- Investments, at value $ 24,834,574 $ 20,931,493 $ 38,481,592 Cash 546 - - Foreign currency (cost of $83 and $41,792, respectively) - - - Receivable for: Investments sold 157,847 589,590 449,198 Interest 33 285 360 Dividends 4,600 11,940 1,106 Foreign tax reclaims - 138 - Expense reimbursement due from Investment Advisor 7,286 9,690 8,419 Reimbursements due from Investment Advisor - - - Deferred Trustees' compensation plan 1,407 1,390 1,481 Other assets 781 793 903 -------------- -------------- -------------- Total assets 25,007,074 21,545,319 38,943,059 -------------- -------------- -------------- LIABILITIES: Payable to custodian bank - 13,940 38,036 Payable for: Investments purchased 85,546 213,464 208,420 Fund shares repurchased - - - Investment advisory fee 13,505 13,292 24,282 Trustees' fees - - - Audit fee 25,798 25,798 25,798 Trustee legal counsel fees 110 140 210 Deferred Trustees' fees 1,407 1,390 1,481 -------------- -------------- -------------- Total liabilities 126,366 268,024 298,227 -------------- -------------- -------------- NET ASSETS $ 24,880,708 $ 21,277,295 $ 38,644,832 ============== ============== ============== NET ASSETS consist of: Paid-in-capital $ 20,753,608 $ 15,277,539 $ 31,856,852 Undistributed net investment income - 86,708 - Accumulated net investment loss (1,732) - (1,969) Accumulated net realized gain 23,342 1,947,732 1,687,094 Net unrealized appreciation (depreciation) on: Investments 4,105,490 3,965,304 5,102,855 Foreign currency translations - 12 - NET ASSETS $ 24,880,708 $ 21,277,295 $ 38,644,832 ============== ============== ============== Shares of capital stock outstanding 1,757,997 1,402,163 2,850,072 ============== ============== ============== Net asset value, offering and redemption price per share $ 14.15 $ 15.17 $ 13.56 ============== ============== ============== CMG CMG CMG SMALL CAP SMALL/MID INTERNATIONAL VALUE FUND CAP FUND STOCK FUND -------------- -------------- -------------- ASSETS: Investments, at identified cost $ 25,832,071 $ 32,213,525 $ 118,841,033 -------------- -------------- -------------- Investments, at value $ 36,905,184 $ 38,441,332 $ 135,909,307 Cash 7,911 191,945 808 Foreign currency (cost of $83 and $41,792, respectively) - 84 41,880 Receivable for: Investments sold 204,418 1,161,228 454,050 Interest - 3 634 Dividends 23,918 1,987 131,878 Foreign tax reclaims - - 58,066 Expense reimbursement due from Investment Advisor 14,491 1,238 6,084 Reimbursements due from Investment Advisor - - - Deferred Trustees' compensation plan 1,530 1,716 2,439 Other assets 1,727 168 944 -------------- -------------- -------------- Total assets 37,159,179 39,799,701 136,606,090 -------------- -------------- -------------- LIABILITIES: Payable to custodian bank - - - Payable for: Investments purchased 115,154 992,408 344,108 Fund shares repurchased - - 4,154 Investment advisory fee 24,128 24,091 84,348 Trustees' fees - 248 - Audit fee 29,036 25,030 25,319 Trustee legal counsel fees 54 1,329 1,494 Deferred Trustees' fees 1,530 1,716 2,439 -------------- -------------- -------------- Total liabilities 169,902 1,044,822 461,862 -------------- -------------- -------------- NET ASSETS $ 36,989,277 $ 38,754,879 $ 136,144,228 ============== ============== ============== NET ASSETS consist of: Paid-in-capital $ 22,968,248 $ 32,231,547 $ 109,105,431 Undistributed net investment income 169,604 - 1,525,484 Accumulated net investment loss - (2,107) - Accumulated net realized gain 2,778,312 297,632 8,451,522 Net unrealized appreciation (depreciation) on: Investments 11,073,113 6,227,807 17,068,274 Foreign currency translations - - (6,483) -------------- -------------- -------------- NET ASSETS $ 36,989,277 $ 38,754,879 $ 136,144,228 ============== ============== ============== Shares of capital stock outstanding 2,302,585 3,372,256 9,895,613 ============== ============== ============== Net asset value, offering and redemption price per share $ 16.06 $ 11.49 $ 13.76 ============== ============== ==============
See Accompanying Notes to Financial Statements. 123 STATEMENTS OF OPERATIONS For the Year Ended July 31, 2005
CMG ENHANCED CMG CMG S&P 500(R) LARGE CAP LARGE CAP INDEX FUND GROWTH FUND VALUE FUND -------------- -------------- -------------- NET INVESTMENT INCOME: Income: Dividends $ 2,138,419 $ 606,373 $ 1,144,820 Interest 11,826 31,987 9,875 Foreign taxes withheld - (5,620) (6,900) -------------- -------------- -------------- Total income 2,150,245 632,740 1,147,795 -------------- -------------- -------------- Expenses: Investment advisory fee 248,671 201,910 231,616 Trustees' fees 6,130 6,206 6,333 Audit fee 31,146 21,278 22,978 Trustee legal counsel fees 3,998 1,567 1,850 Non-recurring costs (See Note 10) 1,828 720 839 -------------- -------------- -------------- Total expenses 291,773 231,681 263,616 Expense reimbursement from Investment Advisor (41,274) (29,051) (31,161) Reimbursement due from Investment Advisor (see Note 9) - - (1,054) Non-recurring costs assumed by Investment Advisor (See Note 10) (1,828) (720) (839) -------------- -------------- -------------- Net expenses 248,671 201,910 230,562 -------------- -------------- -------------- Net investment income (loss) 1,901,574 430,830 917,233 -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 2,731,812 2,173,562 2,822,819 Foreign currency transactions - - - -------------- -------------- -------------- Net realized gain 2,731,812 2,173,562 2,822,819 -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on: Investments 9,378,890 2,991,580 2,693,045 Foreign currency translations - - - Foreign capital gains tax - - - -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) 9,378,890 2,991,580 2,693,045 -------------- -------------- -------------- Net gain 12,110,702 5,165,142 5,515,864 -------------- -------------- -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 14,012,276 $ 5,595,972 $ 6,433,097 -------------- -------------- --------------
See Accompanying Notes to Financial Statements. 124
CMG CMG CMG MID CAP MID CAP SMALL CAP GROWTH FUND VALUE FUND GROWTH FUND -------------- -------------- -------------- NET INVESTMENT INCOME: Income: Dividends $ 80,513 $ 327,291 $ 70,657 Interest 21,132 10,788 17,142 Foreign taxes withheld (911) (522) (110) -------------- -------------- -------------- Total income 100,734 337,557 87,689 -------------- -------------- -------------- Expenses: Investment advisory fee 142,975 160,130 297,930 Trustees' fees 5,790 5,841 6,134 Audit fee 35,955 37,656 37,656 Trustee legal counsel fees 478 621 1,417 Non-recurring costs (See Note 10) 369 419 672 -------------- -------------- -------------- Total expenses 185,567 204,667 343,809 Expense reimbursement from Investment Advisor (42,271) (44,218) (45,275) Reimbursement due from Investment Advisor (see Note 9) - - - Non-recurring costs assumed by Investment Advisor (See Note 10) (369) (419) (672) -------------- -------------- -------------- Net expenses 142,927 160,030 297,862 -------------- -------------- -------------- Net investment income (loss) (42,193) 177,527 (210,173) -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 1,198,457 2,034,375 2,188,414 Foreign currency transactions - (18) - -------------- -------------- -------------- Net realized gain 1,198,457 2,034,357 2,188,414 -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on: Investments 3,842,377 2,345,264 4,715,850 Foreign currency translations - 12 - Foreign capital gains tax - - - -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) 3,842,377 2,345,276 4,715,850 -------------- -------------- -------------- Net gain 5,040,834 4,379,633 6,904,264 -------------- -------------- -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,998,641 $ 4,557,160 $ 6,694,091 -------------- -------------- -------------- CMG CMG CMG SMALL CAP SMALL/MID INTERNATIONAL VALUE FUND CAP FUND STOCK FUND -------------- -------------- -------------- NET INVESTMENT INCOME: Income: Dividends $ 637,803 $ 130,778 $ 3,602,641 Interest 3,682 38,092 86,097 Foreign taxes withheld - (1,369) (295,581) -------------- -------------- -------------- Total income 641,485 167,501 3,393,157 -------------- -------------- -------------- Expenses: Investment advisory fee 327,139 329,249 1,143,795 Trustees' fees 6,978 7,587 7,727 Audit fee 40,894 27,740 32,361 Trustee legal counsel fees 1,317 2,304 7,499 Non-recurring costs (See Note 10) 748 802 2,779 -------------- -------------- -------------- Total expenses 377,076 367,682 1,194,161 Expense reimbursement from Investment Advisor (49,189) (37,358) (47,587) Reimbursement due from Investment Advisor (see Note 9) - - - Non-recurring costs assumed by Investment Advisor (See Note 10) (748) (802) (2,779) -------------- -------------- -------------- Net expenses 327,139 329,522 1,143,795 -------------- -------------- -------------- Net investment income (loss) 314,346 (162,021) 2,249,362 -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 3,348,725 12,002,485 13,316,946 Foreign currency transactions - - (358,520) -------------- -------------- -------------- Net realized gain 3,348,725 12,002,485 12,958,426 -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on: Investments 5,239,285 (736,986) 9,026,289 Foreign currency translations - - (9,628) Foreign capital gains tax - - 53,956 -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) 5,239,285 (736,986) 9,070,617 -------------- -------------- -------------- Net gain 8,588,010 11,265,499 22,029,043 -------------- -------------- -------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 8,902,356 $ 11,103,478 $ 24,278,405 -------------- -------------- --------------
See Accompanying Notes to Financial Statements. 125 STATEMENTS OF CHANGES IN NET ASSETS
CMG ENHANCED S&P 500(R) INDEX FUND -------------------------------- YEAR ENDED JULY 31, -------------------------------- 2005 2004 -------------- -------------- Operations: Net investment income $ 1,901,574 $ 885,309 Net realized gain on investments 2,731,812 582,070 Net change in unrealized appreciation (depreciation) on investments 9,378,890 2,619,440 -------------- -------------- Net increase from operations 14,012,276 4,086,819 Distributions declared to shareholders: From net investment income (1,713,416) (232,474) From net realized gains (896,196) (40,302) -------------- -------------- Total distributions declared to shareholders (2,609,612) (272,776) Share transactions: Subscriptions 17,245,602 94,353,306 Distributions reinvested 408,128 29,758 Redemptions (35,670,610) (9,084,292) -------------- -------------- Net increase (decrease) in share transactions (18,016,880) 85,298,772 -------------- -------------- Net increase (decrease) in net assets (6,614,216) 89,112,815 NET ASSETS: Beginning of period 98,247,283 9,134,468 -------------- -------------- End of period $ 91,633,067 $ 98,247,283 ============== ============== Undistributed net investment income, at end of period $ 821,661 $ 665,116 ============== ============== Change in shares: Subscriptions 1,353,553 8,102,596 Issued for distributions reinvested 31,274 2,509 Redemptions (2,804,223) (746,472) -------------- -------------- Net increase (decrease) (1,419,396) 7,358,633 -------------- --------------
See Accompanying Notes to Financial Statements. 126 STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG LARGE CAP LARGE CAP GROWTH FUND VALUE FUND -------------------------------- -------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED JULY 31, JULY 31, JULY 31, JULY 31, 2005 2004 (a) 2005 2004 (a) -------------- -------------- -------------- -------------- Operations: Net investment income $ 430,830 $ 91,165 $ 917,233 $ 572,398 Net realized gain (loss) on investments 2,173,562 (998,388) 2,822,819 43,501 Net change in unrealized appreciation (depreciation) on investments 2,991,580 761,570 2,693,045 2,651,806 -------------- -------------- -------------- -------------- Net increase (decrease) from operations 5,595,972 (145,653) 6,433,097 3,267,705 Distributions declared to shareholders: From net investment income (349,571) (25,964) (908,008) (82,818) From net realized gains - - (142,837) - -------------- -------------- -------------- -------------- Total distributions declared to shareholders (349,571) (25,964) (1,050,845) (82,818) Share transactions: Subscriptions 4,995,496 45,852,862 2,725,323 49,285,154 Distributions reinvested 60,880 4,175 327,447 14,274 Redemptions (10,674,833) (5,001,843) (17,558,515) (4,629,597) -------------- -------------- -------------- -------------- Net increase (decrease) in share transactions (5,618,457) 40,855,194 (14,505,745) 44,669,831 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (372,056) 40,683,577 (9,123,493) 47,854,718 NET ASSETS: Beginning of period 40,683,577 - 47,854,718 - -------------- -------------- -------------- -------------- End of period $ 40,311,521 $ 40,683,577 $ 38,731,225 $ 47,854,718 ============== ============== ============== ============== Undistributed net investment income, at end of period $ 140,220 $ 65,201 $ 482,730 $ 489,677 ============== ============== ============== ============== Change in shares: Subscriptions 458,901 4,440,392 227,396 4,742,377 Issued for distributions reinvested 5,349 399 27,061 1,333 Redemptions (974,348) (471,762) (1,480,049) (429,448) -------------- -------------- -------------- -------------- Net increase (decrease) (510,098) 3,969,029 (1,225,592) 4,314,262 -------------- -------------- -------------- --------------
(a) The Fund commenced investment operations on September 10, 2003. See Accompanying Notes to Financial Statements. 127 STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG MID CAP MID CAP GROWTH FUND VALUE FUND -------------------------------- -------------------------------- YEAR ENDED JULY 31, YEAR ENDED JULY 31, -------------------------------- -------------------------------- 2005 2004 2005 2004 -------------- -------------- -------------- -------------- Operations: Net investment income (loss) $ (42,193) $ (51,797) $ 177,527 $ 80,641 Net realized gain (loss) on investments and foreign currency transactions 1,198,457 (1,172,749) 2,034,357 75,700 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations 3,842,377 146,764 2,345,276 1,512,473 -------------- -------------- -------------- -------------- Net increase (decrease) from operations 4,998,641 (1,077,782) 4,557,160 1,668,814 Distributions declared to shareholders: From net investment income - - (147,310) (25,250) From net realized gains - (6,844) (163,069) (2,382) -------------- -------------- -------------- -------------- Total distributions declared to shareholders - (6,844) (310,379) (27,632) Share transactions: Subscriptions 6,916,364 20,789,926 1,333,206 21,123,853 Distributions reinvested - 2,911 93,631 4,042 Redemptions (6,317,811) (2,585,860) (6,390,522) (3,425,821) -------------- -------------- -------------- -------------- Net increase (decrease) in share transactions 598,553 18,206,977 (4,963,685) 17,702,074 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets 5,597,194 17,122,351 (716,904) 19,343,256 NET ASSETS: Beginning of period 19,283,514 2,161,163 21,994,199 2,650,943 -------------- -------------- -------------- -------------- End of period $ 24,880,708 $ 19,283,514 $ 21,277,295 $ 21,994,199 ============== ============== ============== ============== Undistributed net investment income, at end of period $ - $ - $ 86,708 $ 57,377 ============== ============== ============== ============== Accumulated net investment loss, at end of period $ (1,732) $ (2,391) $ - $ - ============== ============== ============== ============== Change in shares: Subscriptions 523,196 1,764,371 99,662 1,773,133 Issued for distributions reinvested - 241 6,769 336 Redemptions (511,129) (216,392) (452,689) (273,086) -------------- -------------- -------------- -------------- Net increase (decrease) 12,067 1,548,220 (346,258) 1,500,383 -------------- -------------- -------------- --------------
See Accompanying Notes to Financial Statements. 128 STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG SMALL CAP SMALL CAP GROWTH FUND VALUE FUND -------------------------------- -------------------------------- YEAR ENDED JULY 31, YEAR ENDED JULY 31, -------------------------------- -------------------------------- 2005 2004 2005 2004 -------------- -------------- -------------- -------------- Operations: Net investment income (loss) $ (210,173) $ (186,093) $ 314,346 $ 282,800 Net realized gain on investments 2,188,414 3,236,594 3,348,725 2,739,432 Net change in unrealized appreciation (depreciation) on investments 4,715,850 (1,228,396) 5,239,285 3,889,062 -------------- -------------- -------------- -------------- Net increase from operations 6,694,091 1,822,105 8,902,356 6,911,294 Distributions declared to shareholders: From net investment income - - (284,580) (146,373) From net realized gains (2,288,048) (1,853,636) (2,878,862) (557,335) -------------- -------------- -------------- -------------- Total distributions declared to shareholders (2,288,048) (1,853,636) (3,163,442) (703,708) Share transactions: Subscriptions 7,038,718 20,340,250 4,687,869 22,163,080 Distributions reinvested 1,423,106 1,248,755 1,901,545 445,442 Redemptions (9,950,497) (6,836,214) (15,695,410) (9,816,077) -------------- -------------- -------------- -------------- Net increase (decrease) in share transactions (1,488,673) 14,752,791 (9,105,996) 12,792,445 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets 2,917,370 14,721,260 (3,367,082) 19,000,031 NET ASSETS: Beginning of period 35,727,462 21,006,202 40,356,359 21,356,328 -------------- -------------- -------------- -------------- End of period $ 38,644,832 $ 35,727,462 $ 36,989,277 $ 40,356,359 ============== ============== ============== ============== Undistributed net investment income, at end of period $ - $ - $ 169,604 $ 148,785 ============== ============== ============== ============== Accumulated net investment loss, at end of period $ (1,969) $ (510) $ - $ - ============== ============== ============== ============== Change in shares: Subscriptions 556,247 1,583,555 322,487 1,716,774 Issued for distributions reinvested 108,303 100,382 124,773 33,618 Redemptions (793,968) (526,058) (1,045,818) (740,106) -------------- -------------- -------------- -------------- Net increase (decrease) (129,418) 1,157,879 (598,558) 1,010,286 -------------- -------------- -------------- --------------
See Accompanying Notes to Financial Statements. 129 STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG SMALL/MID INTERNATIONAL CAP FUND STOCK FUND -------------------------------- -------------------------------- YEAR ENDED JULY 31, YEAR ENDED JULY 31, -------------------------------- -------------------------------- 2005 2004 2005 2004 -------------- -------------- -------------- -------------- Operations: Net investment income (loss) $ (162,021) $ (369,067) $ 2,249,362 $ 1,329,857 Net realized gain on investments, foreign currency transactions and foreign capital gains tax 12,002,485 12,174,435 12,958,426 7,546,165 Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and foreign capital gains tax (736,986) (6,374,728) 9,070,617 3,816,938 -------------- -------------- -------------- -------------- Net increase from operations 11,103,478 5,430,640 24,278,405 12,692,960 Distributions declared to shareholders: From net investment income - - (1,284,092) (529,435) From net realized gains - - (3,640,598) - -------------- -------------- -------------- -------------- Total distributions declared to shareholders - - (4,924,690) (529,435) Share transactions: Subscriptions 4,646,441 4,155,162 15,229,078 89,977,364 Distributions reinvested - - 2,823,586 330,247 Redemptions (27,656,623) (32,850,066) (53,513,076) (8,707,904) -------------- -------------- -------------- -------------- Net increase (decrease) in share transactions (23,010,182) (28,694,904) (35,460,412) 81,599,707 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (11,906,704) (23,264,264) (16,106,697) 93,763,232 NET ASSETS: Beginning of period 50,661,583 73,925,847 152,250,925 58,487,693 -------------- -------------- -------------- -------------- End of period $ 38,754,879 $ 50,661,583 $ 136,144,228 $ 152,250,925 ============== ============== ============== ============== Undistributed net investment income, at end of period $ - $ - $ 1,525,484 $ 706,196 ============== ============== ============== ============== Accumulated net investment loss, at end of period $ (2,107) $ (597) $ - $ - ============== ============== ============== ============== Change in shares: Subscriptions 439,948 455,080 1,177,932 7,516,797 Issued for distributions reinvested - - 209,932 27,705 Redemptions (2,842,595) (3,586,319) (3,998,529) (698,471) -------------- -------------- -------------- -------------- Net increase (decrease) (2,402,647) (3,131,239) (2,610,665) 6,846,031 -------------- -------------- -------------- --------------
See Accompanying Notes to Financial Statements. 130 NOTES TO FINANCIAL STATEMENTS July 31, 2005 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 an unlimited number of 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. SECURITY VALUATION. Equity securities, exchange traded funds and securities of certain investment companies 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. 131 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. 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. The CMG International Stock Fund may use a systematic fair valuation model provided by an independent third party to value securities principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. If a security is valued at a "fair value", such value is likely to be different from the last quoted market price for the security. Investments for which market quotations are not readily available, or that have 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. 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. 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. 132 FOREIGN CAPITAL GAINS TAX. Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. 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 the Funds' 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, 2005, permanent book and tax basis differences resulting primarily from differing treatments for net operating losses, distribution reclassifications, return of capital distributions, foreign capital gains tax, foreign currency transactions and REIT dividends 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 $ (31,613) $ 31,613 $ -- CMG Large Cap Growth Fund (6,240) 6,240 -- CMG Large Cap Value Fund (16,172) 16,172 -- CMG Mid Cap Growth Fund 42,852 -- (42,852) CMG Mid Cap Value Fund (886) 886 -- CMG Small Cap Growth Fund 208,714 (208,713) (1) CMG Small Cap Value Fund (8,947) 8,947 -- CMG Small/Mid Cap Fund 160,511 2 (160,513) CMG International Stock Fund (145,982) 145,982 --
Net investment income and net realized gains (losses), as disclosed on the Statements of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended July 31, 2005 and July 31, 2004 was as follows:
JULY 31, 2005 ------------------------------- ORDINARY LONG-TERM INCOME* CAPITAL GAINS --------------- -------------- CMG Enhanced S&P 500(R) Index Fund $ 2,576,992 $ 32,620 CMG Large Cap Growth Fund 349,571 - CMG Large Cap Value Fund 1,050,685 160 CMG Mid Cap Growth Fund -- -- CMG Mid Cap Value Fund 303,737 6,642 CMG Small Cap Growth Fund 1,856,510 431,538 CMG Small Cap Value Fund 2,640,925 522,517 CMG Small/Mid Cap Fund -- -- CMG International Stock Fund 1,263,220 3,661,470
* For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 133
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 --
* For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of July 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED NET ORDINARY LONG-TERM UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ---------------- --------------- --------------- CMG Enhanced S&P 500(R) Index Fund $ 2,899,982 $ 996,011 $ 11,442,336 CMG Large Cap Growth Fund 205,873 1,366,750 3,503,930 CMG Large Cap Value Fund 1,214,045 2,113,833 5,241,379 CMG Mid Cap Growth Fund -- 245,766 3,883,066 CMG Mid Cap Value Fund 680,720 1,363,286 3,957,564 CMG Small Cap Growth Fund 1,462,422 239,312 5,088,214 CMG Small Cap Value Fund 1,132,762 1,916,829 10,973,296 CMG Small/Mid Cap Fund -- 471,469 6,053,970 CMG International Stock Fund 2,274,045 10,959,423 16,954,296
* 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, 2005, 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 $ 12,920,175 $ (1,477,839) $ 11,442,336 CMG Large Cap Growth Fund 3,893,216 (389,286) 3,503,930 CMG Large Cap Value Fund 5,889,439 (648,060) 5,241,379 CMG Mid Cap Growth Fund 4,111,371 (228,305) 3,883,066 CMG Mid Cap Value Fund 4,078,763 (121,211) 3,957,552 CMG Small Cap Growth Fund 8,324,024 (3,235,810) 5,088,214 CMG Small Cap Value Fund 11,430,393 (457,097) 10,973,296 CMG Small/Mid Cap Fund 6,483,477 (429,507) 6,053,970 CMG International Stock Fund 18,999,214 (2,044,918) 16,954,296
134 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 --------------------------------------------- 2010 2011 TOTAL ------------- ------------- ------------- CMG International Stock Fund $ 2,719,144 $ 420,427 $ 3,139,571
The following capital loss carryforwards were utilized during the year ended July 31, 2005:
CAPITAL LOSS CARRYFORWARD UTILIZED ------------ CMG Large Cap Growth Fund $ 67,035 CMG Mid Cap Growth Fund 49,708 CMG Small/Mid Cap Fund 11,273,642 CMG International Stock Fund 1,646,856 1,646,856
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES: INVESTMENT ADVISORY FEE. Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Funds. Each Fund's investment advisory fee is a unified fee. Effective on or about September 30, 2005, Columbia Management Advisors, Inc. will undergo a name change to Columbia Management Advisors, LLC. 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 expense associated with any borrowings by the Funds or extraordinary expenses, if any. The unified fees are paid monthly to Columbia based on each Fund's average daily net assets at the following annual rates: 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 and has contracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. The transfer agent fees for the Funds are included in the unified fee. Effective on or about September 30, 2005, Columbia Funds Services, Inc. will undergo a name change to Columbia Management 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, will 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%
135 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. With the exception of one officer, all officers of the Funds are employees of Columbia or its affiliates and receive no compensation from the Funds. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Funds in accordance with federal securities regulations. Each Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Chief Compliance Officer position. Each Fund's fee, which is included in the unified fee, will not exceed $15,000 per year. 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, 2005, 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 $ 48,278,747 $ 67,042,356 CMG Large Cap Growth Fund 46,391,689 53,277,965 CMG Large Cap Value Fund 20,495,677 34,656,393 CMG Mid Cap Growth Fund 29,140,525 27,787,781 CMG Mid Cap Value Fund 13,122,670 17,404,169 CMG Small Cap Growth Fund 17,448,196 21,481,586 CMG Small Cap Value Fund 16,498,460 28,239,806 CMG Small/Mid Cap Fund 72,552,788 94,140,237 CMG International Stock Fund 100,728,063 137,140,368
NOTE 6. OTHER RELATED PARTY TRANSACTIONS: During the year ended July 31, 2005, the CMG Small Cap Growth Fund used Bank of America Securities, a wholly-owned subsidiary of BOA, as a broker. Total commissions paid to Bank of America Securities during the period were $330. NOTE 7. LINE OF CREDIT: The Funds and other affiliated funds participate in a $350,000,000 committed unsecured revolving line of credit provided by State Street Bank and Trust Company. Borrowings are used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each participating fund based on its borrowings at a rate per annum 136 equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.10% per annum is accrued and apportioned among the participating funds based on their pro-rata portion of the unutilized line of credit. The commitment fee is included in the unified fee. For the year ended July 31, 2005, the Funds did not borrow under this arrangement. NOTE 8. SHARES OF BENEFICIAL INTEREST: As of July 31, 2005, the Funds had shareholders whose shares were beneficially owned by participant accounts over which Bank of America and/or its affiliates had either sole or joint investment discretion. Subscription and redemption activity of these accounts may have a significant effect on the operations of the Funds. The numbers of accounts and the percentages of shares of beneficial interest outstanding held therein are as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD ---------------- ---------------- CMG Enhanced S&P 500(R) Index Fund 1 100.0% CMG Large Cap Growth Fund 1 100.0% CMG Large Cap Value Fund 1 100.0% CMG Mid Cap Growth Fund 1 100.0% CMG Mid Cap Value Fund 1 100.0% CMG Small Cap Growth Fund 1 97.4% CMG Small Cap Value Fund 1 97.2% CMG International Stock Fund 1 91.2%
As of July 31, 2005, two of 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 number of accounts and the percentage of shares of beneficial interest outstanding held therein are as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD ---------------- ---------------- CMG Small/Mid Cap Fund 8 89.3% CMG International Stock Fund 1 5.6%
NOTE 9. OTHER During the year ended July 31, 2005 the CMG Large Cap Value Fund experienced a loss of $1,054 due to a violation of borrowing limitations. The CMG Large Cap Value Fund is in the process of being reimbursed by Columbia. NOTE 10. 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. 137 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. On February 9, 2005, Columbia and Columbia Funds Distributor, Inc. (collectively, the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as the "Settlements." The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Funds' independent trustees and not unacceptable to the staff of the SEC. At this time, the distribution plan is still under development. As such, any gain to the Funds or its shareholders cannot currently be determined. 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. A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, the removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. 138 On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia Funds to an exemption from contingent deferred sales charges upon early redemption ("the CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has transferred the CDSC Lawsuit to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Funds and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. In 2004, certain Columbia Funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Funds and the other defendants to these actions, including Columbia and various of its 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 proceedings 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, 2005, 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 $ 1,828 CMG Large Cap Growth Fund 720 CMG Large Cap Value Fund 839 CMG Mid Cap Growth Fund 369 CMG Mid Cap Value Fund 419 CMG Small Cap Growth Fund 672 CMG Small Cap Value Fund 748 CMG Small/Mid Cap Fund 802 CMG International Stock Fund 2,779
139 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, 2005, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, 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). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 23, 2005 140 Unaudited Information FEDERAL INCOME TAX INFORMATION CMG ENHANCED S&P 500(R) Index Fund For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $1,004,277. 48.71% of the ordinary income distributed by the Fund, for the year ended July 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 54.80%, 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, 2004 to July 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. CMG LARGE CAP GROWTH FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $1,366,750. 100.00% of the ordinary income distributed by the Fund, for the year ended July 31, 2005, 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 August 1, 2004 to July 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. CMG LARGE CAP VALUE FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $2,113,833. 78.11% of the ordinary income distributed by the Fund, for the year ended July 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 83.03%, 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, 2004 to July 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. CMG MID CAP GROWTH FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $245,766. CMG MID CAP VALUE FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $1,363,973. 66.23% of the ordinary income distributed by the Fund, for the year ended July 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 66.75%, 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, 2004 to July 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. 141 CMG SMALL CAP GROWTH FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $406,725. CMG SMALL CAP VALUE FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $2,159,155. 18.21% of the ordinary income distributed by the Fund, for the year ended July 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders 18.05%, 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, 2004 to July 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. CMG SMALL/MID CAP FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $471,469. CMG INTERNATIONAL STOCK FUND For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $10,959,423. Foreign taxes paid during the fiscal year ended July 31, 2005, amounting to $360,171 ($0.04 per share) are expected to be passed through to shareholders as 100.00% allowable foreign tax credits on your 2005 1099-Div Form. Gross income derived from sources within foreign countries amounted to $3,302,177 ($0.33 per share) for the fiscal year ended July 31, 2005. 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, 2004 to July 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. 142 Trustees The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds Complex, 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 overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD ------------------------------------------------------ --------------------------------------------------------------- DISINTERESTED TRUSTEES Douglas A. Hacker (age 49) Executive Vice President-Strategy of United Airlines (airline) P.O. Box 66100 since December, 2002 (formerly President of UAL Loyalty Chicago, IL 60666 Services (airline) from September, 2001 to December, 2002; Trustee (since 1996) Executive Vice President and Chief Financial Officer of United Airlines from July, 1999 to September, 2001; Senior Vice President-Finance from March, 1993 to July, 1999). Oversees 101, Nash Finch Company (food distributor) Janet Langford Kelly (age 47) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm); 9534 W. Gull Lake Drive Adjunct Professor of Law, Northwestern University, since Richland, MI 49083-8530 September, 2004 (formerly Chief Administrative Officer and Trustee (since 1996) Senior Vice President, Kmart 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 101, None Richard W. Lowry (age 69) 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 103(3), None Trustee (since 1995) 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 1981) 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 101, None John J. Neuhauser (age 63) 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 August, 1999). Oversees Trustee (since 1985) 1033, Saucony, Inc. (athletic footwear) Patrick J. Simpson (age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 101, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
143
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD ------------------------------------------------------ --------------------------------------------------------------- DISINTERESTED TRUSTEES Thomas E. Stitzel (age 69) 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 101, None Trustee (since 1998) Thomas C. Theobald (age 68) Partner and Senior Advisor, Chicago Growth Partners (private 8 Sound Shore Drive, equity investing) since September, 2004 (formerly Managing Suite 285 Director, William Blair Capital Partners (private equity Greenwich, CT 06830 investing) from September, 1994 to September, 2004). Oversees Trustee and Chairman of the Board(4) (since 1996) 101, Anixter International (network support equipment distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate management services) and Ambac Financial Group (financial guaranty 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 Hopkinton, NH 03229 to 1997). Oversees 101, Chairman of the Board of Directors, Trustee (since 1998) Enesco Group, Inc. (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth (age 64) Retired since December 2003 (formerly Chairman and Chief 100 S.W. Market Street #1500 Executive Officer, The Regence Group (regional health insurer); Portland, OR 97207 Chairman and Chief Executive Officer, BlueCross BlueShield of Trustee (since 1991) Oregon; Certified Public Accountant, Arthur Young & Company). Oversees 101, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEE William E. Mayer(2) (age 65) Partner, Park Avenue Equity Partners (private equity) since 399 Park Avenue February, 1999 (formerly Partner, Development Capital LLC from Suite 3204 November 1996 to February, 1999). Oversees 103(3), Lee New York, NY 10022 Enterprises (print media), WR Hambrecht + Co. (financial Trustee (since 1994) service provider); Reader's Digest (publishing); 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. (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 also serve as directors/trustees of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. The Statement of Additional Information Includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 144 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS ------------------------------------------------------ --------------------------------------------------------------- Christopher L. Wilson (Age 48) Head of Mutual Funds since August, 2004 and Senior Vice One Financial Center President of the Advisor since January, 2005; President of the Boston, MA 02111 Columbia Funds, Liberty Funds and Stein Roe Funds since President (since 2004) October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton (Age 41) Treasurer of the Columbia Funds since October, 2003 and of the One Financial Center Liberty Funds, Stein Roe Funds and All-Star Funds since Boston, MA 02111 December, 2000; Vice President of the Advisor since April, 2003 Treasurer (since 2000) (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene (Age 54) Senior Vice President and Chief Compliance Officer of the 40 West 57th Street Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star New York, NY 10005 Funds since August, 2004 (formerly Partner, Carter, Ledyard & Senior Vice President and Milburn LLP from January, 2001 to August, 2004; Counsel, Chief Compliance Officer (since 2004) Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). Michael G. Clarke (Age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, One Financial Center Stein Roe Funds and All-Star Funds since October, 2004 Boston, MA 02111 (formerly Controller of the Columbia Funds, Liberty Funds, Chief Accounting Officer (since 2004) Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Touche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman (Age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe One Financial Center Funds and All-Star Funds since October, 2004 (formerly Vice Boston, MA 02111 President of CDC IXIS Asset Management Services, Inc. and Controller (since 2004) Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson (Age 46) Secretary of the Columbia Funds, Liberty Funds and Stein Roe One Financial Center Funds since December, 2004 (formerly Of Counsel, Bingham Boston, MA 02111 McCutchen from April, 2001 to September, 2004; Executive Secretary (since 2004) Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001).
