<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5857
---------------------------------------------
CMG Fund Trust
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Vincent Pietropaolo, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-772-3698
----------------------------
Date of fiscal year end: 7/31/04
--------------------------
Date of reporting period: 7/31/04
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
CMG FUND TRUST
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
COLUMBIA MANAGEMENT(R)
CMG ENHANCED S&P 500(R) INDEX FUND
CMG LARGE CAP GROWTH FUND
CMG LARGE CAP VALUE FUND
CMG MID CAP GROWTH FUND
CMG MID CAP VALUE FUND
CMG SMALL CAP GROWTH FUND
CMG SMALL CAP VALUE FUND
CMG SMALL/MID CAP FUND
CMG INTERNATIONAL STOCK FUND
PORTFOLIOS OF CMG FUND TRUST
ANNUAL REPORT
JULY 31, 2004
NOT FDIC MAY LOSE VALUE
INSURED -----------------
ADVISED BY COLUMBIA MANAGEMENT ADVISORS, INC. NO BANK GUARANTEE
<Page>
CMG ENHANCED S&P 500(R) INDEX FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Enhanced S&P 500(R) Index Fund returned 12.08% for the 12-month period ended
July 31, 2004. The fund's double-digit gain was slightly behind the return of
the S&P 500 Index, which was 13.17% for the same period. However, the fund
outperformed its peer group. The average return for the Lipper Large Cap Core
Funds Category was 9.53%.(1) The fund's focus on large, high quality companies
hurt performance against the index because investors tended to gravitate toward
smaller, lower quality companies. In addition, we did not hold the stock of our
current parent company, Bank of America, or the stock of our previous one,
FleetBoston Financial, in order to avoid a conflict of interest. Both stocks
performed better than most other financial companies, and their absence in the
portfolio held back total return.
While we manage the portfolio to reflect the characteristics of the S&P 500
Index in terms of sector weights and market capitalization, there were 200
stocks in the portfolio on July 31, 2004, compared with the 500 companies in the
S&P 500 Index. In keeping with the mandate to remain broadly diversified, we
generally limit our exposure to any one stock to the company's weight in the S&P
500 Index plus or minus one half of one percent. For example, if the weight of a
stock in the S&P 500 Index is 3.00%, its position in the portfolio would
typically not be greater than 3.50% or less than 2.50%.
In general, we believe that good stock selection is the key to successful
long-term performance. When looking for individual stocks, we use quantitative
analysis to identify large, high quality companies with attractive valuations
and proven records of earnings growth. We look at the financial, economic and
operating factors that affect companies. We use this data to evaluate the
relative attractiveness of each company in our selection universe.
Examples of companies that met our investment criteria during the period
included: Microsoft, Monsanto, an agricultural products company; and TXU, whose
restructuring efforts have dramatically increased its growth potential (3.1%,
0.4% and 0.6% of net assets, respectively). In the energy area we focused on
large oil companies, such as Exxon Mobil and ChevronTexaco, which benefited from
higher oil prices (3.4% and 1.5% of net assets, respectively). In the consumer
discretionary sector, we held Sears, Roebuck and Co. (0.3% of net assets), which
underperformed during the period.
Watson Pharmaceuticals (0.2% of net assets) performed poorly during this period.
The company's stock declined when it reported weaker-than-expected earnings. We
maintained our position because we believe that Watson Pharmaeuticals would be
attractive to investors at its lower valuation. We were also disappointed by the
performance of King Pharmaceuticals (0.3% of net assets).(2)
Our outlook for high quality companies continues to be optimistic. We have
already begun to see a more conservative attitude in the market, with investors
moving away from lower quality companies toward more established companies with
solid business prospects. We believe this shift in emphasis bodes well for the
carefully chosen stocks that make up the portfolio.
1
<Page>
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Exxon Mobil 3.4
General Electric 3.2
Microsoft 3.1
Wal-Mart Stores 2.7
Pfizer 2.4
Johnson & Johnson 2.1
International Business
Machines 1.9
Intel 1.8
JPMorgan Chase & Co. 1.8
Citigroup 1.7
</Table>
We appreciate your continued confidence in CMG Enhanced S&P 500(R) Index Fund.
The Columbia Investment Team
July 31, 2004
The primary risks involved with investing in the fund includes equity risk,
market risk and tracking error risk. Unlike the S&P 500 Index, the fund incurs
administrative expenses and transaction costs in trading stocks. The composition
of the S&P 500 Index and the stocks held by the fund will diverge.
Holdings are calculated as a percentage of net assets and are subject to change.
Because the fund is actively managed, there is no guarantee the fund will
continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
(2) Shortly after the end of this 12-month reporting period, we eliminated our
position in King Pharmaceuticals.
2
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
<Table>
<Caption>
CMG ENHANCED S&P 500(R) INDEX FUND S&P 500 INDEX
5/5/2003 $ 10,000 $ 10,000
5/31/2003 $ 10,510 $ 10,415
6/30/2003 $ 10,540 $ 10,548
7/31/2003 $ 10,730 $ 10,734
8/31/2003 $ 10,930 $ 10,943
9/30/2003 $ 10,819 $ 10,827
10/31/2003 $ 11,399 $ 11,440
11/30/2003 $ 11,479 $ 11,541
12/31/2003 $ 12,085 $ 12,146
1/31/2004 $ 12,266 $ 12,369
2/29/2004 $ 12,408 $ 12,541
3/31/2004 $ 12,197 $ 12,352
4/30/2004 $ 12,005 $ 12,158
5/31/2004 $ 12,156 $ 12,324
6/30/2004 $ 12,378 $ 12,563
7/31/2004 $ 12,026 $ 12,148
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Enhanced S&P 500(R) Index Fund 05/05/03 12.08 16.06
S&P 500 Index 13.17 17.01
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Enhanced S&P 500(R) Index Fund 05/05/03 17.44 20.31
S&P 500 Index 19.11 21.88
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from May 5, 2003.
The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the
performance of 500 widely held, large-capitalization US stocks. Unlike mutual
funds, indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
3
<Page>
UNDERSTANDING YOUR EXPENSES - CMG ENHANCED S&P 500(R) INDEX FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 980.54 1,023.61 1.24 1.27
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.25%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
4
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
5
<Page>
CMG LARGE CAP GROWTH FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Large Cap Growth Fund returned 2.57% from inception on September 10, 2003
through July 31, 2004. The fund trailed the 3.76% return of the Russell 1000
Growth Index for the same period. Using the closest available dates for
comparison (August 31, 2003 through July 31, 2004), the fund also underperformed
the Lipper Large Cap Growth Funds Category average, which gained 3.67%.(1) The
shortfall can largely be attributed to the fund's start-up phase, when the
timing of cash flows had a negative impact on performance. Once the fund was
fully invested, fund performance picked up and tracked the index.
The fund's focus on large profitable companies with strong competitive
positions, healthy balance sheets and above-average sales growth led us to top
performers in the industrial and consumer staples sectors. An above-average
stake in industrials helped the fund as economic growth picked up worldwide.
Tyco International (2.9% of net assets), an industrial conglomerate under new
management, did particularly well. We added to consumer staples holdings, but
kept exposure to the sector lower than the fund's benchmark because valuations
have neared their historical peaks. The fund's strongest performers in consumer
staples included Costco Wholesale (1.4% of net assets), a warehouse chain that
sells consumer goods. The company trimmed costs to improve its bottom line and
capitalized on growing demand from small businesses.
Consumer discretionary stocks also aided performance once the fund was fully
invested. Top performers included XM Satellite Radio Holdings and eBay (1.3% and
1.2% of net assets, respectively). XM benefited from enhanced product offerings
and growing demand, while eBay rallied as more people used its online auction
services. Niche retailers Chico's FAS and Coach (1.0% and 0.8% of net assets,
respectively) also delivered strong results. By contrast, media stocks were
disappointing. Fading expectations for sustainable long-term growth in
advertising revenues put pressure on the sector.
The fund's health care returns were mixed. Medical products and devices
companies, such as Alcon and St. Jude Medical (1.8% and 1.3% of net assets,
respectively), rallied nicely amid new product introductions. However, we lost
some ground by not owning more shares of Johnson & Johnson (1.8% of net assets)
early on when its stock price took off. Biotechnology stocks further detracted
from performance. In particular, Amgen (0.8% of net assets) was hurt by concerns
about Medicare reimbursement rates.
Within technology, we owned a range of companies that we believed could benefit
from an improving economy, increased corporate spending and the growing
popularity of advanced communication devices. Our large position in Microsoft
(4.9% of net assets) reflected its heavy weight in the index. Microsoft made a
positive contribution to the fund's return although it did not perform as well
as the technology sector overall. Other disappointments included Seagate
Technology, which supplies parts, peripherals and other components to technology
systems companies. We sold the stock after earnings shortfalls resulted in sharp
declines. Paychex (0.6% of net assets), a payroll processor for small
businesses, also hurt performance. It slid among concern that sporadic job
growth and modestly higher interest rates would hinder
6
<Page>
earnings prospects. The fund, however, benefited as QUALCOMM, which makes
semiconductors for cell phones, and Yahoo! (1.7% and 1.1% of net assets,
respectively) posted solid gains.
We remain optimistic about the prospects for large-cap growth stocks, especially
those with attractive valuations. We expect high quality companies with good
strategic, competitive and product positioning to do better than companies whose
fortunes are primarily dependent on the fortunes of the economy. With these
factors in mind, we plan to maintain a diversified and balanced approach to
sector exposure while picking what we believe are growth stocks with the
potential to be market leaders.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Microsoft 4.9
Intel 3.1
Tyco International 2.9
Pfizer 2.8
Cisco Systems 2.7
General Electric 2.2
Praxair 2.2
Teva Pharmaceutical Industries 2.1
Zimmer Holdings 2.0
Alcon 1.8
</Table>
Thank you for investing in CMG Large Cap Growth Fund.
The Columbia Investment Team
July 31, 2004
An investment in the fund offers the potential for long-term growth, but also
involves certain risks, including stock market fluctuations due to economic and
business development and the possibility of losses due to the sensitivity of
growth stock prices to changes in current or expected earnings.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
7
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 10, 2003 TO JULY 31, 2004
<Table>
<Caption>
CMG LARGE CAP GROWTH FUND RUSSELL 1000 GROWTH INDEX
9/9/2003 $ 10,000 $ 10,000
9/30/2003 $ 9,690 $ 9,695
10/31/2003 $ 10,230 $ 10,240
11/30/2003 $ 10,380 $ 10,347
12/31/2003 $ 10,627 $ 10,705
1/31/2004 $ 10,817 $ 10,924
2/29/2004 $ 10,888 $ 10,994
3/31/2004 $ 10,778 $ 10,789
4/30/2004 $ 10,488 $ 10,664
5/31/2004 $ 10,768 $ 10,862
6/30/2004 $ 10,948 $ 10,998
7/31/2004 $ 10,257 $ 10,376
</Table>
CUMULATIVE RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION LIFE
CMG Large Cap Growth Fund 09/10/03 2.57
Russell 1000 Growth Index 3.76
</Table>
CUMULATIVE RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION LIFE
CMG Large Cap Growth Fund 09/10/03 9.47
Russell 1000 Growth Index 9.98
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from September 10, 2003.
The Russell 1000 Growth Index is an unmanaged index that measures performance of
those Russell 1000 Index companies with higher price-to-book ratios and higher
forecasted growth values. Unlike mutual funds, indices are not investments, do
not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in an index. Securities in the fund may not match
those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
8
<Page>
UNDERSTANDING YOUR EXPENSES - CMG LARGE CAP GROWTH FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 949.40 1,022.35 2.45 2.54
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.50%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
9
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
10
<Page>
CMG LARGE CAP VALUE FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Large Cap Value Fund returned 11.15% from its inception on September 10,
2003 through July 31, 2004. Although the fund's emphasis on energy stocks helped
it generate a solid, double-digit return, it gained less than the Russell 1000
Value Index. The index returned 14.45% during the same period. Using the closest
available dates for comparison (August 31, 2003, through July 31, 2004), the
fund also underperformed the Lipper Multi-Cap Value Funds Category average,
which was 13.62%.(1)
The fund was held back in the early part of the period because of its emphasis
on higher-quality securities, which trailed lower-quality securities. However,
the fund's higher quality holdings held up better as market conditions declined
and performance picked up in the second half.
The fund was launched in September 2003 in the midst of a rising stock market
and an improving economy. Its best performers were energy stocks, which
represented a larger portion in the portfolio than their weight in the fund's
benchmark, and utility stocks, which were a relatively small position. The
steady rise in oil and natural gas prices during the period boosted the prices
of Exxon Mobil, ConocoPhillips and BP PLC (3.3%, 2.7% and 2.5% of net assets,
respectively). TXU (1.9% of net assets) benefited from its new management team's
aggressive restructuring. The company's asset sales also worked out better than
expected, enabling the company to retain its dividend.
Financial holdings did well early in the reporting period, but lost ground as
interest rates began to rise. Credit card company MBNA (1.0% of net assets)
declined as concerns about a slowdown in consumer spending began to surface, and
higher short-term interest rates created concerns about their profit margins.
Citigroup, Bank of New York and Morgan Stanley (3.9%, 1.3% and 1.1% of net
assets, respectively) were adversely affected by the steady slowdown in capital
markets activity.
In technology, we lost ground with Finnish cell phone manufacturer Nokia (0.8%
of net assets). The company's market share declined, but we believe its plans to
introduce a wide range of new phones with varying price points may help the
stock recover in the coming year. In the consumer sector, Wendy's International
and PepsiCo (1.5% and 1.7% of net assets, respectively) finished the period weak
due to concerns about slowing consumer spending.
Our decisions to emphasize higher quality stocks, broaden the fund's
diversification and bring fund allocations in line with the Russell 1000 Value
Index began to pay off as the year wore on. As the market declined from its
peak, higher quality names pulled ahead of the more aggressive, lower quality
companies that had led the earlier market rally.
We believe this strategy will continue to be effective as the economic situation
becomes clearer. Already there are signs that the economic recovery is maturing.
Although the pace of growth remains solid, it has slowed. We expect profit
growth to also slow. In this environment, we continue to favor high quality
stocks with the potential to do well under a variety of market conditions.
11
<Page>
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Citigroup 3.9
Exxon Mobil 3.3
JPMorgan Chase & Co. 2.8
ConocoPhillips 2.7
BP PLC 2.5
Wells Fargo & Co. 2.3
U.S. Bancorp 2.2
American International Group 2.2
General Electric 2.0
TXU 1.9
</Table>
Thank you for investing in CMG Large Cap Value Fund.
The Columbia Investment Team
July 31, 2004
An investment in the fund offers the potential for long-term growth, but also
involves certain risks, including stock market fluctuations due to economic and
business developments.
Value stocks are securities of companies that may have experienced adverse
business or industry developments or may be subject to special risks that have
caused the stocks to be out of favor. If the advisor's assessment of a company's
prospects is wrong, the price of its stock may not approach the value the
advisor has placed on it.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
12
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 10, 2003 TO JULY 31, 2004
<Table>
<Caption>
CMG LARGE CAP VALUE FUND RUSSELL 1000 VALUE INDEX
9/10/2003 $ 10,000 $ 10,000
9/30/2003 $ 9,820 $ 9,781
10/31/2003 $ 10,190 $ 10,380
11/30/2003 $ 10,230 $ 10,521
12/31/2003 $ 10,904 $ 11,169
1/31/2004 $ 11,045 $ 11,365
2/29/2004 $ 11,345 $ 11,609
3/31/2004 $ 11,265 $ 11,506
4/30/2004 $ 10,994 $ 11,226
5/31/2004 $ 11,004 $ 11,340
6/30/2004 $ 11,315 $ 11,608
7/31/2004 $ 11,115 $ 11,445
</Table>
CUMULATIVE RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION LIFE
CMG Large Cap Value Fund 09/10/03 11.15
Russell 1000 Value Index 14.45
</Table>
CUMULATIVE RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION LIFE
CMG Large Cap Value Fund 09/10/03 13.15
Russell 1000 Value Index 16.09
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from September 10, 2003.
The Russell 1000 Value Index is an unmanaged index that measures the performance
of those Russell 1000 Index companies with lower price-to-book ratios and lower
forecasted growth values. Unlike mutual funds, indices are not investments, do
not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in an index. Securities in the fund may not match
those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
13
<Page>
UNDERSTANDING YOUR EXPENSES - CMG LARGE CAP VALUE FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 1,006.35 1,022.36 2.51 2.53
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.50%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
14
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
15
<Page>
CMG MID CAP GROWTH FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Mid Cap Growth Fund returned 1.06% for the 12-month period ended July 31,
2004. The fund's performance was significantly lower than the 14.79% return of
the Russell Midcap Growth Index and the 9.63% average of the Lipper Mid Cap
Growth Funds Category for the same period.(1) Although the fund's energy
holdings benefited from rising oil prices, in most other sectors, particularly
technology, its lack of exposure to the better-performing segments of the market
hurt performance during the overall period. With a new management team in place
since the beginning of July, we have taken steps aimed at reducing volatility
and improving performance going forward.
Fueled by a strengthening US economy, the stock market moved higher during the
first six months of this reporting period. Small company stocks were the
greatest beneficiaries of this trend. Investors favored small and highly
leveraged, speculative companies on the expectation that they had the most to
gain in an improving economy. However, that sentiment changed dramatically as
investors became concerned about the strength of the recovery early in 2004.
Investors shifted their support to larger, more stable companies.
The fund's technology holdings diminished performance during the period. We
missed most of the major upward moves within the technology sector. In fact, the
fund's relative performance was held back primarily by what it did not own. For
example, it did not have exposure to Broadcom or Corning, both stocks that made
significant gains during the period.
The fund was helped by some of its energy and health care holdings. Rising oil
prices boosted energy stocks and oil service stocks benefited most because
companies have begun to explore for more energy sources after years of
underinvestment. XTO Energy and National-Oilwell (1.2% and 1.7% of net assets,
respectively), as well as exploration and production companies such as Apache
(0.6% of net assets), were helped by this trend. In health care, a few high
quality stocks made positive contributions to the fund, including DaVita, a
dialysis services company, and Elan, an Irish biotechnology and drug company
(1.6% and 0.8% of net assets, respectively).
Although US stock markets have traded lower for the past few months, we see
reasons for optimism--and attractive investment opportunities--going forward. In
light of our expectation for modest but stable growth, we believe that stocks
are more attractively priced. Given this outlook, we have begun adding stocks of
emerging companies with favorable earnings prospects. For example, we added
Advanced Micro Devices and Altera, two semiconductor manufacturers (0.6% and
0.6% of net assets, respectively). We also initiated a position in Juniper
Networks, a communications equipment company (1.0% of net assets). We initiated
positions in these stocks even though we reduced the fund's overall exposure to
technology. At the same time, we increased the fund's financial services and
industrial holdings. We believe these two industries have the potential to
benefit from an improving economy.
16
<Page>
As part of a major restructuring of the fund, we have also taken steps to limit
exposure to any one industry in order to help manage exposure to risk. And, we
have introduced a systematic process that places more emphasis on valuation
relative to earnings growth in selecting individual stocks for the portfolio.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Medicis Pharmaceutical 1.9
Baker Hughes 1.8
Microchip Technology 1.8
National-Oilwell 1.7
Patterson-UTI Energy 1.7
DaVita 1.6
Yum! Brands 1.6
Univision Communications 1.4
Fisher Scientific International 1.4
Linear Technology 1.4
</Table>
Thank you for investing in the CMG Mid Cap Growth Fund.
The Columbia Investment Team
July 31, 2004
Investing in mid-cap stocks may present special risks, including possible
illiquidity and greater price volatility than stocks of larger, more established
companies.
Holdings are calculated as a percentage of net assets and are subject to change.
Because the fund is actively managed, there is no guarantee the fund will
continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
17
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
<Table>
<Caption>
CMG MID CAP GROWTH FUND RUSSELL MIDCAP GROWTH INDEX
5/5/2003 $ 10,000 $ 10,000
5/31/2003 $ 10,580 $ 10,675
6/30/2003 $ 10,730 $ 10,828
7/31/2003 $ 10,930 $ 11,214
8/31/2003 $ 11,470 $ 11,832
9/30/2003 $ 10,849 $ 11,603
10/31/2003 $ 11,739 $ 12,538
11/30/2003 $ 12,059 $ 12,874
12/31/2003 $ 12,165 $ 13,014
1/31/2004 $ 12,445 $ 13,444
2/29/2004 $ 12,415 $ 13,669
3/31/2004 $ 12,265 $ 13,643
4/30/2004 $ 11,705 $ 13,259
5/31/2004 $ 11,865 $ 13,572
6/30/2004 $ 12,125 $ 13,787
7/31/2004 $ 11,046 $ 12,873
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Mid Cap Growth Fund 05/05/03 1.06 8.36
Russell Midcap Growth Index 14.79 22.62
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Mid Cap Growth Fund 05/05/03 13.01 18.19
Russell Midcap Growth Index 27.33 32.09
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from May 5, 2003.
The Russell Midcap Growth Index is an unmanaged index that measures the
performance of those Russell Midcap Index companies with higher price-to-book
ratios and higher forecasted growth values. Unlike mutual funds, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. Securities in the fund may
not match those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
18
<Page>
UNDERSTANDING YOUR EXPENSES - CMG MID CAP GROWTH FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 893.38 1,020.35 3.30 3.53
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.70%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
19
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
20
<Page>
CMG MID CAP VALUE FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Mid Cap Value Fund returned 17.91% for the 12-month period ended July 31,
2004. The fund benefited from a strong stock market, which was buoyed by a
recovering economy and robust profit growth. However, its return was lower than
the 23.43% return of the Russell Midcap Value Index for the same period.
Sub-par returns in the consumer discretionary sector accounted for most of the
fund's shortfall relative to the index. Auto parts supplier Superior Industries
International (0.7% of net assets) was our largest disappointment in the sector.
The company suffered from pricing pressure and manufacturing problems in its
core aluminum wheels business. However, we continue to own the stock because the
company has a leading market share, strong product offering and pristine balance
sheet. Cable television operator Mediacom Communications (0.3% of net assets)
was hurt by increased competition from satellite dish providers. These providers
are increasingly offering local service in Mediacom's markets, often at
promotional prices.
We also had disappointing performance from certain health care and financial
stocks. First Health Group (0.5% of net assets) lowered its earnings estimate
because of continued pricing pressure in one of its key business segments. Janus
Capital Group (1.3% of net assets), an asset management firm, also hindered the
fund's return. One of the contributors to Janus' poor performance was the
aggressive growth style that served it well during the 90s has been out of favor
for some time, resulting in poor performance for many Janus funds. We continue
to own the stock because we believe that improvements in investment performance
and new management have the potential to turn the company around.
Strong returns from the fund's energy and industrial holdings helped
performance. The fund's exposure to energy stocks was higher than its benchmark,
which proved beneficial when oil and natural gas prices moved higher. Our stock
selection also had a positive impact on performance. Both XTO Energy and Amerada
Hess (3.1% and 1.7% of net assets, respectively), posted significant stock price
gains during the period. XTO continued to enjoy growth by acquiring and
successfully exploiting new assets. Amerada appreciated as investors appeared
confident that the company can execute its turnaround strategy.
Our positions in industrials Brink's and Carlisle Companies (1.9% and 1.6% of
net assets, respectively) also did well. Brink's consumer and business security
businesses continued to post solid growth. Moreover, its troubled freight unit
enjoyed a strong recovery, helped both by a better economy and internal
initiatives. Carlisle's stock appreciated because of strong earnings gains,
which resulted from new product introductions, market share gains and the
improved economy.
During the period, we sold positions in Ecolab, International Game Technology
and Zebra Technologies. These were all long-term holdings, which had appreciated
significantly and appeared fully valued. We used the proceeds to establish new
positions in stocks that appeared attractively valued, including Willis Group
Holdings (0.5% of net assets), an insurance broker with the number three
position in its industry. A relatively new management team has rejuvenated the
21
<Page>
company, leading to market share gains against the top two players. The
company's stock price has been weighed down by several specific investor
concerns that we believe could be resolved favorably in the near-term. We also
believe that the company has the potential to gain even more market share going
forward.
Looking ahead, we see mixed signals on the economic front. We believe that the
economy has demonstrated its ability to maintain a steady, if somewhat less
vigorous, pace of growth. However, the likelihood of higher rates, record high
oil prices, concerns about inflation and the upcoming presidential election are
wild cards that could increase uncertainty in the coming months. As value
managers, we will continue to seek to identify well-managed companies in good or
improving businesses that we believe have the potential to do well under a
variety of market conditions.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
XTO Energy 3.1
Golden West Financial 2.7
Dean Foods 2.7
Federated Department Stores 2.3
Brink's 1.9
Telephone & Data Systems 1.7
Amerada Hess 1.7
TJX Companies 1.7
International Flavors & Fragrances 1.6
Charter One Financial 1.6
</Table>
We appreciate your continued confidence in CMG Mid Cap Value Fund.
The Columbia Investment Team
July 31, 2004
Investing in mid-cap stocks may present special risks, including possible
illiquidity and greater price volatility than stocks of larger, more established
companies.
Value stocks are securities of companies that may have experienced adverse
business or industry developments or may be subject to special risks that have
caused the stocks to be out of favor. If the advisor's assessment of a company's
prospects is wrong, the price of its stock may not approach the value the
advisor has placed on it.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
22
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
<Table>
<Caption>
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
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Mid Cap Value Fund 05/05/03 17.91 20.55
Russell Midcap Value Index 23.43 29.22
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Mid Cap Value Fund 05/05/03 26.96 26.92
Russell Midcap Value Index 30.81 34.86
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from May 5, 2003.
The Russell Midcap Value Index is an unmanaged index that measures the
performance of those Russell Midcap Index companies with lower price-to-book
ratios and lower forecasted growth values. The stocks are also members of the
Russell 1000 Value Index. Unlike mutual funds, indices are not investments, do
not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in indices. Securities in the fund may not match
those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
23
<Page>
UNDERSTANDING YOUR EXPENSES - CMG MID CAP VALUE FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 1,014.67 1,021.39 3.50 3.51
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.70%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
24
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
25
<Page>
CMG SMALL CAP GROWTH FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Small Cap Growth Fund returned 10.74% for the 12-month period ended July 31,
2004. Small-cap stocks benefited from a favorable environment, especially during
the first half of the period. The fund's return was slightly less than the
11.32% return of the Russell 2000 Growth Index. However, it outperformed the
9.62% average return for the Lipper Small Cap Growth Funds Category.(1) The fund
benefited from an emphasis on semiconductor and biotechnology stocks, which
rallied for the first nine months of the period. Strong gains from industrials,
energy and financials further fueled returns. The fund's sizable stake in media
as well as disappointing performance from selected technology stocks contributed
to a modest shortfall in performance relative to the benchmark.
We focused on what we believed were higher quality small-cap growth companies
with healthy balance sheets, attractive business models and strong management
teams. We favored innovative companies, which we found mostly in the consumer
discretionary, technology and health care sectors. Jarden (2.1% of net assets),
a diversified consumer products company, was the fund's largest holding and top
performer. A smart acquisition strategy as well as innovative marketing and
distribution drove strong earnings growth. Station Casinos also posted an
outstanding gain. The company prospered from its unique focus on casinos for Las
Vegas residents as well as collaborations with Native American tribes to build
new casinos in other parts of the country. We took profits and sold our stake in
the company.
The fund enjoyed strong gains from specialty pharmaceutical and medical
diagnostic stocks. Standouts included Salix Pharmaceuticals, Nektar Therapeutics
and Cytyc (1.2%, 1.0% and 0.5% of net assets, respectively). Shares of Salix
Pharmaceuticals shot up as it gained approval for a new gastrointestinal drug.
Nektar Therapeutics rallied after filing in Europe for approval of its
innovative inhaled insulin product. Cytyc, which makes the thin prep imaging
system used for PAP smears, benefited from expansion overseas and a recent
acquisition. Our investment in Taro Pharmaceuticals (0.4% of net assets) lost
ground because of a major earnings disappointment.
Within industrials, we emphasized transportation stocks. Freight companies, such
as EGL (0.9% of net assets), benefited from favorable supply/demand dynamics.
Energy stocks were driven higher by rising commodity prices. Standouts included
Maverick Tube (0.6% of net assets), a company that makes metal tubing to
transport gas and oil from offshore drilling sites. In the financial sector, we
targeted banks that were well-positioned for rising interest rates. East-West
Bancorp (1.4% of net assets), a West Coast bank targeting the Chinese-American
community, did particularly well.
Technology stocks came under pressure in the spring as investors worried about
the likelihood that earnings growth would slow from its recent rapid pace.
Within technology, our biggest disappointments included Cray, a supercomputer
company, and Netopia, which makes smart modems for DSL (0.4% and 0.2% of net
assets, respectively). An exception was Silicon Image (1.3% of net assets). The
stock for this semiconductor company rallied as sales and earnings
26
<Page>
exceeded expectations. Media stocks further detracted from performance, as
advertising revenues trailed expectations and investors abandoned the sector.
Although small-cap valuations have risen and investors have become more risk
averse, we remain cautiously optimistic about the prospects for small-cap growth
stocks. We think their earnings outlooks remain better than those for large-cap
stocks, especially as the economy continues to improve. We expect our focus on
higher quality, small-cap growth companies to help us in a potentially volatile
market environment.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Jarden 2.1
East-West Bancorp 1.4
Silicon Image 1.3
Salix Pharmaceutical 1.2
Cost Plus 1.2
Corporate Executive Board 1.1
Artisan Components 1.1
Jefferies Group 1.1
Commercial Capital Bancorp 1.1
Infinity Property & Casualty 1.1
</Table>
Thank you for investing in CMG Small Cap Growth Fund.
The Columbia Investment Team
July 31, 2004
Investments in small-cap companies may be subject to greater volatility and
price fluctuations because small companies often have narrower markets and
limited financial resources and their stocks tend to be thinly traded and less
liquid than investments in larger companies.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
27
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
<Table>
<Caption>
CMG SMALL CAP GROWTH FUND RUSSELL 2000 GROWTH INDEX
5/5/2003 $ 10,000 $ 10,000
5/31/2003 $ 10,750 $ 10,776
6/30/2003 $ 11,010 $ 10,984
7/31/2003 $ 11,530 $ 11,814
8/31/2003 $ 12,060 $ 12,449
9/30/2003 $ 11,620 $ 12,134
10/31/2003 $ 12,851 $ 13,182
11/30/2003 $ 13,141 $ 13,612
12/31/2003 $ 13,483 $ 13,673
1/31/2004 $ 14,037 $ 14,391
2/29/2004 $ 14,197 $ 14,369
3/31/2004 $ 14,410 $ 14,437
4/30/2004 $ 13,760 $ 13,712
5/31/2004 $ 13,781 $ 13,985
6/30/2004 $ 14,100 $ 14,451
7/31/2004 $ 12,769 $ 13,152
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Small Cap Growth Fund 05/05/03 10.74 21.82
Russell 2000 Growth Index 11.32 24.76
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Small Cap Growth Fund 05/05/03 28.06 34.70
Russell 2000 Growth Index 31.55 37.58
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from May 5, 2003.
The Russell 2000 Growth Index is an unmanaged index that measures the
performance of those Russell 2000 Index companies with higher price-to-book
ratios and higher forecasted growth values. Unlike mutual funds, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. Securities in the fund may
not match those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
28
<Page>
UNDERSTANDING YOUR EXPENSES -- CMG SMALL CAP GROWTH FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 913.37 1,020.88 3.81 4.02
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.80%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
29
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
30
<Page>
CMG SMALL CAP VALUE FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Small Cap Value Fund returned 25.79% for the 12-month period ended July 31,
2004. It outperformed both the Russell 2000 Value Index and Lipper Small Cap
Value Funds Category average, which returned 22.83% and 22.48%, respectively.(1)
We believe that strong stock selection in the health care, industrial and
financial sectors helped performance relative to the Russell 2000 Value Index
and its peer group. A below-average stake in financials also benefited the
fund's return.
We continued to focus our efforts on identifying companies with strong
competitive and financial positions, good earnings growth prospects and
reasonable stock valuations. This strategy worked especially well in the second
half of 2003 as optimism about the economy and Iraq conflict propelled stocks
sharply higher. As 2004 unfolded, the market's momentum slowed amid growing
uncertainty on most fronts--geopolitical, political and economic. Investors
became more risk averse, favoring value stocks over growth stocks. Although
large-cap stocks gained ground late in the period, small-cap stocks came out
ahead for the year.
The fund's modest investment in health care produced outsized gains. Standouts
included non-hospital and specialty facilities companies, such as nursing homes,
an oncology practice that was bought out at a premium during the period and a
funeral home chain. The fund also owned a contact lens manufacturer that was a
strong performer. In addition, the performance was aided by our decision to
avoid biotechnology and more expensive pharmaceutical stocks that did not meet
our quality and valuation criteria. These industries turned in weak returns
compared to the health care sector average.
The fund's investments in industrial stocks also contributed to performance. The
sector rallied as the economy improved. We owned shares of machinery and
equipment, transportation, business services, construction and security services
companies, all of which produced strong gains. A below-average stake in
financial stocks also benefited performance. Financials came under pressure as
rising interest rates dampened enthusiasm for the sector. Our exposure to
thrifts was lower than their weight in the fund's index, and that was a
particular benefit because thrifts lagged the sector. In addition, the fund
benefited from favorable stock selection among banks, insurance firms and
specialty financial companies.
In both technology and consumer sectors, we maintained our focus on reasonably
priced stocks, which ran counter to the market's preference early on for more
expensively priced stocks with the best earnings and revenue growth. In
technology, we owned a broad mix of software and hardware names. In the consumer
discretionary sector, we focused on restaurants, specialty retailers and
manufacturers of apparel, shoes, toys and leisure products. The fund's returns
from both technology and consumer stocks were positive, but slightly behind the
sector average for the Russell 2000 Value Index.
Caught between positive earnings growth and worries about rising interest rates,
inflation, the progress of the economic recovery and global tensions, the market
is likely to remain choppy for the remainder of the year. Regardless of market
conditions, our long-term focus remains on
31
<Page>
reasonably valued small-cap stocks issued by companies with strong balance
sheets and good management. We plan to maintain a bias toward economically
sensitive companies as long as these sectors remain attractively valued relative
to other opportunities.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Carpenter Technology 1.0
Consolidated Graphics 1.0
Corn Products International 0.9
PS Business Parks 0.8
Imagistics International 0.8
Cash America International 0.8
MFC Bancorp 0.8
Watsco 0.8
Kellwood 0.8
MPS Group 0.8
</Table>
Thank you for investing in CMG Small Cap Value Fund.
The Columbia Investment Team
July 31, 2004
Investments in small-cap companies may be subject to greater volatility and
price fluctuations because small companies often have narrower markets and
limited financial resources and their stocks tend to be thinly traded and less
liquid than investments in larger companies.
Value stocks are securities of companies that may have experienced adverse
business or industry developments or may be subject to special risks that have
caused the stocks to be out of favor. If the advisor's assessment of a company's
prospects is wrong, the price of its stock may not approach the value the
advisor has placed on it.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
32
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, MAY 5, 2003 TO JULY 31, 2004
<Table>
<Caption>
CMG SMALL CAP VALUE FUND RUSSELL 2000 VALUE INDEX RUSSELL 2000 INDEX
5/5/2003 $ 10,000 $ 10,000 $ 10,000
5/31/2003 $ 10,510 $ 10,766 $ 10,771
6/30/2003 $ 10,720 $ 10,948 $ 10,966
7/31/2003 $ 11,291 $ 11,494 $ 11,652
8/31/2003 $ 11,820 $ 11,931 $ 12,186
9/30/2003 $ 11,710 $ 11,794 $ 11,961
10/31/2003 $ 12,660 $ 12,755 $ 12,965
11/30/2003 $ 13,160 $ 13,245 $ 13,426
12/31/2003 $ 13,619 $ 13,724 $ 13,698
1/31/2004 $ 14,119 $ 14,199 $ 14,293
2/29/2004 $ 14,353 $ 14,475 $ 14,421
3/31/2004 $ 14,619 $ 14,674 $ 14,555
4/30/2004 $ 14,017 $ 13,916 $ 13,813
5/31/2004 $ 14,109 $ 14,084 $ 14,033
6/30/2004 $ 14,885 $ 14,800 $ 14,623
7/31/2004 $ 14,201 $ 14,119 $ 13,640
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Small Cap Value Fund 05/05/03 25.79 32.74
Russell 2000 Value Index 22.83 32.12
Russell 2000 Index 17.06 28.49
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Small Cap Value Fund 05/05/03 38.85 41.18
Russell 2000 Value Index 35.17 40.47
Russell 2000 Index 33.37 39.04
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from May 5, 2003.
The Russell 2000 Value Index is an unmanaged index that tracks the performance
of those Russell 2000 Index companies with lower price-to-book ratios and lower
forecasted growth values. The Russell 2000 Index is an unmanaged index that
tracks the performance of the 2,000 smallest of the 3,000 largest US companies
based on market capitalization. Unlike mutual funds, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in indices. Securities in the fund may not
match those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
33
<Page>
UNDERSTANDING YOUR EXPENSES -- CMG SMALL CAP VALUE FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 1,005.81 1,020.99 4.00 4.03
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.80%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
34
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
35
<Page>
CMG SMALL/MID CAP FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Small/Mid Cap Fund returned 5.66% for the 12-month period ended July 31,
2004. The fund underperformed the Russell 2500 Growth Index, which returned
12.45% for the same period. The fund also underperformed its peer group. The
average return for the Lipper MidCap Growth Funds Category was 9.63%.(1) For the
first several months of the period, the fund benefited from its technology
holdings, particularly stocks of the most speculative companies. However, both
above-average exposure and stock selection within the technology sector held
back performance during the overall period. The fund benefited from some strong
gains in its energy holdings. However, with a new management team in place, we
have taken steps aimed at reducing volatility and improving performance going
forward.
Fueled by a strengthening US economy, the stock market moved higher during the
first six months of the reporting period. In this environment, investors favored
stocks of small and highly leveraged, speculative companies that had the most to
gain in an improving economy. However, sentiment changed dramatically in the
second half of the period as investors became concerned about the strength of
the recovery. That concern resulted in a shift toward stocks of larger, more
stable companies.
While the fund's substantial exposure to technology helped performance in the
first half of the reporting period, its emphasis on the technology services and
software industries was out of step with the index. The fund also was
underrepresented in specialty semiconductor stocks, which were the best
performers in the sector. However, investments in Lexmark International, a
computer printer and peripheral company, and Autodesk, a software company, made
positive contributions to performance (1.0% and 1.4% of net assets,
respectively).
The fund delivered a solid return for the year on the strength of several energy
and health care holdings. In energy, rising oil prices boosted oil services
stocks XTO Energy and National-Oilwell (1.8% and 2.0% of net assets,
respectively). The energy sector also benefited from the fact that companies
have begun exploring for new energy sources after several years of
underinvestment. In health care, the fund's investments in DaVita, a dialysis
services company, and Renal Care Group, a medical equipment and supply company
also helped performance (1.6% and 1.7% of net assets, respectively).
Although US stock markets traded lower over the past few months, we see reasons
for optimism-and attractive investment opportunities-ahead. We believe that
stock prices have become more attractive recently, particularly in light of our
expectation for modest but stable growth over the near term. As part of a major
restructuring of the fund, we have also taken steps to limit the fund's exposure
to any one industry in order to help manage risk. And, we have introduced a
systematic process that places more emphasis on valuation relative to earnings
growth in selecting individual stocks for the portfolio. With a new management
team and a new, more disciplined investment approach in place, we believe that
the fund is well positioned going forward.
36
<Page>
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Amphenol 2.5
Comverse Technology 2.1
National-Oilwell 2.0
Education Management 1.9
Caremark Rx 1.8
Medicis Pharmaceutical 1.8
XTO Energy 1.8
Mircochip Technology 1.8
Renal Care Group 1.7
United Defense Industries 1.7
</Table>
We appreciate your investment in CMG Small/Mid Cap Fund.
The Columbia Investment Team
July 31, 2004
Investments in small- and mid-cap companies may be subject to greater volatility
and price fluctuations because these companies often have narrower markets and
limited financial resources and their stocks tend to be thinly traded and less
liquid than investments in larger companies.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
37
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, DECEMBER 1, 2000 TO JULY 31, 2004
<Table>
<Caption>
CMG SMALL/MID CAP FUND RUSSELL 2500 GROWTH INDEX RUSSELL 2500 INDEX
11/30/2000 $ 10,000 $ 10,000 $ 10,000
12/31/2000 $ 10,830 $ 10,620 $ 10,861
1/31/2001 $ 10,780 $ 11,308 $ 11,218
2/28/2001 $ 9,480 $ 9,563 $ 10,496
3/31/2001 $ 8,650 $ 8,506 $ 9,920
4/30/2001 $ 9,689 $ 9,802 $ 10,796
5/31/2001 $ 9,710 $ 10,086 $ 11,120
6/30/2001 $ 9,640 $ 10,314 $ 11,278
7/31/2001 $ 9,290 $ 9,554 $ 10,875
8/31/2001 $ 8,730 $ 8,919 $ 10,518
9/30/2001 $ 7,659 $ 7,522 $ 9,157
10/31/2001 $ 7,999 $ 8,264 $ 9,630
11/30/2001 $ 8,499 $ 8,978 $ 10,409
12/31/2001 $ 8,900 $ 9,470 $ 10,993
1/31/2002 $ 8,650 $ 9,065 $ 10,857
2/28/2002 $ 8,290 $ 8,505 $ 10,667
3/31/2002 $ 8,740 $ 9,190 $ 11,404
4/30/2002 $ 8,580 $ 8,885 $ 11,376
5/31/2002 $ 8,420 $ 8,438 $ 11,042
6/30/2002 $ 7,840 $ 7,662 $ 10,420
7/31/2002 $ 7,081 $ 6,710 $ 9,177
8/31/2002 $ 7,030 $ 6,709 $ 9,204
9/30/2002 $ 6,690 $ 6,202 $ 8,475
10/31/2002 $ 6,960 $ 6,559 $ 8,751
11/30/2002 $ 7,270 $ 7,168 $ 9,465
12/31/2002 $ 6,870 $ 6,715 $ 9,038
1/31/2003 $ 6,890 $ 6,569 $ 8,797
2/28/2003 $ 6,770 $ 6,416 $ 8,586
3/31/2003 $ 6,860 $ 6,501 $ 8,668
4/30/2003 $ 7,271 $ 7,068 $ 9,440
5/31/2003 $ 7,881 $ 7,817 $ 10,368
6/30/2003 $ 8,060 $ 7,978 $ 10,566
7/31/2003 $ 8,300 $ 8,509 $ 11,134
8/31/2003 $ 8,691 $ 8,965 $ 11,650
9/30/2003 $ 8,271 $ 8,772 $ 11,491
10/31/2003 $ 9,071 $ 9,493 $ 12,399
11/30/2003 $ 9,371 $ 9,814 $ 12,866
12/31/2003 $ 9,441 $ 9,825 $ 13,150
1/31/2004 $ 9,671 $ 10,235 $ 13,630
2/29/2004 $ 9,752 $ 10,330 $ 13,841
3/31/2004 $ 9,622 $ 10,366 $ 13,924
4/30/2004 $ 9,242 $ 9,927 $ 13,256
5/31/2004 $ 9,392 $ 10,133 $ 13,526
6/30/2004 $ 9,551 $ 10,380 $ 13,971
7/31/2004 $ 8,770 $ 9,567 $ 13,158
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Small/Mid Cap Fund 12/01/00 5.66 -3.52
Russell 2500 Growth Index 12.45 -1.20
Russell 2500 Index 18.17 7.77
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Small/Mid Cap Fund 12/01/00 18.49 -1.28
Russell 2500 Growth Index 30.12 1.04
Russell 2500 Index 32.21 9.79
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from December 1, 2000.
The Russell 2500 Growth Index is an unmanaged index that measures the
performance of those Russell 2500 Index companies with higher price-to-book
ratios and higher forecasted growth values. The Russell 2500 Index is an
unmanaged index that tracks the performance of the 2,500 smallest companies of
the Russell 3000 Index. Unlike mutual funds, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. Securities in the fund may not match those in an
index.
Performance results reflect any reimbursement of fund expenses by the advisor or
its affiliates. Absent these reimbursement arrangements, performance results
would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
38
<Page>
UNDERSTANDING YOUR EXPENSES -- CMG SMALL/MID CAP FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 910.99 1,021.13 3.56 3.77
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.75%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
39
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
40
<Page>
CMG INTERNATIONAL STOCK FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For the 12-month period ended July 31, 2004, CMG International Stock Fund
returned 18.40%. A favorable global economic environment in the first half of
the period helped the fund generate a double-digit return. The MSCI All Country
World ex US Index posted a stronger return during the period. It gained 25.29%.
The fund's return was slightly below the average for its peer group. The average
return for the Lipper International Multi-Cap Growth Funds Category was 19.56%.
(1) The portfolio's holdings within the technology sector and its exposure to
certain telecommunications companies that did poorly during the second half of
the period accounted for its shortfall relative to the index.
There were two distinct market environments during the 12-month period. During
the first six months of the period, low valuations, underestimated earnings
growth and the global economic recovery provided a positive backdrop. During
this period, the fund's 14% allocation to technology helped performance.
However, in February the market environment began to change. As valuations began
to look less attractive, fewer companies upgraded earnings estimates and
concerns arose about slowing global growth. In this changed environment, the
fund's relatively large technology weight detracted from the fund's return.
The fund benefited from our regional allocation decisions. We reduced exposure
to emerging markets from about 15% of net assets to approximately 5%. This
reduction helped because emerging markets significantly underperformed developed
markets. We used the proceeds from the sale of emerging market stocks to invest
in Japan and the United Kingdom (UK), where the prospects for long-term economic
growth appeared strong.
In Japan, the economy continued to recover from a 10-year deflationary cycle.
Companies have become more competitive on a global basis. The Japanese
government has demonstrated a willingness to be more accommodative toward
business, and we believe there is the potential for a significant amount of
merger and acquisition activity. With these factors in mind, we invested heavily
in banks, such as UFJ Holdings. The stock did well early in the period. However,
when concerns arose about loan quality and some banks came under government
investigation, Japanese financial stocks lost ground and had a negative impact
on performance. We sold our position in UFJ Holdings.
In the UK, we were drawn to the region's consistent GDP growth, relatively
strong consumer spending and attractive housing sector. Our investments in BP
PLC (2.1% of net assets), a large integrated-energy company, and in
GlaxoSmithKline PLC (1.7% of net assets), a global pharmaceutical company, were
positive for performance.
We also invested in Austria. Here, we emphasized companies with exposure to the
East European countries that have entered the European Union. We added Erste
Bank der oesterreichischen Sparkassen AG (0.7% of net assets), which has had a
significant pick-up in loan growth and Wienerberger AG (0.9% of net assets), the
world's largest producer of bricks used in construction projects. Both companies
aided total return. Overweighting the Scandinavian region-Norway, Denmark and
Sweden-was also helpful.
41
<Page>
At nearly 12% of net assets, the fund had more exposure to health care than the
MSCI index, and that helped performance. In particular, our investment in
medical technology companies such as Nobel Biocare Holding AG (0.5% of net
assets) helped boost the fund's return.
We believe that concerns about the rate of global economic growth and rising
interest rates will continue to weigh on the market for several months. With
this expectation, we have structured the portfolio more defensively by cutting
back on our exposure to small companies and focusing on large, established
companies with dividend-paying potential. We have also reduced the fund's risk
exposure by cutting back on our technology holdings and emphasizing health care.
Within health care, we have focused on the pharmaceuticals industry. We believe
this more cautious positioning may help the fund weather this period of
uncertainty.
The fund's top ten holdings and countries (as a percentage of net assets) as of
July 31, 2004 were:
<Table>
<Caption>
HOLDINGS (%) COUNTRIES (%)
ENI S.p.A. 2.5 United Kingdom 26.1
BP PLC 2.1 Japan 22.5
Nestle SA 1.9 France 10.6
Smith & Nephew PLC 1.9 Germany 6.2
Reckitt Benckiser PLC 1.8 Switzerland 5.4
Vodafone Group PLC 1.7 Sweden 3.5
GlaxoSmithKline PLC 1.7 Netherlands 3.2
Takeda Pharmaceutical Industries 1.6 Italy 3.1
Toyota Motor 1.5 Canada 2.3
E.ON AG 1.5 Austria 1.6
</Table>
We appreciate your continued confidence in CMG International Stock Fund.
The Columbia Investment Team
July 31, 2004
There are also specific risks involved when investing in foreign stocks, such as
currency exchange rate fluctuations, economic change, instability of emerging
countries and political developments.
A concentration of investments in a specific sector, such as the financials
sector, may cause the fund to experience increased volatility.
Holdings and country breakdowns are disclosed as a percentage of net assets, and
are subject to change. Because the fund is actively managed, there is no
guarantee the fund will continue to maintain the holdings and country breakdown
listed. The fund's holdings and their weights within the portfolio may change as
market conditions change.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
42
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1994 TO JULY 31, 2004
<Table>
<Caption>
CMG INTERNATIONAL STOCK FUND MSCI EAFE INDEX MSCI ALL COUNTRY WORLD EX US INDEX
8/1/1994 $ 10,000 $ 10,000 $ 10,000
8/31/1994 $ 10,284 $ 10,237 $ 10,336
9/30/1994 $ 9,913 $ 9,915 $ 10,080
10/31/1994 $ 10,196 $ 10,245 $ 10,351
11/30/1994 $ 9,699 $ 9,752 $ 9,852
12/31/1994 $ 9,542 $ 9,813 $ 9,829
1/31/1995 $ 8,845 $ 9,437 $ 9,383
2/28/1995 $ 8,716 $ 9,409 $ 9,332
3/31/1995 $ 9,051 $ 9,996 $ 9,860
4/30/1995 $ 9,240 $ 10,372 $ 10,244
5/31/1995 $ 9,123 $ 10,249 $ 10,198
6/30/1995 $ 9,090 $ 10,069 $ 10,057
7/31/1995 $ 9,670 $ 10,697 $ 10,628
8/31/1995 $ 9,534 $ 10,289 $ 10,259
9/30/1995 $ 9,741 $ 10,490 $ 10,434
10/31/1995 $ 9,617 $ 10,208 $ 10,156
11/30/1995 $ 9,807 $ 10,491 $ 10,394
12/31/1995 $ 10,068 $ 10,914 $ 10,806
1/31/1996 $ 10,245 $ 10,959 $ 10,954
2/29/1996 $ 10,245 $ 10,996 $ 10,954
3/31/1996 $ 10,642 $ 11,229 $ 11,159
4/30/1996 $ 11,001 $ 11,556 $ 11,497
5/31/1996 $ 11,161 $ 11,343 $ 11,324
6/30/1996 $ 11,395 $ 11,407 $ 11,382
7/31/1996 $ 10,887 $ 11,074 $ 11,004
8/31/1996 $ 11,057 $ 11,098 $ 11,069
9/30/1996 $ 11,304 $ 11,393 $ 11,344
10/31/1996 $ 11,220 $ 11,277 $ 11,230
11/30/1996 $ 11,606 $ 11,726 $ 11,664
12/31/1996 $ 11,757 $ 11,575 $ 11,528
1/31/1997 $ 11,755 $ 11,170 $ 11,316
2/28/1997 $ 12,041 $ 11,353 $ 11,523
3/31/1997 $ 12,133 $ 11,394 $ 11,499
4/30/1997 $ 12,405 $ 11,454 $ 11,597
5/31/1997 $ 13,116 $ 12,200 $ 12,313
6/30/1997 $ 13,731 $ 12,872 $ 12,992
7/31/1997 $ 14,133 $ 13,081 $ 13,255
8/31/1997 $ 13,127 $ 12,103 $ 12,211
9/30/1997 $ 14,020 $ 12,781 $ 12,872
10/31/1997 $ 12,957 $ 11,798 $ 11,775
11/30/1997 $ 12,905 $ 11,678 $ 11,628
12/31/1997 $ 12,954 $ 11,780 $ 11,762
1/31/1998 $ 13,040 $ 12,318 $ 12,114
2/28/1998 $ 13,600 $ 13,109 $ 12,922
3/31/1998 $ 14,226 $ 13,512 $ 13,369
4/30/1998 $ 14,623 $ 13,619 $ 13,465
5/31/1998 $ 14,860 $ 13,553 $ 13,220
6/30/1998 $ 14,790 $ 13,656 $ 13,171
7/31/1998 $ 14,827 $ 13,793 $ 13,296
8/31/1998 $ 13,046 $ 12,084 $ 11,421
9/30/1998 $ 12,094 $ 11,713 $ 11,180
10/31/1998 $ 12,798 $ 12,934 $ 12,352
11/30/1998 $ 13,807 $ 13,596 $ 13,015
12/31/1998 $ 14,532 $ 14,132 $ 13,463
1/31/1999 $ 15,217 $ 14,089 $ 13,448
2/28/1999 $ 14,839 $ 13,754 $ 13,147
3/31/1999 $ 15,095 $ 14,328 $ 13,782
4/30/1999 $ 15,523 $ 14,908 $ 14,471
5/31/1999 $ 15,166 $ 14,140 $ 13,791
6/30/1999 $ 16,094 $ 14,692 $ 14,425
7/31/1999 $ 16,626 $ 15,128 $ 14,763
8/31/1999 $ 17,003 $ 15,184 $ 14,815
9/30/1999 $ 17,411 $ 15,337 $ 14,914
10/31/1999 $ 18,229 $ 15,913 $ 15,469
11/30/1999 $ 20,413 $ 16,465 $ 16,087
12/31/1999 $ 23,110 $ 17,943 $ 17,622
1/31/2000 $ 21,906 $ 16,804 $ 16,665
2/29/2000 $ 23,435 $ 17,256 $ 17,115
3/31/2000 $ 22,861 $ 17,925 $ 17,759
4/30/2000 $ 20,787 $ 16,982 $ 16,768
5/31/2000 $ 18,997 $ 16,568 $ 16,339
6/30/2000 $ 20,071 $ 17,216 $ 17,035
7/31/2000 $ 19,029 $ 16,495 $ 16,362
8/31/2000 $ 19,507 $ 16,638 $ 16,565
9/30/2000 $ 18,313 $ 15,828 $ 15,645
10/31/2000 $ 17,575 $ 15,454 $ 15,148
11/30/2000 $ 16,795 $ 14,875 $ 14,469
12/31/2000 $ 17,602 $ 15,403 $ 14,963
1/31/2001 $ 17,419 $ 15,395 $ 15,187
2/28/2001 $ 16,465 $ 14,240 $ 13,984
3/31/2001 $ 15,367 $ 13,291 $ 12,995
4/30/2001 $ 16,309 $ 14,214 $ 13,879
5/31/2001 $ 15,982 $ 13,713 $ 13,496
6/30/2001 $ 15,420 $ 13,152 $ 12,979
7/31/2001 $ 14,936 $ 12,912 $ 12,690
8/31/2001 $ 14,661 $ 12,586 $ 12,375
9/30/2001 $ 13,274 $ 11,311 $ 11,062
10/31/2001 $ 13,627 $ 11,600 $ 11,372
11/30/2001 $ 13,914 $ 12,028 $ 11,891
12/31/2001 $ 14,246 $ 12,099 $ 12,045
1/31/2002 $ 13,669 $ 11,457 $ 11,529
2/28/2002 $ 13,760 $ 11,537 $ 11,612
3/31/2002 $ 14,429 $ 12,217 $ 12,229
4/30/2002 $ 14,494 $ 12,241 $ 12,323
5/31/2002 $ 14,665 $ 12,396 $ 12,457
6/30/2002 $ 14,310 $ 11,903 $ 11,919
7/31/2002 $ 13,142 $ 10,728 $ 10,757
8/31/2002 $ 13,077 $ 10,704 $ 10,758
9/30/2002 $ 11,765 $ 9,554 $ 9,618
10/31/2002 $ 12,224 $ 10,067 $ 10,133
11/30/2002 $ 12,696 $ 10,524 $ 10,621
12/31/2002 $ 12,206 $ 10,170 $ 10,279
1/31/2003 $ 11,692 $ 9,746 $ 9,918
2/28/2003 $ 11,547 $ 9,523 $ 9,717
3/31/2003 $ 11,468 $ 9,337 $ 9,528
4/30/2003 $ 12,325 $ 10,252 $ 10,447
5/31/2003 $ 12,997 $ 10,873 $ 11,112
6/30/2003 $ 13,248 $ 11,136 $ 11,420
7/31/2003 $ 13,617 $ 11,405 $ 11,724
8/31/2003 $ 13,947 $ 11,680 $ 12,073
9/30/2003 $ 14,329 $ 12,040 $ 12,411
10/31/2003 $ 15,199 $ 12,790 $ 13,215
11/30/2003 $ 15,317 $ 13,074 $ 13,504
12/31/2003 $ 16,334 $ 14,095 $ 14,534
1/31/2004 $ 16,692 $ 14,294 $ 14,768
2/29/2004 $ 16,917 $ 14,624 $ 15,143
3/31/2004 $ 17,063 $ 14,706 $ 15,237
4/30/2004 $ 16,599 $ 14,374 $ 14,763
5/31/2004 $ 16,453 $ 14,422 $ 14,810
6/30/2004 $ 16,770 $ 14,738 $ 15,132
7/31/2004 $ 16,121 $ 14,261 $ 14,692
</Table>
AVERAGE ANNUAL TOTAL RETURNS AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR 10-YEAR
CMG International Stock Fund 02/01/94 18.40 -0.61 4.89
MSCI EAFE Index 25.05 -1.18 3.61
MSCI All Country World ex US Index 25.29 -0.10 3.92
</Table>
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR 10-YEAR
CMG International Stock Fund 02/01/94 26.60 0.83 5.30
MSCI EAFE Index 32.37 0.06 4.06
MSCI All Country World ex US Index 32.48 0.96 4.40
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
The Morgan Stanley Capital International (MSCI) Europe, Australia, Far East
(EAFE) Index is a free float-adjusted market capitalization index that is
designed to measure developed market equity performance, excluding the US and
Canada. The MSCI All Country World ex US Index is an unmanaged index of global
stock market performance that includes developed and emerging markets but
excludes the United States. Unlike mutual funds, indices are not investments, do
not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in an index. Securities in the fund may not match
those in an index.
Performance results reflect any reimbursement of fund expenses by the advisor or
its affiliates. Absent these reimbursement arrangements, performance results
would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
43
<Page>
UNDERSTANDING YOUR EXPENSES -- CMG INTERNATIONAL STOCK FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 967.14 1,021.14 3.66 3.76
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.75%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
44
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
45
<Page>
CMG ENHANCED S&P 500(R) INDEX FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED
JULY 31, JULY 31,
2004 2003 (a)
-------------- --------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.73 $ 10.00
-------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.17 0.04
Net realized and unrealized gain on investments 1.13 0.69
-------------- --------------
Total from investment operations 1.30 0.73
-------------- --------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.05) -
From net realized gains (0.01) -
-------------- --------------
Total distributions declared to shareholders (0.06) -
-------------- --------------
NET ASSET VALUE, END OF PERIOD $ 11.97 $ 10.73
============== ==============
Total return (c)(d) 12.08% 7.30%(e)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 98,247 $ 9,134
Ratio of net expenses to average net assets 0.25% 0.25%(f)
Ratio of net investment income to average net assets 1.43% 1.50%(f)
Reimbursement 0.05% 1.37%(f)
Portfolio turnover rate 60% 2%(e)
</Table>
(a) The Fund commenced investment operations on May 5, 2003. Per share data,
total return and portfolio turnover rate reflect activity from that date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
See Accompanying Notes to Financial Statements.
46
<Page>
CMG LARGE CAP GROWTH FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout the Period)
<Table>
<Caption>
PERIOD
ENDED
JULY 31,
2004 (a)
--------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.03
Net realized and unrealized gain on investments 0.23
--------------
Total from investment operations 0.26
--------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.01)
--------------
NET ASSET VALUE, END OF PERIOD $ 10.25
==============
Total return (c)(d)(e) 2.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 40,684
Ratio of net expenses to average net assets (f) 0.50%
Ratio of net investment income to average net assets (f) 0.31%
Reimbursement (f) 0.14%
Portfolio turnover rate (e) 114%
</Table>
(a) The Fund commenced investment operations on September 10, 2003. Per share
data, total return and portfolio turnover rate reflect activity from that
date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
See Accompanying Notes to Financial Statements.
47
<Page>
CMG LARGE CAP VALUE FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout the Period)
<Table>
<Caption>
PERIOD
ENDED
JULY 31,
2004 (a)
--------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.18
Net realized and unrealized gain on investments 0.93
--------------
Total from investment operations 1.11
--------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.02)
--------------
NET ASSET VALUE, END OF PERIOD $ 11.09
==============
Total return (c)(d)(e) 11.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 47,855
Ratio of net expenses to average net assets (f) 0.50%
Ratio of net investment income to average net assets (f) 1.86%
Reimbursement (f) 0.14%
Portfolio turnover rate (e) 46%
</Table>
(a) The Fund commenced investment operations on September 10, 2003. Per share
data, total return and portfolio turnover rate reflect activity from that
date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
See Accompanying Notes to Financial Statements.
