Reg. Nos. 33-30394/811-5857
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 11 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 10 [ X ]
(Check appropriate box or boxes.)
CMC Fund Trust
(Exact Name of Registrant as Specified in Charter)
1300 SW Sixth Avenue, PO Box 1350, Portland, Oregon 97207
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (503) 222-3600
John A. Kemp
1300 SW Sixth Avenue, PO Box 1350, Portland, Oregon 97207
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
-----
on _______________ pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)(1)
-----
on _______________ pursuant to paragraph (a)(1)
-----
75 days after filing pursuant to paragraph (a)(2)
-----
on _________________ pursuant to paragraph (a)(2) of Rule 485
If appropriate:
this post-effective amendment designates a new effective
----- date for a previously filed post-effective amendment.
Please forward copies of communications to:
Robert J. Moorman
Stoel Rives, L.L.P.
900 SW Fifth Avenue
Portland, Oregon 97204
An indefinite number of shares of the Trust are being registered by this
Registration Statement pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the year ended October 31, 1996 will
be filed on or before December 31, 1996.
1
<PAGE>
CMC FUND TRUST
<TABLE>
<CAPTION>
CROSS-REFERENCE SHEET
Location in
Part A - INFORMATION REQUIRED IN A PROSPECTUS Prospectus
----------
<S> <C> <C>
Item 1. Cover Page............................... Cover
Item 2. Synopsis................................. "Fund Expenses"
Item 3. Condensed Financial Information.......... "Financial Highlights"
Item 4. General Description of
Registrant......................... "Features of the Fund" and
"Description of the Fund"
Item 5. Management of the Fund................... "Management of the Fund" and
"Transfer Agent"
Item 6. Capital Stock and Other
Securities......................... "Voting Rights"; "Taxes";
"Distributions"; and Cover
Item 7. Purchase of Securities Being
Offered............................ "How Investments in the Fund
Are Made" and "Determination
of Net Asset Value"
Item 8. Redemption or Repurchase................. "Redemptions"
Item 9. Legal Proceedings........................ Not applicable
Location in
Statement of
Part B - INFORMATION REQUIRED IN A Additional
STATEMENT OF ADDITIONAL INFORMATION Information
------------
Item 10. Cover Page............................... Cover
Item 11. Table of Contents........................ "Table of Contents"
Item 12. General Information and
History............................ Not applicable
Item 13. Investment Objectives and
Policies........................... "Investment Restrictions" and
"Additional Information
Regarding Certain Investments
by the Fund." Additional
information is in Prospectus
under "Description of the
Fund."
2
<PAGE>
Item 14. Management of the Registrant............. "Management"
Item 15. Control Persons and Principal
Holders of Securities.............. "Management"
Item 16. Investment Advisory and
Other Services..................... "Investment Advisory and Other
Fees Paid to Affiliates" and
"Custodians." Additional
information is in Prospectus
under "Transfer Agent."
Item 17. Brokerage Allocation..................... "Portfolio Transactions"
Item 18. Capital Stock and Other
Securities......................... All required information is in
Prospectus under "Voting
Rights."
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered...................... "Redemptions." Additional
information is in Prospectus
under "Determination of Net
Asset Value" and "How
Investments in the Fund are
Made."
Item 20. Tax Status............................... "Taxes." Additional
information is in Prospectus
under "Taxes."
Item 21. Underwriters............................. Not applicable
Item 22. Calculation of Performance Data.......... "Yield and Performance."
Additional information is in
Prospectus under "Performance
Information."
Item 23. Financial Statements..................... "Financial Statements"
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under
the appropriate item in Part C of this registration statement.
3
<PAGE>
PART A-I
[LOGO]
Columbia
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
1300 S.W. Sixth Avenue
Portland, Oregon 97201
503-222-3600
This Prospectus provides information on CMC Fund Trust (the "Trust"),
an open-end diversified management investment company, and two of its
portfolios (the "Funds"), the CMC Small Cap Fund (the "Small Cap Fund") and
the CMC International Stock Fund (the "International Stock Fund"). The
Funds have different investment objectives.
Small Cap Fund. The Small Cap Fund's investment objective is to
achieve capital appreciation by investing principally in common stocks or
securities convertible into common stocks of companies that each have an
aggregate market valuation of less than $800 million ("small cap"). See
"Small Cap Fund -- Investment Objective and Policies." The Small Cap Fund
may, however, invest up to 35 percent of its total assets in the securities
of companies with larger capitalizations when the Trustees or the Fund's
investment adviser believes the potential for capital appreciation of such
securities is comparable to that of small cap securities. While over the
long-term small cap securities have on average outperformed the Standard
and Poor's 500 Stock Index (the "S&P 500"), which the Fund believes is
generally representative of securities of companies with larger
capitalizations, they have also been more volatile and riskier than the
market as a whole.
International Stock Fund. The International Stock Fund's investment
objective is to provide long-term capital appreciation by investing
primarily in foreign equity securities. Under normal market conditions, at
least 75 percent of the Fund's foreign equity securities will be securities
of well capitalized, seasoned companies. See "International Stock Fund --
Investment Objective and Policies." Investments in foreign securities
involve special risks, including currency risk and political risk, which
may result in significant price fluctuations. See "International Stock Fund
- -- Risk Considerations."
The Funds enable clients of Columbia Management Co. ("CMC" or
"Adviser") to invest in a diversified portfolio of small cap securities or
foreign equity securities rather than having to purchase individual
securities for their accounts.
This Prospectus concisely sets forth information about the Funds that
clients should know before investing and should be retained for future
reference. A Statement of Additional Information about the Funds dated
December 16, 1996 has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon request to the
Trust. The Statement of Additional Information is incorporated by reference
into this Prospectus.