145 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, LLC 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110-2624 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MA 02110-2624 - TRANSFER AGENT - COLUMBIA MANAGEMENT SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 SHC-42/89632-0805 (09/05) 05/7658 A description of the policies and procedures that the fund uses to determine how to vote proxies and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA MANAGEMENT DISTRIBUTORS, 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. Fund distributed by Columbia Management Distributors, Inc., One Financial Center, Boston, MA 02111-2621 [COLUMBIA MANAGEMENT(R) LOGO] CMG SMALL CAP FUND A PORTFOLIO OF CMG FUND TRUST ANNUAL REPORT JULY 31, 2005 MAY LOSE VALUE NOT FDIC ----------------- INSURED NO BANK GUARANTEE Advised by Columbia Management Advisors, Inc. Columbia Management is the primary investment management division of Banc of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. Columbia Management Advisors, Inc. will combine with Banc of America Capital Management, LLC on or about September 30, 2005. At that time, the newly combined advisor will undergo a name change to Columbia Management Advisors, LLC and will continue to operate as a SEC-registered investment advisor, wholly owned subsidiary of Bank of America, N.A. and part of Columbia Management. 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG SMALL CAP FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Small Cap Fund returned 29.59% for the 12-month period ended July 31, 2005. The fund outperformed the Russell 2000(1) Growth Index and the Russell 2000(1) Index, which returned 22.58% and 24.78%, respectively, for the same period. The fund also surpassed the Lipper Small Cap Growth Funds Category average, which was 22.12% for the period.(2) Strong stock selection in the information technology, industrials and health care sectors drove the fund's outperformance. Last summer, we restructured the information technology portion of the portfolio to eliminate commodity-type businesses in favor of those with greater intellectual property content, as reflected in companies with higher gross margins. We believe these changes helped to lead the strong performance throughout the period, led by communication-related stocks Ixia and F5 Networks (1.3% and 1.0% of net assets, respectively). SiRF Technology Holdings, a supplier of chipsets for global positioning systems for consumer and business applications, performed well (1.7% of net assets). CACI International advanced on steady demand for systems integration services geared to the government marketplace (1.7% of net assets). Finally, Macromedia (0.9% of net assets) appreciated on news that it is being acquired. The fund's holdings in the industrials sector outperformed the index, gaining 45% in the reporting period. United Defense Industries' stock price rocketed on news of its acquisition by BAE Systems, and the stock was sold from the portfolio. Joy Global reported significantly higher- than-expected earnings driven by a long-term replacement cycle for mining equipment (1.1% of net assets). URS experienced strength in the commercial and government sectors it provides with engineering design services (1.4% of net assets). Finally, Wabtec benefited from an upturn in demand for rail cars, and BE Aerospace experienced increased demand for airline interiors due to a rebound in the global airline market (1.7% and 1.3% of net assets, respectively). Despite some difficulties in early 2005, the health care sector was a top contributor in the period and the fund's holdings outperformed health care stocks in the index. DaVita (1.4% of net assets) and Renal Care Group, both dialysis service providers, benefited from consolidation in the industry. Investors reacted positively to news that DaVita would acquire Gambro's US dialysis operations and Renal Care Group was acquired. Another beneficiary of consolidation was Accredo Health which agreed to be acquired. The fund did experience some disappointments in pharmaceutical stocks. For instance, Connetics struggled as the FDA denied approval to one of its pipeline drugs. We eventually liquidated the fund's position since the company's risk profile had increased beyond our comfort level. Although the energy and consumer discretionary sectors made solid contributions to the fund's return, the fund's holdings underperformed their counterparts in the index. In energy, stock selection hurt relative performance. In the consumer discretionary sector, a lack of exposure to casino gaming operators and housing stocks hurt relative performance. Stock selection in the materials sector also held back results. One disappointment was OM Group, a cobalt refiner that has benefited from strength in the battery market (1.1% of net assets). While the stock struggled during the period, we remain patient since we believe that its long-term prospects are favorable. 1 In general, we believe that the economy is growing at a healthy rate and the portfolio is positioned accordingly. We are bullish longer term on energy. Earnings are currently very strong in the materials and industrials sectors, but we are watchful for signs of decelerating growth. At the margin, we have taken profits from the most cyclical parts of the portfolio and redeployed these assets into more traditional growth segments. We believe the Federal Reserve Board is reaching the latter innings of increasing the fed fund rate, and expect that traditional growth stocks -- many of which may be found in the health care, information technology and consumer discretionary sectors -- should do quite well. In addition, value stocks have been in favor for the past five years, and we believe many growth names are reasonably priced by comparison. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Salix Pharmaceuticals 1.9 Corporate Executive Board 1.8 SiRF Technology Holdings 1.7 Affiliated Managers Group 1.7 Wabtec 1.7 CACI International 1.7 HealthExtras 1.5 Tempur-Pedic International 1.5 URS 1.4 DaVita 1.4
We appreciate your continued confidence in the CMG Small Cap Fund. Kenneth A. Korngiebel has managed the CMG Small Cap Fund since July 2004 and has been with the advisor or its predecessors or affiliate organizations since 1996. /s/ Kenneth A. Korngiebel Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Investing in growth stocks incurs the possibility of losses because their prices are sensitive to changes in current or expected earnings. Investments in small-cap stocks 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. (1) 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 the fund, indexes 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 2 Holdings are calculated as a percentage of net assets and are subject to change. Because the fund is actively managed, there is no guarantee that 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. AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG Small Cap Fund 08/30/89 29.59 1.48 11.97 Russell 2000 Index 24.78 7.71 9.96 Russell 2000 Growth Index 22.58 -1.46 5.08
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG Small Cap Fund 08/30/89 11.49 -1.36 12.00 Russell 2000 Index 9.45 5.71 9.90 Russell 2000 Growth Index 4.29 -4.51 5.16
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1995 TO JULY 31, 2005
CMG SMALL CAP FUND RUSSELL 2000 INDEX RUSSELL 2000 GROWTH INDEX 8/1/95 $ 10,000 $ 10,000 $ 10,000 8/31/95 $ 10,143 $ 10,207 $ 10,123 9/30/95 $ 10,495 $ 10,390 $ 10,332 10/31/95 $ 10,276 $ 9,925 $ 9,823 11/30/95 $ 10,846 $ 10,342 $ 10,256 12/31/95 $ 11,290 $ 10,615 $ 10,484 1/31/96 $ 11,284 $ 10,604 $ 10,397 2/29/96 $ 11,802 $ 10,934 $ 10,871 3/31/96 $ 11,991 $ 11,157 $ 11,086 4/30/96 $ 13,136 $ 11,754 $ 11,938 5/31/96 $ 13,937 $ 12,217 $ 12,550 6/30/96 $ 13,092 $ 11,715 $ 11,735 7/31/96 $ 11,982 $ 10,693 $ 10,302 8/31/96 $ 12,841 $ 11,314 $ 11,064 9/30/96 $ 13,637 $ 11,756 $ 11,634 10/31/96 $ 13,388 $ 11,575 $ 11,132 11/30/96 $ 13,720 $ 12,052 $ 11,442 12/31/96 $ 13,753 $ 12,368 $ 11,665 1/31/97 $ 14,317 $ 12,615 $ 11,957 2/28/97 $ 13,535 $ 12,310 $ 11,235 3/31/97 $ 12,621 $ 11,729 $ 10,441 4/30/97 $ 12,688 $ 11,762 $ 10,320 5/31/97 $ 14,095 $ 13,070 $ 11,871 6/30/97 $ 14,800 $ 13,630 $ 12,274 7/31/97 $ 15,929 $ 14,264 $ 12,902 8/31/97 $ 16,595 $ 14,591 $ 13,289 9/30/97 $ 17,961 $ 15,659 $ 14,350 10/31/97 $ 16,998 $ 14,971 $ 13,487 11/30/97 $ 16,604 $ 14,874 $ 13,166 12/31/97 $ 16,767 $ 15,134 $ 13,174 1/31/98 $ 16,120 $ 14,895 $ 12,999 2/28/98 $ 17,201 $ 15,996 $ 14,147 3/31/98 $ 18,507 $ 16,655 $ 14,740 4/30/98 $ 18,660 $ 16,747 $ 14,830 5/31/98 $ 17,085 $ 15,844 $ 13,751 6/30/98 $ 17,463 $ 15,877 $ 13,892 7/31/98 $ 16,723 $ 14,591 $ 12,732 8/31/98 $ 12,913 $ 11,758 $ 9,793 9/30/98 $ 13,944 $ 12,678 $ 10,786 10/31/98 $ 14,193 $ 13,195 $ 11,349 11/30/98 $ 15,016 $ 13,887 $ 12,230 12/31/98 $ 16,589 $ 14,746 $ 13,337 1/31/99 $ 16,411 $ 14,943 $ 13,937 2/28/99 $ 14,576 $ 13,732 $ 12,662 3/31/99 $ 14,865 $ 13,946 $ 13,113 4/30/99 $ 15,347 $ 15,196 $ 14,270 5/31/99 $ 15,697 $ 15,418 $ 14,293 6/30/99 $ 17,161 $ 16,115 $ 15,046 7/31/99 $ 17,614 $ 15,673 $ 14,582 8/31/99 $ 17,214 $ 15,093 $ 14,036 9/30/99 $ 17,521 $ 15,096 $ 14,307 10/31/99 $ 19,406 $ 15,158 $ 14,673 11/30/99 $ 22,105 $ 16,063 $ 16,224 12/31/99 $ 26,546 $ 17,882 $ 19,085 1/31/2000 $ 26,716 $ 17,594 $ 18,907 2/29/2000 $ 33,978 $ 20,498 $ 23,307 3/31/2000 $ 32,826 $ 19,148 $ 20,857 4/30/2000 $ 28,798 $ 17,995 $ 18,751 5/31/2000 $ 27,335 $ 16,946 $ 17,108 6/30/2000 $ 31,348 $ 18,423 $ 19,319 7/31/2000 $ 28,768 $ 17,830 $ 17,663 8/31/2000 $ 32,142 $ 19,191 $ 19,521 9/30/2000 $ 30,728 $ 18,626 $ 18,551 10/31/2000 $ 29,204 $ 17,796 $ 17,045 11/30/2000 $ 25,644 $ 15,968 $ 13,949 12/31/2000 $ 27,613 $ 17,340 $ 14,803 1/31/2001 $ 27,992 $ 18,243 $ 16,000 2/28/2001 $ 24,929 $ 17,046 $ 13,807 3/31/2001 $ 22,903 $ 16,213 $ 12,552 4/30/2001 $ 25,495 $ 17,481 $ 14,088 5/31/2001 $ 25,684 $ 17,911 $ 14,415 6/30/2001 $ 26,249 $ 18,529 $ 14,808 7/31/2001 $ 24,881 $ 17,526 $ 13,545 8/31/2001 $ 23,043 $ 16,960 $ 12,699 9/30/2001 $ 19,413 $ 14,677 $ 10,649 10/31/2001 $ 20,780 $ 15,536 $ 11,674 11/30/2001 $ 22,241 $ 16,738 $ 12,648 12/31/2001 $ 23,802 $ 17,771 $ 13,436 1/31/2002 $ 23,048 $ 17,586 $ 12,958 2/28/2002 $ 21,776 $ 17,104 $ 12,120 3/31/2002 $ 23,285 $ 18,478 $ 13,173 4/30/2002 $ 22,530 $ 18,646 $ 12,888 5/31/2002 $ 21,681 $ 17,818 $ 12,134 6/30/2002 $ 20,267 $ 16,934 $ 11,105 7/31/2002 $ 17,391 $ 14,377 $ 9,398 8/31/2002 $ 17,769 $ 14,341 $ 9,394 9/30/2002 $ 16,967 $ 13,312 $ 8,716 10/31/2002 $ 17,296 $ 13,739 $ 9,157 11/30/2002 $ 18,333 $ 14,965 $ 10,064 12/31/2002 $ 17,390 $ 14,131 $ 9,370 1/31/2003 $ 17,343 $ 13,740 $ 9,115 2/28/2003 $ 17,107 $ 13,325 $ 8,871 3/31/2003 $ 17,438 $ 13,497 $ 9,005 4/30/2003 $ 18,805 $ 14,776 $ 9,857 5/31/2003 $ 20,501 $ 16,361 $ 10,968 6/30/2003 $ 21,020 $ 16,658 $ 11,180 7/31/2003 $ 21,774 $ 17,700 $ 12,025 8/31/2003 $ 23,046 $ 18,511 $ 12,671 9/30/2003 $ 22,387 $ 18,169 $ 12,350 10/31/2003 $ 24,601 $ 19,695 $ 13,417 11/30/2003 $ 25,167 $ 20,394 $ 13,855 12/31/2003 $ 25,119 $ 20,808 $ 13,917 1/31/2004 $ 26,674 $ 21,711 $ 14,648 2/29/2004 $ 26,580 $ 21,906 $ 14,626 3/31/2004 $ 26,298 $ 22,110 $ 14,694 4/30/2004 $ 24,978 $ 20,982 $ 13,957 5/31/2004 $ 25,450 $ 21,316 $ 14,234 6/30/2004 $ 26,252 $ 22,213 $ 14,708 7/31/2004 $ 23,895 $ 20,719 $ 13,388 8/31/2004 $ 22,953 $ 20,613 $ 13,100 9/30/2004 $ 24,367 $ 21,580 $ 13,824 10/31/2004 $ 25,074 $ 22,005 $ 14,160 11/30/2004 $ 26,628 $ 23,913 $ 15,357 12/31/2004 $ 27,805 $ 24,620 $ 15,908 1/31/2005 $ 26,437 $ 23,594 $ 15,192 2/28/2005 $ 27,238 $ 23,992 $ 15,400 3/31/2005 $ 26,721 $ 23,306 $ 14,823 4/30/2005 $ 25,024 $ 21,971 $ 13,880 5/31/2005 $ 27,381 $ 23,410 $ 14,859 6/30/2005 $ 29,265 $ 24,313 $ 15,338 7/31/2005 $ 30,971 $ 25,854 $ 16,414
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the period, and does 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,171.08 1,020.38 4.79 4.46 0.89
Expenses paid during the period are equal to the fund's annualized expense ratio of 0.89%, 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 365. 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 funds 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)
PERIOD YEAR ENDED JULY 31, ENDED YEAR ENDED OCTOBER 31, ------------------------- JULY 31, --------------------------------------- 2005 2004 2003(a) 2002 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, BEGINNING OF PERIOD $ 5.07 $ 4.62 $ 3.67 $ 4.41 $ 18.78 $ 13.59 ---------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.03)(b) (0.03)(b) (0.02)(b) (0.02)(b) (0.01) (0.09) Net realized and unrealized gain (loss) on investments 1.53 0.48 0.97 (0.72) (2.18) 6.80 ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations 1.50 0.45 0.95 (0.74) (2.19) 6.71 ---------- ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains - - - -(c) (12.18) (1.52) ---------- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 6.57 $ 5.07 $ 4.62 $ 3.67 $ 4.41 $ 18.78 ========== ========== ========== ========== ========== ========== Total return (d) 29.59% 9.74% 25.89%(e) (16.76)% (28.84)% 50.49% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 30,317 $ 292,028 $ 293,924 $ 227,874 $ 283,521 $ 258,480 Ratio of net expenses to average net assets (f) 0.85% 0.79% 0.81%(g) 0.79% 0.82% 0.79% Ratio of net investment loss to average net assets (f) (0.61)% (0.62)% (0.55)%(g) (0.49)% (0.22)% (0.39)% Portfolio turnover rate 119% 123% 89%(e) 120% 160% 163%
(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) Not annualized. (f) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (g) Annualized. See Accompanying Notes to Financial Statements. 6 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE --------------- --------------- Common Stocks (97.6%) Consumer Discretionary (12.9%) Diversified Consumer Services (0.9%) Education Management Corp. (a) 7,792 $ 270,772 --------------- Hotels, Restaurants & Leisure (5.3%) Applebee's International, Inc. 8,090 214,466 Buffalo Wild Wings, Inc. (a) 2,420 79,303 Cheesecake Factory, Inc. (a) 4,610 164,854 Cosi, Inc. (a) 9,090 76,992 P.F. Chang's China Bistro, Inc. (a) 5,750 327,693 RARE Hospitality International, Inc. (a) 11,390 354,912 Scientific Games Corp., Class A (a) 14,210 389,070 --------------- 1,607,290 --------------- Household Durables (1.5%) Tempur-Pedic International, Inc. (a) 26,250 451,762 --------------- Internet & Catalog Retail (1.0%) Blue Nile, Inc. (a) 3,690 122,729 Netflix, Inc. (a) 5,010 92,986 Provide Commerce, Inc. (a) 3,710 87,742 --------------- 303,457 --------------- Leisure Equipment & Products (1.1%) Marvel Enterprises, Inc. (a) 8,830 171,213 SCP Pool Corp. 4,920 179,285 --------------- 350,498 --------------- Media (1.2%) Getty Images, Inc. (a) 3,040 245,480 Radio One, Inc., Class D (a) 8,260 109,115 --------------- 354,595 --------------- Specialty Retail (1.9%) Aeropostale, Inc. (a) 3,980 118,803 Children's Place Retail Stores, Inc. (a) 3,140 143,498 Maidenform Brands, Inc. (a) 3,200 58,400 PETCO Animal Supplies, Inc. (a) 8,890 247,764 --------------- 568,465 ---------------
See Accompanying Notes to Financial Statements. 7
SHARES VALUE --------------- --------------- Common Stocks (continued) Consumer Staples (1.9%) Food Products (0.9%) Corn Products International, Inc. 11,980 $ 288,358 --------------- Household Products (0.4%) Central Garden & Pet Co. (a) 2,440 122,415 --------------- Personal Products (0.6%) Elizabeth Arden, Inc. (a) 7,380 177,784 --------------- Energy (7.1%) Energy Equipment & Services (3.7%) Atwood Oceanics, Inc. (a) 4,150 282,905 Cal Dive International, Inc. (a) 3,167 187,550 Core Laboratories NV (a) 5,580 179,676 FMC Technologies, Inc. (a) 5,330 193,213 Grey Wolf, Inc. (a) 37,400 286,858 --------------- 1,130,202 --------------- Oil, Gas & Consumable Fuels (3.4%) Arch Coal, Inc. 4,353 247,773 Carrizo Oil & Gas, Inc. (a) 8,150 163,815 Cheniere Energy, Inc. (a) 7,630 259,343 KFx, Inc. (a) 7,760 134,015 Southwestern Energy Co. (a) 3,600 198,396 Warren Resources, Inc. (a) 2,610 28,397 --------------- 1,031,739 --------------- Financials (5.7%) Capital Markets (1.7%) Affiliated Managers Group, Inc. (a) 7,100 506,230 --------------- Commercial Banks (1.5%) Signature Bank (a) 6,790 203,904 UCBH Holdings, Inc. 12,220 223,259 Umpqua Holdings Corp. 1,210 30,165 --------------- 457,328 ---------------
See Accompanying Notes to Financial Statements. 8
SHARES VALUE --------------- --------------- Common Stocks (continued) Consumer Finance (0.6%) First Cash Financial Services, Inc. (a) 7,170 $ 171,005 --------------- Insurance (1.4%) Allmerica Financial Corp. (a) 3,220 125,580 ProAssurance Corp. (a) 7,130 306,305 --------------- 431,885 --------------- Thrifts & Mortgage Finance (0.5%) Sterling Financial Corp. (a) 4,200 163,926 --------------- Health Care (21.0%) Biotechnology (4.6%) Alexion Pharmaceuticals, Inc. (a) 5,110 133,064 Alkermes, Inc. (a) 6,480 100,440 CV Therapeutics, Inc. (a) 4,590 129,300 Digene Corp. (a) 9,130 265,592 Nabi Biopharmaceuticals (a) 13,850 207,612 Neurocrine Biosciences, Inc. (a) 3,000 148,740 Rigel Pharmaceuticals, Inc. (a) 9,740 210,822 United Therapeutics Corp. (a) 3,500 186,725 --------------- 1,382,295 --------------- Health Care Equipment & Supplies (4.2%) ArthroCare Corp. (a) 7,430 271,715 Haemonetics Corp. (a) 2,840 119,933 Kyphon, Inc. (a) 5,832 237,013 Nektar Therapeutics (a) 9,420 176,719 Possis Medical, Inc. (a) 11,660 136,422 ResMed, Inc. (a) 4,892 327,764 --------------- 1,269,566 --------------- Health Care Providers & Services (8.7%) AmSurg Corp. (a) 5,180 145,092 Cerner Corp. (a) 3,690 278,300 Chemed Corp. 2,290 98,470 DaVita, Inc. (a) 8,839 417,554 HealthExtras, Inc. (a) 22,890 455,282 ICON PLC, ADR (a) 10,360 405,594 IDX Systems Corp. (a) 6,860 219,520 LHC Group, Inc. (a) 10,230 179,844 Matria Healthcare, Inc. (a) 2,560 90,470 United Surgical Partners International, Inc. (a) 9,735 350,557 --------------- 2,640,683 ---------------
See Accompanying Notes to Financial Statements. 9
SHARES VALUE --------------- --------------- Common Stocks (continued) Pharmaceuticals (3.5%) Adams Respiratory Therapeutics, Inc. (a) 1,800 $ 53,100 MGI Pharma, Inc. (a) 9,670 263,991 NitroMed, Inc. (a) 7,770 180,575 Salix Pharmaceuticals Ltd. (a) 30,115 581,220 --------------- 1,078,886 --------------- Industrials (17.1%) Aerospace & Defense (2.5%) Armor Holdings, Inc. (a) 3,670 150,030 BE Aerospace, Inc. (a) 21,630 379,174 Engineered Support Systems, Inc. 6,040 223,359 --------------- 752,563 --------------- Air Freight & Logistics (0.5%) UTI Worldwide, Inc. 1,860 132,730 --------------- Commercial Services & Supplies (4.4%) Corporate Executive Board Co. 6,663 537,571 Huron Consulting Group, Inc. (a) 9,840 273,552 Kenexa Corp. (a) 13,540 172,364 Resources Connection, Inc. (a) 11,970 359,100 --------------- 1,342,587 --------------- Construction & Engineering (1.8%) Dycom Industries, Inc. (a) 5,260 128,344 URS Corp. (a) 11,280 422,436 --------------- 550,780 --------------- Electrical Equipment (0.4%) Roper Industries, Inc. 1,710 131,243 --------------- Industrial Conglomerates (0.5%) Raven Industries, Inc. 5,070 133,949 --------------- Machinery (5.9%) ESCO Technologies, Inc. (a) 1,470 161,141 IDEX Corp. 5,650 246,792 Joy Global, Inc. 8,380 344,167 Kennametal, Inc. 3,050 144,966 Terex Corp. (a) 7,940 384,455 Wabtec Corp. 20,640 504,235 --------------- 1,785,756 ---------------
See Accompanying Notes to Financial Statements. 10
SHARES VALUE --------------- --------------- Common Stocks (continued) Marine (0.4%) Dryships, Inc. 8,990 $ 128,557 --------------- Road & Rail (0.7%) Landstar System, Inc. 6,350 211,582 --------------- Information Technology (26.9%) Communications Equipment (5.0%) F5 Networks, Inc. (a) 7,320 308,758 Ixia (a) 20,360 401,906 Packeteer, Inc. (a) 22,930 277,682 SiRF Technology Holdings, Inc. (a) 24,240 529,644 --------------- 1,517,990 --------------- Computers & Peripherals (1.3%) Komag, Inc. (a) 5,500 195,140 Stratasys, Inc. (a) 5,980 181,912 --------------- 377,052 --------------- Electronic Equipment & Instruments (1.6%) Benchmark Electronics, Inc. (a) 4,910 157,120 Dolby Laboratories, Inc., Class A (a) 3,640 69,269 Itron, Inc. (a) 2,450 118,703 Trimble Navigation Ltd. (a) 3,620 141,035 --------------- 486,127 --------------- Internet Software & Services (1.6%) Digital River, Inc. (a) 4,390 175,490 Equinix, Inc. (a) 6,850 303,935 --------------- 479,425 --------------- IT Services (5.8%) Anteon International Corp. (a) 8,830 414,568 CACI International, Inc., Class A (a) 7,630 501,978 Cognizant Technology Solutions Corp., Class A (a) 3,960 194,357 Euronet Worldwide, Inc. (a) 10,400 305,916 Global Payments, Inc. 5,124 339,414 --------------- 1,756,233 --------------- Semiconductors & Semiconductor Equipment (6.4%) ATMI, Inc. (a) 7,410 235,860 Cambridge Display Technology, Inc. (a) 11,080 91,742 ChipMOS TECHNOLOGIES (Bermuda) Ltd. (a) 11,430 79,553
See Accompanying Notes to Financial Statements. 11
SHARES VALUE --------------- --------------- Common Stocks (continued) Semiconductors & Semiconductor Equipment (continued) FEI Co. (a) 7,050 $ 159,965 FormFactor, Inc. (a) 14,610 381,905 Hittite Microwave Corp. (a) 12,430 240,893 Microsemi Corp. (a) 18,550 396,043 PortalPlayer, Inc. (a) 2,880 69,120 Trident Microsystems, Inc. (a) 7,280 237,619 Volterra Semiconductor Corp. (a) 3,900 45,279 --------------- 1,937,979 --------------- Software (5.2%) Agile Software Corp. (a) 15,640 101,504 Embarcadero Technologies, Inc. (a) 38,640 241,500 Epicor Software Corp. (a) 18,960 281,177 Hyperion Solutions Corp. (a) 2,950 138,827 Macromedia, Inc. (a) 6,530 262,179 Micromuse, Inc. (a) 23,500 132,775 Parametric Technology Corp. (a) 34,740 239,706 Serena Software, Inc. (a) 3,850 79,002 The9 Ltd., ADR (a) 4,750 108,490 --------------- 1,585,160 --------------- Materials (2.4%) Chemicals (1.5%) Airgas, Inc. 4,280 126,260 OM Group, Inc. (a) 14,810 346,998 --------------- 473,258 --------------- Metals & Mining (0.9%) Allegheny Technologies, Inc. 5,280 153,490 Century Aluminum Co. (a) 4,570 111,828 --------------- 265,318 --------------- Telecommunication Services (2.6%) Diversified Telecommunication Services (0.4%) Premiere Global Services, Inc. (a) 12,530 128,056 --------------- Wireless Telecommunication Services (2.2%) Dobson Communications Corp., Class A (a) 14,950 105,397 InPhonic, Inc. (a) 6,180 98,880 Millicom International Cellular SA (a) 11,620 246,809 SBA Communications Corp., Class A (a) 12,640 209,698 --------------- 660,784 --------------- Total Common Stocks (Cost of $22,944,182) 29,596,270 ---------------
See Accompanying Notes to Financial Statements. 12
PAR VALUE --------------- --------------- Short-Term Obligation (1.4%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Note maturing 02/15/10, market value of $431,194 (repurchase proceeds $420,111) $ 420,000 $ 420,000 --------------- Total Short-Term Obligation (Cost of $420,000) 420,000 --------------- Total Investments (99.0%) (Cost of $23,364,182) (b) 30,016,270 Other Assets & Liabilities, Net (1.0%) 300,560 --------------- Net Assets (100.0%) $ 30,316,830 ===============
Notes to Schedule of Investments: (a) Non-income producing security. (b) Cost for federal income tax purposes is $24,212,643. At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR (UNAUDITED) NET ASSETS ------------------ --------------- Information Technology 26.9% Health Care 21.0 Industrials 17.1 Consumer Discretionary 12.9 Energy 7.1 Financials 5.7 Telecommunication Services 2.6 Materials 2.4 Consumer Staples 1.9 Short-Term Obligation 1.4 Other Assets & Liabilities, Net 1.0 --------------- 100.0% ===============
ACRONYM NAME ------- ---- ADR American Depositary Receipt
See Accompanying Notes to Financial Statements. 13 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust STATEMENT OF ASSETS AND LIABILITIES July 31, 2005 ASSETS: Investments, at identified cost $ 23,364,182 --------------- Investments, at value $ 30,016,270 Cash 163,884 Receivable for: Investments sold 868,868 Interest 111 Dividends 292 Deferred Trustees' compensation plan 4,748 --------------- Total assets 31,054,173 --------------- LIABILITIES: Payable for: Investments purchased 665,247 Investment advisory fee 24,351 Transfer agent fee 34 Trustees' fees 79 Chief compliance officer expenses and fees 269 Audit fee 25,240 Custody fee 1,137 Deferred Trustees' fees 4,748 Other liabilities 16,238 --------------- Total liabilities 737,343 --------------- NET ASSETS $ 30,316,830 =============== NET ASSETS consist of: Paid-in capital $ 16,802,530 Accumulated net investment loss (5,022) Accumulated net realized gain 6,867,234 Net unrealized appreciation on investments 6,652,088 --------------- NET ASSETS $ 30,316,830 =============== Shares of capital stock outstanding 4,614,495 =============== Net asset value, offering and redemption price per share $ 6.57 ===============
See Accompanying Notes to Financial Statements. 14 STATEMENT OF OPERATIONS For the Year Ended July 31, 2005 NET INVESTMENT INCOME: Income: Dividends $ 205,923 Interest 60,365 Foreign taxes withheld (683) --------------- Total income 265,605 --------------- Expenses: Investment advisory fee 837,140 Transfer agent fee 500 Trustees' fees 11,318 Custody fee 24,796 Chief compliance officer expenses and fees (See Note 4) 3,001 Non-recurring costs (See Note 8) 1,855 Other expenses 66,441 --------------- Total expenses 945,051 Non-recurring costs assumed by Investment Advisor (See Note 8) (1,855) --------------- Net expenses 943,196 --------------- Net investment loss (677,591) --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 46,457,512 Net change in unrealized appreciation (depreciation) on investments (25,488,632) --------------- Net gain 20,968,880 --------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 20,291,289 ===============
See Accompanying Notes to Financial Statements. 15 STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, ---------------------------------- 2005 2004 --------------- --------------- Operations: Net investment loss $ (677,591) $ (2,093,298) Net realized gain on investments 46,457,512 59,673,743 Net change in unrealized appreciation (depreciation) on investments (25,488,632) (26,262,756) --------------- --------------- Net increase from operations 20,291,289 31,317,689 --------------- --------------- Share Transactions: Subscriptions 4,562,259 36,596,397 Redemptions (286,564,984) (69,810,079) --------------- --------------- Net decrease from share transactions (282,002,725) (33,213,682) --------------- --------------- Total decrease in net assets (261,711,436) (1,895,993) --------------- --------------- NET ASSETS: Beginning of period 292,028,266 293,924,259 --------------- --------------- End of period $ 30,316,830 $ 292,028,266 =============== =============== Accumulated net investment loss $ (5,022) $ (2,269) =============== =============== Changes in shares: Subscriptions 801,259 7,088,643 Redemptions (53,836,059) (13,033,571) --------------- --------------- Net decrease (53,034,800) (5,944,928) =============== ===============
See Accompanying Notes to Financial Statements. 16 CMG SMALL CAP FUND A Portfolio of CMG Fund Trust NOTES TO FINANCIAL STATEMENTS July 31, 2005 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 an unlimited number of 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. If a security is valued at a "fair value", such value is likely to be different from the last quoted market price for the security. 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. 17 INCOME RECOGNITION. Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date. 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. 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, if any, 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, 2005, permanent book and tax basis differences resulting primarily from differing treatments for net operating losses were identified and reclassified among the components of the Fund's net assets as follows:
ACCUMULATED ACCUMULATED NET INVESTMENT LOSS NET REALIZED GAIN PAID-IN CAPITAL ------------------- ----------------- --------------- $ 674,838 $ - $ (674,838)
Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. As of July 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------------- ----------------- --------------- $ - $ 7,715,695 $ 5,803,627
* 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, 2005, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 6,175,093 Unrealized depreciation (371,466) ------------ Net unrealized appreciation $ 5,803,627 ============
18 Capital loss carryforwards of $38,443,526 were utilized during the year ended July 31, 2005 for the Fund. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES: INVESTMENT ADVISORY FEE. Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Effective on or about September 30, 2005, Columbia Management Advisors, Inc. will undergo a name change to Columbia Management Advisors, LLC. 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 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 and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $28.00 per open account. Effective on or about September 30, 2005, Columbia Funds Services, Inc. will undergo a name change to Columbia Management Services, Inc. For the year ended July 31, 2005, the Fund's effective transfer agent fee rate was less than 0.01%. CUSTODY CREDITS. The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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. For the year ended July 31, 2005, there were no such credits. FEES PAID TO OFFICERS AND TRUSTEES. With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. OTHER. Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended July 31, 2005, the Fund paid $1,613 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, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $131,866,343 and $409,289,597, respectively. 19 NOTE 6. LINE OF CREDIT: The Fund and other affiliated funds participate in a $350,000,000 committed unsecured revolving line of credit provided by State Street Bank and Trust Company. Borrowings are used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.10% per annum is accrued and apportioned among the participating funds based on their pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. For the year ended July 31, 2005, the Fund did not borrow under this arrangement. NOTE 7. SHARES OF BENEFICIAL INTEREST: As of July 31, 2005, the Fund had shareholders whose shares were beneficially owned by participant accounts over which Bank of America and/or its affiliates had either sole or joint investment discretion. Subscription and redemption activity of these accounts may have a significant effect on the operations of the Fund. The number of such accounts and the percentage of shares of beneficial interest outstanding held therein are as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD ------------ ---------------- 1 16.2%
As of July 31, 2005, the Fund also had other shareholders that held greater than 5% of the shares outstanding. Subscription and redemption activity of these accounts may have a significant effect on the operations of the Fund. The number of such accounts and the percentage of shares of beneficial interest outstanding held therein are as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD ------------ ---------------- 5 73.7%
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. On February 9, 2005, Columbia and the Distributor (collectively, the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as the "Settlements." The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds 20 have also undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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. A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, the removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia Funds to an exemption from contingent deferred sales charges upon early redemption ("the CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has transferred the CDSC Lawsuit to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. In 2004, certain Columbia Funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds 21 are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund and the other defendants to these actions, including Columbia and various of its 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 proceedings 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 Fund. For the year ended July 31, 2005, Columbia has assumed $1,855 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 22 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, 2005, 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 23, 2005 23 Unaudited Information FEDERAL INCOME TAX INFORMATION For the fiscal year ended July 31, 2005, the Fund designates long-term capital gains of $7,715,695. 24 Trustees The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds Complex, 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 overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD -------------------------------------------------------- --------------------------------------------------------------------- DISINTERESTED TRUSTEES Douglas A. Hacker (age 49) 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 from March, 1993 to July, 1999). Oversees 101, Nash Finch Company (food distributor) Janet Langford Kelly (age 47) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm); 9534 W. Gull Lake Drive Adjunct Professor of Law, Northwestern University, since September, Richland, MI 49083-8530 2004 (formerly Chief Administrative Officer and Senior Vice President, Trustee (since 2003) Kmart 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 101, None Richard W. Lowry (age 69) 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 103(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 Trustee (since 2003) 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 101, None John J. Neuhauser (age 63) Academic Vice President and Dean of Faculties since August, 1999, 84 College Road Boston College (formerly Dean, Boston College School of Management Chestnut Hill, MA 02467-3838 from September, 1977 to August, 1999). Oversees 103(3), Saucony, Inc. Trustee (since 2003) (athletic footwear) Patrick J. Simpson (age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 101, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
25
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD -------------------------------------------------------- --------------------------------------------------------------------- DISINTERESTED TRUSTEES Thomas E. Stitzel (age 69) 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 101, None Trustee (since 2003) Thomas C. Theobald (age 68) Partner and Senior Advisor, Chicago Growth Partners (private equity 8 Sound Shore Drive, investing) since September, 2004 (formerly Managing Director, William Suite 285 Blair Capital Partners (private equity investing) from September, 1994 Greenwich, CT 06830 to September, 2004). Oversees 101, Anixter International (network Trustee and Chairman of the Board(4) (since 2003) support equipment distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate management services) and Ambac Financial Group (financial guaranty 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 101, Chairman of the Board of Directors, Enesco Group, Trustee (since 2003) Inc. (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth (age 64) Retired since December 2003 (formerly Chairman and Chief Executive 100 S.W. Market Street Officer, The Regence Group (regional health insurer); Chairman and #1500 Portland, OR 97207 Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Trustee (since 1992) Public Accountant, Arthur Young & Company). Oversees 101, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEE William E. Mayer(2) (age 65) Partner, Park Avenue Equity Partners (private equity) since February, 399 Park Avenue 1999 (formerly Partner, Development Capital LLC from November 1996 to Suite 3204 February, 1999). Oversees 103(3), Lee Enterprises (print media), WR New York, NY 10022 Hambrecht + Co. (financial service provider); Reader's Digest Trustee (since 2003) (publishing); 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. (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 also serve as directors/trustees of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 26 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS -------------------------------------------------------- --------------------------------------------------------------------- Christopher L. Wilson (age 48) Head of Mutual Funds since August, 2004 and Senior Vice President of One Financial Center the Advisor since January, 2005; President of the Columbia Funds, Boston, MA 02111 Liberty Funds and Stein Roe Funds since October, 2004; President and President (since 2004) Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton (age 41) Treasurer of the Columbia Funds since October, 2003 and of the Liberty One Financial Center Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice Boston, MA 02111 President of the Advisor since April, 2003 (formerly President of the Treasurer (since 2000) Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene (age 54) Senior Vice President and Chief Compliance Officer of the Columbia 40 West 57th Street Funds, Liberty Funds, Stein Roe Funds and All-Star Funds since August, New York, NY 10005 2004 (formerly Partner, Carter, Ledyard & Milburn LLP from January, Senior Vice President and Chief Compliance 2001 to August, 2004; Counsel, Carter, Ledyard & Milburn LLP from Officer (since 2004) November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). Michael G. Clarke (age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein One Financial Center Roe Funds and All-Star Funds since October, 2004 (formerly Controller Boston, MA 02111 of the Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Chief Accounting Officer (since 2004) Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Touche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman (age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and One Financial Center All-Star Funds since October, 2004 (formerly Vice President of CDC Boston, MA 02111 IXIS Asset Management Services, Inc. and Deputy Treasurer of the CDC Controller (since 2004) Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson (age 46) Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds One Financial Center since December, 2004 (formerly Of Counsel, Bingham McCutchen from Boston, MA 02111 April, 2001 to September, 2004; Executive Director and General Secretary (since 2004) Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001).
27 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, LLC 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110-2624 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MA 02110-2624 - TRANSFER AGENT - COLUMBIA MANAGEMENT SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 SHC-42/89539-0805 (09/05) 05/7659 A description of the policies and procedures that the fund uses to determine how to vote proxies and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA MANAGEMENT DISTRIBUTORS, 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. Fund distributed by Columbia Management Distributors, Inc., One Financial Center, Boston, Massachusetts 02111-2621 [COLUMBIA MANAGEMENT(R) LOGO] CMG STRATEGIC EQUITY FUND A PORTFOLIO OF CMG FUND TRUST ANNUAL REPORT JULY 31, 2005 NOT FDIC MAY LOSE VALUE INSURED ------------------- NO BANK GUARANTEE Advised by Columbia Management Advisors, Inc. Columbia Management is the primary investment management division of Banc of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. Columbia Management Advisors, Inc. will combine with Banc of America Capital Management, LLC on or about September 30, 2005. At that time, the newly combined advisor will undergo a name change to Columbia Management Advisors, LLC and will continue to operate as a SEC-registered investment advisor, wholly-owned subsidiary of Bank of America, N.A. and part of Columbia Management. 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Strategic Equity Fund returned 16.77% for the 12-month period ended July 31, 2005. The fund outperformed the S&P 500 Index(1) and the Lipper Multi-Cap Core Funds average(2), which returned 14.05% and 16.39%, respectively. The fund's performance was driven by strong stock selection, particularly in the materials, consumer discretionary and health care sectors. In addition, the energy sector made the greatest overall contribution to the fund's return. The fund's defensive stance and larger-than-average cash position reined in performance. Throughout the reporting period, we focused on the potential beneficiaries of rising commodity prices. We believe that emerging markets have propelled demand for energy and raw materials, and companies in these sectors benefited as prices were driven upward by increased demand and limited supply. In the energy sector, the fund's oil service and offshore exploration holdings benefited from heightened demand. Transocean, TGS Nopec Geophysical and Newfield Exploration were all strong contributors. One disappointment in this sector was Input/Output, which suffered revenue disappointments and was sold. In the materials sector, Potash Corp. of Saskatchewan gained nearly 121% for the fund as a result of higher prices and greater demand for Potash. Companhia Vale do Rio Doce, a leading iron ore miner, was up 85% for the fund as it benefited from strong demand for iron ore. Our focus on commodities extended to the industrials sector, where we targeted capital equipment producers that appeared well positioned in the favorable environment. Caterpillar and Bucyrus International were two such companies and gained 50% and 79% for the fund, respectively. Not all industrials names were winners, however: 3M's decline in stock price detracted from performance.(3) The consumer discretionary sector was a strong area for the portfolio, with several foreign holdings leading performance. Finnish companies Nokian Renkaat Oyj, a tire company, and Stockmann Oyj Abp, a department store retailer, benefited from growth in Eastern European markets. Grupo Televisa SA, a large Mexican media company, advanced in a better business climate. The fund's holdings in the health care sector generally performed well, and the sector was another strong contributor to the portfolio's return. However, some large pharmaceutical companies detracted from the group's return. Eli Lilly declined on poor sales reports, and Pfizer struggled with risks associated with a popular pain management drug, litigation and patent expiration. Also on the downside, Biogen Idec and Elan declined on the announcement of a voluntary suspension in the marketing of Tysabri, a treatment for multiple sclerosis. Various other sectors contributed to results. Among consumer staples stocks, Walgreen benefited from robust sales and Gillette from being aquired by Procter & Gamble. Avon Products, however, hurt performance due to disappointing earnings and concerns about the company's distribution model in Asian markets. The fund's information technology stocks also outperformed the index, as did holdings in the utilities sector. We continued to shift the fund's emphasis from small- and mid-cap stocks and value names toward large-cap companies with higher growth potential. As the current economic recovery matures, we plan to seek out companies with less sensitivity to economic cycles and an ability to maintain stable growth. However, we remain cautious about putting cash to work too quickly, as we believe that recent interest rate increases could result in some slowing in 2006. 1 In addition, we will continue to evaluate investment opportunities overseas, considering areas with compelling growth trends and reasonable prices. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were:
(%) Schlumberger 1.1 Samsung Electronics 1.1 Potash Corp. of Saskatchewan 1.0 Berkshire Hathaway 0.9 Walgreen 0.9 Microsoft 0.8 Coca-Cola 0.8 Nokian Renkaat Oyj 0.8 Gillette 0.8 Transocean 0.7
We appreciate your continued confidence in CMG Strategic Equity Fund. Robert A. Unger has managed or co-managed the CMG Strategic Equity Fund since its inception and has been with the advisor or its predecessors or affiliate organizations since 1984. /s/ Robert A. Unger Emil A. Gjester has co-managed the fund since January 2004 and has been with the advisor or its predecessors or affiliate organizations since 1996. /s/ Emil A. Gjester Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. International investing may involve certain risks, including foreign taxation, currency fluctuations, risks associated with possible differences in financial standards and other monetary and political risks. ---------- (1) 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 the fund, 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. (3) Holdings are disclosed as a percentage of net assets on July 31, 2005, and are subject to change: Transocean (0.7%), TGS Nopec Geophysical (0.4%), Newfield Exploration (0.7%), Potash Corp. of Saskatchewan (1.0%), Companhia Vale do Rio Doce (0.4%), Caterpillar (0.7%), Bucyrus International (0.1%) , 3M (0.4%), Nokian Renkaat Oyj (0.8%), Stockmann Oyj Abp (0.5%), Grupo Televisa SA (0.4%), Eli Lilly (0.5%), Pfizer (0.5%), Biogen Idec (0.5%), Elan (0.2%), Walgreen (0.9%), Gillette (0.8%), Avon Products (0.2%). Holdings are calculated as a percentage of net assets, and are subject to change. Because the fund is actively managed, there is no guarantee that 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 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Strategic Equity Fund 10/09/01 16.77 14.13 S&P 500 Index 14.05 5.95
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Strategic Equity Fund 10/09/01 7.35 13.24 S&P 500 Index 6.32 5.05
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, OCTOBER 9, 2001 TO JULY 31, 2005
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 $ 14,163 $ 10,927 8/31/2004 $ 14,214 $ 10,971 9/30/2004 $ 14,542 $ 11,089 10/31/2004 $ 14,676 $ 11,259 11/30/2004 $ 15,455 $ 11,715 12/31/2004 $ 15,962 $ 12,113 1/31/2005 $ 15,571 $ 11,818 2/28/2005 $ 15,984 $ 12,066 3/31/2005 $ 15,734 $ 11,852 4/30/2005 $ 15,322 $ 11,627 5/31/2005 $ 15,757 $ 11,997 6/30/2005 $ 15,888 $ 12,014 7/31/2005 $ 16,540 $ 12,462
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from October 9, 2001. 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) FUND'S ANNUALIZED ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL EXPENSE RATIO (%) 1,000.00 1,000.00 1,062.09 1,022.81 2.05 2.01 0.40
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 365. 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. COMPARE WITH OTHER FUNDS Since all mutual funds 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. 4 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout Each Period)
PERIOD YEAR PERIOD YEAR ENDED JULY 31, ENDED ENDED ENDED ------------------------------ JULY 31, OCTOBER 31, OCTOBER 31, 2005 2004 2003 (a) 2002 2001 (b) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 13.80 $ 12.06 $ 10.14 $ 10.10 $ 10.00 ----------- ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.19(c)(d) 0.12(c) 0.10(c) 0.11(c) -(e) Net realized and unrealized gain (loss) on investments and foreign currency 2.09 1.87 1.88 (0.05) 0.10 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.28 1.99 1.98 0.06 0.10 ----------- ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.14) (0.09) (0.06) (0.02) - From net realized gains (0.72) (0.16) - - - ----------- ----------- ----------- ----------- ----------- Total distributions declared to shareholders (0.86) (0.25) (0.06) (0.02) - ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 15.22 $ 13.80 $ 12.06 $ 10.14 $ 10.10 =========== =========== =========== =========== =========== Total return (f)(g) 16.77% 16.58% 19.66%(h) 0.53% 1.00%(h) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 755,860 $ 618,714 $ 370,620 $ 188,179 $ 36,942 Ratio of net expenses to average net assets (i) 0.40% 0.40% 0.40%(j) 0.40% 0.40%(j) Ratio of net investment income to average net assets (i) 1.31% 0.88% 1.22%(j) 1.01% 0.04%(j) Waiver/reimbursement 0.03% 0.05% 0.05%(j) 0.07% 0.80%(j) Portfolio turnover rate 64% 81% 78%(h) 172% 14%(h)
(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) Net investment income per share reflects a special dividend. The effect of this dividend amounted to $0.02 per share. (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 waived or 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. 5 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
SHARES VALUE -------------- -------------- Common Stocks (82.5%) Consumer Discretionary (9.6%) Auto Components (1.1%) Modine Manufacturing Co. 75,350 $ 2,717,874 Nokian Renkaat Oyj 287,600 5,834,504 Proliance International, Inc. (a) 17,759 111,701 -------------- 8,664,079 -------------- Diversified Consumer Services (0.6%) Career Education Corp. (a) 50,000 1,939,500 Weight Watchers International, Inc. (a) 40,000 2,272,800 -------------- 4,212,300 -------------- Hotels, Restaurants & Leisure (0.7%) Bob Evans Farms, Inc. 30,000 760,800 Fairmont Hotels & Resorts, Inc. 40,000 1,293,600 Yum! Brands, Inc. 60,000 3,141,000 -------------- 5,195,400 -------------- Household Durables (0.7%) Matsushita Electric Industrial Co., Ltd., ADR 125,000 2,027,500 Snap-On, Inc. 60,000 2,200,800 Sony Corp., ADR 27,500 894,025 -------------- 5,122,325 -------------- Internet & Catalog Retail (0.7%) 1-800-FLOWERS.COM, Inc., Class A (a) 50,000 373,000 eBay, Inc. (a) 62,500 2,611,250 IAC/InterActiveCorp (a) 82,500 2,202,750 -------------- 5,187,000 -------------- Leisure Equipment & Products (0.2%) Amer Sports Oyj 80,000 1,561,639 -------------- Media (3.1%) Comcast Corp., Class A (a) 105,000 3,150,000 DIRECTV Group, Inc. (a) 75,000 1,155,000 Discovery Holding Co., Class A (a) 17,000 242,590 Entravision Communications Corp., Class A (a) 90,000 769,500 Grupo Televisa SA, ADR 50,000 3,298,500 John Wiley & Sons, Inc., Class A 30,000 1,285,500 Liberty Global, Inc., Class A (a) 7,500 355,800 Liberty Media Corp., Class A (a) 170,000 1,494,300 Media General, Inc., Class A 52,500 3,596,250 News Corp., Class A 136,828 2,241,243 Pixar (a) 10,000 430,100
See Accompanying Notes to Financial Statements. 6
SHARES VALUE -------------- -------------- Common Stocks (continued) Media (continued) Time Warner, Inc. 163,315 $ 2,779,621 Viacom, Inc., Class B 80,310 2,689,582 -------------- 23,487,986 -------------- Multiline Retail (1.9%) Dillard's, Inc., Class A 30,000 685,800 Fred's, Inc. 82,500 1,592,250 Kohl's Corp. (a) 50,000 2,817,500 May Department Stores Co. 82,500 3,386,625 Saks, Inc. (a) 100,000 2,122,000 Stockmann Oyj Abp, Class B 100,000 4,025,796 -------------- 14,629,971 -------------- Specialty Retail (0.6%) Blockbuster, Inc., Class A 125,000 1,083,750 Blockbuster, Inc., Class B 50,000 407,500 CarMax, Inc. (a) 40,000 1,168,800 PETsMART, Inc. 30,000 892,500 Restoration Hardware, Inc. (a) 100,000 812,000 -------------- 4,364,550 -------------- 72,425,250 -------------- Consumer Staples (9.1%) Beverages (1.8%) Coca-Cola Co. 137,500 6,017,000 Coca-Cola Femsa, SA de CV, ADR 90,000 2,565,900 Coca-Cola Hellenic Bottling Co., SA 90,000 2,539,893 PepsiCo, Inc. 50,000 2,726,500 -------------- 13,849,293 -------------- Food & Staples Retailing (1.8%) United Natural Foods, Inc. (a) 75,000 2,529,000 Wal-Mart Stores, Inc. 92,500 4,564,875 Walgreen Co. 137,500 6,580,750 -------------- 13,674,625 -------------- Food Products (2.6%) Campbell Soup Co. 40,000 1,234,000 Delta & Pine Land Co. 40,000 1,070,000 General Mills, Inc. 40,000 1,896,000 Hain Celestial Group, Inc. (a) 60,000 1,189,800 Kellogg Co. 20,000 906,200 Nestle SA, Registered Shares 17,250 4,727,898 Tyson Foods, Inc., Class A 57,500 1,071,800
See Accompanying Notes to Financial Statements. 7
SHARES VALUE -------------- -------------- Common Stocks (continued) Food Products (continued) Unilever NV, NY Registered Shares 62,500 $ 4,181,875 Wm. Wrigley Jr. Co. 47,500 3,379,150 -------------- 19,656,723 -------------- Household Products (0.5%) Kimberly-Clark Corp. 22,500 1,434,600 Procter & Gamble Co. 40,000 2,225,200 -------------- 3,659,800 -------------- Personal Products (1.7%) Avon Products, Inc. 52,500 1,717,275 Gillette Co. 108,050 5,799,043 L'Oreal SA 32,500 2,566,696 Natura Cosmeticos SA 37,800 1,266,332 NBTY, Inc. (a) 80,000 1,936,000 -------------- 13,285,346 -------------- Tobacco (0.7%) Altria Group, Inc. 75,000 5,022,000 -------------- 69,147,787 -------------- Energy (8.2%) Energy Equipment & Services (4.2%) Cooper Cameron Corp. (a) 55,000 3,903,900 Core Laboratories NV (a) 40,000 1,288,000 GlobalSantaFe Corp. 40,275 1,811,972 National-Oilwell Varco, Inc. (a) 75,000 3,926,250 Schlumberger Ltd. 102,500 8,583,350 TGS Nopec Geophysical Co., ASA (a) 100,000 2,999,489 Transocean, Inc. (a) 100,000 5,643,000 Weatherford International Ltd. (a) 20,000 1,265,600 Willbros Group, Inc. (a) 150,000 2,520,000 -------------- 31,941,561 -------------- Oil, Gas & Consumable Fuels (4.0%) Alpha Natural Resources, Inc. (a) 45,000 1,260,000 Anadarko Petroleum Corp. 15,000 1,325,250 BP PLC, ADR 47,500 3,129,300 Cameco Corp. 22,500 1,056,375 ConocoPhillips 70,000 4,381,300 Exxon Mobil Corp. 77,500 4,553,125 McMoRan Exploration Co. (a) 120,000 2,119,200 Newfield Exploration Co. (a) 125,000 5,311,250 Petroleo Brasileiro SA, ADR 30,000 1,577,100 Plains Exploration & Production Co. (a) 40,000 1,542,000
See Accompanying Notes to Financial Statements. 8
SHARES VALUE -------------- -------------- Common Stocks (continued) Oil, Gas & Consumable Fuels (continued) Royal Dutch Shell PLC, Class A, ADR (a) 30,000 $ 1,838,400 Williams Companies, Inc. 100,000 2,124,000 -------------- 30,217,300 -------------- 62,158,861 -------------- Financials (10.4%) Capital Markets (1.6%) Bank of New York Co., Inc. 75,000 2,308,500 Charles Schwab Corp. 150,000 2,055,000 Lazard Ltd., Class A (a) 75,000 1,789,500 Morgan Stanley 92,500 4,907,125 Nikko Cordial Corp. 100,000 425,864 Nomura Holdings, Inc., ADR 60,000 713,400 -------------- 12,199,389 -------------- Commercial Banks (2.3%) Allied Irish Banks PLC, ADR 30,000 1,299,300 HSBC Holdings PLC, ADR 42,500 3,442,075 Mitsubishi Tokyo Financial Group, Inc., ADR 325,000 2,697,500 Mizuho Financial Group, Inc. 400 1,795,172 SunTrust Banks, Inc. 32,500 2,363,400 U.S. Bancorp 72,500 2,179,350 Wachovia Corp. 20,000 1,007,600 Zions Bancorporation 37,500 2,680,500 -------------- 17,464,897 -------------- Consumer Finance (0.7%) American Express Co. 76,700 4,218,500 MBNA Corp. 40,000 1,006,400 -------------- 5,224,900 -------------- Diversified Financial Services (1.5%) Asset Acceptance Capital Corp. (a) 68,222 1,865,190 Citigroup, Inc. 103,283 4,492,810 JPMorgan Chase & Co. 147,026 5,166,494 -------------- 11,524,494 -------------- Insurance (3.4%) American International Group, Inc. 72,724 4,377,985 Axis Capital Holdings Ltd. 50,000 1,440,000 Berkshire Hathaway, Inc., Class B (a) 2,500 6,955,000 Chubb Corp. 20,000 1,776,400 Cincinnati Financial Corp. 22,375 922,297 Hannover Rueckversicherung AG, Registered Shares 92,500 3,493,812 Jefferson-Pilot Corp. 20,000 1,003,400 Marsh & McLennan Companies, Inc. 60,000 1,738,200
See Accompanying Notes to Financial Statements. 9