48
<Page>
CMG MID CAP GROWTH FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED
JULY 31, JULY 31,
2004 2003 (a)
-------------- --------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 10.00
-------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (b) (0.05) (0.01)
Net realized and unrealized gain on investments 0.17 0.94
-------------- --------------
Total from investment operations 0.12 0.93
-------------- --------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gains (0.01) -
-------------- --------------
NET ASSET VALUE, END OF PERIOD $ 11.04 $ 10.93
============== ==============
Total return (c)(d) 1.06% 9.30%(e)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 19,284 $ 2,161
Ratio of net expenses to average net assets 0.70% 0.70%(f)
Ratio of net investment loss to average net assets (0.38)% (0.44)%(f)
Reimbursement 0.22% 3.85%(f)
Portfolio turnover rate 169% 23%(e)
</Table>
(a) The Fund commenced investment operations on May 5, 2003. Per share data,
total return and portfolio turnover rate reflect activity from that date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
See Accompanying Notes to Financial Statements.
49
<Page>
CMG MID CAP VALUE FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED
JULY 31, JULY 31,
2004 2003 (a)
-------------- --------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.69 $ 10.00
-------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.07 0.01
Net realized and unrealized gain on investments 1.84 0.68
-------------- --------------
Total from investment operations 1.91 0.69
-------------- --------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.02) -
From net realized gains -(c) -
-------------- --------------
Total distributions declared to shareholders (0.02) -
-------------- --------------
NET ASSET VALUE, END OF PERIOD $ 12.58 $ 10.69
============== ==============
Total return (d)(e) 17.91% 6.90%(f)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 21,994 $ 2,651
Ratio of net expenses to average net assets 0.70% 0.70%(g)
Ratio of net investment income to average net assets 0.54% 0.49%(g)
Reimbursement 0.20% 3.61%(g)
Portfolio turnover rate 9% 2%(f)
</Table>
(a) The Fund commenced investment operations on May 5, 2003. Per share data,
total return and portfolio turnover rate reflect activity from that date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) Annualized.
See Accompanying Notes to Financial Statements.
50
<Page>
CMG SMALL CAP GROWTH FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED
JULY 31, JULY 31,
2004 2003 (a)
-------------- --------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.53 $ 10.00
-------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (b) (0.08) (0.02)
Net realized and unrealized gain on investments 1.35 1.55
-------------- --------------
Total from investment operations 1.27 1.53
-------------- --------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gains (0.81) -
-------------- --------------
NET ASSET VALUE, END OF PERIOD $ 11.99 $ 11.53
============== ==============
Total return (c)(d) 10.74% 15.30%(e)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 35,727 $ 21,006
Ratio of net expenses to average net assets 0.80% 0.80%(f)
Ratio of net investment loss to average net assets (0.60)% (0.62)%(f)
Reimbursement 0.10% 0.35%(f)
Portfolio turnover rate 66% 37%(e)
</Table>
(a) The Fund commenced investment operations on May 5, 2003. Per share data,
total return and portfolio turnover rate reflect activity from that date.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
See Accompanying Notes to Financial Statements.
51
<Page>
CMG SMALL CAP VALUE FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED
JULY 31, JULY 31,
2004 2003 (a)
-------------- --------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.29 $ 10.00
-------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.11 0.02
Net realized and unrealized gain on investments 2.79 1.27
-------------- --------------
Total from investment operations 2.90 1.29
-------------- --------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.06) -
From net realized gains (0.22) -
-------------- --------------
Total distributions declared to shareholders (0.28) -
-------------- --------------
NET ASSET VALUE, END OF PERIOD $ 13.91 $ 11.29
============== ==============
Total return (c)(d) 25.79% 12.90%(e)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 40,356 $ 21,356
Ratio of net expenses to average net assets 0.80% 0.80%(f)
Ratio of net investment income to average net assets 0.82% 0.66%(f)
Reimbursement 0.09% 0.36%(f)
Portfolio turnover rate 53% 5%(e)
</Table>
(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
<Page>
CMG SMALL/MID CAP FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
JULY 31, JULY 31, OCTOBER 31, OCTOBER 31,
2004 2003 (a) 2002 2001 (b)
----------- ----------- ----------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.30 $ 6.96 $ 8.00 $ 10.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.05)(c) (0.03)(c) (0.04)(c) (0.02)
Net realized and unrealized gain (loss)
on investments 0.52 1.37 (1.00) (1.98)
----------- ----------- ----------- -----------
Total from investment operations 0.47 1.34 (1.04) (2.00)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 8.77 $ 8.30 $ 6.96 $ 8.00
=========== =========== =========== ===========
Total return (d)(e) 5.66% 19.25%(f) (13.00)% (20.00)%(f)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 50,662 $ 73,926 $ 54,769 $ 49,391
Ratio of net expenses to
average net assets 0.75% 0.78%(g)(h) 0.80%(g) 0.80%(g)(h)
Ratio of net investment loss to
average net assets (0.49)% (0.50)%(g)(h) (0.45)%(g) (0.23)%(g)(h)
Reimbursement 0.06% 0.06%(h) 0.06% 0.17%(h)
Portfolio turnover rate 91% 84%(f) 125% 167%(f)
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
(b) The Fund commenced investment operations on December 1, 2000. Per share
data, total return and portfolio turnover rate reflect activity from that
date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value.
(e) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
See Accompanying Notes to Financial Statements.
53
<Page>
CMG INTERNATIONAL STOCK FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED
JULY 31, JULY 31,
2004 2003 (a)
------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 9.32
------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.14(b) 0.11(b)
Net realized and unrealized gain (loss) on
investments, foreign currency and foreign
capital gains tax 1.76 0.95
------------ ------------
Total from investment operations 1.90 1.06
------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.06) (0.05)
From net realized gains - -
------------ ------------
Total distributions declared
to shareholders (0.06) (0.05)
------------ ------------
NET ASSET VALUE, END OF PERIOD $ 12.17 $ 10.33
============ ============
Total return (d) 18.40%(e) 11.39%(e)(f)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 152,251 $ 58,488
Ratio of net expenses to average
net assets 0.75% 0.93%(g)(h)
Ratio of net investment income (loss) to
average net assets 1.16% 1.50%(g)(h)
Reimbursement 0.05% 0.06%(h)
Portfolio turnover rate 91% 59%(f)
<Caption>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
2002 2001 2000 1999
------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.42 $ 16.20 $ 17.86 $ 12.54
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02(b) 0.03 0.04 (0.02)
Net realized and unrealized gain (loss) on
investments, foreign currency and foreign
capital gains tax (1.09) (3.09) (0.36) 5.34
------------ ------------ ------------ ------------
Total from investment operations (1.07) (3.06) (0.32) 5.32
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.03) - - -
From net realized gains - (2.72) (1.34) -(c)
------------ ------------ ------------ ------------
Total distributions declared
to shareholders (0.03) (2.72) (1.34) -(c)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 9.32 $ 10.42 $ 16.20 $ 17.86
============ ============ ============ ============
Total return (d) (10.28)% (22.46)% (3.58)% 42.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 20,616 $ 20,553 $ 22,975 $ 30,492
Ratio of net expenses to average
net assets 1.31%(g) 1.26%(g) 1.11%(g) 1.31%(g)
Ratio of net investment income (loss) to
average net assets 0.21%(g) 0.29%(g) 0.12%(g) (0.14)%(g)
Reimbursement - - - -
Portfolio turnover rate 111% 117% 140% 96%
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
See Accompanying Notes to Financial Statements.
54
<Page>
CMG ENHANCED S&P 500 (R) INDEX FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (98.1%)
Consumer Discretionary (9.6%)
Automobiles (0.5%)
Ford Motor Co. 32,300 $ 475,456
---------------
Hotels, Restaurants & Leisure (1.4%)
Carnival Corp. 9,900 461,439
McDonald's Corp. 27,200 748,000
Starwood Hotels & Resorts Worldwide, Inc. 2,800 126,000
---------------
1,335,439
---------------
Household Durables (0.5%)
Stanley Works 11,900 504,560
---------------
Internet & Catalog Retail (0.3%)
Amazon.com, Inc. (a) 6,100 237,412
eBay, Inc. (a) 1,100 86,163
---------------
323,575
---------------
Leisure Equipment & Products (0.2%)
Hasbro, Inc. 6,000 109,020
Mattel, Inc. 5,600 98,112
---------------
207,132
---------------
Media (3.5%)
Clear Channel Communications, Inc. 2,800 99,960
Comcast Corp., Class A (a) 30,400 832,960
McGraw-Hill Companies, Inc. 6,800 510,408
Time Warner, Inc. (a) 70,600 1,175,490
UnitedGlobalCom, Inc., Class A (a) 65,100 412,734
Viacom, Inc., Class B 8,300 278,797
Walt Disney Co. 4,200 96,978
---------------
3,407,327
---------------
Multiline Retail (0.4%)
May Department Stores Co. 4,000 106,120
Sears, Roebuck and Co. 8,100 297,108
---------------
403,228
---------------
Specialty Retail (2.1%)
Abercrombie & Fitch Co. 2,600 95,888
Barnes & Noble, Inc. (a) 4,400 151,272
Best Buy Co., Inc. 2,800 134,848
Gap, Inc. 5,000 113,500
Home Depot, Inc. 28,800 971,136
Lowe's Companies, Inc. 2,500 121,800
RadioShack Corp. 17,300 483,535
---------------
2,071,979
---------------
Textiles, Apparel & Luxury Goods (0.7%)
Jones Apparel Group, Inc. 3,900 145,665
NIKE, Inc., Class B 8,000 581,680
---------------
727,345
---------------
</Table>
See Accompanying Notes to Financial Statements.
55
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Consumer Staples (11.2%)
Beverages (2.3%)
Adolph Coors Co., Class B 1,500 $ 103,140
Anheuser-Busch Companies, Inc. 6,700 347,730
Coca-Cola Co. 32,500 1,425,450
PepsiCo, Inc. 7,200 360,000
---------------
2,236,320
---------------
Food & Staples Retailing (3.4%)
Albertson's, Inc. 3,900 95,121
Costco Wholesale Corp. 16,100 654,626
Wal-Mart Stores, Inc. 49,300 2,613,393
---------------
3,363,140
---------------
Food Products (1.7%)
H.J. Heinz Co. 16,000 590,240
Hershey Foods Corp. 12,600 610,344
Kellogg Co. 2,400 99,984
Tyson Foods, Inc. 22,300 425,038
---------------
1,725,606
---------------
Household Products (1.6%)
Clorox Co. 1,900 94,563
Colgate-Palmolive Co. 2,600 138,320
Procter & Gamble Co. 25,200 1,314,180
---------------
1,547,063
---------------
Personal Products (1.3%)
Estee Lauder Companies, Inc., Class A 10,000 439,000
Gillette Co. 20,900 814,682
---------------
1,253,682
---------------
Tobacco (0.9%)
Altria Group, Inc. 9,400 447,440
Reynolds American, Inc. 5,900 424,505
---------------
871,945
---------------
Energy (7.2%)
Energy Equipment & Services (0.7%)
Baker Hughes, Inc. 3,000 120,900
Halliburton Co. 4,400 139,700
Schlumberger Ltd. 5,400 347,328
Transocean, Inc. (a) 3,900 110,760
---------------
718,688
---------------
Oil & Gas (6.5%)
Amerada Hess Corp. 3,500 291,725
Apache Corp. 2,100 97,713
ChevronTexaco Corp. 15,300 1,463,445
ConocoPhillips 12,100 953,117
Exxon Mobil Corp. 71,500 3,310,450
Marathon Oil Corp. 4,100 154,447
Occidental Petroleum Corp. 2,000 98,540
---------------
6,369,437
---------------
</Table>
See Accompanying Notes to Financial Statements.
56
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Financials (19.4%)
Capital Markets (3.0%)
A.G. Edwards, Inc. 12,800 $ 416,000
Bank of New York Co., Inc. 12,800 367,744
Federated Investors, Inc., Class B 17,300 486,303
Franklin Resources, Inc. 11,200 540,400
Goldman Sachs Group, Inc. 4,400 388,036
Mellon Financial Corp. 3,700 101,676
Morgan Stanley 2,000 98,660
Northern Trust Corp. 11,700 469,521
State Street Corp. 2,100 89,901
---------------
2,958,241
---------------
Commercial Banks (4.5%)
Comerica, Inc. 4,000 233,880
Commerce Bancorp, Inc. 7,900 397,686
M&T Bank Corp. 1,200 111,876
National City Corp. 19,500 711,750
North Fork Bancorporation, Inc. 2,600 101,530
PNC Financial Services Group, Inc. 1,900 96,140
SouthTrust Corp. 3,000 116,370
UnionBanCal Corp. 8,300 481,815
U.S. Bancorp 23,200 656,560
Wachovia Corp. 23,300 1,032,423
Wells Fargo & Co. 7,800 447,798
---------------
4,387,828
---------------
Consumer Finance (0.7%)
American Express Co. 2,400 120,600
AmeriCredit Corp. (a) 10,500 200,550
Capital One Financial Corp. 1,400 97,048
MBNA Corp. 9,500 234,555
---------------
652,753
---------------
Diversified Financial Services (3.7%)
Chicago Mercantile Exchange 1,600 200,800
Citigroup, Inc. 37,700 1,662,193
JPMorgan Chase & Co. 46,636 1,740,922
---------------
3,603,915
---------------
Insurance (5.2%)
ACE Ltd. 2,400 97,416
AFLAC, Inc. 3,000 118,920
Allstate Corp. 6,800 320,144
Ambac Financial Group, Inc. 4,200 298,662
American International Group, Inc. 17,900 1,264,635
Aon Corp. 4,400 116,336
Chubb Corp. 9,000 619,020
First American Corp. 6,500 174,590
Hartford Financial Services Group, Inc. 10,000 651,000
Lincoln National Corp. 4,300 187,910
Loews Corp. 4,200 237,846
</Table>
See Accompanying Notes to Financial Statements.
57
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Insurance (continued)
Marsh & McLennan Companies, Inc. 2,200 $ 97,636
MetLife, Inc. 21,000 749,070
Prudential Financial, Inc. 2,200 102,432
SAFECO Corp. 2,300 108,238
---------------
5,143,855
---------------
Real Estate (0.8%)
Apartment Investment & Management Co., Class A, REIT 15,800 505,126
Equity Residential, REIT 5,700 168,435
KB Home 1,800 115,290
---------------
788,851
---------------
Thrifts & Mortgage Finance (1.5%)
Countrywide Financial Corp. 1,700 122,570
Doral Financial Corp. 2,900 113,825
Fannie Mae 14,000 900,340
Freddie Mac 2,600 184,496
Washington Mutual, Inc. 4,300 166,840
---------------
1,488,071
---------------
Health Care (13.9%)
Biotechnology (0.7%)
Amgen, Inc. (a) 12,300 699,624
---------------
Health Care Equipment & Supplies (1.5%)
Becton, Dickinson & Co. 6,600 311,718
Medtronic, Inc. 21,300 1,057,971
PerkinElmer, Inc. 5,300 93,174
---------------
1,462,863
---------------
Health Care Providers & Services (2.8%)
Anthem, Inc. (a) 1,200 98,964
Caremark Rx, Inc. (a) 3,100 94,550
CIGNA Corp. 8,500 527,085
Humana, Inc. (a) 6,200 112,282
IMS Health, Inc. 21,300 516,312
Medco Health Solutions, Inc. (a) 16,710 506,313
UnitedHealth Group, Inc. 13,700 861,730
---------------
2,717,236
---------------
Pharmaceuticals (8.9%)
Abbott Laboratories 20,900 822,415
Andrx Corp. (a) 3,600 93,384
Bristol-Myers Squibb Co. 38,700 886,230
Eli Lilly & Co. 4,200 267,624
Johnson & Johnson 36,700 2,028,409
King Pharmaceuticals, Inc. (a) 25,400 286,766
Merck & Co., Inc. 31,400 1,423,990
Pfizer, Inc. 74,100 2,368,236
</Table>
See Accompanying Notes to Financial Statements.
58
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Pharmaceuticals (continued)
Watson Pharmaceuticals, Inc. (a) 7,500 $ 189,075
Wyeth 10,700 378,780
---------------
8,744,909
---------------
Industrials (11.5%)
Aerospace & Defense (2.3%)
Boeing Co. 17,800 903,350
General Dynamics Corp. 3,400 335,988
Raytheon Co. 2,800 93,940
United Technologies Corp. 10,300 963,050
---------------
2,296,328
---------------
Air Freight & Logistics (1.4%)
FedEx Corp. 1,400 114,632
United Parcel Service, Inc., Class B 17,200 1,237,712
---------------
1,352,344
---------------
Building Products (0.1%)
Masco Corp. 3,500 105,840
---------------
Commercial Services & Supplies (0.7%)
Cendant Corp. 23,700 542,256
Equifax, Inc. 5,900 142,308
---------------
684,564
---------------
Industrial Conglomerates (5.6%)
3M Co. 12,900 1,062,444
General Electric Co. 94,300 3,135,475
Textron, Inc. 4,100 251,330
Tyco International Ltd. 34,100 1,057,100
---------------
5,506,349
---------------
Machinery (0.8%)
Eaton Corp. 7,100 458,944
Illinois Tool Works, Inc. 1,100 99,572
Parker Hannifin Corp. 3,300 189,354
---------------
747,870
---------------
Road & Rail (0.6%)
Burlington Northern Santa Fe Corp. 3,100 109,988
Union Pacific Corp. 9,000 507,060
---------------
617,048
---------------
Information Technology (16.3%)
Communications Equipment (2.2%)
Avaya, Inc. (a) 11,000 161,150
Cisco Systems, Inc. (a) 46,200 963,732
Motorola, Inc. 9,200 146,556
Polycom, Inc. (a) 5,400 104,112
QUALCOMM, Inc. 11,800 815,144
---------------
2,190,694
---------------
</Table>
See Accompanying Notes to Financial Statements.
59
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Computers & Peripherals (4.4%)
Apple Computer, Inc. (a) 3,600 $ 116,424
Dell, Inc. (a) 9,700 344,059
EMC Corp. (a) 13,900 152,483
Hewlett-Packard Co. 43,400 874,510
International Business Machines Corp. 21,300 1,854,591
Lexmark International, Inc., Class A (a) 6,400 566,400
Storage Technology Corp. (a) 15,400 384,230
---------------
4,292,697
---------------
Electronic Equipment & Instruments (0.3%)
Agilent Technologies, Inc. (a) 3,800 90,478
Sanmina-SCI Corp. (a) 13,500 99,090
Symbol Technologies, Inc. 7,400 96,866
---------------
286,434
---------------
Internet Software & Services (0.4%)
VeriSign, Inc. (a) 11,100 194,361
Yahoo!, Inc. (a) 6,000 184,800
---------------
379,161
---------------
IT Services (1.4%)
Affiliated Computer Services, Inc., Class A (a) 1,900 98,610
Automatic Data Processing, Inc. 11,100 465,978
Computer Sciences Corp. (a) 12,600 595,350
Convergys Corp. (a) 16,100 213,164
---------------
1,373,102
---------------
Office Electronics (0.1%)
Xerox Corp. (a) 7,500 103,950
---------------
Semiconductors & Semiconductor Equipment (3.6%)
Altera Corp. (a) 5,000 104,100
Intel Corp. 72,100 1,757,798
Linear Technology Corp. 15,700 613,870
Maxim Integrated Products, Inc. 5,400 259,740
Texas Instruments, Inc. 33,000 703,890
Xilinx, Inc. 3,300 97,119
---------------
3,536,517
---------------
Software (3.9%)
Adobe Systems, Inc. 8,500 358,530
Microsoft Corp. 107,900 3,070,834
Oracle Corp. (a) 29,300 307,943
VERITAS Software Corp. (a) 6,000 114,360
---------------
3,851,667
---------------
Materials (2.6%)
Chemicals (0.5%)
Dow Chemical Co. 2,500 99,725
Monsanto Co. 11,600 420,616
---------------
520,341
---------------
</Table>
See Accompanying Notes to Financial Statements.
60
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Construction Materials (0.1%)
Vulcan Materials Co. 2,200 $ 104,764
---------------
Containers & Packaging (0.5%)
Temple-Inland, Inc. 7,700 525,525
---------------
Metals & Mining (0.9%)
CONSOL Energy, Inc. 6,400 229,376
Peabody Energy Corp. 1,700 95,506
Phelps Dodge Corp. (a) 6,400 498,816
---------------
823,698
---------------
Paper & Forest Products (0.6%)
Louisiana-Pacific Corp. 4,200 99,456
Weyerhaeuser Co. 8,200 508,400
---------------
607,856
---------------
Telecommunication Services (4.0%)
Diversified Telecommunication Services (3.5%)
ALLTEL Corp. 4,300 223,600
BellSouth Corp. 36,000 975,240
CenturyTel, Inc. 7,100 220,029
SBC Communications, Inc. 50,800 1,287,272
Verizon Communications, Inc. 18,100 697,574
---------------
3,403,715
---------------
Wireless Telecommunication Services (0.5%)
Nextel Communications, Inc., Class A (a) 21,100 480,236
---------------
Utilities (2.4%)
Electric Utilities (2.2%)
American Electric Power Co., Inc. 15,700 488,427
Edison International 3,800 101,840
Exelon Corp. 9,300 324,570
Southern Co. 6,100 178,608
TECO Energy, Inc. 35,000 451,500
TXU Corp. 15,000 594,900
---------------
2,139,845
---------------
Multi-Utilities & Unregulated Power (0.2%)
Duke Energy Corp. 5,100 109,650
Sempra Energy 3,900 139,425
---------------
249,075
---------------
Total Common Stocks
(Cost of $93,630,301) 96,369,688
---------------
Investment Management Company (1.4%)
SPDR Trust Series 1
(Cost of $1,392,816) 12,400 1,374,168
---------------
</Table>
See Accompanying Notes to Financial Statements.
61
<Page>
<Table>
<Caption>
PAR VALUE
--------------- ---------------
Short-Term Obligation (0.4%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.240%,
collateralized by a U.S. Treasury Bond
maturing 11/15/27, market value of $440,919
(repurchase proceeds $431,045)
(Cost of $431,000) $ 431,000 $ 431,000
---------------
Total Investments (99.9%)
(Cost of $95,454,117) (b) 98,174,856
Other Assets & Liabilities, Net (0.1%) 72,427
---------------
Net Assets (100.0%) $ 98,247,283
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $95,747,601.
<Table>
<Caption>
ACRONYM NAME
------------------ ----------------------------------
REIT Real Estate Investment Trust
</Table>
See Accompanying Notes to Financial Statements.
62
<Page>
CMG LARGE CAP GROWTH FUND
A Portfolio of CMG Funds Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (97.9%)
Consumer Discretionary (13.8%)
Hotels, Restaurants & Leisure (1.8%)
Carnival Corp. 5,200 $ 242,372
Marriot International, Inc., Class A 9,600 468,480
---------------
710,852
---------------
Internet & Catalog Retail (1.2%)
eBay, Inc. (a) 6,200 485,646
---------------
Media (2.8%)
Omnicom Group, Inc. 5,200 374,504
Viacom, Inc., Class B 7,200 241,848
XM Satellite Radio Holdings, Inc., Class A (a) 20,500 540,995
---------------
1,157,347
---------------
Specialty Retail (7.2%)
Bed Bath & Beyond, Inc. (a) 10,900 385,751
Best Buy Co., Inc. 10,700 515,312
Chico's FAS, Inc. (a) 9,500 397,765
Home Depot, Inc. 9,800 330,456
Lowe's Companies, Inc. 13,970 680,618
Staples, Inc. 21,700 626,696
---------------
2,936,598
---------------
Textiles, Apparel & Luxury Goods (0.8%)
Coach, Inc. (a) 7,500 320,925
---------------
Consumer Staples (12.2%)
Beverages (2.8%)
Coca-Cola Co. 9,800 429,828
PepsiCo, Inc. 14,000 700,000
---------------
1,129,828
---------------
Food & Staples Retailing (2.4%)
Costco Wholesale Corp. 14,400 585,505
Sysco Corp. 11,300 389,285
---------------
974,790
---------------
Food Products (1.9%)
Bunge Ltd. 8,000 321,040
Hershey Foods Corp. 9,200 445,648
---------------
766,688
---------------
Household Products (1.3%)
Procter & Gamble Co. 10,500 547,575
---------------
Personal Products (2.8%)
Alberto-Culver Co. 13,850 645,687
Avon Products, Inc. 11,500 494,615
---------------
1,140,302
---------------
Tobacco (1.0%)
Altria Group, Inc. 8,400 399,840
---------------
</Table>
See Accompanying Notes to Financial Statements.
63
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Energy (0.8%)
Energy Equipment & Services (0.3%)
Smith International, Inc. (a) 2,100 $ 122,388
---------------
Oil & Gas (0.5%)
EOG Resources, Inc. 3,400 216,070
---------------
Financials (6.2%)
Consumer Finance (2.1%)
American Express Co. 10,500 527,625
MBNA Corp. 13,200 325,908
---------------
853,533
---------------
Diversified Financial Services (2.1%)
Citigroup, Inc. 8,600 379,174
Merrill Lynch & Co., Inc. 9,700 482,284
---------------
861,458
---------------
Insurance (2.0%)
American International Group, Inc. 5,800 409,770
Chubb Corp. 3,100 213,218
Progressive Corp. 2,600 199,212
---------------
822,200
---------------
Health Care (20.6%)
Biotechnology (1.7%)
Amgen, Inc. (a) 5,800 329,904
Biogen Idec, Inc. (a) 3,300 198,000
Genentech, Inc. (a) 3,800 184,984
---------------
712,888
---------------
Health Care Equipment & Supplies (9.1%)
Alcon, Inc. 9,700 743,020
Boston Scientific Corp. (a) 10,600 405,556
Kinetic Concepts, Inc. (a) 4,100 184,172
St. Jude Medical, Inc. (a) 7,700 524,601
Thermo Electron Corp. (a) 13,800 354,936
Varian Medical Systems, Inc. (a) 9,800 676,298
Zimmer Holdings, Inc. (a) 10,400 793,624
---------------
3,682,207
---------------
Health Care Providers & Services (2.6%)
Anthem, Inc. (a) 4,700 387,609
Caremark Rx, Inc. (a) 21,800 664,900
---------------
1,052,509
---------------
Pharmaceuticals (7.2%)
Eli Lilly & Co. 3,200 203,904
Johnson & Johnson 13,000 718,510
Pfizer, Inc. 36,100 1,153,756
Teva Pharmaceutical Industries Ltd., ADR 28,400 840,640
---------------
2,916,810
---------------
</Table>
See Accompanying Notes to Financial Statements.
64
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Industrials (10.7%)
Commercial Services & Supplies (1.2%)
Cendant Corp. 21,200 $ 485,056
---------------
Industrial Conglomerates (6.7%)
3M Co. 7,400 609,464
General Electric Co. 27,500 914,375
Tyco International Ltd. 38,120 1,181,720
---------------
2,705,559
---------------
Machinery (2.8%)
Ingersoll-Rand Co., Class A 6,500 446,485
ITT Industries, Inc. 8,700 695,565
---------------
1,142,050
---------------
Information Technology (28.3%)
Communications Equipment (5.8%)
Avaya, Inc. (a) 14,800 216,820
Cisco Systems, Inc. (a) 53,000 1,105,580
Juniper Networks, Inc. (a) 9,500 218,120
Motorola, Inc. 7,700 122,661
QUALCOMM, Inc. 10,100 697,708
---------------
2,360,889
---------------
Computers & Peripherals (4.0%)
Dell, Inc. (a) 17,900 634,913
EMC Corp. (a) 15,900 174,423
International Business Machines Corp. 6,500 565,955
Lexmark International, Inc., Class A (a) 2,900 256,650
---------------
1,631,941
---------------
Electronic Equipment & Instruments (0.8%)
Broadcom Corp., Class A (a) 4,300 152,048
Flextronics International Ltd. (a) 15,300 192,321
---------------
344,369
---------------
Internet Software & Services (1.1%)
Yahoo!, Inc. (a) 13,900 428,120
---------------
IT Services (1.7%)
Cognizant Technology Solutions Corp., Class A (a) 15,400 424,270
Paychex, Inc. 8,200 251,822
---------------
676,092
---------------
Semiconductors & Semiconductor Equipment (6.7%)
Intel Corp. 51,300 1,250,694
Linear Technology Corp. 5,600 218,960
Marvell Technology Group Ltd. (a) 6,800 157,896
Microchip Technology, Inc. 8,900 257,833
Samsung Electronics Co., Ltd., GDR (b) 2,829 506,391
Texas Instruments, Inc. 7,600 162,108
Xilinx, Inc. 6,500 191,295
---------------
2,745,177
---------------
</Table>
See Accompanying Notes to Financial Statements.
65
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Software (8.2%)
Amdocs Ltd. (a) 13,100 $ 284,270
Mercury Interactive Corp. (a) 2,900 106,024
Microsoft Corp. 69,600 1,980,816
Oracle Corp. (a) 27,600 290,076
Red Hat, Inc. (a) 5,100 87,312
SAP AG, ADR 10,600 424,106
Symantec Corp. (a) 3,100 144,956
---------------
3,317,560
---------------
Materials (4.5%)
Chemicals (2.2%)
Praxair, Inc. 22,700 895,515
---------------
Metals & Mining (2.3%)
Alcoa, Inc. 15,800 506,074
Phelps Dodge Corp. (a) 5,480 427,111
---------------
933,185
---------------
Telecommunication Services (0.8%)
Wireless Telecommunication Services (0.8%)
Crown Castle International Corp. (a) 8,300 117,196
Mobile Telesystems, ADR 1,000 117,050
Vimpel Communications, ADR (a) 1,200 104,940
---------------
339,186
---------------
Total Common Stocks
(Cost of $39,038,450) 39,815,153
---------------
Preferred Stock (1.0%)
Consumer Discretionary (1.0%)
Media (1.0%)
News Corp., Ltd., ADR
(Cost of $405,904) 12,300 390,771
---------------
<Caption>
PAR
---------------
Short-Term Obligation (1.9%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.230%,
collateralized by a U.S. Treasury Note
maturing 02/15/12, market value of $811,413
(repurchase proceeds $793,081)
(Cost of $793,000) $ 793,000 793,000
---------------
Total Investments (100.8%)
(Cost of $40,237,354) (c) 40,998,924
Other Assets & Liabilities, Net (-0.8%) (315,347)
---------------
Net Assets (100.0%) $ 40,683,577
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. This security may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At July 31,
2004, the value of this security represents 1.2% of net assets.
(c) Cost for federal income tax purposes is $40,504,495.
<Table>
<Caption>
ACRONYM NAME
------------- -------------------------------
ADR American Depositary Receipt
GDR Global Depositary Receipt
</Table>
See Accompanying Notes to Financial Statements.
66
<Page>
CMG LARGE CAP VALUE FUND
A Portfolio of CMG Funds Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (94.7%)
Consumer Discretionary (7.0%)
Automobiles (0.7%)
General Motors Corp. 8,539 $ 368,372
---------------
Hotels, Restaurants & Leisure (1.7%)
Harrah's Entertainment, Inc. 2,469 114,784
Wendy's International, Inc. 19,482 696,871
---------------
811,655
---------------
Media (3.7%)
Clear Channel Communications, Inc. 9,300 332,010
Gannett Co., Inc. 2,861 237,863
McGraw-Hill Companies, Inc. 6,167 462,895
Time Warner, Inc. (a) 32,167 535,581
Viacom, Inc., Class A 5,611 191,055
---------------
1,759,404
---------------
Specialty Retail (0.9%)
Office Depot, Inc. (a) 26,684 437,618
---------------
Consumer Staples (9.2%)
Beverages (1.7%)
PepsiCo, Inc. 16,297 814,850
---------------
Food & Staples Retailing (1.0%)
Costco Wholesale Corp. 11,623 472,591
---------------
Food Products (2.0%)
ConAgra Foods, Inc. 19,720 512,720
Kraft Foods, Inc., Class A 15,589 476,244
---------------
988,964
---------------
Household Products (3.6%)
Clorox Co. 10,540 524,576
Kimberly-Clark Corp. 9,524 610,203
Procter & Gamble Co. 11,090 578,344
---------------
1,713,123
---------------
Tobacco (0.9%)
Altria Group, Inc. 9,198 437,825
---------------
Energy (13.4%)
Energy Equipment & Services (1.9%)
Halliburton Co. 28,099 892,143
---------------
Oil & Gas (11.5%)
BP PLC, ADR 21,301 1,200,524
ConocoPhillips 16,101 1,268,276
Exxon Mobil Corp. 34,599 1,601,934
</Table>
See Accompanying Notes to Financial Statements.
67
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Oil & Gas (continued)
Marathon Oil Corp. 23,812 $ 896,998
Royal Dutch Petroleum Co., N.Y. Registered Shares 10,691 537,757
---------------
5,505,489
---------------
Financials (29.0%)
Capital Markets (3.8%)
Bank of New York Co., Inc. 21,909 629,445
Goldman Sachs Group, Inc. 4,221 372,250
Morgan Stanley 10,686 527,140
State Street Corp. 6,767 289,695
---------------
1,818,530
---------------
Commercial Banks (6.2%)
National City Corp. 10,201 372,337
U.S. Bancorp 37,018 1,047,609
Wachovia Corp. 10,546 467,293
Wells Fargo & Co. 19,118 1,097,564
---------------
2,984,803
---------------
Consumer Finance (1.0%)
MBNA Corp. 18,909 466,863
---------------
Diversified Financial Services (6.7%)
Citigroup, Inc. 42,615 1,878,895
JPMorgan Chase & Co. 36,101 1,347,650
---------------
3,226,545
---------------
Insurance (8.1%)
AFLAC, Inc. 6,792 269,235
Ambac Financial Group, Inc. 6,745 479,637
American International Group, Inc. 14,588 1,030,642
Lincoln National Corp. 9,190 401,603
Marsh & McLennan Companies, Inc. 5,339 236,945
St. Paul Travelers Companies, Inc. 12,794 474,274
Willis Group Holdings Ltd. 13,541 471,227
XL Capital Ltd., Class A 6,945 490,873
---------------
3,854,436
---------------
Real Estate (1.6%)
Archstone-Smith Trust, REIT 8,554 251,744
Kimco Realty Corp., REIT 5,540 266,474
Vornado Realty Trust, REIT 4,496 261,173
---------------
779,391
---------------
Thrifts & Mortgage Finance (1.6%)
Countrywide Financial Corp. 4,371 315,149
Freddie Mac 6,796 437,051
---------------
752,200
---------------
Health Care (4.4%)
Health Care Providers & Services (1.9%)
Aetna, Inc. 10,438 895,580
---------------
</Table>
See Accompanying Notes to Financial Statements.
68
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Pharmaceuticals (2.5%)
Bristol-Myers Squibb Co. 8,421 $ 192,841
Johnson & Johnson 4,485 247,886
Merck & Co., Inc. 5,294 240,083
Pfizer, Inc. 16,291 520,660
---------------
1,201,470
---------------
Industrials (10.8%)
Aerospace & Defense (3.0%)
General Dynamics Corp. 5,773 570,488
Raytheon Co. 6,862 230,220
United Technologies Corp. 6,670 623,645
---------------
1,424,353
---------------
Commercial Services & Supplies (1.4%)
Waste Management, Inc. 23,937 673,587
---------------
Industrial Conglomerates (4.6%)
General Electric Co. 29,299 974,192
Honeywell International, Inc. 13,320 500,965
Textron, Inc. 11,749 720,214
---------------
2,195,371
---------------
Machinery (1.8%)
Deere & Co. 8,143 511,462
Ingersoll-Rand Co., Class A 5,479 376,352
---------------
887,814
---------------
Information Technology (6.4%)
Communications Equipment (0.8%)
Nokia Corp., ADR 33,962 394,638
---------------
Computers & Peripherals (1.9%)
International Business Machines Corp. 5,241 456,334
Lexmark International, Inc., Class A (a) 4,893 433,030
---------------
889,364
---------------
IT Services (1.1%)
Accenture Ltd., Class A (a) 22,160 545,801
---------------
Office Electronics (1.1%)
Xerox Corp. (a) 38,365 531,739
---------------
Software (1.5%)
Electronic Arts, Inc. (a) 9,329 467,663
Microsoft Corp. 7,799 221,960
---------------
689,623
---------------
Materials (3.5%)
Chemicals (1.5%)
Air Products & Chemicals, Inc. 13,728 710,424
---------------
</Table>
See Accompanying Notes to Financial Statements.
69
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Paper & Forest Products (2.0%)
MeadWestvaco Corp. 19,193 $ 573,103
Weyerhaeuser Co. 6,003 372,186
---------------
945,289
---------------
Telecommunication Services (5.0%)
Diversified Telecommunication Services (5.0%)
BellSouth Corp. 29,685 804,167
SBC Communications, Inc. 31,193 790,431
Verizon Communications, Inc. 21,257 819,245
---------------
2,413,843
---------------
Utilities (6.0%)
Electric Utilities (6.0%)
American Electric Power Co., Inc. 15,492 481,956
Consolidated Edison, Inc. 17,568 719,761
Entergy Corp. 6,703 385,422
Southern Co. 12,608 369,162
TXU Corp. 22,650 898,299
---------------
2,854,600
---------------
Total Common Stocks
(Cost of $42,697,379) 45,338,298
---------------
Investment Management Company (3.5%)
iShares Russell 1000 Value Index
(Cost of $1,651,233) 28,029 1,662,120
---------------
<Caption>
PAR
---------------
Short-Term Obligation (1.6%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.240%,
collateralized by a U.S. Treasury Bond
maturing 08/15/26, market value of $780,800
(repurchase proceeds $761,079)
(Cost of $761,000) $ 761,000 761,000
---------------
Total Investments (99.8%)
(Cost of $45,109,612) (b) 47,761,418
Other Assets & Liabilities, Net (0.2%) 93,300
---------------
Net Assets (100.0%) $ 47,854,718
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $45,204,819.
<Table>
<Caption>
ACRONYM NAME
------------- ---------------------------------
ADR American Depositary Receipt
REIT Real Estate Investment Trust
</Table>
See Accompanying Notes to Financial Statements.
70
<Page>
CMG MID CAP GROWTH FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (95.0%)
Consumer Discretionary (14.4%)
Auto Components (0.5%)
Autoliv, Inc. 2,410 $ 101,437
---------------
Hotels, Restaurants & Leisure (5.3%)
Applebee's International, Inc. 4,000 106,560
Cheesecake Factory, Inc. (a) 2,500 104,425
Four Seasons Hotels, Inc. 970 58,869
Harrah's Entertainment, Inc. 2,850 132,497
Hilton Hotels Corp. 7,270 129,624
International Game Technology 2,670 86,348
Marriott International, Inc., Class A 2,000 97,600
Yum! Brands, Inc. 7,800 299,442
---------------
1,015,365
---------------
Household Durables (1.0%)
Centex Corp. 2,200 93,324
D.R. Horton, Inc. 3,800 104,994
---------------
198,318
---------------
Leisure Equipment & Products (0.5%)
Brunswick Corp. 2,480 96,794
---------------
Media (3.0%)
Lamar Advertising Co., Class A (a) 2,400 96,504
Univision Communications, Inc., Class A (a) 9,370 271,449
XM Satellite Radio Holdings, Inc., Class A (a) 7,600 200,564
---------------
568,517
---------------
Specialty Retail (3.3%)
Bed Bath & Beyond, Inc. (a) 2,195 77,681
Chico's FAS, Inc. (a) 1,400 58,618
PETCO Animal Supplies, Inc. (a) 3,200 95,584
PETsMART, Inc. 3,100 96,131
Staples, Inc. 8,140 235,083
Tiffany & Co. 2,200 78,650
---------------
641,747
---------------
Textiles, Apparel & Luxury Goods (0.8%)
Coach, Inc. (a) 3,400 145,486
---------------
Consumer Staples (2.5%)
Food & Staples Retailing (0.5%)
Whole Foods Market, Inc. 1,100 90,552
---------------
Food Products (1.5%)
Dean Foods Co. (a) 5,070 187,489
Hershey Foods Corp. 2,100 101,724
---------------
289,213
---------------
</Table>
See Accompanying Notes to Financial Statements.
71
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Personal Products (0.5%)
Alberto-Culver Co. 2,000 $ 93,240
---------------
Energy (10.1%)
Energy Equipment & Services (7.4%)
Baker Hughes, Inc. 8,800 354,640
BJ Services Co. (a) 4,635 230,174
Cooper Cameron Corp. (a) 1,900 97,071
Nabors Industries Ltd. (a) 1,820 84,630
National-Oilwell, Inc. (a) 9,890 330,821
Patterson-UTI Energy, Inc. 17,740 323,400
---------------
1,420,736
---------------
Oil & Gas (2.7%)
Apache Corp. 2,660 123,770
EOG Resources, Inc. 1,660 105,493
Murphy Oil Corp. 1,030 79,660
XTO Energy, Inc. 7,486 223,831
---------------
532,754
---------------
Financials (4.7%)
Capital Markets (0.6%)
E*Trade Financial Corp. (a) 9,800 108,486
---------------
Commercial Banks (2.3%)
North Fork Bancorporation, Inc. 2,500 97,625
TCF Financial Corp. 2,600 157,040
UCBH Holdings, Inc. 2,500 97,725
Zions Bancorporation 1,600 96,800
---------------
449,190
---------------
Insurance (1.0%)
Ambac Financial Group, Inc. 2,685 190,930
---------------
Real Estate (0.8%)
St. Joe Company 3,600 154,872
---------------
Health Care (20.1%)
Biotechnology (3.0%)
Amylin Pharmaceuticals, Inc. (a) 6,210 127,926
Gen-Probe, Inc. (a) 3,000 112,260
Genzyme Corp. (a) 3,300 169,224
ImClone Systems, Inc. (a) 1,200 70,704
Martek Biosciences Corp. (a) 1,900 89,908
---------------
570,022
---------------
Health Care Equipment & Supplies (6.3%)
Beckman Coulter, Inc. 2,300 126,891
Biomet, Inc. 4,200 184,758
Boston Scientific Corp. (a) 1,950 74,607
</Table>
See Accompanying Notes to Financial Statements.
72
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Health Care Equipment & Supplies (continued)
Fisher Scientific International, Inc. (a) 4,640 $ 270,048
Kinetic Concepts, Inc. (a) 5,010 225,049
Thermo Electron Corp. (a) 6,850 176,182
Varian Medical Systems, Inc. (a) 2,210 152,512
---------------
1,210,047
---------------
Health Care Providers & Services (5.0%)
Accredo Health, Inc. (a) 5,400 174,960
Anthem, Inc. (a) 1,200 98,964
Community Health Systems, Inc. (a) 3,535 86,996
DaVita, Inc. (a) 9,868 299,676
McKesson Corp. 7,230 232,589
UnitedHealth Group, Inc. 1,271 79,971
---------------
973,156
---------------
Pharmaceuticals (5.8%)
Barr Pharmaceuticals, Inc. (a) 2,715 93,260
Elan Corp. PLC, ADR (a) 7,770 159,674
Endo Pharmaceuticals Holdings, Inc. (a) 7,580 145,536
IVAX Corp. (a) 4,310 102,794
Medicis Pharmaceutical Corp., Class A 10,000 357,700
Nektar Therapeutics (a) 7,100 124,534
Teva Pharmaceutical Industries Ltd., ADR 4,740 140,304
---------------
1,123,802
---------------
Industrials (11.5%)
Aerospace & Defense (1.0%)
L-3 Communications Holdings, Inc. 1,670 102,120
United Defense Industries, Inc. (a) 2,800 97,020
---------------
199,140
---------------
Air Freight & Logistics (1.0%)
C.H. Robinson Worldwide, Inc. 2,200 96,206
Expeditors International of Washington, Inc. 2,000 92,820
---------------
189,026
---------------
Airlines (0.8%)
JetBlue Airways Corp. (a) 6,400 152,384
---------------
Building Products (0.5%)
Masco Corp. 3,150 95,256
---------------
Commercial Services & Supplies (7.5%)
Avery Dennison Corp. 1,800 109,026
Career Education Corp. (a) 2,000 67,620
ChoicePoint, Inc. (a) 5,935 249,270
Cintas Corp. 2,200 92,312
Corporate Executive Board Co. 4,255 241,259
Education Management Corp. (a) 4,500 124,920
Iron Mountain, Inc. (a) 6,100 196,847
</Table>
See Accompanying Notes to Financial Statements.
73
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Commercial Services & Supplies (continued)
Manpower, Inc. 5,940 $ 258,687
Robert Half International, Inc. 3,730 103,769
---------------
1,443,710
---------------
Construction & Engineering (0.7%)
Jacobs Engineering Group, Inc. (a) 3,640 145,527
---------------
Information Technology (24.8%)
Communications Equipment (3.1%)
Avaya, Inc. (a) 6,880 100,792
Comverse Technology, Inc. (a) 11,830 201,819
Juniper Networks, Inc. (a) 8,340 191,486
Polycom, Inc. (a) 5,850 112,788
---------------
606,885
---------------
Computers & Peripherals (0.4%)
Lexmark International, Inc., Class A (a) 800 70,800
---------------
Electronic Equipment & Instruments (3.0%)
Agilent Technologies, Inc. (a) 3,820 90,954
CDW Corp. 2,955 190,007
National Instruments Corp. 3,600 104,580
Solectron Corp. (a) 17,400 95,700
Vishay Intertechnology, Inc. (a) 6,110 94,705
---------------
575,946
---------------
Internet Software & Services (2.3%)
Ask Jeeves, Inc. (a) 5,100 148,308
Check Point Software Technologies Ltd. (a) 8,000 159,120
SINA Corp. (a) 5,000 141,750
---------------
449,178
---------------
IT Services (2.1%)
Cognizant Technology Solutions Corp., Class A (a) 8,000 220,400
Fiserv, Inc. (a) 3,300 113,058
SunGard Data Systems, Inc. (a) 3,300 76,923
---------------
410,381
---------------
Office Electronics (0.9%)
Zebra Technologies Corp., Class A (a) 2,100 173,523
---------------
Semiconductors & Semiconductor Equipment (8.0%)
Advanced Micro Devices (a) 9,000 112,410
Altera Corp. (a) 5,100 106,182
Linear Technology Corp. 6,800 265,880
Marvell Technology Group Ltd. (a) 4,000 92,880
Microchip Technology, Inc. 11,745 340,253
National Semiconductor Corp. (a) 6,800 116,620
NVIDIA Corp. (a) 8,600 132,440
</Table>
See Accompanying Notes to Financial Statements.
74
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Semiconductors & Semiconductor Equipment (continued)
PMC-Sierra, Inc. (a) 14,910 $ 177,131
Silicon Laboratories, Inc. (a) 5,290 186,684
United Microelectronics Corp., ADR (a) 4,067 15,046
---------------
1,545,526
---------------
Software (5.0%)
Amdocs Ltd. (a) 4,120 89,404
BMC Software, Inc. (a) 8,845 138,690
Citrix Systems, Inc. (a) 7,900 139,198
Hyperion Solutions Corp. (a) 4,760 195,255
Mercury Interactive Corp. (a) 5,295 193,585
Novell, Inc. (a) 14,200 97,128
VERITAS Software Corp. (a) 5,625 107,213
---------------
960,473
---------------
Materials (3.8%)
Chemicals (1.2%)
Potash Corp. of Saskatchewan, Inc. 2,420 233,990
---------------
Metals & Mining (2.6%)
Freeport-McMoRan Copper & Gold, Inc., Class B 2,800 97,580
Inco Ltd. (a) 2,800 93,436
Peabody Energy Corp. 3,830 215,169
Phelps Dodge Corp. (a) 1,200 93,528
---------------
499,713
---------------
Telecommunication Services (3.1%)
Wireless Telecommunication Services (3.1%)
Crown Castle International Corp. (a) 11,000 155,320
Millicom International Cellular SA (a) 6,700 113,029
Nextel Partners, Inc., Class A (a) 9,560 153,629
Western Wireless Corp., Class A (a) 6,400 168,896
---------------
590,874
---------------
Total Common Stocks
(Cost of $18,053,883) 18,316,996
---------------
</Table>
See Accompanying Notes to Financial Statements.
75
<Page>
<Table>
<Caption>
PAR VALUE
--------------- ---------------
Short-Term Obligation (5.9%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.230%,
collateralized by a U.S. Treasury Note
maturing 02/15/12, market value of $1,172,040
(repurchase proceeds $1,141,117)
(Cost of $1,141,000) $ 1,141,000 $ 1,141,000
---------------
Total Investments (100.9%)
(Cost of $19,194,883) (b) 19,457,996
Other Assets & Liabilities, Net (-0.9%) (174,482)
---------------
Net Assets (100.0%) $ 19,283,514
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $19,341,766.
<Table>
<Caption>
ACRONYM NAME
------------- -------------------------------
ADR American Depositary Receipt
</Table>
See Accompanying Notes to Financial Statements.
76
<Page>
CMG MID CAP VALUE FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (96.9%)
Consumer Discretionary (17.6%)
Auto Components (3.9%)
BorgWarner, Inc. 2,500 $ 117,975
Gentex Corp. 2,000 71,600
Johnson Controls, Inc. 4,300 242,735
Lear Corp. 4,800 264,624
Superior Industries International, Inc. 4,800 156,912
---------------
853,846
---------------
Hotels, Restaurants & Leisure (3.1%)
Brinker International, Inc. (a) 9,200 329,452
Darden Restaurants, Inc. 3,900 83,187
Harrah's Entertainment, Inc. 3,600 167,364
Six Flags, Inc. (a) 20,500 96,760
---------------
676,763
---------------
Household Durables (0.7%)
Newell Rubbermaid, Inc. 6,800 146,880
---------------
Leisure Equipment & Products (0.7%)
Mattel, Inc. 8,650 151,548
---------------
Media (2.2%)
Knight-Ridder, Inc. 2,900 190,791
Mediacom Communications Corp., Class A (a) 10,900 71,613
New York Times Co., Class A 5,400 224,640
---------------
487,044
---------------
Multiline Retail (2.3%)
Federated Department Stores, Inc. 10,700 512,744
---------------
Specialty Retail (4.2%)
Boise Cascade Corp. 5,050 162,863
Borders Group, Inc. 9,900 226,413
Ross Stores, Inc. 7,400 171,310
TJX Companies, Inc. 15,700 368,479
---------------
929,065
---------------
Textiles, Apparel & Luxury Goods (0.5%)
Wolverine World Wide, Inc. 4,800 112,224
---------------
Consumer Staples (5.0%)
Beverages (1.1%)
Pepsi Bottling Group, Inc. 8,700 242,295
---------------
Food Products (3.4%)
Dean Foods Co. (a) 16,100 595,378
Hormel Foods Corp. 5,400 160,272
---------------
755,650
---------------
</Table>
See Accompanying Notes to Financial Statements.
77
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Personal Products (0.5%)
Avon Products, Inc. 2,600 $ 111,826
---------------
Energy (6.9%)
Energy Equipment & Services (2.1%)
BJ Services Co. (a) 2,850 141,531
Noble Corp. (a) 3,550 137,456
Transocean, Inc. (a) 3,900 110,760
Weatherford International Ltd. (a) 1,650 77,187
---------------
466,934
---------------
Oil & Gas (4.8%)
Amerada Hess Corp. 4,500 375,075
XTO Energy, Inc. 22,775 680,972
---------------
1,056,047
---------------
Financials (22.5%)
Capital Markets (2.5%)
Bear Stearns Companies, Inc. 2,300 191,866
Janus Capital Group, Inc. 21,600 286,416
Lehman Brothers Holdings, Inc. 950 66,595
---------------
544,877
---------------
Commercial Banks (5.9%)
Banknorth Group, Inc. 8,700 277,617
Charter One Financial, Inc. 7,900 350,839
City National Corp. 4,650 299,925
Cullen/Frost Bankers, Inc. 2,750 118,305
North Fork Bancorporation, Inc. 6,500 253,825
---------------
1,300,511
---------------
Insurance (5.1%)
Ambac Financial Group, Inc. 4,750 337,772
Cincinnati Financial Corp. 3,412 136,070
Loews Corp. 3,400 192,542
Nationwide Financial Services, Inc., Class A 4,750 168,483
Old Republic International Corp. 3,100 72,199
St. Paul Travelers Companies, Inc. 3,200 118,624
Willis Group Holdings Ltd. 3,100 107,880
---------------
1,133,570
---------------
Thrifts & Mortgage Finance (9.0%)
Golden West Financial Corp. 5,600 598,696
GreenPoint Financial Corp. 5,200 211,276
PMI Group, Inc. 7,900 325,717
Radian Group, Inc. 5,900 271,518
Sovereign Bancorp, Inc. 15,300 333,081
Webster Financial Corp. 5,050 236,946
---------------
1,977,234
---------------
</Table>
See Accompanying Notes to Financial Statements.
78
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Health Care (4.2%)
Health Care Equipment & Supplies (2.1%)
Biomet, Inc. 3,600 $ 158,364
Millipore Corp. (a) 2,500 131,725
Varian, Inc. (a) 4,800 181,920
---------------
472,009
---------------
Health Care Providers & Services (2.1%)
Anthem, Inc. (a) 250 20,618
First Health Group Corp. (a) 8,300 116,366
HCA, Inc. 3,800 146,870
WellPoint Health Networks, Inc. (a) 1,650 166,815
---------------
450,669
---------------
Industrials (13.6%)
Aerospace & Defense (1.1%)
Alliant Techsystems, Inc. (a) 3,050 192,028
Northrop Grumman Corp. 700 36,820
---------------
228,848
---------------
Air Freight & Logistics (0.7%)
CNF, Inc. 3,750 154,725
---------------
Airlines (0.4%)
AMR Corp. (a) 9,600 80,928
---------------
Commercial Services & Supplies (3.6%)
Brink's Co. 13,000 420,550
Cendant Corp. 7,200 164,736
Manpower, Inc. 4,800 209,040
---------------
794,326
---------------
Electrical Equipment (1.2%)
AMETEK, Inc. 5,600 172,704
Hubbell, Inc., Class B 2,200 99,440
---------------
272,144
---------------
Industrial Conglomerates (2.2%)
ALLETE, Inc. 5,300 146,916
Carlisle Companies, Inc. 5,400 342,846
---------------
489,762
---------------
Machinery (4.4%)
AGCO Corp. (a) 4,400 92,048
Dover Corp. 4,650 184,512
Ingersoll-Rand Co., Class A 3,300 226,677
Navistar International Corp. (a) 8,600 309,170
Parker Hannifin Corp. 2,650 152,057
---------------
964,464
---------------
Information Technology (6.8%)
Communications Equipment (0.9%)
Andrew Corp. (a) 17,100 185,535
---------------
</Table>
See Accompanying Notes to Financial Statements.
79
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Electronic Equipment & Instruments (3.5%)
Amphenol Corp., Class A (a) 11,000 $ 345,730
Arrow Electronics, Inc. (a) 7,900 186,914
AVX Corp. 9,000 112,230
Littelfuse, Inc. (a) 700 27,160
Vishay Intertechnology, Inc. (a) 6,800 105,400
---------------
777,434
---------------
IT Services (1.5%)
Affiliated Computer Services, Inc., Class A (a) 4,400 228,360
DST Systems, Inc. (a) 2,350 107,066
---------------
335,426
---------------
Software (0.9%)
Reynolds & Reynolds Co., Class A 8,700 192,270
---------------
Materials (12.6%)
Chemicals (8.4%)
Air Products & Chemicals, Inc. 4,800 248,400
Eastman Chemical Co. 5,400 241,272
Engelhard Corp. 6,500 191,100
International Flavors & Fragrances, Inc. 9,900 361,746
Lubrizol Corp. 5,200 180,076
OM Group, Inc. (a) 4,000 128,080
PPG Industries, Inc. 2,750 162,113
Praxair, Inc. 8,600 339,270
---------------
1,852,057
---------------
Containers & Packaging (2.4%)
Crown Holdings, Inc. (a) 14,200 143,988
Packaging Corp. of America 9,500 221,920
Pactiv Corp. (a) 6,400 150,912
---------------
516,820
---------------
Paper & Forest Products (1.8%)
Georgia-Pacific Corp. 6,900 231,840
MeadWestvaco Corp. 5,500 164,230
---------------
396,070
---------------
Telecommunication Services (1.7%)
Wireless Telecommunication Services (1.7%)
Telephone & Data Systems, Inc. 5,000 379,500
---------------
Utilities (6.0%)
Electric Utilities (5.1%)
Entergy Corp. 4,350 250,125
Exelon Corp. 9,200 321,080
PPL Corp. 4,250 196,988
Progress Energy, Inc. 6,400 269,696
Reliant Energy, Inc. (a) 8,200 81,016
---------------
1,118,905
---------------
</Table>
See Accompanying Notes to Financial Statements.
80
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Multi-Utilities & Unregulated Power (0.9%)
Energy East Corp. 7,700 $ 187,572
---------------
Total Common Stocks
(Cost of $19,688,482) 21,308,522
---------------
<Caption>
PAR
---------------
Short-Term Obligation (3.1%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.240%,
collateralized by a U.S. Treasury Bond
maturing 08/15/26, market value of $707,600
(repurchase proceeds $693,072)
(Cost of $693,000) $ 693,000 693,000
---------------
Total Investments (100.0%)
(Cost of $20,381,482) (b) 22,001,522
Other Assets & Liabilities, Net (-0.0%) (7,323)
---------------
Net Assets (100.0%) $ 21,994,199
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $20,398,677.
See Accompanying Notes to Financial Statements.
81
<Page>
CMG SMALL CAP GROWTH FUND
A Portfolio of CMG Funds Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (96.8%)
Consumer Discretionary (16.4%)
Hotels, Restaurants & Leisure (3.1%)
Alliance Gaming Corp. (a) 12,400 $ 176,452
Gaylord Entertainment Co. (a) 12,400 361,584
Pinnacle Entertainment, Inc. (a) 17,500 197,575
Scientific Games Corp., Class A (a) 20,900 372,229
---------------
1,107,840
---------------
Media (5.7%)
Arbitron, Inc. (a) 8,000 275,440
Cumulus Media, Inc., Class A (a) 20,700 303,876
Journal Communications, Inc., Class A 5,000 89,200
Lin TV Corp., Class A (a) 18,500 335,775
MDC Partners, Inc., Class A (a) 26,300 290,878
Radio One, Inc., Class D (a) 16,900 257,049
Sinclair Broadcast Group, Inc., Class A 32,600 323,066
TiVo, Inc. (a) 25,900 146,335
---------------
2,021,619
---------------
Multiline Retail (0.5%)
Fred's Inc. 10,800 194,940
---------------
Specialty Retail (7.1%)
Bombay Co., Inc. (a) 37,800 223,398
Cost Plus, Inc. (a) 12,600 421,596
Design Within Reach, Inc. (a) 3,000 48,483
Jarden Corp. (a) 20,450 739,063
Pacific Sunwear of California, Inc. (a) 12,400 252,960
Party City Corp. (a) 13,600 187,952
PETCO Animal Supplies, Inc. (a) 9,200 274,804
Sharper Image Corp. (a) 14,000 373,800
---------------
2,522,056
---------------
Consumer Staples (0.5%)
Food & Staples Retailing (0.5%)
Performance Food Group Co. (a) 6,600 163,548
---------------
Energy (3.4%)
Energy Equipment & Services (2.0%)
Key Energy Services, Inc. (a) 20,000 201,600
Maverick Tube Corp. (a) 7,600 219,184
Unit Corp. (a) 8,700 280,575
---------------
701,359
---------------
Oil & Gas (1.4%)
Edge Petroleum Corp. (a) 7,000 119,700
Energy Partners Ltd. (a) 2,600 40,664
Mission Resources Corp. (a) 24,100 132,791
Western Gas Resources, Inc. 6,700 225,723
---------------
518,878
---------------
</Table>
See Accompanying Notes to Financial Statements.