THE FUNDS CHARGE NO SALES LOAD. SHARES OF THE FUNDS ARE SOLD AND
REDEEMED AT THEIR NET ASSET VALUE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
December 16, 1996
<PAGE>
- --------------------------------------------------------------------------------
Table Of Contents
- --------------------------------------------------------------------------------
Fund Expenses................................................................2
Financial Highlights.........................................................3
Features of the Funds........................................................4
How Investments in the Funds Are Made........................................5
Redemptions..................................................................5
Determination of Net Asset Value.............................................6
Description of the Funds.....................................................7
Small Cap Fund......................................................7
International Stock Fund............................................8
Distributions................................................................10
Performance Information......................................................10
Voting Rights................................................................11
Taxes........................................................................12
Management of the Funds......................................................13
Transfer Agent...............................................................14
Additional Information.......................................................14
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a
shareholder of each Fund will incur. The purpose of this table is to assist
you in understanding the various costs and expenses an investor in a Fund
will bear directly or indirectly. The expenses and fees set forth in the
table are for the 1996 fiscal year. "Other operating expenses" includes
custodial and transfer agent fees and audit, legal, and other business
operating expenses. See "Management of the Funds." If assets under separate
management by CMC are invested in a Fund, the shareholder will pay no fee
pursuant to its advisory contract with CMC with respect to those assets
invested in that Fund (for the period during which the assets are invested
in the Fund).
<TABLE>
<CAPTION>
Small Cap International
Fund Stock Fund
--------------- -------------------
<S> <C> <C>
Shareholder Transaction Expenses None None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management Fees .75% .75%
12b-1 Fees None None
Other Operating Expenses .03% .25%
Total Fund Operating Expenses .78% 1.00%
</TABLE>
EXAMPLE OF EXPENSES
The following example illustrates the expenses that you would pay on a
$1,000 investment over the periods shown, assuming a 5% annual rate of
return and redemption at the end of each period.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Small Cap Fund $7.96 $24.91 $43.33 $96.61
International Stock Fund $10.20 $31.84 $55.24 $122.46
</TABLE>
The above example should not be considered a representation of past or
future expenses or performance. The 5% rate of return used in the example
is required by the SEC for comparative purposes; actual expenses and
performance may be greater or less than those shown.
2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
The tables below have been audited by Coopers & Lybrand, L.L.P.,
independent accountants, as stated in their report appearing on page 42 in
the Statement of Additional Information. This information should be
reviewed in conjunction with the financial statements and notes thereto
appearing in the Statement of Additional Information. Additional
information about the performance of the Funds for fiscal 1996 is in the
Statement of Additional Information under "Financial Statements."
<TABLE>
<CAPTION>
SMALL CAP FUND
--------------
Fiscal Year Ended October 31,
-------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 (1)
------ ------ ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..... $56.00 $49.35 $56.44 $50.68 $49.53 $30.66 $40.12 $40.00
------ ------ ------ ------ ------ ------ ------ --------
Income from Investment Operations:
Net Investment Income (Loss).............. (0.08) 0.22 0.18 0.10 0.03 0.05(2) 0.08(2) 0.13(2)
Net Realized and Unrealized Gains
(Losses) on Investments ................. 16.79 10.88 1.99 15.50 2.72 20.00 (9.43) (0.01)
------ ------ ------ ------ ------ ------ ------ --------
Total from Investment Operations ......... 16.71 11.10 2.17 15.60 2.75 20.05 (9.35) 0.12
------ ------ ------ ------ ------ ------ ------ --------
Less Distributions:
Dividends (from net investment
income) ................................ (0.16) (0.17) (0.10) (0.03) (0.06) (0.11)
Dividends (in excess of net investment
income) ................................ (0.01)
Distributions (from capital gains) ....... (20.67) (4.25) (8.99) (9.74) (1.57) (1.12)
Distributions (in excess of capital
gains) ................................. (0.04) (0.09)
------ ------ ------ ------ ------ ------ ------ --------
Total Distributions .................. (20.67) (4.45) (9.26) (9.84) (1.60) (1.18) (0.11) --
------ ------ ------ ------ ------ ------ ------ --------
Net Asset Value, End of Period ........... $52.04 $56.00 $49.35 $56.44 $50.68 $49.53 $30.66 $40.12
====== ====== ====== ====== ====== ====== ====== ========
Total Return ............................. 30.30% 22.55% 3.87% 30.87% 5.54% 65.44% -23.35% 0.30%(3)
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) .............................. $522 $537 $468 $493 $411 $276 $128 $20
Ratio of Expenses to Average Net
Assets ................................. 0.78% 0.77% 0.78% 0.79% 0.80% 0.81% 0.91% 1.46%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................. (.14)% 0.43% 0.29% 0.17% 0.06% 0.12% 0.21% 1.85%
Portfolio Turnover Rate .................. 147.77% 125.8% 97.24% 64.39% 56.02% 69.65% 59.42% 34.48%
Average Commission Rate Paid on
Portfolio Transactions(4) ..............$0.0539
(1) From inception of operations on August 30, 1989. Ratios and portfolio
turnover rates are annualized.
(2) Based on average number of shares outstanding during the period.
(3) Not annualized.
(4) The average commission rate paid by the fund is computed by dividing
the total dollar amount of commissions paid during the period by the
total number of shares purchased and sold during the period for which
commissions were charged.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL STOCK FUND
------------------------
Fiscal Year Ended October 31,
-----------------------------------------------
1996 1995 1994(1)
------ ------ -------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ...................... $37.06 $39.51 $40.00
------ ------ ------
Income from Investment Operations:
Net Investment Income ..................................... 0.32 0.39 0.10
Net Realized and Unrealized Gains (Losses)
on Investments and Foreign Currency Related
Transactions ............................................ 5.86 (2.64) (0.59)
------ ------ ------
Total from Investment Operations ...................... 6.18 (2.25) (0.49)
------ ------ ------
Less Distributions:
Dividends (from net investment income) .................... (0.78) (0.19)
Dividends (in excess of net investment
income) ................................................. (0.01)
------ ------ ------
Total Distributions ................................... (0.78) (0.20) --
------ ------ ------
Net Asset Value, End of Period ............................ $42.46 $37.06 $39.51
====== ====== ======
Total Return .............................................. 16.67% -5.69% -1.23%(2)
Ratios/Supplemental Data
Net Assets, End of Period (in millions) ................... $74 $69 $84
Ratio of Expenses to Average Net Assets ................... 1.00% 0.98% 1.16%
Ratio of Net Investment Income to Average
Net Assets .............................................. .78% 0.99% 0.53%
Portfolio Turnover Rate ................................... 119.98% 158.32% 123.80%
Average Commission Rate Paid
on Portfolio Transactions (3) ........................... $0.0012
(1) From inception of operations on February 1, 1994. Ratios and portfolio
turnover rates are annualized.