SHARES VALUE -------------- -------------- Common Stocks (continued) Insurance (continued) PartnerRe Ltd. 10,000 $ 648,200 St. Paul Travelers Companies, Inc. 72,510 3,191,890 -------------- 25,547,184 -------------- Real Estate (0.3%) Mitsubishi Estate Co., Ltd. 100,000 1,107,533 Post Properties, Inc., REIT 30,000 1,197,300 -------------- 2,304,833 -------------- Thrifts & Mortgage Finance (0.6%) Fannie Mae 30,000 1,675,800 Freddie Mac 42,500 2,689,400 -------------- 4,365,200 -------------- 78,630,897 -------------- Health Care (14.7%) Biotechnology (2.4%) Abgenix, Inc. (a) 125,000 1,296,250 Amgen, Inc. (a) 62,500 4,984,375 Applera Corp. - Applied Biosystems Group 125,000 2,602,500 Biogen Idec, Inc. (a) 87,500 3,437,875 ICOS Corp. (a) 20,000 504,200 MedImmune, Inc. (a) 62,500 1,775,625 Millennium Pharmaceuticals, Inc. (a) 100,000 1,033,000 Pharmion Corp. (a) 22,500 554,400 Qiagen NV (a) 150,000 1,992,000 -------------- 18,180,225 -------------- Health Care Equipment & Supplies (4.2%) Alcon, Inc. 30,000 3,436,500 Baxter International, Inc. 132,500 5,203,275 Haemonetics Corp. (a) 40,000 1,689,200 Hospira, Inc. (a) 127,850 4,890,262 Kyphon, Inc. (a) 30,000 1,219,200 Medtronic, Inc. 102,500 5,528,850 Millipore Corp. (a) 30,000 1,838,100 STERIS Corp. 40,000 1,086,800 Viasys Healthcare, Inc. (a) 82,500 2,049,300 Waters Corp. (a) 30,000 1,358,400 Zimmer Holdings, Inc. (a) 40,000 3,294,400 -------------- 31,594,287 -------------- Health Care Providers & Services (3.2%) Community Health Systems, Inc. (a) 77,500 2,992,275 Health Management Associates, Inc., Class A 40,000 952,000 HEALTHSOUTH Corp. (a) 100,000 536,000
See Accompanying Notes to Financial Statements. 10
SHARES VALUE -------------- -------------- Common Stocks (continued) Health Care Providers & Services (continued) Henry Schein, Inc. (a) 80,000 $ 3,453,600 LifePoint Hospitals, Inc. (a) 25,000 1,169,000 McKesson Corp. 100,000 4,500,000 Omnicare, Inc. 82,500 3,803,250 Quest Diagnostics, Inc. 40,000 2,053,600 Tenet Healthcare Corp. (a) 135,000 1,638,900 UnitedHealth Group, Inc. 30,000 1,569,000 WebMD Corp. (a) 150,000 1,591,500 -------------- 24,259,125 -------------- Pharmaceuticals (4.9%) Abbott Laboratories 98,500 4,593,055 Andrx Corp. (a) 100,000 1,855,000 Dr. Reddy's Laboratories Ltd., ADR 60,000 1,134,600 Elan Corp. PLC, ADR (a) 157,500 1,178,100 Eli Lilly & Co. 65,000 3,660,800 Gedeon Richter Ltd. 20,000 3,162,630 Merck & Co., Inc. 47,500 1,475,350 Novartis AG, ADR 75,000 3,653,250 Pfizer, Inc. 152,592 4,043,688 Schering-Plough Corp. 150,000 3,123,000 Shire Pharmaceuticals Group PLC, ADR 40,000 1,400,000 Taro Pharmaceuticals Industries Ltd. (a) 62,500 1,468,125 Valeant Pharmaceuticals International 100,000 1,973,000 Watson Pharmaceuticals, Inc. (a) 60,000 2,004,000 Wyeth 47,500 2,173,125 -------------- 36,897,723 -------------- 110,931,360 -------------- Industrials (9.1%) Aerospace & Defense (0.2%) Raytheon Co. 30,000 1,179,900 -------------- Air Freight & Logistics (1.0%) United Parcel Service, Inc., Class B 75,000 5,472,750 Yamato Transport Co., Ltd. 160,000 2,120,130 -------------- 7,592,880 -------------- Airlines (0.4%) AMR Corp. (a) 100,000 1,405,000 Southwest Airlines Co. 100,000 1,419,000 -------------- 2,824,000 -------------- Building Products (0.2%) American Standard Cos., Inc. 32,500 1,439,100 --------------
See Accompanying Notes to Financial Statements. 11
SHARES VALUE -------------- -------------- Common Stocks (continued) Commercial Services & Supplies (1.4%) Avery Dennison Corp. 82,500 $ 4,675,275 Cendant Corp. 100,000 2,136,000 Central Parking Corp. 40,000 580,000 ChoicePoint, Inc. (a) 40,000 1,744,000 Labor Ready, Inc. (a) 20,000 474,200 Waste Management, Inc. 50,000 1,406,000 -------------- 11,015,475 -------------- Construction & Engineering (0.3%) Insituform Technologies, Inc., Class A (a) 100,000 1,925,000 -------------- Electrical Equipment (0.6%) ABB Ltd. (a) 75,000 509,310 ABB Ltd. ADR (a) 100,000 681,000 Thomas & Betts Corp. (a) 100,000 3,377,000 -------------- 4,567,310 -------------- Industrial Conglomerates (1.2%) 3M Co. 42,500 3,187,500 General Electric Co. 117,550 4,055,475 Siemens AG, ADR 25,000 1,924,250 -------------- 9,167,225 -------------- Machinery (2.6%) AGCO Corp. (a) 50,000 1,034,500 Bucyrus International, Inc., Class A 22,500 958,950 Caterpillar, Inc. 100,000 5,391,000 Deere & Co. 25,000 1,838,250 Eaton Corp. 50,000 3,267,000 Hitachi Construction Machinery Co., Ltd. 125,000 1,706,023 Kaydon Corp. 40,000 1,234,400 OSG Corp. 93,000 1,208,706 Pall Corp. 50,000 1,548,500 Timken Co. 40,000 1,058,800 ZENON Environmental, Inc. (a) 30,000 659,556 -------------- 19,905,685 -------------- Marine (0.6%) A.P. Moller - Maersk A/S 275 2,676,737 Finnlines Oyj 130,000 2,154,458 -------------- 4,831,195 --------------
See Accompanying Notes to Financial Statements. 12
SHARES VALUE -------------- -------------- Common Stocks (continued) Road & Rail (0.1%) Kansas City Southern (a) 30,000 $ 676,800 -------------- Trading Companies & Distributors (0.5%) Fastenal Co. 20,000 1,312,800 GATX Corp. 72,500 2,740,500 -------------- 4,053,300 -------------- 69,177,870 -------------- Information Technology (12.9%) Communications Equipment (3.1%) Cisco Systems, Inc. (a) 225,680 4,321,772 Corning, Inc. (a) 200,000 3,810,000 Foundry Networks, Inc. (a) 125,000 1,480,000 Motorola, Inc. 50,400 1,067,472 Nokia Oyj, ADR 150,000 2,392,500 Packeteer, Inc. (a) 60,000 726,600 Plantronics, Inc. 75,000 2,562,000 QUALCOMM, Inc. 122,500 4,837,525 Tandberg ASA 220,000 2,493,191 -------------- 23,691,060 -------------- Computers & Peripherals (1.0%) EMC Corp. (a) 151,650 2,076,089 Hewlett-Packard Co. 100,000 2,462,000 International Business Machines Corp. 27,500 2,295,150 Sun Microsystems, Inc. (a) 175,000 672,000 -------------- 7,505,239 -------------- Electronic Equipment & Instruments (0.4%) Celestica, Inc. (a) 75,000 873,750 Murata Manufacturing Co., Ltd. 18,000 871,294 Solectron Corp. (a) 125,000 480,000 Symbol Technologies, Inc. 82,500 960,300 -------------- 3,185,344 -------------- Internet Software & Services (0.4%) Yahoo!, Inc. (a) 100,000 3,334,000 -------------- IT Services (1.7%) Automatic Data Processing, Inc. 50,000 2,220,500 DST Systems, Inc. (a) 92,500 4,695,300 First Data Corp. 70,000 2,879,800 Iron Mountain, Inc. (a) 20,000 685,800 Paychex, Inc. 62,500 2,181,875 -------------- 12,663,275 --------------
See Accompanying Notes to Financial Statements. 13
SHARES VALUE -------------- -------------- Common Stocks (continued) Office Electronics (0.2%) Canon, Inc., ADR 15,000 $ 737,550 Zebra Technologies Corp., Class A (a) 10,000 390,000 -------------- 1,127,550 -------------- Semiconductors & Semiconductor Equipment (3.4%) Advanced Micro Devices, Inc. (a) 87,500 1,757,000 Analog Devices, Inc. 57,500 2,254,000 Applied Materials, Inc. 100,000 1,846,000 FEI Co. (a) 50,000 1,134,500 Intel Corp. 130,300 3,536,342 Intersil Corp., Class A 50,000 968,500 Micron Technology, Inc. (a) 105,000 1,247,400 Samsung Electronics Co., Ltd., GDR (b) 30,000 8,272,500 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 105,000 901,947 Texas Instruments, Inc. 121,650 3,863,604 -------------- 25,781,793 -------------- Software (2.7%) Business Objects SA, ADR (a) 30,000 990,300 Cadence Design Systems, Inc. (a) 50,000 804,500 Check Point Software Technologies Ltd. (a) 75,000 1,689,750 Intuit, Inc. (a) 20,000 960,000 Microsoft Corp. 248,120 6,354,353 Novell, Inc. (a) 100,000 608,000 Oracle Corp. (a) 189,230 2,569,744 Quest Software, Inc. (a) 100,000 1,425,000 SAP AG, ADR 30,000 1,284,600 Symantec Corp. (a) 100,000 2,197,000 Wind River Systems, Inc. (a) 100,000 1,709,000 -------------- 20,592,247 -------------- 97,880,508 -------------- Materials (4.1%) Chemicals (2.0%) Air Products & Chemicals, Inc. 57,500 3,436,200 Dow Chemical Co. 30,000 1,438,500 E.I. du Pont de Nemours & Co. 30,000 1,280,400 International Flavors & Fragrances, Inc. 30,000 1,137,600 Potash Corp. of Saskatchewan, Inc. 70,000 7,459,200 -------------- 14,751,900 -------------- Construction Materials (0.3%) Vulcan Materials Co. 30,000 2,107,200 -------------- Containers & Packaging (0.1%) Smurfit-Stone Container Corp. (a) 50,000 606,500 --------------
See Accompanying Notes to Financial Statements. 14
SHARES VALUE -------------- -------------- Common Stocks (continued) Metals & Mining (1.4%) Alumina Ltd., ADR 67,500 $ 1,186,650 Barrick Gold Corp. 50,000 1,225,000 Companhia Vale do Rio Doce, ADR 100,000 3,256,000 Inco Ltd. 57,500 2,356,350 Newmont Mining Corp. 47,500 1,783,625 Placer Dome, Inc. 75,000 1,040,250 -------------- 10,847,875 -------------- Paper & Forest Products (0.3%) International Paper Co. 40,000 1,264,000 Votorantim Celulose e Papel SA, ADR 100,000 1,205,000 -------------- 2,469,000 -------------- 30,782,475 -------------- Telecommunication Services (1.7%) Diversified Telecommunication Services (1.3%) AFK Sistema (a) 50,000 886,000 BellSouth Corp. 67,500 1,863,000 Philippine Long Distance Telephone Co., ADR 36,800 1,069,776 SBC Communications, Inc. 50,000 1,222,500 Telekomunikasi Indonesia, ADR 110,000 2,544,300 Verizon Communications, Inc. 50,000 1,711,500 -------------- 9,297,076 -------------- Wireless Telecommunication Services (0.4%) Crown Castle International Corp. (a) 75,000 1,632,000 Telemig Celular Participacoes SA 50,000 1,588,500 -------------- 3,220,500 -------------- 12,517,576 -------------- Utilities (2.7%) Electric Utilities (1.1%) Edison International 100,000 4,088,000 Entergy Corp. 20,800 1,621,152 Exelon Corp. 40,000 2,140,800 Westar Energy, Inc. 30,000 729,900 -------------- 8,579,852 -------------- Gas Utilities (0.2%) ONEOK, Inc. 50,000 1,747,500 -------------- Independent Power Producers & Energy Traders (0.2%) Duke Energy Corp. 50,000 1,477,000 --------------
See Accompanying Notes to Financial Statements. 15
SHARES VALUE -------------- -------------- Common Stocks (continued) Multi-Utilities (1.0%) Dominion Resources, Inc. 20,000 $ 1,477,200 NiSource, Inc. 125,000 3,036,250 TECO Energy, Inc. 137,500 2,607,000 -------------- 7,120,450 -------------- Water Utilities (0.2%) American States Water Co. 37,500 1,166,250 -------------- 20,091,052 -------------- Total Common Stocks (Cost of $479,235,480) 623,743,636 -------------- Investment Company (0.3%) iShares MSCI Japan Index Fund (Cost of $1,543,000) 200,000 2,048,000 -------------- Par -------------- Short-Term Obligation (16.9%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Bond maturing 05/15/13, market value of $130,169,354 (repurchase proceeds $127,646,711) (Cost of $127,613,000) $ 127,613,000 127,613,000 -------------- Total Investments (99.7%) (Cost of $608,391,480) (c) 753,404,636 Other Assets & Liabilities, Net (0.3%) 2,455,112 -------------- Net Assets (100.0%) $ 755,859,748 ==============
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, 2005, the value of this security represents 1.1% of net assets. (c) Cost for federal income tax purposes is $612,078,747. See Accompanying Notes to Financial Statements. 16 At July 31, 2005, the Fund held investments in the following sectors:
% OF SECTOR NET ASSETS ------ ---------- Health Care 14.7% Information Technology 12.9 Financials 10.4 Consumer Discretionary 9.6 Consumer Staples 9.1 Industrials 9.1 Energy 8.2 Materials 4.1 Utilities 2.7 Telecommunication Services 1.7 Investment Company 0.3 Short-Term Obligation 16.9 Other Assets & Liabilities, Net 0.3 ---------- 100.0% ==========
ACRONYM NAME -------------- ---------------------------- ADR American Depositary Receipt GDR Global Depositary Receipt REIT Real Estate Investment Trust
See Accompanying Notes to Financial Statements. 17 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust STATEMENT OF ASSETS AND LIABILITIES July 31, 2005 ASSETS: Investments, at identified cost (including repurchase agreement) $ 608,391,480 ------------- Investments, at value $ 625,791,636 Repurchase agreement 127,613,000 Cash 738 Receivable for: Investments sold 3,885,529 Capital stock sold 8,106 Interest 33,711 Dividends 789,583 Foreign tax reclaims 54,972 Expense reimbursement due from Investment Advisor 3,735 Deferred Trustees' compensation plan 4,658 ------------- Total Assets 758,185,668 ------------- LIABILITIES: Payable for: Investments purchased 1,546,114 Capital stock redeemed 465,334 Investment advisory fee 253,917 Transfer agent fee 205 Trustees' fees 33 Custody fee 7,101 Chief compliance officer fees and expenses 576 Deferred Trustees' fees 4,658 Other liabilities 47,982 ------------- Total Liabilities 2,325,920 ------------- NET ASSETS $ 755,859,748 ============= NET ASSETS consist of: Paid-in capital $ 575,704,327 Undistributed net investment income 5,520,856 Accumulated net realized gain 29,623,085 Net unrealized appreciation (depreciation) on: Investments 145,013,156 Foreign currency translations (1,676) ------------- NET ASSETS $ 755,859,748 ============= Shares of capital stock outstanding 49,664,049 ============= Net asset value, offering and redemption price per share $ 15.22 =============
See Accompanying Notes to Financial Statements. 18 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust STATEMENT OF OPERATIONS For the Year Ended July 31, 2005 NET INVESTMENT INCOME: Income: Dividends $ 9,805,169 Interest 2,544,563 Foreign withholding tax (290,496) ------------- Total Investment Income 12,059,236 ------------- Expenses: Investment advisory fee 2,812,400 Transfer agent fee 2,099 Trustees' fees 20,046 Custody fee 67,005 Chief compliance officer fees and expenses (See Note 4) 6,181 Non-recurring costs (See Note 8) 12,981 Other expenses 132,790 ------------- Total Expenses 3,053,502 Expense reimbursement by Investment Advisor (228,462) Non-recurring costs assumed by Investment Advisor (See Note 8) (12,981) Custody earnings credit (1,518) ------------- Net Expenses 2,810,541 ------------- Net Investment Income 9,248,695 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments 34,895,782 Foreign currency transactions (106,216) ------------- Net realized gain 34,789,566 ------------- Net change in unrealized appreciation (depreciation) on: Investments 62,846,727 Foreign currency translations (2,135) ------------- Net change in unrealized appreciation (depreciation) 62,844,592 ------------- Net Gain 97,634,158 ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 106,882,853 =============
See Accompanying Notes to Financial Statements. 19 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, ------------------------------ 2005 2004 ------------- ------------- Operations: Net investment income $ 9,248,695 $ 5,021,621 Net realized gain on investments and foreign currency transactions 34,789,566 42,218,753 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations 62,844,592 30,946,840 ------------- ------------- Net increase from operations 106,882,853 78,187,214 Distributions declared to shareholders: From net investment income (6,517,434) (3,979,500) From net realized gains (33,081,757) (6,937,177) ------------- ------------- Total distributions declared to shareholders (39,599,191) (10,916,677) ------------- ------------- Share Transactions: Subscriptions 107,867,251 236,903,542 Distributions reinvested 38,913,285 10,729,185 Redemptions (76,918,698) (66,809,077) ------------- ------------- Net increase in share transactions 69,861,838 180,823,650 ------------- ------------- Net increase in net assets 137,145,500 248,094,187 NET ASSETS: Beginning of period 618,714,248 370,620,061 ------------- ------------- End of period $ 755,859,748 $ 618,714,248 ============= ============= Undistributed net investment income $ 5,520,856 $ 2,983,567 ============= ============= Changes in Shares: Subscriptions 7,444,993 18,201,135 Issued for distributions reinvested 2,670,781 795,344 Redemptions (5,281,801) (4,903,233) ------------- ------------- Net increase 4,833,973 14,093,246 ------------- -------------
See Accompanying Notes to Financial Statements. 20 CMG STRATEGIC EQUITY FUND A Portfolio of CMG Fund Trust NOTES TO FINANCIAL STATEMENTS July 31, 2005 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 an unlimited number of 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 certain investment companies 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 shares are determined as of such times. Foreign currency exchange rates are generally determined at 2:00 p.m. Eastern (U.S.) time. 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 have 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. If a security is valued at a "fair value", such value is likely to be different from the last quoted market price for the security. 21 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. 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. 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. 22 For the year ended July 31, 2005, permanent book and tax basis 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 INCOME NET REALIZED GAIN PAID-IN CAPITAL --------------------- ----------------- --------------- $ (193,972) $ 193,972 $ -
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 years ended July 31, 2005 and July 31, 2004 was as follows:
JULY 31, 2005 JULY 31, 2004 ------------- ------------- DISTRIBUTIONS PAID FROM: Ordinary income* $ 20,070,000 $ 8,312,541 Long-term capital gains 19,529,191 2,604,136
*For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of July 31, 2005, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED NET UNREALIZED ORDINARY INCOME LONG-TERM CAPITAL GAINS APPRECIATION* --------------- ----------------------- -------------- $ 11,177,991 $ 27,659,707 $ 141,325,889
*The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and REIT adjustments. Unrealized appreciation and depreciation at July 31, 2005, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 147,543,976 Unrealized depreciation (6,218,087) ------------- Net unrealized appreciation $ 141,325,889 =============
23 NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE. Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Effective on or about September 30, 2005, Columbia Management Advisors, Inc. will undergo a name change to Columbia Management Advisors, LLC. 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 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 pricing and bookkeeping services. TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has contracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $28.00 per open account. Effective on or about September 30, 2005, Columbia Funds Services, Inc. will undergo a name change to Columbia Management Services, Inc. For the year ended July 31, 2005, the Fund's effective transfer agent fee rate was less than 0.01%. EXPENSE LIMITS AND FEE REIMBURSEMENTS. Columbia has contractually agreed to reimburse the Fund through November 30, 2005 for certain expenses so that the expenses incurred by the Fund, including the investment advisory fee, will 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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. With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Chief Compliance Officer position. The Fund's fee will not exceed $15,000 per year. 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, 2005, the Fund paid $2,215 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. 24 NOTE 5. PORTFOLIO INFORMATION For the year ended July 31, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $399,228,913 and $377,288,655, respectively. NOTE 6. LINE OF CREDIT The Fund and other affiliated funds participate in a $350,000,000 committed unsecured revolving line of credit provided by State Street Bank and Trust Company. Borrowings are used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.10% per annum is accrued and apportioned among the participating funds based on their pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statement of Operations. For the year ended July 31, 2005, the Fund did not borrow under this arrangement. NOTE 7. SHARES OF BENEFICIAL INTEREST As of July 31, 2005, 42.5% of the outstanding shares of the Fund were held by 5 shareholders, each of which owns 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. On February 9, 2005, Columbia and Columbia Funds Distributor, Inc. (collectively, the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as the "Settlements." The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and 25 other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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. A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, the Trustees off the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, the removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia Funds to an exemption from contingent deferred sales charges upon early redemption ("the CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has transferred the CDSC Lawsuit to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any Fund, if any, cannot currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. 26 In 2004, certain Columbia Funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund and the other defendants to these actions, including Columbia and various of its 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 proceedings 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 Fund. For the year ended July 31, 2005, Columbia has assumed $12,981 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 27 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"), a portfolio of CMG Fund Trust, at July 31, 2005, 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). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 23, 2005 28 Unaudited Information FEDERAL INCOME TAX INFORMATION 23.34% of the ordinary income distributed by the Fund, for the year ended July 31, 2005, qualifies for the corporate dividends received deduction. For non-corporate shareholders, 31.77%, or the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act of 2003, of the income earned by the Fund for the year August 1, 2004 to July 31, 2005 may represent qualified dividend income. Final information will be provided in your 2005 1099-Div Form. For the fiscal year ended July 31, 2005, the Fund designated long-term capital gains of $29,413,986. 29 Trustees The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds Complex, 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 overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD -------------------------------------------------------- -------------------------------------------------------------- DISINTERESTED TRUSTEES Douglas A. Hacker (age 49) 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 1996) 2002; Executive Vice President and Chief Financial Officer of United Airlines from July, 1999 to September, 2001; Senior Vice President--Finance from March, 1993 to July, 1999). Oversees 101, Nash Finch Company (food distributor) Janet Langford Kelly (age 47) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm); 9534 W. Gull Lake Drive Adjunct Professor of Law, Northwestern University, since Richland, MI 49083-8530 September, 2004 (formerly Chief Administrative Officer and Trustee (since 1996) Senior Vice President, Kmart 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 101, None Richard W. Lowry (age 69) 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 103(3), None Trustee (since 1995) 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 1981) 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 101, None John J. Neuhauser (age 63) 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 August, 1999). Oversees Trustee (since 1985) 103(3), Saucony, Inc. (athletic footwear) Patrick J. Simpson (age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 101, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
30
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD -------------------------------------------------------- -------------------------------------------------------------- DISINTERESTED TRUSTEES Thomas E. Stitzel (age 69) 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 101, None Trustee (since 1998) Thomas C. Theobald (age 68) Partner and Senior Advisor, Chicago Growth Partners (private 8 Sound Shore Drive, equity investing) since September, 2004 (formerly Managing Suite 285 Director, William Blair Capital Partners (private equity Greenwich, CT 06830 investing) from September, 1994 to September, 2004). Oversees Trustee and Chairman of the Board(4) (since 1996) 101, Anixter International (network support equipment distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate management services) and Ambac Financial Group (financial guaranty 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 Hopkinton, NH 03229 to 1997). Oversees 101, Chairman of the Board of Directors, Trustee (since 1998) Enesco Group, Inc. (designer, importer and distributor of giftware and collectibles) Richard L. Woolworth (age 64) Retired since December 2003 (formerly Chairman and Chief 100 S.W. Market Street Executive Officer, The Regence Group (regional health #1500 Portland, OR 97207 insurer); Chairman and Chief Executive Officer, BlueCross Trustee (since 1991) BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company). Oversees 101, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEE William E. Mayer(2) (age 65) Partner, Park Avenue Equity Partners (private equity) since 399 Park Avenue February, 1999 (formerly Partner, Development Capital LLC from Suite 3204 November 1996 to February, 1999). Oversees 103(3), Lee New York, NY 10022 Enterprises (print media), WR Hambrecht + Co. (financial Trustee (since 1994) service provider); Reader's Digest (publishing); 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. (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 also serve as directors/trustees of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. The Statement of Additional Information Includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 31 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS -------------------------------------------------------- -------------------------------------------------------------- Christopher L. Wilson (age 48) Head of Mutual Funds since August, 2004 and Senior Vice One Financial Center President of the Advisor since January, 2005; President of the Boston, MA 02111 Columbia Funds, Liberty Funds and Stein Roe Funds since President (since 2004) October, 2004; President and Chief Executive Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton (age 41) Treasurer of the Columbia Funds since October, 2003 and of the One Financial Center Liberty Funds, Stein Roe Funds and All-Star Funds since Boston, MA 02111 December, 2000; Vice President of the Advisor since April, Treasurer (since 2000) 2003 (formerly President of the Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene (age 54) Senior Vice President and Chief Compliance Officer of the 40 West 57th Street Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star New York, NY 10005 Funds since August, 2004 (formerly Partner, Carter, Ledyard & Senior Vice President and Chief Compliance Milburn LLP from January, 2001 to August, 2004; Counsel, Officer (since 2004) Carter, Ledyard & Milburn LLP from November, 1999 to December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). Michael G. Clarke (age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, One Financial Center Stein Roe Funds and All-Star Funds since October, 2004 Boston, MA 02111 (formerly Controller of the Columbia Funds, Liberty Funds, Chief Accounting Officer (since 2004) Stein Roe Funds and All-Star Funds from May, 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Touche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman (age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe One Financial Center Funds and All-Star Funds since October, 2004 (formerly Vice Boston, MA 02111 President of CDC IXIS Asset Management Services, Inc. and Controller (since 2004) Deputy Treasurer of the CDC Nvest Funds and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson (age 46) Secretary of the Columbia Funds, Liberty Funds and Stein Roe One Financial Center Funds since December, 2004 (formerly Of Counsel, Bingham Boston, MA 02111 McCutchen from April, 2001 to September, 2004; Executive Secretary (since 2004) Director and General Counsel, Massachusetts Pension Reserves Investment Management Board from September, 1997 to March, 2001).