82
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Financials (11.1%)
Capital Markets (1.6%)
Investors Financial Services Corp. 3,957 $ 180,756
Jefferies Group, Inc. 12,600 394,884
---------------
575,640
---------------
Commercial Banks (3.9%)
Boston Private Financial Holdings, Inc. 11,500 266,915
East-West Bancorp, Inc. 15,000 505,800
Mercantile Bank Corp. 8,280 285,329
Prosperity Bancshares, Inc. 13,400 324,682
---------------
1,382,726
---------------
Diversified Financial Services (3.7%)
ACE Cash Express, Inc. (a) 8,500 196,520
Commercial Capital Bancorp, Inc. (a) 17,633 387,397
Greenhill & Co., Inc. (a) 10,800 220,860
MTC Technologies, Inc. (a) 12,400 310,000
National Financial Partners Corp. 6,400 215,552
---------------
1,330,329
---------------
Insurance (1.9%)
Infinity Property & Casualty Corp. 13,400 385,652
Philadelphia Consolidated Holding Co. (a) 5,700 311,619
---------------
697,271
---------------
Health Care (22.3%)
Biotechnology (5.6%)
BioMarin Pharmaceuticals, Inc. (a) 29,300 167,596
Cell Therapeutics, Inc. (a) 31,300 170,585
Cytogen Corp. (a) 13,800 167,532
Exact Sciences Corp. (a) 24,000 115,920
ILEX Oncology, Inc. (a) 7,300 183,887
Isolagen, Inc. (a) 20,300 162,197
NeoPharm, Inc. (a) 27,721 174,642
Neurocrine Biosciences, Inc. (a) 6,800 316,676
Protein Design Labs, Inc. (a) 17,100 277,020
Telik, Inc. (a) 13,400 264,784
---------------
2,000,839
---------------
Health Care Equipment & Supplies (7.5%)
Bio-Rad Laboratories, Inc., Class A (a) 6,700 351,080
Cardiac Science, Inc. (a) 53,800 107,600
Conceptus (a) 19,900 194,025
Cytyc Corp. (a) 8,000 193,360
Integra LifeSciences Holdings Corp. (a) 9,600 303,312
LCA-Vision, Inc. (a) 11,500 300,035
Medical Action Industries, Inc. (a) 18,800 311,140
Noven Pharmaceuticals, Inc. (a) 16,600 335,486
Palomar Medical Technologies, Inc. (a) 5,400 80,136
SonoSite, Inc. (a) 12,700 289,306
SurModics, Inc. (a) 9,300 222,456
---------------
2,687,936
---------------
</Table>
See Accompanying Notes to Financial Statements.
83
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Health Care Providers & Services (2.5%)
Advisory Board Co. (a) 9,500 $ 303,240
America Service Group, Inc. (a) 6,111 216,513
LifePoint Hospitals, Inc. (a) 7,800 260,598
U.S. Physical Therapy, Inc. (a) 8,600 113,004
---------------
893,355
---------------
Pharmaceuticals (6.7%)
Advancis Pharmaceutical Corp. (a) 20,800 168,064
Atrix Laboratories, Inc. (a) 8,800 283,448
Bone Care International, Inc. (a) 13,900 348,751
Caraco Pharmaceutical Laboratories Ltd. (a) 7,200 52,416
DepoMed, Inc. (a) 44,800 214,592
DOV Pharmaceutical, Inc. (a) 17,100 222,300
Nektar Therapeutics (a) 20,800 364,832
Renovis, Inc. (a) 17,600 135,696
Salix Pharmaceuticals Ltd. (a) 20,250 431,730
Taro Pharmaceuticals Industries Ltd. (a) 7,100 158,543
---------------
2,380,372
---------------
Industrials (12.0%)
Aerospace & Defense (1.1%)
DRS Technologies, Inc. (a) 10,500 375,060
---------------
Air Freight & Logistics (1.6%)
EGL, Inc. (a) 12,700 322,707
UTI Worldwide, Inc. 5,100 262,599
---------------
585,306
---------------
Commercial Services & Supplies (3.3%)
Corporate Executive Board Co. 7,200 408,240
Laureate Education, Inc. (a) 7,000 247,100
Navigant Consulting, Inc. (a) 13,300 278,635
NCO Group, Inc. (a) 10,100 252,197
---------------
1,186,172
---------------
Construction & Engineering (0.8%)
Chicago Bridge & Iron Co. NV, N.Y. Registered Shares 9,700 283,143
---------------
Electrical Equipment (0.6%)
Plug Power, Inc. (a) 36,000 224,460
---------------
Machinery (1.5%)
Bucyrus International, Inc., Class A (a) 4,000 96,000
CUNO, Inc. (a) 5,100 268,566
RAE Systems, Inc. (a) 32,800 164,000
---------------
528,566
---------------
Road & Rail (2.6%)
Genesee & Wyoming, Inc., Class A (a) 13,382 310,462
Heartland Express, Inc. 10,300 278,203
</Table>
See Accompanying Notes to Financial Statements.
84
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Road & Rail (continued)
Sirva, Inc. (a) 14,500 $ 339,010
---------------
927,675
---------------
Trading Companies & Distributors (0.5%)
Aceto Corp. 11,700 191,763
---------------
Information Technology (29.3%)
Communications Equipment (2.4%)
F5 Networks, Inc. (a) 10,700 280,233
Finisar Corp. (a) 63,200 95,748
Inter-Tel, Inc. 11,021 239,046
Netopia, Inc. (a) 22,200 81,030
NMS Communications Corp. (a) 27,600 164,496
---------------
860,553
---------------
Computers & Peripherals (2.2%)
Applied Films Corp. (a) 11,200 208,880
Cray, Inc. (a) 49,900 159,181
PalmSource, Inc. (a) 15,900 322,134
Pinnacle Systems, Inc. (a) 28,300 111,785
---------------
801,980
---------------
Electronic Equipment & Instruments (3.1%)
Anixter International, Inc. 7,300 244,404
Global Imaging Systems, Inc. (a) 10,900 330,597
Itron, Inc. (a) 14,000 267,260
OSI Systems, Inc. (a) 13,800 257,094
---------------
1,099,355
---------------
Internet Software & Services (4.1%)
Corillian Corp. (a) 53,800 266,310
Digital River, Inc. (a) 9,400 264,140
Digitas, Inc. (a) 32,400 216,756
Equinix, Inc. (a) 6,700 217,750
Kanbay International, Inc. (a) 11,000 170,610
PEC Solutions, Inc. (a) 2,200 24,024
Retek, Inc. (a) 32,300 131,138
Telecommunication Systems, Inc., Class A (a) 30,600 165,240
---------------
1,455,968
---------------
IT Services (0.7%)
MAXIMUS, Inc. (a) 8,400 268,548
---------------
Semiconductors & Semiconductor Equipment (10.3%)
Artisan Components, Inc. (a) 16,700 406,311
August Technology Corp. (a) 15,800 163,530
Brooks Automation, Inc. (a) 23,700 341,517
DSP Group, Inc. (a) 7,100 139,941
</Table>
See Accompanying Notes to Financial Statements.
85
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Semiconductors & Semiconductor Equipment (continued)
Entegris, Inc. (a) 38,300 $ 340,870
FEI Co. (a) 13,800 277,518
Integrated Circuit Systems, Inc. (a) 6,400 153,088
IXYS Corp. (a) 35,400 258,774
Lattice Semiconductor Corp. (a) 19,300 94,570
Leadis Technology, Inc. (a) 17,800 195,800
Mykrolis Corp. (a) 18,100 181,000
Silicon Image, Inc. (a) 38,800 465,212
Silicon Storage Technology, Inc. (a) 34,600 229,744
Ultratech, Inc. (a) 18,800 234,248
Zoran Corp. (a) 10,400 183,976
---------------
3,666,099
---------------
Software (6.5%)
Activision, Inc. (a) 16,811 246,281
Captiva Software Corp. (a) 24,800 209,808
Epicor Software Corp. (a) 17,800 220,364
Magma Design Automation, Inc. (a) 19,000 337,250
Manhattan Associates, Inc. (a) 9,000 233,640
Micromuse, Inc. (a) 66,800 300,600
OpenTV Corp. (a) 78,200 216,614
ScanSoft, Inc. (a) 35,800 146,064
Take-Two Interactive Software, Inc. (a) 9,300 291,276
Verity, Inc. (a) 11,800 131,334
---------------
2,333,231
---------------
Materials (1.8%)
Chemicals (0.4%)
Landec Corp. (a) 24,700 139,036
---------------
Metals & Mining (1.4%)
AMCOL International Corp. 10,600 213,060
Steel Technologies, Inc. 12,200 281,942
---------------
495,002
---------------
Total Common Stocks
(Cost of $34,213,620) 34,600,625
---------------
</Table>
See Accompanying Notes to Financial Statements.
86
<Page>
<Table>
<Caption>
PAR VALUE
--------------- ---------------
Short-Term Obligation (3.7%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.240%,
collateralized by a U.S. Treasury Bond
maturing 08/15/26, market value of $1,342,575
(repurchase proceeds $1,315,136)
(Cost of $1,315,000) $ 1,315,000 $ 1,315,000
---------------
Total Investments (100.5%)
(Cost of $35,528,620) (b) 35,915,625
Other Assets & Liabilities, Net (-0.5%) (188,163)
---------------
Net Assets (100.0%) $ 35,727,462
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $35,533,493.
See Accompanying Notes to Financial Statements.
87
<Page>
CMG SMALL CAP VALUE FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (99.7%)
Consumer Discretionary (15.0%)
Auto Components (1.2%)
BorgWarner, Inc. 5,200 $ 245,388
Modine Manufacturing Co. 3,800 112,708
Standard Motor Products, Inc. 8,900 127,270
---------------
485,366
---------------
Hotels, Restaurants & Leisure (4.0%)
Bally Total Fitness Holding Corp. (a) 16,500 85,140
Bob Evans Farms, Inc. 4,961 132,062
Buca, Inc. (a) 20,900 108,471
Dave & Buster's, Inc. (a) 10,200 173,808
Landry's Restaurants, Inc. 8,500 256,955
Lone Star Steakhouse & Saloon, Inc. 11,600 281,184
Marcus Corp. 10,600 186,454
Prime Hospitality Corp. (a) 14,200 130,356
Scientific Games Corp., Class A (a) 15,600 277,836
---------------
1,632,266
---------------
Household Durables (1.4%)
American Greetings Corp., Class A (a) 6,200 144,584
CSS Industries, Inc. 5,300 168,328
Kimball International, Inc., Class B 11,700 160,992
Russ Berrie & Co., Inc. 3,700 70,448
---------------
544,352
---------------
Leisure Equipment & Products (0.9%)
Action Performance Companies, Inc. 13,100 141,480
JAKKS Pacific, Inc. (a) 11,200 224,784
Travis Boats & Motors, Inc. (a) 300 180
---------------
366,444
---------------
Media (2.4%)
4Kids Entertainment, Inc. (a) 10,100 219,978
Alliance Atlantis Communications, Inc., Class B (a) 4,000 75,880
Catalina Marketing Corp. (a) 7,600 151,772
Journal Communications, Inc., Class A 6,700 119,528
Liberty Corp. 5,000 219,500
Media General, Inc., Class A 2,900 173,304
---------------
959,962
---------------
Multiline Retail (0.3%)
ShopKo Stores, Inc. (a) 7,600 118,180
---------------
Specialty Retail (2.6%)
Building Materials Holding Corp. 5,200 104,130
GameStop Corp., Class A (a) 12,400 190,960
Goody's Family Clothing, Inc. 15,000 130,800
Monro Muffler Brake, Inc. (a) 11,420 252,496
Movie Gallery, Inc. 3,500 60,865
Pier 1 Imports, Inc. 8,400 150,612
</Table>
See Accompanying Notes to Financial Statements.
88
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Specialty Retail (continued)
Rent-Way, Inc. (a) 12,100 $ 90,992
TBC Corp. (a) 3,100 74,183
---------------
1,055,038
---------------
Textiles, Apparel & Luxury Goods (2.2%)
Culp, Inc. (a) 1,400 10,920
Delta Apparel, Inc. 3,100 68,107
Hampshire Group Ltd. (a) 5,800 163,038
Kellwood Co. 7,600 305,140
Russell Corp. 8,400 148,596
Stride Rite Corp. 10,700 111,280
Tandy Brands Accessories, Inc. 5,200 70,824
---------------
877,905
---------------
Consumer Staples (2.5%)
Food & Staples Retailing (0.9%)
BJ's Wholesale Club, Inc. (a) 4,700 109,557
Chronimed, Inc. (a) 12,600 98,910
John B. Sanfilippo & Son, Inc. (a) 2,500 66,375
Winn-Dixie Stores, Inc. 11,900 75,208
---------------
350,050
---------------
Food Products (1.6%)
Central Garden & Pet Co. (a) 2,400 68,112
Corn Products International, Inc. 8,400 362,208
M&F Worldwide Corp. (a) 8,900 116,234
Omega Protein Corp. (a) 12,100 109,142
---------------
655,696
---------------
Energy (6.0%)
Energy Equipment & Services (1.7%)
Lufkin Industries, Inc. 6,700 220,095
Universal Compression Holdings, Inc. (a) 5,900 193,579
Willbros Group, Inc. (a) 18,200 267,722
---------------
681,396
---------------
Oil & Gas (4.3%)
Atlas America, Inc. (a) 2,100 42,168
Carrizo Oil & Gas, Inc. (a) 18,700 184,943
Cimarex Energy Co. (a) 3,200 104,096
Energy Partners Ltd. (a) 10,200 159,528
Harvest Natural Resources, Inc. (a) 15,100 208,078
Magnum Hunter Resources, Inc. (a) 16,700 179,024
Range Resources Corp. 10,500 175,875
Stone Energy Corp. (a) 5,800 262,392
Western Gas Resources, Inc. 8,900 299,841
Whiting Petroleum Corp. (a) 4,700 111,296
---------------
1,727,241
---------------
</Table>
See Accompanying Notes to Financial Statements.
89
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Financials (26.1%)
Capital Markets (0.2%)
LaBranche & Co., Inc. 9,900 $ 81,081
---------------
Commercial Banks (10.6%)
BancFirst Corp. 1,000 59,450
BancorpSouth, Inc. 7,900 166,848
BancTrust Financial Group, Inc. 5,300 93,174
Bank of Granite Corp. 7,600 145,540
Bryn Mawr Bank Corp. 9,600 209,472
Capitol Bancorp Ltd. 8,200 211,970
Chemical Financial Corp. 7,400 255,596
Chittenden Corp. 8,700 295,539
Columbia Banking System, Inc. 5,500 119,735
Community Trust Bancorp, Inc. 4,660 140,592
First Citizens BancShares, Inc., Class A 1,200 142,800
First Financial Bankshares, Inc. 3,850 154,077
Greater Bay Bancorp 6,100 160,735
Hancock Holding Co. 3,600 108,108
MainSource Financial Group, Inc. 2,195 41,266
Merchants Bancshares, Inc. 6,100 161,644
Mid-State Bancshares 11,100 270,507
Northrim BanCorp, Inc. 5,700 114,855
Omega Financial Corp. 1,300 40,170
Riggs National Corp. 12,300 274,167
S.Y. Bancorp, Inc. 1,200 26,280
Sterling Bancshares, Inc. 17,400 226,896
TriCo Bancshares 15,400 277,662
UMB Financial Corp. 4,500 225,540
Whitney Holding Corp. 4,400 179,784
Wintrust Financial Corp. 3,300 174,999
---------------
4,277,406
---------------
Consumer Finance (0.8%)
Cash America International, Inc. 14,300 321,035
---------------
Diversified Financial Services (1.4%)
Metris Companies, Inc. (a) 23,200 154,280
MFC Bancorp Ltd. (a) 18,800 319,600
QC Holdings, Inc. (a) 5,500 82,225
---------------
556,105
---------------
Insurance (5.3%)
AmerUs Group Co. 3,100 119,350
CNA Surety Corp. (a) 11,800 120,478
Commerce Group, Inc. 3,800 183,958
Delphi Financial Group, Inc., Class A 6,800 275,740
Harleysville Group, Inc. 9,200 173,880
Horace Mann Educators Corp. 9,400 157,544
Kansas City Life Insurance Co. 900 40,140
</Table>
See Accompanying Notes to Financial Statements.
90
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Insurance (continued)
Navigators Group, Inc. (a) 3,700 $ 111,000
Phoenix Companies, Inc. 19,400 201,178
ProCentury Corp. (a) 12,700 124,333
Quanta Capital Holdings Ltd. (a) 15,600 156,780
RLI Corp. 5,700 209,760
UICI (a) 3,200 76,544
United National Group Ltd., Class A (a) 8,000 117,520
Universal American Financial Corp. (a) 7,900 85,715
---------------
2,153,920
---------------
Real Estate (6.6%)
Alexandria Real Estate Equities, REIT 3,900 234,351
American Financial Realty Trust, REIT 9,000 119,250
Boykin Lodging Co., REIT (a) 15,700 132,194
Brandywine Realty Trust, REIT 5,900 161,070
EastGroup Properties, Inc., REIT 7,000 227,010
Equity One, Inc., REIT 9,200 166,060
First Potomac Realty Trust, REIT 8,300 164,340
Getty Realty Corp., REIT 6,100 142,496
Gladstone Commercial Corp., REIT 7,200 117,720
Mid-America Apartment Communities, Inc., REIT 7,100 254,535
Nationwide Health Properties, Inc., REIT 11,900 227,290
PS Business Parks, Inc., REIT 8,200 329,640
Tanger Factory Outlet Centers, Inc., REIT 4,200 166,530
Universal Health Realty Income Trust, REIT 4,200 119,448
Urstadt Biddle Properties, Inc., Class A, REIT 9,000 122,040
---------------
2,683,974
---------------
Thrifts & Mortage Finance (1.2%)
Corus Bankshares, Inc. 7,100 285,065
ITLA Capital Corp. (a) 2,500 100,475
MASSBANK Corp. 2,500 85,625
---------------
471,165
---------------
Health Care (5.0%)
Health Care Equipment & Supplies (1.3%)
Analogic Corp. 4,200 174,468
Ocular Sciences, Inc. (a) 5,800 255,954
Sola International, Inc. (a) 5,500 89,430
---------------
519,852
---------------
Health Care Providers & Services (3.7%)
Capital Senior Living Corp. (a) 4,200 18,900
Cross Country Healthcare, Inc. (a) 8,800 131,296
Genesis HealthCare Corp. (a) 4,800 128,880
Hooper Holmes, Inc. 16,700 77,321
Kindred Healthcare, Inc. (a) 10,400 252,200
Orthodontic Centers of America, Inc. (a) 18,000 121,680
PAREXEL International Corp. (a) 11,000 211,310
Pediatrix Medical Group, Inc. (a) 4,400 278,256
</Table>
See Accompanying Notes to Financial Statements.
91
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Health Care Providers & Services (continued)
Province Healthcare Co. (a) 6,000 $ 87,180
Stewart Enterprises, Inc., Class A (a) 29,000 201,840
---------------
1,508,863
---------------
Industrials (20.1%)
Aerospace & Defense (2.0%)
AAR Corp. (a) 13,135 136,604
Herley Industries, Inc. (a) 6,500 122,200
Kaman Corp., Class A 11,100 138,084
Ladish Co., Inc. (a) 14,000 125,440
Precision Castparts Corp. 5,400 304,182
---------------
826,510
---------------
Air Freight & Logistics (1.0%)
Hub Group, Inc., Class A (a) 6,411 209,255
Ryder System, Inc. 4,100 175,890
---------------
385,145
---------------
Airlines (0.6%)
FLYi, Inc. (a) 8,000 29,360
MAIR Holdings, Inc. (a) 6,900 64,032
SkyWest, Inc. 9,800 138,474
---------------
231,866
---------------
Building Products (1.5%)
Jacuzzi Brands, Inc. (a) 10,700 82,604
NCI Building Systems, Inc. (a) 6,800 209,508
Watsco, Inc. 10,800 315,792
---------------
607,904
---------------
Commercial Services & Supplies (5.4%)
ABM Industries, Inc. 9,400 169,106
Angelica Corp. 5,000 120,350
Casella Waste Systems, Inc., Class A (a) 20,200 246,440
Century Business Services, Inc. (a) 11,942 50,395
Consolidated Graphics, Inc. (a) 9,100 395,941
Danka Business Systems PLC, ADR (a) 13,000 54,860
Electro Rent Corp. 3,900 37,908
First Consulting Group, Inc. (a) 1,229 6,649
Healthcare Services Group, Inc. 11,750 197,753
Imagistics International, Inc. (a) 10,100 328,250
NCO Group, Inc. (a) 6,000 149,820
SOURCECORP, Inc. (a) 6,000 141,060
TeleTech Holdings, Inc. (a) 14,800 129,500
United Rentals, Inc. (a) 8,200 162,688
---------------
2,190,720
---------------
Construction & Engineering (1.3%)
Comfort Systems USA, Inc. (a) 20,800 124,592
EMCOR Group, Inc. (a) 2,900 125,483
MasTec, Inc. (a) 3,600 22,464
</Table>
See Accompanying Notes to Financial Statements.
92
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Construction & Engineering (continued)
Quanta Services, Inc. (a) 6,000 $ 37,680
Washington Group International, Inc. (a) 5,800 193,836
---------------
504,055
---------------
Electrical Equipment (1.8%)
C&D Technologies, Inc. 8,900 139,730
Genlyte Group, Inc. (a) 3,300 205,590
Powell Industries, Inc. (a) 1,200 20,532
Tecumseh Products Co., Class A 4,100 167,403
Woodward Governor Co. 3,400 208,658
---------------
741,913
---------------
Machinery (4.4%)
Alamo Group, Inc. 4,300 69,832
Briggs & Stratton Corp. 3,100 258,850
EnPro Industries, Inc. (a) 9,700 240,172
Esterline Technologies Corp. (a) 9,000 282,510
Harsco Corp. 6,700 300,696
Kadant, Inc. (a) 9,100 182,910
Robbins & Myers, Inc. 8,519 161,094
Stewart & Stevenson Services, Inc. 12,500 196,875
UNOVA, Inc. (a) 5,200 87,932
---------------
1,780,871
---------------
Road & Rail (1.4%)
Covenant Transport, Inc., Class A (a) 6,900 121,854
Dollar Thrifty Automotive Group, Inc. (a) 6,100 146,949
U.S. Xpress Enterprises, Inc., Class A (a) 4,200 77,154
Werner Enterprises, Inc. 10,000 199,300
---------------
545,257
---------------
Trading Companies & Distributors (0.7%)
Hughes Supply, Inc. 4,805 292,721
---------------
Information Technology (11.8%)
Communications Equipment (0.9%)
Anaren, Inc. (a) 12,600 151,074
Black Box Corp. 3,700 140,600
Tollgrade Communications, Inc. (a) 9,400 78,208
---------------
369,882
---------------
Computers & Peripherals (1.3%)
Advanced Digital Information Corp. (a) 2,700 24,084
Electronics for Imaging, Inc. (a) 3,100 62,217
Hutchinson Technology, Inc. (a) 5,500 122,485
Hypercom Corp. (a) 17,600 119,680
Imation Corp. 1,700 56,355
Innovex, Inc. (a) 11,900 43,435
Intergraph Corp. (a) 3,456 91,204
---------------
519,460
---------------
</Table>
See Accompanying Notes to Financial Statements.
93
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Electronic Equipment & Instruments (3.0%)
Anixter International, Inc. 3,700 $ 123,876
Belden CDT, Inc. (a) 5,950 115,727
Benchmark Electronics, Inc. (a) 5,000 142,900
Checkpoint Systems, Inc. (a) 9,600 165,216
Identix, Inc. (a) 18,000 97,020
MTS Systems Corp. 6,700 143,849
Nu Horizons Electronics Corp. (a) 15,700 120,890
OSI Systems, Inc. (a) 6,000 111,780
Planar Systems, Inc. (a) 7,100 98,051
Vishay Intertechnology, Inc. (a) 5,800 89,900
---------------
1,209,209
---------------
Internet Software & Services (1.5%)
ActivCard Corp. (a) 15,100 100,113
Keynote Systems, Inc. (a) 12,000 158,040
Modem Media, Inc. (a) 11,300 51,867
MPS Group, Inc. (a) 33,900 304,422
---------------
614,442
---------------
IT Services (2.3%)
Acxiom Corp. 9,100 200,200
Agilysys, Inc. (a) 7,400 110,260
Brightpoint, Inc. (a) 14,100 187,530
CompuCom Systems, Inc. (a) 24,800 113,088
Computer Horizons Corp. (a) 17,200 66,908
Inforte Corp. (a) 11,900 97,580
Lightbridge, Inc. (a) 14,200 61,060
MAXIMUS, Inc. (a) 3,100 99,107
---------------
935,733
---------------
Semiconductors & Semiconductor Equipment (0.6%)
Exar Corp. (a) 9,700 130,659
Pericom Semiconductor Corp. (a) 9,500 94,905
---------------
225,564
---------------
Software (2.2%)
Captaris, Inc. (a) 24,300 134,136
Internet Security Systems, Inc. (a) 9,000 137,880
Lawson Software, Inc. (a) 11,900 84,490
MSC.Software Corp. (a) 15,600 114,972
PLATO Learning, Inc. (a) 20,300 178,031
SeaChange International, Inc. (a) 10,100 148,369
Sybase, Inc. (a) 7,200 104,904
---------------
902,782
---------------
Materials (8.8%)
Chemicals (2.7%)
A. Schulman, Inc. 6,900 143,658
Cytec Industries, Inc. 4,600 214,360
H.B. Fuller Co. 5,500 147,015
Lubrizol Corp. 3,200 110,816
Minerals Technologies, Inc. 3,300 184,371
</Table>
See Accompanying Notes to Financial Statements.
94
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Chemicals (continued)
Sensient Technologies Corp. 6,900 $ 142,416
Stepan Co. 5,700 138,168
---------------
1,080,804
---------------
Construction Materials (0.7%)
Eagle Materials, Inc. 4,400 290,312
---------------
Containers & Packaging (1.0%)
AptarGroup, Inc. 3,900 165,009
Greif, Inc., Class A 6,600 245,256
---------------
410,265
---------------
Metals & Mining (3.5%)
AMCOL International Corp. 6,200 124,620
Carpenter Technology Corp. 9,800 421,400
Metal Management, Inc. (a) 11,200 217,168
Peabody Energy Corp. 4,100 230,338
RTI International Metals, Inc. (a) 12,400 185,876
Steel Technologies, Inc. 9,900 228,789
---------------
1,408,191
---------------
Paper & Forest Products (0.9%)
Glatfelter 8,700 115,971
Mercer International, Inc. (a) 16,000 156,800
Schweitzer-Mauduit International, Inc. 2,500 70,625
---------------
343,396
---------------
Telecommunication Services (0.7%)
Diversified Telecommunication Services (0.3%)
North Pittsburgh Systems, Inc. 7,100 135,965
---------------
Wireless Telecommunication Services (0.4%)
Price Communications Corp. (a) 9,230 137,527
---------------
Utilities (3.7%)
Electric Utilities (3.0%)
Central Vermont Public Service Corp. 10,200 198,186
CH Energy Group, Inc. 6,800 299,200
El Paso Electric Co. (a) 11,700 176,085
Maine & Maritimes Corp. 2,200 69,080
MGE Energy, Inc. 3,900 122,967
Otter Tail Corp. 5,900 146,556
Puget Energy, Inc. 9,800 211,680
---------------
1,223,754
---------------
Gas Utilities (0.7%)
Cascade Natural Gas Corp. 4,400 88,396
Northwest Natural Gas Co. 3,200 94,016
WGL Holdings, Inc. 3,400 93,296
---------------
275,708
---------------
Total Common Stocks
(Cost of $34,383,425) 40,217,253
---------------
</Table>
See Accompanying Notes to Financial Statements.
95
<Page>
<Table>
<Caption>
PAR VALUE
--------------- ---------------
Short-Term Obligation (0.4%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.240%,
collateralized by a U.S. Treasury Bond
maturing 11/15/27, market value of $173,019
(repurchase proceeds $166,017)
(Cost of $166,000) $ 166,000 $ 166,000
---------------
Total Investments (100.1%)
(Cost of $34,549,425) (b) 40,383,253
Other Assets & Liabilities, Net (-0.1%) (26,894)
---------------
Net Assets (100.0%) $ 40,356,359
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $34,765,143.
<Table>
<Caption>
ACRONYM NAME
------------- --------------------------------
ADR American Depositary Receipt
REIT Real Estate Investment Trust
</Table>
See Accompanying Notes to Financial Statements.
96
<Page>
CMG SMALL/MID CAP FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (97.4%)
Consumer Discretionary (14.7%)
Auto Components (2.0%)
Autoliv, Inc. 17,130 $ 721,002
Gentex Corp. 8,335 298,393
---------------
1,019,395
---------------
Hotels, Restaurants & Leisure (3.0%)
Applebee's International, Inc. 9,900 263,736
Cheesecake Factory, Inc. (a) 4,300 179,611
Four Seasons Hotels, Inc. 2,670 162,042
Harrah's Entertainment, Inc. 7,540 350,535
Hilton Hotels Corp. 17,620 314,165
P.F. Chang's China Bistro, Inc. (a) 5,800 257,694
---------------
1,527,783
---------------
Household Durables (1.3%)
Garmin Ltd. 8,510 319,125
Harman International Industries, Inc. 3,740 320,630
---------------
639,755
---------------
Leisure Equipment & Products (0.4%)
Brunswick Corp. 5,710 222,861
---------------
Media (3.9%)
Entercom Communications Corp. (a) 9,415 362,007
Getty Images, Inc. (a) 7,380 403,096
Univision Communications, Inc., Class A (a) 26,480 767,126
XM Satellite Radio Holdings, Inc., Class A (a) 16,900 445,991
---------------
1,978,220
---------------
Multiline Retail (0.6%)
Dollar General Corp. 14,400 277,920
---------------
Specialty Retail (2.7%)
Advance Auto Parts, Inc. (a) 4,090 151,821
Bed Bath & Beyond, Inc. (a) 5,280 186,859
Chico's FAS, Inc. (a) 4,700 196,789
PETCO Animal Supplies, Inc. (a) 13,100 391,297
Williams-Sonoma, Inc. (a) 13,960 453,560
---------------
1,380,326
---------------
Textiles, Apparel & Luxury Goods (0.8%)
Columbia Sportswear Co. (a) 6,950 380,512
---------------
Consumer Staples (0.5%)
Personal Products (0.5%)
NBTY, Inc. (a) 10,340 224,998
---------------
</Table>
See Accompanying Notes to Financial Statements.
97
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Energy (13.3%)
Energy Equipment & Services (7.5%)
BJ Services Co. (a) 8,750 $ 434,525
Key Energy Services, Inc. (a) 35,120 354,010
Nabors Industries Ltd. (a) 12,400 576,600
National-Oilwell, Inc. (a) 30,480 1,019,556
Patterson-UTI Energy, Inc. 35,620 649,353
Precision Drilling Corp. (a) 9,280 461,494
Rowan Companies, Inc. (a) 12,710 310,378
---------------
3,805,916
---------------
Oil & Gas (5.8%)
Apache Corp. 10,630 494,614
Ashland, Inc. 7,880 411,888
EOG Resources, Inc. 7,890 501,410
Murphy Oil Corp. 8,160 631,094
XTO Energy, Inc. 30,678 917,272
---------------
2,956,278
---------------
Financials (2.9%)
Capital Markets (1.2%)
Affiliated Managers Group, Inc. (a) 13,450 617,490
---------------
Insurance (1.7%)
Allmerica Financial Corp. (a) 10,540 314,197
Ambac Financial Group, Inc. 7,770 552,525
---------------
866,722
---------------
Health Care (16.4%)
Biotechnology (1.9%)
Affymetrix, Inc. (a) 8,410 227,154
Amylin Pharmaceuticals, Inc. (a) 35,030 721,618
---------------
948,772
---------------
Health Care Equipment & Supplies (1.8%)
Boston Scientific Corp. (a) 5,230 200,100
Kinetic Concepts, Inc. (a) 7,240 325,221
Varian Medical Systems, Inc. (a) 5,590 385,766
---------------
911,087
---------------
Health Care Providers & Services (7.6%)
Caremark Rx, Inc. (a) 30,415 927,657
Community Health Systems, Inc. (a) 22,820 561,600
DaVita, Inc. (a) 27,338 830,240
Manor Care, Inc. 21,630 675,937
Renal Care Group, Inc. (a) 27,170 865,636
---------------
3,861,070
---------------
Pharmaceuticals (5.1%)
Barr Pharmaceuticals, Inc. (a) 11,460 393,651
Endo Pharmaceuticals Holdings, Inc. (a) 19,810 380,352
IVAX Corp. (a) 11,440 272,844
</Table>
See Accompanying Notes to Financial Statements.
98
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Pharmaceuticals (continued)
Medicis Pharmaceutical Corp., Class A 25,830 $ 923,939
Nektar Therapeutics (a) 13,250 232,405
Teva Pharmaceutical Industries Ltd., ADR 12,510 370,296
---------------
2,573,487
---------------
Industrials (12.5%)
Aerospace & Defense (1.7%)
United Defense Industries, Inc. (a) 24,100 835,065
---------------
Commercial Services & Supplies (4.0%)
ChoicePoint, Inc. (a) 11,596 487,032
Education Management Corp. (a) 34,290 951,890
ITT Educational Services, Inc. (a) 4,670 148,740
Manpower, Inc. 10,600 461,630
---------------
2,049,292
---------------
Construction & Engineering (0.7%)
Jacobs Engineering Group, Inc. (a) 9,290 371,414
---------------
Electrical Equipment (1.4%)
American Power Conversion Corp. 27,320 412,532
Roper Industries, Inc. 5,220 292,320
---------------
704,852
---------------
Machinery (4.1%)
Donaldson Co., Inc. 31,220 831,389
IDEX Corp. 11,580 371,602
Joy Global, Inc. 10,480 311,151
Kennametal, Inc. 12,910 568,040
---------------
2,082,182
---------------
Road & Rail (0.6%)
Sirva, Inc. (a) 12,110 283,132
---------------
Information Technology (32.2%)
Communications Equipment (5.8%)
3Com Corp. (a) 42,760 210,807
ADTRAN, Inc. 9,590 256,149
Andrew Corp. (a) 8,280 89,838
Comverse Technology, Inc. (a) 62,020 1,058,061
F5 Networks, Inc. (a) 15,810 414,064
Foundry Networks, Inc. (a) 11,160 114,502
Polycom, Inc. (a) 40,570 782,190
---------------
2,925,611
---------------
Computers & Peripherals (2.4%)
Electronics for Imaging, Inc. (a) 35,645 715,395
Lexmark International, Inc., Class A (a) 5,730 507,105
---------------
1,222,500
---------------
</Table>
See Accompanying Notes to Financial Statements.
99
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Electronic Equipment & Instruments (6.6%)
Amphenol Corp., Class A (a) 40,050 $ 1,258,772
AVX Corp. 28,860 359,884
CDW Corp. 10,520 676,436
National Instruments Corp. 14,100 409,605
Sanmina-SCI Corp. (a) 29,160 214,034
Vishay Intertechnology, Inc. (a) 27,200 421,600
---------------
3,340,331
---------------
Internet Software & Services (1.1%)
Ask Jeeves, Inc. (a) 11,020 320,462
SINA Corp. (a) 9,000 255,150
---------------
575,612
---------------
IT Services (2.0%)
Anteon International Corp. (a) 5,060 157,568
CACI International, Inc., Class A (a) 6,100 250,771
DST Systems, Inc. (a) 6,150 280,194
Global Payments, Inc. 6,870 313,615
---------------
1,002,148
---------------
Semiconductors & Semiconductor Equipment (7.8%)
Altera Corp. (a) 23,790 495,308
Fairchild Semiconductor International, Inc., Class A (a) 15,610 229,311
Integrated Device Technology, Inc. (a) 46,490 531,381
Lattice Semiconductor Corp. (a) 23,500 115,150
Marvell Technology Group Ltd. (a) 14,060 326,473
Microchip Technology, Inc. 31,450 911,106
National Semiconductor Corp. (a) 12,870 220,720
NVIDIA Corp. (a) 24,170 372,218
PMC-Sierra, Inc. (a) 22,100 262,548
Silicon Laboratories, Inc. (a) 14,150 499,353
---------------
3,963,568
---------------
Software (6.5%)
Amdocs Ltd. (a) 11,130 241,521
Autodesk, Inc. 17,680 710,736
BEA Systems, Inc. (a) 15,220 98,778
BMC Software, Inc. (a) 22,100 346,528
Hyperion Solutions Corp. (a) 7,090 290,832
Macromedia, Inc. (a) 28,680 579,336
Mercury Interactive Corp. (a) 13,990 511,474
Siebel Systems, Inc. (a) 32,720 263,723
VERITAS Software Corp. (a) 13,450 256,357
---------------
3,299,285
---------------
Materials (3.8%)
Chemicals (1.6%)
Airgas, Inc. 6,430 139,853
Potash Corp. of Saskatchewan, Inc. 7,240 700,036
---------------
839,889
---------------
</Table>
See Accompanying Notes to Financial Statements.
100
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Metals & Mining (2.2%)
Arch Coal, Inc. 7,630 $ 257,665
Massey Energy Co. 6,600 182,490
Peabody Energy Corp. 11,910 669,104
---------------
1,109,259
---------------
Telecommunication Services (1.1%)
Wireless Telecommunication Services (1.1%)
Nextel Partners, Inc., Class A (a) 33,770 542,684
---------------
Total Common Stocks
(Cost of $42,374,623) 49,339,416
---------------
<Caption>
PAR
---------------
Short-Term Obligation (4.6%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.230%,
collateralized by a U.S. Treasury Note
maturing 05/15/10, market value of $2,376,088
(repurchase proceeds $2,326,238)
(Cost of $2,326,000) $ 2,326,000 2,326,000
---------------
Total Investments (102.0%)
(Cost of $44,700,623) (b) 51,665,416
Other Assets & Liabilities, Net (-2.0%) (1,003,833)
---------------
Net Assets (100.0%) $ 50,661,583
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $45,131,836.
<Table>
<Caption>
ACRONYM NAME
------------------- ---------------------------
ADR American Depositary Receipt
</Table>
See Accompanying Notes to Financial Statements.
101
<Page>
CMG INTERNATIONAL STOCK FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (96.0%)
Consumer Discretionary (15.3%)
Auto Components (0.8%)
Denso Corp. 47,500 $ 1,165,775
---------------
Automobiles (3.0%)
Renault SA 29,070 2,290,933
Toyota Motor Corp. 57,800 2,327,900
---------------
4,618,833
---------------
Hotels, Restaurants & Leisure (2.2%)
Accor SA 27,100 1,149,456
Carnival Corp. 20,300 946,183
Compass Group PLC 119,104 692,853
InterContinental Hotels Group PLC 54,399 578,468
---------------
3,366,960
---------------
Household Durables (2.7%)
Funai Electric Co., Ltd. 5,100 715,242
Koninklijke (Royal) Philips Electronics NV 77,700 1,881,374
Matsushita Electric Industrial Co., Ltd. 107,000 1,427,500
---------------
4,024,116
---------------
Media (3.6%)
Dentsu, Inc. 300 765,946
JC Decaux SA (a) 42,600 905,496
News Corp., Ltd. 106,800 915,068
Pearson PLC 103,220 1,157,714
Reuters Group PLC 148,500 879,390
WPP Group PLC 96,400 891,810
---------------
5,515,424
---------------
Multiline Retail (2.3%)
Aeon Co., Ltd. 18,100 621,585
Big C Supercenter Public Co., Ltd. 515,600 234,704
Isetan Co., Ltd. 77,000 882,591
Seiyu Ltd. (a) 157,000 427,662
Takashimaya Co., Ltd. 67,000 624,012
Wal-Mart de Mexico SA de CV, Series V 231,500 705,941
---------------
3,496,495
---------------
Specialty Retail (0.7%)
Aoyama Trading Co., Ltd. 17,300 390,372
Nitori Co., Ltd. 11,350 700,989
---------------
1,091,361
---------------
Consumer Staples (11.0%)
Beverages (1.5%)
Diageo PLC 144,310 1,789,232
ITO EN Ltd. 11,400 532,926
---------------
2,322,158
---------------
</Table>
See Accompanying Notes to Financial Statements.
102
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Food & Staples Retailing (1.2%)
C.P. Seven-Eleven Public Co., Ltd., Foreign Shares 149,700 $ 228,356
Metro AG 23,972 1,098,919
William Morrison Supermarkets PLC 155,478 511,979
---------------
1,839,254
---------------
Food Products (4.2%)
Ajinomoto Co., Inc. 64,000 745,089
Cadbury Schweppes PLC 89,978 737,046
Nestle SA, Registered Shares 11,462 2,925,897
Unilever PLC 229,320 2,025,515
---------------
6,433,547
---------------
Household Products (2.8%)
Kao Corp. 61,000 1,513,552
Reckitt Benckiser PLC 101,540 2,778,365
---------------
4,291,917
---------------
Personal Products (0.3%)
Oriflame Cosmetics SA, SDR (a) 13,000 431,674
---------------
Tobacco (1.0%)
Imperial Tobacco Group PLC 69,496 1,512,151
---------------
Energy (8.7%)
Oil & Gas (8.7%)
BP PLC, ADR 55,880 3,149,397
EnCana Corp. 44,100 1,951,020
ENI S.p.A 185,130 3,805,989
Norsk Hydro ASA 10,120 639,046
PTT Public Co., Ltd. 175,300 649,416
Shell Transport & Trading Co., PLC 145,300 1,053,412
Total SA 10,030 1,945,046
---------------
13,193,326
---------------
Financials (21.0%)
Capital Markets (0.6%)
Credit Suisse Group 29,590 948,220
---------------
Commercial Banks (13.1%)
Alpha Bank AE 34,080 807,162
Anglo Irish Bank Corp., PLC 45,160 714,504
Banco Popolare di Verona e Novara 52,800 879,816
Banco Popular Espanol SA 15,560 836,951
Bank of Ireland 58,734 768,269
Barclays PLC 274,690 2,298,820
Credit Agricole SA 72,000 1,696,615
Danske Bank SA 42,000 966,029
Erste Bank der oesterreichischen Sparkassen AG 29,000 1,124,404
Hansabank Ltd. 60,072 496,884
</Table>
See Accompanying Notes to Financial Statements.
103
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Commercial Banks (continued)
HBOS PLC 56,150 $ 727,845
Kookmin Bank (a) 31,230 857,791
Lloyds TSB Group PLC 93,610 702,081
Mitsubishi Tokyo Financial Group, Inc. 124 1,111,413
Mizuho Financial Group, Inc. 193 732,198
National Bank of Greece SA 32,487 691,317
Royal Bank of Scotland Group PLC 81,360 2,288,362
Siam Commercial Bank Public Co., Ltd., Registered Shares 82,300 89,673
Skandinaviska Enskilda Banken AB, Class A 51,000 687,358
Societe Generale 9,900 811,735
Sumitomo Mitsui Financial Group, Inc. 118 711,808
---------------
20,001,035
---------------
Diversified Financial Services (1.3%)
ING Groep NV 81,650 1,892,596
---------------
Insurance (4.0%)
Allianz AG, Registered Shares 10,872 1,049,590
AXA 59,800 1,227,240
Irish Life & Permanent PLC 11,100 167,746
Irish Life & Permanent PLC 37,500 568,965
Millea Holdings, Inc. 107 1,577,561
Mitsui Sumitomo Insurance Co., Ltd. 82,000 759,293
T&D Holdings, Inc. 16,000 743,651
---------------
6,094,046
---------------
Real Estate (2.0%)
Mitsubishi Estate Co., Ltd. 122,000 1,389,617
Sun Hung Kai Properties Ltd. 190,000 1,607,734
---------------
2,997,351
---------------
Health Care (11.9%)
Health Care Equipment & Supplies (2.4%)
Nobel Biocare Holding AG 5,600 765,027
Smith & Nephew PLC 282,900 2,856,474
---------------
3,621,501
---------------
Pharmaceuticals (9.5%)
AstraZeneca PLC 45,300 2,028,216
Chugai Pharmaceutical Co., Ltd. 143,000 2,248,456
GlaxoSmithKline PLC 125,700 2,554,423
Novartis AG, Registered Shares 40,970 1,831,017
Sanofi-Synthelabo SA 31,010 2,054,225
Takeda Pharmaceutical Co., Ltd. 52,900 2,477,718
Teva Pharmaceutical Industries Ltd., ADR 44,600 1,320,160
---------------
14,514,215
---------------
Industrials (10.7%)
Building Products (0.9%)
Wienerberger AG 38,300 1,372,176
---------------
</Table>
See Accompanying Notes to Financial Statements.
104
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Commercial Services & Supplies (1.2%)
Capita Group PLC 131,000 $ 729,285
Randstad Holding NV 41,600 1,137,309
---------------
1,866,594
---------------
Construction & Engineering (2.8%)
JGC Corp. 101,000 944,307
Shimizu Corp. 206,000 857,446
Taisei Corp. 275,000 872,702
Vinci SA 15,078 1,532,682
---------------
4,207,137
---------------
Industrial Conglomerates (1.7%)
Aeon Mall Co., Ltd. 3,100 158,296
Burberry Group PLC 130,186 888,178
Siemens AG, Registered Shares 10,945 767,279
Smith Group PLC 58,425 775,936
---------------
2,589,689
---------------
Machinery (2.5%)
Atlas Copco AB, Class B 53,400 1,759,278
Heidelberger Druckmaschinen AG 23,900 740,756
Volvo AB, Class B 35,100 1,256,934
---------------
3,756,968
---------------
Road & Rail (0.5%)
Canadian National Railway Co. 17,945 803,606
---------------
Trading Companies & Distributors (0.6%)
Mitsubishi Corp. 103,000 992,637
---------------
Transportation Infrastructure (0.5%)
BAA PLC 75,140 764,849
---------------
Information Technology (5.0%)
Electronic Equipment & Instruments (2.3%)
Celestica, Inc. (a) 44,400 755,702
Keyence Corp. 3,500 741,313
Tandberg ASA 77,300 694,173
TDK Corp. 19,600 1,356,767
---------------
3,547,955
---------------
IT Services (0.7%)
NIWS Co., Ltd. 125 322,515
TIS, Inc. 18,000 689,351
---------------
1,011,866
---------------
Office Electronics (1.0%)
Canon, Inc. 31,000 1,516,070
---------------
</Table>
See Accompanying Notes to Financial Statements.
105
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Common Stocks (continued)
Semiconductors & Semiconductor Equipment (1.0%)
ARM Holdings PLC 235,691 $ 451,304
Samsung Electronics Co., Ltd. 2,920 1,040,273
---------------
1,491,577
---------------
Materials (4.7%)
Chemicals (3.6%)
BASF AG 26,870 1,430,441
L'Air Liquide SA 9,240 1,494,132
Linde AG 14,100 764,523
Sygenta AG 21,330 1,760,849
---------------
5,449,945
---------------
Construction Materials (0.7%)
Cemex SA de CV, ADR 38,000 1,070,840
---------------
Paper & Forest Products (0.4%)
UPM-Kymmene Oyj 32,700 634,521
---------------
Telecommunication Services (4.7%)
Diversified Telecommunication Services (2.7%)
Bharti Tele-Ventures Ltd. (a) 204,080 668,898
France Telecom SA 42,320 1,047,094
Nippon Telegraph & Telephone Corp. 140 698,521
Telefonaktiebolaget LM Ericsson, ADR (a) 62,400 1,666,704
---------------
4,081,217
---------------
Wireless Telecommunication Services (2.0%)
NTT DoCoMo, Inc. 313 545,889
Vodafone Group PLC 1,190,050 2,581,831
---------------
3,127,720
---------------
Utilities (3.0%)
Electric Utilities (2.0%)
E.ON AG 32,498 2,310,251
Scottish Power PLC 103,531 742,115
---------------
3,052,366
---------------
Multi-Utilities & Unregulated Power (1.0%)
National Grid Transco PLC 192,100 1,521,144
---------------
Total Common Stocks
(Cost of $138,195,734) 146,230,832
---------------
Preferred Stock (0.9%)
Consumer Discretionary (0.9%)
Automobiles (0.9%)
Porsche AG
(Cost of $1,338,250) 2,081 1,345,137
---------------
Rights (0.0%)
Accor SA (a)
(Cost of $0) 27,100 -(b)
---------------
</Table>
See Accompanying Notes to Financial Statements.
106
<Page>
<Table>
<Caption>
PAR VALUE
--------------- ---------------
Short-Term Obligation (3.7%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.230%,
collateralized by a U.S. Treasury Note
maturing 11/15/10, market value of $5,692,228
(repurchase proceeds $5,576,572)
(Cost of $5,576,000) $ 5,576,000 $ 5,576,000
---------------
Total Investments (100.6%)
(Cost of $145,109,984)(c) 153,151,969
Other Assets & Liabilities, Net (-0.6%) (901,044)
---------------
Net Assets (100.0%) $ 152,250,925
===============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security has no value.
(c) Cost for federal income tax purposes is $145,625,608.
<Table>
<Caption>
ACRONYM NAME
---------------- ------------------------------
ADR American Depositary Receipt
SDR Swedish Depositary Receipt
</Table>
See Accompanying Notes to Financial Statements.
107
<Page>
<Table>
<Caption>
SUMMARY OF SECURITIES % OF TOTAL
BY COUNTRY VALUE INVESTMENTS
- ---------------------------------- --------------- ---------------
United Kingdom $ 39,668,195 25.9%
Japan 34,288,670 22.4
France 16,154,654 10.5
Germany 9,506,896 6.2
Switzerland 8,231,010 5.4
United States* 5,576,000 3.6
Sweden 5,370,274 3.5
Netherlands 4,911,279 3.2
Italy 4,685,805 3.1
Canada 3,510,328 2.3
Austria 2,496,580 1.6
Ireland 2,219,484 1.5
South Korea 1,898,064 1.2
Mexico 1,776,781 1.2
Hong Kong 1,607,734 1.1
Greece 1,498,479 1.0
Norway 1,333,219 0.9
Israel 1,320,160 0.9
Thailand 1,202,149 0.8
Denmark 966,029 0.6
Panama 946,183 0.6
Australia 915,068 0.6
Spain 836,951 0.5
India 668,898 0.4
Finland 634,521 0.4
Estonia 496,884 0.3
Luxembourg 431,674 0.3
--------------- ---------------
$ 153,151,969 100.0%
=============== ===============
</Table>
* Represents short-term obligation.
See Accompanying Notes to Financial Statements.
108
<Page>
This page is intentionally left blank
<Page>
CMG ENHANCED S&P 500(R) INDEX FUND
CMG LARGE CAP GROWTH FUND
CMG LARGE CAP VALUE FUND
Portfolios of CMG Fund Trust
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 2004
<Table>
<Caption>
CMG ENHANCED CMG CMG
S&P 500(R) LARGE CAP LARGE CAP
INDEX FUND GROWTH FUND VALUE FUND
--------------- --------------- ---------------
ASSETS:
Investments, at identified cost $ 95,454,117 $ 40,237,354 $ 45,109,612
--------------- --------------- ---------------
Investments, at value $ 98,174,856 $ 40,998,924 $ 47,761,418
Cash 761 766 193
Cash denominated in foreign currency (cost of $1,039,454) - - -
Receivable for:
Investments sold - 226,644 -
Capital stock sold - 75,000 25,000
Interest 30 54 52
Dividends and foreign tax reclaims 124,926 15,080 122,292
Expense reimbursement due from Investment Advisor 6,565 19,125 17,983
Reimbursement due from Investment Advisor (See Note 8) - - -
Deferred Trustees' compensation plan 446 495 428
--------------- --------------- ---------------
Total Assets 98,307,584 41,336,088 47,927,366
--------------- --------------- ---------------
LIABILITIES:
Payable for:
Investments purchased - 572,818 -
Fund shares repurchased 20,000 - -
Investment advisory fee 20,112 17,302 19,900
Trustees' fees 1,774 503 502
Audit fee 17,272 34,050 34,050
Foreign capital gains tax accrued - - -
Deferred Trustees' fees 446 495 428
Other liabilities 697 27,343 17,768
--------------- --------------- ---------------
Total liabilities 60,301 652,511 72,648
--------------- --------------- ---------------
NET ASSETS $ 98,247,283 $ 40,683,577 $ 47,854,718
=============== =============== ===============
NET ASSETS consists of:
Paid-in-capital $ 94,313,772 $ 40,855,194 $ 44,669,574
Undistributed net investment income 665,116 65,201 489,677
Accumulated net investment loss - - -
Accumulated net realized gain (loss) 547,656 (998,388) 43,661
Net unrealized appreciation (depreciation) on:
Investments 2,720,739 761,570 2,651,806
Foreign currency translations - - -
Foreign capital gains tax - - -
--------------- --------------- ---------------
NET ASSETS $ 98,247,283 $ 40,683,577 $ 47,854,718
=============== =============== ===============
Shares of capital stock outstanding 8,210,306 3,969,029 4,314,262
=============== =============== ===============
Net asset value, offering and redemption price per share $ 11.97 $ 10.25 $ 11.09
=============== =============== ===============
</Table>
See Accompanying Notes to Financial Statements.
110
<Page>
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
<Table>
<Caption>
CMG CMG CMG
MID CAP MID CAP SMALL CAP
GROWTH FUND VALUE FUND GROWTH FUND
--------------- --------------- ---------------
ASSETS:
Investments, at identified cost $ 19,194,883 $ 20,381,482 $ 35,528,620
--------------- --------------- ---------------
Investments, at value $ 19,457,996 $ 22,001,522 $ 35,915,625
Cash 60 453 380
Cash denominated in foreign currency (cost of $1,039,454) - - -
Receivable for:
Investments sold 55,794 - 70,851
Capital stock sold - - -
Interest 78 48 91
Dividends and foreign tax reclaims 3,399 14,268 2,009
Expense reimbursement due from Investment Advisor 9,626 11,422 11,095
Reimbursement due from Investment Advisor (See Note 8) - - -
Deferred Trustees' compensation plan 431 417 466
--------------- --------------- ---------------
Total Assets 19,527,384 22,028,130 36,000,517
--------------- --------------- ---------------
LIABILITIES:
Payable for:
Investments purchased 211,510 - 228,480
Fund shares repurchased - - -
Investment advisory fee 11,659 13,278 23,834
Trustees' fees 499 500 504
Audit fee 19,373 19,373 19,373
Foreign capital gains tax accrued - - -
Deferred Trustees' fees 431 417 466
Other liabilities 398 363 398
--------------- --------------- ---------------
Total liabilities 243,870 33,931 273,055
--------------- --------------- ---------------
NET ASSETS $ 19,283,514 $ 21,994,199 $ 35,727,462
=============== =============== ===============
NET ASSETS consists of:
Paid-in-capital $ 20,197,907 $ 20,241,224 $ 33,345,526
Undistributed net investment income - 57,377 -
Accumulated net investment loss (2,391) - (510)
Accumulated net realized gain (loss) (1,175,115) 75,558 1,995,441
Net unrealized appreciation (depreciation) on:
Investments 263,113 1,620,040 387,005
Foreign currency translations - - -
Foreign capital gains tax - - -
--------------- --------------- ---------------
NET ASSETS $ 19,283,514 $ 21,994,199 $ 35,727,462
=============== =============== ===============
Shares of capital stock outstanding 1,745,930 1,748,421 2,979,490
=============== =============== ===============
Net asset value, offering and redemption price per share $ 11.04 $ 12.58 $ 11.99
=============== =============== ===============
<Caption>
CMG CMG CMG
SMALL CAP SMALL/MID INTERNATIONAL
VALUE FUND CAP FUND STOCK FUND
--------------- --------------- ---------------
ASSETS:
Investments, at identified cost $ 34,549,425 $ 44,700,623 $ 145,109,984
--------------- --------------- ---------------
Investments, at value $ 40,383,253 $ 51,665,416 $ 153,151,969
Cash 684 9 639
Cash denominated in foreign currency (cost of $1,039,454) - - 1,034,253
Receivable for:
Investments sold 3,771 353,551 1,348,865
Capital stock sold - 159 30,000
Interest 11 4,026 381
Dividends and foreign tax reclaims 35,573 - 204,325
Expense reimbursement due from Investment Advisor 7,736 12,450 18,079
Reimbursement due from Investment Advisor (See Note 8) - - 47,741
Deferred Trustees' compensation plan 456 544 761
--------------- --------------- ---------------
Total Assets 40,431,484 52,036,155 155,837,013
--------------- --------------- ---------------
LIABILITIES:
Payable for:
Investments purchased 27,515 1,311,263 3,402,677
Fund shares repurchased - - -
Investment advisory fee 26,813 34,681 96,710
Trustees' fees 470 559 2,022
Audit fee 19,373 25,000 28,499
Foreign capital gains tax accrued - - 53,956
Deferred Trustees' fees 456 544 761
Other liabilities 498 2,525 1,463
--------------- --------------- ---------------
Total liabilities 75,125 1,374,572 3,586,088
--------------- --------------- ---------------
NET ASSETS $ 40,356,359 $ 50,661,583 $ 152,250,925
=============== =============== ===============
NET ASSETS consists of:
Paid-in-capital $ 32,074,244 $ 55,402,242 $ 144,565,843
Undistributed net investment income 148,785 - 706,196
Accumulated net investment loss - (597) -
Accumulated net realized gain (loss) 2,299,502 (11,704,855) (1,012,288)
Net unrealized appreciation (depreciation) on:
Investments 5,833,828 6,964,793 8,041,985
Foreign currency translations - - 3,145
Foreign capital gains tax - - (53,956)
--------------- --------------- ---------------
NET ASSETS $ 40,356,359 $ 50,661,583 $ 152,250,925
=============== =============== ===============
Shares of capital stock outstanding 2,901,143 5,774,903 12,506,278
=============== =============== ===============
Net asset value, offering and redemption price per share $ 13.91 $ 8.77 $ 12.17
=============== =============== ===============
</Table>
See Accompanying Notes to Financial Statements.
111
<Page>
CMG ENHANCED S&P 500(R) INDEX FUND
CMG LARGE CAP GROWTH FUND
CMG LARGE CAP VALUE FUND
Portfolios of CMG Fund Trust
STATEMENTS OF OPERATIONS
For the Year Ended July 31, 2004
<Table>
<Caption>
CMG ENHANCED CMG CMG
S&P 500(R) LARGE CAP LARGE CAP
INDEX FUND GROWTH FUND (a) VALUE FUND (a)
--------------- --------------- ---------------
NET INVESTMENT INCOME:
Income:
Dividends $ 1,033,576 $ 234,300 $ 721,283
Interest 6,285 7,567 11,886
Foreign withholding tax - (2,430) (6,786)
--------------- --------------- ---------------
Total income 1,039,861 239,437 726,383
--------------- --------------- ---------------
Expenses:
Investment advisory fee 154,552 148,272 153,985
Trustees' fees 5,615 4,233 4,241
Audit fee 22,691 37,769 37,769
Trustee legal counsel fees 727 611 604
Non-recurring costs (See Note 9) 4,268 1,854 2,045
--------------- --------------- ---------------
Total expenses 187,853 192,739 198,644
Expense reimbursement from Investment Advisor (29,033) (42,613) (42,614)
Non-recurring costs assumed by Investment Advisor
(See Note 9) (4,268) (1,854) (2,045)
--------------- --------------- ---------------
Net expenses 154,552 148,272 153,985
--------------- --------------- ---------------
Net investment income (loss) 885,309 91,165 572,398
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY AND FOREIGN CAPITAL GAINS TAX:
Net realized gain (loss) on:
Investments 582,070 (998,388) 43,501
Foreign currency transactions - - -
Foreign capital gains tax - - -
Net realized loss on the disposal of investments
purchased/sold in error (See Note 8) - - -
--------------- --------------- ---------------
Net realized gain (loss) 582,070 (998,388) 43,501
--------------- --------------- ---------------
Net change in unrealized appreciation/depreciation on:
Investments 2,619,440 761,570 2,651,806
Foreign currency translations - - -
Foreign capital gains tax - - -
--------------- --------------- ---------------
Net change in unrealized appreciation/depreciation 2,619,440 761,570 2,651,806
--------------- --------------- ---------------
Net gain (loss) 3,201,510 (236,818) 2,695,307
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 4,086,819 $ (145,653) $ 3,267,705
--------------- --------------- ---------------
</Table>
(a) The Fund commenced investment operations on September 10, 2003.
See Accompanying Notes to Financial Statements.