(2) Not annualized.
(3) The average commission rate paid by the fund is computed by dividing
the total dollar amount of commissions paid during the period by the
total number of shares purchased and sold during the period for which
commissions were charged.
</TABLE>
- --------------------------------------------------------------------------------
FEATURES OF THE FUNDS
- --------------------------------------------------------------------------------
The Trust enables clients of CMC to invest in diversified portfolios
of either small cap securities or foreign securities rather than purchasing
such securities on an individual basis. Although there are risks that
cannot be eliminated in owning securities, management believes the Funds
offer many advantages to CMC's clients that would not normally be available
if similar securities were purchased on an individual basis. Among those
advantages are economies of scale, diversification, convenience, and, with
respect to the International Stock Fund, foreign custody. Notwithstanding
those advantages, investments by the Funds in small cap companies and
foreign securities, respectively, may be regarded as speculative. See
"Investment Objective and Policies" for each Fund.
By combining a portion of the capital of CMC clients' accounts into a
large portfolio, it is possible to offer all clients who invest in a Fund
effective access to either small capitalization or foreign company issues,
as the case may be, as well as professional investment supervision.
4
<PAGE>
Each Fund is a portfolio of the Trust, an open-end diversified
management company established as an Oregon business trust under a Restated
Declaration of Trust dated October 13, 1993 ("Declaration of Trust"). The
Trust has established one other portfolio, the CMC High Yield Fund. The
Trust is not required under its Declaration of Trust to hold annual
shareholder meetings, but special meetings may be called for purposes such
as electing or removing Trustees, changing fundamental investment policies,
or approving an investment advisory contract.
Each Fund is a "no-load fund", which means investors pay no sales load
and do not incur any additional expenses beyond those paid directly by the
Fund. See "Fund Expenses."
- --------------------------------------------------------------------------------
HOW INVESTMENTS IN THE FUNDS ARE MADE
- --------------------------------------------------------------------------------
Investments in a Fund may be made directly by an institutional client
of CMC. In addition, an independent fiduciary of a CMC client account,
after careful review of this prospectus, including Fund expenses and its
consistency with the client's written investment guidelines, may approve
the investment in a Fund and authorize CMC to invest in a Fund at its
discretion for the client's portfolio, subject to limitations imposed by
the independent fiduciary. If CMC is deemed to be a fiduciary with respect
to a shareholder of a Fund under the Employee Retirement Income Security
Act of 1974, certain conditions must be satisfied before assets may be
invested in a Fund by CMC on behalf of the shareholder. See "Investment
Advisory and Other Fees Paid to Affiliates" in the Statement of Additional
Information.
The shares of each Fund are purchased and redeemed at the net asset
value next determined after an order is received by the Fund. Net asset
value of each Fund is determined as of the close of regular trading
(normally 4:00 p.m. New York time) on each day the New York Stock Exchange
("NYSE") is open for business. See "Determination of Net Asset Value."
Orders received by a Fund are processed the day they are received.
Orders received before the close of regular trading on each day the NYSE is
open for business will be entered at the net asset value per share
calculated that day. Orders received after the close of regular trading on
each day the NYSE is open for business will be entered at the net asset
value next determined. All investments are credited to the shareholder's
account in full and fractional shares computed to the third decimal place.
Although the Funds have no policy with respect to initial or subsequent
minimum investments, purchase orders may be refused at the discretion of a
Fund.
Shares purchased are credited to the CMC client's account on the
record books of the applicable Fund, with confirmations supplied by the
Fund to the account custodian for the CMC client.
Shareholder inquiries, including requests for certificated shares, may
be made by writing to CMC or the applicable Fund at 1300 SW Sixth Avenue,
Portland, Oregon 97207 or by calling (503) 222-3600.
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
Redemptions of all or any portion of a shareholder's investment can be
made at any time. Redemptions of shares are at the net asset value next
computed after receipt of a redemption order on days when the NYSE is open
for business. See "Determination of Net Asset Value." Payment will be made
within seven days of the date of redemption except as provided by the rules
of the SEC.
5
<PAGE>
If certificates for shares of a Fund have been issued to a
shareholder, they must be returned to the Fund, properly endorsed, before
any redemption request may be processed. Redemption proceeds are normally
transmitted in the manner specified in the redemption request on the
business day following the effective date of the redemption. Although a
shareholder may redeem shares that were recently purchased by check, a Fund
may hold the redemption proceeds until payment for the purchase of such
shares has cleared, which may take up to 15 days from the date of purchase.
No interest is paid on the redemption proceeds after the redemption date
and before the proceeds are transmitted. This holding period does not apply
to the redemption of shares recently purchased by bank wire or with a
cashier's or certified check.
Each Fund reserves the right to redeem Fund shares in cash or in kind.
The Trust has elected, however, to be governed by Rule 18f-1 under the
Investment Company Act of 1940 (the "1940 Act"), pursuant to which each
Fund is obligated to redeem, during any 90-day period, shares of a
shareholder solely for cash up to the lesser of $250,000 or 1 percent of
the net asset value of the Fund. A shareholder who is redeemed in kind may
incur brokerage fees upon the sale of any securities distributed upon
redemption.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of each Fund is determined by CMC, under
procedures approved by the Trustees of the Trust, as of the close of
regular trading (normally 4 p.m. New York time) on each day the NYSE is
open for business and at other times determined by the Trustees. The net
asset value per share is computed by dividing the value of all assets of
the Fund, less its liabilities, by the number of shares outstanding.
Securities will be valued according to the market value obtained in a
consistent manner from the broadest and most representative markets. These
market quotations, depending on local convention or regulation, may be last
sale price, last bid or asked price, or the mean between last bid and asked
prices as of, in each case, the close of the applicable exchange.