32 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, LLC 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110-2624 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110-2624 - TRANSFER AGENT - COLUMBIA MANAGEMENT SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 SHC-42/89540-0805 (09/05) 05/7532 A description of the policies and procedures that the fund uses to determine how to vote proxies and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA MANAGEMENT DISTRIBUTORS, 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. Fund distributed by Columbia Management Distributors, Inc., One Financial Center, Boston, MA 02111-2621 [COLUMBIA MANAGEMENT(R) LOGO] 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, 2005 NOT FDIC MAY LOSE VALUE INSURED ----------------- NO BANK GUARANTEE Advised by Columbia Management Advisors, Inc. Columbia Management is the primary investment management division of Banc of America Corporation. Columbia Management entities furnish investment management services and advise institutional and mutual fund portfolios. Columbia Management Advisors, Inc. will combine with Banc of America Capital Management, LLC on or about September 30, 2005. At that time, the newly combined advisor will undergo a name change to Columbia Management Advisors, LLC and will continue to operate as a SEC-registered investment advisor, wholly owned subsidiary of Bank of America, N.A. and part of Columbia Management. TABLE OF CONTENTS Management Discussion of Fund Performance CMG Core Bond Fund 1 CMG Short Term Bond Fund 6 CMG Ultra Short Term Bond Fund 11 CMG High Yield Fund 16 Financial Statements Financial Highlights 21 Schedule of Investments 25 Statements of Assets and Liabilities 59 Statements of Operations 60 Statements of Changes in Net Assets 61 Notes to Financial Statements 63 Report of Independent Registered Public Accounting Firm 71 Unaudited Information 72 Trustees 73 Officers 75
The views expressed in the Portfolio Commentaries reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a CMG Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Fund. References to specific company securities should not be constructed as a recommendation or investment advice. 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG CORE BOND FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE For the 12-month period ended July 31, 2005, the CMG Core Bond Fund returned 4.98%. The fund outperformed both the Lehman Brothers Aggregate Bond Index,(1) which returned 4.79%, and the Lipper Corporate Debt Funds A-Rated Category, which averaged 4.71% over the same period.(2) Investments in corporate bonds and mortgage-backed securities aided performance relative to the fund's benchmark. We believe these same holdings helped the fund exceed its peer group average. AN UNUSUAL ENVIRONMENT FOR BONDS Fixed-income investors faced an unusual combination of circumstances during the past 12 months. Seldom, if ever, has the Federal Reserve's (the Fed's) sustained effort to raise short-term interest rates higher been accompanied by such a persistent decline in long-term rates. The Fed raised the federal funds rate a total of eight times during the period, reflecting a backdrop of steady yet unspectacular growth in the national economy.(3) However, long-term rates were insulated from the Fed's efforts. While yields on 2-year Treasury obligations rose by 134 basis points over the past year, yields on 10-year and 30-year bonds fell by 20 and 73 basis points, respectively. Because we expected long-term rates to rise along with short-term rates, in keeping with historical precedent, we kept the portfolio's duration relatively short during the period. This strategy hampered returns during the period as long-term bonds exhibited unexpected strength. CORPORATE BONDS AND MORTGAGES PROVE THEIR WORTH We believe that the ultimate reason for the fund's above-average showing during the period was our willingness to move outside the Treasury market into corporate bonds, mortgage-backed securities and asset-backed securities. Each of these sectors outperformed Treasury securities of comparable maturities, aided by the combination of rising corporate profits and stable-to-lower long-term rates. Our security selection within these sectors also added to our returns. Within the corporate bond market, we overweighted strong-performing industries such as energy, capital goods and consumer non-cyclicals. Within the mortgage arena, our exposure to 15-year mortgage collateral was especially helpful to overall performance. These securities did better than longer-term mortgage obligations. LOOKING AHEAD As the trends of the past year unfolded, we took steps to position the portfolio to take advantage of the prevailing economic environment. Two particular aspects of this positioning are worth highlighting, because we believe they remain relevant for the year ahead. First, we reduced our commitment to corporate bonds, noting that their yield advantage over Treasuries has declined to historically low levels and that the steady rise in short-term rates may begin to 1 crimp corporate profits. In addition, we maintained a position in TIPS (Treasury Inflation Protected Securities) in case the economy experiences higher-than-expected inflation in the year ahead. The ability of the economy to weather higher energy prices has been impressive, but recent trends suggest potential benefits for securities that peg their rates to inflation. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were (%): Federal National Mortgage Association, TBA 5.000% 09/14/2035 9.1 U.S. Treasury Bond, 6.250% 08/15/2023 7.3 Federal National Mortgage Association, 5.000% 04/01/2020 5.2 Federal National Mortgage Association, 5.500% 12/01/2032 3.4 U.S. Treasury Inflation Index Note 3.625% 01/15/2008 3.0 Federal National Mortgage Association Discount, 3.174% 09/14/2005 2.8 Federal National Mortgage Association 5.000% 01/25/2031 2.5 AmeriCredit Automobile Receivables Trust 3.220% 07/06/2008 2.0 Federal Home Loan Mortgage Corp. 4.500% 03/15/2018 2.0 Federal National Mortgage Association 5.000%, 02/01/2020 1.8
We appreciate your continued confidence in the CMG Core Bond Fund. Leonard A. Aplet has co-managed the CMG Core Bond Fund since September 2000 and has been with the advisor or its predecessors or affiliate organizations since 1987. /s/ Leonard A. Aplet Richard R. Cutts has co-managed the Fund since November 2000 and has been with the advisor or its predecessors or affiliate organizations since 1994. /s/ Richard R. Cutts Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa. ---------- (1) 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 $250 million par amount outstanding and with at least one year to final maturity. Unlike the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. (3) The federal funds rate was increased again on August 9, 2005. 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 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Core Bond Fund 9/1/00 4.98 6.38 Lehman Brothers Aggregate Bond Index 4.79 6.83
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Core Bond Fund 9/1/00 6.93 6.67 Lehman Brothers Aggregate Bond Index 6.80 7.15
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 1, 2000 TO JULY 31, 2005
CMG CORE BOND FUND LEHMAN BROTHERS AGGREGATE BOND INDEX 9/1/2000 $ 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 $ 13,204 8/31/2004 $ 13,129 $ 13,456 9/30/2004 $ 13,178 $ 13,492 10/31/2004 $ 13,296 $ 13,605 11/30/2004 $ 13,181 $ 13,497 12/31/2004 $ 13,319 $ 13,621 1/31/2005 $ 13,399 $ 13,704 2/28/2005 $ 13,330 $ 13,623 3/31/2005 $ 13,265 $ 13,554 4/30/2005 $ 13,443 $ 13,737 5/31/2005 $ 13,583 $ 13,885 6/30/2005 $ 13,659 $ 13,961 7/31/2005 $ 13,550 $ 13,834
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from September 1, 2000. 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,011.31 1,023.55 1.25 1.25 0.25
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 365. 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 funds 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 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG SHORT TERM BOND FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Short Term Bond Fund returned 2.47% for the 12-month period ended July 31, 2005. The fund outperformed the Merrill Lynch 1-3 Year Treasury Index,(1) which returned 1.22% during the period. The fund also outperformed its peer group, the Lipper Short Investment Grade Debt Funds Category, whose average return was 1.76%.(2) The maturity structure of the portfolio was well matched to interest-rate movements during the period, which aided performance. THE BARBELL MEETS A FLATTENING YIELD CURVE Throughout the past 12 months, we maintained a "barbell" structure that emphasized the short and long ends of the fund's maturity spectrum while de-emphasizing intermediate maturities. This strategy was a good fit with a Treasury yield curve that flattened over the course of the year. The yield curve "flattens" when short-term rates rise and long-term rates decline. Normally, the yield curve, which displays the progression of yields from short to long-term, is positively sloped. In particular, the fund benefited from the Federal Reserve's (the Fed's) repeated short-term interest rate increases. The Fed raised the federal funds rate eight times during the reporting period.(3) As short-term securities matured, we were able to reinvest the proceeds at higher rates than those available during the past two years. In addition, the coupons on the fund's floating-rate notes were reset at steadily higher levels as the year went on. ADDED VALUE OUTSIDE THE TREASURY MARKET The fund's performance was enhanced by positions in corporate bonds, which outperformed Treasury bonds for the period as a whole. Industry selection was generally favorable. The fund was overweight in energy and consumer non-cyclical sectors, which were strong performers during the period. The fund's exposure to the auto manufacturers sector proved to be a slight detriment. The entire sector came under pressure in the spring when General Motors and Ford bonds were downgraded. We eliminated the fund's General Motors Acceptance holdings and elected to retain small positions in Ford Motor Credit and DaimlerChrysler N.A. Holding (0.6% and 0.3%, respectively). Positions in mortgage-backed and asset-backed securities also aided our performance, as bonds in these sectors outperformed Treasury securities with comparable maturities. Our ability to make significant investments in these longer-term sectors was made possible by the barbell approach, whose short-term component kept the portfolio's overall duration in check. Duration is a measure of interest-rate sensitivity. LOOKING AHEAD As the trends of the past year unfolded, we took steps to position the portfolio to take advantage of the prevailing economic environment. Two particular aspects of this positioning are worth highlighting because we believe they remain relevant for the year ahead. First, we reduced the fund's commitment to corporate bonds, noting that their yield advantage over 6 Treasuries has declined to historically low levels and that the steady rise in short-term interest rates could begin to crimp corporate profits. Second, we maintained a position in TIPS (Treasury Inflation Protected Securities) in case the economy experiences higher-than-expected inflation in the year ahead. The ability of the economy to weather higher energy prices has been impressive, but recent trends suggest potential benefits from securities that peg their rates to inflation. The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were (%): U.S. Treasury Note, 3.375% 10/15/2009 5.0 U.S. Treasury Inflation Index Note, 3.625% 01/15/2008 3.9 SLM Student Loan Trust, 4.080% 01/25/2013 3.4 Federal Home Loan Mortgage Corp., 4.000% 10/15/2026 2.4 Countrywide Home Loans, 3.860% 08/25/2018 2.3 Prudential Securities Secured Financing, 6.480% 11/01/2031 2.1 Federal Home Loan Mortgage Corp., 3.000% 06/15/2009 2.0 Federal National Mortgage Association, 4.500% 01/01/2020 2.0 Residential Asset Securitization Trust, 3.910% 02/25/2034 1.9 Federal Home Loan Mortgage Corp., 4.000% 05/01/2011 1.8
We appreciate your continued confidence in the CMG Short Term Bond Fund. Leonard A. Aplet has co-managed the CMG Short Term Bond Fund since February 1998 and has been with the advisor or its predecessors or affiliate organizations since 1987. /s/ Leonard A. Aplet Richard R. Cutts has co-managed the Fund since November 2000 and has been with the advisor or its predecessors or affiliate organizations since 1994. /s/ Richard R. Cutts Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa. ---------- (1) 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 the fund, 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. (3) The federal funds rate was increased again on August 9, 2005. 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. 7 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR 5-YEAR LIFE CMG Short Term Bond Fund 2/2/98 2.47 4.98 5.02 Merrill Lynch 1-3 Year Treasury Index 1.22 4.30 4.57
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR 5-YEAR LIFE CMG Short Term Bond Fund 2/2/98 3.11 5.18 5.11 Merrill Lynch 1-3 Year Treasury Index 1.87 4.49 4.66
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, FEBRUARY 2, 1998 TO JULY 31, 2005
CMG SHORT TERM BOND FUND MERRILL LYNCH 1-3 YEAR TREASURY INDEX 2/2/98 $ 10,000 $ 10,000 2/28/98 $ 10,005 $ 10,010 3/31/98 $ 10,040 $ 10,051 4/30/98 $ 10,099 $ 10,098 5/31/98 $ 10,168 $ 10,152 6/30/98 $ 10,236 $ 10,205 7/31/98 $ 10,279 $ 10,253 8/31/98 $ 10,425 $ 10,382 9/30/98 $ 10,563 $ 10,519 10/31/98 $ 10,536 $ 10,570 11/30/98 $ 10,561 $ 10,561 12/31/98 $ 10,612 $ 10,598 1/31/99 $ 10,691 $ 10,640 2/28/99 $ 10,608 $ 10,588 3/31/99 $ 10,688 $ 10,661 4/30/99 $ 10,723 $ 10,695 5/31/99 $ 10,687 $ 10,689 6/30/99 $ 10,704 $ 10,722 7/31/99 $ 10,695 $ 10,756 8/31/99 $ 10,705 $ 10,787 9/30/99 $ 10,815 $ 10,858 10/31/99 $ 10,847 $ 10,887 11/30/99 $ 10,875 $ 10,908 12/31/99 $ 10,886 $ 10,923 1/31/2000 $ 10,879 $ 10,918 2/29/2000 $ 10,956 $ 10,992 3/31/2000 $ 11,046 $ 11,060 4/30/2000 $ 11,040 $ 11,088 5/31/2000 $ 11,075 $ 11,134 6/30/2000 $ 11,233 $ 11,250 7/31/2000 $ 11,316 $ 11,321 8/31/2000 $ 11,431 $ 11,404 9/30/2000 $ 11,543 $ 11,487 10/31/2000 $ 11,598 $ 11,549 11/30/2000 $ 11,743 $ 11,658 12/31/2000 $ 11,929 $ 11,797 1/31/2001 $ 12,094 $ 11,944 2/28/2001 $ 12,197 $ 12,022 3/31/2001 $ 12,295 $ 12,122 4/30/2001 $ 12,301 $ 12,155 5/31/2001 $ 12,386 $ 12,223 6/30/2001 $ 12,440 $ 12,264 7/31/2001 $ 12,639 $ 12,402 8/31/2001 $ 12,734 $ 12,473 9/30/2001 $ 12,918 $ 12,679 10/31/2001 $ 13,064 $ 12,800 11/30/2001 $ 12,973 $ 12,772 12/31/2001 $ 12,945 $ 12,777 1/31/2002 $ 13,010 $ 12,802 2/28/2002 $ 13,080 $ 12,864 3/31/2002 $ 12,995 $ 12,776 4/30/2002 $ 13,104 $ 12,919 5/31/2002 $ 13,205 $ 12,971 6/30/2002 $ 13,284 $ 13,080 7/31/2002 $ 13,352 $ 13,240 8/31/2002 $ 13,464 $ 13,285 9/30/2002 $ 13,588 $ 13,395 10/31/2002 $ 13,456 $ 13,426 11/30/2002 $ 13,452 $ 13,384 12/31/2002 $ 13,581 $ 13,511 1/31/2003 $ 13,599 $ 13,510 2/28/2003 $ 13,699 $ 13,567 3/31/2003 $ 13,724 $ 13,591 4/30/2003 $ 13,774 $ 13,617 5/31/2003 $ 13,888 $ 13,669 6/30/2003 $ 13,900 $ 13,689 7/31/2003 $ 13,713 $ 13,615 8/31/2003 $ 13,743 $ 13,625 9/30/2003 $ 13,919 $ 13,749 10/31/2003 $ 13,863 $ 13,698 11/30/2003 $ 13,866 $ 13,691 12/31/2003 $ 13,949 $ 13,770 1/31/2004 $ 14,008 $ 13,798 2/29/2004 $ 14,082 $ 13,864 3/31/2004 $ 14,133 $ 13,907 4/30/2004 $ 14,018 $ 13,774 5/31/2004 $ 13,997 $ 13,761 6/30/2004 $ 14,022 $ 13,760 7/31/2004 $ 14,085 $ 13,809 8/31/2004 $ 14,184 $ 13,905 9/30/2004 $ 14,201 $ 13,892 10/31/2004 $ 14,241 $ 13,935 11/30/2004 $ 14,212 $ 13,865 12/31/2004 $ 14,269 $ 13,895 1/31/2005 $ 14,278 $ 13,889 2/28/2005 $ 14,272 $ 13,857 3/31/2005 $ 14,259 $ 13,858 4/30/2005 $ 14,345 $ 13,936 5/31/2005 $ 14,408 $ 13,989 6/30/2005 $ 14,460 $ 14,017 7/31/2005 $ 14,435 $ 13,974
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from February 2, 1998. 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,010.91 1,023.55 1.25 1.25 0.25
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 365. 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 funds 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 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG ULTRA SHORT TERM BOND FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG Ultra Short Term Bond Fund returned 1.83% for the 12-month period ended July 31, 2005. The fund outperformed both the Citigroup One-Year U.S. Treasury Bill Index,(1) which returned 1.46% for the period, and the average return of the Lipper Short Investment Grade Debt Funds Category, which was 1.76%.(2) The fund had more exposure to corporate bonds and asset backed securities than the index. We believe that this overweight accounted for its strong relative performance. Short-term bonds faced a challenging environment over the past 12 months. Their difficulties were driven primarily by the monetary policy of the Federal Reserve Board (the Fed), which raised a key short term interest rate--the federal funds rate--eight times during the period. These actions resulted in a two percentage-point rise in short-term interest rates, which negatively affected the fund's fixed income holdings as bond yields and prices move in opposite directions.(3) However, the positive economic growth that sparked the Fed's rate-raising cycle aided returns from the fund's corporate bond positions as the yield spread between them and US Treasuries narrowed. These corporate securities outperformed short-term Treasuries, providing a boost to performance. In addition, floating-rate bonds performed particularly well. Because their yields are reset periodically, the fund was able to capture the positive effect of increases in short-term rates. The search for income (yield) is central to the fund's efforts to offset the negative impact of rising rates on the principal value of short-term bonds. To improve the portfolio's overall yield while maintaining a high average credit quality, we emphasized short-term corporate bonds rated A and AA by Moody's, particularly floating-rate bonds. Corporate securities represented 42% of the portfolio at the end of the period. We also increased the fund's holdings in asset-backed securities, which are secured by an issuing company's income-producing assets, to 13%. We intend to maintain this exposure as long as these bonds continued to perform well. Mortgage-backed securities, which are secured by pools of mortgage loans, have also done well and we plan to add to the fund's position (11% of the portfolio as of 7/31/05) as individual values merit. We expect the Fed to continue to raise short-term interest rates until early 2006. To take advantage of this environment, we plan to maintain the fund's position in floating-rate issues. Should the Fed take a breather from its rate-raising cycle, we are prepared to increase the fund's fixed-rate corporate exposure and to extend the fund's duration in order to enhance return by reducing the portfolio's exposure to floating rate corporate bonds. Duration is a measure of interest rate sensitivity. We raise duration when we expect interest rates to decline. If we are right in our judgment, this move has the potential to increase return. If we are wrong, and interest rates continue to increase, a longer duration can hurt performance. 11 The fund's top ten holdings (as a percentage of net assets) as of July 31, 2005 were (%): U.S. Treasury Notes, 2.500% 10/31/2006 2.5 Federal National Mortgage Association, TBA 5.500% 12/01/2020 2.5 Federal National Mortgage Association, 3.250% 06/28/2006 2.4 Federal Home Loan Mortgage Corp., 5.000% 12/01/2019 2.3 Federal National Mortgage Association, 6.000% 09/01/2019 2.2 SLM Corp., 3.610% 09/15/2006 1.9 Goldman Sachs Group, Inc., 3.833% 10/27/2006 1.8 Morgan Stanley, 3.440% 11/24/2006 1.8 Emerson Electric, 6.300% 11/01/2005 1.8 Federal Home Loan Mortgage Corp., 2.750% 10/15/2006 1.8
We appreciate your continued confidence in the CMG Ultra Short Term Bond Fund. Guy C. Holbrook has managed the Fund since its inception and has been with the advisor or its predecessors or affiliate organizations since 1998. /s/ Guy C. Holbrook 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. ---------- (1) 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 the fund, 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. (3) The federal funds rate was increased again on August 9, 2005. 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. 12 CUMULATIVE TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Ultra Short Term Bond Fund 3/8/04 1.83 1.24 Citigroup One-Year U.S. Treasury Bill Index 1.46 1.00
CUMULATIVE TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR LIFE CMG Ultra Short Term Bond Fund 3/8/04 2.02 1.32 Citigroup One-Year U.S. Treasury Bill Index 1.69 1.08
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, MARCH 8, 2004 TO JULY 31, 2005
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 $ 9,991 $ 9,996 8/31/2004 $ 10,015 $ 10,025 9/30/2004 $ 10,021 $ 10,022 10/31/2004 $ 10,046 $ 10,039 11/30/2004 $ 10,042 $ 10,022 12/31/2004 $ 10,079 $ 10,038 1/31/2005 $ 10,067 $ 10,045 2/28/2005 $ 10,074 $ 10,044 3/31/2005 $ 10,069 $ 10,059 4/30/2005 $ 10,111 $ 10,095 5/31/2005 $ 10,153 $ 10,127 6/30/2005 $ 10,174 $ 10,144 7/31/2005 $ 10,175 $ 10,141
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Index performance is from March 8, 2004. 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,010.61 1,023.55 1.25 1.25 0.25
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 365. 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 funds 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 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 MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE UPDATES. CMG HIGH YIELD FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE CMG HIGH YIELD FUND A Portfolio of CMG Fund Trust MANAGEMENT DISCUSSION OF FUND PERFORMANCE For the 12-month period ended July 31, 2005, the CMG High Yield Fund returned 7.98%. That was slightly lower than the Merrill Lynch Intermediate BB Index,(1) which returned 8.53%. It was also below the average return of the Lipper High Current Yields Category, which was 9.55% for the period.(2) Generally speaking, performance of the fund, the index and the fund's peer group reflected their relative commitments to lower quality issues. The fund's average credit quality is higher than its peer group average, a strategy that we believe is prudent for the longer term. Macroeconomic conditions were favorable for the high-yield marketplace over the past 12 months. The economy's steady growth enabled corporate issuers to improve their balance sheets, a special boon to lower-quality issuers. The Merrill Lynch Cash Pay CCC Index advanced 14.02% for the year, mirroring the 14% advance in the S&P 500 and outpacing the Intermediate BB Index by over five percentage points. Our preference for higher quality investments led us to underweight the electric utility and telecommunications sectors, both of which outperformed the overall market. However, the fund established a small position in electric utilities, including an investment in AES, which was a strong performer for the fund during the period (1.2% of net assets). We also increased the fund's exposure to energy-related investments from 13.2% to 15.3%. Energy is one of the largest sectors weightings within the portfolio. In terms of individual holdings, the fund benefited from the strong operating performance of its holdings in the entertainment and leisure sector, notably Royal Caribbean and Speedway Motorsports (1.8% and 1.1% of net assets, respectively). Peabody Energy, the nation's largest coal enterprise, was another stronger performer (2.1% of net assets). Although customer deliveries were affected by a series of rail disruptions, Peabody was nonetheless a major beneficiary of high coal prices. Poor performers included paper and forest products and packaging concerns Boise Cascade and Smurfit-Stone Container. Both companies were hurt by stiff price competition within their primary markets (1.0% and 1.0% of net assets, respectively). Cinemark was also a weak performer, held back by a spate of disappointing Hollywood releases that dampened theater attendance nationwide (1.1% of net assets). We continue to believe that high-yield investments offer attractive prospects. The absence of meaningful inflationary pressures outside of the energy sector is likely to keep long-term bond yields in check, a plus for fixed-income investments in general. While it is possible that persistently high energy prices could restrain economic growth and bring inflation back into play, the fund's heavy weight in the energy sector should help insulate the portfolio from that scenario. Finally, from the standpoint of relative performance, the yield advantage of lower quality issues has narrowed considerably over the past two years, making it less likely that CCC and other low-rated bonds will continue to outperform. In that regard, we plan to continue the fund's emphasis on higher quality bonds. 16 The fund's top ten issuers (as a percentage of net assets) as of July 31, 2005 were (%): Peabody Energy 2.1 Cott Beverages 2.1 Lamar Media 2.1 Chesapeake Energy 2.1 Ball 2.0 HCA 2.0 Constellation Brands 2.0 Station Casinos 1.9 Caesars Entertainment 1.9 MGM Mirage 1.9
We appreciate your continued confidence in the CMG High Yield Fund. Jeffrey L. Rippey has managed or co-managed the CMG High Yield Fund since its inception in 1994 and has been with the advisor or its predecessors or affiliate organizations since 1981. /s/ Jeffrey L. Rippey Kurt M. Havnaer has co-managed the Fund since February 2000. He has been with the advisor or its predecessors or affiliate organizations since 1996. /s/ Kurt M. Havnaer Effective September 20, 2005 Stephen Peacher, Kevin L. Cronk and Thomas A. LaPoint began co-managing CMG High Yield Fund, replacing Jeffrey L. Rippey and Kurt M. Havnaer. Stephen Peacher, a managing director of Columbia Management, is the lead manager for the Fund and has been associated with Columbia Management since April, 2005. Kevin L. Cronk and Thomas A. LaPoint have been with the advisor or its predecessors or affiliate organization since 1999. Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa. Investments in high yield or "junk" bonds offer the potential for higher income than investments in investment-grade bonds but they also have a higher degree of risk. Changes in economic conditions or other circumstances may adversely affect a high-yield bond issuer's ability to make timely principal and interest payments. ---------- (1) The Merrill Lynch Intermediate BB Index is a market-weighted index, consisting of BB cash pay bonds, which are US dollar denominated bonds issued in the US 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 the fund, indices are not investments, they 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. (2) Lipper Inc., a widely respected data provider in the industry, calculates an average total return (assuming reinvestment of distributions) for mutual funds with investment objectives similar to those of the fund. Lipper makes no adjustment for the effect of sales loads. 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. 17 AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2005 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG High Yield Fund 7/6/94 7.98 7.09 7.60 Merrill Lynch Intermediate BB Index 8.53 7.06 7.03 Merrill Lynch U.S. High Yield, Cash Pay Index 10.85 8.01 7.34
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%)
INCEPTION 1-YEAR 5-YEAR 10-YEAR CMG High Yield Fund 7/6/94 8.79 7.10 7.65 Merrill Lynch Intermediate BB Index 8.97 7.09 6.97 Merrill Lynch U.S. High Yield, Cash Pay Index 10.64 7.83 7.29
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. 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. [CHART] GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1995 TO JULY 31, 2005
CMG HIGH YIELD FUND MERRILL LYNCH INTERMEDIATE BB INDEX MERRILL LYNCH U.S. HIGH YIELD, CASH PAY INDEX 8/1/95 $ 10,000 $ 10,000 $ 10,000 8/31/95 $ 10,026 $ 10,077 $ 10,061 9/30/95 $ 10,171 $ 10,188 $ 10,176 10/31/95 $ 10,324 $ 10,286 $ 10,248 11/30/95 $ 10,445 $ 10,426 $ 10,348 12/31/95 $ 10,620 $ 10,576 $ 10,515 1/31/96 $ 10,776 $ 10,724 $ 10,681 2/29/96 $ 10,833 $ 10,690 $ 10,697 3/31/96 $ 10,696 $ 10,621 $ 10,668 4/30/96 $ 10,676 $ 10,573 $ 10,674 5/31/96 $ 10,689 $ 10,602 $ 10,750 6/30/96 $ 10,704 $ 10,702 $ 10,815 7/31/96 $ 10,794 $ 10,761 $ 10,888 8/31/96 $ 10,998 $ 10,848 $ 11,001 9/30/96 $ 11,192 $ 11,033 $ 11,237 10/31/96 $ 11,316 $ 11,206 $ 11,361 11/30/96 $ 11,571 $ 11,425 $ 11,590 12/31/96 $ 11,649 $ 11,444 $ 11,679 1/31/97 $ 11,743 $ 11,538 $ 11,769 2/28/97 $ 11,900 $ 11,660 $ 11,934 3/31/97 $ 11,723 $ 11,551 $ 11,802 4/30/97 $ 11,838 $ 11,675 $ 11,936 5/31/97 $ 12,139 $ 11,862 $ 12,177 6/30/97 $ 12,289 $ 12,028 $ 12,362 7/31/97 $ 12,620 $ 12,317 $ 12,659 8/31/97 $ 12,600 $ 12,279 $ 12,638 9/30/97 $ 12,782 $ 12,454 $ 12,847 10/31/97 $ 12,774 $ 12,532 $ 12,932 11/30/97 $ 12,911 $ 12,613 $ 13,055 12/31/97 $ 13,062 $ 12,729 $ 13,179 1/31/98 $ 13,283 $ 12,884 $ 13,375 2/28/98 $ 13,350 $ 12,913 $ 13,430 3/31/98 $ 13,430 $ 12,984 $ 13,546 4/30/98 $ 13,480 $ 13,065 $ 13,609 5/31/98 $ 13,552 $ 13,169 $ 13,705 6/30/98 $ 13,650 $ 13,257 $ 13,773 7/31/98 $ 13,822 $ 13,343 $ 13,852 8/31/98 $ 13,357 $ 13,063 $ 13,253 9/30/98 $ 13,616 $ 13,305 $ 13,280 10/31/98 $ 13,541 $ 13,156 $ 13,062 11/30/98 $ 14,003 $ 13,440 $ 13,656 12/31/98 $ 14,018 $ 13,534 $ 13,661 1/31/99 $ 14,178 $ 13,622 $ 13,796 2/28/99 $ 14,101 $ 13,559 $ 13,691 3/31/99 $ 14,230 $ 13,701 $ 13,809 4/30/99 $ 14,339 $ 13,849 $ 14,024 5/31/99 $ 14,176 $ 13,710 $ 13,927 6/30/99 $ 14,149 $ 13,701 $ 13,901 7/31/99 $ 14,156 $ 13,731 $ 13,922 8/31/99 $ 14,033 $ 13,674 $ 13,780 9/30/99 $ 14,034 $ 13,729 $ 13,727 10/31/99 $ 14,055 $ 13,665 $ 13,646 11/30/99 $ 14,270 $ 13,795 $ 13,802 12/31/99 $ 14,354 $ 13,871 $ 13,874 1/31/2000 $ 14,290 $ 13,804 $ 13,804 2/29/2000 $ 14,321 $ 13,784 $ 13,817 3/31/2000 $ 14,227 $ 13,691 $ 13,623 4/30/2000 $ 14,328 $ 13,674 $ 13,627 5/31/2000 $ 14,313 $ 13,571 $ 13,477 6/30/2000 $ 14,640 $ 13,870 $ 13,708 7/31/2000 $ 14,764 $ 14,037 $ 13,807 8/31/2000 $ 15,034 $ 14,238 $ 13,975 9/30/2000 $ 15,018 $ 14,157 $ 13,894 10/31/2000 $ 14,898 $ 13,865 $ 13,487 11/30/2000 $ 14,702 $ 13,846 $ 13,065 12/31/2000 $ 15,123 $ 14,112 $ 13,348 1/31/2001 $ 15,707 $ 14,668 $ 14,144 2/28/2001 $ 15,851 $ 14,889 $ 14,367 3/31/2001 $ 15,766 $ 15,013 $ 14,178 4/30/2001 $ 15,728 $ 15,113 $ 14,023 5/31/2001 $ 15,806 $ 15,361 $ 14,292 6/30/2001 $ 15,601 $ 15,249 $ 13,998 7/31/2001 $ 15,751 $ 15,511 $ 14,215 8/31/2001 $ 15,995 $ 15,688 $ 14,353 9/30/2001 $ 15,334 $ 14,905 $ 13,433 10/31/2001 $ 15,929 $ 15,269 $ 13,828 11/30/2001 $ 16,390 $ 15,662 $ 14,277 12/31/2001 $ 16,229 $ 15,522 $ 14,176 1/31/2002 $ 16,341 $ 15,516 $ 14,255 2/28/2002 $ 16,205 $ 15,414 $ 14,118 3/31/2002 $ 16,416 $ 15,737 $ 14,454 4/30/2002 $ 16,542 $ 16,033 $ 14,684 5/31/2002 $ 16,511 $ 16,049 $ 14,605 6/30/2002 $ 16,080 $ 14,839 $ 13,566 7/31/2002 $ 15,818 $ 14,237 $ 13,026 8/31/2002 $ 16,117 $ 14,506 $ 13,352 9/30/2002 $ 16,041 $ 14,448 $ 13,139 10/31/2002 $ 16,025 $ 14,417 $ 13,028 11/30/2002 $ 16,554 $ 14,944 $ 13,805 12/31/2002 $ 16,683 $ 15,151 $ 14,014 1/31/2003 $ 16,857 $ 15,427 $ 14,418 2/28/2003 $ 17,028 $ 15,558 $ 14,604 3/31/2003 $ 17,332 $ 15,748 $ 14,982 4/30/2003 $ 17,770 $ 16,291 $ 15,824 5/31/2003 $ 17,793 $ 16,430 $ 15,995 6/30/2003 $ 18,035 $ 16,747 $ 16,432 7/31/2003 $ 17,734 $ 16,465 $ 16,197 8/31/2003 $ 17,863 $ 16,587 $ 16,409 9/30/2003 $ 18,262 $ 17,024 $ 16,847 10/31/2003 $ 18,464 $ 17,270 $ 17,191 11/30/2003 $ 18,616 $ 17,464 $ 17,428 12/31/2003 $ 18,836 $ 17,728 $ 17,832 1/31/2004 $ 19,015 $ 17,923 $ 18,111 2/29/2004 $ 19,098 $ 18,046 $ 18,103 3/31/2004 $ 19,304 $ 18,265 $ 18,230 4/30/2004 $ 19,129 $ 17,987 $ 18,099 5/31/2004 $ 18,756 $ 17,733 $ 17,809 6/30/2004 $ 18,958 $ 17,927 $ 18,069 7/31/2004 $ 19,258 $ 18,190 $ 18,317 8/31/2004 $ 19,643 $ 18,521 $ 18,648 9/30/2004 $ 19,947 $ 18,743 $ 18,908 10/31/2004 $ 20,227 $ 18,993 $ 19,267 11/30/2004 $ 20,267 $ 19,021 $ 19,461 12/31/2004 $ 20,352 $ 19,206 $ 19,751 1/31/2005 $ 20,336 $ 19,223 $ 19,736 2/28/2005 $ 20,574 $ 19,398 $ 20,014 3/31/2005 $ 20,006 $ 18,911 $ 19,470 4/30/2005 $ 19,942 $ 18,917 $ 19,267 5/31/2005 $ 20,329 $ 19,235 $ 19,622 6/30/2005 $ 20,622 $ 19,538 $ 19,994 7/31/2005 $ 20,806 $ 19,750 $ 20,298