112
<Page>
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
<Table>
<Caption>
CMG CMG CMG
MID CAP MID CAP SMALL CAP
GROWTH FUND VALUE FUND GROWTH FUND
--------------- --------------- ---------------
NET INVESTMENT INCOME:
Income:
Dividends $ 36,887 $ 177,858 $ 50,705
Interest 6,184 7,754 10,517
Foreign withholding tax (397) - (196)
--------------- --------------- ---------------
Total income 42,674 185,612 61,026
--------------- --------------- ---------------
Expenses:
Investment advisory fee 94,471 104,971 247,119
Trustees' fees 4,348 3,958 4,460
Audit fee 24,792 24,792 24,792
Trustee legal counsel fees 576 1,082 1,092
Non-recurring costs (See Note 9) 889 986 1,657
--------------- --------------- ---------------
Total expenses 125,076 135,789 279,120
Expense reimbursement from Investment Advisor (29,716) (29,832) (30,344)
Non-recurring costs assumed by Investment Advisor
(See Note 9) (889) (986) (1,657)
--------------- --------------- ---------------
Net expenses 94,471 104,971 247,119
--------------- --------------- ---------------
Net investment income (loss) (51,797) 80,641 (186,093)
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY AND FOREIGN CAPITAL GAINS TAX:
Net realized gain (loss) on:
Investments (1,170,829) 75,700 3,236,594
Foreign currency transactions (1,920) - -
Foreign capital gains tax - - -
Net realized loss on the disposal of investments
purchased/sold in error (See Note 8) - - -
--------------- --------------- ---------------
Net realized gain (loss) (1,172,749) 75,700 3,236,594
--------------- --------------- ---------------
Net change in unrealized appreciation/depreciation on:
Investments 146,764 1,512,473 (1,228,396)
Foreign currency translations - - -
Foreign capital gains tax - - -
--------------- --------------- ---------------
Net change in unrealized appreciation/depreciation 146,764 1,512,473 (1,228,396)
--------------- --------------- ---------------
Net gain (loss) (1,025,985) 1,588,173 2,008,198
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (1,077,782) $ 1,668,814 $ 1,822,105
--------------- --------------- ---------------
<Caption>
CMG CMG CMG
SMALL CAP SMALL/MID INTERNATIONAL
VALUE FUND CAP FUND STOCK FUND
--------------- --------------- ---------------
NET INVESTMENT INCOME:
Income:
Dividends $ 554,329 $ 180,203 $ 2,425,658
Interest 4,040 17,446 47,821
Foreign withholding tax - (1,433) (281,785)
--------------- --------------- ---------------
Total income 558,369 196,216 2,191,694
--------------- --------------- ---------------
Expenses:
Investment advisory fee 275,569 565,283 861,837
Trustees' fees 4,375 5,244 8,656
Audit fee 24,792 35,886 44,021
Trustee legal counsel fees 1,421 5,775 3,756
Non-recurring costs (See Note 9) 1,799 3,385 6,643
--------------- --------------- ---------------
Total expenses 307,956 615,573 924,913
Expense reimbursement from Investment Advisor (30,588) (46,905) (56,433)
Non-recurring costs assumed by Investment Advisor
(See Note 9) (1,799) (3,385) (6,643)
--------------- --------------- ---------------
Net expenses 275,569 565,283 861,837
--------------- --------------- ---------------
Net investment income (loss) 282,800 (369,067) 1,329,857
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY AND FOREIGN CAPITAL GAINS TAX:
Net realized gain (loss) on:
Investments 2,739,432 12,174,435 7,991,443
Foreign currency transactions - - (265,407)
Foreign capital gains tax - - (179,871)
Net realized loss on the disposal of investments
purchased/sold in error (See Note 8) - - -
--------------- --------------- ---------------
Net realized gain (loss) 2,739,432 12,174,435 7,546,165
--------------- --------------- ---------------
Net change in unrealized appreciation/depreciation on:
Investments 3,889,062 (6,374,728) 3,822,302
Foreign currency translations - - 2,935
Foreign capital gains tax - - (8,299)
--------------- --------------- ---------------
Net change in unrealized appreciation/depreciation 3,889,062 (6,374,728) 3,816,938
--------------- --------------- ---------------
Net gain (loss) 6,628,494 5,799,707 11,363,103
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 6,911,294 $ 5,430,640 $ 12,692,960
--------------- --------------- ---------------
</Table>
See Accompanying Notes to Financial Statements.
113
<Page>
CMG ENHANCED S&P 500(R) INDEX FUND
Portfolio of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
CMG ENHANCED
S&P 500(R)
INDEX FUND
-------------------------------------
YEAR ENDED PERIOD ENDED
JULY 31, JULY 31,
2004 2003 (a)
--------------- ---------------
Operations:
Net investment income $ 885,309 $ 14,758
Net realized gain on investments 582,070 3,535
Net change in unrealized appreciation/depreciation on investments 2,619,440 101,175
--------------- ---------------
Net increase from operations 4,086,819 119,468
Distributions declared to shareholders:
From net investment income (232,474) -
From net realized gains (40,302) -
--------------- ---------------
Total distributions declared to shareholders (272,776) -
Share transactions:
Subscriptions 94,353,306 9,015,000
Distributions reinvested 29,758 -
Redemptions (9,084,292) -
--------------- ---------------
Net increase in shares transactions 85,298,772 9,015,000
--------------- ---------------
Net increase in net assets 89,112,815 9,134,468
NET ASSETS:
Beginning of period 9,134,468 -
--------------- ---------------
End of period $ 98,247,283 $ 9,134,468
=============== ===============
Undistributed net investment income $ 665,116 $ 14,758
=============== ===============
Change in Shares:
Subscriptions 8,102,596 851,673
Issued for distributions reinvested 2,509 -
Redemptions (746,472) -
--------------- ---------------
Net increase 7,358,633 851,673
--------------- ---------------
</Table>
(a) The Fund commenced investment operations on May 5, 2003.
See Accompanying Notes to Financial Statements.
114
<Page>
CMG LARGE CAP GROWTH FUND
CMG LARGE CAP VALUE FUND
Portfolios of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
CMG CMG
LARGE CAP LARGE CAP
GROWTH FUND VALUE FUND
--------------- ---------------
PERIOD ENDED PERIOD ENDED
JULY 31, JULY 31,
2004 (a) 2004 (a)
--------------- ---------------
Operations:
Net investment income $ 91,165 $ 572,398
Net realized gain (loss) on investments (998,388) 43,501
Net change in unrealized appreciation/depreciation on investments 761,570 2,651,806
--------------- ---------------
Net increase (decrease) from operations (145,653) 3,267,705
Distributions declared to shareholders:
From net investment income (25,964) (82,818)
--------------- ---------------
Share transactions:
Subscriptions 45,852,862 49,285,154
Distributions reinvested 4,175 14,274
Redemptions (5,001,843) (4,629,597)
--------------- ---------------
Net increase in shares transactions 40,855,194 44,669,831
--------------- ---------------
Net increase in net assets 40,683,577 47,854,718
NET ASSETS:
Beginning of period - -
--------------- ---------------
End of period $ 40,683,577 $ 47,854,718
=============== ===============
Undistributed net investment income $ 65,201 $ 489,677
=============== ===============
Change in Shares:
Subscriptions 4,440,392 4,742,377
Issued for distributions reinvested 399 1,333
Redemptions (471,762) (429,448)
--------------- ---------------
Net increase 3,969,029 4,314,262
--------------- ---------------
</Table>
(a) The Fund commenced investment operations on September 10, 2003.
See Accompanying Notes to Financial Statements.
115
<Page>
CMG MID CAP GROWTH FUND
CMG MID CAP VALUE FUND
Portfolios of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
CMG CMG
MID CAP MID CAP
GROWTH FUND VALUE FUND
---------------------------------- ---------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
2004 2003 (a) 2004 2003 (a)
--------------- --------------- --------------- ---------------
Operations:
Net investment income (loss) $ (51,797) $ (1,676) $ 80,641 $ 1,986
Net realized gain (loss) on
investments (1,172,749) 4,190 75,700 2,240
Net change in unrealized
appreciation/depreciation
on investments 146,764 116,349 1,512,473 107,567
--------------- --------------- --------------- ---------------
Net increase (decrease) from
operations (1,077,782) 118,863 1,668,814 111,793
Distributions declared to shareholders:
From net investment income - - (25,250) -
From net realized gains (6,844) - (2,382) -
--------------- --------------- --------------- ---------------
Total distributions declared
to shareholders (6,844) - (27,632) -
Share transactions:
Subscriptions 20,789,926 2,042,300 21,123,853 2,539,150
Distributions reinvested 2,911 - 4,042 -
Redemptions (2,585,860) - (3,425,821) -
--------------- --------------- --------------- ---------------
Net increase in shares transactions 18,206,977 2,042,300 17,702,074 2,539,150
--------------- --------------- --------------- ---------------
Net increase in net assets 17,122,351 2,161,163 19,343,256 2,650,943
NET ASSETS:
Beginning of period 2,161,163 - 2,650,943 -
--------------- --------------- --------------- ---------------
End of period $ 19,283,514 $ 2,161,163 $ 21,994,199 $ 2,650,943
=============== =============== =============== ===============
Undistributed net investment
income $ - $ - $ 57,377 $ 1,986
=============== =============== =============== ===============
Accumulated net investment loss $ (2,391) $ - $ - $ -
=============== =============== =============== ===============
Change in Shares:
Subscriptions 1,764,371 197,710 1,773,133 248,038
Issued for distributions reinvested 241 - 336 -
Redemptions (216,392) - (273,086) -
--------------- --------------- --------------- ---------------
Net increase 1,548,220 197,710 1,500,383 248,038
--------------- --------------- --------------- ---------------
</Table>
(a) The Fund commenced investment operations on May 5, 2003.
See Accompanying Notes to Financial Statements.
116
<Page>
CMG SMALL CAP GROWTH FUND
CMG SMALL CAP VALUE FUND
Portfolios of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
CMG CMG
SMALL CAP SMALL CAP
GROWTH FUND VALUE FUND
---------------------------------- ---------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
2004 2003 (a) 2004 2003 (a)
--------------- --------------- --------------- ---------------
Operations:
Net investment income (loss) $ (186,093) $ (25,882) $ 282,800 $ 26,809
Net realized gain on investments 3,236,594 823,948 2,739,432 115,873
Net change in unrealized
appreciation/depreciation
on investments (1,228,396) 1,615,401 3,889,062 1,931,846
--------------- --------------- --------------- ---------------
Net increase from operations 1,822,105 2,413,467 6,911,294 2,074,528
Distributions declared to shareholders:
From net investment income - - (146,373) -
From net realized gains (1,853,636) - (557,335) -
--------------- --------------- --------------- ---------------
Total distributions declared
to shareholders (1,853,636) - (703,708) -
Share transactions:
Subscriptions 20,340,250 19,177,304 22,163,080 19,724,518
Distributions reinvested 1,248,755 - 445,442 -
Redemptions (6,836,214) (584,569) (9,816,077) (442,718)
--------------- --------------- --------------- ---------------
Net increase in shares transactions 14,752,791 18,592,735 12,792,445 19,281,800
--------------- --------------- --------------- ---------------
Net increase in net assets 14,721,260 21,006,202 19,000,031 21,356,328
NET ASSETS:
Beginning of period 21,006,202 - 21,356,328 -
--------------- --------------- --------------- ---------------
End of period $ 35,727,462 $ 21,006,202 $ 40,356,359 $ 21,356,328
=============== =============== =============== ===============
Undistributed net investment
income $ - $ - $ 148,785 $ 26,809
=============== =============== =============== ===============
Accumulated net investment loss $ (510) $ - $ - $ -
=============== =============== =============== ===============
Change in Shares:
Subscriptions 1,583,555 1,873,343 1,716,774 1,931,086
Issued for distributions reinvested 100,382 - 33,618 -
Redemptions (526,058) (51,732) (740,106) (40,229)
--------------- --------------- --------------- ---------------
Net increase 1,157,879 1,821,611 1,010,286 1,890,857
--------------- --------------- --------------- ---------------
</Table>
(a) The Fund commenced investment operations on May 5, 2003.
See Accompanying Notes to Financial Statements.
117
<Page>
CMG SMALL/MID CAP FUND
CMG INTERNATIONAL STOCK FUND
Portfolios of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
CMG CMG
SMALL/MID INTERNATIONAL
CAP FUND STOCK FUND
-------------------------------------------- ------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
JULY 31, JULY 31, OCTOBER 31, JULY 31, JULY 31, OCTOBER 31,
2004 2003 (a) 2002 2004 2003 (a) 2002
------------ ------------ ------------ ------------ ------------ ------------
Operations:
Net investment
income (loss) $ (369,067) $ (234,660) $ (287,809) $ 1,329,857 $ 403,458 $ 48,664
Net realized gain (loss)
on investments, foreign
currency transactions and
foreign capital gains tax 12,174,435 98,697 (11,733,008) 7,546,165 (1,950,231) (3,433,114)
Net change in unrealized
appreciation/depreciation
on investments, foreign
currency translations and
foreign capital gains tax (6,374,728) 12,048,506 1,504,894 3,816,938 5,770,512 68,234
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations 5,430,640 11,912,543 (10,515,923) 12,692,960 4,223,739 (3,316,216)
Distributions declared
to shareholders:
From net investment
income - - - (529,435) (92,056) (69,418)
------------ ------------ ------------ ------------ ------------ ------------
Share transactions:
Subscriptions 4,155,162 9,106,124 23,551,961 89,977,364 36,683,376 10,312,316
Distributions reinvested - - - 330,247 86,707 69,418
Redemptions (32,850,066) (1,861,599) (7,658,216) (8,707,904) (3,029,686) (6,933,677)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
shares transactions (28,694,904) 7,244,525 15,893,745 81,599,707 33,740,397 3,448,057
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets (23,264,264) 19,157,068 5,377,822 93,763,232 37,872,080 62,423
NET ASSETS:
Beginning of period 73,925,847 54,768,779 49,390,957 58,487,693 20,615,613 20,553,190
------------ ------------ ------------ ------------ ------------ ------------
End of period $ 50,661,583 $ 73,925,847 $ 54,768,779 $152,250,925 $ 58,487,693 $ 20,615,613
============ ============ ============ ============ ============ ============
Undistributed net
investment income $ - $ 25,825 $ 21,326 $ 706,196 $ 352,135 $ 84,225
============ ============ ============ ============ ============ ============
Accumulated net
investment loss $ (597) $ - $ - $ - $ - $ -
============ ============ ============ ============ ============ ============
Change in Shares:
Subscriptions 455,080 1,296,527 2,797,021 7,516,797 3,755,927 944,395
Issued for distributions
reinvested - - - 27,705 9,466 6,392
Redemptions (3,586,319) (262,053) (1,096,189) (698,471) (317,061) (710,896)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) (3,131,239) 1,034,474 1,700,832 6,846,031 3,448,332 239,891
------------ ------------ ------------ ------------ ------------ ------------
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
See Accompanying Notes to Financial Statements.
118
<Page>
CMG ENHANCED S&P 500(R) INDEX FUND
CMG LARGE CAP GROWTH FUND
CMG LARGE CAP VALUE FUND
CMG MID CAP GROWTH FUND
CMG MID CAP VALUE FUND
CMG SMALL CAP GROWTH FUND
CMG SMALL CAP VALUE FUND
CMG SMALL/MID CAP FUND
CMG INTERNATIONAL STOCK FUND
Portfolios of CMG Fund Trust
NOTES TO FINANCIAL STATEMENTS
July 31, 2004
NOTE 1. ORGANIZATION:
CMG Fund Trust (the "Trust") is an Oregon business trust registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. Information presented in these financial statements pertains to the
following diversified funds (individually referred to as a "Fund", collectively
referred to as the "Funds"):
CMG Enhanced S&P 500(R) Index Fund
CMG Large Cap Growth Fund
CMG Large Cap Value Fund
CMG Mid Cap Growth Fund
CMG Mid Cap Value Fund
CMG Small Cap Growth Fund
CMG Small Cap Value Fund
CMG Small/Mid Cap Fund
CMG International Stock Fund
INVESTMENT GOALS. The CMG Enhanced S&P 500(R) Index Fund seeks to outperform the
total return, over the long run, of the Standard & Poor's 500 Composite Stock
Index (the "S&P 500(R)"). The CMG Large Cap Growth Fund and CMG Large Cap Value
Fund seek long-term growth by investing primarily in large capitalization
equities. The CMG Mid Cap Growth Fund and CMG Mid Cap Value Fund seek long-term
growth by investing primarily in middle capitalization equities. The CMG Small
Cap Growth Fund and CMG Small Cap Value Fund seek long-term growth by investing
primarily in small capitalization equities. The CMG Small/Mid Cap Fund seeks
long-term capital appreciation by investing in small and middle capitalization
equities. The CMG International Stock Fund seeks long-term capital appreciation.
FUND SHARES. Each Fund may issue 100 million shares of no par value capital
stock, which are offered continuously at net asset value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by the Funds in the preparation of their
financial statements.
119
<Page>
SECURITY VALUATION. Equity securities and exchange traded funds are valued at
the last sale price on the principal exchange on which they trade, except for
securities traded on the NASDAQ, which are valued at the NASDAQ official close
price. Unlisted securities or listed securities for which there were no sales
during the day are valued at the closing bid price on such exchanges or
over-the-counter markets.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Foreign securities are generally valued at the last sale price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Funds'
shares are determined as of such times. Foreign currency exchange rates are
generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events
affecting the values of such foreign securities and such exchange rates may
occur between the times at which they are determined and the close of the
customary trading session of the NYSE, which would not be reflected in the
computation of the Funds' net asset value. If events materially affecting the
values of such foreign securities occur and it is determined that market
quotations are not reliable, then these foreign securities will be valued at
their fair value using procedures approved by the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
REPURCHASE AGREEMENTS. Each Fund may engage in repurchase agreement transactions
with institutions that the Funds' investment advisor has determined are
creditworthy. Each Fund, through its custodian, receives delivery of underlying
securities collateralizing a repurchase agreement. Collateral is at least equal,
at all times, to the value of the repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty. These risks include possible delays or
restrictions upon each Fund's ability to dispose of the underlying securities
and a possible decline in the value of the underlying securities during the
period while the Funds seek to assert their rights.
INCOME RECOGNITION. Interest income is recorded on the accrual basis. Corporate
actions and dividend income are recorded on the ex-date, except for certain
foreign securities which are recorded as soon after ex-date as the Funds become
aware of such, net of non-reclaimable tax withholdings. The Funds estimate
components of distributions from real estate investment trusts (REITs).
Distributions received in excess of income are recorded as a reduction of the
cost of the related investments. If the Funds no longer own the applicable
securities, any distributions received in excess of income are recorded as
realized gains.
Effective February 1, 2004, the Funds adopted the policy to reduce cost of
investments for financial statement purposes by the distributions received in
excess of income from REITs. The cumulative effect of this accounting change did
not impact the net assets of the Funds, but resulted in reclassifications as
follows:
<Table>
<Caption>
DECREASE IN DECREASE IN UNDISTRIBUTED
COST NET INVESTMENT INCOME
----------- -------------------------
CMG Enhanced S&P 500(R) Index Fund $ 124 $ 124
CMG Small Cap Value Fund 12,920 12,920
</Table>
The effect of the change for the year ended July 31, 2004 is as follows:
<Table>
<Caption>
INCREASE IN INCREASE IN
UNREALIZED DECREASE IN NET NET REALIZED
APPRECIATION INVESTMENT INCOME GAIN
------------ ----------------- ------------
CMG Enhanced S&P 500(R) Index Fund $ 266 $ 266 $ -
CMG Small Cap Value Fund 13,123 14,124 1,001
</Table>
120
<Page>
FOREIGN CURRENCY TRANSACTIONS. The values of all assets and liabilities quoted
in foreign currencies are translated into U.S. dollars at that day's exchange
rates. Net realized and unrealized gains (losses) on foreign currency
transactions include gains (losses) arising from the fluctuation in exchange
rates between trade and settlement dates on securities transactions, gains
(losses) arising from the disposition of foreign currency and currency gains
(losses) between the accrual and payment dates on dividends, interest income and
foreign withholding taxes.
For financial statement purposes, the Funds do not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains (losses) on
investments.
FEDERAL INCOME TAX STATUS. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code,
as amended, and will distribute substantially all of its taxable income, if any,
for its tax year, and as such will not be subject to federal income taxes. In
addition, each Fund intends to distribute in each calendar year substantially
all of its net investment income, capital gains and certain other amounts, if
any, such that each Fund should not be subject to federal excise tax. Therefore,
no federal income or excise tax provision is recorded.
FOREIGN CAPITAL GAINS TAXES. Realized gains in certain countries may be subject
to foreign taxes at the fund level, at rates ranging from approximately 10% to
30%. The Funds accrue for such foreign taxes on net realized and unrealized
gains at the appropriate rate for each jurisdiction.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on
ex-date. Net realized capital gains, if any, are distributed at least annually.
NOTE 3. FEDERAL TAX INFORMATION:
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to a Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended July 31, 2004, permanent differences resulting primarily from
differing treatments for section 988 reclassification of foreign currency,
foreign capital gains tax, net operating loss reclassifications, non-deductible
excise tax paid and REIT adjustments were identified and reclassified among the
components of the Funds' net assets as follows:
<Table>
<Caption>
UNDISTRIBUTED
OR
ACCUMULATED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME (LOSS) GAIN (LOSS) PAID-IN CAPITAL
-------------- ------------ ---------------
CMG Enhanced S&P 500(R)
Index Fund $ (2,353) $ 2,353 $ -
CMG Large Cap Growth Fund - - -
CMG Large Cap Value Fund 97 160 (257)
CMG Mid Cap Growth Fund 49,406 1,964 (51,370)
CMG Mid Cap Value Fund - - -
CMG Small Cap Growth Fund 185,583 (185,583) -
CMG Small Cap Value Fund (1,531) 1,532 (1)
CMG Small/Mid Cap Fund 342,645 25,823 (368,468)
CMG International Stock Fund (446,361) 446,361 -
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statements of Operations, and net assets were not affected by these
reclassifications.
121
<Page>
The tax character of distributions paid during the year ended July 31, 2004, the
period ended July 31, 2003 and the year ended October 31, 2002 was as follows:
<Table>
<Caption>
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 -
<Caption>
JULY 31, 2003
------------------------------
ORDINARY LONG-TERM
INCOME* CAPITAL GAINS
-------------- -------------
CMG International Stock Fund $ 92,056 $ -
<Caption>
OCTOBER 31, 2002
------------------------------
ORDINARY LONG-TERM
INCOME* CAPITAL GAINS
-------------- -------------
CMG International Stock Fund $ 69,418 $ -
</Table>
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
As of July 31, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
------------- ------------- --------------
CMG Enhanced S&P 500(R)
Index Fund $ 1,482,394 $ 24,353 $ 2,427,255
CMG Large Cap Growth Fund 65,665 - 494,429
CMG Large Cap Value Fund 628,855 160 2,556,599
CMG Mid Cap Growth Fund - - 116,230
CMG Mid Cap Value Fund 144,632 5,955 1,602,845
CMG Small Cap Growth Fund 1,736,189 264,126 382,132
CMG Small Cap Value Fund 2,384,315 280,191 5,618,110
CMG Small/Mid Cap Fund - - 6,533,580
CMG International Stock Fund 1,033,476 3,661,470 7,522,674
</Table>
* The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to deferral of losses from wash sales.
122
<Page>
Unrealized appreciation and depreciation at July 31, 2004, based on cost of
investments for federal income tax purposes, excluding any unrealized
appreciation and depreciation from changes in the value of other assets and
liabilities resulting from changes in exchange rates, was:
<Table>
<Caption>
NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
CMG Enhanced S&P 500(R) Index Fund $ 6,057,121 $ (3,629,866) $ 2,427,255
CMG Large Cap Growth Fund 2,294,331 (1,799,902) 494,429
CMG Large Cap Value Fund 3,736,738 (1,180,139) 2,556,599
CMG Mid Cap Growth Fund 874,790 (758,560) 116,230
CMG Mid Cap Value Fund 2,358,543 (755,698) 1,602,845
CMG Small Cap Growth Fund 4,630,800 (4,248,668) 382,132
CMG Small Cap Value Fund 6,892,182 (1,274,072) 5,618,110
CMG Small/Mid Cap Fund 8,682,193 (2,148,613) 6,533,580
CMG International Stock Fund 12,555,242 (5,028,881) 7,526,361
</Table>
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:
<Table>
<Caption>
YEAR OF EXPIRATION
-------------------------------------------------------------------
2009 2010 2011 2012 TOTAL
---------- ----------- ---------- ---------- ----------
CMG Large Cap Growth Fund $ - $ - $ - $ 67,035 $ 67,035
CMG Mid Cap Growth Fund - - - 49,708 49,708
CMG Small/Mid Cap Fund - 11,217,812 55,830 - 11,273,642
CMG International Stock Fund 616,859 3,440,479 420,427 - 4,477,765
</Table>
Capital loss carryforwards of $11,911,256 and $4,090,680 of the CMG Small/Mid
Cap Fund and CMG International Stock Fund, respectively, were utilized during
the year ended July 31, 2004. Expired capital loss carryforwards are recorded as
a reduction of paid-in capital. The capital loss carryforward of $4,477,765 of
CMG International Stock Fund is subject to limitations under the Internal
Revenue Code and may not be utilized for the year ended July 31, 2004. As a
result, the Fund has $3,661,470 of undistributed long-term capital gains after
the utilization of $4,090,680 of capital losses for the year ended July 31,
2004.
Under current tax rules, certain currency and capital losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following fiscal year. As of July 31, 2004, post-October currency losses and
capital losses attributed to security transactions were deferred to August 1,
2004 as follows:
<Table>
<Caption>
POST-OCTOBER POST-OCTOBER
CURRENCY LOSSES CAPITAL LOSSES
--------------- --------------
CMG Large Cap Growth Fund $ - $ 664,212
CMG Mid Cap Growth Fund 1,920 978,524
</Table>
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES:
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Funds. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston, including the Funds' investment advisor and transfer agent, was
acquired by Bank of America Corporation ("BOA"). The acquisition did not change
the way the Funds are managed, the investment personnel assigned to manage the
Funds or the fees paid by the Funds.
123
<Page>
INVESTMENT ADVISORY FEE. Each Fund's investment advisory fee is a unified fee.
Columbia, out of the unified fee it receives from the Funds, pays all accounting
fees, legal fees, transfer agent fees, custody fees and miscellaneous expenses
of the Funds. The unified fee does not include brokerage fees, taxes, Trustees'
fees, Trustee legal counsel fees, audit fees, interest expenses associated with
any borrowings by the Funds or extraordinary expenses, if any. The unified fees
are paid monthly to Columbia at the following annual rates based on average
daily net assets:
<Table>
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%
</Table>
PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and
bookkeeping services to each Fund under a pricing, bookkeeping and fund
administration agreement. Under a separate agreement (the "Outsourcing
Agreement"), Columbia has delegated certain of those functions to State Street
Corporation ("State Street"). As a result, Columbia pays fees to State Street
under the Outsourcing Agreement. The pricing and bookkeeping fees for the Funds
are included in the unified fee.
TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services to the Funds. The transfer
agent fees for the Funds are included in the unified fee.
Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia
Funds Services, Inc.
EXPENSE LIMITS AND FEE WAIVERS. Columbia has contractually agreed to reimburse
the Funds through March 1, 2009 for certain expenses so that the expenses
incurred by the Funds, including the investment advisory fees, would not exceed
the following annual rates based on each Fund's average daily net assets:
<Table>
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%
</Table>
FEES PAID TO OFFICERS AND TRUSTEES. The Funds pay no compensation to their
officers, all of whom are employees of Columbia or its affiliates.
The Funds' trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Funds' assets.
OTHER. Columbia provides certain services to the Funds related to Sarbanes-Oxley
compliance. The fees for such services are included in the unified fee.
124
<Page>
NOTE 5. PORTFOLIO INFORMATION:
For the year ended July 31, 2004, the cost of purchases and proceeds from sales
of securities, excluding short-term obligations, were as follows:
<Table>
<Caption>
PURCHASES SALES
--------------- ---------------
CMG Enhanced S&P 500 (R)
Index Fund $ 122,728,927 $ 36,880,787
CMG Large Cap Growth Fund 79,070,049 38,627,216
CMG Large Cap Value Fund 59,895,121 15,590,010
CMG Mid Cap Growth Fund 38,711,378 21,457,115
CMG Mid Cap Value Fund 18,404,129 1,194,709
CMG Small Cap Growth Fund 31,832,572 19,589,823
CMG Small Cap Value Fund 30,855,166 18,198,654
CMG Small/Mid Cap Fund 65,877,649 95,513,154
CMG International Stock Fund 179,268,224 99,786,425
</Table>
NOTE 6. LINE OF CREDIT:
Effective July 23, 2004, the Funds and other affiliated funds began
participating in a $350,000,000 credit facility, which is used for temporary or
emergency purposes to facilitate portfolio liquidity. Interest is charged to
each Fund based on its borrowings. In addition, each Fund has agreed to pay
commitment fees on its pro-rata portion of the unutilized line of credit. The
commitment fee is included in the unified fee.
Prior to July 23, 2004, the Funds participated in a $100,000,000 uncommitted
line of credit along with the other funds of the Trust and several of the
Columbia Funds, an affiliated group of funds managed by the investment advisor.
The uncommitted line of credit, which was scheduled to expire on July 2, 2004,
was extended by the Trust and expired on July 23, 2004.
For the year ended July 31, 2004, the Funds did not borrow under these
arrangements.
NOTE 7. SHARES OF BENEFICIAL INTEREST:
As of July 31, 2004, the Funds had shareholders that held greater than 5% of the
shares outstanding. Subscription and redemption activity of these shareholders
may have a material effect on the Funds. The numbers of shareholders greater
than 5% and the aggregate percentage of shares outstanding held were as follows:
<Table>
<Caption>
NUMBER OF % OF SHARES
SHAREHOLDERS OUTSTANDING HELD
--------------- ----------------
CMG Enhanced S&P 500(R) Index Fund 3 100.00%
CMG Large Cap Growth Fund 3 100.00%
CMG Large Cap Value Fund 3 100.00%
CMG Mid Cap Growth Fund 3 100.00%
CMG Mid Cap Value Fund 3 99.92%
CMG Small Cap Growth Fund 3 100.00%
CMG Small Cap Value Fund 3 100.00%
CMG Small/Mid Cap Fund 9 87.92%
CMG International Stock Fund 3 85.18%
</Table>
125
<Page>
NOTE 8. OTHER
During the year ended July 31, 2004, the CMG Mid Cap Value Fund received a
reimbursement of $4,842 from Columbia. This reimbursement was due to a trading
error that resulted in a loss to the Fund.
During the year ended July 31, 2004, the CMG International Stock Fund purchased
shares of Compass Group PLC in error. This position was subsequently sold off at
a loss of $47,741 and the Fund was reimbursed by Columbia.
NOTE 9. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES:
FOREIGN SECURITIES. There are certain additional risks involved when investing
in foreign securities that are not inherent with investments in domestic
securities. These risks may involve foreign currency exchange rate fluctuations,
adverse political and economic developments and the possible prevention of
currency exchange or other foreign governmental laws or restrictions. In
addition, the liquidity of foreign securities may be more limited than that of
domestic securities.
Investments in emerging market countries are subject to additional risk. The
risk of foreign investments is typically increased in less developed countries.
These countries are also more likely to experience high levels of inflation,
deflation or currency devaluation which could hurt their economies and
securities markets.
INDUSTRY FOCUS. The Funds may focus their investments in certain industries,
subjecting them to greater risk than a fund that is more diversified.
LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and
certain of their affiliates (collectively, "The Columbia Group") have received
information requests and subpoenas from various regulatory and law enforcement
authorities in connection with their investigations of late trading and market
timing in mutual funds as well as other industry wide issues. The Columbia Group
has not uncovered any instances where Columbia or CFDI were knowingly involved
in late trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil complaint in New York Supreme Court, County of New York
against Columbia and CFDI alleging that Columbia and CFDI had violated certain
New York antifraud statutes. If either Columbia or CFDI is unsuccessful in its
defense of these proceedings, it could be barred from serving as an investment
advisor or distributor for any investment company registered under the
Investment Company Act of 1940, as amended (a "registered investment company").
Such results could prevent Columbia, CFDI or any company that is an affiliated
person of Columbia and CFDI from serving as an investment advisor or distributor
for any registered investment company, including your fund. Your fund has been
informed by Columbia that, if these results occur, it will seek exemptive relief
from the SEC to permit it to continue to serve as your fund's investment
advisor. There is no assurance that such exemptive relief will be granted. On
March 15, 2004, Columbia and CFDI entered into agreements in principle with the
SEC Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and CFDI agreed, among other things, to the following
conditions: payment of $70 million in disgorgement; payment of $70 million in
civil penalties; an order requiring Columbia and CFDI to cease and desist from
violations of the antifraud provisions and other provisions of the federal
securities laws; governance changes designed to maintain the independence of the
mutual fund boards of trustees and ensure compliance with securities laws and
their fiduciary duties; and retention of an independent consultant to review
Columbia's and CFDI's compliance policies and procedures. The agreement requires
the final approval of the SEC. In a separate agreement with the NYAG, the
Columbia Group and its affiliate Banc of America Capital Management, LLC have
agreed to collectively reduce mutual fund fees by $160 million over a five-year
period.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
126
<Page>
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). More than 300 cases (including those filed against
entities unaffiliated with the funds, their Boards and/or FleetBoston and its
affiliated entities) have been consolidated in a multi-district proceeding and
transferred to the Federal District Court in Maryland. Recently, certain
Columbia funds and affiliated entities have been named as defendants in several
derivative actions under various sections of the Investment Company Act of 1940,
as amended, alleging, among other things, that the fees and expenses paid by
those funds are excessive. The funds and the other defendants to these actions,
including Columbia and various affiliates, certain other mutual funds advised by
Columbia and its affiliates, and various directors of such funds, have denied
these allegations and are contesting the plaintiffs' claims. These suits and
certain regulatory investigations are ongoing, however, based on currently
available information, Columbia believes that these lawsuits are without merit,
that the likelihood they will have a material adverse impact on any fund is
remote, and that the lawsuits are not likely to materially affect its ability to
provide investment management services to its clients, including the funds.
For the year ended July 31, 2004, Columbia has assumed legal, consulting
services and Trustees' fees incurred by the Funds in connection with these
matters as follows:
<Table>
CMG Enhanced S&P 500(R) Index Fund $ 4,268
CMG Large Cap Growth Fund 1,854
CMG Large Cap Value Fund 2,045
CMG Mid Cap Growth Fund 889
CMG Mid Cap Value Fund 986
CMG Small Cap Growth Fund 1,657
CMG Small Cap Value Fund 1,799
CMG Small/Mid Cap Fund 3,385
CMG International Stock Fund 6,643
</Table>
127
<Page>
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES OF CMG FUND TRUST AND SHAREHOLDERS OF CMG ENHANCED S&P 500(R)
INDEX FUND, CMG LARGE CAP GROWTH FUND, CMG LARGE CAP VALUE FUND, CMG MID CAP
GROWTH FUND, CMG MID CAP VALUE FUND, CMG SMALL CAP GROWTH FUND, CMG SMALL CAP
VALUE FUND, CMG SMALL/MID CAP FUND AND CMG INTERNATIONAL STOCK FUND
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CMG Enhanced S&P 500(R) Index Fund,
CMG Large Cap Growth Fund, CMG Large Cap Value Fund, CMG Mid Cap Growth Fund,
CMG Mid Cap Value Fund, CMG Small Cap Growth Fund, CMG Small Cap Value Fund, CMG
Small/Mid Cap Fund and CMG International Stock Fund (the "Funds")(each a series
of CMG Fund Trust), at July 31, 2004, and the results of their operations, the
changes in their net assets, and their financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States), which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at July
31, 2004 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 2004
128
<Page>
Unaudited Information
FEDERAL INCOME TAX INFORMATION
CMG ENHANCED S&P 500(R) INDEX FUND
For the fiscal year ended July 31, 2004, the Fund designates long-term capital
gains of $24,353.
48.83% of the ordinary income distributed by the Fund, for the year ended July
31, 2004, qualifies for the corporate dividends received deduction.
For non-corporate shareholders 58.71%, or the maximum amount allowable under the
Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the
Fund for the period August 1, 2003 to July 31, 2004 may represent qualified
dividend income. Final information will be provided in your 2004 1099-Div Form.
CMG LARGE CAP GROWTH FUND
100.00% of the ordinary income distributed by the Fund, for the period ended
July 31, 2004, qualifies for the corporate dividends received deduction.
For non-corporate shareholders 100.00%, or the maximum amount allowable under
the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by
the Fund for the period September 10, 2003 to July 31, 2004 may represent
qualified dividend income. Final information will be provided in your 2004
1099-Div Form.
CMG LARGE CAP VALUE FUND
For the period ended July 31, 2004, the Fund designates long-term capital gains
of $160.
88.65% of the ordinary income distributed by the Fund, for the period ended July
31, 2004, qualifies for the corporate dividends received deduction.
For non-corporate shareholders 94.46%, or the maximum amount allowable under the
Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the
Fund for the period September 10, 2003 to July 31, 2004 may represent qualified
dividend income. Final information will be provided in your 2004 1099-Div Form.
CMG MID CAP GROWTH FUND
7.75% of the ordinary income distributed by the Fund, for the year ended July
31, 2004, qualifies for the corporate dividends received deduction.
For non-corporate shareholders 7.75%, or the maximum amount allowable under the
Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the
Fund for the period August 1, 2003 to July 31, 2004 may represent qualified
dividend income. Final information will be provided in your 2004 1099-Div Form.
CMG MID CAP VALUE FUND
For the fiscal year ended July 31, 2004, the Fund designates long-term capital
gains of $5,955.
100.00% of the ordinary income distributed by the Fund, for the year ended July
31, 2004, qualifies for the corporate dividends received deduction.
129
<Page>
For non-corporate shareholders 100.00%, or the maximum amount allowable under
the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by
the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified
dividend income. Final information will be provided in your 2004 1099-Div Form.
CMG SMALL CAP GROWTH FUND
For the fiscal year ended July 31, 2004, the Fund designates long-term capital
gains of $264,126.
CMG SMALL CAP VALUE FUND
For the fiscal year ended July 31, 2004, the Fund designates long-term capital
gains of $280,191.
18.91% of the ordinary income distributed by the Fund, for the year ended July
31, 2004, qualifies for the corporate dividends received deduction.
For non-corporate shareholders 18.82%, or the maximum amount allowable under the
Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the
Fund for the period August 1, 2003 to July 31, 2004 may represent qualified
dividend income. Final information will be provided in your 2004 1099-Div Form.
CMG INTERNATIONAL STOCK FUND
For the fiscal year ended July 31, 2004, the Fund designates long-term capital
gains of $3,661,470.
Foreign taxes paid during the fiscal year ended July 31, 2004, amounting to
$462,739 ($0.04 per share) are expected to be passed through to shareholders as
100% allowable foreign tax credits on Form 1099-DIV for the year ending December
31, 2004.
For non-corporate shareholders 100.00%, or the maximum amount allowable under
the Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by
the Fund for the period August 1, 2003 to July 31, 2004 may represent qualified
dividend income. Final information will be provided in your 2004 1099-Div Form.
Gross income derived from sources within foreign countries amounted to
$2,236,775 ($0.18 per share) for the fiscal year ended July 31, 2004.
130
<Page>
Trustees
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and Officers of the CMG Fund Trust, the year each was first
elected or appointed to office, their principal business occupations during at
least the last five years, the number of portfolios in the fund complex overseen
by the Trustee, and other directorships they hold are shown below. Each Officer
listed below serves as an Officer of the CMG Fund Trust. Each Officer listed
below held such office for the period ended July 31, 2004. The Statement of
Additional Information (SAI) contains additional information about the Trustees
and is available without charge upon request by calling the fund's distributor
at 800-345-6611.
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------- --------------------------------------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker (age 48) Executive Vice President-Strategy of United Airlines
P.O. Box 66100 (airline) since December 2002 (formerly President of UAL
Chicago, IL 60666 Loyalty Services (airline) from September 2001 to December
Trustee (since 2003) 2002; Executive Vice President and Chief Financial Officer of
United Airlines from July 1999 to September 2001; Senior Vice
President-Finance of United Airlines from March 1993 to July
1999). Oversees 118, Orbitz, Inc. (on-line travel company)
Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since
9534 W. Gull Lake Drive September 2004; Private Investor since March 2004 (formerly
Richland, MI 49083-8530 Chief Administrative Officer and Senior Vice President, Kmart
Trustee (since 2003) Holding Corporation (consumer goods) from September 2003 to
March 2004; Executive Vice President-Corporate Development
and Administration, General Counsel and Secretary, Kellogg
Company (food manufacturer), from September 1999 to August
2003; Senior Vice President, Secretary and General Counsel,
Sara Lee Corporation (branded, packaged, consumer-products
manufacturer) from January 1995 to September 1999). Oversees
118, None
Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and
10701 Charleston Drive Chief Executive Officer, U.S. Plywood Corporation (building
Vero Beach, FL 32963 products manufacturer)). Oversees 120(3), None
Trustee (since 2003)
Charles R. Nelson (age 62) Professor of Economics, University of Washington, since
Department of Economics January 1976; Ford and Louisa Van Voorhis Professor of
University of Washington Political Economy, University of Washington, since September
Seattle, WA 98195 1993; (formerly Director, Institute for Economic Research,
Trustee (since 2003) University of Washington from September 2001 to June 2003)
Adjunct Professor of Statistics, University of Washington,
since September 1980; Associate Editor, Journal of Money
Credit and Banking, since September 1993; consultant on
econometric and statistical matters. Oversees 118, None
John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August
84 College Road 1999, Boston College (formerly Dean, Boston College School of
Chestnut Hill, MA 02467-3838 Management from September 1977 to September 1999). Oversees
Trustee (since 2003) 121(3),(4), Saucony, Inc. (athletic footwear and apparel)
Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
</Table>
131
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------- --------------------------------------------------------------
DISINTERESTED TRUSTEES
Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance
2208 Tawny Woods Place from 1975 to 1999, College of Business, Boise State
Boise, ID 83706 University); Chartered Financial Analyst. Oversees 118, None
Trustee (since 2003)
Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private
227 West Monroe Street, equity investing) since September 1994. Oversees 118, Anixter
Suite 3500 International (network support equipment distributor), Jones
Chicago, IL 60606 Lang LaSalle (real estate management services) and Ventas,
Trustee and Chairman of the Board(5) (since 2003) Inc (real estate investment trust) and MONY Group (life
insurance).
Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global
359 Stickney Hill Road Education Industry, IBM Corporation (computer and technology)
Hopkinton, NH 03229 from 1994 to 1997). Oversees 119(4), Chairman of the Board of
Trustee (since 2003) Directors, Enesco Group, Inc. (designer, importer and
distributor of giftware and collectibles)
Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief
100 S.W. Market Street #1500 Executive Officer, The Regence Group (regional health
Portland, OR 97207 insurer); Chairman and Chief Executive Officer, BlueCross
Trustee (since 1992) BlueShield of Oregon; Certified Public Accountant, Arthur
Young & Company. Oversees 118, Northwest Natural Gas Co.
(natural gas service provider)
INTERESTED TRUSTEES
William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private
399 Park Avenue equity) since February 1999 (formerly Founding Partner,
Suite 3204 Development Capital LLC from November 1996 to February 1999).
New York, NY 10022 Oversees 120(3), Lee Enterprises (print media), WR Hambrecht +
Trustee (since 2003) Co. (financial service provider), First Health (healthcare),
Reader's Digest (publishing) and OPENFIELD Solutions (retail
industry technology provider)
</Table>
- ---------------
(1) In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds complex. Each Trustee serves for an indefinite term in
accordance with the current Bylaws of the Trust until the date a Trustee
resigns, retires or is removed in accordance with the Bylaws of the Trust.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of
the Liberty All-Star Funds, currently consisting of 2 funds, which are
advised by an affiliate of the Advisor.
(4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the
Advisor.
(5) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
132
<Page>
Officers
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH
COLUMBIA FUNDS, YEAR FIRST ELECTED OR
APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------------------------------- --------------------------------------------------------------
Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty
One Financial Center All-Star Funds since June 2001; Assistant Treasurer of
Boston, MA 02111 Columbia Acorn and Wanger Funds since June 2004 (formerly
Chief Accounting Officer Controller of the Columbia Funds and of the Liberty All-Star
Funds from May 2002 to May 2004); Controller and Chief
Accounting Officer of the Galaxy Funds since September 2002
(formerly Vice President, Corporate Audit, State Street Bank
and Trust Company from May 1998 to April 2001).
Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star
One Financial Center Funds since 2004; Assistant Treasurer of Columbia Acorn and
Boston, MA 02111 Wanger Funds since June 2004 (formerly Assistant Treasurer of
Controller (since 2004) the Columbia Funds and of the Liberty All-Star Funds from
June 2002 to May 2004; Vice President, Product Strategy &
Development of Liberty Funds Group from February 2001 to June
2002; Assistant Treasurer of the Liberty Funds and of the
Liberty All-Star Funds from August 1999 to February 2001;
Audit Manager at Deloitte & Touche LLP from May 1997 to
August 1999).
J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004;
One Financial Center Treasurer of the Columbia Funds and of the Liberty All-Star
Boston, MA 02111 Funds since December 2000; Vice President of the Advisor
Treasurer (since 2000) and since April 2003 (formerly Chief Accounting Officer and
President (since 2004) Controller of the Liberty Funds and Liberty All-Star Funds
from February 1998 to October 2000); Treasurer of the Galaxy
Funds since September 2002; Treasurer, Columbia Management
Multi-Strategy Hedge Fund, LLC since December 2002 (formerly
Vice President of Colonial from February 1998 to October
2000).
David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star
One Financial Center Funds since December 2003; Senior Counsel, Bank of America
Boston, MA 02111 Corporation (formerly FleetBoston Financial Corporation)
Secretary (since 2003) since January 1996; Associate General Counsel, Columbia
Management Group since November 2002.
</Table>
133
<Page>
CMG FUND TRUST
1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201
- TRUSTEES -
DOUGLAS A. HACKER
JANET LANGFORD KELLY
RICHARD W. LOWRY
WILLIAM E. MAYER
CHARLES R. NELSON
JOHN J. NEUHAUSER
PATRICK J. SIMPSON
THOMAS E. STITZEL
THOMAS C. THEOBALD
ANNE-LEE VERVILLE
RICHARD L. WOOLWORTH
- INVESTMENT ADVISOR -
COLUMBIA MANAGEMENT ADVISORS, INC.
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02266-8081
- LEGAL COUNSEL -
ROPES & GRAY LLC
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2624
- TRANSFER AGENT -
COLUMBIA FUNDS SERVICES, INC.
P.O. BOX 8081
BOSTON, MASSACHUSETTS 02266-8081
CMC-02/529S-0804 (09/04) 2576
A description of the policies and procedures that the fund uses to determine how
to vote proxies relating to its portfolio securities and a copy of a fund's
voting record are available (i) at www.columbiamanagement.com; and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER, INC.
PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A
MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA MANAGEMENT
REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS, WHICH
CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT CAREFULLY
BEFORE YOU INVEST.
The manager's views contained in this report are subject to change at any time,
based on market and other considerations. Portfolio changes should not be
considered recommendations for action by individual investors.
Funds distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth
Avenue, Portland, Oregon 97201
<Page>
COLUMBIA MANAGEMENT(R)
CMG SMALL CAP FUND
A PORTFOLIO OF CMG FUND TRUST
ANNUAL REPORT
JULY 31, 2004
NOT FDIC MAY LOSE VALUE
INSURED -----------------
ADVISED BY COLUMBIA MANAGEMENT ADVISORS, INC. NO BANK GUARANTEE
<Page>
CMG SMALL CAP FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Small Cap Fund returned 9.74% for the 12-month period ended July 31, 2004.
Fund performance was lower than the Russell 2000 Growth Index and the Russell
2000 Index, which returned 11.32% and 17.06%, respectively, for the same period.
However, the fund outperformed the Lipper Small Cap Growth Funds Category
average, which returned 9.62% for the period.(1) The fund benefited from its
emphasis on health care and technology stocks. However, it lacked significant
exposure to specialty semiconductor stocks, which were among the best technology
performers during the year. With a new management team in place, we have taken
steps aimed at reducing volatility and improving performance going forward.
Fueled by a strengthening US economy, the stock market moved higher during the
first six months of this reporting period. In this environment, investors
favored small and highly leveraged, speculative companies that have the most to
gain in an improving economy.
Because the fund focuses on small-cap stocks, it was the beneficiary of this
trend early in the reporting period. However, sentiment changed dramatically as
investors reacted to a sluggish employment picture, the threat of higher
interest rates and concerns about national security. The market's focus shifted
from small companies to larger, more stable companies, and that shift hurt
small-cap stocks as the year wore on.
While the fund's substantial exposure to technology helped performance in the
first half of the reporting period, its emphasis on the technology services and
software industry was out of step with its benchmarks. Within technology, the
fund was underrepresented in specialty semiconductor stocks, which were the best
performers for the benchmarks.
The fund delivered a solid return for the year on the strength of many of its
energy and health care holdings. In energy, rising oil prices boosted oil
service stocks XTO Energy and National-Oilwell (1.8% and 2.0% of net assets,
respectively). The energy sector also benefited from the fact that companies
have begun exploring for new energy sources after several years of under
investment. In health care, the fund's investments in DaVita, a dialysis
services company, and Kyphon, a medical equipment and supply company, also
helped performance (1.6% and 0.6% of net assets, respectively).
Although US stock markets have traded lower during the past few months, we see
reasons for optimism--and attractive investment opportunities-ahead. In light
of our expectation for modest but stable growth over the near term, we believe
that stock prices have become more attractive. As part of a restructuring of the
fund, we have taken steps to limit the fund's exposure to any one industry in
order to help manage risk. We have also introduced a
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates an
average total return for mutual funds with similar investment objectives as
those of the fund.
1
<Page>
systematic process that places more emphasis on valuations relative to earnings
growth in selecting individual stocks for the portfolio.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
Amphenol 2.5
Renal Care Group 2.0
National-Oilwell 2.0
Education Management 1.9
XTO Energy 1.8
United Defense Industries 1.6
DaVita 1.6
Polycom 1.6
ArthroCare 1.6
Manhattan Associates 1.5
</Table>
We appreciate your continued confidence in the CMG Small Cap Fund.
The Columbia Investment Team
July 31, 2004
Investments in small-cap companies may be subject to greater volatility and
price fluctuations because small companies often have narrower markets and
limited financial resources and their stocks tend to be thinly traded and less
liquid than investments in larger companies.
Holdings are calculated as a percentage of net assets and are subject to change.
Because the fund is actively managed, there is no guarantee the fund will
continue to maintain the holdings breakdown listed. The fund's holdings and
their weights within the portfolio may change as market conditions change.
2
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1994 TO JULY 31, 2004
<Table>
<Caption>
CMG SMALL CAP FUND RUSSELL 2000 INDEX RUSSELL 2000 GROWTH INDEX
7/31/94 $ 10,000 $ 10,000 $ 10,000
8/31/94 $ 10,422 $ 10,557 $ 10,735
9/30/94 $ 10,542 $ 10,522 $ 10,781
10/31/94 $ 10,668 $ 10,481 $ 10,898
11/30/94 $ 10,205 $ 10,058 $ 10,456
12/31/94 $ 10,532 $ 10,328 $ 10,704
1/31/95 $ 10,277 $ 10,198 $ 10,487
2/28/95 $ 10,738 $ 10,622 $ 10,970
3/31/95 $ 11,035 $ 10,805 $ 11,292
4/30/95 $ 11,147 $ 11,045 $ 11,462
5/31/95 $ 11,320 $ 11,235 $ 11,612
6/30/95 $ 11,992 $ 11,818 $ 12,412
7/31/95 $ 12,723 $ 12,499 $ 13,379
8/31/95 $ 12,905 $ 12,757 $ 13,544
9/30/95 $ 13,353 $ 12,986 $ 13,823
10/31/95 $ 13,074 $ 12,405 $ 13,143
11/30/95 $ 13,799 $ 12,926 $ 13,722
12/31/95 $ 14,364 $ 13,268 $ 14,027
1/31/96 $ 14,356 $ 13,253 $ 13,911
2/29/96 $ 15,015 $ 13,667 $ 14,545
3/31/96 $ 15,256 $ 13,945 $ 14,833
4/30/96 $ 16,713 $ 14,691 $ 15,972
5/31/96 $ 17,732 $ 15,270 $ 16,791
6/30/96 $ 16,657 $ 14,643 $ 15,700
7/31/96 $ 15,245 $ 13,364 $ 13,783
8/31/96 $ 16,338 $ 14,141 $ 14,803
9/30/96 $ 17,351 $ 14,694 $ 15,565
10/31/96 $ 17,033 $ 14,467 $ 14,894
11/30/96 $ 17,456 $ 15,063 $ 15,309
12/31/96 $ 17,498 $ 15,458 $ 15,607
1/31/97 $ 18,215 $ 15,767 $ 15,997
2/28/97 $ 17,221 $ 15,386 $ 15,031
3/31/97 $ 16,058 $ 14,660 $ 13,970
4/30/97 $ 16,143 $ 14,701 $ 13,808
5/31/97 $ 17,934 $ 16,335 $ 15,883
6/30/97 $ 18,830 $ 17,036 $ 16,421
7/31/97 $ 20,267 $ 17,828 $ 17,262
8/31/97 $ 21,114 $ 18,236 $ 17,780
9/30/97 $ 22,852 $ 19,571 $ 19,199
10/31/97 $ 21,627 $ 18,712 $ 18,045
11/30/97 $ 21,125 $ 18,591 $ 17,616
12/31/97 $ 21,332 $ 18,916 $ 17,626
1/31/98 $ 20,509 $ 18,617 $ 17,392
2/28/98 $ 21,885 $ 19,993 $ 18,927
3/31/98 $ 23,546 $ 20,817 $ 19,721
4/30/98 $ 23,742 $ 20,931 $ 19,841
5/31/98 $ 21,738 $ 19,803 $ 18,398
6/30/98 $ 22,218 $ 19,844 $ 18,586
7/31/98 $ 21,276 $ 18,237 $ 17,034
8/31/98 $ 16,429 $ 14,695 $ 13,103
9/30/98 $ 17,740 $ 15,846 $ 14,431
10/31/98 $ 18,058 $ 16,493 $ 15,185
11/30/98 $ 19,105 $ 17,357 $ 16,363
12/31/98 $ 21,106 $ 18,431 $ 17,844
1/31/99 $ 20,880 $ 18,676 $ 18,647
2/28/99 $ 18,546 $ 17,164 $ 16,941
3/31/99 $ 18,913 $ 17,431 $ 17,544
4/30/99 $ 19,526 $ 18,993 $ 19,093
5/31/99 $ 19,971 $ 19,270 $ 19,123
6/30/99 $ 21,834 $ 20,141 $ 20,131
7/31/99 $ 22,410 $ 19,590 $ 19,509
8/31/99 $ 21,902 $ 18,865 $ 18,779
9/30/99 $ 22,292 $ 18,869 $ 19,142
10/31/99 $ 24,690 $ 18,946 $ 19,632
11/30/99 $ 28,124 $ 20,077 $ 21,707
12/31/99 $ 33,775 $ 22,350 $ 25,534
1/31/2000 $ 33,991 $ 21,990 $ 25,296
2/29/2000 $ 43,230 $ 25,620 $ 31,183
3/31/2000 $ 41,764 $ 23,932 $ 27,906
4/30/2000 $ 36,640 $ 22,491 $ 25,087
5/31/2000 $ 34,778 $ 21,180 $ 22,889
6/30/2000 $ 39,884 $ 23,027 $ 25,847
7/31/2000 $ 36,601 $ 22,285 $ 23,632
8/31/2000 $ 40,895 $ 23,986 $ 26,118
9/30/2000 $ 39,095 $ 23,281 $ 24,820
10/31/2000 $ 37,156 $ 22,242 $ 22,804
11/30/2000 $ 32,627 $ 19,958 $ 18,663
12/31/2000 $ 35,133 $ 21,672 $ 19,805
1/31/2001 $ 35,614 $ 22,802 $ 21,408
2/28/2001 $ 31,718 $ 21,306 $ 18,473
3/31/2001 $ 29,139 $ 20,264 $ 16,793
4/30/2001 $ 32,438 $ 21,849 $ 18,849
5/31/2001 $ 32,678 $ 22,386 $ 19,286
6/30/2001 $ 33,397 $ 23,158 $ 19,813
7/31/2001 $ 31,657 $ 21,906 $ 18,123
8/31/2001 $ 29,317 $ 21,198 $ 16,990
9/30/2001 $ 24,700 $ 18,345 $ 14,248
10/31/2001 $ 26,439 $ 19,418 $ 15,618
11/30/2001 $ 28,297 $ 20,921 $ 16,923
12/31/2001 $ 30,284 $ 22,212 $ 17,977
1/31/2002 $ 29,324 $ 21,981 $ 17,337
2/28/2002 $ 27,705 $ 21,378 $ 16,215
3/31/2002 $ 29,625 $ 23,095 $ 17,624
4/30/2002 $ 28,665 $ 23,305 $ 17,244
5/31/2002 $ 27,584 $ 22,270 $ 16,235
6/30/2002 $ 25,786 $ 21,166 $ 14,858
7/31/2002 $ 22,127 $ 17,970 $ 12,574
8/31/2002 $ 22,607 $ 17,925 $ 12,568
9/30/2002 $ 21,587 $ 16,638 $ 11,661
10/31/2002 $ 22,006 $ 17,172 $ 12,251
11/30/2002 $ 23,324 $ 18,704 $ 13,465
12/31/2002 $ 22,126 $ 17,662 $ 12,536
1/31/2003 $ 22,066 $ 17,173 $ 12,195
2/28/2003 $ 21,766 $ 16,654 $ 11,869
3/31/2003 $ 22,186 $ 16,869 $ 12,048
4/30/2003 $ 23,925 $ 18,468 $ 13,188
5/31/2003 $ 26,083 $ 20,450 $ 14,675
6/30/2003 $ 26,743 $ 20,820 $ 14,958
7/31/2003 $ 27,703 $ 22,123 $ 16,089
8/31/2003 $ 29,321 $ 23,136 $ 16,953
9/30/2003 $ 28,483 $ 22,708 $ 16,524
10/31/2003 $ 31,299 $ 24,616 $ 17,951
11/30/2003 $ 32,019 $ 25,490 $ 18,536
12/31/2003 $ 31,959 $ 26,007 $ 18,620
1/31/2004 $ 33,937 $ 27,136 $ 19,597
2/29/2004 $ 33,818 $ 27,380 $ 19,568
3/31/2004 $ 33,459 $ 27,635 $ 19,660
4/30/2004 $ 31,780 $ 26,225 $ 18,673
5/31/2004 $ 32,380 $ 26,642 $ 19,045
6/30/2004 $ 33,400 $ 27,764 $ 19,679
7/31/2004 $ 30,409 $ 25,894 $ 17,913
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR 10-YEAR
CMG Small Cap Fund 08/30/89 9.74 6.29 11.76
Russell 2000 Index 17.06 5.74 9.98
Russell 2000 Growth Index 11.32 -1.69 6.00
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR 10-YEAR
CMG Small Cap Fund 08/30/89 24.89 8.87 12.90
Russell 2000 Index 33.37 6.63 10.93
Russell 2000 Growth Index 31.55 -0.45 7.16
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
The Russell 2000 Index is an unmanaged index that tracks the performance of the
2,000 smallest of the 3,000 largest U.S. companies based on market
capitalization. The Russell 2000 Growth Index is also an unmanaged index that
measures the performance of those Russell 2000 Index companies with higher
price-to-book ratios and higher forecasted growth values. Unlike mutual funds,
indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
3
<Page>
UNDERSTANDING YOUR EXPENSES - CMG SMALL CAP FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this period,"
locate the amount under "actual." Multiply this number by the result from
step 1. Your answer is an estimate of the expenses you paid on your account
during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 899.25 1,020.98 3.68 3.92
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.78%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
4
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
5
<Page>
CMG SMALL CAP FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED YEAR ENDED OCTOBER 31,
JULY 31, JULY 31, ------------------------------
2004 2003(a) 2002 2001
----------- ----------- ----------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.62 $ 3.67 $ 4.41 $ 18.78
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.03)(c) (0.02)(c) (0.02)(c) (0.01)
Net realized and unrealized gain (loss)
on investments 0.48 0.97 (0.72) (2.18)
----------- ----------- ----------- -----------
Total from investment operations 0.45 0.95 (0.74) (2.19)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gains - - -(d) (12.18)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 5.07 $ 4.62 $ 3.67 $ 4.41
=========== =========== =========== ===========
Total return (e) 9.74% 25.89%(f) (16.76)% (28.84)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 292,028 $ 293,924 $ 227,874 $ 283,521
Ratio of net expenses to average net assets (g) 0.79% 0.81%(h) 0.79% 0.82%
Ratio of net investment loss to average
net assets (g) (0.62)% (0.55)%(h) (0.49)% (0.22)%
Portfolio turnover rate 123% 89%(f) 120% 160%
<Caption>
YEAR ENDED OCTOBER 31,
----------------------------
2000 1999(b)
----------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.59 $ 9.96
----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.09) (0.04)
Net realized and unrealized gain (loss)
on investments 6.80 3.69
----------- -----------
Total from investment operations 6.71 3.65
----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gains (1.52) (0.02)
----------- -----------
NET ASSET VALUE, END OF PERIOD $ 18.78 $ 13.59
=========== ===========
Total return (e) 50.49% 36.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 258,480 $ 240,129
Ratio of net expenses to average net assets (g) 0.79% 0.79%
Ratio of net investment loss to average
net assets (g) (0.39)% (0.33)%
Portfolio turnover rate 163% 186%
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
(b) Per share amounts have been adjusted to retroactively reflect a 4 for 1
share split effective September 1, 1999.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Rounds to less than $0.01 per share.