Securities for which market quotations are not readily available and other
assets will be valued at fair value as determined in good faith under
procedures established by and under the general supervision of the
Trustees. These procedures may include valuing portfolio securities by
reference to other securities with comparable ratings, interest rates, and
maturities and using pricing services, in each case only when these
procedures result in prices that are believed to reflect fair market value.
Fair value for debt securities with remaining maturities of less than 60
days is based on cost adjusted for amortization of discount or premium and
accrued interest (unless the Trustees believe unusual circumstances
indicate another method of determining fair value should be considered).
Trading in securities on many foreign securities exchanges and
over-the-counter markets is normally completed at various times before the
close of business on each day on which the NYSE is open. In addition,
trading of these foreign securities may not take place on all NYSE business
days. Trading may take place in various foreign markets on Saturday or on
other days the NYSE is not open for business and on which a Fund's net
asset value is therefore not calculated. The calculation of a Fund's net
asset value may not take place contemporaneously with the determination of
the prices of the Fund's portfolio securities. Events affecting the values
of portfolio securities that occur between the time the prices are
determined and the close of the NYSE will not be reflected in a Fund's
calculation of net asset value unless the Trustees deem that the particular
event would materially affect net asset value. Assets of foreign securities
are translated from the local currency into U.S. dollars at the prevailing
exchange rates.
6
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
Small Cap Fund
Investment Objective and Policies. The investment objective of the
Small Cap Fund is to achieve capital appreciation by investing, in normal
circumstances, at least 65 percent of the value of the Fund's total assets
in common stocks or securities convertible into common stocks of "small
cap" companies. As of the date of this prospectus, a company is considered
small cap if it has an aggregate market valuation of less than $800
million. Upon notice to shareholders, the definition of small cap may
change in the future if CMC determines, based on changes in market levels
and accepted industry definitions, that a different market capitialization
is more appropriate. There is no minimum aggregate market valuation for a
company to be considered an appropriate investment for the Fund. The Fund
may, however, invest from time to time up to 35 percent of the value of the
Fund's total assets in the securities of larger, more established companies
when the Trustees or the Fund's investment adviser believes such securities
offer capital appreciation potential that is generally comparable to small
cap securities. During periods when the Fund's investment adviser
determines market conditions call for a temporary defensive posture, the
Fund may without limit retain cash or invest in high-grade fixed income
securities or money market instruments. See "Additional Information --
Temporary Investments and -- Repurchase Agreements." To the extent the
Fund's assets are invested in these types of securities or held in cash,
the Fund will not be invested in securities designed to achieve the Fund's
investment objective of capital appreciation. The Fund may also purchase
certain options and futures contracts. See "Additional Information --
Options and Financial Futures Transactions." The Fund's investment
objective may be changed by the Trustees without shareholder approval upon
30 days written notice.
The Small Cap Fund may invest in convertible debentures and
convertible preferred stock, each convertible into the common stock of
small cap companies. Convertible debentures are interest-bearing debt
securities, typically unsecured, that represent an obligation of the
corporation providing the owner with claims to the corporation's earnings
and assets before common and preferred stock owners, generally on par with
unsecured creditors. If unsecured, claims of convertible debenture owners
would be inferior to claims of secured debt holders. Convertible preferred
stocks are securities that represent an ownership interest in a corporation
providing the owner with claims to the corporation's earnings and assets
before common stock owners but after bond owners. Investments by the Small
Cap Fund in convertible debentures or convertible preferred stock would be
a substitute for an investment in the underlying common stock, primarily
either in circumstances where only the convertible security is available in
quantities necessary to satisfy the Fund's investment needs (for example,
in the case of a new issuance of convertible securities) or where, because
of financial market conditions, the conversion price of the convertible
security is comparable to the price of the underlying common stock, in
which case a preferred position with respect to the corporation's earnings
and assets may be preferable to holding common stock.
The Small Cap Fund may also invest in warrants, which are options to
buy a stated number of underlying securities at a specified price any time
during the life of the warrants. The securities underlying these warrants
will be the same types of securities that the Fund will invest in to
achieve its investment objective of capital appreciation. The purchaser of
a warrant expects the market price of the underlying security will exceed
the purchase price of the warrant plus the exercise price of the warrant,
thus resulting in a profit. If the market price never exceeds the purchase
price plus the exercise price of the warrant before the expiration date of
the warrant, the purchaser will suffer a loss equal to the purchase price
of the warrant. Securities held by the Small Cap Fund will generally be
traded in established over-the-counter markets or listed on a national or
regional securities exchange. The Small Cap Fund does not intend to
concentrate its investments in any particular industry or group of
industries, but to diversify its holdings among as many different companies
and industries as seems appropriate in
7
<PAGE>
light of the conditions prevailing at any given time. The Small Cap Fund
may also invest up to 5 percent of its total assets in equity securities of
closed-end investment companies where the investment policies of the
closed-end investment company are generally similar to those of the Fund.
To the extent the Fund makes any such investments, shareholders of the Fund
will incur, indirectly, additional investment advisory and other expenses
as indirect shareholders of the closed-end investment company.
The Small Cap Fund may invest up to one-third of its total assets in
securities issued by companies in developed foreign countries, principally
companies in Canada, Western Europe, and Asia, or in American Depository
Receipts ("ADRs") for foreign securities. For a discussion of the special
risks involved with investing in foreign securities, see "International
Stock Fund -- Risk Considerations."
Investments in small cap companies may involve greater risks, with a
corresponding effect on the Small Cap Fund's net asset value, than
investments in larger companies. For this reason, the Fund is not intended
to be a complete investment vehicle. The Fund is designed for that portion
of a portfolio that can appropriately be invested in securities with
greater risk but also greater potential for appreciation.
International Stock Fund
Investment Objective and Policies. The International Stock Fund's
investment objective is to provide long-term capital appreciation by
investing primarily in equity securities of companies based outside the
United States. This objective may be changed by the Trustees without
shareholder approval upon 30 days written notice. There is no assurance
that the Fund will achieve its investment objective.