The chart above shows the growth in value of a hypothetical $10,000 investment in the fund compared to the index during the stated time period, and does 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 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 $8,600 at the end of the period, the result would be 8.6. 2. In the section of the table below titled "Expenses paid during the period," locate the amount under "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period. FEBRUARY 1, 2005 - JULY 31, 2005
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL 1,000.00 1,000.00 1,022.51 1,022.81 2.01 2.01 0.40
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 365. 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 funds 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)
PERIOD PERIOD YEAR ENDED JULY 31, ENDED YEAR ENDED OCTOBER 31, ENDED --------------------- JULY 31, ------------------------ OCTOBER 31, 2005 2004 2003 (a) 2002 2001 2000 (b) -------- -------- -------- -------- -------- ----------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.36 $ 10.38 $ 10.52 $ 10.83 $ 10.02 $ 10.00 -------- -------- -------- -------- -------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.42(c) 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 0.09 0.11 (0.12) (0.15)(d) 0.81 0.02 -------- -------- -------- -------- -------- ----------- Total from investment operations 0.51 0.48 0.19 0.41 1.46 0.13 -------- -------- -------- -------- -------- ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.45) (0.41) (0.33) (0.58) (0.65) (0.11) From net realized gains - (0.09) - (0.14) -(e) - -------- -------- -------- -------- -------- ----------- Total distributions (0.45) (0.50) (0.33) (0.72) (0.65) (0.11) -------- -------- -------- -------- -------- ----------- NET ASSET VALUE, END OF PERIOD $ 10.42 $ 10.36 $ 10.38 $ 10.52 $ 10.83 $ 10.02 ======== ======== ======== ======== ======== =========== TOTAL RETURN (f)(g) 4.98% 4.67% 1.76%(h) 3.97% 15.01% 1.31%(h) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 79,102 $ 32,810 $ 30,512 $ 27,412 $ 28,774 $ 10,866 Ratio of net expenses to average net assets (i) 0.25% 0.35% 0.40%(j) 0.40% 0.40% 0.40%(j) Ratio of investment income to average net assets (i) 4.01% 3.54% 3.95%(j) 5.34%(d) 6.14% 6.57%(j) Waiver/reimbursement 0.06% 0.25% 0.29%(j) 0.16% 0.25% 1.06%(j) Portfolio turnover rate 130% 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 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)
PERIOD YEAR ENDED JULY 31, ENDED YEAR ENDED OCTOBER 31, ---------------------- JULY 31, ------------------------------------- 2005 2004 2003 (a) 2002 2001 2000 --------- --------- --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.95 $ 12.01 $ 12.15 $ 12.41 $ 11.73 $ 11.72 --------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.40(b) 0.35(b) 0.34(b) 0.59(b)(c) 0.76 0.77 Net realized and unrealized gain (loss) on investments (0.11) (0.03) (0.11) (0.22)(c) 0.68 0.01 --------- --------- --------- --------- --------- --------- Total from investment operations 0.29 0.32 0.23 0.37 1.44 0.78 --------- --------- --------- --------- --------- --------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.45) (0.38) (0.37) (0.63) (0.76) (0.77) From net realized gains - - - - - - --------- --------- --------- --------- --------- --------- Total distributions (0.45) (0.38) (0.37) (0.63) (0.76) (0.77) --------- --------- --------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD $ 11.79 $ 11.95 $ 12.01 $ 12.15 $ 12.41 $ 11.73 ========= ========= ========= ========= ========= ========= TOTAL RETURN (d)(e) 2.47% 2.72% 1.91%(f) 3.12% 12.62% 6.92% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 95,842 $ 119,125 $ 113,193 $ 140,757 $ 89,791 $ 82,809 Ratio of net expenses to average net assets (g) 0.25% 0.25% 0.25%(h) 0.25% 0.25% 0.25% Ratio of interest expense to average net assets - - -(h)(i) - - - Ratio of net investment income to average net assets (g) 3.38% 2.91% 3.79%(h) 4.73%(c) 6.27% 6.56% Waiver/reimbursement 0.04% 0.10% 0.08%(h) 0.05% 0.08% 0.08% Portfolio turnover rate 51% 79% 93%(f) 132% 82% 86%
(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 year 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) 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 agreements, if applicable, had an impact of less than 0.01%. (h) Annualized. (i) Rounds to less than 0.01%. See Accompanying Notes to Financial Statements. 22 CMG ULTRA SHORT TERM BOND FUND A Portfolio of CMG Fund Trust FINANCIAL HIGHLIGHTS (For a Fund Share Outstanding Throughout the Period)
YEAR PERIOD ENDED ENDED JULY 31, JULY 31, 2005 2004 (a) ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $ 10.00 ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.24 0.07 Net realized and unrealized loss on investments (0.06) (0.08) ------------ ------------ Total from investment operations 0.18 (0.01) ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.36) (0.11) Return of capital (0.03) - ------------ ------------ Total distributions (0.39) (0.11) ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 9.67 $ 9.88 ============ ============ TOTAL RETURN (c)(d) 1.83% (0.08)%(e) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 81,575 $ 67,235 Ratio of net expenses to average net assets 0.25% 0.25%(f) Ratio of net investment income to average net assets 2.44% 1.69%(f) Waiver/reimbursement 0.05% 0.22%(f) Portfolio turnover rate 75% 12%(e)
(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)
PERIOD YEAR ENDED JULY 31, ENDED YEAR ENDED OCTOBER 31, ------------------------ JULY 31, ------------------------------------ 2005 2004 2003(a) 2002 2001 2000 --------- --------- --------- --------- --------- --------- NET ASSET VALUE, BEGINNING OF PERIOD $ 8.00 $ 7.90 $ 7.55 $ 8.14 $ 8.30 $ 8.54 --------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.51(b) 0.53(b) 0.43(b) 0.64(b)(c) 0.72 0.73 Net realized and unrealized gain (loss) on investments 0.11 0.14 0.37 (0.58)(c) (0.16) (0.24) --------- --------- --------- --------- --------- --------- Total from investment operations 0.62 0.67 0.80 0.06 0.56 0.49 --------- --------- --------- --------- --------- --------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.54) (0.57) (0.45) (0.65) (0.72) (0.73) --------- --------- --------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD $ 8.08 $ 8.00 $ 7.90 $ 7.55 $ 8.14 $ 8.30 ========= ========= ========= ========= ========= ========= TOTAL RETURN (d) 7.98%(e) 8.60%(e) 10.67%(e)(f) 0.60% 6.92% 6.01% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $ 269,243 $ 382,157 $ 429,042 $ 286,228 $ 348,979 $ 319,985 Ratio of net expenses to average net assets (g) 0.40% 0.40% 0.42%(h) 0.42% 0.44% 0.43% Ratio of investment income to average net assets (g) 6.26% 6.64% 7.32%(h) 7.98%(c) 8.63% 8.70% Waiver/reimbursement 0.02% 0.02% 0.01%(h) - - - Portfolio turnover rate 39% 47% 47%(f) 62% 59% 56%
(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 year ended October 31, 2002, was to decrease net investment income per share by $0.01, decrease net realized and unrealized loss per share 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. (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. 24 CMG CORE BOND FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
PAR VALUE -------------- -------------- Mortgage-Backed Securities (43.0%) Agency Collateralized Mortgage Obligations (14.6%) Federal Home Loan Mortgage Corp. 4.000% 07/15/14 - 10/15/26 $ 3,955,000 $ 3,840,762 4.500% 03/15/18 - 08/15/28 3,730,000 3,680,385 6.500% 10/15/23 100,000 105,468 Federal National Mortgage Association 4.500% 11/25/14 900,000 896,365 5.000% 01/25/31 2,000,000 1,984,844 6.500% 07/25/30 22,495 22,589 Government National Mortgage Association 4.500% 04/16/28 1,000,000 993,843 -------------- 11,524,256 -------------- Mortgage-Backed Securities (28.4%) Federal Home Loan Mortgage Corp. 3.500% 10/01/18 321,211 299,960 4.000% 07/01/19 285,000 275,381 5.000% 01/01/19 - 07/01/19 2,623,997 2,632,716 5.500% 11/01/17 - 09/01/34 547,928 554,535 6.000% 05/01/17 185,175 191,206 TBA, 5.000% 08/16/20 (a) 908,000 892,110 Federal National Mortgage Association 5.000% 02/01/20 - 06/01/20 6,478,112 6,495,753 5.500% 12/01/32 - 12/01/33 3,820,149 3,843,044 TBA, 5.000% 09/14/35 (a) 7,298,000 7,192,003 Government National Mortgage Association 7.000% 01/15/32 - 03/15/32 63,473 67,049 -------------- 22,443,757 -------------- Total Mortgage-Backed Securities (Cost of $34,092,300) 33,968,013 -------------- Corporate Fixed-Income Bonds & Notes (28.0%) Basic Materials (0.8%) Forest Products & Paper (0.4%) International Paper Co. 4.250% 01/15/09 350,000 342,006 -------------- Metals & Mining (0.4%) Alcan, Inc. 4.500% 05/15/13 325,000 313,875 -------------- 655,881 -------------- Communications (3.2%) Media (1.0%) Jones Intercable, Inc. 7.625% 04/15/08 375,000 402,476 Time Warner, Inc. 6.625% 05/15/29 325,000 355,527 -------------- 758,003 --------------
See Accompanying Notes to Financial Statements. 25
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Telecommunications (2.2%) Cingular Wireless Services, Inc. 8.750% 03/01/31 $ 275,000 $ 379,863 Deutsche Telekom International Finance 8.500% 06/15/10 325,000 370,094 Sprint Capital Corp. 6.875% 11/15/28 200,000 225,720 Verizon Global Funding Corp. 7.250% 12/01/10 500,000 556,740 Vodafone Group PLC 7.750% 02/15/10 175,000 196,880 -------------- 1,729,297 -------------- 2,487,300 -------------- Consumer Cyclical (0.9%) Auto Manufacturers (0.3%) DaimlerChrysler NA Holding Corp. 8.500% 01/18/31 150,000 192,140 -------------- Retail (0.6%) Lowe's Companies, Inc. 6.500% 03/15/29 175,000 201,397 Wal-Mart Stores, Inc. 4.000% 01/15/10 300,000 293,481 -------------- 494,878 -------------- 687,018 -------------- Consumer Non-Cyclical (3.4%) Beverages (0.9%) Anheuser-Busch Companies, Inc. 5.750% 04/01/10 50,000 52,048 Bottling Group LLC 2.450% 10/16/06 400,000 391,656 Diageo Capital PLC 3.375% 03/20/08 250,000 243,332 -------------- 687,036 -------------- Food (1.2%) General Mills, Inc. 2.625% 10/24/06 400,000 391,956 Kroger Co. 6.200% 06/15/12 335,000 353,797 Safeway, Inc. 4.950% 08/16/10 170,000 168,844 -------------- 914,597 -------------- Healthcare Services (1.0%) UnitedHealth Group, Inc. 3.375% 08/15/07 400,000 391,004
See Accompanying Notes to Financial Statements. 26
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Healthcare Services (continued) WellPoint, Inc. 6.375% 01/15/12 $ 300,000 $ 327,045 6.800% 08/01/12 100,000 111,538 -------------- 829,587 -------------- Household Products/Wares (0.3%) Fortune Brands, Inc. 2.875% 12/01/06 225,000 220,372 -------------- 2,651,592 -------------- Energy (1.8%) Oil & Gas (1.3%) ChevronTexaco Capital Co. 3.500% 09/17/07 200,000 197,022 Devon Energy Corp. 7.950% 04/15/32 175,000 225,887 Marathon Oil Corp. 6.800% 03/15/32 350,000 399,469 Occidental Petroleum Corp. 4.250% 03/15/10 225,000 220,700 -------------- 1,043,078 -------------- Pipelines (0.5%) Kinder Morgan Energy Partners LP 7.300% 08/15/33 350,000 417,025 -------------- 1,460,103 -------------- Financials (11.2%) Banks (2.7%) Marshall & Ilsley Corp. 4.375% 08/01/09 400,000 398,360 U.S. Bank N.A 6.375% 08/01/11 275,000 300,671 Wachovia Corp. 4.875% 02/15/14 700,000 697,522 Wells Fargo & Co. 3.419% 03/10/08 (b) 730,000 725,175 -------------- 2,121,728 -------------- Diversified Financial Services (6.4%) American Express Credit Corp. 3.000% 05/16/08 300,000 288,636 American General Finance Corp. 5.375% 09/01/09 50,000 51,148 Bear Stearns Co., Inc. 6.500% 05/01/06 200,000 203,310 Capital One Financial Corp. 5.500% 06/01/15 210,000 211,787 CIT Group, Inc. 4.125% 02/21/06 150,000 150,081
See Accompanying Notes to Financial Statements. 27
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Diversified Financial Services (continued) Citigroup, Inc. 5.000% 09/15/14 $ 430,000 $ 433,866 Countrywide Home Loans, Inc. 2.875% 02/15/07 425,000 415,089 Credit Suisse First Boston USA, Inc. 4.625% 01/15/08 400,000 401,368 Goldman Sachs Group, Inc. 6.345% 02/15/34 325,000 345,995 HSBC Finance Corp. 6.400% 06/17/08 455,000 477,404 JPMorgan Chase Capital XV 5.875% 03/15/35 625,000 626,675 Lehman Brothers Holdings, Inc. 4.000% 01/22/08 225,000 222,554 Merrill Lynch & Co., Inc. 4.125% 01/15/09 400,000 393,528 Morgan Stanley 4.750% 04/01/14 200,000 194,508 Pitney Bowes Credit Corp. 5.750% 08/15/08 225,000 233,084 SLM Corp. 5.125% 08/27/12 425,000 430,687 -------------- 5,079,720 -------------- Insurance (1.2%) Allstate Financial Global Funding II 2.625% 10/22/06 (c) 150,000 146,788 American International Group, Inc. 2.875% 05/15/08 625,000 596,644 Genworth Financial, Inc. 4.750% 06/15/09 200,000 200,984 -------------- 944,416 -------------- Real Estate Investment Trusts (REITs) (0.4%) Health Care Property Investors, Inc. 6.450% 06/25/12 300,000 319,047 -------------- Savings & Loans (0.5%) Washington Mutual, Inc. 4.200% 01/15/10 400,000 391,604 -------------- 8,856,515 -------------- Industrials (4.4%) Aerospace & Defense (0.4%) Lockheed Martin Corp. 8.500% 12/01/29 160,000 223,792 United Technologies Corp. 7.125% 11/15/10 100,000 111,395 -------------- 335,187 --------------
See Accompanying Notes to Financial Statements. 28
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Auto Manufacturers (0.7%) Ford Motor Credit Co. 7.375% 10/28/09 $ 550,000 $ 548,471 -------------- Environmental Control (0.4%) Waste Management, Inc. 7.375% 08/01/10 325,000 358,072 -------------- Machinery (0.9%) Caterpillar Financial Services Corp. 3.625% 11/15/07 350,000 343,742 John Deere Capital Corp. 4.625% 04/15/09 375,000 374,936 -------------- 718,678 -------------- Miscellaneous Manufacturing (1.0%) General Electric Co. 5.000% 02/01/13 750,000 760,477 -------------- Transportation (1.0%) Canadian National Railway Co. 7.195% 01/02/16 74,295 87,075 CSX Corp. 6.750% 03/15/11 275,000 299,846 Union Pacific Corp. 3.875% 02/15/09 385,000 375,198 -------------- 762,119 -------------- 3,483,004 -------------- Technology (0.3%) Computers (0.3%) International Business Machines Corp. 5.875% 11/29/32 250,000 271,165 -------------- Utilities (2.0%) Electric (1.9%) CenterPoint Energy Houston Electric LLC 5.750% 01/15/14 350,000 367,017 Exelon Generation Co. LLC 6.950% 06/15/11 325,000 358,101 Scottish Power PLC 4.910% 03/15/10 400,000 400,504 Virginia Electric and Power Co. 5.375% 02/01/07 350,000 354,221 -------------- 1,479,843 --------------
See Accompanying Notes to Financial Statements. 29
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Gas (0.1%) Sempra Energy 4.750% 05/15/09 $ 100,000 $ 99,555 -------------- 1,579,398 -------------- Total Corporate Fixed-Income Bonds & Notes (Cost of $22,192,874) 22,131,976 -------------- Government Agencies & Obligations (14.5%) Foreign Government Bonds (1.5%) Province of Ontario 3.500% 09/17/07 350,000 344,173 Province of Quebec 6.500% 01/17/06 275,000 278,143 Republic of Italy 2.500% 03/31/06 300,000 296,799 United Mexican States 7.500% 04/08/33 230,000 262,660 -------------- 1,181,775 -------------- U.S. Government Agencies & Obligations (13.0%) Federal Home Loan Bank 2.250% 09/13/05 375,000 374,363 3.000% 05/15/06 (d) 100,000 99,192 U.S. Treasury Bond 6.250% 08/15/23 4,810,000 5,799,994 U.S. Treasury Inflation Index Note 3.625% 01/15/08 2,250,265 2,358,559 U.S. Treasury Notes 4.250% 11/15/13 950,000 949,889 3.500% 11/15/06 740,000 735,924 -------------- 10,317,921 -------------- Total Government Agencies & Obligations (Cost of $11,520,234) 11,499,696 -------------- Collateralized Mortgage Obligations (6.0%) Bear Stearns Asset Backed Securities, Inc. 5.000% 01/25/34 371,046 366,074 Countrywide Alternative Loan Trust 3.860% 03/25/34 (b) 219,530 219,309 5.250% 03/25/35 - 08/25/35 2,173,179 2,167,378 Countrywide Home Loans Mortgage Pass Through Trust 4.599% 12/19/33 (b) 278,871 269,923 Residential Funding Mortgage Securities I, Inc. 3.860% 07/25/18 (b) 395,423 395,953 Structured Asset Securities Corp. 5.500% 07/25/33 1,291,987 1,297,845 -------------- Total Collateralized Mortgage Obligations (Cost of $4,742,123) 4,716,482 --------------
See Accompanying Notes to Financial Statements. 30
PAR VALUE -------------- -------------- Commercial Mortgage-Backed Securities (1.4%) Asset Securitization Corp. 7.400% 10/13/26 $ 529,848 $ 544,472 CS First Boston Mortgage Securities Corp. 4.512% 07/15/37 500,000 495,083 Nationslink Funding Corp. 6.888% 11/10/30 90,000 93,749 -------------- Total Commercial Mortgage-Backed Securities (Cost of $1,149,618) 1,133,304 -------------- Asset-Backed Securities (2.7%) ABFS Mortgage Loan Trust 4.428% 12/15/33 327,179 312,773 AmeriCredit Automobile Receivables Trust 3.220% 07/06/08 1,575,000 1,562,857 IMC Home Equity Loan Trust 7.310% 11/20/28 67,553 67,549 7.520% 08/20/28 34,617 34,587 New Century Home Equity Loan Trust 2.940% 11/25/33 95,748 95,502 7.320% 07/25/29 7,195 7,291 Wilshire Mortgage Loan Trust 7.255% 05/25/28 76,831 76,648 -------------- Total Asset-Backed Securities (Cost of $2,190,179) 2,157,207 -------------- Short-Term Obligations (16.2%) Repurchase Agreement (13.4%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Government Agency Obligation maturing 05/15/13, market value of $10,791,040 (repurchase proceeds $10,579,794) 10,577,000 10,577,000 -------------- U.S. Government Agency & Obligation (2.8%) Federal National Mortgage Association 3.174% 09/14/05 (e) 2,225,000 2,216,461 -------------- Total Short-Term Obligations (Cost of $12,793,461) 12,793,461 -------------- Total Investments (111.8%) (Cost of $88,680,789) (f) 88,400,139 Other Assets & Liabilities, Net (-11.8%) (9,297,675) -------------- Net Assets (100.0%) $ 79,102,464 ==============
See Accompanying Notes to Financial Statements. 31 Notes to Schedule of Investments: (a) Security purchased on a delayed delivery basis. (b) The interest rate shown on floating rate or variable rate securities reflects the rate at July 31, 2005. (c) 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, 2005, this security, which is not illiquid, represents 0.2% of net assets. (d) Security pledged as collateral for open futures contracts. (e) The rate shown represents the annualized yield at the date of purchase. (f) Cost for federal income tax purposes is $88,864,347. At July 31, 2005, the Fund held the following open short futures contracts:
NUMBER OF AGGREGATE FACE EXPIRATION UNREALIZED TYPE CONTRACTS VALUE VALUE DATE APPRECIATION ---------------------------------------------------------------------------------------------- 2-Year U.S. Treasury Notes 30 $ 6,194,531 $ 6,244,219 Sept-2005 $ 49,688 ACRONYM NAME ------- ---- TBA To Be Announced
At July 31, 2005, the asset allocation of the Fund is as follows:
% OF ASSET ALLOCATION NET ASSETS ---------------- ---------- Mortgage-Backed Securities 43.0% Corporate Fixed-Income Bonds & Notes 28.0 Government Agencies & Obligations 14.5 Collateralized Mortgage Obligations 6.0 Asset-Backed Securities 2.7 Commercial Mortgage-Backed Securities 1.4 Short-Term Obligations 16.2 Other Assets & Liabilities, Net (11.8) ---------- 100.0% ==========
See Accompanying Notes to Financial Statements. 32 CMG SHORT TERM BOND FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (33.8%) Basic Materials (0.6%) Forest Products & Paper (0.6%) International Paper Co. 4.250% 01/15/09 $ 550,000 $ 537,438 -------------- Communications (3.9%) Media (1.1%) Jones Intercable, Inc. 7.625% 04/15/08 500,000 536,635 Time Warner, Inc. 6.125% 04/15/06 565,000 572,690 -------------- 1,109,325 -------------- Telecommunications (2.8%) AT&T Wireless Services, Inc. 7.500% 05/01/07 300,000 315,501 Deutsche Telekom International Finance BV 8.500% 06/15/10 350,000 398,562 SBC Communications, Inc. 5.750% 05/02/06 450,000 454,855 Sprint Capital Corp. 6.375% 05/01/09 345,000 364,379 Verizon Global Funding Corp. 7.600% 03/15/07 825,000 864,592 Vodafone Group PLC 7.750% 02/15/10 225,000 253,132 -------------- 2,651,021 -------------- 3,760,346 -------------- Consumer Cyclical (1.2%) Auto Manufacturers (0.3%) DaimlerChrysler N.A. Holding Corp. 4.750% 01/15/08 265,000 265,119 -------------- Retail (0.9%) Costco Wholesale Corp. 5.500% 03/15/07 400,000 406,868 Wal-Mart Stores, Inc. 4.000% 01/15/10 500,000 489,135 -------------- 896,003 -------------- 1,161,122 -------------- Consumer Non-Cyclical (4.0%) Beverages (0.5%) Coca-Cola Enterprises, Inc. 5.750% 11/01/08 475,000 492,998 --------------
See Accompanying Notes to Financial Statements. 33
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Food (1.2%) General Mills, Inc. 2.625% 10/24/06 $ 625,000 $ 612,431 Kroger Co. 7.650% 04/15/07 275,000 287,826 Safeway, Inc. 4.950% 08/16/10 280,000 278,096 -------------- 1,178,353 -------------- Healthcare Services (1.5%) WellPoint, Inc. 4.875% 08/01/05 475,000 474,952 6.375% 06/15/06 500,000 508,920 UnitedHealth Group, Inc. 3.375% 08/15/07 500,000 488,755 -------------- 1,472,627 -------------- Household Products/Wares (0.8%) Fortune Brands, Inc. 2.875% 12/01/06 725,000 710,087 -------------- 3,854,065 -------------- Energy (2.2%) Oil & Gas (1.6%) ChevronTexaco Capital Co. 3.500% 09/17/07 500,000 492,555 Devon Energy Corp. 2.750% 08/01/06 550,000 540,947 Marathon Oil Corp. 5.375% 06/01/07 500,000 507,170 -------------- 1,540,672 -------------- Pipelines (0.6%) Kinder Morgan Energy Partners LP 6.750% 03/15/11 500,000 542,710 -------------- 2,083,382 -------------- Financials (15.7%) Banks (3.1%) Marshall & Ilsley Corp. 4.375% 08/01/09 600,000 597,540 U.S. Bancorp 3.125% 03/15/08 600,000 580,842 Wachovia Corp. 3.500% 08/15/08 850,000 827,322 Wells Fargo & Co. 3.419% 03/10/08 (a) 1,000,000 993,390 -------------- 2,999,094 -------------- Diversified Financial Services (9.2%) American Express Credit Corp. 3.000% 05/16/08 500,000 481,060 American General Finance Corp. 3.000% 11/15/06 250,000 246,205 Bear Stearns Companies, Inc. 6.500% 05/01/06 300,000 304,965
See Accompanying Notes to Financial Statements. 34
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Diversified Financial Services (continued) Capital One Bank 4.875% 05/15/08 $ 225,000 $ 226,530 CIT Group, Inc. 4.125% 02/21/06 350,000 350,189 Citigroup, Inc. 6.750% 12/01/05 950,000 959,576 Countrywide Home Loans, Inc. 2.875% 02/15/07 500,000 488,340 Credit Suisse First Boston USA, Inc. 4.625% 01/15/08 350,000 351,197 General Electric Capital Corp. 4.250% 01/15/08 1,450,000 1,444,330 Goldman Sachs Group, Inc. 4.125% 01/15/08 325,000 322,423 HSBC Finance Corp. 6.400% 06/17/08 475,000 498,389 JPMorgan Chase & Co. 3.800% 10/02/09 750,000 726,960 Lehman Brothers Holdings, Inc. 4.000% 01/22/08 550,000 544,022 Merrill Lynch & Co., Inc. 4.125% 01/15/09 425,000 418,124 Morgan Stanley 3.875% 01/15/09 650,000 633,912 Pitney Bowes Credit Corp. 5.750% 08/15/08 350,000 362,576 USA Education, Inc. 5.625% 04/10/07 400,000 407,768 -------------- 8,766,566 -------------- Insurance (1.8%) Allstate Financial Global Funding II 2.625% 10/22/06 (b) 600,000 587,154 American International Group, Inc. 2.875% 05/15/08 650,000 620,509 Genworth Financial, Inc. 4.750% 06/15/09 500,000 502,460 -------------- 1,710,123 -------------- Real Estate Investment Trusts (0.4%) Health Care Properties Investors, Inc. 7.500% 01/15/07 400,000 415,764 -------------- Savings & Loans (1.2%) Washington Mutual, Inc. 4.200% 01/15/10 650,000 636,357 World Savings Bank 4.125% 03/10/08 500,000 496,400 -------------- 1,132,757 -------------- 15,024,304 --------------
See Accompanying Notes to Financial Statements. 35
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Industrials (3.8%) Aerospace & Defense (0.6%) Boeing Co. 8.100% 11/15/06 $ 525,000 $ 549,229 -------------- Auto Manufacturers (0.6%) Ford Motor Credit Co. 7.375% 10/28/09 575,000 573,401 -------------- Environmental Control (0.3%) Waste Management, Inc. 7.125% 10/01/07 300,000 314,763 -------------- Machinery (1.0%) Caterpillar Financial Services Corp. 3.625% 11/15/07 600,000 589,272 John Deere Capital Corp. 4.625% 04/15/09 400,000 399,932 -------------- 989,204 -------------- Transportation (1.3%) Canadian National Railway Co. 6.450% 07/15/06 600,000 611,442 CSX Corp. 6.750% 03/15/11 325,000 354,364 Union Pacific Corp. 3.875% 02/15/09 325,000 316,725 -------------- 1,282,531 -------------- 3,709,128 -------------- Technology (0.6%) Computers (0.6%) International Business Machines Corp. 4.250% 09/15/09 580,000 575,267 -------------- Utilities (1.8%) Electric (1.5%) Exelon Generation Co. LLC 6.950% 06/15/11 350,000 385,647 Scottish Power PLC 4.910% 03/15/10 550,000 550,693 Virginia Electric & Power Co. 5.375% 02/01/07 500,000 506,030 -------------- 1,442,370 -------------- Gas (0.3%) Sempra Energy 4.750% 05/15/09 250,000 248,888 -------------- 1,691,258 -------------- Total Corporate Fixed-Income Bonds & Notes (Cost of $32,626,079) 32,396,310 --------------
See Accompanying Notes to Financial Statements. 36
PAR VALUE -------------- -------------- Collateralized Mortgage Obligations (17.5%) Bear Stearns Adjustable Rate Mortgage Trust 3.515% 06/25/34 (a) $ 1,000,000 $ 1,043,850 Bear Stearns Asset Backed Securities, Inc. 5.000% 01/25/34 928,893 916,446 Countrywide Alternative Loan Trust 3.860% 03/25/34 (a) 1,226,337 1,225,107 5.250% 08/25/35 1,500,110 1,509,005 Countrywide Home Loans 3.860% 08/25/18 (a) 2,236,917 2,225,665 3.960% 03/25/34 (a) 1,334,166 1,335,460 First Horizon Asset Securities, Inc. 3.960% 03/25/18 (a) 1,183,968 1,189,900 3.910% 06/25/18 (a) 1,051,493 1,055,794 IMPAC CMB Trust 3.840% 12/25/33 (a) 481,865 483,614 Ocwen Residential MBS Corp. 7.000% 10/25/40 (b) 102,417 102,766 PNC Mortgage Securities Corp. 0.000% 04/28/27 (a)(b) 9,542 9,000 Residential Accredit Loans, Inc. 3.860% 06/25/34 (a) 981,190 981,190 Residential Asset Securitization Trust 5.500% 07/25/33 265,354 265,152 3.910% 02/25/34 (a) 1,828,379 1,829,933 SACO I, Inc. 7.000% 08/25/36 (b) 270,483 271,429 Structured Asset Securities Corp. 5.750% 04/25/33 1,006,941 1,001,664 Washington Mutual Mortgage Securities Corp. 3.960% 03/25/18 - 06/25/18 (a) 1,305,766 1,312,516 -------------- Total Collateralized Mortgage Obligations (Cost of $16,697,481) 16,758,491 -------------- Commercial Mortgage-Backed Securities (4.0%) LB-UBS Commercial Mortgage Trust 5.642% 12/15/25 795,321 809,605 Nationslink Funding Corp. 6.888% 11/10/30 500,000 520,825 Nomura Asset Securities Corp. 7.120% 04/13/39 530,000 538,045 Prudential Securities Secured Financing Corp. 6.480% 11/01/31 1,948,577 2,022,370 -------------- Total Commercial Mortgage-Backed Securities (Cost of $3,971,065) 3,890,845 --------------
See Accompanying Notes to Financial Statements. 37
PAR VALUE -------------- -------------- Asset-Backed Securities (16.6%) AmeriCredit Automobile Receivables Trust 2.970% 03/06/07 $ 209,607 $ 209,276 Ameriquest Mortgage Securities, Inc. 3.810% 05/25/33 (a) 259,960 260,023 CIT Equipment Collateral 2.200% 03/20/08 143,598 141,616 Cityscape Home Equity Loan Trust 7.410% 05/25/28 63,597 63,521 7.650% 09/25/25 448,155 447,140 7.940% 10/25/18 122,214 122,028 ContiMortgage Home Loan Equity Trust 7.580% 08/15/28 486,787 487,776 Countrywide Asset-Backed Certificates 3.550% 08/25/35 (a) 945,210 945,380 IMC Home Equity Loan Trust 7.500% 04/25/26 584,099 590,488 7.520% 08/20/28 82,549 82,477 KeyCorp Student Loan Trust 3.490% 08/27/25 (a) 857,979 861,922 3.930% 01/27/23 (a)(b) 1,005,004 1,012,130 Long Beach Auto Receivables Trust 4.050% 04/15/11 1,700,000 1,679,855 New Century Home Equity Loan Trust 3.830% 01/25/34 (a) 821,086 825,118 SLM Student Loan Trust 3.630% 01/25/10 (a) 751,278 752,214 3.960% 07/25/11 (a) 1,400,000 1,400,644 4.080% 01/25/13 (a) 3,140,000 3,234,855 UCFC Home Equity Loan 6.315% 04/15/30 294,833 299,738 Volkswagen Auto Lease Trust 3.940% 10/20/10 1,500,000 1,497,660 WFS Financial Owner Trust 2.810% 08/22/11 1,000,000 978,320 -------------- Total Asset-Backed Securities (Cost of $15,841,315) 15,892,181 -------------- Mortgage-Backed Securities (14.6%) Agency Collateralized Mortgage Obligations (5.6%) Federal Home Loan Mortgage Corp. 3.000% 06/15/09 1,913,704 1,904,863 4.000% 09/15/15 - 10/15/26 2,970,000 2,926,978 6.500% 11/15/30 158,888 160,837 Federal National Mortgage Association 4.010% 09/25/18 (a) 342,202 342,434 -------------- 5,335,112 --------------
See Accompanying Notes to Financial Statements. 38
PAR VALUE -------------- -------------- Mortgage-Backed Securities (continued) Mortgage-Backed Securities (9.0%) Federal Home Loan Mortgage Corp. 4.000% 05/01/11 $ 1,768,461 $ 1,736,053 4.500% 11/01/07 695,318 694,770 5.500% 12/01/17 348,440 355,505 Federal National Mortgage Association 4.500% 01/01/20 1,911,795 1,881,706 5.000% 08/01/19 - 05/01/20 1,822,553 1,827,564 5.500% 11/01/18 821,500 838,121 6.000% 03/01/09 - 05/01/09 414,163 420,381 Small Business Administration 3.875% 10/25/21 - 06/25/22 (a) 566,313 570,674 4.000% 07/25/21 - 11/25/21 (a) 109,407 109,418 4.375% 01/25/17 (a) 229,656 229,610 -------------- 8,663,802 -------------- Total Mortgage-Backed Securities (Cost of $14,129,310) 13,998,914 -------------- Government Agencies & Obligations (11.8%) Foreign Government Bonds (2.3%) Province of Ontario 6.000% 02/21/06 350,000 353,808 Province of Quebec 6.500% 01/17/06 600,000 606,858 7.000% 01/30/07 85,000 88,550 Republic of Italy 2.500% 03/31/06 750,000 741,998 United Mexican States 4.625% 10/08/08 400,000 398,000 -------------- 2,189,214 -------------- U.S. Government Agencies & Obligations (9.5%) A.I.D. Morocco 3.875% 05/01/23 (a) 360,000 357,588 Federal Home Loan Bank 3.000% 05/15/06 125,000 123,990 U.S. Treasury Inflation Index Note 3.625% 01/15/08 3,610,050 3,783,784 U.S. Treasury Note 3.375% 10/15/09 4,980,000 4,831,960 -------------- 9,097,322 -------------- Total Government Agencies & Obligations (Cost of $11,494,504) 11,286,536 --------------