(e) Total return at net asset value assuming all distributions reinvested.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
See Accompanying Notes to Financial Statements.
6
<Page>
CMG SMALL CAP FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
---------- --------------
Common Stocks (98.5%)
Consumer Discretionary (13.6%)
Auto Components (3.2%)
Autoliv, Inc. 98,732 $ 4,155,630
Gentex Corp. 48,055 1,720,369
Wabtec Corp. 186,200 3,388,840
--------------
9,264,839
--------------
Hotels, Restaurants & Leisure (3.2%)
Applebee's International, Inc. 57,500 1,531,800
CBRL Group, Inc. 54,080 1,796,538
Cheesecake Factory, Inc. (a) 25,100 1,048,427
P.F. Chang's China Bistro, Inc. (a) 33,400 1,483,962
Scientific Games Corp., Class A (a) 104,330 1,858,117
WMS Industries, Inc. (a) 58,930 1,605,253
--------------
9,324,097
--------------
Internet & Catalog Retail (0.7%)
Insight Enterprises, Inc. (a) 132,940 2,132,358
--------------
Leisure Equipment & Products (1.1%)
Nautilus Group, Inc. 167,400 3,100,248
--------------
Media (2.7%)
Entercom Communications Corp. (a) 41,689 1,602,942
Entravision Communications Corp., Class A (a) 120,890 854,692
Getty Images, Inc. (a) 57,120 3,119,894
Radio One, Inc., Class D (a) 161,732 2,459,944
--------------
8,037,472
--------------
Specialty Retail (2.0%)
Advance Auto Parts, Inc. (a) 23,370 867,494
Aeropostale, Inc. (a) 85,110 2,594,153
PETCO Animal Supplies, Inc. (a) 76,770 2,293,120
--------------
5,754,767
--------------
Textiles, Apparel & Luxury Goods (0.7%)
Columbia Sportswear Co. (a) 39,770 2,177,407
--------------
Consumer Staples (0.3%)
Personal Products (0.3%)
NBTY, Inc. (a) 35,450 771,392
--------------
Energy (9.9%)
Energy Equipment & Services (7.1%)
Atwood Oceanics, Inc. (a) 33,570 1,297,816
CAL Dive International, Inc. (a) 66,747 2,069,157
Input/Output, Inc. (a) 68,200 656,766
Key Energy Services, Inc. (a) 258,240 2,603,059
Lone Star Technologies, Inc. (a) 38,430 1,280,488
Maverick Tube Corp. (a) 35,570 1,025,839
National-Oilwell, Inc. (a) 171,688 5,742,964
</Table>
See Accompanying Notes to Financial Statements.
7
<Page>
<Table>
<Caption>
SHARES VALUE
---------- --------------
Common Stocks (continued)
Energy Equipment & Services (continued)
Patterson-UTI Energy, Inc. 222,760 $ 4,060,915
Precision Drilling Corp. (a) 29,156 1,449,928
Veritas DGC, Inc. (a) 21,650 533,240
--------------
20,720,172
--------------
Oil & Gas (2.8%)
Global Industries Ltd. (a) 172,970 873,499
Quicksilver Resources, Inc. (a) 65,620 2,078,185
XTO Energy, Inc. 178,325 5,331,917
--------------
8,283,601
--------------
Financials (3.5%)
Capital Markets (1.3%)
Affiliated Managers Group, Inc. (a) 79,340 3,642,499
--------------
Commercial Banks (0.3%)
Umpqua Holdings Corp. 34,500 780,045
--------------
Diversified Financial Services (0.4%)
Euronet Worldwide, Inc. (a) 69,600 1,252,800
--------------
Insurance (1.5%)
Allmerica Financial Corp. (a) 71,730 2,138,271
ProAssurance Corp. (a) 72,670 2,302,912
--------------
4,441,183
--------------
Health Care (15.5%)
Biotechnology (1.1%)
Connetics Corp. (a) 113,660 3,129,060
Isolagen, Inc. (a) 12,990 103,790
--------------
3,232,850
--------------
Health Care Equipment & Supplies (3.4%)
ArthroCare Corp. (a) 175,560 4,675,163
Kyphon, Inc. (a) 67,022 1,811,605
Regeneration Technologies, Inc. (a) 83,330 809,968
ResMed, Inc. (a) 53,980 2,645,020
--------------
9,941,756
--------------
Health Care Providers & Services (9.2%)
Chemed Corp. 29,470 1,379,196
DaVita, Inc. (a) 156,559 4,754,697
Dendrite International, Inc. (a) 45,200 673,932
Henry Schein, Inc. (a) 62,075 4,165,232
ICON PLC, ADR (a) 104,970 3,878,642
Kindred Healthcare, Inc. (a) 94,310 2,287,018
Pharmaceutical Product Development, Inc. (a) 41,600 1,458,496
Renal Care Group, Inc. (a) 186,250 5,933,925
United Surgical Partners International, Inc. (a) 68,470 2,412,883
--------------
26,944,021
--------------
</Table>
See Accompanying Notes to Financial Statements.
8
<Page>
<Table>
<Caption>
SHARES VALUE
---------- --------------
Common Stocks (continued)
Pharmaceuticals (1.8%)
MGI Pharma, Inc. (a) 53,840 $ 1,508,058
Nektar Therapeutics (a) 117,300 2,057,442
Salix Pharmaceuticals Ltd. (a) 76,965 1,640,894
--------------
5,206,394
--------------
Industrials (15.1%)
Aerospace & Defense (2.1%)
Armor Holdings, Inc. (a) 41,010 1,496,865
United Defense Industries, Inc. (a) 138,750 4,807,687
--------------
6,304,552
--------------
Air Freight & Logistics (0.7%)
UTI Worldwide, Inc. 39,670 2,042,608
--------------
Commercial Services & Supplies (6.3%)
Corinthian Colleges, Inc. (a) 149,724 2,802,833
Corporate Executive Board Co. 68,503 3,884,120
Education Management Corp. (a) 201,492 5,593,418
Ionics, Inc. (a) 32,040 866,362
Resources Connection, Inc. (a) 72,670 2,818,143
Tetra Tech, Inc. (a) 160,500 2,590,470
--------------
18,555,346
--------------
Construction & Engineering (0.9%)
URS Corp. (a) 110,050 2,657,707
--------------
Electrical Equipment (1.2%)
Power-One, Inc. (a) 188,340 1,651,742
Roper Industries, Inc. 30,710 1,719,760
--------------
3,371,502
--------------
Machinery (3.3%)
IDEX Corp. 66,410 2,131,097
Joy Global, Inc. 76,270 2,264,456
Kennametal, Inc. 73,530 3,235,320
Terex Corp. (a) 49,110 1,910,870
--------------
9,541,743
--------------
Road & Rail (0.6%)
Sirva, Inc. (a) 71,620 1,674,476
--------------
Information Technology (34.6%)
Communications Equipment (4.2%)
Aspect Communications Corp. (a) 191,590 1,622,767
F5 Networks, Inc. (a) 131,790 3,451,580
Ixia (a) 303,070 2,363,946
Polycom, Inc. (a) 244,800 4,719,744
--------------
12,158,037
--------------
</Table>
See Accompanying Notes to Financial Statements.
9
<Page>
<Table>
<Caption>
SHARES VALUE
---------- --------------
Common Stocks (continued)
Computers & Peripherals (1.7%)
Electronics for Imaging, Inc. (a) 210,434 $ 4,223,410
Stratasys, Inc. (a) 33,900 889,536
--------------
5,112,946
--------------
Electronic Equipment & Instruments (7.4%)
Amphenol Corp., Class A (a) 232,446 7,305,778
Artesyn Technologies, Inc. (a) 206,940 1,543,772
AVX Corp. 166,830 2,080,370
Benchmark Electronics, Inc. (a) 117,530 3,359,007
Electro Scientific Industries, Inc. (a) 121,200 3,120,900
KEMET Corp. (a) 179,950 1,815,696
National Instruments Corp. 80,919 2,350,697
--------------
21,576,220
--------------
Internet Software & Services (3.3%)
Ask Jeeves, Inc. (a) 50,530 1,469,412
Equinix, Inc. (a) 56,460 1,834,950
FindWhat.com (a) 71,740 1,169,362
Packeteer, Inc. (a) 264,610 2,482,042
Sapient Corp. (a) 162,400 1,135,176
SINA Corp. (a) 51,700 1,465,695
--------------
9,556,637
--------------
IT Services (4.4%)
Anteon International Corp. (a) 57,700 1,796,778
CACI International, Inc., Class A (a) 70,090 2,881,400
Cognizant Technology Solutions Corp., Class A (a) 103,370 2,847,844
Global Payments, Inc. 51,744 2,362,114
IDX Systems Corp. (a) 49,590 1,489,188
MPS Group, Inc. (a) 167,650 1,505,497
--------------
12,882,821
--------------
Semiconductors & Semiconductor Equipment (5.7%)
Axcelis Technologies, Inc. (a) 203,440 1,898,095
Credence Systems Corp. (a) 423,320 3,792,947
Integrated Device Technology, Inc. (a) 273,980 3,131,591
LTX Corp. (a) 84,700 688,611
PLX Technology, Inc. (a) 160,960 1,429,325
Power Integrations, Inc. (a) 51,200 1,033,216
Sigmatel, Inc. (a) 116,000 1,771,320
Silicon Laboratories, Inc. (a) 81,300 2,869,077
--------------
16,614,182
--------------
Software (7.9%)
Agile Software Corp. (a) 109,670 815,945
Altiris, Inc. (a) 69,810 1,752,929
Autodesk, Inc. 62,650 2,518,530
Cerner Corp. (a) 59,700 2,686,500
Citrix Systems, Inc. (a) 87,740 1,545,979
Embarcadero Technologies, Inc. (a) 151,820 1,153,832
Macromedia, Inc. (a) 159,160 3,215,032
Manhattan Associates, Inc. (a) 173,410 4,501,724
</Table>
See Accompanying Notes to Financial Statements.
10
<Page>
<Table>
<Caption>
SHARES VALUE
---------- --------------
Common Stocks (continued)
Software (continued)
Parametric Technology Corp. (a) 459,460 $ 2,085,948
Quest Software, Inc. (a) 125,690 1,515,821
RadiSys Corp. (a) 102,130 1,267,433
--------------
23,059,673
--------------
Materials (4.3%)
Chemicals (1.6%)
Airgas, Inc. 74,280 1,615,590
OM Group, Inc. (a) 88,690 2,839,854
--------------
4,455,444
--------------
Metals & Mining (2.7%)
Arch Coal, Inc. 46,090 1,556,459
GrafTech International Ltd. (a) 206,650 2,279,350
Massey Energy Co. 58,880 1,628,032
Steel Dynamics, Inc. 75,910 2,486,052
--------------
7,949,893
--------------
Telecommunication Services (1.7%)
Diversified Telecommunication Services (1.0%)
PTEK Holdings, Inc. (a) 268,450 3,084,491
--------------
Wireless Telecommunication Services (0.7%)
Wireless Facilities, Inc. (a) 261,110 1,953,103
--------------
Total Common Stocks
(Cost of $255,418,562) 287,559,282
--------------
</Table>
See Accompanying Notes to Financial Statements.
11
<Page>
<Table>
<Caption>
PAR VALUE
------------- --------------
Short-Term Obligation (2.4%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/04, due 08/02/04 at 1.230%,
collateralized by a U.S. Treasury Bond
maturing 11/15/09, market value of $7,188,953
(repurchase proceeds $7,044,722)
(Cost of $7,044,000) $ 7,044,000 $ 7,044,000
--------------
Total Investments (100.9%)
(Cost of $262,462,562) (b) 294,603,282
Other Assets & Liabilities, Net (-0.9%) (2,575,016)
--------------
Net Assets (100.0%) $ 292,028,266
==============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $263,609,314.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depositary Receipt
</Table>
See Accompanying Notes to Financial Statements.
12
<Page>
CMG SMALL CAP FUND
A Portfolio of CMG Fund Trust
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2004
<Table>
<Caption>
ASSETS:
Investments, at identified cost $ 262,462,562
--------------
Investments, at value $ 294,603,282
Cash 17
Receivable for:
Investments sold 2,737,246
Interest 481
Dividends 11,949
Foreign tax reclaim 683
Deferred Trustees' compensation plan 2,175
--------------
Total assets 297,355,833
--------------
LIABILITIES:
Payable for:
Investments purchased 5,087,815
Investment advisory fee 194,238
Transfer agent fee 136
Trustees' fees 89
Audit fee 24,000
Custody fee 2,191
Deferred Trustees' fee 2,175
Other liabilities 16,923
--------------
Total liabilities 5,327,567
--------------
NET ASSETS $ 292,028,266
==============
NET ASSETS consist of:
Paid-in capital $ 299,480,093
Accumulated net investment loss (2,269)
Accumulated net realized loss (39,590,278)
Net unrealized appreciation on investments 32,140,720
--------------
NET ASSETS $ 292,028,266
==============
Shares of capital stock outstanding 57,649,295
==============
Net asset value, offering and redemption price per share $ 5.07
==============
</Table>
See Accompanying Notes to Financial Statements.
13
<Page>
CMG SMALL CAP FUND
A Portfolio of CMG Fund Trust
STATEMENT OF OPERATIONS
For the Year Ended July 31, 2004
<Table>
<Caption>
NET INVESTMENT INCOME:
Income:
Dividends $ 462,451
Interest 93,135
Foreign withholding tax (1,425)
--------------
Total income 554,161
--------------
Expenses:
Investment advisory fee 2,528,059
Transfer agent fee 4,752
Trustees' fees 4,329
Custody fee 25,474
Non-recurring costs (See Note 8) 15,278
Other expenses 85,114
--------------
Total expenses 2,663,006
Non-recurring costs assumed by Investment Advisor (See Note 8) (15,278)
Custody earnings credit (269)
--------------
Net expenses 2,647,459
--------------
Net investment loss (2,093,298)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 59,673,743
Net change in unrealized appreciation/depreciation on investments (26,262,756)
--------------
Net gain 33,410,987
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 31,317,689
--------------
</Table>
See Accompanying Notes to Financial Statements.
14
<Page>
CMG SMALL CAP FUND
A Portfolio of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED PERIOD ENDED YEAR ENDED
JULY 31, 2004 JULY 31, 2003(a) OCTOBER 31, 2002
--------------- ---------------- ----------------
Operations:
Net investment loss $ (2,093,298) $ (1,028,938) $ (1,466,876)
Net realized gain (loss) on investments 59,673,743 7,809,978 (50,084,055)
Net change in unrealized appreciation/depreciation
on investments (26,262,756) 52,680,821 (2,348,752)
--------------- ---------------- ----------------
Net increase (decrease) from operations 31,317,689 59,461,861 (53,899,683)
--------------- ---------------- ----------------
Distributions declared to shareholders:
From net realized gains - - (74,803)
--------------- ---------------- ----------------
Share Transactions:
Subscriptions 36,596,397 26,844,551 122,231,939
Distributions reinvested - - 74,656
Redemptions (69,810,079) (20,255,831) (123,979,565)
--------------- ---------------- ----------------
Net increase (decrease) from share transactions (33,213,682) 6,588,720 (1,672,970)
--------------- ---------------- ----------------
Total increase (decrease) in net assets (1,895,993) 66,050,581 (55,647,456)
--------------- ---------------- ----------------
NET ASSETS:
Beginning of period 293,924,259 227,873,678 283,521,134
--------------- ---------------- ----------------
End of period $ 292,028,266 $ 293,924,259 $ 227,873,678
=============== ================ ================
Undistributed net investment income (accumulated
net investment loss) $ (2,269) $ 79,879 $ 72,143
=============== ================ ================
Changes in shares:
Subscriptions 7,088,643 6,868,955 28,006,875
Issued for distributions reinvested -- -- 15,143
Redemptions (13,033,571) (5,286,942) (30,327,298)
--------------- ---------------- ----------------
Net increase (decrease) (5,944,928) 1,582,013 (2,305,280)
=============== ================ ================
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
See Accompanying Notes to Financial Statements.
15
<Page>
CMG SMALL CAP FUND
A Portfolio of CMG Fund Trust
NOTES TO FINANCIAL STATEMENTS
July 31, 2004
NOTE 1. ORGANIZATION:
CMG Small Cap Fund (the "Fund"), a series of CMG Fund Trust (the "Trust"), is a
diversified portfolio. The Trust is an Oregon business trust registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company.
INVESTMENT GOAL. The Fund seeks to provide investors with long-term capital
appreciation, by investing primarily in smaller capitalization companies.
FUND SHARES. The Fund may issue 100 million shares of no par value capital
stock, which are offered continuously at net asset value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements.
SECURITY VALUATION. Equity securities are valued at the last sale price on the
principal exchange on which they trade, except for securities traded on the
NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities
or listed securities for which there were no sales during the day are valued at
the closing bid price on such exchanges or over-the-counter markets.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement transactions
with institutions that the Fund's investment advisor has determined are
creditworthy. The Fund, through its custodian, receives delivery of underlying
securities collateralizing a repurchase agreement. Collateral is at least equal,
at all times, to the value of the repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty. These risks include possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities and
a possible decline in the value of the underlying securities during the period
while the Fund seeks to assert its rights.
16
<Page>
INCOME RECOGNITION. Interest income is recorded on the accrual basis. Corporate
actions and dividend income are recorded on the ex-date, except for certain
foreign securities which are recorded as soon after ex-date as the Fund becomes
aware of such, net of non-reclaimable tax withholdings. Awards from class action
litigation are recorded as a reduction of cost if the Fund still owns the
applicable securities on the payment date. If the Fund no longer owns the
applicable securities, the proceeds are recorded as realized gains. The Fund
estimates components of distributions from real estate investment trusts
(REITs). Distributions received in excess of income are recorded as a reduction
of the cost of the related investments. If the Fund no longer owns the
applicable securities, any distributions received in excess of income are
recorded as realized gains.
FOREIGN CURRENCY TRANSACTIONS. The values of all assets and liabilities quoted
in foreign currencies are translated into U.S. dollars at that day's exchange
rates. Net realized and unrealized gains (losses) on foreign currency
transactions include gains (losses) arising from the fluctuation in exchange
rates between trade and settlement dates on securities transactions, gains
(losses) arising from the disposition of foreign currency and currency gains
(losses) between the accrual and payment dates on dividends, interest income and
foreign withholding taxes.
For financial statement purposes, the Fund does not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains (losses) on
investments.
FEDERAL INCOME TAX STATUS. The Fund intends to qualify each year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as amended,
and will distribute substantially all of its taxable income, if any, for its tax
year, and as such will not be subject to federal income taxes. In addition, the
Fund intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Fund should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on
ex-date. Net realized capital gains, if any, are distributed at least annually.
NOTE 3. FEDERAL TAX INFORMATION:
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended July 31, 2004, permanent differences resulting primarily from
differing treatments for net operating loss reclassifications and REIT
adjustments were identified and reclassified among the components of the Fund's
net assets as follows:
<Table>
<Caption>
ACCUMULATED ACCUMULATED
NET INVESTMENT LOSS NET REALIZED LOSS PAID-IN CAPITAL
------------------- ----------------- ---------------
$ 2,011,150 $ 89,073 $ (2,100,223)
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
17
<Page>
The tax character of distributions paid during the year ended July 31, 2004,
period ended July 31, 2003 and year ended October 31, 2002 was as follows:
<Table>
<Caption>
JULY 31, 2004 JULY 31, 2003 OCTOBER 31, 2002
------------- ------------- ----------------
Distributions paid from:
Ordinary income* $ - $ - $ 74,803
</Table>
*For tax purposes short-term capital gains distributions, if any, are considered
ordinary income distributions.
As of July 31, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
------------- ------------- --------------
$ - $ - $ 30,993,968
</Table>
*The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to deferral of losses from wash sales.
Unrealized appreciation and depreciation at July 31, 2004, based on cost of
investments for federal income tax purposes was:
<Table>
Unrealized appreciation $ 49,486,209
Unrealized depreciation (18,492,241)
-------------
Net unrealized appreciation $ 30,993,968
=============
</Table>
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:
<Table>
<Caption>
CAPITAL LOSS
CARRYFORWARD
------------
YEAR OF EXPIRATION
2010 $ 38,443,526
</Table>
Capital loss carryforwards of $58,484,878 were utilized during the year ended
July 31, 2004 for the Fund. Expired capital loss carryforwards are recorded as a
reduction of paid-in capital.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES:
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston, including the Fund's investment advisor and transfer agent, was
acquired by Bank of America Corporation ("BOA"). The acquisition did not change
the way the Fund is managed, the investment personnel assigned to manage the
Fund or the fees paid by the Fund.
18
<Page>
INVESTMENT ADVISORY FEE. Columbia provides administrative and other services to
the Fund in addition to investment advisory services. Columbia receives a
monthly investment advisory fee at the annual rate of 0.75% of the Fund's
average daily net assets.
PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and
bookkeeping services to the Fund under a pricing, bookkeeping and fund
administration agreement. Under a separate agreement (the "Outsourcing
Agreement"), Columbia has delegated certain of those functions to State Street
Corporation ("State Street"). As a result, Columbia pays fees to State Street
under the Outsourcing Agreement. The Fund is not charged a fee for these
services.
TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services to the Fund. For such
services, the Transfer Agent receives a fee, paid monthly, at the annual rate of
$28.00 per open account.
Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly
transfer agent fee based on a per account fee or a minimum of $1,500 per month.
For the year ended July 31, 2004, the Fund's effective transfer agent fee rate
was 0.001%.
Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia
Funds Services, Inc.
CUSTODY CREDITS. The Fund has an agreement with its custodian bank under which
custody fees may be reduced by balance credits. The Fund could have invested a
portion of the assets utilized in connection with the expense offset arrangement
in an income-producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES. The Fund pays no compensation to its
officers, all of whom are employees of Columbia or its affiliates.
The Fund's trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
OTHER. Columbia provides certain services to the Fund related to Sarbanes-Oxley
compliance. For the year ended July 31, 2004, the Fund paid $1,794 to Columbia
for such services. This amount is included in "Other expenses" on the Statement
of Operations.
NOTE 5. PORTFOLIO INFORMATION:
For the year ended July 31, 2004, the cost of purchases and proceeds from sales
of securities, excluding short-term obligations, were $398,860,583 and
$428,037,553, respectively.
NOTE 6. LINE OF CREDIT:
Effective July 23, 2004, the Fund and other affiliated funds began participating
in a $350,000,000 credit facility, which is used for temporary or emergency
purposes to facilitate portfolio liquidity. Interest is charged to the Fund
based on its borrowings. In addition, the Fund has agreed to pay commitment fees
on its pro-rata portion of the unutilized line of credit. The commitment fee is
included in "Other expenses" on the Statement of Operations.
19
<Page>
Prior to July 23, 2004, the Fund participated in a $100,000,000 uncommitted line
of credit along with the other funds of the Trust and several other Columbia
Funds, an affiliated group of funds managed by the investment advisor. The
uncommitted line of credit, which was scheduled to expire on July 2, 2004, was
extended by the Trust and expired on July 23, 2004.
For the year ended July 31, 2004, the Fund did not borrow under these
arrangements.
NOTE 7. SHARES OF BENEFICIAL INTEREST:
As of July 31, 2004, 52.6% of the outstanding shares of the Fund were held by 6
shareholders, each of which represents in excess of 5% of the Fund's shares
outstanding. Subscription and redemption activity of these shareholders may have
a material effect on the Fund.
NOTE 8. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES:
INDUSTRY FOCUS. The Fund may focus its investments in certain industries,
subjecting it to greater risk than a fund that is more diversified.
LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and
certain of their affiliates (collectively, "the Columbia Group") have received
information requests and subpoenas from various regulatory and law enforcement
authorities in connection with their investigations of late trading and market
timing in mutual funds as well as other industry wide issues. The Columbia Group
has not uncovered any instances where Columbia or CFDI were knowingly involved
in late trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil complaint in New York Supreme Court, County of New York
against Columbia and CFDI alleging that Columbia and CFDI had violated certain
New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its
defense of these proceedings, it could be barred from serving as an investment
advisor or distributor for any investment company registered under the
Investment Company Act of 1940, as amended (a "registered investment company").
Such results could prevent Columbia, CFDI or any company that is an affiliated
person of Columbia and CFDI from serving as an investment advisor or distributor
for any registered investment company, including your fund. Your fund has been
informed by Columbia that, if these results occur, it will seek exemptive relief
from the SEC to permit it to continue to serve as your fund's investment
advisor. There is no assurance that such exemptive relief will be granted. On
March 15, 2004, Columbia and CFDI entered into agreements in principle with the
SEC Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and CFDI agreed, among other things, to the following
conditions: payment of $70 million in disgorgement; payment of $70 million in
civil penalties; an order requiring Columbia and CFDI to cease and desist from
violations of the antifraud provisions and other provisions of the federal
securities laws; governance changes designed to maintain the independence of the
mutual fund boards of trustees and ensure compliance with securities laws and
their fiduciary duties; and retention of an independent consultant to review
Columbia's and CFDI's compliance policies and procedures. The agreement requires
the final approval of the SEC. In a separate agreement with the NYAG, the
Columbia Group and its affiliate Banc of America Capital Management, LLC have
agreed to collectively reduce mutual fund fees by $160 million over a five-year
period.
20
<Page>
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). More than 300 cases (including those filed against
entities unaffiliated with the funds, their Boards and/or FleetBoston and its
affiliated entities) have been consolidated in a multi-district proceeding and
transferred to the Federal District Court in Maryland. Recently, certain
Columbia funds and affiliated entities have been named as defendants in several
derivative actions under various sections of the Investment Company Act of 1940,
as amended, alleging, among other things, that the fees and expenses paid by
those funds are excessive. The funds and the other defendants to these actions,
including Columbia and various affiliates, certain other mutual funds advised by
Columbia and its affiliates, and various directors of such funds, have denied
these allegations and are contesting the plaintiffs' claims. These suits and
certain regulatory investigations are ongoing, however, based on currently
available information, Columbia believes that these lawsuits are without merit,
that the likelihood they will have a material adverse impact on any fund is
remote, and that the lawsuits are not likely to materially affect its ability to
provide investment management services to its clients, including the funds.
For the year ended July 31, 2004, Columbia has assumed $15,278 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
21
<Page>
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES OF CMG FUND TRUST AND SHAREHOLDERS OF CMG SMALL CAP FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CMG Small Cap Fund (the "Fund"), a
portfolio of CMG Fund Trust, at July 31, 2004, and the results of its
operations, the changes in its net assets, and its financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States), which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at July 31, 2004 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 2004
22
<Page>
Trustees
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and Officers of the CMG Fund Trust, the year each was first
elected or appointed to office, their principal business occupations during at
least the last five years, the number of portfolios in the fund complex overseen
by the Trustee, and other directorships they hold are shown below. Each Officer
listed below serves as an Officer of the CMG Fund Trust. Each Officer listed
below held such office for the period ended July 31, 2004. The Statement of
Additional Information (SAI) contains additional information about the Trustees
and is available without charge upon request by calling the fund's distributor
at 800-345-6611.
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------ ------------------------------------------------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker (age 48) Executive Vice President-Strategy of United Airlines (airline) since
P.O. Box 66100 December 2002 (formerly President of UAL Loyalty Services (airline)
Chicago, IL 60666 from September 2001 to December 2002; Executive Vice President
Trustee (since 2003) and Chief Financial Officer of United Airlines from July 1999 to
September 2001; Senior Vice President-Finance of United Airlines from
March 1993 to July 1999). Oversees 118, Orbitz, Inc. (on-line travel
company)
Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since September
9534 W. Gull Lake Drive 2004; Private Investor since March 2004 (formerly Chief
Richland, MI 49083-8530 Administrative Officer and Senior Vice President, Kmart Holding
Trustee (since 2003) Corporation (consumer goods) from September 2003 to March 2004;
Executive Vice President-Corporate Development and
Administration, General Counsel and Secretary, Kellogg Company
(food manufacturer), from September 1999 to August 2003;
Senior Vice President, Secretary and General Counsel, Sara Lee
Corporation (branded, packaged, consumer-products manufacturer)
from January 1995 to September 1999). Oversees 118, None
Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and Chief
10701 Charleston Drive Executive Officer, U.S. Plywood Corporation (building products
Vero Beach, FL 32963 manufacturer)). Oversees 120(3), None
Trustee (since 2003)
Charles R. Nelson (age 62) Professor of Economics, University of Washington, since January
Department of Economics 1976; Ford and Louisa Van Voorhis Professor of Political Economy,
University of Washington University of Washington, since September 1993; (formerly Director,
Seattle, WA 98195 Institute for Economic Research, University of Washington from
Trustee (since 2003) September 2001 to June 2003) Adjunct Professor of Statistics,
University of Washington, since September 1980; Associate Editor,
Journal of Money Credit and Banking, since September 1993;
consultant on econometric and statistical matters. Oversees 118, None
John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August 1999,
84 College Road Boston College (formerly Dean, Boston College School of
Chestnut Hill, MA 02467-3838 Management from September 1977 to September 1999). Oversees 121(3),(4),
Trustee (since 2003) Saucony, Inc. (athletic footwear and apparel)
Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
</Table>
23
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------ ------------------------------------------------------------------------
DISINTERESTED TRUSTEES
Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance from
2208 Tawny Woods Place 1975 to 1999, College of Business, Boise State University); Chartered
Boise, ID 83706 Financial Analyst. Oversees 118, None
Trustee (since 2003)
Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private equity
227 West Monroe Street, investing) since September 1994. Oversees 118, Anixter International
Suite 3500 (network support equipment distributor), Jones Lang LaSalle (real
Chicago, IL 60606 estate management services) and Ventas, Inc (real estate investment trust)
Trustee and Chairman of the Board(5) (since 2003) and MONY Group (life insurance).
Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global Education
359 Stickney Hill Road Industry, IBM Corporation (computer and technology) from 1994 to
Hopkinton, NH 03229 1997). Oversees 119(4), Chairman of the Board of Directors, Enesco
Trustee (since 2003) Group, Inc. (designer, importer and distributor of giftware and
collectibles)
Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief Executive
100 S.W. Market Street #1500 Officer, The Regence Group (regional health insurer); Chairman and
Portland, OR 97207 Chief Executive Officer, BlueCross BlueShield of Oregon; Certified
Trustee (since 1992) Public Accountant, Arthur Young & Company. Oversees 118,
Northwest Natural Gas Co. (natural gas service provider)
INTERESTED TRUSTEES
William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since
399 Park Avenue February 1999 (formerly Founding Partner, Development Capital LLC
Suite 3204 from November 1996 to February 1999). Oversees 120(3),
New York, NY 10022 Lee Enterprises (print media), WR Hambrecht + Co. (financial
Trustee (since 2003) service provider), First Health (healthcare), Reader's Digest
(publishing) and OPENFIELD Solutions (retail industry technology
provider)
</Table>
- ----------
(1) In December 2000, the boards of each of the former Liberty Funds and
former Stein Roe Funds were combined into one board of trustees
responsible for the oversight of both fund groups (collectively, the
"Liberty Board"). In October 2003, the trustees on the Liberty Board were
elected to the boards of the Columbia Funds (the "Columbia Board") and of
the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that
election, Patrick J. Simpson and Richard L. Woolworth, who had been
directors on the Columbia Board and trustees on the CMG Funds Board, were
appointed to serve as trustees of the Liberty Board. The date shown is the
earliest date on which a trustee/director was elected or appointed to the
board of a Fund in the Columbia Funds complex. Each Trustee serves for an
indefinite term in accordance with the current Bylaws of the Trust until
the date a Trustee resigns, retires or is removed in accordance with the
Bylaws of the Trust.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee
of the Liberty All-Star Funds, currently consisting of 2 funds, which are
advised by an affiliate of the Advisor.
(4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by
the Advisor.
(5) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
24
<Page>
Officers
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH
COLUMBIA FUNDS, YEAR FIRST ELECTED OR
APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------------------------------ ------------------------------------------------------------------------
Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty
One Financial Center All-Star Funds since June 2001; Assistant Treasurer of Columbia
Boston, MA 02111 Acorn and Wanger Funds since June 2004 (formerly Controller of the
Chief Accounting Officer Columbia Funds and of the Liberty All-Star Funds from May 2002 to
May 2004); Controller and Chief Accounting Officer of the Galaxy
Funds since September 2002 (formerly Vice President, Corporate Audit,
State Street Bank and Trust Company from May 1998 to April 2001).
Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds
One Financial Center since 2004; Assistant Treasurer of Columbia Acorn and Wanger
Boston, MA 02111 Funds since June 2004 (formerly Assistant Treasurer of the Columbia
Controller (since 2004) Funds and of the Liberty All-Star Funds from June 2002 to May 2004;
Vice President, Product Strategy & Development of Liberty Funds Group
from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds
and of the Liberty All-Star Funds from August 1999 to February 2001;
Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999).
J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer
One Financial Center of the Columbia Funds and of the Liberty All-Star Funds since
Boston, MA 02111 December 2000; Vice President of the Advisor since April 2003
Treasurer (since 2000) and (formerly Chief Accounting Officer and Controller of the Liberty
President (since 2004) Funds and Liberty All-Star Funds from February 1998 to October 2000);
Treasurer of the Galaxy Funds since September 2002; Treasurer, Columbia
Management Multi-Strategy Hedge Fund, LLC since December 2002
(formerly Vice President of Colonial from February 1998 to October 2000).
David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds
One Financial Center since December 2003; Senior Counsel, Bank of America Corporation
Boston, MA 02111 (formerly FleetBoston Financial Corporation) since January 1996;
Secretary (since 2003) Associate General Counsel, Columbia Management Group since
November 2002.
</Table>
25
<Page>
CMG FUND TRUST
1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201
- TRUSTEES -
DOUGLAS A. HACKER
JANET LANGFORD KELLY
RICHARD W. LOWRY
WILLIAM E. MAYER
CHARLES R. NELSON
JOHN J. NEUHAUSER
PATRICK J. SIMPSON
THOMAS E. STITZEL
THOMAS C. THEOBALD
ANNE-LEE VERVILLE
RICHARD L. WOOLWORTH
- INVESTMENT ADVISOR -
COLUMBIA MANAGEMENT ADVISORS, INC.
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
- LEGAL COUNSEL -
ROPES & GRAY LLC
ONE INTERNATIONAL PLACE
BOSTON, MA 02110-2624
- TRANSFER AGENT -
COLUMBIA FUNDS SERVICES, INC.
P.O. BOX 8081
BOSTON, MASSACHUSETTS 02266-8081
CMC-02/527S-0804 (09/04) 2544
A description of the policies and procedures that the fund uses to determine how
to vote proxies relating to its portfolio securities and a copy of a fund's
voting record are available (i) at www.columbiamanagement.com; and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER,
INCORPORATED. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA
MANAGEMENT REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS,
WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT
CAREFULLY BEFORE YOU INVEST.
Fund distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth
Avenue, Portland, Oregon 97201
<Page>
COLUMBIA MANAGEMENT(R)
CMG STRATEGIC EQUITY FUND
A PORTFOLIO OF CMG FUND TRUST
ANNUAL REPORT
JULY 31, 2004
Not FDIC May Lose Value
Insured No Bank Guarantee
Advised by Columbia Management Advisors, Inc.
<Page>
CMG STRATEGIC EQUITY FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Strategic Equity Fund returned 16.58% for the 12-month period ended July 31,
2004. The fund outperformed both the S&P 500 Index and the Lipper Multi-Cap Core
Funds average, which returned 13.17% and 12.43%, respectively.(1)
Our decision to emphasize sectors that could benefit from the economic recovery
helped boost performance in the first half of the fiscal year, while energy
stocks have been key to the fund's strong return thus far in 2004. Caterpillar,
CNH Global, Timken, Eaton, Georgia Pacific (which was sold during the period)
and Dow Chemical all had a favorable impact. Later, soaring prices for oil and
gas boosted energy company earnings, including those of oil services firms
Halliburton and Transocean, in which we held good-sized positions. Prices for
shares of Texas-based Input/Output and Norway's TGS Nopec Geophysical, two
recent additions to the portfolio, also rose. These seismic exploration
companies are poised to benefit as large oil companies seek new deposits of oil
and gas. Our cautious approach to the lackluster consumer sector also helped
relative returns, while higher interest rates led us to underweight financial
services companies.(2)
Fading prospects for sustained global economic growth caused emerging and other
international markets to weaken after several consecutive quarters of positive
returns. In Korea, Samsung Electronics fell sharply as its earnings outlook
clouded over. Millicom International Cellular, which provides cellular phone
services in more than a dozen developing countries, recorded a strong gain for
the period despite recent profit-taking. Questions about the company's licensing
in Pakistan made investors uneasy, as did concerns that arose in other emerging
markets where the company operates.
Based on the uncertain growth outlook for next year and an oversupply in
semiconductors, we reduced the fund's overall exposure to technology issues.
However, we increased holdings among software makers, including Check Point
Software Technologies, which makes internet security systems, and networking
specialist Novell.
In health care, shares of large pharmaceutical companies remained under pressure
from patent expirations and anemic new product flows. In biotechnology, where
patent expirations are not a factor, Biogen Idec contributed to the fund's
return. Cardinal Health, which develops and markets products and services for
the health care industry, slumped sharply under the weight
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
(2) Holdings are disclosed as a percentage of net assets on July 31, 2004, and
are subject to change: Caterpillar (0.5%), CNH Global (0.0%), Timken
(0.5%), Eaton (0.6%), Dow Chemical (0.3%), Halliburton (0.6%), Transocean
(0.6%), Input/Output (0.5%), TGS Nopec Geophysical (0.4%), Samsung
Electronics (0.7%), Millicom International Cellular (0.3%), Check Point
Software Technologies (0.2%), Novell (0.1%), Biogen Idec (1.0%), Cardinal
Health (0.3%), AmerisourceBergen (0.2%), Microsoft (1.2%), Nestle (0.8%),
and Unilever (0.4%).
1
<Page>
of investigations into its accounting practices and a diminished earnings
outlook. Shares of drug distribution firm AmerisourceBergen also declined.
Beginning in April, larger-capitalization companies reversed a long-standing
trend and began to outperform small- and mid-sized issues. That shift worked
well with our desire to place the portfolio on a more conservative footing,
given our doubts about the economic recovery's sustainability into next year. To
capitalize on the change in investor focus, we have adjusted holdings to
emphasize stocks of larger, higher quality companies. We added to our position
in Microsoft. We also broadened exposure to consumer staples companies, by
adding Nestle and Unilever. Consistent with our cautious approach, we increased
the fund's cash position to approximately 18% at the end of the period.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were:
<Table>
<Caption>
(%)
3M 1.5
Microsoft 1.2
Berkshire Hathaway 1.2
Schlumberger 1.0
Biogen Idec 1.0
JPMorgan Chase & Co. 0.9
Nestle 0.8
DST Systems 0.8
Walgreen 0.8
Pfizer 0.7
</Table>
We appreciate your continued confidence in CMG Strategic Equity Fund.
The Columbia Investment Team
July 31, 2004
An investment in CMG Strategic Equity Fund offers the potential for long-term
growth, but also involves certain risks, including stock market fluctuations due
to economic and business developments.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weighting within the portfolio may change as market conditions change.
2
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, OCTOBER 9, 2001 TO JULY 31, 2004
<Table>
<Caption>
CMG STRATEGIC EQUITY FUND S&P 500 INDEX
10/9/2001 $ 10,000 $ 10,000
10/31/2001 $ 10,100 $ 10,033
11/30/2001 $ 11,040 $ 10,803
12/31/2001 $ 11,386 $ 10,898
1/31/2002 $ 11,315 $ 10,738
2/28/2002 $ 11,295 $ 10,531
3/31/2002 $ 11,956 $ 10,927
4/30/2002 $ 11,816 $ 10,265
5/31/2002 $ 11,836 $ 10,189
6/30/2002 $ 11,286 $ 9,464
7/31/2002 $ 10,494 $ 8,726
8/31/2002 $ 10,565 $ 8,783
9/30/2002 $ 9,633 $ 7,828
10/31/2002 $ 10,154 $ 8,517
11/30/2002 $ 11,025 $ 9,019
12/31/2002 $ 10,357 $ 8,490
1/31/2003 $ 10,105 $ 8,267
2/28/2003 $ 9,954 $ 8,143
3/31/2003 $ 9,924 $ 8,222
4/30/2003 $ 10,800 $ 8,900
5/31/2003 $ 11,606 $ 9,369
6/30/2003 $ 11,757 $ 9,489
7/31/2003 $ 12,150 $ 9,656
8/31/2003 $ 12,603 $ 9,844
9/30/2003 $ 12,462 $ 9,739
10/31/2003 $ 13,137 $ 10,291
11/30/2003 $ 13,398 $ 10,381
12/31/2003 $ 14,009 $ 10,925
1/31/2004 $ 14,256 $ 11,126
2/29/2004 $ 14,513 $ 11,281
3/31/2004 $ 14,543 $ 11,111
4/30/2004 $ 14,338 $ 10,936
5/31/2004 $ 14,430 $ 11,086
6/30/2004 $ 14,799 $ 11,301
7/31/2004 $ 14,164 $ 10,926
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Strategic Equity Fund 10/09/01 16.58 13.20
S&P 500 Index 13.17 3.21
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Strategic Equity Fund 10/09/01 25.88 15.48
S&P 500 Index 19.11 4.59
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
The index performance is from October 9, 2001.
The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the
performance of 500 widely held, large-capitalization U.S. stocks. Unlike mutual
funds, indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
Performance results reflect any waivers or reimbursement of fund expenses by the
advisor or its affiliates. Absent these waivers or reimbursement arrangements,
performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
3
<Page>
UNDERSTANDING YOUR EXPENSES - CMG STRATEGIC EQUITY FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this
period," locate the amount under "actual." Multiply this number by the
result from step 1. Your answer is an estimate of the expenses you paid on
your account during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 993.54 1,022.87 1.98 2.01
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.40%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
4
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
5
<Page>
CMG STRATEGIC EQUITY FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
JULY 31, JULY 31, OCTOBER 31, OCTOBER 31,
2004 2003(a) 2002 2001(b)
--------- --------- ----------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.06 $ 10.14 $ 10.10 $ 10.00
--------- --------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.12(c) 0.10(c) 0.11(c) -(d)
Net realized and unrealized gain (loss)
on investments and foreign currency 1.87 1.88 (0.05) 0.10
--------- --------- ----------- -----------
Total from investment operations 1.99 1.98 0.06 0.10
--------- --------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.09) (0.06) (0.02) -
From net realized gains (0.16) - - -
--------- --------- ----------- -----------
Total distributions declared to
shareholders (0.25) (0.06) (0.02) -
--------- --------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.80 $ 12.06 $ 10.14 $ 10.10
========= ========= =========== ===========
Total return (e)(f) 16.58% 19.66%(g) 0.53% 1.00%(g)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 618,714 $ 370,620 $ 188,179 $ 36,942
Ratio of net expenses to
average net assets (h) 0.40% 0.40%(i) 0.40% 0.40%(i)
Ratio of net investment income to
average net assets (h) 0.88% 1.22%(i) 1.01% 0.04%(i)
Waiver/reimbursement 0.05% 0.05%(i) 0.07% 0.80%(i)
Portfolio turnover rate 81% 78%(g) 172% 14%(g)
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
(b) The Fund commenced investment operations on October 9, 2001. Per share
data, total return and portfolio turnover rate reflect activity from that
date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Rounds to less than $0.01 per share.
(e) Total return at net asset value assuming all distributions reinvested.
(f) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
See Accompanying Notes to Financial Statements.
6
<Page>
CMG STRATEGIC EQUITY FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (81.3%)
Consumer Discretionary (8.9%)
Auto Components (0.9%)
Modine Manufacturing Co. 85,350 $ 2,531,481
Nokian Renkaat Oyj 30,360 2,876,224
-------------
5,407,705
-------------
Hotels, Restaurants & Leisure (0.2%)
Fairmont Hotels & Resorts, Inc. 50,000 1,287,500
-------------
Household Durables (1.3%)
Ekornes ASA 130,000 2,473,843
Matsushita Electric Industrial Co., Ltd., ADR 100,000 1,346,000
Newell Rubbermaid, Inc. 75,000 1,620,000
Pioneer Corp., ADR 40,000 864,000
Sony Corp., ADR 57,500 1,992,375
-------------
8,296,218
-------------
Internet & Catalog Retail (0.8%)
eBay, Inc. (a) 42,500 3,329,025
IAC/InterActiveCorp (a) 62,500 1,706,250
-------------
5,035,275
-------------
Media (3.9%)
Comcast Corp., Class A (a) 75,000 2,010,000
DIRECTV Group, Inc. (a) 150,000 2,431,500
Entravision Communications Corp., Class A (a) 90,000 636,300
Fox Entertainment Group, Inc. (a) 42,000 1,135,260
Gemstar-TV Guide International, Inc. (a) 50,000 232,000
Grupo Televisa SA, ADR (a) 75,000 3,525,000
John Wiley & Sons, Inc., Class A 30,000 970,800
Liberty Media Corp. (a) 150,000 1,272,000
Liberty Media International, Inc., Class A (a) 7,500 233,850
Media General, Inc., Class A 45,000 2,689,200
Pixar, Inc. (a) 20,000 1,364,800
Pulitzer, Inc. 30,000 1,387,500
Time Warner, Inc. (a) 150,815 2,511,070
Viacom, Inc., Class B 80,310 2,697,613
Vivendi Universal SA, ADR (a) 40,000 995,200
-------------
24,092,093
-------------
Multiline Retail (1.3%)
Dillard's, Inc., Class A 100,000 2,279,000
Dollar General Corp. 40,000 772,000
Ito-Yokado Co., Ltd. 75,000 2,919,495
Stockmann Oyj ABP, Class B 90,000 2,083,979
-------------
8,054,474
-------------
Specialty Retail (0.5%)
Carmax, Inc. (a) 87,996 1,830,317
PETsMART, Inc. 40,000 1,240,400
-------------
3,070,717
-------------
</Table>
See Accompanying Notes to Financial Statements.
7
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (continued)
Consumer Staples (8.4%)
Beverages (1.3%)
Coca-Cola Co. 80,000 $ 3,508,800
Coca-Cola Femsa, SA de CV, ADR 137,500 2,818,750
PepsiCo, Inc. 40,000 2,000,000
-------------
8,327,550
-------------
Food & Staples Retailing (2.1%)
Albertson's, Inc. 147,500 3,597,525
Costco Wholesale Corp. 30,000 1,219,800
United Natural Foods, Inc. (a) 80,000 1,733,600
Walgreen Co. 127,500 4,641,000
Wal-Mart Stores, Inc. 30,000 1,590,300
-------------
12,782,225
-------------
Food Products (2.1%)
General Mills, Inc. 30,000 1,347,000
Hain Celestial Group, Inc. (a) 40,000 661,200
Kellogg Co. 47,500 1,978,850
Nestle SA, Registered Shares 20,000 5,105,386
Tyson Foods, Inc. 75,000 1,429,500
Unilever NV, N.Y. Registered Shares 40,000 2,453,200
-------------
12,975,136
-------------
Household Products (0.9%)
Kimberly-Clark Corp. 42,500 2,722,975
Procter & Gamble Co. 60,000 3,129,000
-------------
5,851,975
-------------
Personal Products (1.8%)
Estee Lauder Companies, Inc., Class A 57,500 2,524,250
Gillette Co. 108,050 4,211,789
L'Oreal SA 32,500 2,326,804
Natura Cosmeticos SA (a) 17,800 304,975
Oriflame Cosmetics SA, SDR (a) 50,000 1,660,286
-------------
11,028,104
-------------
Tobacco (0.2%)
Altria Group, Inc. 20,000 952,000
-------------
Energy (9.0%)
Energy Equipment & Services (5.5%)
BJ Services Co. (a) 30,000 1,489,800
Cooper Cameron Corp. (a) 32,500 1,660,425
Core Laboratories NV (a) 67,500 1,485,000
GlobalSantaFe Corp. 40,275 1,103,535
Halliburton Co. 115,000 3,651,250
Helmerich & Payne, Inc. 27,500 696,300
Input/Output, Inc. (a) 300,000 2,889,000
Rowan Companies, Inc. (a) 75,000 1,831,500
Schlumberger Ltd. 100,000 6,432,000
TGS Nopec Geophysical Co., ASA (a) 150,000 2,501,639
</Table>
See Accompanying Notes to Financial Statements.
8
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (continued)
Energy Equipment & Services (continued)
Transocean, Inc. (a) 137,500 $ 3,905,000
Varco International, Inc. (a) 122,500 2,960,825
Weatherford International Ltd. (a) 37,500 1,754,250
Willbros Group, Inc. (a) 100,000 1,471,000
-------------
33,831,524
-------------
Oil & Gas (3.5%)
Anadarko Petroleum Corp. 30,000 1,793,700
BP PLC, ADR 75,000 4,227,000
ConocoPhillips 40,000 3,150,800
Devon Energy Corp. 42,500 2,953,325
Exxon Mobil Corp. 57,500 2,662,250
Newfield Exploration Co. (a) 57,500 3,396,525
Unocal Corp. 52,500 2,034,900
Williams Companies, Inc. 125,000 1,518,750
-------------
21,737,250
-------------
Financials (9.4%)
Capital Markets (1.5%)
Bank of New York Co., Inc. 75,000 2,154,750
Charles Schwab Corp. 125,000 1,097,500
Morgan Stanley 25,000 1,233,250
Nikko Cordial Corp. 200,000 907,988
Nomura Holdings, Inc., ADR 125,000 1,725,000
Piper Jaffray Companies, Inc. (a) 49,950 2,035,462
-------------
9,153,950
-------------
Commercial Banks (2.0%)
Allied Irish Banks PLC, ADR 30,000 922,500
Fifth Third Bancorp 32,500 1,604,200
HSBC Holdings PLC, ADR 22,500 1,661,400
Kookmin Bank, ADR 5,000 137,900
Mitsubishi Tokyo Financial Group, Inc., ADR 300,000 2,718,000
SunTrust Banks, Inc. 32,500 2,143,375
U.S. Bancorp 72,500 2,051,750
Wachovia Corp. 25,000 1,107,750
-------------
12,346,875
-------------
Consumer Finance (0.7%)
American Express Co. 76,700 3,854,175
MBNA Corp. 30,000 740,700
-------------
4,594,875
-------------
Diversified Financial Services (1.8%)
Citigroup, Inc. 60,783 2,679,922
GATX Corp. 82,500 2,102,100
Instinet Group, Inc. (a) 175,000 782,250
JPMorgan Chase & Co. 157,026 5,861,781
-------------
11,426,053
-------------
Insurance (2.4%)
American International Group, Inc. 52,724 3,724,951
Berkshire Hathaway, Inc., Class B (a) 2,500 7,235,000
</Table>
See Accompanying Notes to Financial Statements.
9
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (continued)
Insurance (continued)
Cincinnati Financial Corp. 31,500 $ 1,256,220
St. Paul Travelers Companies, Inc. 62,510 2,317,246
-------------
14,533,417
-------------
Real Estate (0.3%)
Mitsubishi Estate Co., Ltd. 100,000 1,139,030
Post Properties, Inc., REIT 30,000 839,700
-------------
1,978,730
-------------
Thrifts & Mortgage Finance (0.7%)
Freddie Mac 32,500 2,090,075
Radian Group, Inc. 47,500 2,185,950
-------------
4,276,025
-------------
Health Care (13.4%)
Biotechnology (2.1%)
Abgenix, Inc. (a) 100,000 977,500
Amgen, Inc. (a) 72,500 4,123,800
Biogen Idec, Inc. (a) 100,000 6,000,000
MedImmune, Inc. (a) 80,000 1,843,200
-------------
12,944,500
-------------
Health Care Equipment & Supplies (3.6%)
Alcon, Inc. 52,500 4,021,500
Applera Corp. - Applied Biosystems Group 125,000 2,586,250
Baxter International, Inc. 92,500 2,781,475
Cytyc Corp. (a) 70,000 1,691,900
Haemonetics Corp. (a) 62,500 1,875,000
Hospira, Inc. (a) 100,350 2,600,069
Kinetic Concepts, Inc. (a) 20,000 898,400
Medtronic, Inc. 35,000 1,738,450
Millipore Corp. (a) 32,500 1,712,425
Zimmer Holdings, Inc. (a) 30,000 2,289,300
-------------
22,194,769
-------------
Health Care Providers & Services (2.6%)
Accredo Health, Inc. (a) 62,500 2,025,000
AmerisourceBergen Corp. 25,000 1,351,500
Cardinal Health, Inc. 47,500 2,113,750
Laboratory Corp. of America Holdings (a) 20,000 783,200
McKesson Corp. 125,000 4,021,250
Quest Diagnostics, Inc. 45,000 3,693,600
Tenet Healthcare Corp. (a) 77,500 866,450
UnitedHealth Group, Inc. 20,000 1,258,000
-------------
16,112,750
-------------
Pharmaceuticals (5.1%)
Abbott Laboratories 98,500 3,875,975
Bristol-Myers Squibb Co. 67,080 1,536,132
Dr. Reddy's Laboratories Ltd., ADR 17,500 296,450
Elan Corp. PLC, ADR (a) 152,500 3,133,875
Eli Lilly & Co. 67,500 4,301,100
</Table>
See Accompanying Notes to Financial Statements.
10
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (continued)
Pharmaceuticals (continued)
Nektar Therapeutics (a) 42,500 $ 745,450
Novartis AG, ADR 75,000 3,349,500
Pfizer, Inc. 140,092 4,477,340
Richter Gedeon Ltd. 20,000 1,973,337
Schering-Plough Corp. 100,000 1,946,000
Shire Pharmaceuticals Group PLC, ADR (a) 52,500 1,395,450
Valeant Pharmaceuticals International 100,000 1,751,000
Wyeth 75,000 2,655,000
-------------
31,436,609
-------------
Industrials (11.7%)
Aerospace & Defense (0.1%)
Raytheon Co. 20,000 671,000
-------------
Air Freight & Logistics (0.6%)
United Parcel Service, Inc., Class B 50,000 3,598,000
-------------
Building Products (0.3%)
TOTO Ltd. 200,000 1,947,229
-------------
Commercial Services & Supplies (2.8%)
Allied Waste Industries, Inc. (a) 100,000 924,000
Aramark Corp., Class B 45,000 1,206,900
Avery Dennison Corp. 67,500 4,088,475
Cendant Corp. 137,500 3,146,000
Central Parking Corp. 50,000 796,500
ChoicePoint, Inc. (a) 47,500 1,995,000
G & K Services, Inc., Class A 52,500 2,022,300
Ionics, Inc. (a) 47,500 1,284,400
Waste Management, Inc. 75,000 2,110,500
-------------
17,574,075
-------------
Construction & Engineering (0.4%)
Insituform Technologies, Inc., Class A (a) 95,000 1,707,150
Shaw Group, Inc. (a) 72,500 719,200
-------------
2,426,350
-------------
Electrical Equipment (0.8%)
Emerson Electric Co. 27,500 1,669,250
Thomas & Betts Corp. (a) 112,500 2,958,750
-------------
4,628,000
-------------
Industrial Conglomerates (2.5%)
3M Co. 112,500 9,265,500
General Electric Co. 112,550 3,742,289
Siemens AG, ADR 30,000 2,107,200
-------------
15,114,989
-------------
</Table>
See Accompanying Notes to Financial Statements.
11
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (continued)
Machinery (3.2%)
AGCO Corp. (a) 60,000 $ 1,255,200
Bucyrus International, Inc., Class A (a) 72,500 1,740,000
Caterpillar, Inc. 42,500 3,123,325
CNH Global NV 10,000 197,000
Eaton Corp. 60,000 3,878,400
Federal Signal Corp. 100,000 1,701,000
Flowserve Corp. (a) 40,000 958,000
Joy Global, Inc. 30,000 890,700
Kaydon Corp. 62,500 1,820,625
Timken Co. 125,000 3,105,000
Tomra Systems ASA 350,000 1,287,168
-------------
19,956,418
-------------
Marine (0.4%)
A.P. Moller - Maersk 250 1,738,188
Finnlines Oyj 34,400 947,084
-------------
2,685,272
-------------
Road & Rail (0.2%)
Kansas City Southern (a) 60,000 877,200
-------------
Trading Companies & Distributors (0.4%)
Fastenal Co. 40,000 2,495,200
-------------
Information Technology (11.0%)
Communications Equipment (1.5%)
3Com Corp. (a) 100,000 493,000
Cisco Systems, Inc. (a) 125,680 2,621,685
Motorola, Inc. 75,400 1,201,122
QUALCOMM, Inc. 27,500 1,899,700
Polycom, Inc. (a) 100,000 1,928,000
Tellabs, Inc. (a) 125,000 1,113,750
-------------
9,257,257
-------------
Computers & Peripherals (1.2%)
EMC Corp. (a) 101,650 1,115,100
Gateway, Inc. (a) 100,000 450,000
Hypercom Corp. (a) 240,000 1,632,000
International Business Machines Corp. 25,000 2,176,750
Sun Microsystems, Inc. (a) 200,000 790,000
Synaptics, Inc. (a) 65,000 961,350
-------------
7,125,200
-------------
Electronic Equipment & Instruments (0.7%)
Celestica, Inc. (a) 75,000 1,286,250
Murata Manufacturing Co., Ltd. 30,000 1,491,437
OKI Electric Industry Co., Ltd. (a) 125,000 449,499
Solectron Corp. (a) 100,000 550,000
Symbol Technologies, Inc. 50,000 654,500
-------------
4,431,686
-------------
</Table>
See Accompanying Notes to Financial Statements.
12
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (continued)
IT Services (2.0%)
Automatic Data Processing, Inc. 50,000 $ 2,099,000
DST Systems, Inc. (a) 110,000 5,011,600
Electronic Data Systems Corp. 75,000 1,386,000
First Data Corp. 50,000 2,230,500
Paychex, Inc. 52,500 1,612,275
-------------
12,339,375
-------------
Internet Software & Services (0.8%)
Check Point Software Technologies Ltd. (a) 75,000 1,491,750
webMethods, Inc. (a) 40,000 190,800
Yahoo!, Inc. (a) 115,000 3,542,000
-------------
5,224,550
-------------
Office Electronics (0.1%)
Canon, Inc., ADR 15,000 735,000
-------------
Semiconductors & Semiconductor Equipment (2.5%)
Analog Devices, Inc. 20,000 794,000
FEI Co. (a) 100,000 2,011,000
Intel Corp. 85,300 2,079,614
Micron Technology, Inc. (a) 125,575 1,699,030
NVIDIA Corp. (a) 100,000 1,540,000
Samsung Electronics Co. Ltd., GDR (b) 25,000 4,475,000
Taiwan Semiconductor Manufacturing Co. Ltd., ADR (a) 100,000 712,002
Texas Instruments, Inc. 89,150 1,901,569
-------------
15,212,215
-------------
Software (2.2%)
Activision, Inc. (a) 100,000 1,465,000
McAfee, Inc. (a) 50,000 899,000
Microsoft Corp. 255,620 7,274,945
Novell, Inc. (a) 120,000 820,800
Oracle Corp. (a) 124,230 1,305,657
PeopleSoft, Inc. (a) 30,000 540,600
SAP AG, ADR 30,000 1,200,300
Verity, Inc. (a) 30,000 333,900
-------------
13,840,202
-------------
Materials (5.2%)
Chemicals (2.8%)
Air Products & Chemicals, Inc. 47,500 2,458,125
Dow Chemical Co. 50,000 1,994,500
E.I. du Pont de Nemours & Co. 67,500 2,893,725
International Flavors & Fragrances, Inc. 62,500 2,283,750
Landec Corp. (a) 30,000 168,870
Millennium Chemicals, Inc. (a) 30,000 529,500
Nippon Zeon Co. 125,000 795,613
Potash Corp. of Saskatchewan, Inc. 42,500 4,109,325
Rohm & Haas Co. 50,000 1,960,000
-------------
17,193,408
-------------
Construction Materials (0.2%)
Vulcan Materials Co. 30,000 1,428,600
-------------
</Table>
See Accompanying Notes to Financial Statements.