Under normal market conditions, the International Stock Fund will
invest in equity securities (i.e., common stock and preferred stock),
including securities convertible into equity securities, of issuers located
outside the United States. Under normal market conditions, at least 75
percent of the Fund's assets invested in equity securities will be
securities of well capitalized, seasoned companies. The Fund considers a
company well capitalized if it has an aggregate market valuation over $500
million. The Fund may invest in smaller, less seasoned companies when the
Fund's investment adviser believes such companies offer attractive
opportunities consistent with the Fund's overall investment objective. An
investment in a less seasoned company may involve greater risks than an
investment in a larger, more established company. See "Additional
Information --Investments in Small and Unseasoned Companies." In addition
to investing in equity securities, the Fund may also enter into foreign
currency exchange contracts and purchase other securities to protect
against fluctuations in exchange rates. These securities are described
below and under "Additional Information."
The International Stock Fund's investment adviser intends to select
portfolio securities using what is sometimes referred to as a "top down"
approach, under which the international investment environment is first
analyzed in the following areas: economic activity and prospects for growth
in the United States and foreign countries, trends in monetary and fiscal
policy, the outlook for currency exchange rates, prospects for political
changes, investor sentiment, and market momentum. This "top down" analysis
aids in identifying the appropriate allocation of investments among various
geographic regions or countries and the various business sectors within
those regions or countries. The Fund does not intend to concentrate its
investment in any particular industries. Once the analysis is completed,
specific portfolio selections are made. Factors affecting individual
security selection include:
-- financial strength of the issuer
-- ability of management
-- dynamics of the business sector
-- earnings growth and profit margins
-- trend in sales
-- potential for new product development
-- dividend payment history and potential
-- financial ratios, including price/earnings and price/book
ratios
-- investment for the future in research and facilities
8
<PAGE>
The International Stock Fund will invest in at least three different
foreign countries and may invest in companies located anywhere in the
world. The Fund intends to invest principally in the following countries:
Austria, Belgium, Denmark, Finland, France, Germany, Italy, The
Netherlands, Norway, Spain, Sweden, Switzerland, the United Kingdom,
Australia, Hong Kong, Japan, New Zealand, Singapore, Canada, and Mexico.
Currency Management. The value of the International Stock Fund will
fluctuate as a result of changes in the exchange rates between the U.S.
dollar and the currencies in which the foreign securities or bank deposits
held by the Fund are denominated. To reduce or limit exposure to adverse
changes in currency exchange rates (referred to as "hedging"), the Fund may
enter into forward currency exchange contracts that in effect lock in a
rate of exchange during the period of the forward contract. Forward
contracts are usually entered into with currency traders, are not traded on
securities exchanges, and usually have a term of less than one year but can
be renewed. A default on a contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the market price. The Fund will only enter into
forward contracts for hedging and not for speculation. If required by the
Investment Company Act or the SEC, the Fund may "cover" its commitment
under the forward contracts by segregating cash or liquid high-grade
securities with the Fund's custodian in an amount not less than the value
of the Fund's total assets committed to the consummation of the contracts.
Under normal market conditions, no more than 25 percent of the Fund's
assets may be committed to the consummation of currency exchange contracts.
The International Stock Fund may also purchase or sell foreign
currencies on a "spot" (cash) basis or on a forward basis to lock in the
U.S. dollar value of a transaction at the exchange rate or rates then
prevailing. The Fund may use this hedging technique in an attempt to
insulate itself against possible losses and gains resulting from a change
in the relationship between the U.S. dollar and the relevant foreign
currency during the period between the date the security is purchased or
sold and the date on which payment is made or received.
Hedging against adverse changes in exchange rates will not eliminate
fluctuation in the prices of the International Stock Fund's portfolio
securities or prevent loss if the prices of those securities decline. In
addition, the use of forward contracts may limit potential gains from an
appreciation in the U.S. dollar value of a foreign currency. The
forecasting of short-term currency market movements is very difficult, and
there can be no assurance that short-term hedging strategies used by the
Fund will be successful.
Risk Considerations. Investing in foreign securities that are traded
principally in markets outside the United States may involve greater risk
than investing in domestic securities. Investing in foreign securities,
which are generally denominated in foreign currencies, and the use of
forward currency exchange contracts involve risks not typically associated
with investing in domestic securities. The value of the International Stock
Fund's portfolio will be affected by changes in currency exchange rates and
in currency exchange regulations. Foreign securities may be subject to
foreign taxes that would reduce their effective yield. Certain foreign
governments levy withholding taxes against dividend and interest income.
Although in some countries a portion of these taxes is recoverable, the
unrecovered portion of any foreign withholding taxes would reduce the
income the Fund receives from its foreign investments.
Foreign investments involve certain other risks, including possible
political or economic instability in the country of the issuer, the
difficulty of predicting international trade patterns, and the possibility
of currency exchange controls. Foreign securities may also be subject to
greater fluctuations in price than domestic securities. There may be less
publicly available information about a foreign company than about a
domestic company. Foreign companies generally are not subject to uniform
accounting, auditing, and financial reporting standards comparable to those
applicable to domestic companies. There is generally less government
regulation of stock exchanges, brokers, and listed companies abroad than in
the United States. In addition, with respect to certain foreign countries,
there is a possibility of expropriation, nationalization, confiscatory
taxation, or diplomatic developments that could affect investments in those
countries. Finally, in the event of default on a foreign debt obligation,
it may be more difficult for the International Stock Fund to obtain or
enforce a judgment against the issuers of the
9
<PAGE>
obligation. The Fund will normally execute its portfolio securities
transactions on the principal stock exchange on which the security is
traded.
The International Stock Fund may invest a portion of its assets in
developing countries or in countries with new or developing capital
markets, such as countries in Eastern Europe. The considerations noted
above regarding the risk of investing in foreign securities are generally
more significant for these investments. These countries may have relatively
unstable governments and securities markets in which only a small number of
securities trade. Markets of developing countries may generally be more
volatile than markets of developed countries. Investments in these markets
may involve significantly greater risks, as well as the potential for
greater gains.