See Accompanying Notes to Financial Statements. 39
PAR VALUE -------------- -------------- Short-Term Obligation (3.4%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Note maturing 05/15/13, market value of $3,301,591 (repurchase proceeds $3,235,855) $ 3,235,000 $ 3,235,000 -------------- Total Short-Term Obligation (Cost of $3,235,000) 3,235,000 -------------- Total Investments (101.7%) (Cost of $97,994,754) (c) 97,458,277 Other Assets & Liabilities, Net (-1.7%) (1,616,233) -------------- Net Assets (100.0%) $ 95,842,044 ==============
Notes to Schedule of Investments: (a) The interest rate shown on floating rate or variable rate securities reflects the rate at July 31, 2005. (b) 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, 2005, these securities, which did not include any illiquid securities, amounted to $1,982,479, which represents 2.1% of net assets. (c) Cost for federal income tax purposes is $98,563,051. At July 31, 2005, the Fund held the following open short futures contract:
AGGREGATE FACE EXPIRATION UNREALIZED TYPE CONTRACTS VALUE VALUE DATE APPRECIATION ----------------------------------------------------------------------------------------------- 2-Year U.S. Treasury Notes 30 $ 6,194,531 $ 6,244,218 Sep-2005 $ 49,687
On July 31, 2005, cash of $12,000 was pledged as collateral for open futures contracts and was being held by the broker of the futures contracts. At July 31, 2005, the asset allocation of the Fund is as follows:
% OF ASSET ALLOCATION NET ASSETS ---------------- ---------- Corporate Fixed-Income Bonds & Notes 33.8% Collateralized Mortgage Obligations 17.5 Asset-Backed Securities 16.6 Mortgage-Backed Securities 14.6 Government Agencies & Obligations 11.8 Commercial Mortgage-Backed Securities 4.0 Short-Term Obligations 3.4 Other Assets & Liabilities, Net (1.7) ---------- 100.0% ==========
See Accompanying Notes to Financial Statements. 40 CMG ULTRA SHORT TERM BOND FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (41.9%) Communications (1.2%) Telecommunications (1.2%) France Telecom SA 7.450% 03/01/06 $ 400,000 $ 407,400 Verizon Global Funding Corp. 6.750% 12/01/05 536,000 541,012 -------------- 948,412 -------------- Consumer Cyclical (6.0%) Apparel (1.2%) Jones Apparel Group, Inc. 7.875% 06/15/06 500,000 514,535 Nike, Inc. 5.500% 08/15/06 500,000 506,170 -------------- 1,020,705 -------------- Auto Manufacturers (1.3%) DaimlerChrysler North America Holding Corp. 3.890% 05/24/06 (a) 600,000 600,324 6.400% 05/15/06 455,000 462,444 -------------- 1,062,768 -------------- Retail (2.6%) Lowe's Companies, Inc. 7.500% 12/15/05 570,000 576,994 McDonald's Corp. 5.375% 04/30/07 610,000 620,077 Target Corp. 5.950% 05/15/06 885,000 897,133 -------------- 2,094,204 -------------- Textiles (0.9%) Cintas Corp. 5.125% 06/01/07 750,000 759,735 -------------- 4,937,412 -------------- Consumer Non-Cyclical (3.6%) Agriculture (0.6%) Cargill, Inc. 6.250% 05/01/06 (b) 500,000 507,630 -------------- Beverages (1.5%) Coca-Cola Enterprises, Inc. 5.375% 08/15/06 550,000 556,264 Bottling Group LLC 2.450% 10/16/06 700,000 685,398 -------------- 1,241,662 -------------- Healthcare Services (0.6%) WellPoint, Inc. 3.750% 12/14/07 500,000 489,800 --------------
See Accompanying Notes to Financial Statements. 41
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Pharmaceuticals (0.6%) Eli Lilly & Co. 3.340% 08/24/07 (a) $ 500,000 $ 499,875 -------------- Tobacco (0.3%) Altria Group, Inc. 6.375% 02/01/06 200,000 202,088 -------------- 2,941,055 -------------- Energy (0.9%) Oil & Gas (0.5%) Ras Laffan Liquefied Natural Gas Co., Ltd. 3.437% 09/15/09 (b) 457,050 433,041 -------------- Pipelines (0.4%) Duke Energy Field Services LLC 7.500% 08/16/05 300,000 300,369 -------------- 733,410 -------------- Financials (24.7%) Banks (1.9%) Bank of Scotland 3.500% 11/30/07 (b) 1,000,000 979,950 Bank One Corp. 3.494% 02/27/06 (a) 545,000 544,978 -------------- 1,524,928 -------------- Diversified Financial Services (20.0%) Caterpillar Financial Services Corp. 3.400% 09/08/06 (a) 1,000,000 999,430 CIT Group, Inc. 3.468% 02/15/07 (a) 1,000,000 1,001,350 6.500% 02/07/06 360,000 364,396 Countrywide Home Loans, Inc. 3.250% 05/21/08 1,500,000 1,445,790 Credit Suisse First Boston USA, Inc. 3.768% 02/15/07 (a) 1,000,000 1,006,320 Education Loans, Inc. 3.380% 12/01/36 (a) 900,000 900,000 Ford Motor Credit Co. 4.950% 01/15/08 350,000 338,114 6.875% 02/01/06 150,000 151,473 General Electric Capital Corp. 5.350% 03/30/06 500,000 504,250 6.500% 12/10/07 500,000 522,905 Goldman Sachs Group, Inc. 3.833% 10/27/06 (a) 1,500,000 1,502,235 Household Financial Corp. 7.650% 05/15/07 1,400,000 1,474,998
See Accompanying Notes to Financial Statements. 42
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Diversified Financial Services (continued) John Deere Capital Corp. 3.625% 05/25/07 $ 500,000 $ 493,430 JPMorgan & Co., Inc. 6.250% 12/15/05 500,000 504,165 MBNA America Bank NA 7.750% 09/15/05 280,000 281,246 Merrill Lynch & Co. 3.600% 06/06/06 (a) 700,000 701,218 3.684% 05/22/06 (a) 800,000 804,971 Morgan Stanley 3.440% 11/24/06 (a) 1,500,000 1,501,170 National Rural Utilities 6.650% 10/01/05 325,000 326,371 SLM Corp. 3.610% 09/15/06 (a) 1,510,000 1,510,725 -------------- 16,334,557 -------------- Insurance (2.2%) Berkshire Hathaway Finance Corp. 3.330% 05/16/08 (a)(b) 500,000 499,920 Genworth Financial, Inc. 3.560% 06/15/07 (a) 1,100,000 1,101,595 Prudential Financial, Inc. 4.104% 11/15/06 225,000 224,391 -------------- 1,825,906 -------------- Savings & Loans (0.6%) World Savings Bank FSB 4.125% 03/10/08 500,000 496,400 -------------- 20,181,791 -------------- Industrials (2.3%) Electrical Components & Equipment (1.8%) Emerson Electric Co. 6.300% 11/01/05 1,470,000 1,478,893 -------------- Transportation (0.5%) CSX Corp. 4.010% 08/03/06 (a) 387,000 387,000 -------------- 1,865,893 -------------- Technology (0.4%) Software (0.4%) First Data Corp. 4.700% 11/01/06 300,000 301,404 -------------- Utilities (2.8%) Electric (2.2%) Alabama Power Co. 2.650% 02/15/06 400,000 396,984
See Accompanying Notes to Financial Statements. 43
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Electric (continued) Consolidated Edison Co. 6.625% 12/15/05 $ 329,000 $ 332,014 Georgia Power Co. 6.200% 02/01/06 300,000 302,949 Wisconsin Electric Power Co. 3.500% 12/01/07 750,000 732,195 -------------- 1,764,142 -------------- Gas (0.6%) Sempra Energy 6.950% 12/01/05 500,000 504,670 -------------- 2,268,812 -------------- Total Corporate Fixed-Income Bonds & Notes (Cost of $34,339,764) 34,178,189 -------------- Asset-Backed Securities (13.3%) AmeriCredit Automobile Receivables Trust 3.930% 10/06/11 500,000 489,645 Ameriquest Mortgage Securities, Inc. 5.000% 06/25/06 I.O. (c) 7,100,000 227,342 Chase Funding Mortgage Loan Asset-Backed Certificates 7.140% 09/25/28 239,767 240,849 Citibank Credit Card Issuance Trust 2.700% 01/15/08 310,000 308,363 Credit-Based Asset Servicing & Securitization 3.630% 05/25/35 (a) 26,382 26,382 DaimlerChrysler Auto Trust 3.090% 01/08/08 300,000 298,509 Franklin Auto Trust 3.130% 11/15/11 500,000 489,100 Harley-Davidson Motorcycle Trust 2.630% 11/15/10 251,089 246,712 Long Beach Mortgage Loan Trust 4.500% 12/25/06 I.O. (c) 4,921,392 196,167 MBNA Credit Card Master Note Trust 5.750% 10/15/08 439,000 444,698 Nissan Auto Lease Trust 2.570% 06/15/09 510,816 505,272 Onyx Acceptance Grantor Trust 2.400% 12/15/07 153,538 152,806 3.090% 09/15/08 500,000 495,710 Providian Gateway Master Trust 3.350% 09/15/11 (b) 1,500,000 1,465,275 Residential Asset Mortgage Products, Inc. 3.420% 10/25/27 1,237,000 1,218,136 3.640% 04/25/24 (a) 334,249 334,269 3.810% 01/25/26 700,000 690,774 Soundview Home Equity Loan Trust 3.450% 04/25/35 (a) 478,734 478,854
See Accompanying Notes to Financial Statements. 44
PAR VALUE -------------- -------------- Asset-Backed Securities (continued) Triad Auto Receivables Owner Trust 1.400% 09/12/07 $ 66,779 $ 66,588 USAA Auto Owner Trust 2.930% 07/16/07 261,776 260,472 Volkswagen Auto Loan Enhanced Trust 2.270% 10/22/07 185,080 183,425 Wells Fargo Financial Auto Owner Trust 3.390% 06/15/06 448,211 448,023 WFS Financial Owner Trust 1.760% 01/21/08 118,424 117,925 2.850% 09/22/08 500,000 494,965 3.020% 05/20/11 998,691 982,373 -------------- Total Asset-Backed Securities (Cost of $11,004,311) 10,862,634 -------------- Government Agencies & Obligations (13.2%) Foreign Government Bonds (1.2%) Italy Government International Bond 4.000% 06/16/08 1,000,000 989,790 -------------- U.S. Government Agencies & Obligations (12.0%) Federal Home Loan Bank 2.500% 11/15/05 500,000 498,286 5.375% 02/15/07 1,250,000 1,271,177 Federal Home Loan Mortgage Corp. 2.750% 10/15/06 1,500,000 1,475,725 2.810% 02/02/06 1,000,000 994,402 3.750% 11/15/06 1,000,000 994,959 Federal National Mortgage Association 3.250% 06/28/06 2,000,000 1,983,904 U.S. Treasury Notes 2.500% 10/31/06 2,100,000 2,063,168 3.125% 01/31/07 500,000 493,789 -------------- 9,775,410 -------------- Total Government Agencies & Obligations (Cost of $10,883,233) 10,765,200 -------------- Mortgage-Backed Securities (10.7%) Agency Collateralized Mortgage Obligations (3.3%) Federal Home Loan Mortgage Corp. 4.000% 05/15/14 - 07/15/24 739,638 733,107 4.250% 03/15/17 1,050,000 1,047,748 Federal National Mortgage Association 5.000% 01/25/23 885,662 889,582 -------------- 2,670,437 -------------- Mortgage-Backed Securities (7.4%) Federal Home Loan Mortgage Corp. 5.000% 12/01/19 1,863,077 1,869,000 --------------
See Accompanying Notes to Financial Statements. 45
PAR VALUE -------------- -------------- Mortgage-Backed Securities (continued) Federal National Mortgage Association 6.000% 09/01/19 $ 1,722,634 $ 1,779,604 6.500% 07/01/34 375,097 388,612 TBA, 5.500% 12/01/20 (d) 2,000,000 2,040,000 -------------- 6,077,216 -------------- Total Mortgage-Backed Securities (Cost of $8,842,440) 8,747,653 -------------- Municipal Bonds (6.3%) CA El Dorado Irrigation District Certificates of Participation Series 2004 B, 2.950% 03/01/34 (e) 500,000 498,870 IL Midwestern University Foundation Education Loan Revenue Series 2002 A, 3.380% 10/01/37 (e) 1,000,000 1,000,000 KS Wyandotte County Kansas City Unified Government Special Obligation Revenue 1st Lien, Series 2005, 4.670% 12/01/09 (e) 500,000 499,175 MO Higher Education Loan Authority Series 1995 D, 3.380% 02/15/25 (e) 500,000 500,000 NJ Camden County Improvement Authority Series 2005, 4.220% 08/03/06 (e) 500,000 500,000 NY City Series 2005 L, 4.000% 12/01/06 (e) 300,000 299,058 NY State Urban Development Corp. Revenue Series 2004 B-3, 3.580% 12/15/07 (e) 800,000 786,000 OH Knowledge Works Foundation Student Loan Revenue Series 2000 A-3, 3.500% 11/01/35 (e) 500,000 500,000 OK State Student Loan Authority Series 2000 A-1, 3.440% 06/01/30 (e) 500,000 500,000 -------------- Total Municipal Bonds (Cost of $5,100,888) 5,083,103 -------------- Collateralized Mortgage Obligation (0.5%) Washington Mutual 3.624% 04/25/35 425,533 424,852 -------------- Total Collateralized Mortgage Obligation (Cost of $425,533) 424,852 --------------
See Accompanying Notes to Financial Statements. 46
PAR VALUE -------------- -------------- Short-Term Obligations (25.6%) Repurchase Agreement (11.0%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Bond maturing 05/15/16, market value of $9,149,292 (repurchase proceeds $8,967,368) $ 8,965,000 $ 8,965,000 -------------- U.S. Government Agency & Obligation (14.6%) Government & Agency Discount Note (14.6%) Federal National Mortgage Association 3.480% 12/13/05 (f) 3,000,000 2,961,118 3.225% 10/19/05 (f) 9,000,000 8,936,306 -------------- 11,897,424 -------------- Total Short-Term Obligations (Cost of $20,862,424) 20,862,424 -------------- Total Investments (111.5%) (Cost of $91,458,593) (g) 90,924,055 Other Assets & Liabilities, Net (-11.5%) (9,348,852) -------------- Net Assets (100.0%) $ 81,575,203 ==============
Notes to Schedule of Investments: (a) The interest rate shown on floating rate or variable rate securities reflects the rate at July 31, 2005. (b) 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, 2005, these securities, which did not include any illiquid securities, amounted to $3,885,816, which represents 4.8% of net assets. (c) Accrued interest accumulates in the value of this security and is payable at redemption. (d) Security purchased on a delayed delivery basis. (e) Auction rate security. A debt security in which the interest rate is reset periodically, at intervals established at the time of issuance. (f) The rate shown represents the annualized yield at the date of purchase. (g) Cost for federal income tax purposes is $91,783,509. See Accompanying Notes to Financial Statements. 47 At July 31, 2005, the asset allocation of the Fund is as follows:
% OF ASSET ALLOCATION NET ASSETS ---------------- ---------- Corporate Fixed Income Bonds & Notes 41.9% Asset-Backed Securities 13.3 Government Agencies & Obligations 13.2 Mortgage-Backed Securities 10.7 Municipal Bonds 6.3 Collateralized Mortgage Obligation 0.5 Short-Term Obligations 25.6 Other Assets & Liabilities, Net (11.5) ------ 100.0% ======
ACRONYM NAME ------- ---- I.O. Interest only securitiy TBA To Be Announced
See Accompanying Notes to Financial Statements. 48 CMG HIGH YIELD FUND A Portfolio of CMG Fund Trust SCHEDULE OF INVESTMENTS July 31, 2005
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (93.2%) Basic Materials (4.0%) Chemicals (2.3%) Chemicals-Diversified (0.6%) EquiStar Chemicals LP 10.125% 09/01/08 $ 950,000 $ 1,052,125 10.625% 05/01/11 585,000 652,275 -------------- 1,704,400 -------------- Chemicals-Specialty (0.6%) Nalco Co. 7.750% 11/15/11 1,385,000 1,475,025 -------------- Industrial-Gases (1.1%) Airgas, Inc. 6.250% 07/15/14 155,000 158,875 9.125% 10/01/11 2,570,000 2,775,600 -------------- 2,934,475 -------------- 6,113,900 -------------- Forest Products & Paper (1.0%) Paper & Related Products (1.0%) Boise Cascade LLC 7.125% 10/15/14 2,660,000 2,620,100 -------------- Iron/Steel (0.7%) Steel-Producers (0.7%) Russel Metals, Inc. 6.375% 03/01/14 1,260,000 1,215,900 United States Steel Corp. 9.750% 05/15/10 750,000 821,250 -------------- 2,037,150 -------------- 10,771,150 -------------- Communications (14.0%) Advertising (2.1%) Advertising Sales (2.1%) Lamar Media Corp. 7.250% 01/01/13 5,265,000 5,580,900 -------------- Media (9.0%) Cable TV (4.9%) DirecTV Holdings LLC 6.375% 06/15/15 (a) 575,000 575,000 8.375% 03/15/13 3,409,000 3,775,467 EchoStar DBS Corp. 5.750% 10/01/08 2,985,000 2,962,612 6.625% 10/01/14 1,270,000 1,262,063
See Accompanying Notes to Financial Statements. 49
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Media (continued) Rogers Cable, Inc. 6.250% 06/15/13 $ 2,550,000 $ 2,562,750 7.875% 05/01/12 1,880,000 2,053,900 -------------- 13,191,792 -------------- Multimedia (0.5%) Emmis Operating Co. 6.875% 05/15/12 1,495,000 1,495,000 -------------- Publishing-Periodicals (3.1%) Dex Media West LLC 5.875% 11/15/11 3,995,000 3,965,038 R.H. Donnelley Finance Corp. 10.875% 12/15/12 (a) 3,770,000 4,373,200 -------------- 8,338,238 -------------- Television (0.5%) LIN Television Corp. 6.500% 05/15/13 1,350,000 1,306,125 -------------- 24,331,155 -------------- Telecommunications (2.9%) Cellular Telecommunications (2.9%) Nextel Communications, Inc. 5.950% 03/15/14 120,000 124,200 6.875% 10/31/13 605,000 645,838 7.375% 08/01/15 4,110,000 4,428,525 Rogers Wireless, Inc. 7.500% 03/15/15 850,000 933,937 8.000% 12/15/12 1,485,000 1,603,800 -------------- 7,736,300 -------------- 37,648,355 -------------- Consumer Cyclical (21.7%) Auto Parts & Equipment (0.7%) Auto/Truck Parts & Equipment-Original (0.7%) Accuride Corp. 8.500% 02/01/15 1,075,000 1,118,000 TRW Automotive, Inc. 9.375% 02/15/13 750,000 841,875 -------------- 1,959,875 -------------- Entertainment (3.0%) Music (0.8%) Warner Music Group 7.375% 04/15/14 2,035,000 2,096,050 --------------
See Accompanying Notes to Financial Statements. 50
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Entertainment (continued) Racetracks (1.1%) Speedway Motorsports, Inc. 6.750% 06/01/13 $ 2,740,000 $ 2,829,050 -------------- Theaters (1.1%) Cinemark USA, Inc. 9.000% 02/01/13 2,855,000 2,997,750 -------------- 7,922,850 -------------- Home Builders (2.5%) Building-Residential/Commercial (2.5%) Beazer Homes USA, Inc. 6.875% 07/15/15 (a) 1,350,000 1,356,750 K. Hovnanian Enterprises, Inc. 6.000% 01/15/10 875,000 870,625 6.375% 12/15/14 750,000 755,625 6.500% 01/15/14 1,050,000 1,068,375 KB Home 7.750% 02/01/10 225,000 239,063 8.625% 12/15/08 2,160,000 2,359,800 -------------- 6,650,238 -------------- Leisure Time (2.4%) Cruise Lines (1.8%) Royal Caribbean Cruises Ltd. 6.750% 03/15/08 525,000 547,969 6.875% 12/01/13 1,300,000 1,391,000 8.750% 02/02/11 2,530,000 2,896,850 -------------- 4,835,819 -------------- Leisure & Recreational Products (0.6%) Leslie's Poolmart 7.750% 02/01/13 1,605,000 1,637,100 -------------- 6,472,919 -------------- Lodging (9.3%) Casino Hotels (8.2%) CCM Merger, Inc. 8.000% 08/01/13 (a) 1,240,000 1,267,900 Caesars Entertainment, Inc. 7.875% 03/15/10 2,995,000 3,320,706 8.875% 09/15/08 800,000 888,000 9.375% 02/15/07 955,000 1,018,269 Kerzner International Ltd. 8.875% 08/15/11 2,805,000 3,001,350 MGM Mirage, Inc. 6.000% 10/01/09 4,010,000 4,020,025 8.500% 09/15/10 1,090,000 1,203,087
See Accompanying Notes to Financial Statements. 51
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Lodging (continued) Station Casinos, Inc. 6.500% 02/01/14 $ 2,620,000 $ 2,688,775 6.875% 03/01/16 2,465,000 2,542,031 Wynn Las Vegas LLC 6.625% 12/01/14 2,105,000 2,049,744 -------------- 21,999,887 -------------- Hotels & Motels (1.1%) Starwood Hotels & Resorts Worldwide, Inc. 7.375% 05/01/07 325,000 338,000 7.875% 05/01/12 2,360,000 2,643,200 -------------- 2,981,200 -------------- 24,981,087 -------------- Retail (3.8%) Retail-Automobiles (1.7%) AutoNation, Inc. 9.000% 08/01/08 2,745,000 3,026,362 Group 1 Automotive, Inc. 8.250% 08/15/13 1,390,000 1,407,375 -------------- 4,433,737 -------------- Retail-Convenience Store (1.1%) Couche-Tard US 7.500% 12/15/13 2,855,000 3,040,575 -------------- Retail-Propane Distributors (0.5%) Suburban Propane Partners LP 6.875% 12/15/13 1,460,000 1,416,200 -------------- Retail-Restaurants (0.5%) Domino's, Inc. 8.250% 07/01/11 1,300,000 1,397,500 -------------- 10,288,012 -------------- 58,274,981 -------------- Consumer Non-Cyclical (17.2%) Beverages (4.0%) Beverages-Non-Alcoholic (2.1%) Cott Beverages, Inc. 8.000% 12/15/11 5,285,000 5,602,100 -------------- Beverages-Wine/Spirits (1.9%) Constellation Brands, Inc. 8.000% 02/15/08 1,468,000 1,556,080 8.125% 01/15/12 3,455,000 3,705,487 -------------- 5,261,567 -------------- 10,863,667 --------------
See Accompanying Notes to Financial Statements. 52
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Commercial Services (4.0%) Commercial Services (1.5%) Iron Mountain, Inc. 7.750% 01/15/15 $ 1,850,000 $ 1,887,000 8.625% 04/01/13 2,175,000 2,289,188 -------------- 4,176,188 -------------- Consulting Services (0.1%) FTI Consulting 7.625% 06/15/13 (a) 275,000 279,469 -------------- Funeral Services & Related Items (0.3%) Stewart Enterprises, Inc. 6.250% 02/15/13 (a) 730,000 719,050 -------------- Private Corrections (1.6%) Corrections Corp. of America 6.250% 03/15/13 765,000 759,262 7.500% 05/01/11 3,330,000 3,471,525 -------------- 4,230,787 -------------- Rental Auto/Equipment (0.5%) United Rentals, Inc. 7.000% 02/15/14 600,000 565,500 7.750% 11/15/13 725,000 706,875 -------------- 1,272,375 -------------- 10,677,869 -------------- Food (0.5%) Food-Miscellaneous/Diversified (0.5%) Del Monte Corp. 6.750% 02/15/15 (a) 1,275,000 1,303,688 -------------- Healthcare Services (6.3%) Medical-HMO (1.1%) Coventry Health Care, Inc. 5.875% 01/15/12 2,925,000 2,976,187 -------------- Medical-Hospitals (3.1%) Community Health Systems, Inc. 6.500% 12/15/12 200,000 202,750 HCA, Inc. 6.950% 05/01/12 5,000,000 5,263,650 Triad Hospitals, Inc. 7.000% 05/15/12 2,700,000 2,835,000 -------------- 8,301,400 --------------
See Accompanying Notes to Financial Statements. 53
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Healthcare Services (continued) Medical-Nursing Homes (0.5%) Extendicare Health Services, Inc. 6.875% 05/01/14 $ 1,200,000 $ 1,194,000 9.500% 07/01/10 255,000 275,400 -------------- 1,469,400 -------------- Medical-Outpatient/Home Medical (0.5%) Select Medical Corp. 7.625% 02/01/15 1,465,000 1,446,688 -------------- Medical Products (1.1%) Fisher Scientific International, Inc. 6.750% 08/15/14 2,730,000 2,869,912 -------------- 17,063,587 -------------- Household Products/Wares (1.0%) Consumer Products-Miscellaneous (1.0%) Scotts Co. 6.625% 11/15/13 2,680,000 2,760,400 -------------- Pharmaceuticals (1.4%) Medical-Wholesale Drug Distribution (0.8%) AmerisourceBergen Corp. 8.125% 09/01/08 2,055,000 2,224,538 -------------- Pharmacy Services (0.6%) Omnicare, Inc. 8.125% 03/15/11 1,365,000 1,433,250 -------------- 3,657,788 -------------- 46,326,999 -------------- Energy (15.3%) Coal (3.6%) Arch Western Finance LLC 6.750% 07/01/13 3,875,000 3,981,563 Peabody Energy Corp. 6.875% 03/15/13 5,435,000 5,761,100 -------------- 9,742,663 -------------- Oil & Gas (7.1%) Oil & Gas Drilling (0.6%) Pride International, Inc. 7.375% 07/15/14 1,410,000 1,551,000 -------------- Oil Companies-Exploration & Production (6.5%) Chesapeake Energy Corp. 6.375% 06/15/15 2,960,000 3,041,400 7.500% 09/15/13 2,315,000 2,500,200
See Accompanying Notes to Financial Statements. 54
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Oil & Gas (continued) Newfield Exploration Co. 6.625% 09/01/14 $ 4,080,000 $ 4,289,100 Plains Exploration & Production Co. 7.125% 06/15/14 2,535,000 2,737,800 Pogo Producing Co. 6.625% 03/15/15 (a) 2,025,000 2,070,562 Vintage Petroleum, Inc. 7.875% 05/15/11 2,800,000 2,940,000 -------------- 17,579,062 -------------- 19,130,062 -------------- Oil & Gas Services (2.3%) Oil-Field Services (1.7%) Hornbeck Offshore Services, Inc. 6.125% 12/01/14 1,480,000 1,491,100 Universal Compression, Inc. 7.250% 05/15/10 2,845,000 2,973,025 -------------- 4,464,125 -------------- Oil Field Machinery & Equipment (0.6%) Grant Prideco, Inc. 6.125% 08/15/15 (a) 1,595,000 1,624,906 -------------- 6,089,031 -------------- Pipelines (2.3%) Pipelines (2.3%) MarkWest Energy Partners LP 6.875% 11/01/14 (a) 1,560,000 1,579,500 Williams Companies, Inc. 7.125% 09/01/11 1,440,000 1,564,200 8.125% 03/15/12 2,740,000 3,164,700 -------------- 6,308,400 -------------- 41,270,156 -------------- Financials (0.8%) Real Estate Investment Trusts (REITs) (0.8%) REITs-Diversified (0.3%) iStar Financial, Inc. 5.125% 04/01/11 735,000 726,672 -------------- REITs-Hotels (0.5%) Host Marriott LP 6.375% 03/15/15 1,515,000 1,503,638 -------------- 2,230,310 --------------
See Accompanying Notes to Financial Statements. 55
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Industrials (15.3%) Aerospace & Defense (2.9%) Aerospace/Defense-Equipment (1.2%) TransDigm, Inc. 8.375% 07/15/11 $ 2,875,000 $ 3,040,313 -------------- Electronics-Military (1.7%) L-3 Communications Corp. 6.125% 07/15/13 260,000 262,600 6.375% 10/15/15 (a) 1,600,000 1,620,000 7.625% 06/15/12 2,570,000 2,749,900 -------------- 4,632,500 -------------- 7,672,813 -------------- Environmental Control (1.0%) Non-Hazardous Waste Disposal (1.0%) Allied Waste North America, Inc. 6.375% 04/15/11 2,725,000 2,656,875 6.500% 11/15/10 30,000 29,550 -------------- 2,686,425 -------------- Hand/Machine Tools (1.0%) Machine Tools & Related Products (1.0%) Kennametal, Inc. 7.200% 06/15/12 2,560,000 2,800,358 -------------- Machinery-Diversified (1.5%) Machinery-General Industry (1.5%) Manitowoc Co., Inc. 7.125% 11/01/13 1,195,000 1,260,725 Westinghouse Air Brake Technologies Corp. 6.875% 07/31/13 2,590,000 2,693,600 -------------- 3,954,325 -------------- Packaging & Containers (6.0%) Containers-Metal/Glass (5.0%) Ball Corp. 6.875% 12/15/12 5,030,000 5,306,650 Owens-Brockway Glass Container 6.750% 12/01/14 735,000 747,863 8.875% 02/15/09 1,115,000 1,181,900 Owens-Illinois, Inc. 7.500% 05/15/10 1,900,000 1,990,250 Silgan Holdings, Inc. 6.750% 11/15/13 4,050,000 4,166,437 -------------- 13,393,100 --------------
See Accompanying Notes to Financial Statements. 56
PAR VALUE -------------- -------------- Corporate Fixed-Income Bonds & Notes (continued) Packaging & Containers (continued) Containers-Paper/Plastic (1.0%) Smurfit-Stone Container Corp. 7.375% 07/15/14 $ 75,000 $ 70,125 8.375% 07/01/12 1,555,000 1,582,212 9.750% 02/01/11 980,000 1,036,350 -------------- 2,688,687 -------------- 16,081,787 -------------- Transportation (2.9%) Transportation-Marine (2.0%) Overseas Shipholding Group 8.250% 03/15/13 810,000 860,625 Teekay Shipping Corp. 8.875% 07/15/11 4,030,000 4,574,050 -------------- 5,434,675 -------------- Transportation-Services (0.9%) Offshore Logistics, Inc. 6.125% 06/15/13 2,570,000 2,486,475 -------------- 7,921,150 -------------- 41,116,858 -------------- Technology (1.1%) Semiconductors (1.1%) Electronic Components-Semiconductors (1.1%) Freescale Semiconductor, Inc. 6.875% 07/15/11 2,815,000 2,976,863 -------------- Utilities (3.8%) Electric (3.8%) Electric-Generation (2.3%) AES Corp. 7.750% 03/01/14 3,035,000 3,308,150 Texas Genco LLC 6.875% 12/15/14 (a) 2,885,000 3,036,463 -------------- 6,344,613 -------------- Electric-Integrated (1.5%) Nevada Power Co. 5.875% 01/15/15 (a) 705,000 719,100 6.500% 04/15/12 735,000 765,319 NorthWestern Corp. 5.875% 11/01/14 (a) 175,000 179,812 TECO Energy, Inc. 6.750% 05/01/15 (a) 1,280,000 1,366,400 7.000% 05/01/12 840,000 903,000 -------------- 3,933,631 -------------- 10,278,244 -------------- Total Corporate Fixed-Income Bonds & Notes (Cost of $247,172,843) 250,893,916 --------------
See Accompanying Notes to Financial Statements. 57
PAR VALUE -------------- -------------- Short-Term Obligation (5.1%) Repurchase agreement with State Street Bank & Trust Co., dated 07/29/05, due 08/01/05 at 3.170%, collateralized by a U.S. Treasury Note maturing 02/15/10, market value of $14,006,363 (repurchase proceeds $13,730,626) $ 13,727,000 $ 13,727,000 -------------- Total Short-Term Obligation (Cost of $13,727,000) 13,727,000 -------------- Total Investments (98.3%) (Cost of $260,899,843) (b) 264,620,916 Other Assets & Liabilities, Net (1.7%) 4,621,695 -------------- Net Assets (100.0%) $ 269,242,611 ==============
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, 2005, these securities, which did not include any illiquid securities, amounted to $22,071,800, which represents 8.2% of net assets. (b) Cost for federal income tax purposes is $262,266,765. At July 31, 2005, the asset allocation of the Fund is as follows:
% OF ASSET ALLOCATION NET ASSETS ---------------- ---------- Consumer Cyclical 21.7% Consumer Non-Cyclical 17.2 Energy 15.3 Industrials 15.3 Communications 14.0 Basic Materials 4.0 Utilities 3.8 Technology 1.1 Financials 0.8 Short-Term Obligation 5.1 Other Assets & Liabilities, Net 1.7 ---------- 100.0% ==========
See Accompanying Notes to Financial Statements. 58 STATEMENTS OF ASSETS AND LIABILITIES July 31, 2005
CMG CMG CMG CMG CORE BOND SHORT TERM ULTRA SHORT TERM HIGH YIELD FUND BOND FUND BOND FUND FUND --------------- --------------- ---------------- --------------- ASSETS: Investments, at identified cost (including repurchase agreements) $ 88,680,789 $ 97,994,754 $ 91,458,593 $ 260,899,843 --------------- --------------- ---------------- --------------- Investments, at value $ 77,823,139 $ 94,223,277 $ 81,959,055 $ 250,893,916 Repurchase agreement 10,577,000 3,235,000 8,965,000 13,727,000 Cash 436 - 206,141 - Cash at broker - 12,000 - - Receivable for: Investments sold - - 1,400,000 1,181,989 Investments sold on a delayed delivery basis 1,187,448 - - - Capital stock sold - - 688,000 133,285 Interest 641,632 642,809 589,794 4,550,740 Futures variation margin 6,094 6,093 - - Expense reimbursement due from Investment Advisor 2,434 4,158 1,807 7,233 Deferred Trustees' compensation plan 1,595 2,489 788 3,695 Other assets 342 - 843 553 --------------- --------------- ---------------- --------------- Total Assets 90,240,120 98,125,826 93,811,428 270,498,411 --------------- --------------- ---------------- --------------- LIABILITIES: Payable for: Payable to custodian bank - 4,774 - 4,733 Investments purchased 1,437,997 2,021,955 5,271,999 575,000 Investments purchased on a delayed delivery basis 9,363,460 - - - Fund shares repurchased 16,110 11,221 6,649,433 4,949 Distributions 273,201 194,480 270,563 546,427 Investment advisory fee 17,793 22,507 17,774 90,486 Audit fee 27,500 26,011 25,668 30,510 Deferred Trustees' fees 1,595 2,489 788 3,695 Other liabilities - 345 - - --------------- --------------- ---------------- --------------- Total liabilities 11,137,656 2,283,782 12,236,225 1,255,800 --------------- --------------- ---------------- --------------- NET ASSETS $ 79,102,464 $ 95,842,044 $ 81,575,203 $ 269,242,611 =============== =============== ================ =============== NET ASSETS consist of: Paid-in capital $ 79,511,215 $ 100,272,925 $ 83,251,631 $ 312,282,489 Overdistributed net investment income (129,609) (402,571) (596,700) (1,346,465) Accumulated net realized loss (48,180) (3,541,520) (545,190) (45,414,486) Net unrealized appreciation (depreciation) on: Investments (280,650) (536,477) (534,538) 3,721,073 Futures contracts 49,688 49,687 - - --------------- --------------- ---------------- --------------- NET ASSETS $ 79,102,464 $ 95,842,044 $ 81,575,203 $ 269,242,611 =============== =============== ================ =============== Shares of capital stock outstanding 7,591,527 8,132,385 8,434,875 33,329,839 =============== =============== ================ =============== Net asset value, offering and redemption price per share $ 10.42 $ 11.79 $ 9.67 $ 8.08 =============== =============== ================ ===============
See Accompanying Notes to Financial Statements. 59 STATEMENTS OF OPERATIONS For the Year Ended July 31, 2005