13
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Common Stocks (continued)
Containers & Packaging (0.2%)
Smurfit-Stone Container Corp. (a) 75,800 $ 1,410,638
-------------
Metals & Mining (1.5%)
Alcoa, Inc. 30,000 960,900
Barrick Gold Corp. 75,000 1,434,000
Companhia Vale do Rio Doce, ADR 42,500 2,290,750
CONSOL Energy, Inc. 40,000 1,433,600
Inco Ltd. (a) 40,000 1,334,800
Placer Dome, Inc. 75,000 1,201,500
Wolfden Resources, Inc. (a) 75,000 250,685
-------------
8,906,235
-------------
Paper & Forest Products (0.5%)
Bowater, Inc. 32,500 1,212,250
Votorantim Celulose e Papel SA, ADR 57,500 2,056,200
-------------
3,268,450
-------------
Telecommunication Services (2.4%)
Diversified Telecommunication Services (1.7%)
Citizens Communications Co. 75,000 1,080,000
Compania Anonima Nacional Telefonos de Venezuela, ADR 112,500 2,246,625
Covad Communications Group, Inc. (a) 200,000 380,000
PT Perusahaan Telekomunikiasi 100,000 1,701,000
Phillippine Long Distance Telephone Co., ADR 36,800 824,688
SBC Communications, Inc. 50,000 1,267,000
Telefonaktiebolaget LM Ericsson, ADR (a) 40,000 1,068,400
Verizon Communications, Inc. 50,000 1,927,000
-------------
10,494,713
-------------
Wireless Telecommunication Services (0.7%)
Millicom International Cellular SA (a) 122,500 2,066,575
Mobile Telesystems, ADR (a) 20,000 2,341,000
-------------
4,407,575
-------------
Utilities (1.9%)
Electric Utilities (1.1%)
Edison International 87,500 2,345,000
TECO Energy, Inc. 137,500 1,773,750
TXU Corp. 50,000 1,983,000
Westar Energy, Inc. 37,000 746,290
-------------
6,848,040
-------------
Gas Utilities (0.3%)
NiSource, Inc. 100,000 2,070,000
-------------
Multi-Utilities & Unregulated Power (0.5%)
Calpine Corp. (a) 75,000 289,500
Duke Energy Corp. 60,000 1,290,000
Dynegy Inc., Class A (a) 100,000 420,000
Oneok, Inc. 57,500 1,207,500
-------------
3,207,000
-------------
Total Common Stocks
(Cost of $421,895,669) 503,102,176
-------------
</Table>
See Accompanying Notes to Financial Statements.
14
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
Investment Company (0.4%)
iShares MSCI Japan Index Fund
(Cost of $1,773,500) 225,000 $ 2,214,000
-------------
Preferred Stock (0.3%)
Consumer Discretionary (0.3%)
Media (0.3%)
News Corp., Ltd., ADR
(Cost of $1,663,106) 68,414 2,173,513
-------------
Rights (0.0%)
Liberty Media International, Inc., Class A, Expires 08/23/04
(Cost of $0) 1,500 9,015
-------------
<Caption>
PAR
-------------
Short-Term Obligation (18.2%)
Repurchase agreement with State Street Bank &
Trust, dated 07/30/04, due 08/02/04 at 1.230%
collateralized by U.S. Treasury Bonds
with various maturities to 11/15/10, market value of $114,591,629
(repurchase proceeds $112,347,514)
(Cost of $112,336,000) $ 112,336,000 112,336,000
-------------
Total Investments (100.2%)
(Cost of $537,668,275) (c) 619,834,704
Other Assets and Liabilities, Net (-0.2%) (1,120,456)
-------------
Net Assets (100.0%) $ 618,714,248
=============
</Table>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. This security may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At July 31,
2004, the value of this security represents 0.7% of net assets.
(c) Cost for federal income tax purposes is $541,401,370.
<Table>
<Caption>
ACRONYM NAME
- ----------------- -----------------------------
ADR American Depositary Receipt
GDR Global Depositary Receipt
REIT Real Estate Investment Trust
SDR Swedish Depositary Receipt
</Table>
See Accompanying Notes to Financial Statements.
15
<Page>
CMG STRATEGIC EQUITY FUND
A Portfolio of CMG Fund Trust
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2004
<Table>
ASSETS:
Investments, at identified cost (including repurchase agreement) $ 537,668,275
--------------
Investments, at value $ 507,498,704
Repurchase agreement 112,336,000
Cash 748
Receivable for:
Investments sold 3,256,402
Capital stock sold 635,542
Dividends 439,084
Interest 7,676
Foreign tax reclaim 30,477
Expense reimbursement due from Investment Advisor 12,994
Deferred Trustees' compensation plan 1,106
--------------
Total assets 624,218,733
--------------
LIABILITIES:
Payable for:
Investments purchased 5,199,284
Capital stock redeemed 21,506
Investment advisory fee 213,076
Transfer agent fee 407
Trustees' fee 2,095
Custody fee 12,693
Deferred Trustees' fees 1,106
Other liabilities 54,318
--------------
Total liabilities 5,504,485
--------------
NET ASSETS $ 618,714,248
==============
NET ASSETS consist of:
Paid-in capital $ 505,842,489
Undistributed net investment income 2,983,567
Accumulated net realized gain 27,721,304
Net unrealized appreciation on:
Investments 82,166,429
Foreign currency translations 459
--------------
NET ASSETS $ 618,714,248
==============
Shares of capital stock outstanding 44,830,076
==============
Net asset value, offering and redemption price per share $ 13.80
==============
</Table>
See Accompanying Notes to Financial Statements.
16
<Page>
STATEMENT OF OPERATIONS
For the Year Ended July 31, 2004
<Table>
NET INVESTMENT INCOME:
Income:
Dividends $ 6,604,901
Interest 864,375
Foreign withholding tax (167,098)
--------------
Total income 7,302,178
--------------
Expenses:
Investment advisory fee 2,280,557
Transfer agent fee 5,490
Trustees' fees 15,697
Custody fee 74,447
Non-recurring costs (See Note 8) 28,731
Other expenses 190,390
--------------
Total expenses 2,595,312
Expense reimbursements by Investment Advisor (284,273)
Non-recurring costs assumed by Investment Advisor (See Note 8) (28,731)
Custody earnings credit (1,751)
--------------
Net expenses 2,280,557
--------------
Net investment income 5,021,621
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments 42,363,217
Foreign currency transactions (144,464)
--------------
Net realized gain 42,218,753
--------------
Net change in unrealized appreciation/depreciation on:
Investments 30,946,381
Foreign currency translations 459
--------------
Net change in unrealized appreciation/depreciation 30,946,840
--------------
Net gain 73,165,593
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 78,187,214
==============
</Table>
See Accompanying Notes to Financial Statements.
17
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED PERIOD ENDED YEAR ENDED
JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002
------------- ----------------- ----------------
Operations:
Net investment income $ 5,021,621 $ 2,657,828 $ 1,070,922
Net realized gain (loss) on investments and
foreign currency transactions 42,218,753 1,504,435 (9,099,006)
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations 30,946,840 54,067,910 (3,343,013)
------------- ----------------- ----------------
Net increase (decrease) from operations 78,187,214 58,230,173 (11,371,097)
Distributions declared to shareholders:
From net investment income (3,979,500) (1,463,038) (63,470)
From net realized gains (6,937,177) - -
------------- ----------------- ----------------
Total distributions declared to shareholders (10,916,677) (1,463,038) (63,470)
------------- ----------------- ----------------
Share transactions:
Subscriptions 236,903,542 141,164,376 174,100,499
Distributions reinvested 10,729,185 1,438,209 63,245
Redemptions (66,809,077) (16,928,805) (11,491,615)
------------- ----------------- ----------------
Net increase in share transactions 180,823,650 125,673,780 162,672,129
------------- ----------------- ----------------
Net increase in net assets 248,094,187 182,440,915 151,237,562
NET ASSETS:
Beginning of period 370,620,061 188,179,146 36,941,584
------------- ----------------- ----------------
End of period $ 618,714,248 $ 370,620,061 $ 188,179,146
============= ================= ================
Undistributed net investment income $ 2,983,567 $ 2,200,131 $ 1,009,924
============= ================= ================
Changes in Shares:
Subscriptions 18,201,135 13,628,484 15,932,938
Issued for distributions reinvested 795,344 140,587 5,562
Redemptions (4,903,233) (1,583,795) (1,045,757)
------------- ----------------- ----------------
Net increase 14,093,246 12,185,276 14,892,743
------------- ----------------- ----------------
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
See Accompanying Notes to Financial Statements.
18
<Page>
CMG STRATEGIC EQUITY FUND
A Portfolio of CMG Fund Trust
NOTES TO FINANCIAL STATEMENTS
July 31, 2004
NOTE 1. ORGANIZATION:
CMG Strategic Equity Fund (the "Fund"), a series of CMG Fund Trust (the
"Trust"), is a diversified portfolio. The Trust is an Oregon business trust
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
INVESTMENT GOAL. The Fund seeks long-term growth of capital and total returns
greater than those of the market over time.
FUND SHARES. The Fund may issue 100 million shares of no par value capital
stock, which are offered continuously at net asset value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements.
Equity securities and exchange traded funds are valued at the last sale price on
the principal exchange on which they trade, except for securities traded on the
NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities
or listed securities for which there were no sales during the day are valued at
the closing bid price on such exchanges or over-the-counter markets.
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Foreign securities are generally valued at the last sale price on the foreign
exchange or market on which they trade. If any foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
(Funds') shares are determined as of such times. Foreign currency exchange rates
are generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events
affecting the values of such foreign securities and such exchange rates may
occur between the times at which they are determined and the close of the
customary trading session of the NYSE, which would not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
values of such foreign securities occur and it is determined that market
quotations are not reliable, then these foreign securities will be valued at
their fair value using procedures approved by the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
19
<Page>
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement transactions
with institutions that the Fund's investment advisor has determined are
creditworthy. The Fund, through its custodian, receives delivery of underlying
securities collateralizing a repurchase agreement. Collateral is at least equal,
at all times, to the value of the repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty. These risks include possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities and
a possible decline in the value of the underlying securities during the period
while the Fund seeks to assert its rights.
INCOME RECOGNITION. Interest income is recorded on the accrual basis. Corporate
actions and dividend income are recorded on the ex-date, except for certain
foreign securities which are recorded as soon after ex-date as the Fund becomes
aware of such, net of non-reclaimable tax withholdings. The Fund estimates
components of distributions from real estate investment trusts (REITs).
Distributions received in excess of income are recorded as a reduction of the
cost of the related investments. If the Fund no longer owns the applicable
securities, any distributions received in excess of income are recorded as
realized gains.
Effective February 1, 2004, the Fund adopted the policy to reduce cost of
investments for financial statement purposes by the distributions received in
excess of income from REITs. The cumulative effect of this accounting change did
not impact the net assets of the Fund, but resulted in reclassifications as
follows:
<Table>
<Caption>
DECREASE IN DECREASE IN UNDISTRIBUTED
COST NET INVESTMENT INCOME
----------- -------------------------
$ 42,856 $ 42,856
</Table>
The effect of the change for the year ended July 31, 2004 is as follows:
<Table>
<Caption>
INCREASE IN INCREASE IN
UNREALIZED DECREASE IN NET NET REALIZED
APPRECIATION INVESTMENT INCOME GAIN
------------ ----------------- ------------
$ 8,608 $ 24,717 $ 16,109
</Table>
FOREIGN CURRENCY TRANSACTIONS. The values of all assets and liabilities quoted
in foreign currencies are translated into U.S. dollars at that day's exchange
rates. Net realized and unrealized gains (losses) on foreign currency
transactions include gains (losses) arising from the fluctuation in exchange
rates between trade and settlement dates on securities transactions, gains
(losses) arising from the disposition of foreign currency and currency gains
(losses) between the accrual and payment dates on dividends, interest income and
foreign withholding taxes.
For financial statement purposes, the Fund does not distinguish that portion of
gains (losses) on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the investments. Such
fluctuations are included with the net realized and unrealized gains (losses) on
investments.
FEDERAL INCOME TAX STATUS. The Fund intends to qualify each year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, as amended,
and will distribute substantially all of its taxable income, if any, for its tax
year, and as such will not be subject to federal income taxes. In addition, the
Fund intends to distribute in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, such that
the Fund should not be subject to federal excise tax. Therefore, no federal
income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on
ex-date. Net realized capital gains, if any, are distributed at least annually.
20
<Page>
NOTE 3. FEDERAL TAX INFORMATION:
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to the Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended July 31, 2004, permanent differences resulting primarily from
differing treatments for foreign currency transactions and REIT adjustments were
identified and reclassified among the components of the Fund's net assets as
follows:
<Table>
<Caption>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN CAPITAL
-------------- ------------ -------
$ (215,829) $ 215,831 $ (2)
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by this
reclassification.
The tax character of distributions paid during the year ended July 31, 2004, the
period ended July 31, 2003 and the year ended October 31, 2002 was as follows:
<Table>
<Caption>
JULY 31, 2004 JULY 31, 2003 OCTOBER 31, 2002
------------- ------------- ----------------
Distributions paid from:
Ordinary income* $ 8,312,541 $ 1,463,038 $ 63,470
Long-term capital gains 2,604,136 - -
</Table>
*For tax purposes short-term capital gains distributions, if any, are considered
ordinary income distributions.
As of July 31, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM NET UNREALIZED
INCOME CAPITAL GAINS APPRECIATION*
-------------- -------------- --------------
$ 16,664,310 $ 17,774,912 $ 78,433,793
</Table>
*The differences between book-basis and tax-basis net unrealized appreciation
are primarily due to deferral of losses from wash sales and changes in the value
of assets and liabilities resulting from changes in exchange rates.
Unrealized appreciation and depreciation at July 31, 2004, based on cost of
investments for federal income tax purposes was:
<Table>
Unrealized appreciation $ 89,881,655
Unrealized depreciation (11,448,321)
--------------
Net unrealized appreciation $ 78,433,334
==============
</Table>
21
<Page>
Capital loss carryforwards may be available to reduce taxable income arising
from future net realized gains on investments, if any, to the extent permitted
by the Internal Revenue Code.
Capital loss carryforwards of $4,679,207 were utilized during the year ended
July 31, 2004. Expired capital loss carryforwards are recorded as a reduction of
paid-in capital.
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES:
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston, including the Fund's investment advisor and transfer agent, was
acquired by Bank of America Corporation ("BOA"). The acquisition did not change
the way the Fund is managed, the investment personnel assigned to manage the
Fund or the fees paid by the Fund.
INVESTMENT ADVISORY FEE. Columbia provides administrative and other services to
the Fund in addition to investment advisory services. Columbia receives a
monthly investment advisory fee at the annual rate of 0.40% of the Fund's
average daily net assets.
In addition to the investment advisory fee, each shareholder pays an annual fee
calculated as a percentage of the shareholder's net assets in the Fund. The
annual fee ranges between 0.20% on the first $25 million of the shareholder's
net assets in the Fund, to 0.00% on the shareholder's net assets in the Fund in
excess of $25 million.
PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and
bookkeeping services to the Fund under a pricing, bookkeeping and fund
administration agreement. Under a separate agreement (the "Outsourcing
Agreement"), Columbia has delegated certain of those functions to State Street
Corporation ("State Street"). As a result, Columbia pays fees to State Street
under the Outsourcing Agreement. The Fund is not charged a fee for these
services.
TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services to the Fund. For such
services, the Transfer Agent receives a fee, paid monthly, at the annual rate of
$28.00 per open account.
Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly
transfer agent fee based on a per account fee or a minimum of $1,500 per month.
For the year ended July 31, 2004, the Fund's effective transfer agent fee rate
was less than 0.01%.
Effective October 13, 2003, Liberty Funds Services, Inc. was renamed Columbia
Funds Services, Inc.
EXPENSE LIMITS AND FEE REIMBURSEMENTS. Columbia has contractually agreed,
through October 31, 2004, to reimburse the Fund for certain expenses so that the
expenses incurred by the Fund, including the investment advisory fee, would not
exceed 0.40% of the Fund's average daily net assets.
CUSTODY CREDITS. The Fund has an agreement with its custodian bank under which
custody fees may be reduced by balance credits. The Fund could have invested a
portion of the assets utilized in connection with the expense offset arrangement
in an income-producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES. The Fund pays no compensation to its
officers, all of whom are employees of Columbia or its affiliates.
22
<Page>
The Fund's trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
OTHER. Columbia provides certain services to the Fund related to Sarbanes-Oxley
compliance. For the year ended July 31, 2004, the Fund paid $1,994 to Columbia
for such services. This amount is included in "Other expenses" on the Statement
of Operations.
NOTE 5. PORTFOLIO INFORMATION:
For the year ended July 31, 2004, the cost of purchases and proceeds from sales
of securities, excluding short-term obligations, were $489,350,638 and
$382,748,659, respectively.
NOTE 6. LINE OF CREDIT:
Effective July 23, 2004, the Fund and other affiliated funds began participating
in a $350,000,000 credit facility, which is used for temporary or emergency
purposes to facilitate portfolio liquidity. Interest is charged to the Fund
based on its borrowings. In addition, the Fund has agreed to pay commitment fees
on its pro-rata portion of the unutilized line of credit. The commitment fee is
included in "Other expenses" on the Statement of Operations.
Prior to July 23, 2004, the Fund participated in a $100,000,000 uncommitted line
of credit along with the other funds of the Trust and several of the Columbia
Funds, an affiliated group of funds managed by the investment advisor. The
uncommitted line of credit, which was scheduled to expire on July 2, 2004, was
extended by the Trust and expired on July 23, 2004.
For the year ended July 31, 2004, the Fund did not borrow under these
arrangements.
NOTE 7. SHARES OF BENEFICIAL INTEREST:
As of July 31, 2004, 40.5% of the outstanding shares of the Fund were held by 5
shareholders, each of which represents in excess of 5% of the Fund's shares
outstanding. Subscription and redemption activity of these shareholders may have
a material effect on the Fund.
NOTE 8. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES:
INDUSTRY FOCUS. The Fund may focus its investments in certain industries,
subjecting it to greater risk than a fund that is more diversified.
FOREIGN SECURITIES. There are certain additional risks involved when investing
in foreign securities that are not inherent with investments in domestic
securities. These risks may involve foreign currency exchange rate fluctuations,
adverse political and economic developments and the possible prevention of
currency exchange or other foreign governmental laws or restrictions. In
addition, the liquidity of foreign securities may be more limited than that of
domestic securities.
LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and
certain of their affiliates (collectively, "the Columbia Group") have received
information requests and subpoenas from various regulatory and law enforcement
authorities in connection with their investigations of late trading and market
timing in mutual funds as well as other industry wide issues. The Columbia Group
has not uncovered any instances where Columbia or CFDI were knowingly involved
in late trading of mutual fund shares.
23
<Page>
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil complaint in New York Supreme Court, County of New York
against Columbia and CFDI alleging that Columbia and CFDI had violated certain
New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its
defense of these proceedings, it could be barred from serving as an investment
advisor or distributor for any investment company registered under the
Investment Company Act of 1940, as amended (a "registered investment company").
Such results could prevent Columbia, CFDI or any company that is an affiliated
person of Columbia and CFDI from serving as an investment advisor or distributor
for any registered investment company, including your fund. Your fund has been
informed by Columbia that, if these results occur, it will seek exemptive relief
from the SEC to permit it to continue to serve as your fund's investment
advisor. There is no assurance that such exemptive relief will be granted. On
March 15, 2004, Columbia and CFDI entered into agreements in principle with the
SEC Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and CFDI agreed, among other things, to the following
conditions: payment of $70 million in disgorgement; payment of $70 million in
civil penalties; an order requiring Columbia and CFDI to cease and desist from
violations of the antifraud provisions and other provisions of the federal
securities laws; governance changes designed to maintain the independence of the
mutual fund boards of trustees and ensure compliance with securities laws and
their fiduciary duties; and retention of an independent consultant to review
Columbia's and CFDI's compliance policies and procedures. The agreement requires
the final approval of the SEC. In a separate agreement with the NYAG, the
Columbia Group and its affiliate Banc of America Capital Management, LLC have
agreed to collectively reduce mutual fund fees by $160 million over a five-year
period.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). More than 300 cases (including those filed against
entities unaffiliated with the funds, their Boards and/or FleetBoston and its
affiliated entities) have been consolidated in a multi-district proceeding and
transferred to the Federal District Court in Maryland. Recently, certain
Columbia funds and affiliated entities have been named as defendants in several
derivative actions under various sections of the Investment Company Act of 1940,
as amended, alleging, among other things, that the fees and expenses paid by
those funds are excessive. The funds and the other defendants to these actions,
including Columbia and various affiliates, certain other mutual funds advised by
Columbia and its affiliates, and various directors of such funds, have denied
these allegations and are contesting the plaintiffs' claims. These suits and
certain regulatory investigations are ongoing, however, based on currently
available information, Columbia believes that these lawsuits are without merit,
that the likelihood they will have a material adverse impact on any fund is
remote, and that the lawsuits are not likely to materially affect its ability to
provide investment management services to its clients, including the funds.
For the year ended July 31, 2004, Columbia has assumed $28,731 of legal,
consulting services and Trustees' fees incurred by the Fund in connection with
these matters.
24
<Page>
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES OF CMG FUND TRUST AND SHAREHOLDERS OF CMG STRATEGIC EQUITY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CMG Strategic Equity Fund (the
"Fund"), one of the portfolios of CMG Fund Trust, at July 31, 2004, and the
results of its operations, changes in its net assets and financial highlights
for the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States), generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 2004
25
<Page>
Unaudited Information
FEDERAL INCOME TAX INFORMATION
38.21% of the ordinary income distributed by the Fund, in the period ended July
31, 2004, qualifies for the corporate dividends received deduction.
For non-corporate shareholders 45.14%, or the maximum amount allowable under the
Jobs and Growth Tax Relief Reconciliation Act of 2003, of income earned by the
Fund for the period August 1, 2003 to July 31, 2004 may represent qualified
dividend income. Final information will be provided in your 2004 1099-Div Form.
For the fiscal year ended July 31, 2004, the Fund designates long-term capital
gains of $20,379,048.
26
<Page>
Trustees
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and Officers of the CMG Fund Trust, the year each was first
elected or appointed to office, their principal business occupations during at
least the last five years, the number of portfolios in the fund complex overseen
by the Trustee, and other directorships they hold are shown below. Each Officer
listed below serves as an Officer of the CMG Fund Trust. Each Officer listed
below held such office for the period ended July 31, 2004. The Statement of
Additional Information (SAI) contains additional information about the Trustees
and is available without charge upon request by calling the fund's distributor
at 800-345-6611.
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------ -----------------------------------------------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker (age 48) Executive Vice President--Strategy of United Airlines (airline) since
P.O. Box 66100 December 2002 (formerly President of UAL Loyalty Services (airline)
Chicago, IL 60666 from September 2001 to December 2002; Executive Vice President and
Trustee (since 2003) Chief Financial Officer of United Airlines from July 1999 to September
2001; Senior Vice President-Finance of United Airlines from March 1993
to July 1999). Oversees 118, Orbitz, Inc. (on-line travel company)
Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since September 2004;
9534 W. Gull Lake Drive Private Investor since March 2004 (formerly Chief Administrative
Richland, MI 49083-8530 Officer and Senior Vice President, Kmart Holding Corporation (consumer
Trustee (since 2003) goods) from September 2003 to March 2004; Executive Vice
President--Corporate Development and Administration, General Counsel
and Secretary, Kellogg Company (food manufacturer), from September 1999
to August 2003; Senior Vice President, Secretary and General Counsel,
Sara Lee Corporation (branded, packaged, consumer-products
manufacturer) from January 1995 to September 1999). Oversees 118, None
Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and Chief
10701 Charleston Drive Executive Officer, U.S. Plywood Corporation (building products
Vero Beach, FL 32963 manufacturer)). Oversees 120(3), None
Trustee (since 2003)
Charles R. Nelson (age 62) Professor of Economics, University of Washington, since January 1976;
Department of Economics Ford and Louisa Van Voorhis Professor of Political Economy, University
University of Washington of Washington, since September 1993; (formerly Director, Institute for
Seattle, WA 98195 Economic Research, University of Washington from September 2001 to June
Trustee (since 2003) 2003) Adjunct Professor of Statistics, University of Washington, since
September 1980; Associate Editor, Journal of Money Credit and Banking,
since September 1993; consultant on econometric and statistical
matters. Oversees 118, None
John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston
84 College Road College (formerly Dean, Boston College School of Management from
Chestnut Hill, MA 02467-3838 September 1977 to September 1999). Oversees 121(3),(4), Saucony, Inc.
Trustee (since 2003) (athletic footwear and apparel)
</Table>
27
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------ -----------------------------------------------------------------------
DISINTERESTED TRUSTEES
Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm). Oversees 118, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance from
2208 Tawny Woods Place 1975 to 1999, College of Business, Boise State University); Chartered
Boise, ID 83706 Financial Analyst. Oversees 118, None
Trustee (since 2003)
Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private equity
227 West Monroe Street, investing) since September 1994. Oversees 118, Anixter International
Suite 3500 (network support equipment distributor), Jones Lang LaSalle (real
Chicago, IL 60606 estate management services) and Ventas, Inc (real estate investment
Trustee and Chairman of the Board(5) (since 2003) trust) and MONY Group (life insurance).
Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global Education
359 Stickney Hill Road Industry, IBM Corporation (computer and technology) from 1994 to 1997).
Hopkinton, NH 03229 Oversees 119(4), Chairman of the Board of Directors, Enesco Group, Inc.
Trustee (since 2003) (designer, importer and distributor of giftware and collectibles)
Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief Executive
100 S.W. Market Street #1500 Officer, The Regence Group (regional health insurer); Chairman and
Portland, OR 97207 Chief Executive Officer, BlueCross BlueShield of Oregon; Certified
Trustee (since 1992) Public Accountant, Arthur Young & Company. Oversees 118, Northwest
Natural Gas Co. (natural gas service provider)
INTERESTED TRUSTEES
William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since
399 Park Avenue February 1999 (formerly Founding Partner, Development Capital LLC from
Suite 3204 November 1996 to February 1999). Oversees 120(3), Lee Enterprises
New York, NY 10022 (print media), WR Hambrecht + Co. (financial service provider), First
Trustee (since 2003) Health (healthcare), Reader's Digest (publishing) and OPENFIELD
Solutions (retail industry technology provider)
</Table>
- ----------------
(1) In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the
"CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds complex. Each Trustee serves for an indefinite term in
accordance with the current Bylaws of the Trust until the date a Trustee
resigns, retires or is removed in accordance with the Bylaws of the Trust.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of
the Liberty All-Star Funds, currently consisting of 2 funds, which are
advised by an affiliate of the Advisor.
(4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the
Advisor.
(5) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
28
<Page>
Officers
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH
COLUMBIA FUNDS, YEAR FIRST ELECTED OR
APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------------------------------ -----------------------------------------------------------------------
Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty All-Star
One Financial Center Funds since June 2001; Assistant Treasurer of Columbia Acorn and Wanger
Boston, MA 02111 Funds since June 2004 (formerly Controller of the Columbia Funds and of
Chief Accounting Officer the Liberty All-Star Funds from May 2002 to May 2004); Controller and
Chief Accounting Officer of the Galaxy Funds since September 2002
(formerly Vice President, Corporate Audit, State Street Bank and Trust
Company from May 1998 to April 2001).
Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds
One Financial Center since 2004; Assistant Treasurer of Columbia Acorn and Wanger Funds
Boston, MA 02111 since June 2004 (formerly Assistant Treasurer of the Columbia Funds and
Controller (since 2004) of the Liberty All-Star Funds from June 2002 to May 2004; Vice
President, Product Strategy & Development of Liberty Funds Group from
February 2001 to June 2002; Assistant Treasurer of the Liberty Funds
and of the Liberty All-Star Funds from August 1999 to February 2001;
Audit Manager at Deloitte & Touche LLP from May 1997 to August 1999).
J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer of
One Financial Center the Columbia Funds and of the Liberty All-Star Funds since December
Boston, MA 02111 2000; Vice President of the Advisor since April 2003 (formerly Chief
Treasurer (since 2000) and Accounting Officer and Controller of the Liberty Funds and Liberty
President (since 2004) All-Star Funds from February 1998 to October 2000); Treasurer of the
Galaxy Funds since September 2002; Treasurer, Columbia Management
Multi-Strategy Hedge Fund, LLC since December 2002 (formerly Vice
President of Colonial from February 1998 to October 2000).
David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds since
One Financial Center December 2003; Senior Counsel, Bank of America Corporation (formerly
Boston, MA 02111 FleetBoston Financial Corporation) since January 1996; Associate
Secretary (since 2003) General Counsel, Columbia Management Group since November 2002.
</Table>
29
<Page>
CMG FUND TRUST
1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201
- TRUSTEES -
DOUGLAS A. HACKER
JANET LANGFORD KELLY
RICHARD W. LOWRY
WILLIAM E. MAYER
CHARLES R. NELSON
JOHN J. NEUHAUSER
PATRICK J. SIMPSON
THOMAS E. STILZEL
THOMAS C. THEOBALD
ANNE-LEE VERVILLE
RICHARD L. WOOLWORTH
- INVESTMENT ADVISOR -
COLUMBIA MANAGEMENT ADVISORS, INC.
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
- LEGAL COUNSEL -
ROPES & GRAY LLC
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2624
- TRANSFER AGENT -
COLUMBIA FUNDS SERVICES, INC.
P.O. BOX 8081
BOSTON, MASSACHUSETTS 02266-8081
941-02/528S-0804 (09/04) 2577
A description of the policies and procedures that the fund uses to determine how
to vote proxies relating to its portfolio securities and a copy of a fund's
voting record are available (i) at www.columbiamanagement.com; and (ii) on the
Securities and Exchange Commission's website at www.sec.gov.
THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER,
INCORPORATED. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA
MANAGEMENT REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS,
WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT
CAREFULLY BEFORE YOU INVEST.
Fund distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth
Avenue, Portland, Oregon 97201
<Page>
COLUMBIA MANAGEMENT(R)
CMG CORE BOND FUND
CMG SHORT TERM BOND FUND
CMG ULTRA SHORT TERM BOND FUND
CMG HIGH YIELD FUND
PORTFOLIOS OF CMG FUND TRUST
ANNUAL REPORT
JULY 31, 2004
NOT FDIC MAY LOSE VALUE
ADVISED BY COLUMBIA MANAGEMENT ADVISORS, INC. INSURED NO BANK GUARANTEE
<Page>
CMG CORE BOND FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For the 12-month period ended July 31, 2004, the CMG Core Bond Fund returned
4.67%. The fund's performance slightly trailed the Lehman Brothers Aggregate
Bond Index, which returned 4.84%, and the Lipper Corporate Debt Funds A-Rated
Category, which averaged 4.75% over the same period.(1) The fund was positioned
conservatively at a time when risk-taking was rewarded.
For most of the 12-month period, corporate bonds outperformed Treasury
securities. As the economic recovery progressed, investors gained confidence in
the corporate sector and were attracted to the higher yields it offered. For the
full year, corporate bonds returned 6.52%, well above the 3.87% return of
Treasury securities. Among corporate bond issues, securities with lower credit
ratings tended to outperform those with higher ratings.
Although we increased the fund's commitment to corporate bonds during the
period, the portfolio's above-average credit quality caused a slight performance
shortfall relative to its index and peer group. The fund devoted only 7% of its
assets to the high-yield sector, which was by far the best performing sector
within the fixed-income market during the period.
Short-term interest rates rose relative to longer-term rates during the period.
Bonds with maturities of 10 years or longer performed better than was expected
during a time of sustained economic growth and tended to outperform shorter-term
securities. This trend was slightly negative for the fund, whose average
maturity was slightly less than that of its index and peer group.
As fixed income markets struggled in the last quarter of the reporting period,
the fund benefited from its substantial allocation to the mortgage sector, which
lost only 1.2% for the quarter. Among our mortgage investments, we emphasized
collateralized mortgage obligations, or CMOs, which offer a yield advantage and
are less sensitive to changes in interest rates than conventional mortgage
securities. Higher rates hurt conventional mortgage securities because fewer
homeowners refinance their mortgages when interest rates rise, thus delaying the
return of principal to bond holders.
In a widely anticipated move, policymakers at the Federal Reserve Board raised
the federal funds rate--a key overnight bank lending rate--from 1.00% to 1.25%
on June 30, 2004.(2) The fund's bias toward higher quality securities helped the
fund after the Fed's action. Our minimal exposure to high-yield securities aided
performance when low quality bonds declined sharply in July, erasing much of
their earlier gains.
Now that the Fed has signaled its intentions to raise short-term interest rates
at a "measured" pace, we see every reason to maintain our defensive positioning.
Overall, we expect to keep the fund's average maturity relatively short and its
average credit quality relatively high. In addition,
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
(2) In August, the federal funds rate was increased to 1.50%.
1
<Page>
we continue to emphasize floating rate securities and to maintain a small
allocation to Treasury Inflation Protected Securities, or TIPs, which provide
price protection against rising inflation.
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were (%):
<Table>
Structured Asset Securities Corp., 5.500% 07/25/2033 3.5
U.S. Treasury Bonds, 7.250% 05/15/2016 3.4
New Century Home Equity Loan Trust, 2.940% 11/25/2033 3.1
Federal Home Loan Mortgage Corp., 4.500% 08/15/2028 3.1
Federal Home Loan Mortgage Corp., TBA, 5.000% 12/01/2099 3.1
Government National Mortgage Association, 4.500% 04/16/2028 3.0
Federal Home Loan Mortgage Corp., 5.000% 05/01/2034 2.9
U.S. Treasury Notes, 4.875% 02/15/2012 2.9
Federal Home Loan Mortgage Corp., 4.000% 10/15/2026 2.8
U.S. Treasury Inflation Index Bonds, 3.625% 01/15/2008 2.8
</Table>
We appreciate your continued confidence in the CMG Core Bond Fund.
The Columbia Investment Team
July 31, 2004
Investing in fixed-income securities offers the potential for attractive current
income and total returns, but also involves certain risks. The value and return
of your investment may fluctuate as a result of changes in interest rates, the
financial strength of issuers of lower-rated bonds or political and economic
developments.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weightings within the portfolio may change as market conditions change.
2
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, SEPTEMBER 1, 2000 TO JULY 31, 2004
<Table>
<Caption>
CMG CORE BOND FUND LEHMAN BROTHERS AGGREGATE BOND INDEX
8/31/2000 $ 10,000 $ 10,000
9/30/2000 $ 10,075 $ 10,063
10/31/2000 $ 10,130 $ 10,129
11/30/2000 $ 10,309 $ 10,296
12/31/2000 $ 10,522 $ 10,487
1/31/2001 $ 10,681 $ 10,659
2/28/2001 $ 10,786 $ 10,752
3/31/2001 $ 10,844 $ 10,806
4/30/2001 $ 10,784 $ 10,760
5/31/2001 $ 10,850 $ 10,825
6/30/2001 $ 10,897 $ 10,866
7/31/2001 $ 11,144 $ 11,109
8/31/2001 $ 11,264 $ 11,237
9/30/2001 $ 11,424 $ 11,368
10/31/2001 $ 11,651 $ 11,606
11/30/2001 $ 11,503 $ 11,446
12/31/2001 $ 11,445 $ 11,373
1/31/2002 $ 11,499 $ 11,465
2/28/2002 $ 11,605 $ 11,576
3/31/2002 $ 11,426 $ 11,384
4/30/2002 $ 11,636 $ 11,605
5/31/2002 $ 11,736 $ 11,703
6/30/2002 $ 11,823 $ 11,804
7/31/2002 $ 11,911 $ 11,947
8/31/2002 $ 12,114 $ 12,149
9/30/2002 $ 12,295 $ 12,345
10/31/2002 $ 12,114 $ 12,289
11/30/2002 $ 12,093 $ 12,285
12/31/2002 $ 12,281 $ 12,539
1/31/2003 $ 12,292 $ 12,551
2/28/2003 $ 12,473 $ 12,724
3/31/2003 $ 12,458 $ 12,714
4/30/2003 $ 12,554 $ 12,819
5/31/2003 $ 12,776 $ 13,058
6/30/2003 $ 12,731 $ 13,031
7/31/2003 $ 12,330 $ 12,594
8/31/2003 $ 12,399 $ 12,677
9/30/2003 $ 12,730 $ 13,013
10/31/2003 $ 12,609 $ 12,892
11/30/2003 $ 12,633 $ 12,923
12/31/2003 $ 12,741 $ 13,054
1/31/2004 $ 12,846 $ 13,159
2/29/2004 $ 12,988 $ 13,301
3/31/2004 $ 13,090 $ 13,401
4/30/2004 $ 12,767 $ 13,052
5/31/2004 $ 12,699 $ 13,000
6/30/2004 $ 12,773 $ 13,074
7/31/2004 $ 12,907 $ 13,201
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Core Bond 9/1/00 4.67 6.73
Lehman Brothers Aggregate Bond Index 4.84 7.35
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR LIFE
CMG Core Bond 9/1/00 0.32 6.60
Lehman Brothers Aggregate Bond Index 0.32 7.24
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
Index performance is from September 1, 2000.
The Lehman Brothers Aggregate Bond Index is a market value-weighted index that
tracks the daily price, coupon, pay-downs, and total return performance of
fixed-rate, publicly placed, dollar-denominated, and non-convertible investment
grade debt issues with at least $100 million par amount outstanding and with at
least one year to final maturity. Unlike mutual funds, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. Securities in the fund may
not match those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
3
<Page>
UNDERSTANDING YOUR EXPENSES - CMG CORE BOND FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this
period," locate the amount under "actual." Multiply this number by the
result from step 1. Your answer is an estimate of the expenses you paid on
your account during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 1,004.13 1,023.32 1.54 1.56
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.31%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
4
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
5
<Page>
CMG SHORT TERM BOND FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Short Term Bond Fund returned 2.72% for the 12-month period ended July 31,
2004. The fund outperformed both the Merrill Lynch 1-3 Year Treasury Index and
the Merrill Lynch 1-5 Year Government/Corporate Bond Index, which returned 1.42%
and 2.29%, respectively, during the period. The fund also outperformed its peer
group, the Lipper Short Investment Grade Debt Funds Category, whose average
return was 1.74%.(1) The fund's "barbell" structure, which combines short-term
floating rate instruments with securities at the longer end of its maturity
spectrum, was chiefly responsible for the strong showing.
For most of the 12-month period, the fixed-income market rewarded investors who
were willing to take on risk by investing in bonds with longer maturities or
lower credit quality. This environment was slightly negative for the fund, which
concentrates on higher quality short-term bonds. In addition, the fund
sacrificed some performance by maintaining a shorter duration than its
benchmarks. Duration is a measure of interest-rate sensitivity.
However, the fund was able to generate a competitive return because of its
barbell structure. We owned short-term floating rate notes, which carried higher
yields than Treasury securities of comparable maturities. We also owned
longer-term securities--in this context, those with maturities of about five
years--which increased in value as long-term interest rates declined.
On June 30, the Federal Reserve Board raised the federal funds rate--the key
overnight bank lending rate--from 1.00% to 1.25%.(2) In anticipation of the
Fed's action, fixed income markets were weak during the spring and early summer.
Lower quality bonds were especially weak, reversing a trend that had been in
place for over a year. In this changed environment, the fund's relatively
defensive positioning was helpful.
The fund also was aided by its emphasis on the mortgage sector. During the first
part of the period, we shifted investments from conventional passthrough
securities into structured instruments such as CMOs (collateralized mortgage
obligations). This was a defensive move in advance of rising interest rates.
Refinancing activity tends to slow when interest rates rise, delaying the return
of principal to holders of conventional mortgage bonds.
The benefit of our strategy emerged when rates ticked higher toward the end of
the period and bond prices fell across all sectors. The loss sustained by
Treasury and corporate bonds was twice that suffered by mortgage bonds.
Because we had expected higher interest rates for some time, we did not have to
make significant adjustments to the fund after the Fed declared that a series of
incremental rate hikes may be in store. In particular, our emphasis on floating
rate securities, whose interest payments are adjusted with market rates, helped
to position the fund for a rising-rate environment.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
(2) In August, the federal funds rate was increased to 1.50%.
6
<Page>
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were (%):
<Table>
Federal Home Loan Mortgage Corp., 3.000% 06/15/2009 3.1
SLM Student Loan Trust, 2.260% 01/25/2013 2.7
Federal Home Loan Mortgage Corp., 4.000% 2026 (various pools) 2.5
KeyCorp Student Loan Trust, 1.970% 10/25/2025 2.2
New Century Home Equity Loan Trust, 1.820% 01/25/2034 2.1
Countrywide Home Loans, 1.500% 08/25/2018 2.1
U.S. Treasury Inflation Index Bond, 3.625% 01/15/2008 2.0
Residential Asset Securitization Trust, 1.900% 02/25/2034 1.9
Countrywide Home Loans, 1.950% 03/25/2034 1.6
Residential Asset Securitization Trust, 5.500% 07/25/2033 1.3
</Table>
We appreciate your continued confidence in the CMG Short Term Bond Fund.
The Columbia Investment Team
July 31, 2004
Investing in fixed-income securities offers the potential for attractive current
income and total returns, but also involves certain risks. The value and return
of your investment may fluctuate as a result of changes in interest rates, the
financial strength of issuers of lower-rated bonds or political and economic
developments.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weightings within the portfolio may change as market conditions change.
7
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, FEBRUARY 2, 1998 TO JULY 31, 2004
<Table>
<Caption>
MERRILL LYNCH 1-5 YEAR
CMG SHORT TERM BOND FUND GOVERNMENT/CORPORATE BOND INDEX MERRILL LYNCH 1-3 YEAR TREASURY INDEX
2/2/98 $ 10,000 $ 10,000 $ 10,000
2/28/98 $ 10,005 $ 10,002 $ 10,010
3/31/98 $ 10,040 $ 10,041 $ 10,051
4/30/98 $ 10,099 $ 10,088 $ 10,098
5/31/98 $ 10,168 $ 10,150 $ 10,152
6/30/98 $ 10,236 $ 10,209 $ 10,205
7/31/98 $ 10,279 $ 10,255 $ 10,253
8/31/98 $ 10,425 $ 10,403 $ 10,382
9/30/98 $ 10,563 $ 10,589 $ 10,519
10/31/98 $ 10,536 $ 10,623 $ 10,570
11/30/98 $ 10,561 $ 10,608 $ 10,561
12/31/98 $ 10,612 $ 10,648 $ 10,598
1/31/99 $ 10,691 $ 10,701 $ 10,640
2/28/99 $ 10,608 $ 10,605 $ 10,588
3/31/99 $ 10,688 $ 10,692 $ 10,661
4/30/99 $ 10,723 $ 10,727 $ 10,695
5/31/99 $ 10,687 $ 10,685 $ 10,689
6/30/99 $ 10,704 $ 10,716 $ 10,722
7/31/99 $ 10,695 $ 10,728 $ 10,756
8/31/99 $ 10,705 $ 10,749 $ 10,787
9/30/99 $ 10,815 $ 10,836 $ 10,858
10/31/99 $ 10,847 $ 10,861 $ 10,887
11/30/99 $ 10,875 $ 10,879 $ 10,908
12/31/99 $ 10,886 $ 10,881 $ 10,923
1/31/2000 $ 10,879 $ 10,857 $ 10,918
2/29/2000 $ 10,956 $ 10,934 $ 10,992
3/31/2000 $ 11,046 $ 11,019 $ 11,060
4/30/2000 $ 11,040 $ 11,027 $ 11,088
5/31/2000 $ 11,075 $ 11,059 $ 11,134
6/30/2000 $ 11,233 $ 11,205 $ 11,250
7/31/2000 $ 11,316 $ 11,284 $ 11,321
8/31/2000 $ 11,431 $ 11,389 $ 11,404
9/30/2000 $ 11,543 $ 11,492 $ 11,487
10/31/2000 $ 11,598 $ 11,544 $ 11,549
11/30/2000 $ 11,743 $ 11,676 $ 11,658
12/31/2000 $ 11,929 $ 11,846 $ 11,797
1/31/2001 $ 12,094 $ 12,017 $ 11,944
2/28/2001 $ 12,197 $ 12,111 $ 12,022
3/31/2001 $ 12,295 $ 12,221 $ 12,122
4/30/2001 $ 12,301 $ 12,229 $ 12,155
5/31/2001 $ 12,386 $ 12,301 $ 12,223
6/30/2001 $ 12,440 $ 12,346 $ 12,264
7/31/2001 $ 12,639 $ 12,544 $ 12,402
8/31/2001 $ 12,734 $ 12,636 $ 12,473
9/30/2001 $ 12,918 $ 12,862 $ 12,679
10/31/2001 $ 13,064 $ 13,013 $ 12,800
11/30/2001 $ 12,973 $ 12,935 $ 12,772
12/31/2001 $ 12,945 $ 12,908 $ 12,777
1/31/2002 $ 13,010 $ 12,946 $ 12,802
2/28/2002 $ 13,080 $ 13,026 $ 12,864
3/31/2002 $ 12,995 $ 12,896 $ 12,776
4/30/2002 $ 13,104 $ 13,074 $ 12,919
5/31/2002 $ 13,205 $ 13,174 $ 12,971
6/30/2002 $ 13,284 $ 13,289 $ 13,080
7/31/2002 $ 13,352 $ 13,459 $ 13,240
8/31/2002 $ 13,464 $ 13,573 $ 13,285
9/30/2002 $ 13,588 $ 13,746 $ 13,395
10/31/2002 $ 13,456 $ 13,744 $ 13,426
11/30/2002 $ 13,452 $ 13,720 $ 13,384
12/31/2002 $ 13,581 $ 13,930 $ 13,511
1/31/2003 $ 13,599 $ 13,937 $ 13,510
2/28/2003 $ 13,699 $ 14,059 $ 13,567
3/31/2003 $ 13,724 $ 14,087 $ 13,591
4/30/2003 $ 13,774 $ 14,151 $ 13,617
5/31/2003 $ 13,888 $ 14,302 $ 13,669
6/30/2003 $ 13,900 $ 14,321 $ 13,689
7/31/2003 $ 13,713 $ 14,136 $ 13,615
8/31/2003 $ 13,743 $ 14,144 $ 13,625
9/30/2003 $ 13,919 $ 14,369 $ 13,749
10/31/2003 $ 13,863 $ 14,282 $ 13,698
11/30/2003 $ 13,866 $ 14,280 $ 13,691
12/31/2003 $ 13,949 $ 14,389 $ 13,770
1/31/2004 $ 14,008 $ 14,442 $ 13,798
2/29/2004 $ 14,082 $ 14,546 $ 13,864
3/31/2004 $ 14,133 $ 14,627 $ 13,907
4/30/2004 $ 14,018 $ 14,399 $ 13,774
5/31/2004 $ 13,997 $ 14,362 $ 13,761
6/30/2004 $ 14,022 $ 14,378 $ 13,760
7/31/2004 $ 14,087 $ 14,464 $ 13,806
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR LIFE
CMG Short Term Bond 2/2/98 2.72 5.66 5.42
Merrill Lynch 1-5 Year Government/Corporate Bond Index 2.29 6.16 5.85
Merrill Lynch 1-3 Year Treasury Index 1.42 5.12 5.09
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR LIFE
CMG Short Term Bond 2/2/98 0.89 5.55 5.42
Merrill Lynch 1-5 Year Government/Corporate Bond Index 0.40 6.06 5.84
Merrill Lynch 1-3 Year Treasury Index 0.50 5.11 5.10
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
The index performance is from February 2, 1998.
The Merrill Lynch 1-5 Year Government/Corporate Index is an unmanaged index that
includes all US government debt with at least $100 million face value
outstanding, and investment-grade rated corporate debt with at least $100
million face value outstanding, with a maturity between 1-5 years. The Merrill
Lynch 1-3 Year Treasury Index is an unmanaged index that measures the return of
Treasury bills with maturities of 1-3 years. Unlike mutual funds, indices are
not investments, do not incur fees or expenses and are not professionally
managed. It is not possible to invest directly in an index. Securities in the
fund may not match those in an index.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
8
<Page>
UNDERSTANDING YOUR EXPENSES - CMG SHORT TERM BOND FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this
period," locate the amount under "actual." Multiply this number by the
result from step 1. Your answer is an estimate of the expenses you paid on
your account during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 1,005.67 1,023.62 1.25 1.26
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.25%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
9
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
10
<Page>
CMG ULTRA SHORT TERM BOND FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
CMG Ultra Short Term Bond Fund returned negative 0.08% from its inception on
March 8, 2004 through July 31, 2004. The fund's performance reflected a
challenging environment for bonds as interest rates rose during the period. The
return was slightly lower than the return of the Citigroup One-Year U.S.
Treasury Bill Index, which was negative 0.05% for the period.
The fund outperformed the Lipper Short Investment Grade Debt Funds Category
average, which was negative 0.38% from February 29, 2004 through July 31,
2004.(1) We believe our decision to emphasize short-term floating rate notes and
asset-backed bonds helped the fund do better than its peer group. The fund's
sizable cash position (primarily in short-term corporate paper) also helped
performance as interest rates headed higher. Going forward we plan to put more
cash to work in other sectors. However, the fund will continue to maintain a
sizeable cash position because of its short-term focus.
The fund launched during a period of increased economic momentum. A substantial
increase in the number of new jobs added to the workforce was reported from
March through May, an indication that the US labor market had finally turned the
corner. The Federal Reserve Board responded to these and other signs of economic
strength by announcing its intention to begin raising short-term interest rates
at a measured pace. The Fed made good on its intentions by raising the federal
funds rate from 1.00% to 1.25% on June 30, 2004.(2) Yields on one- and two-year
Treasury notes rose sharply and prices fell in response to higher short-term
rates, because yield and price move in opposite directions.
In an environment of rising interest rates, the fund benefited from its
substantial position in floating rate bonds. These bonds, which typically adjust
their yields quarterly, have less exposure to interest rate risk than fixed-rate
securities. We also took advantage of the abilities of our asset-backed research
team, which identified good values in securities issued by selected companies.
Asset-backed bonds are secured by income-producing assets, such as equipment,
automobiles or credit card receivables. Together floating rate and asset-backed
securities accounted for nearly 30% of the fund's investments. Both positions
aided the fund's performance during the quarter.
Despite recent weakness in several key economic indicators, we believe the
economy will show improvement in the third quarter of 2004. We expect a stronger
economy will lead to even higher short-term interest rates by year end, although
the timing and extent of future rate increases are impossible to predict. An
escalation in geopolitical risks as well as the outcome of the forthcoming
presidential election could also have an impact on interest rates.
We continue to pay close attention to interest rates and the economy as we
continue to put new money to work in the portfolio. More importantly, we will
seek to take advantage of opportunities to invest in attractively valued bonds
while adhering to the fund's conservative risk profile.
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund. Performance as of February 29, 2004 was the closest
available date to the fund's inception.
(2) In August, the federal funds rate was increased to 1.50%.
11
<Page>
The fund's top ten holdings (as a percentage of net assets) as of July 31, 2004
were (%):
<Table>
CIT Group, Inc., 1.409% 11/04/2005 3.0
U.S. Treasury Bills, 1.625% 04/30/2005 2.6
U.S. Treasury Bills, 1.500% 07/31/2005 2.1
Federal Home Loan Bank, 3.625% 10/15/2004 1.5
Federal Home Loan Mortgage Corp., 2.810% 02/02/2006 1.5
General Electric Capital Corp., 1.410% 05/12/2006 1.5
Federal Home Loan Bank, 1.625% 04/15/2005 1.5
Federal National Mortgage Association, zero coupon 03/04/2005 1.5
Federal National Mortgage Association, zero coupon 04/29/2005 1.5
Federal Home Loan Mortgage Corp., zero coupon 05/03/2005 1.5
</Table>
We appreciate your continued confidence in the CMG Ultra Short Term Bond Fund.
The Columbia Investment Team
July 31, 2004
Investing in fixed-income securities offers the potential for attractive current
income and total returns, but also involves certain risks. The value and return
of your investment may fluctuate as a result of changes in interest rates, the
financial strength of issuers of lower-rated bonds or political and economic
developments.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weightings within the portfolio may change as market conditions change.
12
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, MARCH 8, 2004 TO JULY 31, 2004
<Table>
<Caption>
CMG ULTRA SHORT TERM BOND FUND CITIGROUP ONE-YEAR U.S. TREASURY BILL INDEX
3/8/2004 $ 10,000 $ 10,000
3/31/2004 $ 9,999 $ 10,006
4/30/2004 $ 9,977 $ 9,979
5/31/2004 $ 9,972 $ 9,977
6/30/2004 $ 9,972 $ 9,974
7/31/2004 $ 9,992 $ 9,995
</Table>
CUMULATIVE TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION LIFE
CMG Ultra Short Term Bond Fund 3/8/04 -0.08
Citigroup One-Year U.S. Treasury Bill Index -0.05
</Table>
CUMULATIVE TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION LIFE
CMG Ultra Short Term Bond Fund 3/8/04 -0.27
Citigroup One-Year U.S. Treasury Bill Index -0.27
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
The index performance is from March 8, 2004.
The Citigroup One-Year U.S. Treasury Bill Index consists of a single 1-year U.S.
Treasury Bill whose return is tracked until its maturity. Unlike mutual funds,
indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
Performance results reflect any waivers or reimbursement of fund expenses by the
advisor or its affiliates. Absent these waivers or reimbursement arrangements,
performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
13
<Page>
UNDERSTANDING YOUR EXPENSES - CMG ULTRA SHORT TERM BOND FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this
period," locate the amount under "actual." Multiply this number by the
result from step 1. Your answer is an estimate of the expenses you paid on
your account during the period.
MARCH 8, 2004 (COMMENCEMENT OF OPERATIONS) - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 999.26 1,018.96 0.98 0.99
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.25%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
14
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
15
<Page>
CMG HIGH YIELD FUND
A Portfolio of CMG Fund Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For the 12-month period ended July 31, 2004, the CMG High Yield Fund returned
8.60%. That was less than both the Merrill Lynch Intermediate BB Index, which
returned 10.47%, and the average return of the Lipper High Current Yields
Category, which was 11.91% for the period.(1) The fund's investment performance
was held back because it did not own lower quality securities, which did
especially well during the latter months of 2003. However, as the period wore
on, the performance gap between higher and lower quality securities narrowed,
and the fund's relative performance improved.
As the economic recovery unfolded in 2003, fixed-income investors became
increasingly willing to assume the risks of lower quality securities in return
for their higher yields. The market's preference for lower quality securities
created a striking performance gap: BB-rated securities returned 11.44% during
the 12 months ended July 31, 2004, while CCC-rated issues returned 18.03%. The
fund's strategy to generally not own CCC-rated bonds, which carry a
significantly higher bankruptcy risk than higher rated securities, placed it at
a disadvantage to its peer group. However, CCC-rated securities lost ground in
the second half of the period. In July, they suffered a sharp decline, mirroring
a sell-off in the small-cap stock market.
The fund's returns were aided by favorable sector allocation decisions. In part,
the fund benefited because of what it DIDN'T own. For example, the fund had no
exposure to the airline sector, which suffered from increased competition and
higher fuel prices. Similarly, we avoided the electric utility industry, where
bonds issued by Calpine and others posted heavy losses during the second half of
the period. The fund also had minimal exposure to the telecommunications sector,
an industry in which many companies continued to struggle. The fund's only
holding in this sector, Nextel (2.0% of net assets), improved its competitive
standing during the past 12 months and was a positive performer for the fund.
Energy was the fund's single biggest sector position, and it benefited from the
steady increase in oil prices during the period. At the end of the period,
energy represented 13% of the fund's assets. Holdings in the cable television
industry also made a positive contribution to performance. Satellite companies
continued to take market share from traditional cable companies, a trend that
favored fund holdings such as DirecTV and Echostar (1.8% and 2.1% of net assets,
respectively).
Several issuers of securities that the fund holds were bought out or upgraded by
rating agencies during the period. Among the fund's health care holdings,
Apogent Technologies (1.7% of net assets) was bought by Fisher Scientific and
its bonds appreciated sharply as a result. Within the automotive sector,
American Axle and Lear were both raised to investment grade status, and the
fund's bonds were sold or tendered.
The fund also made several new purchases during the period. The biggest addition
to the portfolio was cruise operator Royal Caribbean (2.1% of net assets), which
recently completed a major
- ----------
(1) Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
16
<Page>
program to augment its fleet. With capital spending now sharply down and the
travel business showing increasing strength, the company offered an attractive
risk/reward profile. We also added to our health care position by purchasing
bonds of hospital company HCA (1.0% of net assets). HCA has been on our focus
list for some time, and we purchased bonds when they became available at
favorable yield levels.
On the sell side, the fund eliminated its position in entertainment company Six
Flags, in anticipation of lower earnings. We also sold Canadian paper company
Cascades because of valuation concerns.
Overall, the fundamentals of the high yield bond market remain attractive as
default rates have continued to move down. At the end of June, the Moody's
trailing 12-month default rate was 3.3%, versus 5.2% at the beginning of the
year. We believe the high yield market is capable of holding its ground even if
interest rates tick higher. High-yield securities have historically outperformed
investment grade securities in rising-rate environments. The yield advantage
once enjoyed by the lowest-quality issuers has shrunk considerably. We believe
that this may raise the relative performance potential of BB-rated securities in
the months ahead.
The fund's top ten issuers (as a percentage of net assets) as of July 31, 2004
were (%):
<Table>
Peabody Energy Corp. 2.2
Iron Mountain, Inc. 2.1
Caesars Entertainment 2.1
Royal Caribbean Cruises Ltd. 2.1
Echostar DBS 2.1
Station Casinos, Inc. 2.1
Cott Beverages, Inc. 2.1
R.H. Donnelley Financial Corp. 2.1
Grant Prideco, Inc. 2.0
Nextel Communications, Inc. 2.0
</Table>
We appreciate your continued confidence in the CMG High Yield Fund.
The Columbia Investment Team
July 31, 2004
Investing in high yield securities (commonly known as "junk bonds") offers the
potential for high current income and attractive total return, but involves
certain risks. Changes in economic conditions or other circumstances may
adversely affect a junk bond issuer's ability to make principal and interest
payments. Rising interest rates tend to lower the value of all bonds.
Holdings are calculated as a percentage of net assets, and are subject to
change. Because the fund is actively managed, there is no guarantee the fund
will continue to maintain the holdings breakdown listed. The fund's holdings and
their weightings within the portfolio may change as market conditions change.