In addition to investing directly in foreign equity securities, the
International Stock Fund may also purchase such securities in the form of
American Depository Receipts ("ADRs") and Global Depository Receipts
("GDRs"). ADRs in registered form are dollar-denominated securities
designed for use in the U.S. securities markets. ADRs are sponsored and
issued by domestic banks and represent and may be converted into underlying
foreign securities deposited with the domestic bank or a correspondent
bank. ADRs do not eliminate the risks inherent in investing in the
securities of foreign issuers. By investing in ADRs rather than directly in
the foreign security, however, the Fund may avoid currency risks during the
settlement period for either purchases or sales. There is a large, liquid
market in the United States for most ADRs. GDRs are receipts representing
an arrangement with a European bank similar to that for ADRs. GDRs are not
necessarily denominated in the currency of the underlying security.
Additional costs may be incurred in connection with the International
Stock Fund's foreign investments. Foreign brokerage commissions are
generally higher than those in the United States. Expenses may also be
incurred on currency conversions when the Fund moves investments from one
country to another. Increased custodian costs as well as administrative
difficulties may be experienced in connection with maintaining assets in
foreign jurisdictions.
A description of other investment restrictions and certain investment
practices of the International Stock Fund is included under "Additional
Information" and in the Statement of Additional Information. The Fund's
investment restrictions include a prohibition on investing more than 10
percent of its total assets in the securities of companies that have a
record of less than 3 years of continuous operations or more than 10
percent of its total assets in illiquid securities.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
Generally, each Fund distributes net investment income twice a year
and net realized capital gains from investment transactions annually. The
amount distributed, if any, will vary according to the income received from
securities held by the Funds and capital gains realized from the sale of
securities.
All distributions are paid as cash dividends and reinvested in
additional shares at the net asset value at the close of business on the
record date unless the account has elected to receive them in cash.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Historical average annual total return and total return information
for the Funds will be provided periodically. Such performance information
represents historical data, and the investment return and principal value
of an investment will fluctuate so that shares of a Fund when redeemed may
be worth more or less than their original cost. "Total return" refers to
the change in value of an investment in a
10
<PAGE>
Fund over a stated period, assuming the reinvestment of any dividends and
capital gains. "Average annual total return" is a hypothetical rate of
return that, if achieved annually, would have produced the same total
return if performance had been constant over the entire period. Average
annual total returns smooth out the variations in performance but are not
the same as actual annual results. The table below shows total return and
performance information for the Small Cap Fund and the International Stock
Fund for the periods ended October 31, 1996. A discussion by the Adviser
regarding each Fund's performance for fiscal 1996 is set forth under
"Financial Statements" in the Statement of Additional Information.
<TABLE>
<CAPTION>
Average Annual Total Return Total Return
------------------------------- --------------------------------
Since Since
1 Year 5 Years Inception* 1 Year 5 Years Inception*
------ ------- --------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
CMC Small Cap Fund................ 30.30% 18.03% 16.02% 30.30% 129.11% 191.43%
Since Since
1 Year Inception* 1 Year Inception*
------ --------- ------ ---------
CMC International Stock Fund...... 16.67% 3.13% 16.67% 8.69%
<FN>
* Since August 30, 1989 for the Small Cap Fund and since February 1, 1994
for the International Stock Fund.
</FN>
</TABLE>
The Funds may compare their performance to other mutual funds with
similar investment objectives and to the mutual fund industry as a whole,
as quoted by ranking services and publications of general interest.
Examples of these services or publications include Lipper Analytical
Services, Inc., Barron's, Business Week, Changing Times, The Financial
Times, Financial World, Forbes, Investor's Daily, Money, Morningstar Mutual
Funds, Personal Investor, The Economist, The Wall Street Journal, and USA
Today. (Lipper Analytical Services, Inc. is an independent rating service
that ranks over 1,000 mutual funds based upon total return performance).
These ranking services and publications may rank the performance of the
Funds against all other funds over specified periods and against funds in
specified categories.
The Funds may compare their performance to that of a recognized stock
index, such as the S&P 500 Stock Index, the Russell 2000 Stock Index,
Morgan Stanley Capital International Europe, Australia, Far East Index, or
the FT/S&P Actuaries Europe-Pacific Index. Client communications may
contain past or present performance rankings. This is not to be considered
representative or indicative of future results.
- --------------------------------------------------------------------------------
VOTING RIGHTS
- --------------------------------------------------------------------------------
The Trust may establish separate series of investment portfolios under
its Declaration of Trust. The Funds and CMC High Yield Fund are the only
series established under the Trust. Shares of each series vote together,
except as provided in the Trust's Declaration of Trust and under applicable
law. It is expected that shares of a series would vote separately by series
on any changes in fundamental investment policies relating to that series.
All shares of each series of the Trust, including the Funds, have equal
rights as to voting, redemption, and distribution. All issued and
outstanding shares of the Funds are fully paid and nonassessable. Shares
have no preemptive or conversion rights. Fractional shares have the same
rights proportionately as full shares. The shares of the Funds do not have
cumulative voting rights, which means that the holders of more than 50
percent of the shares of the Funds and any other portfolio of the Trust, if
established, voting for the election of Trustees can elect all the Trustees
if they choose to do so. In certain circumstances, Trustees may be removed
by action of the Trustees or the shareholders.
Under the provisions of the 1940 Act, and as used elsewhere in this
Prospectus, the phrase "vote of a majority of the outstanding voting
securities of the Fund" means the vote, at any meeting of shareholders
11
<PAGE>
of the Fund, of (i) 67 percent or more of the shares present or represented
by proxy at the meeting, if the holders of more than 50 percent of the
outstanding shares are present or represented by proxy, or (ii) more than
50 percent of the outstanding shares, whichever is less. As of November 29,
1996, 58.55% or 1,007,113 shares of the International Stock Fund were
beneficially owned by the State of Oregon Stock Growth Fund.
Annual meetings of shareholders will not be held except as required by
the 1940 Act and other applicable law. A special meeting will be held to
vote on the removal of a Trustee or Trustees of the Trust if requested in
writing by the holders of not less than 10% of the outstanding shares of
the Trust.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By qualifying and by meeting certain other requirements, a Fund will not be
subject to federal income taxes to the extent it distributes to its
shareholders its net investment income and realized capital gains. Each
Fund intends to make sufficient distributions to relieve itself from
liability for federal income taxes.