CMG CMG CMG CMG CORE BOND SHORT TERM ULTRA SHORT TERM HIGH YIELD FUND BOND FUND BOND FUND FUND --------------- --------------- ---------------- --------------- NET INVESTMENT INCOME: Income: Interest $ 2,532,395 $ 3,868,165 $ 1,982,911 $ 22,642,204 --------------- --------------- ---------------- --------------- Expenses: Investment advisory fee 148,407 265,538 184,575 1,358,810 Trustees' fees 6,517 7,974 4,744 14,566 Audit fee 29,400 30,731 29,868 37,441 Non-recurring costs (See Note 8) 1,150 1,929 973 6,213 Other expenses 1,832 4,849 2,618 12,727 --------------- --------------- ---------------- --------------- Total expenses 187,306 311,021 222,778 1,429,757 Expense reimbursement from Investment Advisor (37,749) (42,554) (37,230) (63,511) Non-recurring costs assumed by Investment Advisor (See Note 8) (1,150) (1,929) (973) (6,213) --------------- --------------- ---------------- --------------- Net expenses 148,407 266,538 184,575 1,360,033 --------------- --------------- ---------------- --------------- Net investment income 2,383,988 3,601,627 1,798,336 21,282,171 --------------- --------------- ---------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS: Net realized gain (loss) on: Investments 200,146 (153,941) (23,356) 8,588,241 Futures contracts (23,876) (22,959) - - --------------- --------------- ---------------- --------------- Net realized gain (loss) 176,270 (176,900) (23,356) 8,588,241 --------------- --------------- ---------------- --------------- Net change in unrealized appreciation/ depreciation on: Investments (279,008) (927,258) (366,837) (3,213,339) Futures contracts 62,438 49,687 - - --------------- --------------- ---------------- --------------- Net change in unrealized appreciation/depreciation (216,570) (877,571) (366,837) (3,213,339) --------------- --------------- ---------------- --------------- Net gain (loss) (40,300) (1,054,471) (390,193) 5,374,902 --------------- --------------- ---------------- --------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,343,688 $ 2,547,156 $ 1,408,143 $ 26,657,073 =============== =============== ================ ===============
See Accompanying Notes to Financial Statements. 60 STATEMENTS OF CHANGES IN NET ASSETS
CMG CMG CORE SHORT TERM BOND FUND BOND FUND ---------------------------------- ---------------------------------- YEAR ENDED JULY 31, YEAR ENDED JULY 31, ---------------------------------- ---------------------------------- 2005 2004 2005 2004 --------------- --------------- ---------------- --------------- Operations: Net investment income $ 2,383,988 $ 1,476,947 $ 3,601,627 $ 3,613,606 Net realized gain (loss) on investments and futures contracts 176,270 58,772 (176,900) 141,676 Net change in unrealized appreciation/depreciation on investments and futures contracts (216,570) (28,286) (877,571) (513,208) --------------- --------------- --------------- --------------- Net increase from operations 2,343,688 1,507,433 2,547,156 3,242,074 --------------- --------------- --------------- --------------- Distributions declared to shareholders: From net investment income (2,560,924) (1,618,453) (4,015,551) (3,965,886) From net realized gains - (424,522) - - --------------- --------------- --------------- --------------- Total distributions declared to shareholders (2,560,924) (2,042,975) (4,015,551) (3,965,886) --------------- --------------- --------------- --------------- Share transactions: Subscriptions 58,926,891 45,285,510 26,264,611 59,951,561 Distributions reinvested 329,461 1,214,069 2,577,783 3,016,948 Redemptions (12,746,687) (43,666,147) (50,657,075) (56,312,517) --------------- --------------- --------------- --------------- Net increase (decrease) in share transactions 46,509,665 2,833,432 (21,814,681) 6,655,992 --------------- --------------- --------------- --------------- Net increase (decrease) in net assets 46,292,429 2,297,890 (23,283,076) 5,932,180 NET ASSETS: Beginning of period 32,810,035 30,512,145 119,125,120 113,192,940 --------------- --------------- --------------- --------------- End of period $ 79,102,464 $ 32,810,035 $ 95,842,044 $ 119,125,120 =============== =============== =============== =============== Overdistributed net investment income $ (129,609) $ (75,858) $ (402,571) $ (426,314) =============== =============== =============== =============== Changes in shares: Subscriptions 5,606,416 4,306,892 2,196,838 4,971,382 Issued for distributions reinvested 31,434 115,771 216,646 250,706 Redemptions (1,214,434) (4,193,418) (4,251,192) (4,673,216) --------------- --------------- --------------- --------------- Net increase (decrease) 4,423,416 229,245 (1,837,708) 548,872
See Accompanying Notes to Financial Statements. 61
CMG CMG ULTRA SHORT TERM HIGH YIELD BOND FUND FUND ---------------------------------- ---------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED JULY 31, JULY 31, JULY 31, ---------------------------------- 2005 2004 (a) 2005 2004 --------------- --------------- --------------- --------------- Operations: Net investment income $ 1,798,336 $ 207,140 $ 21,282,171 $ 28,629,074 Net realized gain (loss) on investments (23,356) (19,498) 8,588,241 11,465,251 Net change in unrealized appreciation/depreciation on investments (366,837) (167,701) (3,213,339) (3,719,002) --------------- --------------- --------------- --------------- Net increase from operations 1,408,143 19,941 26,657,073 36,375,323 --------------- --------------- --------------- --------------- Distributions declared to shareholders: From net investment income (2,717,420) (387,092) (22,727,424) (30,204,485) Return of capital (206,594) - - - --------------- --------------- --------------- --------------- Total distributions declared to shareholders (2,924,014) (387,092) (22,727,424) (30,204,485) --------------- --------------- --------------- --------------- Share transactions: Subscriptions 36,802,190 72,925,807 32,168,726 118,229,818 Distributions reinvested 1,256,886 110,468 17,597,737 24,159,735 Redemptions (22,203,245) (5,433,881) (166,610,851) (195,444,715) --------------- --------------- --------------- --------------- Net increase (decrease) in share transactions 15,855,831 67,602,394 (116,844,388) (53,055,162) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets 14,339,960 67,235,243 (112,914,739) (46,884,324) NET ASSETS: Beginning of period 67,235,243 - 382,157,350 429,041,674 --------------- --------------- --------------- --------------- End of period $ 81,575,203 $ 67,235,243 $ 269,242,611 $ 382,157,350 =============== =============== =============== =============== Overdistributed net investment income $ (596,700) $ (169,810) $ (1,346,465) $ (1,401,331) =============== =============== =============== =============== Changes in shares: Subscriptions 3,774,819 7,343,456 3,950,673 14,671,669 Issued for distributions reinvested 128,653 11,162 2,166,477 2,996,559 Redemptions (2,274,518) (548,697) (20,573,327) (24,196,101) --------------- --------------- --------------- --------------- Net increase (decrease) 1,628,954 6,805,921 (14,456,177) (6,527,873)
(a) The Fund commenced investment operations on March 8, 2004. See Accompanying Notes to Financial Statements. 62 NOTES TO FINANCIAL STATEMENTS July 31, 2005 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 principal. The CMG Ultra Short Term Bond Fund seeks a high level of current income consistent with the maintenance of liquidity and the preservation of principal. 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 an unlimited number of 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. SECURITY VALUATION. Debt securities generally are valued by pricing services 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. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. 63 Investments for which market quotations are not readily available, or have 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. If a security is valued at a "fair value", such value is likely to be different from the last quoted market price for the security. 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 will 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 receivable or payable 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. TREASURY INFLATION INDEXED SECURITIES. The Fund may invest in Treasury Inflation-Indexed Securities ("TIPS"). The principal amount of TIPS is adjusted periodically for inflation based on a monthly published index. Interest payments are based on the inflation-adjusted principal at the time the interest is paid. INTEREST ONLY SECURITIES. The Fund may invest in Interest Only Securities ("IO"). Interest Only securities are stripped mortgage backed securities entitled to receive all of the security's interest, but none of its principal. Interest is accrued daily. The daily accrual factor is adjusted each month to reflect the pay down of principal. 64 INCOME RECOGNITION. Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. 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 the Funds' 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, 2005, permanent book and tax basis differences resulting primarily from differing treatments for amortization/accretion adjustments and paydown gain/loss 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 $ 123,185 $ (123,185) $ - CMG Short Term Bond Fund 437,667 (437,667) - CMG Ultra Short Term Bond Fund 492,194 (492,194) - CMG High Yield Fund 1,500,119 (2,199,873) 699,754
Net investment income and net realized gains (losses), as disclosed on the Statements of Operations, and net assets were not affected by these reclassifications. The tax character of distributions paid during the years ended July 31, 2005 and July 31, 2004 was as follows:
JULY 31, 2005 ----------------------------------------------- TAX ORDINARY LONG-TERM RETURN INCOME* CAPITAL GAINS OF CAPITAL ------------ ------------- ---------- CMG Core Bond Fund $ 2,560,924 $ - $ - CMG Short Term Bond Fund 4,015,551 - - CMG Ultra Short Term Bond Fund 2,717,420 - 206,594 CMG High Yield Fund 22,727,424 - -
65
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 - -
*For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. As of July 31, 2005, 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 $ 319,658 $ 19,258 $ (464,208) CMG Short Term Bond Fund 350,722 - (1,104,774) CMG Ultra Short Term Bond Fund - - (859,454) CMG High Yield Fund 551,010 - 2,354,151
*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, 2005, based on cost of investments for federal income tax purposes, was:
NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ -------------- CMG Core Bond Fund $ 422,890 $ (887,098) $ (464,208) CMG Short Term Bond Fund 258,217 (1,362,991) (1,104,774) CMG Ultra Short Term Bond Fund 6,092 (865,546) (859,454) CMG High Yield Fund 4,731,878 (2,377,727) 2,354,151
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:
2008 2009 2010 2012 2013 TOTAL --------- ------------ ----------- -------- -------- ------------ CMG Short Term Bond Fund $ 537,548 $ - $ 2,365,257 $ 19,156 $ 25,391 $ 2,947,352 CMG Ultra Short Term Bond Fund - - - 29,640 47,961 77,601 CMG High Yield Fund - 20,199,377 25,194,365 - - 45,393,742
66 Capital loss carryforwards of $6,361,581, for CMG High Yield Fund, were utilized during the year ended 2005. 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. Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. 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, 2005, post-October capital losses of $532,109 and $467,588 attributed to security transactions were deferred to August 1, 2005 for the CMG Short Term Bond Fund and CMG Ultra Short Term Bond Fund, respectively. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES: INVESTMENT ADVISORY FEE. Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Funds. Each Fund's investment advisory fee is a unified fee. Effective on or about September 30, 2005, Columbia Management Advisors, Inc. will undergo a name change to Columbia Management Advisors, LLC. 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 expense associated with any borrowings by the Funds or extraordinary expenses, if any. The unified fees are paid monthly to Columbia based on each Fund's average daily net assets at the following annual rates: 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%
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 and has contracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. The transfer agent fees for the Funds are included in the unified fee. Effective on or about September 30, 2005, Columbia Funds Services, Inc. will undergo a name change to Columbia Management Services, Inc. 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, will 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%
67 FEES PAID TO OFFICERS AND TRUSTEES. With the exception of one officer, all officers of the Funds are employees of Columbia or its affiliates and receive no compensation from the Funds. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. Each Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Chief Compliance Officer position. Each Fund's fee, which is included in the unified fee, will not exceed $15,000 per year. 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, 2005, 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 $ 91,382,826 $ 60,074,341 $ 26,289,392 $ 12,746,913 CMG Short Term Bond Fund 27,852,915 17,552,360 27,376,296 32,589,623 CMG Ultra Short Term Bond Fund 24,382,390 14,845,275 54,233,847 33,365,523 CMG High Yield Fund - - 125,137,231 199,282,042
Sales of securities for the CMG High Yield Fund includes the value of securities delivered through an in-kind redemption of certain fund shares on July 31, 2005. Any realized gain on securities delivered through an in-kind redemption of fund shares is not taxable to the CMG High Yield Fund. The value of securities and realized gain on securities delivered through an in-kind redemption of Fund shares aggregated $43,127,993 and $699,754, respectively. Prior to the in-kind redemption, the shareholder owned 14.1% of the Fund. NOTE 6. LINE OF CREDIT: The Funds and other affiliated funds participate in a $350,000,000 committed unsecured revolving line of credit provided by State Street Bank and Trust Company. Borrowings are used for temporary or emergency purposes to facilitate portfolio liquidity. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.10% per annum is accrued and apportioned among the participating funds based on their pro-rata portion of the unutilized line of credit. The commitment fee is included in "Other expenses" on the Statements of Operations. For the year ended July 31, 2005, the Funds did not borrow under this arrangement. 68 NOTE 7. SHARES OF BENEFICIAL INTEREST As of July 31, 2005, the Funds had shareholders whose shares were beneficially owned by participant accounts over which Bank of America and/or its affiliates had either sole or joint investment discretion. Subscription and redemption activity of these accounts may have a significant effect on the operations of the Funds. The numbers of accounts and the percentages of shares of beneficial interest outstanding held therein are as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD ------------ ---------------- CMG Core Bond Fund 1 98.6% CMG Short Term Bond Fund 1 60.3% CMG Ultra Short Term Bond Fund 1 99.6% CMG High Yield Fund 1 32.8%
As of July 31, 2005, two of 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 number of accounts and the percentage of shares of beneficial interest outstanding held therein are as follows:
NUMBER OF % OF SHARES SHAREHOLDERS OUTSTANDING HELD ------------ ---------------- CMG Short Term Bond Fund 1 27.4% CMG High Yield Fund 2 22.7%
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 to the extent that there is no established secondary market. 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. On February 9, 2005, Columbia and the Distributor (collectively, the "Columbia Group") entered into an assurance of Discontinuance with the New York Attorney General ("NYAG") the NYAG Settlement") and consented to the entry of a cease-and-desist order by the Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as the "Settlements". The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and 69 certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual funds management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Funds' independent trustees and not unacceptable to the staff of the SEC. At this time, the distribution plan is still under development. As such, any gain to the Funds or their shareholders cannot currently be determined. 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. A copy of the SEC Order is available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has transferred the CDSC Lawsuit to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the 70 Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Funds and the other defendants to these actions, including Columbia and various of its 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 proceedings 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, 2005, Columbia has assumed legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters as follows: CMG Core Bond Fund $ 1,150 CMG Short Term Bond Fund 1,929 CMG Ultra Short Term Bond Fund 973 CMG High Yield Fund 6,213
71 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, 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, 2005, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, 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). Those standards 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts September 29, 2005 72 Unaudited Information For the fiscal year ended July 31, 2005, the CMG Core Bond Fund designates long term capital gains of $19,258. 73 Trustees The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds Complex, 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 overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex.
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD ------------------------------------------------------ --------------------------------------------------------------------------- DISINTERESTED TRUSTEES Douglas A. Hacker (age 49) Executive Vice President--Strategy of United Airlines (airline) since P.O. Box 66100 December, 2002 (formerly President of UAL Loyalty Services (airline) from Chicago, IL 60666 September, 2001 to December, 2002; Executive Vice President and Chief Trustee (since 1996) Financial Officer of United Airlines from July, 1999 to September, 2001; Senior Vice President--Finance from March, 1993 to July, 1999). Oversees 101, Nash Finch Company (food distributor) Janet Langford Kelly (age 47) Partner, Zelle, Hofmann, Voelbel, Mason & Gette LLP (law firm); Adjunct 9534 W. Gull Lake Drive Professor of Law, Northwestern University, since September, 2004 (formerly Richland, MI 49083-8530 Chief Administrative Officer and Senior Vice President, Kmart Holding Trustee (since 1996) 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 101, None Richard W. Lowry (age 69) 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 103(3), None Trustee (since 1995) Charles R. Nelson (age 62) Professor of Economics, University of Washington, since January, 1976; Ford Department of Economics 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 1981) 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 101, None John J. Neuhauser (age 63) Academic Vice President and Dean of Faculties since August, 1999, Boston 84 College Road College (formerly Dean, Boston College School of Management from September, Chestnut Hill, MA 02467-3838 1977 to August, 1999). Oversees 1063, Saucony, Inc. (athletic footwear) Trustee (since 1985) Patrick J. Simpson (age 61) Partner, Perkins Coie L.L.P. (law firm). Oversees 101, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000)
74
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/DIRECTOR, ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD ------------------------------------------------------ --------------------------------------------------------------------------- DISINTERESTED TRUSTEES Thomas E. Stitzel (age 69) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 2208 Tawny Woods Place 1999, College of Business, Boise State University); Chartered Financial Boise, ID 83706 Analyst. Oversees 101, None Trustee (since 1998) Thomas C. Theobald (age 68) Partner and Senior Advisor, Chicago Growth Partners (private equity 8 Sound Shore Drive, investing) since September, 2004 (formerly Managing Director, William Blair Suite 285 Capital Partners (private equity investing) from September, 1994 to Greenwich, CT 06830 September, 2004). Oversees 101, Anixter International (network support Trustee and Chairman of the Board(4) (since 1996) equipment distributor); Ventas, Inc. (real estate investment trust); Jones Lang LaSalle (real estate management services) and Ambac Financial Group (financial guaranty 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 101, Hopkinton, NH 03229 Chairman of the Board of Directors, Enesco Group, Inc. (designer, importer Trustee (since 1998) and distributor of giftware and collectibles) Richard L. Woolworth (age 64) Retired since December 2003 (formerly Chairman and Chief Executive Officer, 100 S.W. Market Street The Regence Group (regional health insurer); Chairman and Chief Executive #1500 Portland, OR 97207 Officer, BlueCross BlueShield of Oregon; Certified Public Accountant, Trustee (since 1991) Arthur Young & Company). Oversees 101, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEE William E. Mayer(2) (age 65) Partner, Park Avenue Equity Partners (private equity) since February, 1999 399 Park Avenue (formerly Partner, Development Capital LLC from November 1996 to February, Suite 3204 1999). Oversees 103(3), Lee Enterprises (print media), WR Hambrecht + Co. New York, NY 10022 (financial service provider); Reader's Digest (publishing); OPENFIELD Trustee (since 1994) 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. (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 also serve as directors/trustees of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. The Statement of Additional Information Includes additional information about the Trustees of the Funds and is available, without charge, upon request by calling 800-426-3750. 75 Officers
NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS ------------------------------------------------------ --------------------------------------------------------------------------- Christopher L. Wilson (age 48) Head of Mutual Funds since August, 2004 and Senior Vice President of the One Financial Center Advisor since January, 2005; President of the Columbia Funds, Liberty Funds Boston, MA 02111 and Stein Roe Funds since October, 2004; President and Chief Executive President (since 2004) Officer of the Nations Funds since January, 2005; President of the Galaxy Funds since April 2005; Director of Bank of America Global Liquidity Funds, plc since May 2005; Director of Banc of America Capital Management (Ireland), Limited since May 2005; Senior Vice President of BACAP Distributors LLC since January, 2005; Director of FIM Funding, Inc. since January, 2005; Senior Vice President of Columbia Funds Distributor, Inc. since January, 2005; Director of Columbia Funds Services, Inc. since January, 2005 (formerly President and Chief Executive Officer, CDC IXIS Asset Management Services, Inc. from September, 1998 to August, 2004). J. Kevin Connaughton (age 41) Treasurer of the Columbia Funds since October, 2003 and of the Liberty One Financial Center Funds, Stein Roe Funds and All-Star Funds since December, 2000; Vice Boston, MA 02111 President of the Advisor since April, 2003 (formerly President of the Treasurer (since 2000) Columbia Funds, Liberty Funds and Stein Roe Funds from February, 2004 to October, 2004; Chief Accounting Officer and Controller of the Liberty Funds and All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002 (formerly Treasurer from December, 2002 to December, 2004 and President from February, 2004 to December, 2004 of the Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February, 1998 to October, 2000). Mary Joan Hoene (age 54) Senior Vice President and Chief Compliance Officer of the Columbia Funds, 40 West 57th Street Liberty Funds, Stein Roe Funds and All-Star Funds since August, 2004 New York, NY 10005 (formerly Partner, Carter, Ledyard & Milburn LLP from January, 2001 to Senior Vice President and Chief Compliance August, 2004; Counsel, Carter, Ledyard & Milburn LLP from November, 1999 to Officer (since 2004) December, 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April, 1998 to November, 1999). Michael G. Clarke (age 35) Chief Accounting Officer of the Columbia Funds, Liberty Funds, Stein Roe One Financial Center Funds and All-Star Funds since October, 2004 (formerly Controller of the Boston, MA 02111 Columbia Funds, Liberty Funds, Stein Roe Funds and All-Star Funds from May, Chief Accounting Officer (since 2004) 2004 to October, 2004; Assistant Treasurer from June, 2002 to May, 2004; Vice President, Product Strategy & Development of the Liberty Funds and Stein Roe Funds from February, 2001 to June, 2002; Assistant Treasurer of the Liberty Funds, Stein Roe Funds and the All-Star Funds from August, 1999 to February, 2001; Audit Manager, Deloitte & Touche LLP from May, 1997 to August, 1999). Jeffrey R. Coleman (age 35) Controller of the Columbia Funds, Liberty Funds, Stein Roe Funds and One Financial Center All-Star Funds since October, 2004 (formerly Vice President of CDC IXIS Boston, MA 02111 Asset Management Services, Inc. and Deputy Treasurer of the CDC Nvest Funds Controller (since 2004) and Loomis Sayles Funds from February, 2003 to September, 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August, 2000 to February, 2003; Tax Manager of PFPC, Inc. from November, 1996 to August, 2000). R. Scott Henderson (age 46) Secretary of the Columbia Funds, Liberty Funds and Stein Roe Funds since One Financial Center December, 2004 (formerly Of Counsel, Bingham McCutchen from April, 2001 to Boston, MA 02111 September, 2004; Executive Director and General Counsel, Massachusetts Secretary (since 2004) Pension Reserves Investment Management Board from September, 1997 to March, 2001).
76 CMG FUND TRUST 1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201 - INVESTMENT ADVISOR - COLUMBIA MANAGEMENT ADVISORS, LLC 100 FEDERAL STREET BOSTON, MASSACHUSETTS 02110-2624 - LEGAL COUNSEL - ROPES & GRAY LLC ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110-2624 - TRANSFER AGENT - COLUMBIA MANAGEMENT SERVICES, INC. P.O. BOX 8081 BOSTON, MASSACHUSETTS 02266-8081 SHC-42/89541-08/05 (09/05) 05/7535 A description of the policies and procedures that the fund uses to determine how to vote proxies and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30 is available from the SEC's website. Information regarding how the fund voted proxies relating to portfolio securities is also available from the fund's website. The fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA MANAGEMENT DISTRIBUTORS, 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. Fund distributed by Columbia Management Distributors, Inc., One Financial Center, Boston, MA 02111-2621 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 for the series of the registrant whose report to stockholders is 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, 2005 and July 31, 2004 are approximately as follows:
2005 2004 $ 390,300 $ 357,600
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. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years ended July 31, 2005 and July 31, 2004 are approximately as follows:
2005 2004 $ 55,500 $ 49,000
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 2005 and 2004, Audit-Related Fees include certain agreed-upon procedures performed for semi-annual shareholder reports. Fiscal year 2005 represents 15 series of the registrant, while fiscal year 2004 includes 14 series of the registrant. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years ended July 31, 2005 and July 31, 2004 are approximately as follows:
2005 2004 $ 48,800 $ 43,500
Tax Fees in both fiscal years 2005 and 2004 consist primarily of the review of annual tax returns (15 series in fiscal year 2005 and 12 series in fiscal year 2004) and include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. Fiscal year 2005 also includes review of compliance documents and consultation and assistance with foreign tax filings, while fiscal year 2004 includes the review of calculations of required shareholder distributions for seven series, tax research and consultation and assistance with foreign tax filings. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years ended July 31, 2005 and July 31, 2004 are approximately as follows:
2005 2004 $ 0 $ 0
All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. None of the amounts described in paragraphs (a) through (d) above were approved pursuant to the "de minimus" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (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 June 1 through May 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) The percentage of services described in paragraphs (b) through (d) of this Item approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended July 31, 2005 and July 31, 2004 was zero. (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, 2005 and July 31, 2004 are disclosed in (b) through (d) of this Item. During the fiscal years ended July 31, 2005 and July 31, 2004, there were no Audit-Related Fees or Tax Fees that were approved 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. During the fiscal years ended July 31, 2005 and 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 $95,500 and $95,000, respectively. For both fiscal years, All Other Fees consist primarily of internal controls reviews of the registrant's transfer agent. The percentage of Audit-Related Fees, Tax Fees and 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 both fiscal years ended July 31, 2005 and July 31, 2004 was zero. (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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, based on their 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. 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/ Christopher L. Wilson ---------------------------------------------------- Christopher L. Wilson, President Date September 26, 2005 ------------------------------------------------------------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Christopher L. Wilson ---------------------------------------------------- Christopher L. Wilson, President Date September 26, 2005 ------------------------------------------------------------------------ By (Signature and Title) /s/ J. Kevin Connaughton ---------------------------------------------------- J. Kevin Connaughton, Treasurer Date September 26, 2005 ------------------------------------------------------------------------