17
<Page>
[CHART]
GROWTH OF A $10,000 INVESTMENT, AUGUST 1, 1994 TO JULY 31, 2004
<Table>
<Caption>
CMG HIGH YIELD FUND MERRILL LYNCH INTERMEDIATE BB INDEX MERRILL LYNCH U.S. HIGH YIELD, CASH PAY INDEX
8/1/94 $ 10,000 $ 10,000 $ 10,000
8/31/94 $ 10,074 $ 10,079 $ 10,069
9/30/94 $ 10,116 $ 10,068 $ 10,065
10/31/94 $ 10,130 $ 10,089 $ 10,090
11/30/94 $ 10,001 $ 10,024 $ 10,004
12/31/94 $ 10,129 $ 10,119 $ 10,115
1/31/95 $ 10,273 $ 10,284 $ 10,258
2/28/95 $ 10,582 $ 10,564 $ 10,578
3/31/95 $ 10,672 $ 10,689 $ 10,725
4/30/95 $ 10,908 $ 10,889 $ 10,976
5/31/95 $ 11,188 $ 11,236 $ 11,319
6/30/95 $ 11,283 $ 11,336 $ 11,405
7/31/95 $ 11,430 $ 11,390 $ 11,535
8/31/95 $ 11,459 $ 11,477 $ 11,605
9/30/95 $ 11,626 $ 11,604 $ 11,737
10/31/95 $ 11,800 $ 11,715 $ 11,821
11/30/95 $ 11,938 $ 11,874 $ 11,936
12/31/95 $ 12,139 $ 12,045 $ 12,129
1/31/96 $ 12,317 $ 12,214 $ 12,320
2/29/96 $ 12,382 $ 12,176 $ 12,339
3/31/96 $ 12,225 $ 12,097 $ 12,305
4/30/96 $ 12,202 $ 12,042 $ 12,312
5/31/96 $ 12,218 $ 12,075 $ 12,400
6/30/96 $ 12,235 $ 12,190 $ 12,475
7/31/96 $ 12,338 $ 12,257 $ 12,559
8/31/96 $ 12,571 $ 12,356 $ 12,689
9/30/96 $ 12,792 $ 12,566 $ 12,962
10/31/96 $ 12,934 $ 12,763 $ 13,104
11/30/96 $ 13,225 $ 13,012 $ 13,369
12/31/96 $ 13,315 $ 13,034 $ 13,472
1/31/97 $ 13,421 $ 13,141 $ 13,576
2/28/97 $ 13,601 $ 13,280 $ 13,766
3/31/97 $ 13,399 $ 13,156 $ 13,613
4/30/97 $ 13,530 $ 13,298 $ 13,768
5/31/97 $ 13,875 $ 13,511 $ 14,046
6/30/97 $ 14,046 $ 13,700 $ 14,260
7/31/97 $ 14,425 $ 14,028 $ 14,602
8/31/97 $ 14,402 $ 13,985 $ 14,577
9/30/97 $ 14,609 $ 14,185 $ 14,819
10/31/97 $ 14,600 $ 14,273 $ 14,917
11/30/97 $ 14,757 $ 14,366 $ 15,059
12/31/97 $ 14,929 $ 14,498 $ 15,202
1/31/98 $ 15,182 $ 14,675 $ 15,428
2/28/98 $ 15,259 $ 14,707 $ 15,491
3/31/98 $ 15,351 $ 14,788 $ 15,625
4/30/98 $ 15,407 $ 14,881 $ 15,698
5/31/98 $ 15,489 $ 14,999 $ 15,808
6/30/98 $ 15,602 $ 15,099 $ 15,887
7/31/98 $ 15,799 $ 15,197 $ 15,977
8/31/98 $ 15,266 $ 14,878 $ 15,287
9/30/98 $ 15,562 $ 15,153 $ 15,318
10/31/98 $ 15,477 $ 14,984 $ 15,067
11/30/98 $ 16,005 $ 15,307 $ 15,752
12/31/98 $ 16,022 $ 15,414 $ 15,757
1/31/99 $ 16,205 $ 15,515 $ 15,913
2/28/99 $ 16,117 $ 15,443 $ 15,792
3/31/99 $ 16,264 $ 15,605 $ 15,928
4/30/99 $ 16,389 $ 15,774 $ 16,176
5/31/99 $ 16,202 $ 15,615 $ 16,065
6/30/99 $ 16,172 $ 15,605 $ 16,034
7/31/99 $ 16,180 $ 15,640 $ 16,058
8/31/99 $ 16,039 $ 15,574 $ 15,894
9/30/99 $ 16,041 $ 15,636 $ 15,834
10/31/99 $ 16,065 $ 15,564 $ 15,740
11/30/99 $ 16,310 $ 15,712 $ 15,920
12/31/99 $ 16,407 $ 15,799 $ 16,003
1/31/2000 $ 16,333 $ 15,723 $ 15,923
2/29/2000 $ 16,369 $ 15,699 $ 15,937
3/31/2000 $ 16,261 $ 15,594 $ 15,714
4/30/2000 $ 16,376 $ 15,574 $ 15,719
5/31/2000 $ 16,360 $ 15,457 $ 15,546
6/30/2000 $ 16,733 $ 15,797 $ 15,812
7/31/2000 $ 16,875 $ 15,988 $ 15,925
8/31/2000 $ 17,184 $ 16,217 $ 16,120
9/30/2000 $ 17,165 $ 16,124 $ 16,026
10/31/2000 $ 17,028 $ 15,792 $ 15,557
11/30/2000 $ 16,805 $ 15,770 $ 15,070
12/31/2000 $ 17,285 $ 16,073 $ 15,397
1/31/2001 $ 17,952 $ 16,706 $ 16,314
2/28/2001 $ 18,118 $ 16,958 $ 16,572
3/31/2001 $ 18,020 $ 17,099 $ 16,353
4/30/2001 $ 17,976 $ 17,214 $ 16,175
5/31/2001 $ 18,066 $ 17,496 $ 16,486
6/30/2001 $ 17,831 $ 17,368 $ 16,146
7/31/2001 $ 18,003 $ 17,667 $ 16,396
8/31/2001 $ 18,282 $ 17,868 $ 16,555
9/30/2001 $ 17,527 $ 16,977 $ 15,494
10/31/2001 $ 18,207 $ 17,391 $ 15,950
11/30/2001 $ 18,733 $ 17,838 $ 16,468
12/31/2001 $ 18,549 $ 17,679 $ 16,351
1/31/2002 $ 18,677 $ 17,672 $ 16,443
2/28/2002 $ 18,522 $ 17,555 $ 16,285
3/31/2002 $ 18,763 $ 17,924 $ 16,672
4/30/2002 $ 18,908 $ 18,261 $ 16,938
5/31/2002 $ 18,872 $ 18,279 $ 16,846
6/30/2002 $ 18,379 $ 16,901 $ 15,648
7/31/2002 $ 18,079 $ 16,215 $ 15,026
8/31/2002 $ 18,421 $ 16,521 $ 15,401
9/30/2002 $ 18,335 $ 16,455 $ 15,155
10/31/2002 $ 18,316 $ 16,421 $ 15,027
11/30/2002 $ 18,921 $ 17,020 $ 15,923
12/31/2002 $ 19,068 $ 17,257 $ 16,165
1/31/2003 $ 19,267 $ 17,571 $ 16,631
2/28/2003 $ 19,463 $ 17,720 $ 16,845
3/31/2003 $ 19,810 $ 17,936 $ 17,281
4/30/2003 $ 20,311 $ 18,555 $ 18,253
5/31/2003 $ 20,337 $ 18,713 $ 18,450
6/30/2003 $ 20,614 $ 19,074 $ 18,954
7/31/2003 $ 20,269 $ 18,753 $ 18,682
8/31/2003 $ 20,417 $ 18,892 $ 18,927
9/30/2003 $ 20,873 $ 19,389 $ 19,433
10/31/2003 $ 21,104 $ 19,670 $ 19,829
11/30/2003 $ 21,278 $ 19,891 $ 20,103
12/31/2003 $ 21,529 $ 20,191 $ 20,569
1/31/2004 $ 21,733 $ 20,413 $ 20,890
2/29/2004 $ 21,829 $ 20,554 $ 20,882
3/31/2004 $ 22,064 $ 20,803 $ 21,028
4/30/2004 $ 21,864 $ 20,486 $ 20,876
5/31/2004 $ 21,437 $ 20,197 $ 20,542
6/30/2004 $ 21,669 $ 20,418 $ 20,842
7/31/2004 $ 22,027 $ 20,722 $ 21,128
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JULY 31, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR 10-YEAR
CMG High Yield Fund 7/6/94 8.60 6.36 8.22
Merrill Lynch Intermediate BB Index 10.47 5.79 7.56
Merrill Lynch U.S High Yield, Cash Pay Index 13.08 5.64 7.77
</Table>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%)
<Table>
<Caption>
INCEPTION 1-YEAR 5-YEAR LIFE
CMG High Yield Fund 7/6/94 5.13 6.03 8.05
Merrill Lynch Intermediate BB Index 7.04 5.52 7.51(1)
Merrill Lynch U.S High Yield, Cash Pay Index 9.97 5.38 7.71(1)
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PLEASE VISIT
www.columbiamanagement.com FOR DAILY AND MOST RECENT MONTH-END PERFORMANCE
UPDATES.
The Merrill Lynch Intermediate BB Index is a market-weighted index, consisting
of BB cash pay bonds, which are U.S. dollar denominated bonds issued in the U.S.
domestic market with maturities between 1 and 10 years. The Merrill Lynch U.S.
High Yield, Cash Pay Index is an unmanaged index that tracks the performance of
non-investment-grade corporate bonds. Unlike mutual funds, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. Securities in the fund may
not match those in an index.
(1) Merrill Lynch Intermediate BB Index performance is from June 30, 1994.
Merrill Lynch U.S. High Yield, Cash Pay Index performance is from July 6,
1994.
Performance results reflect any voluntary waivers or reimbursement of fund
expenses by the advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
All results shown assume reinvestment of distributions. The graph and table do
not reflect the deduction of taxes that the shareholder would pay on fund
distributions or redemption of fund shares.
18
<Page>
UNDERSTANDING YOUR EXPENSES - CMG HIGH YIELD FUND
As a fund shareholder, you incur two types of costs. There are transaction
costs, which generally include sales charges on purchases and may include
redemption or exchange fees. There are also ongoing costs, which generally
include investment advisory fees and other fund expenses. The information on
this page is intended to help you understand your ongoing costs of investing in
the fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
ANALYZING YOUR FUND'S EXPENSES
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the reporting period. The information in
the following table is based on an initial investment of $1,000, which is
invested at the beginning of the reporting period and held for the entire
period. Expense information is calculated two ways and each method provides you
with different information. The amount listed in the "actual" column is
calculated using the fund's actual operating expenses and total return for the
period. The amount listed in the "hypothetical" column assumes that the return
each year is 5% before expenses and includes the fund's actual expense ratio.
You should not use the hypothetical account values and expenses to estimate
either your actual account balance at the end of the period or the expenses you
paid during this reporting period.
ESTIMATING YOUR ACTUAL EXPENSES
To estimate the expenses that you paid over the period, first you will need your
account balance at the end of the period:
1. Divide your ending account balance by $1,000. For example, if an account
balance was $8,600 at the end of the period, the result would be 8.6.
2. In the section of the table below titled "Expenses paid during this
period," locate the amount under "actual." Multiply this number by the
result from step 1. Your answer is an estimate of the expenses you paid on
your account during the period.
FEBRUARY 1, 2004 - JULY 31, 2004
<Table>
<Caption>
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)
ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL
1,000.00 1,000.00 1,013.00 1,022.90 1.98 1.99
</Table>
Expenses paid during the period are equal to the fund's annualized expense ratio
of 0.40%, multiplied by the average account value over the period, then
multiplied by the number of days in the fund's most recent fiscal half-year and
divided by 366.
Had the Investment Advisor not reimbursed a portion of expenses, total return
would have been reduced.
It is important to note that the expense amounts shown in the table are meant to
highlight only ongoing costs of investing in the fund and do not reflect any
transactional costs, such as sales charges, redemption or exchange fees.
Therefore, the hypothetical examples provided may not help you determine the
relative total costs of owning shares of different funds. If these transactional
costs were included, your costs would have been higher.
19
<Page>
COMPARE WITH OTHER FUNDS
Since all mutual fund companies are required to include the same hypothetical
calculations about expenses in shareholder reports, you can use this information
to compare the ongoing cost of investing in the fund with other funds. To do so,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. As you compare hypothetical
examples of other funds, it is important to note that hypothetical examples are
meant to highlight the continuing costs of investing in a fund and do not
reflect any transactional costs, such as sales charges or redemption or exchange
fees.
20
<Page>
CMG CORE BOND FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD PERIOD
ENDED ENDED YEAR ENDED OCTOBER 31, ENDED
JULY 31, JULY 31, ---------------------------- OCTOBER 31,
2004 2003 (a) 2002 2001 2000 (b)
---------- ---------- ---------- ---------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.38 $ 10.52 $ 10.83 $ 10.02 $ 10.00
---------- ---------- ---------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.37(c) 0.31(c) 0.56(c)(d) 0.65 0.11
Net realized and unrealized gain (loss)
on investments and futures contracts 0.11 (0.12) (0.15)(d) 0.81 0.02
---------- ---------- ---------- ---------- -----------
Total from investment operations 0.48 0.19 0.41 1.46 0.13
---------- ---------- ---------- ---------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.41) (0.33) (0.58) (0.65) (0.11)
From net realized gains (0.09) - (0.14) -(e) -
---------- ---------- ---------- ---------- -----------
Total distributions (0.50) (0.33) (0.72) (0.65) (0.11)
---------- ---------- ---------- ---------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.36 $ 10.38 $ 10.52 $ 10.83 $ 10.02
========== ========== ========== ========== ===========
TOTAL RETURN (f)(g) 4.67% 1.76%(h) 3.97% 15.01% 1.31%(h)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 32,810 $ 30,512 $ 27,412 $ 28,774 $ 10,866
Ratio of net expenses to average net assets (i) 0.35% 0.40%(j) 0.40% 0.40% 0.40%(j)
Ratio of net investment income to average
net assets (i) 3.54% 3.95%(j) 5.34%(d) 6.14% 6.57%(j)
Waiver/reimbursement 0.25% 0.29%(j) 0.16% 0.25% 1.06%(j)
Portfolio turnover rate 231% 181%(h) 147% 140% 103%(h)
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
(b) The Fund commenced investment operations on September 1, 2000. Per share
data, total return and portfolio turnover rate reflect activity from that
date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting discount on all debt securities. The effect of this
change for the year ended October 31, 2002, was to decrease net investment
income per share by $0.02, decrease net realized and unrealized loss per
share data by $0.02 and decrease the ratio of net investment income to
average net assets from 5.53% to 5.34%. Per share data and ratios for
periods prior to October 31, 2002 have not been restated to reflect this
change in presentation.
(e) Rounds to less than $0.01 per share.
(f) Total return at net asset value assuming all distributions reinvested.
(g) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
See Accompanying Notes to Financial Statements.
21
<Page>
CMG SHORT TERM BOND FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED YEAR ENDED OCTOBER 31,
JULY 31, JULY 31, ------------------------------------------------------
2004 2003 (a) 2002 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.01 $ 12.15 $ 12.41 $ 11.73 $ 11.72 $ 12.09
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.35(b) 0.34(b) 0.59(b)(c) 0.76 0.77 0.72
Net realized and unrealized gain (loss)
on investments (0.03) (0.11) (0.22)(c) 0.68 0.01 (0.37)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.32 0.23 0.37 1.44 0.78 0.35
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.38) (0.37) (0.63) (0.76) (0.77) (0.72)
From net realized gains - - - - - -(d)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.38) (0.37) (0.63) (0.76) (0.77) (0.72)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 11.95 $ 12.01 $ 12.15 $ 12.41 $ 11.73 $ 11.72
========== ========== ========== ========== ========== ==========
TOTAL RETURN (e)(f) 2.72% 1.91%(g) 3.12% 12.62% 6.92% 2.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 119,125 $ 113,193 $ 140,757 $ 89,791 $ 82,809 $ 144,821
Ratio of net expenses to average
net assets (h) 0.25% 0.25%(i) 0.25% 0.25% 0.25% 0.25%
Ratio of interest expense to average
net assets - -(i)(j) - - - -
Ratio of net investment income to average
net assets (h) 2.91% 3.79%(i) 4.73%(c) 6.27% 6.56% 6.22%
Waiver/reimbursement 0.10% 0.08%(i) 0.05% 0.08% 0.08% 0.07%
Portfolio turnover rate 79% 93%(g) 132% 82% 86% 128%
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting discount on all debt securities. The effect of this
change for the period ended October 31, 2002, was to decrease net
investment income per share by $0.04, decrease net realized and unrealized
loss per share by $0.04 and decrease the ratio of net investment income to
average net assets from 5.08% to 4.73%. Per share data and ratios for
periods prior to October 31, 2002 have not been restated to reflect this
change in presentation.
(d) Rounds to less than $0.01 per share.
(e) Total return at net asset value assuming all distributions reinvested.
(f) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
agreements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
(j) Rounds to less than 0.01%.
See Accompanying Notes to Financial Statements.
22
<Page>
<Table>
<Caption>
PERIOD
ENDED
JULY 31,
2004 (a)
------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.07
Net realized and unrealized loss on investments (0.08)
------------
Total from investment operations (0.01)
------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.11)
------------
NET ASSET VALUE, END OF PERIOD $ 9.88
============
TOTAL RETURN (c)(d)(e) (0.08)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 67,235
Ratio of net expenses to average net assets (f) 0.25%
Ratio of net investment income to average net assets (f) 1.69%
Waiver/reimbursement (f) 0.22%
Portfolio turnover rate (e) 12%
</Table>
(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
<Page>
CMG HIGH YIELD FUND
A Portfolio of CMG Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
<Table>
<Caption>
YEAR PERIOD
ENDED ENDED YEAR ENDED OCTOBER 31,
JULY 31, JULY 31, -------------------------------------------------------
2004 2003 (a) 2002 2001 2000 1999 (b)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.90 $ 7.55 $ 8.14 $ 8.30 $ 8.54 $ 8.95
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.53(c) 0.43(c) 0.64(c)(d) 0.72 0.73 0.74
Net realized and unrealized gain
(loss) on investments 0.14 0.37 (0.58)(d) (0.16) (0.24) (0.41)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.67 0.80 0.06 0.56 0.49 0.33
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.57) (0.45) (0.65) (0.72) (0.73) (0.74)
From net realized gains - - - - - -(e)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions declared
to shareholders (0.57) (0.45) (0.65) (0.72) (0.73) (0.74)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 8.00 $ 7.90 $ 7.55 $ 8.14 $ 8.30 $ 8.54
=========== =========== =========== =========== =========== ===========
TOTAL RETURN (f) 8.60%(g) 10.67%(g)(h) 0.60% 6.92% 6.01% 3.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 382,157 $ 429,042 $ 286,228 $ 348,979 $ 319,985 $ 271,551
Ratio of net expenses to average
net assets (i) 0.40% 0.42%(j) 0.42% 0.44% 0.43% 0.43%
Ratio of net investment income to
average net assets (i) 6.64% 7.32%(j) 7.98%(d) 8.63% 8.70% 8.39%
Waiver/reimbursement 0.02% 0.01%(j) - - - -
Portfolio turnover rate 47% 47%(h) 62% 59% 56% 62%
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
(b) Per share amounts have been adjusted to retroactively reflect a 4 for 1
share split effective September 1, 1999.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting discount on all debt securities. The effect of this
change for the year ended October 31, 2002, was to decrease net investment
income per share by $0.01, decrease net realized and unrealized loss per
share data by $0.01 and decrease the ratio of net investment income to
average net assets from 8.11% to 7.98%. Per share data and ratios for
periods prior to October 31, 2002 have not been restated to reflect this
change in presentation.
(e) Rounds to less than $0.01 per share.
(f) Total return at net asset value assuming all distributions reinvested.
(g) Had the Investment Advisor not reimbursed a portion of expenses, total
return would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(j) Annualized.
See Accompanying Notes to Financial Statements.
24
<Page>
CMG CORE BOND FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
U.S. Government & Agency Securities (41.4%)
U.S. Treasury Notes & Bonds (9.1%)
U.S. Treasury Bonds
7.250% 05/15/2016 $ 925,000 $ 1,130,379
U.S. Treasury Inflation Index Bonds
3.625% 01/15/2008 825,047 903,071
U.S. Treasury Notes
4.875% 02/15/2012 900,000 937,687
---------------
2,971,137
---------------
U.S. Agency Bonds (1.6%)
Federal Home Loan Bank
2.125% 12/15/2004 (a) 50,000 50,097
3.625% 10/15/2004 480,000 481,958
---------------
532,055
---------------
Government National Mortgage Association (GNMA) (0.3%)
7.000% 01/15/2032 - 03/15/2032 99,416 105,635
---------------
Federal Home Loan Mortgage Corp. (FHLMC) (10.8%)
3.500% 10/01/2018 356,367 331,985
5.000% 04/01/2019 299,970 302,034
5.000% 05/01/2034 974,828 950,500
6.000% 05/01/2017 258,074 269,818
To Be Announced
5.000% 01/01/2019 (b) 1,000,000 1,006,250
5.500% 11/01/2017 - 03/01/2018 (b) 660,000 668,811
---------------
3,529,398
---------------
Federal National Mortgage Association (FNMA) (0.9%)
4.000% 03/01/2019 308,035 295,713
---------------
Agency Collateralized Mortgage Obligations (18.7%)
FHLMC GNMA Gtd. Multiclass Mtg. Partn. Ctfs.
Series 1602 Cl. PJ
6.500% 10/15/2023 100,000 106,658
Series 2113 Cl. MU
6.500% 08/15/2027 25,707 25,798
Series 2687 Cl. MQ
4.500% 10/15/2018 220,000 221,579
Series 2689 Cl. PC
4.000% 09/15/2015 360,000 352,686
Series 2695 Cl. AT
4.000% 10/15/2026 925,000 923,702
Series 2695 Cl. BO
4.500% 08/15/2028 1,030,000 1,011,432
Series 2695 Cl. DG
4.000% 10/15/2018 600,000 541,810
Series 2700 Cl. PD
4.500% 02/15/2027 900,000 894,128
</Table>
See Accompanying Notes to Financial Statements.
25
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
U.S. Government & Agency Securities (continued)
Agency Collateralized Mortgage Obligations (continued)
FNMA Gtd. Remic Pass Thru Ctfs.
Remic Tr. 2001-34 Cl. AE
6.000% 07/25/2029 $ 68,935 $ 69,040
Remic Tr. 2001-56 Cl. KD
6.500% 07/25/2030 33,551 33,874
Remic Tr. 2002-8 Cl. PD
6.500% 07/25/2030 73,975 75,909
Remic Tr. 2003-87 Cl. TG
4.500% 11/25/2014 900,000 899,036
GNMA Gtd. Remic Pass Thru Secs.
Remic Tr. 2003-97 Cl. NC
4.500% 04/16/2028 1,000,000 995,665
---------------
6,151,317
---------------
Total U.S. Government & Agency Securities
(Cost of $13,597,894) 13,585,255
---------------
Corporate Notes & Bonds (31.9%)
Financials (10.7%)
Allstate Financial Global Funding II
2.625% 10/22/2006 (c) 150,000 148,146
American Express Credit Corp.
3.000% 05/16/2008 275,000 266,544
American General Finance
5.375% 09/01/2009 50,000 52,100
Capital One Bank
4.875% 05/15/2008 100,000 101,977
CIT Group, Inc.
4.125% 02/21/2006 150,000 152,699
Citigroup, Inc.
7.250% 10/01/2010 215,000 243,408
Countrywide Home Loans
2.875% 02/15/2007 225,000 221,213
Genworth Financial, Inc.
4.750% 06/15/2009 200,000 202,668
Goldman Sachs Capital 1
6.345% 02/15/2034 150,000 143,619
Health Care Property Investors, Inc.
6.875% 06/08/2015 125,000 129,161
Household Finance Corp.
6.400% 06/17/2008 230,000 248,559
JPMorgan Chase & Co.
5.750% 01/02/2013 250,000 256,883
Merrill Lynch & Co.
4.125% 01/15/2009 150,000 149,120
Morgan Stanley & Co.
4.750% 04/01/2014 175,000 163,404
SLM Corp.
5.125% 08/27/2012 200,000 198,254
</Table>
See Accompanying Notes to Financial Statements.
26
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Financials (continued)
U.S. Bank N.A.
6.375% 08/01/2011 $ 200,000 $ 218,044
Wachovia Corp.
3.500% 08/15/2008 250,000 245,287
Washington Mutual, Inc.
5.625% 01/15/2007 125,000 131,637
Wells Fargo Financial, Inc.
5.900% 05/21/2006 225,000 236,176
---------------
3,508,899
---------------
Industrial (18.7%)
Alcan, Inc.
7.250% 03/15/2031 125,000 143,129
Anheuser-Busch Companies, Inc.
5.750% 04/01/2010 50,000 53,137
Anthem, Inc.
6.800% 08/01/2012 200,000 221,002
AT&T Wireless Services, Inc.
8.750% 03/01/2031 125,000 155,379
Boeing Co.
6.125% 02/15/2033 175,000 173,329
Canadian National Railway Co.
7.195% 01/02/2016 74,295 85,408
Coca-Cola Enterprises, Inc.
6.950% 11/15/2026 125,000 139,531
ConocoPhillips
8.500% 05/25/2005 100,000 105,041
Cox Enterprises, Inc.
8.000% 02/15/2007 (c) 130,000 143,264
DaimlerChrysler N.A. Holding Corp.
8.500% 01/18/2031 140,000 164,247
Deutsche Telekom International Finance BV
8.500% 06/15/2010 150,000 176,793
Devon Financing Corp.
6.875% 09/30/2011 100,000 117,246
Diageo Capital PLC
3.375% 03/20/2008 250,000 245,750
Ford Motor Credit Co.
7.375% 10/28/2009 285,000 305,229
General Electric Co.
5.000% 02/01/2013 350,000 349,314
General Mills, Inc.
2.625% 10/24/2006 200,000 196,368
General Motors Acceptance Corp.
7.750% 01/19/2010 250,000 272,025
International Business Machines Corp.
5.875% 11/29/2032 250,000 246,865
</Table>
See Accompanying Notes to Financial Statements.
27
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Industrial (continued)
International Paper Co.
4.250% 01/15/2009 $ 175,000 $ 173,175
Jones Intercable, Inc.
7.625% 04/15/2008 175,000 193,707
Kroger Co.
6.200% 06/15/2012 160,000 168,640
Lockheed Martin Corp.
8.500% 12/01/2029 85,000 107,902
Lowe's Companies, Inc.
6.500% 03/15/2029 175,000 186,013
Marathon Oil Corp.
6.800% 03/15/2032 125,000 132,160
Newell Rubbermaid, Inc.
4.000% 05/01/2010 110,000 105,037
Pepsi Americas, Inc.
3.875% 09/12/2007 125,000 125,675
Sprint Capital Corp.
6.875% 11/15/2028 100,000 99,152
Target Corp.
7.000% 07/15/2031 150,000 169,331
Time Warner, Inc.
6.625% 05/15/2029 200,000 195,888
Union Pacific Corp.
3.875% 02/15/2009 135,000 132,274
United Technologies Corp.
7.125% 11/15/2010 100,000 114,090
Verizon Global
7.250% 12/01/2010 150,000 169,037
Vodafone Group PLC
7.750% 02/15/2010 200,000 230,662
Wal-Mart Stores, Inc.
4.125% 02/15/2011 250,000 242,960
Waste Management, Inc.
7.375% 08/01/2010 150,000 169,480
Wyeth
5.500% 02/01/2014 125,000 120,714
---------------
6,128,954
---------------
Utilities (2.5%)
CenterPoint Energy Houston
5.750% 01/15/2014 150,000 155,768
Exelon Generation Co. LLC
6.950% 06/15/2011 150,000 165,445
Kinder Morgan Energy Partners LP
6.750% 03/15/2011 175,000 189,408
PSEG Power LLC
6.950% 06/01/2012 125,000 136,981
</Table>
See Accompanying Notes to Financial Statements.
28
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Utilities (continued)
Sempra Energy
4.750% 05/15/2009 $ 175,000 $ 176,473
---------------
824,075
---------------
Total Corporate Notes & Bonds
(Cost of $10,674,450) 10,461,928
---------------
International Notes & Bonds (2.5%)
Quebec Province
6.500% 01/17/2006 275,000 289,679
Republic of Italy
2.500% 03/31/2006 300,000 298,659
United Mexican States
7.500% 04/04/2033 230,000 228,275
---------------
Total International Notes & Bonds
(Cost of $817,703) 816,613
---------------
Other Securitized Loans (18.6%)
Asset-Backed Securities (6.9%)
ABSF Mortgage Loan Trust
Series 2002-4 Cl. A
4.428% 12/15/2033 752,071 729,524
Honda Auto Receivables Owner Trust
Series 2000-3 Cl. A3
3.000% 05/18/2006 262,630 263,778
IMC Home Equity Loan Trust
Series 1997-3 Cl. A6
7.520% 08/20/2028 34,617 34,672
Series 1997-5 Cl. A9
7.310% 11/20/2028 72,433 72,605
New Century Home Equity Loan Trust
Series 1999-NCA Cl. A7
7.320% 07/25/2029 33,568 34,624
Series 2003-5 Cl. AI2
2.940% 11/25/2033 1,020,000 1,013,054
Wilshire Mortgage Loan Trust
Series 1997-2 Cl. A5
7.255% 05/25/2028 92,864 97,414
---------------
2,245,671
---------------
Collateralized Mortgage Obligations (11.3%)
Bear Stearns Asset Backed Securities, Inc.
Series 2003-AC7 Cl. A1
5.000% 01/25/2034 584,744 590,609
Countrywide Alternative Loan Trust
Series 2004-2CB Cl. 1A4
1.850% 03/25/2034 271,319 271,246
</Table>
See Accompanying Notes to Financial Statements.
29
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Other Securitized Loans (continued)
Collateralized Mortgage Obligations (continued)
Countrywide Home Loans
Series 2003-49 Cl. A9
4.629% 12/19/2033 (d) $ 322,326 $ 318,687
First Nationwide Trust
Series 2000-1 Cl. IIA3
8.000% 10/25/2030 29,610 29,643
GMAC Mortgage Corporation Loan Trust
Series 2003-GH2 Cl. A4
5.000% 10/25/2033 680,000 644,205
IMPAC Secured Assets Corp.
Series 2002-3 Cl. A3
6.360% 08/25/2032 229,079 231,477
Residential Funding Mortgage Securities I, Inc.,
Mtg. Pass Thru Secs.
Series 2003-S14 Cl. A5
1.850% 07/25/2018 (d) 476,015 474,325
Structured Asset Securities Corp.
Series 2003-21 Cl. 1A3
5.500% 07/25/2033 1,150,495 1,158,721
---------------
3,718,913
---------------
Commercial Mortgage-Backed Securities (0.4%)
GMAC Commercial Mortgage Asset Corp.
Series 2001-FLAA Cl. B1
1.880% 6/15/2013 (c)(d) 42,893 42,898
NationsLink Funding Corp.
Series 1999-Sl Cl. A5
6.888% 11/10/2030 90,000 97,495
---------------
140,393
---------------
Total Other Securitized Loans
(Cost of $5,880,346) 6,104,977
---------------
Short-Term Obligation (10.2%)
U.S. Treasury Bill (0.5%)
1.110% 08/05/2004 175,000 174,978
---------------
Repurchase Agreement (9.7%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/2004, due 08/02/2004 at 1.230%,
collateralized by a U.S. Treasury Note
maturing 02/15/2012, market value of $3,245,650
(repurchase proceeds $3,180,326) 3,180,000 3,180,000
---------------
Total Short-Term Obligations
(Cost of $3,355,000) 3,354,978
---------------
Total Investments (104.6%)
(Cost of $34,325,393) (e) 34,323,751
Other Assets & Liabilities, Net (-4.6%) (1,513,716)
---------------
Net Assets (100.0%) $ 32,810,035
===============
</Table>
See Accompanying Notes to Financial Statements.
30
<Page>
At July 31, 2004, the fund held the following open short futures contracts:
<Table>
<Caption>
AGGREGATE FACE EXPIRATION UNREALIZED
TYPE VALUE VALUE DATE DEPRECIATION
- -----------------------------------------------------------------------------------------------
2 Year U.S. Treasury Note $ 3,378,000 $ 3,365,250 Sept-04 $ (12,750)
</Table>
Notes to Schedule of Investments:
(a) Security pledged as collateral for open futures contracts.
(b) This security has been purchased on a delayed delivery basis.
(c) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
July 31, 2004, these securities amounted to $334,308, which represents
1.0% of net assets.
(d) Variable rate security. The interest rate shown reflects the rate as of
July 31, 2004.
(e) Cost for federal income tax purposes is $34,446,818.
See Accompanying Notes to Financial Statements.
31
<Page>
CMG SHORT TERM BOND FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
U.S. Government & Agency Securities (14.3%)
U.S. Treasury Note & Bond (2.5%)
U.S. Treasury Inflation Index Bond
3.625% 01/15/2008 $ 2,170,869 $ 2,376,168
U.S. Treasury Notes
3.500% 11/15/2006 600,000 608,813
---------------
2,984,981
---------------
U.S. Agency Bonds (8.1%)
Federal Home Loan Mortgage Corp. (FHLMC)
3.000% 06/15/2009 3,737,320 3,749,583
4.000% 09/15/2015 - 10/15/2026 2,970,000 2,961,067
4.500% 11/01/2007 1,095,808 1,108,933
5.500% 12/01/2017 867,263 892,102
6.500% 11/15/2030 484,408 496,608
To be announced
5.500% TBA (a) 450,000 461,529
---------------
9,669,822
---------------
Federal National Mortgage Association (FNMA) (2.5%)
2.000% 09/25/2018 717,927 720,081
5.500% 02/01/2018 1,509,780 1,553,519
6.000% 03/01/2009 - 05/01/2009 746,522 763,631
---------------
3,037,231
---------------
Other Government Agencies (1.2%)
A.I.D., Morocco
1.980% 05/01/2023 (b) 380,000 372,780
Small Business Administration
1.875% 10/25/2021 - 06/25/2022 (b) 596,432 603,293
2.000% 07/25/2021 - 11/25/2021 (b) 117,716 119,028
2.375% 01/25/2017 (b) 286,339 291,390
---------------
1,386,491
---------------
Total U.S. Government & Agency Securities
(Cost of $17,139,705) 17,078,525
---------------
Corporate Notes & Bonds (36.1%)
Financials (15.0%)
Allstate Financial Global Funding II
2.625% 10/22/2006 (c) 600,000 592,584
American Express Credit Corp.
3.000% 05/16/2008 1,000,000 969,250
American General Finance Corp.
3.000% 11/15/2006 250,000 248,000
American International Group, Inc.
2.875% 05/15/2008 650,000 631,130
Bear Stearns Co., Inc.
6.500% 05/01/2006 600,000 634,962
Capital One Bank
4.875% 05/15/2008 350,000 356,920
</Table>
See Accompanying Notes to Financial Statements.
32
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Financials (continued)
CIT Group, Inc.
4.125% 02/21/2006 $ 350,000 $ 356,296
Citigroup, Inc.
6.750% 12/01/2005 950,000 1,000,131
Countrywide Home Loans
2.875% 02/15/2007 500,000 491,585
Credit Suisse First Boston (USA), Inc.
5.750% 04/15/2007 600,000 633,378
Fifth Third Bank
2.700% 01/30/2007 700,000 692,580
General Electric Capital Corp.
4.250% 01/15/2008 1,450,000 1,473,649
Genworth Financial, Inc.
4.750% 06/15/2009 500,000 506,670
Goldman Sachs Group, Inc.
4.125% 01/15/2008 325,000 327,324
Health Care Property Investors, Inc.
6.875% 06/08/2005 500,000 516,645
Household Finance Corp.
6.400% 06/17/2008 475,000 513,328
JPMorgan Chase & Co.
3.125% 12/11/2006 1,000,000 995,900
Lehman Brothers Holdings, Inc.
4.000% 01/22/2008 550,000 552,101
Marshall & Isley Corp.
4.375% 08/01/2009 600,000 600,906
Merrill Lynch & Co., Inc.
2.470% 03/10/2006 700,000 694,057
Morgan Stanley
6.100% 04/15/2006 650,000 683,768
US Bancorp
3.125% 03/15/2008 1,000,000 975,370
USA Education
5.625% 04/10/2007 800,000 843,216
Wachovia Corp.
3.500% 08/15/2008 850,000 833,978
Washington Mutual, Inc.
5.625% 01/15/2007 600,000 631,860
Wells Fargo & Co.
5.900% 05/21/2006 1,100,000 1,154,637
---------------
17,910,225
---------------
Industrial (18.3%)
Alcan, Inc.
1.774% 12/08/2005 (b)(c) 850,000 850,000
Anthem, Inc.
4.875% 08/01/2005 475,000 485,968
</Table>
See Accompanying Notes to Financial Statements.
33
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Industrial (continued)
AOL Time Warner, Inc.
6.125% 04/15/2006 $ 565,000 $ 591,804
Bell Atlantic Financial Services, Inc.
7.600% 03/15/2007 825,000 904,711
Boeing Co.
8.100% 11/15/2006 525,000 578,592
Bottling Group LLC
2.450% 10/16/2006 1,000,000 983,540
ChevronTexaco Capital Co.
3.500% 09/17/2007 500,000 500,270
Coca-Cola Enterprises, Inc.
8.000% 01/04/2005 925,000 948,042
Costco Wholesale Corp.
5.500% 03/15/2007 975,000 1,027,357
Cox Enterprises, Inc.
8.000% 02/15/2007 (c) 475,000 523,464
CSX Corp.
6.460% 06/22/2005 525,000 543,569
DaimlerChrysler N.A. Holding Corp.
4.750% 01/15/2008 300,000 304,941
Deutsche Telekom International Finance BV
8.500% 06/15/2010 350,000 412,517
Devon Energy Corp.
2.750% 08/01/2006 550,000 544,043
Ford Motor Credit Co.
7.375% 10/28/2009 1,085,000 1,162,013
Fortune Brands, Inc.
2.875% 12/01/2006 725,000 719,642
General Mills, Inc.
2.625% 10/24/2006 625,000 613,650
General Motors Acceptance Corp.
7.750% 01/19/2010 500,000 544,050
Honeywell International, Inc.
5.125% 11/01/2006 800,000 832,912
International Business Machines Corp.
4.250% 09/15/2009 580,000 581,792
International Paper Co.
4.250% 01/15/2009 550,000 544,264
Jones Intercable, Inc.
7.625% 04/15/2008 500,000 553,450
Kroger Co.
7.650% 04/15/2007 275,000 301,166
Lockheed Martin Corp.
7.700% 06/15/2008 475,000 537,838
Lowe's Companies, Inc.
7.500% 12/15/2005 500,000 531,650
</Table>
See Accompanying Notes to Financial Statements.
34
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Industrial (continued)
Marathon Oil Corp.
5.375% 06/01/2007 $ 500,000 $ 522,570
Newell Rubbermaid, Inc.
2.000% 05/01/2005 600,000 596,916
Occidental Petroleum Corp.
4.250% 03/15/2010 425,000 419,348
Pitney Bowes Credit Corp.
5.750% 08/15/2008 350,000 373,517
Procter & Gamble Co.
4.750% 06/15/2007 675,000 699,341
Sprint Capital Corp.
6.375% 05/01/2009 345,000 368,356
Union Pacific Corp.
3.875% 02/15/2009 325,000 318,438
United Technologies Corp.
4.875% 11/01/2006 700,000 724,983
Vodaphone Group PLC
7.750% 02/15/2010 475,000 547,822
Waste Management, Inc.
7.125% 10/01/2007 525,000 575,951
Wyeth
4.375% 03/01/2008 500,000 501,500
---------------
21,769,987
---------------
Utilities (2.8%)
Alabama Power Co.
3.125% 05/01/2008 725,000 705,070
Dominion Resources, Inc.
2.800% 02/15/2005 700,000 702,401
Exelon Generation Co. LLC
6.950% 06/15/2011 475,000 523,911
Kinder Morgan Energy Partners L.P.
8.000% 03/15/2005 585,000 605,019
PSEG Power LLC
6.875% 04/15/2006 325,000 344,243
Sempra Energy
4.750% 05/15/2009 475,000 479,000
---------------
3,359,644
---------------
Total Corporate Notes & Bonds
(Cost of $42,425,418) 43,039,856
---------------
International Notes & Bonds (2.2%)
Ontario Province
6.000% 02/21/2006 350,000 366,856
Quebec Province
6.500% 01/17/2006 600,000 632,028
7.000% 01/30/2007 85,000 92,570
</Table>
See Accompanying Notes to Financial Statements.
35
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
International Notes & Bonds (continued)
Republic of Italy
2.500% 03/31/2006 $ 750,000 $ 746,648
United Mexican States
4.625% 10/08/2008 780,000 776,880
---------------
Total International Notes & Bonds
(Cost of $2,600,062) 2,614,982
---------------
Other Securitized Loans (37.7%)
Asset Backed Securities (18.0%)
ABFS Mortgage Loan Trust
Series 1997-2 Cl. A5
7.125% 01/15/2029 175,633 182,363
AmeriCredit Automobile Receivables Trust
Series 2002-EM Cl. A3A
2.970% 03/06/2007 947,661 949,935
Ameriquest Mortgage Securities, Inc.
Series 2003-AR2 Cl. A4
1.880% 05/25/2033 (b) 1,299,273 1,300,078
CIT Equipment Collateral Trust
Series 2004-VT1 Cl. A3
2.200% 03/20/2008 150,000 148,336
Cityscape Home Equity Loan Trust
Series 1996-3 Cl. A8
7.650% 09/25/2025 826,658 825,847
Series 1997-3 Cl. A5
7.890% 07/25/2018 258,477 258,166
Series 1997-4 Cl. A4
7.440% 10/25/2018 125,310 125,186
Series 1997-B Cl. A7
7.410% 05/25/2028 124,216 124,406
ContiMortgage Home Equity Loan Trust
Series 1997-3 Cl. A8
7.580% 08/15/2028 567,616 580,109
IMC Home Equity Loan Trust
Series 1995-3 Cl. A5
7.500% 04/25/2026 984,637 994,484
Series 1997-3 Cl. A6
7.520% 08/20/2028 82,549 82,680
KeyCorp Student Loan Trust
Series 1996-A Cl. A2
1.630% 08/27/2025 (b) 1,231,230 1,239,162
Series 1997-1, Cl. A2
2.090% 01/27/2023 (b)(c) 1,265,130 1,282,923
Series 2003-A, Cl. 2A2
1.970% 10/25/2025 (b) 2,600,000 2,620,462
</Table>
See Accompanying Notes to Financial Statements.
36
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Other Securitized Loans (continued)
Asset Backed Securities (continued)
Lehman Home Equity Loan Trust
Series 1996-3 Cl. A2
1.469% 12/15/2027 (b) $ 197,373 $ 205,187
New Century Home Equity Loan Trust
Series 2003-6, Cl. A2
1.820% 01/25/2034 (b) 2,539,291 2,546,909
SLM Student Loan Trust
Series 1996-1 Cl. CTFS
2.190% 07/25/2011 (b) 1,300,000 1,313,559
Series 1996-4 Cl. CTFS
2.140% 07/25/2011 (b) 1,400,000 1,400,910
Series 1997-2 Cl. A2
1.810% 01/25/2010 (b) 1,563,478 1,567,704
Series 1997-4 Cl. A2
2.260% 01/25/2013 (b) 3,140,000 3,176,966
Series 2001-2 Cl. A1T
1.970% 07/27/2009 (b) 239,137 239,668
UCFC Home Equity Loan Trust
Series 1998-D Cl. AF7
6.315% 04/15/2030 296,692 315,852
---------------
21,480,892
---------------
Collateralized Mortgage Obligations (18.5%)
Bear Stearns Adjustable Rate Mortgage Trust
Series 2004-4 Cl. A6
3.517% 06/25/2034 (b) 1,000,000 980,650
Bear Stearns Asset Backed Securities, Inc.
Series 2003-AC2 Cl. A3
3.500% 06/25/2033 221,387 220,679
Series 2003-AC7 Cl. A1
5.000% 01/25/2034 1,463,876 1,478,559
Countrywide Alternative Loan Trust
Series 2004-2CB
1.850% 03/25/2034 1,515,644 1,515,237
Countrywide Home Loans
Series 2002-5 Cl. 2A1
6.000% 04/25/2017 156,104 157,117
Series 2003-J7 Cl. 4A2
1.500% 08/25/2018 2,541,252 2,526,309
Series 2004-J7 Cl. A2
1.950% 03/25/2034 1,846,628 1,849,177
First Horizon Mortgage Pass-Through Trust
Series 2003-2 Cl. 2A1
1.600% 03/25/2018 1,450,948 1,458,638
Series 2003-4 Cl. 2A2
1.550% 06/25/2018 1,293,078 1,298,677
</Table>
See Accompanying Notes to Financial Statements.
37
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Other Securitized Loans (continued)
Collateralized Mortgage Obligations (continued)
First Nationwide Trust
Series 2000-1 Cl. 2A3
8.000% 10/25/2030 $ 67,929 $ 68,005
IMPAC CMB Trust
Series 2003-12 Cl. A1
1.680% 12/25/2033 888,146 890,518
IMPAC Secured Assets CMN Owner Trust
Series 2002-3 Cl. A3
6.360% 08/25/2032 523,608 529,090
Ocwen Residential MBS Corp.
Series 1998-R1 Cl. A1
7.000% 10/25/2040 (c) 312,410 319,421
PNC Mortgage Securities Corp.
Series 1996-PR1 Cl. A
0.000% 4/28/2027 (b)(c) 18,000 17,838
Residential Asset Credit Loans, Inc.
Series 2004-QS8 Cl. A4
1.850% 06/25/2034 1,187,082 1,187,082
Residential Asset Securitization Trust
Series 2003-A7 Cl. A1
5.500% 07/25/2033 1,598,426 1,606,546
Series 2003-A15 Cl. 1A2
1.900% 02/25/2034 (b) 2,259,119 2,258,871
Saco I, Inc.
Series 1997-2 Cl. 1A5
7.000% 08/25/2036 515,428 525,505
Structured Asset Securities Corp.
Series 2003-8 Cl. 2A7
5.750% 04/25/2033 1,500,749 1,523,921
Washington Mutual Mortgage Securities Corp.
Series 2003-MS5 Cl. 1A4
1.950% 03/25/2018 (b) 945,372 950,534
Series 2003-S4 Cl. 1A3
1.950% 06/25/2018 (b) 644,708 648,279
---------------
22,010,653
---------------
Commercial Mortgage Backed Securities (1.2%)
GMAC Commercial Mortgage Asset Corp.
Series 2001-FLAA Cl. B1
1.880% 06/15/2013 (b)(c) 260,420 260,454
NationsLink Funding Corp.
Series 1999-Sl Cl. A5
6.888% 05/10/2007 500,000 541,640
Nomura Asset Securities Corp.
Series 1996-MD5 Cl. A1B
7.120% 04/13/2039 530,000 561,683
---------------
1,363,777
---------------
Total Other Securitized Loans
(Cost of $45,032,719) 44,855,322
---------------
</Table>
See Accompanying Notes to Financial Statements.
38
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Short-Term Obligations (9.6%)
U.S. Treasury Bill (3.4%)
1.170% 08/05/2004 $ 4,000,000 $ 3,999,500
---------------
Repurchase Agreement (6.2%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/2004, due 08/02/2004 at 1.230%,
collateralized by a U.S. Treasury Note
maturing 02/15/2012, market value of $7,557,274
(repurchase proceeds $7,408,759) 7,408,000 7,408,000
---------------
Total Short-Term Obligations
(Cost of $11,407,500) 11,407,500
---------------
Total Investments (99.9%)
(Cost of $118,605,404) (d) 118,996,185
Other Assets & Liabilities, Net (0.1%) 128,935
---------------
Net Assets (100.0%) $ 119,125,120
===============
</Table>
Notes to Schedule of Investments:
(a) This security has been purchased on a delayed delivery basis.
(b) Variable rate security. The interest rate shown reflects the rate as of
July 31, 2004.
(c) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
July 31, 2004, these securities amounted to $3,846,684, which represents
3.2% of net assets.
(d) Cost for federal income tax purposes is $119,066,707.
See Accompanying Notes to Financial Statements.
39
<Page>
CMG ULTRA SHORT TERM BOND FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
U.S. Government & Agency Securities (10.5%)
U.S. Agency Bonds (10.5%)
Federal Home Loan Bank
1.625% 04/15/2005 $ 1,000,000 $ 996,309
2.125% 12/15/2004 500,000 500,974
2.500% 11/15/2005 500,000 499,924
3.625% 10/15/2004 1,000,000 1,004,079
---------------
3,001,286
---------------
Federal Home Loan Mortgage Corp. (FHLMC)
(a) 05/03/2005 1,000,000 984,321
2.810% 02/02/2006 1,000,000 1,002,410
4.000% 05/15/2014 100,000 99,554
---------------
2,086,285
---------------
Federal National Mortgage Association (FNMA)
(a) 03/04/2005 1,000,000 988,468
(a) 04/29/2005 1,000,000 985,075
---------------
1,973,543
---------------
Total U.S. Government & Agency Securities
(Cost of $7,077,425) 7,061,114
---------------
Corporate Notes & Bonds (26.7%)
Financials (14.9%)
Allstate Corp.
7.875% 05/01/2005 500,000 520,460
CIT Group, Inc.
1.409% 11/04/2005 (b) 2,000,000 2,000,500
1.450% 02/15/2007 (b) 400,000 399,940
6.625% 06/15/2015 448,000 463,138
General Electric Capital Corp.
1.410% 05/12/2006 (b) 1,000,000 1,000,250
5.350% 03/30/2006 500,000 519,755
Genworth Financial, Inc.
1.670% 06/15/2007 (b) 500,000 499,895
Goldman Sachs Group LP
6.625% 12/01/2004 (c) 500,000 507,215
Hewlett-Packard Co.
7.150% 06/15/2005 500,000 520,000
Household Finance Corp.
6.500% 01/24/2006 400,000 420,980
International Lease Finance Corp.
5.120% 06/01/2005 400,000 408,640
John Deere Capital Corp.
1.560% 05/20/2005 (b) 250,000 249,950
4.125% 07/15/2005 360,000 365,630
JPMorgan Chase & Co., Inc.
6.250% 12/15/2005 500,000 521,805
MBNA America Bank NA
7.750% 09/15/2005 (c) 280,000 294,829
</Table>
See Accompanying Notes to Financial Statements.
40
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Financials (continued)
SLM Corp.
1.720% 09/15/2006 (b) $ 750,000 $ 750,292
Verizon Global Funding Corp.
6.750% 12/01/2005 536,000 564,210
---------------
10,007,489
---------------
Industrial (7.4%)
Altria Group, Inc.
6.375% 02/01/2006 200,000 206,646
AT&T Corp.
7.000% 05/15/2005 300,000 309,660
Coca-Cola Co.
4.000% 06/01/2005 500,000 506,860
Ford Motor Credit Co.
6.875% 02/01/2006 250,000 262,358
General Motors Acceptance Corp.
5.750% 11/05/2004 250,000 252,102
Nabisco, Inc.
6.375% 02/01/2005 500,000 510,215
Raytheon Co.
6.500% 07/15/2005 250,000 258,683
Sprint Capital Corp.
7.900% 03/15/2005 300,000 310,386
Target Corp.
7.500% 02/15/2005 560,000 575,999
Time Warner, Inc.
5.625% 05/01/2005 275,000 281,094
United Technologies Corp.
6.625% 11/15/2004 300,000 303,984
Vodafone Group PLC
7.625% 02/15/2005 500,000 513,725
Wal-Mart Stores
6.550% 08/10/2004 420,000 420,349
Waste Management, Inc.
7.000% 05/15/2005 245,000 252,570
---------------
4,964,631
---------------
Utilities (4.4%)
Consolidated Natural Gas
7.250% 10/01/2004 500,000 504,275
Duke Energy Field Services LLC
7.500% 08/16/2005 300,000 313,275
Kinder Morgan Inc.
6.650% 03/01/2005 250,000 255,740
National Rural Utilities
1.580% 02/07/2005 (b) 690,000 689,952
5.500% 01/15/2005 150,000 152,094
6.650% 10/01/2005 325,000 339,940
</Table>
See Accompanying Notes to Financial Statements.
41
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Utilities (continued)
Ocean Energy, Inc.
7.625% 07/01/2005 $ 150,000 $ 156,720
Sempra Energy
6.950% 12/01/2005 300,000 315,864
Wisconsin Electric Power
7.250% 08/01/2004 250,000 249,987
---------------
2,977,847
---------------
Total Corporate Notes & Bonds
(Cost of $19,599,460) 17,949,967
---------------
Other Securitized Loans (12.0%)
Asset Backed Securities (8.9%)
Citibank Credit Card Issuance Trust
Series 2001-A8
4.100% 12/07/2006 860,000 866,639
Series 2003-A2
2.700% 01/15/2008 310,000 309,845
Credit-Based Asset Servicing & Securities
Series 2004-CB4
1.620% 05/25/2035 (b) 190,112 190,138
DaimlerChrysler Auto Trust
Series 2002-C
3.090% 01/08/2008 300,000 301,290
Harley-Davidson Motorcycle Trust
Series 2003-1
2.630% 11/15/2010 275,000 273,463
Long Beach Mortgage Loan Trust
Series 2004-3
4.500% 12/25/2006 7,108,665 452,040
MBNA Credit Card Master Note Trust
Series 2001-A1
5.750% 10/15/2008 439,000 460,542
Nissan Auto Lease Trust
Series 2003-A
2.570% 06/15/2009 750,000 746,178
Onyx Acceptance Auto Trust
Series 2003-D
2.400% 12/15/2007 285,000 284,085
Series 2004-B
3.090% 09/15/2008 500,000 499,560
Triad Auto Receivables Owner Trust
Series 2004-A
1.400% 09/12/2007 250,000 248,515
USAA Auto Owner Trust
Series 2002-1
2.930% 07/16/2007 300,000 299,982
</Table>
See Accompanying Notes to Financial Statements.
42
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Other Securitized Loans (continued)
Asset Backed Securities (continued)
Volkswagen Auto Loan Enhanced Trust
Series 2003-2
2.270% 10/22/2007 $ 203,000 $ 202,091
WFS Financial Owner Trust
Series 2003-2
1.760% 01/21/2008 350,000 348,380
Series 2004-2
2.850% 09/22/2008 500,000 498,145
---------------
5,980,893
---------------
Collateralized Mortgage Obligations (3.1%)
Countrywide Home Loan
1.400% 02/17/2006 (b) 400,000 399,936
1.795% 06/02/2006 (b) 680,000 683,862
3.500% 12/19/2005 500,000 504,835
Residential Asset Mortgage Products, Inc.
Series 2003-RS7
2.920% 07/25/2022 475,000 474,544
---------------
2,063,177
---------------
Total Other Securitized Loans
(Cost of $6,528,611) 8,044,070
---------------
Variable Rate Demand Notes (d) (5.2%)
AZ School Facilities Board
Series 2003 A-1
1.490% 07/01/2018 500,000 500,000
CA El Dorado District
Certificates of Participation
Series 2004 B
2.950% 03/01/2034 500,000 499,885
FL Educational Loan Marketing Corp.
Series 2003 A-3
1.540% 12/01/2036 500,000 500,000
MD State Health & Higher Educational Faciliites Authority
Series 2004 C
1.500% 07/01/2029 500,000 500,000
MO Higher Education Loan Authority
Series 1995 D
1.580% 02/15/2025 500,000 500,000
OH Knowledge Works Foundation Student Loan
Series 2000 A-3
1.600% 11/01/2035 500,000 500,000
OK State Student Loan Authority
Series 2000 A-1
1.580% 06/01/2030 500,000 500,000
---------------
Total Variable Rate Demand Notes
(Cost of $3,500,000) 3,499,885
---------------
</Table>
See Accompanying Notes to Financial Statements.
43
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Commercial Paper (1.2%)
Merrill Lynch & Co., Inc.
1.680% 05/22/2006 (b) (Cost of $804,971) $ 800,000 $ 804,971
---------------
Short-Term Obligations (30.8%)
U.S. Government & Agency Securities (6.0%)
Federal Home Loan Mortgage Corp. Discount Note
(a) 11/04/2004 900,000 897,221
U.S. Treasury Bills
1.500% 07/31/2005 1,400,000 1,392,180
1.625% 04/30/2005 1,750,000 1,746,309
---------------
4,035,710
---------------
Repurchase Agreement (24.8%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/2004, due 08/02/2004 at 1.240%,
collateralized by a U.S. Treasury Bond
maturing 11/15/2028, market value of $17,038,342
(repurchase proceeds $16,701,726) 16,700,000 16,700,000
---------------
Total Short-Term Obligations
(Cost of $20,752,951) 20,735,710
---------------
Total Investments (86.4%)
(Cost of $58,263,418) (e) 58,095,717
Other Assets & Liabilities, Net (13.6%) 9,139,526
---------------
Net Assets (100.0%) $ 67,235,243
===============
</Table>
Notes to Schedule of Investments:
(a) Zero coupon bond.
(b) Variable rate security. The interest rate shown reflects the rate as of
July 31, 2004.
(c) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
July 31, 2004, these securities amounted to $802,044, which represents
1.2% of net assets.
(d) Variable rate demand note. This security is payable upon demand and is
secured by letters of credit or other credit support agreements from
banks. The interest rate changes periodically and the interest rate shown
reflects the rate as of July 31, 2004.
(e) Cost for federal income tax purposes is $58,433,228.
See Accompanying Notes to Financial Statements.
44
<Page>
CMG HIGH YIELD FUND
A Portfolio of CMG Fund Trust
SCHEDULE OF INVESTMENTS
July 31, 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (96.3%)
Aerospace (4.3%)
K & F Industries, Inc.
Senior Subordinated Notes, Series B
9.625% 12/15/2010 $ 3,625,000 $ 3,951,250
L-3 Communications Corp.
Senior Subordinated Notes
7.625% 06/15/2012 7,225,000 7,730,750
TD Funding Corp.
Senior Subordinated Notes
8.375% 07/15/2011 4,500,000 4,702,500
---------------
16,384,500
---------------
Broadcasting (2.4%)
LIN Television Corp.
Senior Subordinated Notes
6.500% 05/15/2013 3,700,000 3,570,500
Sinclair Broadcast Group, Inc.
Senior Subordinated Notes
8.000% 03/15/2012 695,000 715,850
8.750% 12/15/2011 4,360,000 4,687,000
---------------
8,973,350
---------------
Cable TV (5.7%)
DirecTV Holdings
Senior Notes
8.375% 03/15/2013 6,190,000 6,932,800
Echostar DBS
Senior Notes
5.750% 10/01/2008 7,975,000 7,915,188
Rogers Cable, Inc.
Notes
6.250% 06/15/2013 4,000,000 3,847,560
7.875% 05/01/2012 2,990,000 3,193,739
---------------
21,889,287
---------------
Capital Goods (2.6%)
Kennametal, Inc.
Senior Notes
7.200% 06/15/2012 5,460,000 5,837,723
Westinghouse Air Brake Co.
Senior Notes
6.875% 07/31/2013 3,860,000 3,888,950
---------------
9,726,673
---------------
Chemicals (4.9%)
Acetex Corp.
Senior Notes
10.875% 08/01/2009 2,645,000 2,889,662
Airgas, Inc.
Senior Subordinated Notes
9.125% 10/01/2011 4,245,000 4,765,012
</Table>
See Accompanying Notes to Financial Statements.
45
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Chemicals (continued)
Equistar Chemical LP
Senior Notes
10.125% 09/01/2008 $ 1,100,000 $ 1,199,000
10.625% 05/01/2011 675,000 742,500
Ethyl Corp.
Senior Notes
8.875% 05/01/2010 2,750,000 2,942,500
MacDermid, Inc.
Senior Subordinated Notes
9.125% 07/15/2011 2,960,000 3,307,800
Nalco Co.
Senior Notes
7.750% 11/15/2011 (a) 2,590,000 2,706,550
---------------
18,553,024
---------------
Consumer Products (3.1%)
Hasbro, Inc.
Notes
6.150% 07/15/2008 4,450,000 4,583,500
K2, Inc.
Senior Notes
7.375% 07/01/2014 (a) 1,910,000 1,956,470
Scotts Co.
Senior Subordinated Notes
6.625% 11/15/2013 5,135,000 5,186,350
---------------
11,726,320
---------------
Diversified Media (2.4%)
Lamar Media Corp.
Senior Subordinated Notes
7.250% 01/01/2013 7,260,000 7,495,950
Warner Music Group
Senior Subordinated Notes
7.375% 04/15/2014 (a) 1,940,000 1,862,400
---------------
9,358,350
---------------
Energy (13.2%)
Chesapeake Energy Corp.
8.375% 11/01/2008 125,000 136,562
9.000% 08/15/2012 3,775,000 4,312,938
Senior Notes
7.500% 09/15/2013 2,725,000 2,888,500
Grant Prideco, Inc.
Senior Notes
9.000% 12/15/2009 4,730,000 5,226,650
Grant Prideco, Inc.
Senior Notes, Series B
9.625% 12/01/2007 2,270,000 2,519,700
</Table>
See Accompanying Notes to Financial Statements.
46
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Energy (continued)
Key Energy Services, Inc.
Senior Notes, Series C
8.375% 03/01/2008 $ 1,750,000 $ 1,828,750
Offshore Logistic, Inc.
Senior Notes
6.125% 06/15/2013 5,305,000 5,145,850
Plains E&P Co.
Senior Notes
7.125% 06/15/2014 (a) 2,775,000 2,858,250
Pogo Producing Co.
Senior Subordinated Notes, Series B
8.250% 04/15/2011 1,120,000 1,229,200
Pride International, Inc.
Senior Notes
7.375% 07/15/2014 (a) 3,280,000 3,362,000
9.375% 05/01/2007 1,215,000 1,233,225
10.000% 06/01/2009 2,125,000 2,237,625
Suburban Propane Partners
Senior Notes
6.875% 12/15/2013 2,405,000 2,392,975
Universal Compression, Inc.
Senior Notes
7.875% 05/15/2011 3,350,000 3,484,000
Vintage Petroleum, Inc.
Senior Subordinated Notes
9.750% 06/30/2009 4,125,000 4,269,375
Westport Resources Corp.
Senior Subordinated Notes
8.250% 11/01/2011 6,555,000 7,439,925
---------------
50,565,525
---------------
Entertainment/Film (1.2%)
Cinemark USA, Inc.
Senior Subordinated Notes
9.000% 02/01/2013 4,275,000 4,681,125
---------------
Environmental (2.5%)
Allied Waste North America, Inc.
Senior Notes
6.375% 04/15/2011 2,700,000 2,632,500
6.500% 11/15/2010 1,525,000 1,502,125
Allied Waste North America, Inc.
Senior Notes, Series B
7.375% 04/15/2014 3,625,000 3,489,062
Synagro Technologies, Inc.
Senior Subordinated Notes
9.500% 04/01/2009 1,760,000 1,852,400
---------------
9,476,087
---------------
</Table>
See Accompanying Notes to Financial Statements.
47
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Food/Beverage/Tobacco (3.7%)
Constellation Brands, Inc.
Senior Notes, Series B
8.000% 02/15/2008 $ 1,698,000 $ 1,855,065
Constellation Brands, Inc.
Senior Subordinated Notes, Series B
8.125% 01/15/2012 3,995,000 4,304,613
Cott Beverages, Inc.