Shareholders that are subject to federal income taxes will recognize
ordinary income on distributions of net investment income or of any excess
of net short-term capital gain over net long-term capital loss.
Distributions properly designated as representing the excess of net
long-term capital gain over net short-term capital loss are taxable to
shareholders as long-term capital gain, regardless of the length of time
the shareholder held shares of the Fund. A portion of any distributions
received from a Fund may be eligible for the dividends received deduction
in the case of corporate shareholders, depending on the amount of
qualifying dividends received by the Fund from domestic corporations.
The tax character of dividends and other distributions from a Fund is
the same whether they are paid in cash or reinvested in additional shares
of the Fund. Dividends declared in October, November, or December to
shareholders of record as of a date in one of those months and paid in the
following January will be reportable as if received by the shareholders on
December 31. Thus, the shareholders may be taxed on these dividends in the
taxable year prior to the year of actual receipt.
A distribution may be taxable to a shareholder even if the
distribution reduces the net asset value of the shares held below their
cost (and is in an economic sense a return of the shareholder's capital).
This tax result is most likely when shares are purchased shortly before an
annual distribution of capital gains or other earnings.
Investment income received by the International Stock Fund and derived
from foreign securities may be subject to foreign income taxes withheld by
the foreign company. The United States has entered into tax treaties with
many foreign countries that entitle a fund to a reduced rate of tax or
exemption from tax on this income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the
International Stock Fund's assets to be invested within various countries
will fluctuate and the extent to which foreign tax refunds will be
recovered is uncertain. The International Stock Fund intends to operate so
as to qualify for treaty-reduced tax rates where applicable.
If the International Stock Fund has paid withholding or other taxes to
foreign governments during the year, the taxes will reduce the Fund's
income. In that event, the International Stock Fund may qualify for and
make an election permitted under the Code so that shareholders will be
required to treat as taxable income their pro rata portion of the income
taxes paid by the Fund to foreign countries and may, subject to
limitations, be able to claim a credit or deduction for the same amount.
Although the International Stock Fund intends to meet the requirements of
the Code to "pass through" these foreign taxes, there can be no assurance
the Fund will be able to do so.
12
<PAGE>
Each Fund will mail to its shareholders annually a summary of the
federal income tax status of the Fund's distributions for the preceding
year. Additional information regarding certain income tax consequences of
investments in the Funds is set forth in the Statement of Additional
Information.
This "Taxes" section is only a brief summary of the major tax
considerations affecting each Fund and its shareholders and is not a
complete or detailed explanation of tax matters. In addition to Federal
taxes, shareholders of the Funds may be subject to state and local taxes.
Accordingly, investors are urged to consult their tax advisers concerning
the tax consequences to them of investing in the Funds.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
Each Fund is managed under the general supervision of the Trustees of
the Trust. The Trust has contracted with CMC to provide investment advisory
services to the Funds. CMC has acted as an investment adviser since 1969
and acts as investment manager for approximately $13 billion of assets of
other institutions. CMC is owned by its employees, including J. Jerry
Inskeep, Jr. and James F. Rippey, who are Trustees and officers of the
Trust. The address of CMC is 1300 S.W. Sixth, P.O. Box 1350, Portland,
Oregon 97207-1350.
Under the investment advisory contract with the Trust, CMC provides
research, advice, and supervision with respect to investment matters and
determines which securities are purchased or sold. In addition, CMC
provides office space and pays all executive salaries and expenses and
ordinary office expenses of the Funds. Certain employees of CMC are also
officers of the Trust and, subject to the authority of the Trustees of the
Trust, are responsible for the overall management of the Trust.
The Adviser uses an investment team approach to analyze investment
themes and strategies for the Funds. Alan J. Folkman, a Senior Vice
President and director of CMC, is the Chief Investment Officer of the
Investment Team. With over 28 years of experience in the investment
management industry, Mr. Folkman supervises the Investment Team in
establishing broad investment strategies and determining portfolio
guidelines for the Funds.
Members of the Investment Team are responsible for the analysis of
particular industries or types of fixed income securities and for
recommendations on individual securities within those industries or asset
categories. Investment decisions for the Funds are then made by the
Investment Team and the individual portfolio managers who are responsible
for investment decisions on behalf of the Funds.
Richard J. Johnson, a Vice President of CMC and a Chartered Financial
Analyst, joined the Investment Team in 1994 and assumed principal
responsibility for investment decisions on behalf of the Small Cap Fund in
April 1995. Mr. Johnson is the portfolio manager for Columbia Small Cap
Fund, Inc. (since its inception in October, 1996). Mr. Johnson is also the
portfolio manager for CTC Small Stock Fund (since April 1995), an
investment fund managed by Columbia Trust Company. Prior to joining the
Columbia Investment Team, Mr. Johnson was a Portfolio Manager and Analyst
with Provident Investment Counsel (1990-1994). Mr. Johnson received a
Masters of Business Administration from the Anderson Graduate School of
Management at UCLA in 1990.
James McAlear, a Vice President of CMC, has had principal
responsibility for investment decisions on behalf of the International
Stock Fund since its inception in 1994. Mr. McAlear is also the portfolio
manager for Columbia International Stock Fund, Inc. (since 1992) and CTC
International Stock Investment Fund (since 1992). Prior to joining the
Columbia Investment Team in 1992, Mr. McAlear was a Senior Vice President
of IDS International, Inc. (1985-1992) and an Executive Director for
Merrill Lynch Europe (1972-1985).
13
<PAGE>
Members of the Investment Team and other personnel of the Trust or CMC
are permitted to trade securities for their own or family accounts, subject
to the rules of the Code of Ethics adopted by the Trust. The rules that
govern personal trading by investment personnel are based on the principal
that employees owe a fiduciary duty to conduct their trades in a manner
that is not detrimental to the Funds or their shareholders. The Trust has
adopted the recommendations of the Investment Company Institute, an
organization comprised of members of the mutual fund industry, relating to
restrictions on personal trading. For more information on the Code of
Ethics and specific trading restrictions, see the Statement of Additional
Information.