Senior Subordinated Notes
8.000% 12/15/2011 7,275,000 7,802,437
---------------
13,962,115
---------------
Food & Drug Retail (1.0%)
Couche-Tard US
Senior Subordinated Notes
7.500% 12/15/2013 3,690,000 3,754,575
---------------
Gaming (6.8%)
Kerzner International
Senior Subordinated Notes
8.875% 08/15/2011 2,360,000 2,542,900
MGM MIRAGE, Inc.
Senior Notes
6.000% 10/01/2009 1,600,000 1,584,000
9.750% 06/01/2007 5,450,000 6,015,437
Park Place Entertainment Corp.
Senior Subordinated Notes
9.375% 02/15/2007 7,100,000 7,810,000
Station Casinos, Inc.
Senior Subordinated Notes
6.500% 02/01/2014 4,920,000 4,784,700
6.875% 03/01/2016 3,150,000 3,063,375
---------------
25,800,412
---------------
Health Care (9.7%)
AmerisourceBergen Corp.
Senior Notes
8.125% 09/01/2008 4,350,000 4,719,750
Apogent Technologies, Inc.
Senior Subordinated Notes
6.500% 05/15/2013 5,825,000 6,458,469
HCA, Inc.
Notes
6.950% 05/01/2012 3,700,000 3,896,285
Omnicare, Inc.
Senior Subordinated Notes, Series B
8.125% 03/15/2011 5,750,000 6,152,500
</Table>
See Accompanying Notes to Financial Statements.
48
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Health Care (continued)
Province Healthcare Co.
Senior Subordinated Notes
7.500% 06/01/2013 $ 3,400,000 $ 3,306,500
Select Medical Corp.
Senior Subordinated Notes
7.500% 08/01/2013 1,775,000 1,766,125
9.500% 06/15/2009 3,625,000 3,896,875
Triad Hospitals, Inc.
Senior Notes
7.000% 05/15/2012 6,800,000 6,936,000
---------------
37,132,504
---------------
Homebuilders (3.3%)
KB Home
Senior Subordinated Notes
7.750% 02/01/2010 260,000 271,700
8.625% 12/15/2008 5,250,000 5,722,500
9.500% 02/15/2011 630,000 699,300
Toll Corp.
Senior Subordinated Notes
8.250% 02/01/2011 150,000 162,000
8.250% 12/01/2011 5,485,000 5,937,513
---------------
12,793,013
---------------
Hotels (1.1%)
ITT Corp.
Notes
6.750% 11/15/2005 2,750,000 2,849,688
Starwood Hotels & Resorts Worldwide, Inc.
Senior Notes
7.375% 05/01/2007 1,305,000 1,376,775
---------------
4,226,463
---------------
Leisure (3.0%)
Royal Caribbean Cruises Ltd.
Senior Notes
6.750% 03/15/2008 1,185,000 1,229,438
6.875% 12/01/2013 1,500,000 1,513,125
8.000% 05/15/2010 610,000 661,850
8.750% 02/02/2011 4,085,000 4,595,625
Speedway Motorsports, Inc.
Senior Subordinated Notes
6.750% 06/01/2013 3,580,000 3,580,000
---------------
11,580,038
---------------
Metals & Mining (3.7%)
Arch Western Finance
Senior Notes
6.750% 07/01/2013 (a) 4,480,000 4,592,000
</Table>
See Accompanying Notes to Financial Statements.
49
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Metals & Mining (continued)
Peabody Energy Corp.
Senior Notes
6.875% 03/15/2013 $ 7,325,000 $ 7,508,125
Russel Metals, Inc.
Senior Notes
6.375% 03/01/2014 2,035,000 1,953,600
---------------
14,053,725
---------------
Non Food and Drug Retail (0.3%)
Finlay Fine Jewelry Corp.
Senior Notes
8.375% 06/01/2012 (a) 1,050,000 1,102,500
---------------
Packaging (2.8%)
Ball Corp.
Senior Notes
6.875% 12/15/2012 2,460,000 2,524,575
7.750% 08/01/2006 1,250,000 1,337,500
Owens-Brockway Glass Container
8.875% 02/15/2009 1,290,000 1,399,650
Silgan Holdings, Inc.
Senior Subordinated Notes
6.750% 11/15/2013 5,550,000 5,466,750
---------------
10,728,475
---------------
Paper & Forest Products (1.7%)
Stone Container Corp.
Senior Notes
8.250% 10/01/2012 625,000 664,062
8.375% 07/01/2012 2,665,000 2,844,887
9.750% 02/01/2011 2,810,000 3,105,050
---------------
6,613,999
---------------
Printing & Publishing (3.4%)
Dex Media East LLC
Senior Subordinated Notes
12.125% 11/15/2012 2,870,000 3,400,950
Houghton Mifflin Co.
Senior Subordinated Notes
9.875% 02/01/2013 1,990,000 2,044,725
R.H. Donnelley Financial Corp.
Senior Notes
8.875% 12/15/2010 (a) 45,000 49,050
R.H. Donnelley Financial Corp.
Senior Subordinated Notes
10.875% 12/15/2012 (a) 6,585,000 7,655,063
---------------
13,149,788
---------------
</Table>
See Accompanying Notes to Financial Statements.
50
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Real Estate Investment Trust (1.5%)
iStar Financial, Inc.
Senior Notes
5.125% 04/01/2011 (a) $ 1,475,000 $ 1,412,312
6.000% 12/15/2010 450,000 451,125
7.000% 03/15/2008 2,350,000 2,491,000
8.750% 08/15/2008 1,343,000 1,510,875
---------------
5,865,312
---------------
Restaurants (0.5%)
Yum! Brands, Inc.
Senior Notes
8.500% 04/15/2006 1,750,000 1,900,798
---------------
Services (5.5%)
Corrections Corp. of America
Senior Notes
7.500% 05/01/2011 5,475,000 5,646,094
Iron Mountain, Inc.
Senior Subordinated Notes
7.750% 01/15/2015 2,140,000 2,198,850
8.625% 04/01/2013 5,350,000 5,751,250
United Rentals, Inc.
Senior Subordinated Notes
7.000% 02/15/2014 1,200,000 1,086,000
7.750% 11/15/2013 6,480,000 6,253,200
---------------
20,935,394
---------------
Shipping (1.7%)
Teekay Shipping Corp.
Senior Notes
8.875% 07/15/2011 5,840,000 6,424,000
---------------
Specialty Retail (1.3%)
AutoNation, Inc.
Senior Notes
9.000% 08/01/2008 3,275,000 3,668,000
Group 1 Automotive
Senior Subordinated Notes
8.250% 08/15/2013 1,375,000 1,423,125
---------------
5,091,125
---------------
Technology (1.0%)
Freescale Semiconductor, Inc.
Senior Notes
6.875% 07/15/2011 (a) 3,720,000 3,747,900
---------------
</Table>
See Accompanying Notes to Financial Statements.
51
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------------- ---------------
Corporate Notes & Bonds (continued)
Telecommunications (2.0%)
Nextel Communications, Inc.
Senior Notes
9.375% 11/15/2009 $ 2,050,000 $ 2,188,375
9.500% 02/01/2011 1,300,000 1,456,000
Nextel Communications, Inc.
Serial Redeemable Note
7.375% 08/01/2015 3,950,000 4,137,625
---------------
7,782,000
---------------
Total Corporate Notes & Bonds
(Cost of $361,043,965) 367,978,377
---------------
Short-Term Obligation (3.3%)
Repurchase agreement with State Street Bank &
Trust Co., dated 07/30/2004, due 08/02/2004 at 1.230%,
collateralized by a U.S. Treasury Bond
maturing 02/15/2012, market value of $12,865,827
(repurchase proceeds $12,611,293)
(Cost of $12,610,000) 12,610,000 12,610,000
---------------
Total Investments (99.6%)
(Cost of $373,653,965) (b) 380,588,377
Other Assets & Liabilities, Net (0.4%) 1,568,973
---------------
Net Assets (100.0%) $ 382,157,350
===============
</Table>
Notes to Schedule of Investments:
(a) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
July 31, 2004, these securities amounted to $31,304,495, which represents
8.2% of net assets.
(b) Cost for federal income tax purposes is $375,102,828.
See Accompanying Notes to Financial Statements.
52
<Page>
CMG CORE BOND FUND
CMG SHORT TERM BOND FUND
CMG ULTRA SHORT TERM BOND FUND
CMG HIGH YIELD FUND
Portfolios of CMG Fund Trust
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 2004
<Table>
<Caption>
CMG CMG CMG CMG
CORE BOND SHORT TERM ULTRA SHORT TERM HIGH YIELD
FUND BOND FUND BOND FUND (a) FUND
--------------- --------------- ---------------- ---------------
ASSETS:
Investments, at identified cost
(including repurchase agreement) $ 34,325,393 $ 118,605,404 $ 58,263,418 $ 373,653,965
--------------- --------------- ---------------- ---------------
Investments, at value $ 31,143,751 $ 111,588,185 $ 41,395,717 $ 367,978,377
Repurchase agreement 3,180,000 7,408,000 16,700,000 12,610,000
Cash 180 10,721 12,321,934 438
Receivable for:
Investments sold - - 996,467 -
Capital stock sold 16,080 39,480 500,000 65,612
Interest 270,237 672,105 330,243 7,001,877
Expense reimbursement due from
Investment Advisor 4,850 5,484 10,064 115
Deferred Trustees' compensation plan 502 886 - 1,107
Other assets - - 2,359 -
--------------- --------------- ---------------- ---------------
Total Assets 34,615,600 119,724,861 72,256,784 387,657,526
--------------- --------------- ---------------- ---------------
LIABILITIES:
Payable for:
Investments purchased - - 4,702,700 4,584,927
Investments purchased on a delayed
delivery basis 1,670,510 461,647 - -
Fund shares repurchased - - 199,746 298,613
Futures variation margin 4,250 - - -
Distributions 93,833 80,563 83,111 453,216
Investment advisory fee 8,300 27,930 8,999 129,093
Trustees' fees 767 1,032 1,685 -
Audit fee 27,000 27,000 25,300 27,779
Deferred Trustees' fees 502 886 - 1,107
Other liabilities 403 683 - 5,441
--------------- --------------- ---------------- ---------------
Total Liabilities 1,805,565 599,741 5,021,541 5,500,176
--------------- --------------- ---------------- ---------------
NET ASSETS $ 32,810,035 $ 119,125,120 $ 67,235,243 $ 382,157,350
=============== =============== ================ ===============
NET ASSETS consist of:
Paid-in capital $ 33,001,550 $ 122,087,606 $ 67,602,394 $ 428,427,123
Overdistributed net investment income (75,858) (426,314) (169,810) (1,401,331)
Accumulated net realized loss (101,265) (2,926,953) (29,640) (51,802,854)
Net unrealized appreciation (depreciation) on:
Investments (1,642) 390,781 (167,701) 6,934,412
Futures contracts (12,750) - - -
--------------- --------------- ---------------- ---------------
NET ASSETS $ 32,810,035 $ 119,125,120 $ 67,235,243 $ 382,157,350
=============== =============== ================ ===============
Shares of capital stock outstanding 3,168,111 9,970,093 6,805,921 47,786,016
=============== =============== ================ ===============
Net asset value, offering and redemption
price per share $ 10.36 $ 11.95 $ 9.88 $ 8.00
=============== =============== ================ ===============
</Table>
(a) The Fund commenced investment operations on March 8, 2004.
See Accompanying Notes to Financial Statements.
53
<Page>
CMG CORE BOND FUND
CMG SHORT TERM BOND FUND
CMG ULTRA SHORT TERM BOND FUND
CMG HIGH YIELD FUND
Portfolios of CMG Fund Trust
STATEMENTS OF OPERATIONS
For the Year Ended July 31, 2004
<Table>
<Caption>
CMG CMG CMG CMG
CORE BOND SHORT TERM ULTRA SHORT TERM HIGH YIELD
FUND BOND FUND BOND FUND (a) FUND
--------------- --------------- ---------------- ---------------
NET INVESTMENT INCOME:
Income:
Interest $ 1,624,014 $ 3,925,138 $ 237,321 $ 30,358,398
Foreign withholding tax - - - (4,533)
--------------- --------------- ---------------- ---------------
Total income 1,624,014 3,925,138 237,321 30,353,865
--------------- --------------- ---------------- ---------------
Expenses:
Investment advisory fee 128,332 311,532 30,181 1,724,791
Transfer agent fee 3,961 4,482 - -
Trustees' fees 7,608 8,957 1,685 13,638
Custody fee 5,567 6,701 - -
Audit fee 38,989 35,989 25,300 38,618
Registration fee 49,164 51,471 - -
Reports to shareholders 12,641 9,587 - -
Non-recurring costs (See Note 8) 1,934 5,531 - 18,229
Other expenses 3,582 9,495 249 13,393
--------------- --------------- ---------------- ---------------
Total expenses 251,778 443,745 57,415 1,808,669
Expense reimbursement from
Investment Advisor (102,451) (126,222) (27,234) (65,649)
Non-recurring costs assumed by
Investment Advisor (See Note 8) (1,934) (5,531) - (18,229)
Custody earnings credit (326) (460) - -
--------------- --------------- ---------------- ---------------
Net expenses 147,067 311,532 30,181 1,724,791
--------------- --------------- ---------------- ---------------
Net investment income 1,476,947 3,613,606 207,140 28,629,074
--------------- --------------- ---------------- ---------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments 19,892 141,676 (19,498) 11,465,251
Futures contracts 38,880 - - -
--------------- --------------- ---------------- ---------------
Net realized gain (loss) 58,772 141,676 (19,498) 11,465,251
--------------- --------------- ---------------- ---------------
Net change in unrealized appreciation/
depreciation on:
Investments (44,567) (513,208) (167,701) (3,719,002)
Futures contracts 16,281 - - -
--------------- --------------- ---------------- ---------------
Net change in unrealized
appreciation/depreciation (28,286) (513,208) (167,701) (3,719,002)
--------------- --------------- ---------------- ---------------
Net gain (loss) 30,486 (371,532) (187,199) 7,746,249
--------------- --------------- ---------------- ---------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 1,507,433 $ 3,242,074 $ 19,941 $ 36,375,323
=============== =============== ================ ===============
</Table>
(a) The Fund commenced investment operations on March 8, 2004.
See Accompanying Notes to Financial Statements.
54
<Page>
CMG CORE BOND FUND
A Portfolio of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED PERIOD ENDED YEAR ENDED
JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002
--------------- ----------------- ----------------
Operations:
Net investment income $ 1,476,947 $ 804,361 $ 1,502,637
Net realized gain (loss) on investments
and futures contracts 58,772 451,945 22,974
Net change in unrealized appreciation/depreciation
on investments and futures contracts (28,286) (884,129) (441,733)
--------------- ----------------- ----------------
Net increase from operations 1,507,433 372,177 1,083,878
--------------- ----------------- ----------------
Distributions declared to shareholders:
From net investment income (1,618,453) (845,766) (1,555,680)
From net realized gains (424,522) - (361,418)
--------------- ----------------- ----------------
Total distributions declared to shareholders (2,042,975) (845,766) (1,917,098)
Share transactions:
Subscriptions 45,285,510 13,544,369 2,380,359
Distributions reinvested 1,214,069 712,005 1,909,849
Redemptions (43,666,147) (10,682,420) (4,819,536)
--------------- ----------------- ----------------
Net increase (decrease) in share transactions 2,833,432 3,573,954 (529,328)
--------------- ----------------- ----------------
Net increase (decrease) in net assets 2,297,890 3,100,365 (1,362,548)
NET ASSETS:
Beginning of period 30,512,145 27,411,780 28,774,328
--------------- ----------------- ----------------
End of period $ 32,810,035 $ 30,512,145 $ 27,411,780
=============== ================= ================
Overdistributed net investment income $ (75,858) $ (55,614) $ (41,336)
=============== ================= ================
Changes in shares:
Subscriptions 4,306,892 1,265,332 226,168
Issued for distributions reinvested 115,771 67,108 182,889
Redemptions (4,193,418) (1,000,170) (458,196)
--------------- ----------------- ----------------
Net increase (decrease) 229,245 332,270 (49,139)
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
See Accompanying Notes to Financial Statements.
55
<Page>
CMG SHORT TERM BOND FUND
A Portfolio of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED PERIOD ENDED YEAR ENDED
JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002
--------------- ----------------- ----------------
Operations:
Net investment income $ 3,613,606 $ 3,700,095 $ 6,621,939
Net realized gain (loss) on investments
and futures contracts 141,676 2,198,748 (2,162,083)
Net change in unrealized appreciation/depreciation
on investments and futures contracts (513,208) (2,821,216) 67,269
--------------- ----------------- ----------------
Net increase from operations 3,242,074 3,077,627 4,527,125
--------------- ----------------- ----------------
Distributions declared to shareholders:
From net investment income (3,965,886) (4,009,769) (7,115,313)
--------------- ----------------- ----------------
Share transactions:
Subscriptions 59,951,561 53,909,699 93,097,391
Distributions reinvested 3,016,948 3,872,033 7,003,463
Redemptions (56,312,517) (84,413,234) (46,547,089)
--------------- ----------------- ----------------
Net increase (decrease) in share transactions 6,655,992 (26,631,502) 53,553,765
--------------- ----------------- ----------------
Net increase (decrease) in net assets 5,932,180 (27,563,644) 50,965,577
NET ASSETS:
Beginning of period 113,192,940 140,756,584 89,791,007
--------------- ----------------- ----------------
End of period $ 119,125,120 $ 113,192,940 $ 140,756,584
=============== ================= ================
Overdistributed net investment income $ (426,314) $ (226,765) $ (339,254)
=============== ================= ================
Changes in shares:
Subscriptions 4,971,382 4,425,228 7,604,040
Issued for distributions reinvested 250,706 318,466 574,008
Redemptions (4,673,216) (6,910,326) (3,823,461)
--------------- ----------------- ----------------
Net increase (decrease) 548,872 (2,166,632) 4,354,587
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
See Accompanying Notes to Financial Statements.
56
<Page>
CMG ULTRA SHORT TERM BOND FUND
A Portfolio of CMG Fund Trust
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
PERIOD ENDED
JULY 31, 2004 (a)
-----------------
Operations:
Net investment income $ 207,140
Net realized gain (loss) on investments (19,498)
Net change in unrealized appreciation/depreciation on investments (167,701)
-----------------
Net increase from operations 19,941
Distributions declared to shareholders:
From net investment income (387,092)
-----------------
Share transactions:
Subscriptions 72,925,807
Distributions reinvested 110,468
Redemptions (5,433,881)
-----------------
Net increase in share transactions 67,602,394
-----------------
Net increase in net assets 67,235,243
NET ASSETS:
Beginning of period -
-----------------
End of period $ 67,235,243
=================
Overdistributed net investment income $ (169,810)
=================
Changes in shares:
Subscriptions 7,343,456
Issued for distributions reinvested 11,162
Redemptions (548,697)
-----------------
Net increase 6,805,921
</Table>
(a) The Fund commenced investment operations on March 8, 2004.
See Accompanying Notes to Financial Statements.
57
<Page>
CMG HIGH YIELD FUND
A Portfolio of CMG Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED PERIOD ENDED YEAR ENDED
JULY 31, 2004 JULY 31, 2003 (a) OCTOBER 31, 2002
--------------- ----------------- ----------------
Operations:
Net investment income $ 28,629,074 $ 19,360,784 $ 28,534,687
Net realized gain (loss) on investments 11,465,251 1,182,628 (24,532,571)
Net change in unrealized appreciation/depreciation
on investments (3,719,002) 11,692,827 (3,668,160)
--------------- ----------------- ----------------
Net increase from operations 36,375,323 32,236,239 333,956
Distributions declared to shareholders:
From net investment income (30,204,485) (19,919,406) (28,989,392)
--------------- ----------------- ----------------
Share transactions:
Subscriptions 118,229,818 274,845,721 131,994,303
Distributions reinvested 24,159,735 16,684,887 25,255,040
Redemptions (195,444,715) (161,034,205) (191,344,858)
--------------- ----------------- ----------------
Net increase (decrease) in share transactions (53,055,162) 130,496,403 (34,095,515)
--------------- ----------------- ----------------
Net increase (decrease) in net assets (46,884,324) 142,813,236 (62,750,951)
NET ASSETS:
Beginning of period 429,041,674 286,228,438 348,979,389
--------------- ----------------- ----------------
End of period $ 382,157,350 $ 429,041,674 $ 286,228,438
=============== ================= ================
Overdistributed net investment income $ (1,401,331) $ (482,515) $ (370,235)
=============== ================= ================
Changes in shares:
Subscriptions 14,671,669 34,794,784 16,446,956
Issued for distributions reinvested 2,996,559 2,111,371 3,176,244
Redemptions (24,196,101) (20,522,378) (24,583,292)
--------------- ----------------- ----------------
Net increase (decrease) (6,527,873) 16,383,777 (4,960,092)
</Table>
(a) The Fund changed its fiscal year end from October 31 to July 31.
See Accompanying Notes to Financial Statements.
58
<Page>
CMG CORE BOND FUND
CMG SHORT TERM BOND FUND
CMG ULTRA SHORT TERM BOND FUND
CMG HIGH YIELD FUND
Portfolios of CMG Fund Trust
NOTES TO FINANCIAL STATEMENTS
July 31, 2004
NOTE 1. ORGANIZATION:
CMG Fund Trust (the "Trust") is an Oregon business trust registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. Information presented in these financial statements pertains to the
following diversified funds (individually referred to as a "Fund", collectively
referred to as the "Funds"):
CMG Core Bond Fund
CMG Short Term Bond Fund
CMG Ultra Short Term Bond Fund
CMG High Yield Fund
INVESTMENT GOALS. The CMG Core Bond Fund seeks a high level of current income
consistent with capital preservation. The CMG Short Term Bond Fund seeks a high
level of current income consistent with a high degree of stability of principle.
The CMG Ultra Short Term Bond Fund seeks a high level of current income
consistent with the maintenance of liquidity and the preservation of principle.
The CMG High Yield Fund seeks a high level of current income. Capital
appreciation is a secondary objective when consistent with a high level of
current income.
FUND SHARES. Each Fund may issue 100 million shares of no par value capital
stock, which are offered continuously at net asset value.
Effective February 27, 2004, the CMG Fixed Income Securities Fund name was
changed to the CMG Core Bond Fund. The CMG Ultra Short Term Bond Fund commenced
operations on March 8, 2004.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies consistently followed by the Funds in the preparation of their
financial statements.
SECURITY VALUATION. Debt securities generally are valued by a pricing service
approved by the Trust's Board of Trustees, based upon market transactions for
normal, institutional-size trading units of similar securities. The services may
use various pricing techniques which take into account appropriate factors such
as yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other data, as well as broker quotes. Debt securities for which quotations
are readily available are valued at an over-the-counter or exchange bid
quotation. Certain debt securities, which tend to be more thinly traded and of
lesser quality, are priced based on fundamental analysis of the financial
condition of the issuer and the estimated value of any collateral. Valuations
developed through pricing techniques may vary from the actual amounts realized
upon sale of the securities, and the potential variation may be greater for
those securities valued using fundamental analysis.
59
<Page>
Short-term debt obligations maturing within 60 days are valued at amortized
cost, which approximates market value.
Investments in other investment companies are valued at net asset value.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
SECURITY TRANSACTIONS. Security transactions are accounted for on the trade
date. Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
FUTURES CONTRACTS. Each Fund may invest in municipal and U.S. Treasury futures
contracts. The Funds may invest in these instruments to hedge against the
effects of changes in the value of portfolio securities due to anticipated
changes in interest rates and/or market conditions, for duration management, or
when the transactions are economically appropriate to the reduction of risk
inherent in the management of the Funds and not for trading purposes. The use of
futures contracts involves certain risks, which include: (1) imperfect
correlation between the price movement of the instruments and the underlying
securities, (2) inability to close out positions due to differing trading hours,
or the temporary absence of a liquid market, for either the instrument or the
underlying securities, or (3) an inaccurate prediction by Columbia Management
Advisors, Inc. of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recorded in the Funds' Statement
of Assets and Liabilities at any given time.
Upon entering into a futures contract, each Fund deposits cash or securities
with the broker in an amount sufficient to meet the initial margin requirement.
Subsequent payments are made or received by the Funds equal to the daily change
in the contract value and are recorded as variation margin payable or receivable
and offset in unrealized gains or losses. Each Fund also identifies portfolio
securities as segregated with the custodian in a separate account in an amount
equal to the futures contract. The Funds recognize a realized gain or loss when
the contract is closed or expires.
REPURCHASE AGREEMENTS. Each Fund may engage in repurchase agreement transactions
with institutions that the Funds' investment advisor has determined are
creditworthy. Each Fund, through its custodian, receives delivery of underlying
securities collateralizing a repurchase agreement. Collateral is at least equal,
at all times, to the value of the repurchase obligation including interest. A
repurchase agreement transaction involves certain risks in the event of default
or insolvency of the counterparty. These risks include possible delays or
restrictions upon each Fund's ability to dispose of the underlying securities
and a possible decline in the value of the underlying securities during the
period while the Funds seek to assert their rights.
DELAYED DELIVERY SECURITIES. The Funds may trade securities on other than normal
settlement terms, including securities purchased or sold on a "when-issued"
basis. This may increase the risk if the other party to the transaction fails to
deliver and causes the Funds to subsequently invest at less advantageous prices.
The Funds identify cash or liquid portfolio securities as segregated with the
custodian in an amount equal to the delayed delivery commitment.
INCOME RECOGNITION. Interest income is recorded on the accrual basis. Premium
and discount are amortized and accreted, respectively, on all debt securities.
60
<Page>
FEDERAL INCOME TAX STATUS. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code,
as amended, and will distribute substantially all of its taxable income, if any,
for its tax year, and as such will not be subject to federal income taxes. In
addition, each Fund intends to distribute in each calendar year substantially
all of its net investment income, capital gains and certain other amounts, if
any, such that each Fund should not be subject to federal excise tax. Therefore,
no federal income or excise tax provision is recorded.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment income are declared
daily and paid monthly. Net realized capital gains, if any, are distributed at
least annually.
NOTE 3. FEDERAL TAX INFORMATION:
The timing and character of income and capital gain distributions are determined
in accordance with income tax regulations, which may differ from GAAP.
Reclassifications are made to a Fund's capital accounts for permanent tax
differences to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
For the year ended July 31, 2004, permanent differences resulting primarily from
differing treatments for amortization/accretion adjustments and distribution
reclasses were identified and reclassified among the components of the Funds'
net assets as follows:
<Table>
<Caption>
OVERDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME LOSS PAID-IN CAPITAL
--------------- ------------ ---------------
CMG Core Bond Fund $ 121,262 $ (121,262) $ -
CMG Short Term Bond Fund 152,731 (152,731) -
CMG Ultra Short Term Bond Fund 10,142 (10,142) -
CMG High Yield Fund 656,595 (656,595) -
</Table>
Net investment income and net realized gains (losses), as disclosed on the
Statement of Operations, and net assets were not affected by these
reclassifications.
61
<Page>
The tax character of distributions paid during the year ended July 31, 2004, the
period ended July 31, 2003 and the year ended October 31, 2002 was as follows:
<Table>
<Caption>
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 - -
<Caption>
JULY 31, 2003
-----------------------------------------------
TAX
ORDINARY LONG-TERM RETURN
INCOME* CAPITAL GAINS OF CAPITAL
------------ ------------- ----------
CMG Core Bond Fund $ 845,766 $ - $ -
CMG Short Term Bond Fund 4,009,769 - -
CMG High Yield Fund 19,919,406 - -
<Caption>
OCTOBER 31, 2002
-----------------------------------------------
TAX
ORDINARY LONG-TERM RETURN
INCOME* CAPITAL GAINS OF CAPITAL
------------ ------------- ----------
CMG Core Bond Fund $ 1,881,625 $ 35,473 $ -
CMG Short Term Bond Fund 7,115,313 - -
CMG High Yield Fund 28,989,392 - -
</Table>
* For tax purposes short-term capital gains distributions, if any, are
considered ordinary income distributions.
62
<Page>
As of July 31, 2004, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
NET
UNDISTRIBUTED UNDISTRIBUTED UNREALIZED
ORDINARY LONG-TERM APPRECIATION
INCOME CAPITAL GAINS (DEPRECIATION)*
------------- ------------- ---------------
CMG Core Bond Fund $ 93,984 $ - $ (123,067)
CMG Short Term Bond Fund 111,556 - (70,522)
CMG Ultra Short Term Bond Fund 83,111 - (337,511)
CMG High Yield Fund 454,455 - $ 5,485,549
</Table>
* The differences between book-basis and tax-basis net unrealized
appreciation/depreciation are primarily due to deferral of losses from wash
sales and amortization/accretion adjustments.
Unrealized appreciation and depreciation at July 31, 2004, based on cost of
investments for federal income tax purposes, was:
<Table>
<Caption>
NET
UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
------------- ------------- ---------------
CMG Core Bond Fund $ 289,808 $ (412,875) $ (123,067)
CMG Short Term Bond Fund 718,412 (788,934) (70,522)
CMG Ultra Short Term Bond Fund 10,850 (348,361) (337,511)
CMG High Yield Fund 9,101,565 (3,616,016) 5,485,549
</Table>
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:
<Table>
<Caption>
YEAR OF EXPIRATION
---------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 TOTAL
------------ ------------ ------------ ------------ ------------ ------------
CMG Short Term Bond Fund $ 537,548 $ - $ 2,365,257 $ - $ 19,156 $ 2,921,961
CMG Ultra Short Term Bond Fund - - - - 29,640 29,640
CMG High Yield Fund 2,316,195 24,244,763 25,194,365 - - 51,755,323
</Table>
Capital loss carryforwards of $10,079,147 were utilized and $684,212 expired
during the year ended July 31, 2004 for the CMG High Yield Fund. Any capital
loss carryforwards acquired as part of a merger that are permanently lost due to
provisions under Internal Revenue Code are included as being expired. Expired
capital loss carryforwards are recorded as a reduction of paid-in capital.
Under current tax rules, certain capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
As of July 31, 2004, post-October capital losses of $66,169 attributed to
security transactions were deferred to August 1, 2004 for the CMG Core Bond
Fund.
63
<Page>
NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES:
Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the
Funds. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary
of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004,
FleetBoston, including the Funds' investment advisor and transfer agent, was
acquired by Bank of America Corporation ("BOA"). The acquisition did not change
the way the Funds are managed, the investment personnel assigned to manage the
Funds or the fees paid by the Funds.
INVESTMENT ADVISORY FEE. Each Fund's investment advisory fee is a unified fee.
Columbia, out of the unified fee it receives from the Funds, pays all accounting
fees, legal fees, transfer agent fees, custody fees and miscellaneous expenses
of the Funds. The unified fee does not include brokerage fees, taxes, Trustees'
fees, Trustee legal counsel fees, audit fees, interest expenses associated with
any borrowings by the Funds or extraordinary expenses, if any. The unified fees
are paid monthly to Columbia at the following annual rates based on average
daily net assets:
<Table>
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%
</Table>
Effective February 27, 2004, the investment advisory fee for the CMG Core Bond
Fund and the CMG Short Term Bond Fund became a unified fee. Prior to this date,
Columbia received a monthly investment advisory fee based on each Fund's average
daily net assets at the following annual rates:
<Table>
CMG Core Bond Fund 0.35%
CMG Short Term Bond Fund 0.25%
</Table>
PRICING & BOOKKEEPING FEES. Columbia is responsible for providing pricing and
bookkeeping services to each Fund under a pricing, bookkeeping and fund
administration agreement. Under a separate agreement (the "Outsourcing
Agreement"), Columbia has delegated certain of those functions to State Street
Corporation ("State Street"). As a result, Columbia pays fees to State Street
under the Outsourcing Agreement. The pricing and bookkeeping fees for the Funds
are included in the unified fee.
TRANSFER AGENT FEE. Columbia Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services to the Funds. The transfer
agent fees for the Funds are included in the unified fee.
Prior to February 27, 2004, the Transfer Agent received a fee from the CMG Core
Bond Fund and the CMG Short Term Bond Fund at the annual rate of $34.00 per open
account. Prior to November 1, 2003, the Transfer Agent was entitled to receive a
monthly transfer agent fee from the CMG Core Bond Fund and the CMG Short Term
Bond Fund based on a per account fee or a minimum of $1,500 per month.
For the year ended July 31, 2004, the effective transfer agent fee rates for the
CMG Core Bond Fund and the CMG Short Term Bond Fund were 0.010% and 0.004%,
respectively.
Effective October 13, 2003, Liberty Fund Services, Inc. was renamed Columbia
Fund Services, Inc.
64
<Page>
FEE WAIVERS. Columbia has contractually agreed to reimburse the Funds through
March 1, 2009 for certain expenses so that the expenses incurred by the Funds,
including the investment advisory fees, would not exceed the following annual
rates based on each Fund's average daily net assets:
<Table>
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%
</Table>
Prior to February 27, 2004, Columbia reimbursed the CMG Core Bond Fund so that
the expenses incurred by the Fund, including the investment advisory fees, did
not exceed 0.40% of the Fund's average daily net assets.
CUSTODY CREDITS. The CMG Core Bond Fund and CMG Short Term Bond Fund had an
agreement with their custodian bank through February 26, 2004, under which
custody fees may be reduced by balance credits. A Fund could have invested a
portion of the assets utilized in connection with the expense offset arrangement
in an income-producing asset if it had not entered into such an agreement.
FEES PAID TO OFFICERS AND TRUSTEES. The Funds pay no compensation to its
officers, all of whom are employees of Columbia or its affiliates.
The Funds' trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Funds' assets.
OTHER. Columbia provides certain services to the Funds related to Sarbanes-Oxley
compliance. The fees for such services are included in the unified fee.
NOTE 5. PORTFOLIO INFORMATION:
For the year ended July 31, 2004, the cost of purchases and proceeds from sales
of securities, excluding short-term obligations, were as follows:
<Table>
<Caption>
U.S. GOVERNMENT SECURITIES OTHER INVESTMENT SECURITIES
------------------------------- -------------------------------
PURCHASES SALES PURCHASES SALES
-------------- -------------- -------------- --------------
CMG Core Bond Fund $ 63,561,312 $ 64,787,209 $ 26,893,465 $ 22,683,056
CMG Short Term Bond Fund 28,371,167 34,005,914 71,422,910 52,243,901
CMG Ultra Short Term Bond Fund 12,327,771 2,077,239 31,066,874 1,259,889
CMG High Yield Fund - - 187,970,209 226,809,088
</Table>
NOTE 6. LINE OF CREDIT:
Effective July 23, 2004, the Funds and other affiliated funds began
participating in a $350,000,000 credit facility, which is used for temporary or
emergency purposes to facilitate portfolio liquidity. Interest is charged to
each Fund based on its borrowings. In addition, each Fund has agreed to pay
commitment fees on its pro-rata portion of the unutilized line of credit. The
commitment fee is included in "Other expenses" on the Statement of Operations.
65
<Page>
Prior to July 23, 2004, the Funds participated in a $100,000,000 uncommitted
line of credit along with the Columbia Funds, an affiliated group of funds
managed by the investment advisor. The uncommitted line of credit, which was
scheduled to expire on July 2, 2004, was extended by the Trust and expired on
July 23, 2004.
For the year ended July 31, 2004, the Funds did not borrow under these
arrangements.
NOTE 7. SHARES OF BENEFICIAL INTEREST:
As of July 31, 2004, the Funds had shareholders that held greater than 5% of the
shares outstanding. Subscription and redemption activity of these shareholders
may have a material effect on the Funds. The numbers of shareholders greater
than 5% and the aggregate percentage of shares outstanding held were as follows:
<Table>
<Caption>
NUMBER OF % OF SHARES
SHAREHOLDERS OUTSTANDING HELD
------------ ----------------
CMG Core Bond Fund 3 88.5%
CMG Short Term Bond Fund 5 65.2%
CMG Ultra Short Term Bond Fund 2 94.9%
CMG High Yield Fund 5 54.5%
</Table>
NOTE 8. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES:
HIGH-YIELD SECURITIES. Investing in high-yield securities may involve greater
credit risk and considerations not typically associated with investing in U.S.
Government bonds and other higher quality fixed income securities. These
securities are non-investment grade securities, often referred to as "junk
bonds." Economic downturns may disrupt the high yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates would likely have an adverse impact on the value of such
obligations. Moreover, high-yield securities may be less liquid due to the
extent that there is no established retail secondary market and because of a
decline in the value of such securities.
INDUSTRY FOCUS. The Funds may focus their investments in certain industries,
subjecting them to greater risk than a fund that is more diversified.
LEGAL PROCEEDINGS. Columbia, Columbia Funds Distributor, Inc. ("CFDI"), and
certain of their affiliates (collectively, "The Columbia Group") have received
information requests and subpoenas from various regulatory and law enforcement
authorities in connection with their investigations of late trading and market
timing in mutual funds, as well as other industry wide issues. The Columbia
Group has not uncovered any instances where Columbia or CFDI were knowingly
involved in late trading of mutual fund shares.
On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a
civil complaint in the United States District Court for the District of
Massachusetts against Columbia and CFDI, alleging that they had violated certain
provisions of the federal securities laws in connection with trading activity in
mutual fund shares. Also on February 24, 2004, the New York Attorney General
("NYAG") filed a civil complaint in New York Supreme Court, County of New York
against Columbia and CFDI alleging that Columbia and CFDI had violated certain
New York anti-fraud statutes. If either Columbia or CFDI is unsuccessful in its
defense of these proceedings, it could be barred from serving as an investment
advisor or distributor for any investment company registered under the
Investment
66
<Page>
Company Act of 1940, as amended (a "registered investment company"). Such
results could prevent Columbia, CFDI or any company that is an affiliated person
of Columbia and CFDI from serving as an investment advisor or distributor for
any registered investment company, including your fund. Your fund has been
informed by Columbia that, if these results occur, it will seek exemptive relief
from the SEC to permit it to continue to serve as your fund's investment
advisor. There is no assurance that such exemptive relief will be granted. On
March 15, 2004, Columbia and CFDI entered into agreements in principle with the
SEC Division of Enforcement and NYAG in settlement of the charges. Under the
agreements, Columbia and CFDI agreed, among other things, to the following
conditions: payment of $70 million in disgorgement; payment of $70 million in
civil penalties; an order requiring Columbia and CFDI to cease and desist from
violations of the antifraud provisions and other provisions of the federal
securities laws; governance changes designed to maintain the independence of the
mutual fund boards of trustees and ensure compliance with securities laws and
their fiduciary duties; and retention of an independent consultant to review
Columbia's and CFDI's compliance policies and procedures. The agreement requires
the final approval of the SEC. In a separate agreement with the NYAG, the
Columbia Group and its affiliate Banc of America Capital Management, LLC have
agreed to collectively reduce mutual fund fees by $160 million over a five-year
period.
As a result of these matters or any adverse publicity or other developments
resulting from them, there may be increased redemptions or reduced sales of fund
shares, which could increase transaction costs or operating expenses, or have
other adverse consequences for the funds.
In connection with the events described in detail above, various parties have
filed suit against certain funds, their Boards and/or FleetBoston (and
affiliated entities). More than 300 cases (including those filed against
entities unaffiliated with the funds, their Boards and/or FleetBoston and its
affiliated entities) have been consolidated in a multi-district proceeding and
transferred to the Federal District Court in Maryland. Recently, certain
Columbia funds and affiliated entities have been named as defendants in several
derivative actions under various sections of the Investment Company Act of 1940,
as amended, alleging, among other things, that the fees and expenses paid by
those funds are excessive. The funds and the other defendants to these actions,
including Columbia and various affiliates, certain other mutual funds advised by
Columbia and its affiliates, and various directors of such funds, have denied
these allegations and are contesting the plaintiffs' claims. These suits and
certain regulatory investigations are ongoing, however, based on currently
available information, Columbia believes that these lawsuits are without merit,
that the likelihood they will have a material adverse impact on any fund is
remote, and that the lawsuits are not likely to materially affect its ability to
provide investment management services to its clients, including the funds.
For the year ended July 31, 2004, Columbia has assumed legal, consulting
services and Trustees' fees incurred by the Funds in connection with these
matters as follows:
<Table>
CMG Core Bond Fund $ 1,934
CMG Short Term Bond Fund 5,531
CMG Ultra Short Term Bond Fund -
CMG High Yield Fund 18,229
</Table>
67
<Page>
Report of Independent Registered Public Accounting Firm
TO THE TRUSTEES OF THE CMG FUND TRUST AND THE SHAREHOLDERS OF CMG CORE BOND
FUND, CMG SHORT TERM BOND FUND, CMG ULTRA SHORT TERM BOND FUND AND CMG HIGH
YIELD FUND
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CMG Core Bond Fund, (formerly CMG
Fixed Income Securities Fund), CMG Short Term Bond Fund, CMG Ultra Short Term
Bond Fund and CMG High Yield Fund (the "Funds") (each a series of CMG Fund
Trust), at July 31, 2004, and the results of their operations, the changes in
their net assets, and their financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 2004
68
<Page>
Unaudited Information
For the fiscal year ended July 31, 2004, the CMG Core Bond Fund designates
long-term capital gains of $48,252.
69
<Page>
Trustees
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and Officers of the CMG Fund Trust, the year each was first
elected or appointed to office, their principal business occupations during at
least the last five years, the number of portfolios in the fund complex overseen
by the Trustee, and other directorships they hold are shown below. Each Officer
listed below serves as an Officer of the CMG Fund Trust. Each Officer listed
below held such office for the period ended July 31, 2004. The Statement of
Additional Information (SAI) contains additional information about the Trustees
and is available without charge upon request by calling the fund's distributor
at 800-345-6611.
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------ -------------------------------------------------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker (age 48) Executive Vice President-Strategy of United Airlines (airline) since
P.O. Box 66100 December 2002 (formerly President of UAL Loyalty Services (airline)
Chicago, IL 60666 from September 2001 to December 2002; Executive Vice President
Trustee (since 2003) and Chief Financial Officer of United Airlines from July 1999 to
September 2001; Senior Vice President-Finance of United Airlines from
March 1993 to July 1999). Oversees 118, Orbitz, Inc. (on-line travel
company)
Janet Langford Kelly (age 46) Adjunct Professor of Law, Northwestern University since September 2004;
9534 W. Gull Lake Drive Private Investor since March 2004 (formerly Chief Administrative Officer
Richland, MI 49083-8530 and Senior Vice President, Kmart Holding Corporation (consumer goods)
Trustee (since 2003) from September 2003 to March 2004; Executive Vice President-Corporate
Development and Administration, General Counsel and Secretary, Kellogg
Company (food manufacturer), from September 1999 to August 2003; Senior
Vice President, Secretary and General Counsel, Sara Lee Corporation
(branded, packaged, consumer-products manufacturer) from January 1995 to
September 1999). Oversees 118, None
Richard W. Lowry (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive
10701 Charleston Drive Officer, U.S. Plywood Corporation (building products manufacturer)).
Vero Beach, FL 32963 Oversees 120(3), None
Trustee (since 2003)
Charles R. Nelson (age 62) Professor of Economics, University of Washington, since January 1976;
Department of Economics Ford and Louisa Van Voorhis Professor of Political Economy, University of
University of Washington Washington, since September 1993; (formerly Director, Institute for
Seattle, WA 98195 Economic Research, University of Washington from September 2001 to June
Trustee (since 2003) 2003) Adjunct Professor of Statistics, University of Washington, since
September 1980; Associate Editor, Journal of Money Credit and Banking,
since September 1993; consultant on econometric and statistical matters.
Oversees 118, None
John J. Neuhauser (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston
84 College Road College (formerly Dean, Boston College School of Management from
Chestnut Hill, MA 02467-3838 September 1977 to September 1999). Oversees 121(3),(4), Saucony, Inc.
Trustee (since 2003) (athletic footwear and apparel)
Patrick J. Simpson (age 59) Partner, Perkins Coie L.L.P. (law firm) Oversees 118, None
1120 N.W. Couch Street
Tenth Floor
Portland, OR 97209-4128
Trustee (since 2000)
</Table>
70
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN
NAME, ADDRESS AND AGE, POSITION WITH FUNDS, YEAR FIRST COLUMBIA FUNDS COMPLEX OVERSEEN BY TRUSTEE,
ELECTED OR APPOINTED TO OFFICE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------ -------------------------------------------------------------------------
DISINTERESTED TRUSTEES
Thomas E. Stitzel (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975
2208 Tawny Woods Place to 1999, College of Business, Boise State University); Chartered
Boise, ID 83706 Financial Analyst. Oversees 118, None
Trustee (since 2003)
Thomas C. Theobald (age 67) Managing Director, William Blair Capital Partners (private equity
227 West Monroe Street, investing) since September 1994. Oversees 118, Anixter International
Suite 3500 (network support equipment distributor), Jones Lang LaSalle (real estate
Chicago, IL 60606 management services) and Ventas, Inc (real estate investment trust) and
Trustee and Chairman of the Board(5) (since 2003) MONY Group (life insurance)
Anne-Lee Verville (age 59) Retired since 1997 (formerly General Manager, Global Education Industry,
359 Stickney Hill Road IBM Corporation (computer and technology) from 1994 to 1997). Oversees
Hopkinton, NH 03229 119(4), Chairman of the Board of Directors, Enesco Group, Inc. (designer,
Trustee (since 2003) importer and distributor of giftware and collectibles)
Richard L. Woolworth (age 63) Retired since December 2003 (formerly Chairman and Chief Executive
100 S.W. Market Street #1500 Officer, The Regence Group (regional health insurer); Chairman and Chief
Portland, OR 97207 Executive Officer, BlueCross BlueShield of Oregon; Certified Public
Trustee (since 1992) Accountant, Arthur Young & Company. Oversees 118, Northwest Natural Gas
Co. (natural gas service provider)
INTERESTED TRUSTEES
William E. Mayer(2) (age 64) Managing Partner, Park Avenue Equity Partners (private equity) since
399 Park Avenue February 1999 (formerly Founding Partner, Development Capital LLC from
Suite 3204 November 1996 to February 1999). Oversees 120(3), Lee Enterprises (print
New York, NY 10022 media), WR Hambrecht + Co. (financial service provider), First Health
Trustee (since 2003) (healthcare), Reader's Digest (publishing) and OPENFIELD Solutions
(retail industry technology provider)
</Table>
- ----------
(1) In December 2000, the boards of each of the former Liberty Funds and
former Stein Roe Funds were combined into one board of trustees
responsible for the oversight of both fund groups (collectively, the
"Liberty Board"). In October 2003, the trustees on the Liberty Board were
elected to the boards of the Columbia Funds (the "Columbia Board") and of
the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that
election, Patrick J. Simpson and Richard L. Woolworth, who had been
directors on the Columbia Board and trustees on the CMG Funds Board, were
appointed to serve as trustees of the Liberty Board. The date shown is the
earliest date on which a trustee/director was elected or appointed to the
board of a Fund in the Columbia Funds complex. Each Trustee serves for an
indefinite term in accordance with the current Bylaws of the Trust until
the date a Trustee resigns, retires or is removed in accordance with the
Bylaws of the Trust.
(2) Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co.
(3) Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee
of the Liberty All-Star Funds, currently consisting of 2 funds, which are
advised by an affiliate of the Advisor.
(4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by
the Advisor.
(5) Mr. Theobald was appointed as Chairman of the Board effective December 10,
2003.
71
<Page>
Officers
<Table>
<Caption>
NAME, ADDRESS AND AGE, POSITION WITH
COLUMBIA FUNDS, YEAR FIRST ELECTED OR
APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------------------------------ -------------------------------------------------------------------------
Vicki L. Benjamin (Age 43) Chief Accounting Officer of the Columbia Funds and Liberty All-Star Funds
One Financial Center since June 2001; Assistant Treasurer of Columbia Acorn and Wanger Funds
Boston, MA 02111 since June 2004 (formerly Controller of the Columbia Funds and of the
Chief Accounting Officer Liberty All-Star Funds from May 2002 to May 2004); Controller and Chief
Accounting Officer of the Galaxy Funds since September 2002 (formerly
Vice President, Corporate Audit, State Street Bank and Trust Company from
May 1998 to April 2001).
Michael Clarke (Age 34) Controller of the Columbia Funds and of the Liberty All-Star Funds since
One Financial Center 2004; Assistant Treasurer of Columbia Acorn and Wanger Funds since June
Boston, MA 02111 2004 (formerly Assistant Treasurer of the Columbia Funds and of the
Controller (since 2004) Liberty All-Star Funds from June 2002 to May 2004; Vice President,
Product Strategy & Development of Liberty Funds Group from February 2001
to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty
All-Star Funds from August 1999 to February 2001; Audit Manager at
Deloitte & Touche LLP from May 1997 to August 1999).
J. Kevin Connaughton (Age 40) President of the Columbia Funds since February 27, 2004; Treasurer of the
One Financial Center Columbia Funds and of the Liberty All-Star Funds since December 2000;
Boston, MA 02111 Vice President of the Advisor since April 2003 (formerly Chief Accounting
Treasurer (since 2000) and Officer and Controller of the Liberty Funds and Liberty All-Star Funds
President (since 2004) from February 1998 to October 2000); Treasurer of the Galaxy Funds since
September 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund,
LLC since December 2002 (formerly Vice President of Colonial from
February 1998 to October 2000).
David A. Rozenson (Age 50) Secretary of the Columbia Funds and of the Liberty All-Star Funds since
One Financial Center December 2003; Senior Counsel, Bank of America Corporation (formerly
Boston, MA 02111 FleetBoston Financial Corporation) since January 1996; Associate General
Secretary (since 2003) Counsel, Columbia Management Group since November 2002.
</Table>
72
<Page>
CMG FUND TRUST
1300 S.W. SIXTH AVENUE, PORTLAND, OREGON 97201
- TRUSTEES -
DOUGLAS A. HACKER
JANET LANGFORD KELLY
RICHARD W. LOWRY
WILLIAM E. MAYER
CHARLES R. NELSON
JOHN J. NEUHAUSER
PATRICK J. SIMPSON
THOMAS E. STITZEL
THOMAS C. THEOBALD
ANNE-LEE VERVILLE
RICHARD L. WOOLWORTH
- INVESTMENT ADVISOR -
COLUMBIA MANAGEMENT ADVISORS, INC.
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
- LEGAL COUNSEL -
ROPES & GRAY LLC
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2624
- TRANSFER AGENT -
COLUMBIA FUNDS SERVICES, INC.
P.O. BOX 8081
BOSTON, MASSACHUSETTS 02266-8081
CMC-02/526S-0804 (09/04) 2575
A description of the policies and procedures that the fund uses to determine how
to vote proxies relating to its portfolio securities is available (i) at
www.columbiamanagement.com and (ii) on the Securities and Exchange Commission's
website at http://www.sec.gov.
THE CMG FUNDS ARE OFFERED BY PROSPECTUS THROUGH COLUMBIA FINANCIAL CENTER,
INCORPORATED. PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES OF A MUTUAL FUND CAREFULLY BEFORE INVESTING. CONTACT YOUR COLUMBIA
MANAGEMENT REPRESENTATIVE OR VISIT www.columbiamanagement.com FOR A PROSPECTUS,
WHICH CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND. READ IT
CAREFULLY BEFORE YOU INVEST.
Fund distributed by Columbia Financial Center, Incorporated, 1301 SW Fifth
Avenue, Portland, Oregon 97201
<Page>
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this report,
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.
(b) During the period covered by this report, there were not any amendments
to a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers or
implicit waivers to a provision of the code of ethics adopted in 2(a)
above.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas
E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members
of the registrant's Board of Trustees and Audit Committee, each qualify as an
audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr.
Woolworth are each independent trustees, as defined in paragraph (a)(2) of this
item's instructions and collectively constitute the entire Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fee information below is disclosed in aggregate for the series of the registrant
whose reports to stockholders are included in this annual filing.
(a) Aggregate Audit Fees billed by the principal accountant for professional
services rendered during the fiscal years ended July 31, 2004 and July 31, 2003
are approximately as follows:
<Table>
<Caption>
2004 2003
$ 357,600 $ 211,900
</Table>
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.
<Page>
Audit fees during the fiscal year ended July 31, 2004 include the audit of 15
series of the registrant. Audit fees during the fiscal year ended July 31, 2003
include the audit of 12 series of the registrant, five of which had commenced
operations on May 5, 2003.
(b) Aggregate Audit-Related Fees billed by the principal accountant for
professional services rendered during the fiscal years ended July 31, 2004 and
July 31, 2003 are approximately as follows:
<Table>
<Caption>
2004 2003
$ 49,000 $ 24,500
</Table>
Audit-Related Fees include amounts for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported in Audit Fees
above. In both fiscal years 2004 and 2003, Audit-Related Fees include certain
agreed-upon procedures performed for semi-annual shareholder reports. Fiscal
year 2004 represents 14 series of the registrant, while fiscal year 2003
includes seven series of the registrant.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. For the registrant, the
percentage of Audit-Related services that were approved under the "de minimis"
exception during the fiscal years ended July 31, 2004 and July 31, 2003 was
zero.
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal years
ended July 31, 2004 and July 31, 2003, there were no Audit-Related Fees that
were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
The percentage of Audit-Related fees required to be approved under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de
minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003
was zero.
(c) Aggregate Tax Fees billed by the principal accountant for professional
services rendered during the fiscal years ended July 31, 2004 and July 31, 2003
are approximately as follows:
<Table>
<Caption>
2004 2003
$ 43,500 $ 10,300
</Table>
Tax Fees include amounts for professional services by the principal accountant
for tax compliance, tax advice and tax planning. Tax Fees in both fiscal years
2004 and 2003
<Page>
primarily consist of the review of annual tax returns (12 series in fiscal year
2004 and seven series in fiscal year 2003), while fiscal year 2004 also includes
the review of calculations of required shareholder distributions for seven
series, tax research and consultation and assistance with foreign tax filings.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. For the registrant, the
percentage of Tax Fees that were approved under the "de minimis" exception
during the fiscal years ended July 31, 2004 and July 31, 2003 was zero.
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal years
ended July 31, 2004 and July 31, 2003, there were no Tax Fees that were approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
The percentage of Tax fees required to be approved under paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception
during the fiscal years ended July 31, 2004 and July 31, 2003 was zero.
(d) Aggregate All Other Fees billed by the principal accountant for professional
services rendered during the fiscal years ended July 31, 2004 and July 31, 2003
are as follows:
<Table>
<Caption>
2004 2003
$ 0 $ 0
</Table>
All Other Fees include amounts for products and services provided by the
principal accountant, other than the services reported in (a)-(c) above.
The "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X became effective on May 6, 2003. For the registrant, the
percentage of All Other Fees that were approved under the "de minimis" exception
during the fiscal years ended July 31, 2004 and July 31, 2003 was zero.
The pre-approval requirements for services to the investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser) and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant under paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X became effective on May 6, 2003. During the fiscal year
ended July 31, 2004, All Other Fees that were approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $95,000. During the
fiscal year ended July 31, 2003, All Other Fees that would have been subject to
pre-approval had paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X been
applicable at the time the services were provided, were approximately $95,000.
For
<Page>
both fiscal years, All Other Fees relate to internal controls reviews of the
registrant's transfer agent.
The percentage of All Other Fees required to be approved under paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de
minimis" exception during the fiscal years ended July 31, 2004 and July 31, 2003
was zero.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL OVERVIEW
The Audit Committee of the registrant has adopted a formal policy (the "Policy")
which sets forth the procedures and the conditions pursuant to which the Audit
Committee will pre-approve (i) all audit and non-audit (including audit related,
tax and all other) services provided by the registrant's independent auditor to
the registrant and individual funds (collectively "Fund Services"), and (ii) all
non-audit services provided by the registrant's independent auditor to the
funds' adviser or a control affiliate of the adviser, that relate directly to
the funds' operations and financial reporting (collectively "Fund-related
Adviser Services"). A "control affiliate" is an entity controlling, controlled
by, or under common control with the adviser that provides ongoing services to
the funds, and the term "adviser" is deemed to exclude any unaffiliated
sub-adviser whose role is primarily portfolio management and is sub-contracted
or overseen by another investment adviser. The adviser and control affiliates
are collectively referred to as "Adviser Entities."
The Audit Committee uses a combination of specific (on a case-by-case basis as
potential services are contemplated) and general (pre-determined list of
permitted services) pre-approvals. Unless a type of service has received general
pre-approval, it will require specific pre-approval by the Audit Committee if it
is to be provided by the independent auditor.
The Policy does not delegate the Audit Committee's responsibilities to
pre-approve services performed by the independent auditor to management.
II. GENERAL PROCEDURES
On an annual basis, the Fund Treasurer and/or Director of Trustee Administration
shall submit to the Audit Committee a schedule of the types of Fund Services and
Fund-related Adviser Services that are subject to general pre-approval.
These schedules will provide a description of each type of service that is
subject to general pre-approval and, where possible, will provide estimated fees
for each instance of providing each service. This general pre-approval and
related fees (where provided) will generally cover a one-year period (for
example, from July 1 through July 31 of the following year). The Audit Committee
will review and approve the types of services and review the projected fees for
the next one-year period and may add to, or subtract from, the list of general
pre-approved services from time to time, based on subsequent
<Page>
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
<Page>
pre-determined threshold established by the Audit Committee; the independent
auditor, Fund Treasurer and/or Director of Trustee Administration will notify
the Audit Committee not later than its next meeting. Such notification shall
include a general description of the services provided, the entity that is to be
the recipient of such services, the timing of the engagement, the entity's
reasons for selecting the independent auditor, and the projected fees. Such
information will allow the Audit Committee to consider whether non-audit
services provided to the adviser and Adviser Entities, which were not subject to
Audit Committee pre-approval, are compatible with maintaining the auditor's
independence with respect to the Funds.
IV. REPORTING TO THE AUDIT COMMITTEE
The Fund Treasurer or Director of Trustee Administration shall report to the
Audit Committee at each of its regular meetings regarding all Fund Services or
Fund-related Adviser Services initiated since the last such report was rendered,
including:
- A general description of the services, and
- Actual billed and projected fees, and
- The means by which such Fund Services or Fund-related Adviser Services
were pre-approved by the Audit Committee.
In addition, the independent auditor shall report to the Audit Committee
annually, and no more than 90 days prior to the filing of audit reports with the
SEC, all non-audit services provided to entities in the funds' "investment
company complex," as defined by SEC rules, that did not require pre-approval
under the Policy.
V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE
The Policy may be amended from time to time by the Audit Committee. Prompt
notice of any amendments will be provided to the independent auditor, Fund
Treasurer and Director of Trustee Administration. The Policy shall be reviewed
and approved at least annually by the Audit Committee.
*****
(e)(2) This information has been included in items (b)-(d) above.
(f) Not applicable.
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the registrant for the fiscal years ended July 31, 2004 and July 31,
2003 are disclosed in (b)-(d) above.
All non-audit fees billed by the registrant's accountant for services rendered
to the registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen by
another investment
<Page>
adviser) and any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant for the fiscal
years ended July 31, 2004 and July 31, 2003 are also disclosed in (b)-(d) above.
Such fees were approximately $95,000 and $95,000, respectively.
(h) The registrant's Audit Committee of the Board of Directors has considered
whether the provision of non-audit services that were rendered to the
registrant's adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X, is compatible with maintaining the principal accountant's
independence. The Audit Committee determined that the provision of such services
is compatible with maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
The registrant's "Schedule I - Investments in securities of unaffiliated
issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form
N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not filed Schedule 14A subsequent to the effective date of
that Schedule's Item 7(d)(2)(ii)(G). However, it is the registrant's policy to
consider candidates for the Board of Trustees/Directors who are recommended by
shareholders. A Fund shareholder who wishes to nominate a candidate to the Board
may send information regarding prospective candidates to the Fund's Governance
Committee, care of the Fund's Secretary. The information should include evidence
of the shareholder's Fund ownership, a full listing of the proposed candidate's
education, experience, current employment, date of birth, names and addresses of
at least three professional references, information as to whether the candidate
is not an "interested person" under the 1940 Act
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and "independent" under NYSE Listing Standards in relation to the Fund, and such
other information as may be helpful to the independent trustees/directors in
evaluating the candidate. All satisfactorily completed information packages
regarding a candidate will be forwarded to an independent trustee/director for
consideration.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer, based on his evaluation of the registrant's disclosure controls
and procedures as of a date within 90 days of the filing of this report,
has concluded that such controls and procedures are adequately designed
to ensure that information required to be disclosed by the registrant in
Form N-CSR is accumulated and communicated to the registrant's
management, including the principal executive officer and principal
financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(a)(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
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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
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By (Signature and Title) /s/ J. Kevin Connaughton
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J. Kevin Connaughton, President and Treasurer
Date September 27, 2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ J. Kevin Connaughton
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J. Kevin Connaughton, President and Treasurer
Date September 27, 2004
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