The investment advisory fee of each Fund is accrued daily and paid
monthly. The advisory fee for each Fund equals the annual rate of .75 of 1
percent of its daily net assets. While comparable to the advisory fees paid
by other mutual funds with similar investment objectives, these fees are
higher than the advisory fees paid by most other mutual funds. For the
fiscal year ended October 31, 1996, the investment advisory fees incurred
by the Small Cap Fund and International Stock Fund were $4,126,463 and
$508,330 respectively. The Funds assume their respective costs relating to
trust matters, cost of services to shareholders, transfer and dividend
paying agent fees, custodian fees, legal and auditing expenses,
disinterested trustees' fees, taxes and governmental fees, interest,
brokers' commissions, transaction expenses, cost of stock certificates and
any other expenses (including clerical expenses) of issue, sale,
repurchase, or redemption of its shares, expenses of registering or
qualifying its shares for sale, transfer taxes, and all expenses of
preparing its registration statements, prospectuses, and reports.
- --------------------------------------------------------------------------------
TRANSFER AGENT
- --------------------------------------------------------------------------------
Columbia Trust Company (the "Trust Company") acts as transfer agent
and dividend paying agent for the Funds. The Trust Company is owned by its
employees, including J. Jerry Inskeep, Jr. and James F. Rippey, who are
also principal shareholders of CMC and Trustees and officers of the Trust.
The address of the Trust Company is 1301 S.W. Fifth Avenue, P.O. Box 1350,
Portland, Oregon 97207-1350.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Repurchase Agreements. The Funds may invest in repurchase agreements,
which are agreements by which the Fund purchases a security and
simultaneously commits to resell that security to the seller (a commercial
bank or recognized securities dealer) at a stated price within a number of
days (usually not more than seven) from the date of purchase. The resale
price reflects the purchase price plus a rate of interest which is
unrelated to the coupon rate or maturity of the purchased security.
Repurchase agreements may be considered loans by a Fund collateralized by
the underlying security. The obligation of the seller to pay the stated
price is in effect secured by the underlying security. The seller will be
required to maintain the value of the collateral underlying any repurchase
agreement at a level at least equal to the price of the repurchase
agreement. In the case of default by the seller, a Fund could incur a loss.
In the event of a bankruptcy proceeding commenced against the seller, a
Fund may incur costs and delays in realizing upon the collateral. Each Fund
will enter into repurchase agreements only with those banks or securities
dealers who are deemed creditworthy pursuant to criteria adopted by the
Trustees of the Trust. There is no limit on the portion of a Fund's assets
that may be invested in repurchase agreements with maturities of seven days
or less.
Investments in Small and Unseasoned Companies. The Funds may invest in
companies that are unseasoned; that is, these companies may have limited or
unprofitable operating histories, limited financial resources, and
inexperienced management. In addition, they often face competition from
larger or more established firms that have greater resources. Securities of
small and unseasoned companies are
14
<PAGE>
frequently traded in the over-the-counter market or on regional exchanges
where low trading volumes may result in erratic or abrupt price movements.
To dispose of these securities, the Funds may have to sell them over an
extended period of time or below the original purchase price. Investments
by the Funds in these small or unseasoned companies may also be regarded as
speculative. Each Fund has a fundamental policy not to invest more than 10
percent of its total assets in companies that have a record of less than
three years of continuous operations.
Illiquid Securities. The Funds may buy securities whose public resale
would be subject to legal restrictions ("restricted securities"). No
illiquid securities, including restricted securities and repurchase
agreements of more than seven days maturity, will be acquired if upon the
purchase more than 10 percent of the value of a Fund's net assets would
consist of these securities. "Illiquid securities" are securities that may
not be sold or disposed of in the ordinary course of business within seven
days at approximately the price used to determine the Fund's net asset
value. Under current interpretations of the Staff of the SEC, the following
instruments in which the Fund may invest will be considered illiquid: (1)
repurchase agreements maturing in more than seven days; (2) restricted
securities (securities whose public resale is subject to legal
restrictions); (3) options, with respect to specific securities, not traded
on a national securities exchange that are not readily marketable; and (4)
any other securities in which the Fund may invest that are not readily
marketable.
The International Stock Fund may purchase certain restricted
securities that can be resold to qualifying institutions pursuant to a
regulatory exemption under Rule 144A ("Rule 144A securities"). If a dealer
or institutional trading market exists for Rule 144A securities, such
securities are deemed to be liquid and thus not subject to the
International Stock Fund's 10 percent limitation on the investment in
restricted or other illiquid securities. Under the supervision of the
Trustees of the Trust, the Adviser determines the liquidity of Rule 144A
securities and, through reports from the Adviser, the Trustees monitor
trading activity in these securities. In reaching liquidity decisions, the
Adviser will consider, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and
(4) the nature of the security and the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers, and the
procedures for the transfer). Because institutional trading in Rule 144A
securities is relatively new, it is difficult to predict accurately how
these markets will develop. If institutional trading in Rule 144A
securities declines, the International Stock Fund's liquidity could be
adversely affected to the extent it is invested in such securities.
Options and Financial Futures Transactions. Each Fund may invest up to
5 percent of its net assets in premiums on put and call exchange-traded
options. A call option gives the holder (buyer) the right to purchase a
security at a specified price (the exercise price) at any time until a
certain date (the expiration date). A put option gives the buyer the right
to sell a security at the exercise price at any time until the expiration
date. Each Fund may also purchase options on securities indices. Options on
securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at a specified price,
an option on a securities index gives the holder the right to receive, on
exercise of the option, an amount of cash if the closing level of the
securities index on which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the
option. Each Fund may enter into closing transactions, exercise its
options, or permit the options to expire. A Fund may only write call
options on securities or securities indices that are covered. A call option
on a security is covered if written on a security the Fund owns or if the
Fund has an absolute and immediate right to acquire that security without
additional cash consideration upon conversion or exchange of other
securities held by the Fund. If additional cash consideration is required,
that amount will be held in a segregated account by the Fund's custodian
bank. A call option on a securities index is covered if the Fund owns
securities whose price changes, in the opinion of the Advisor, are expected
to be substantially similar to those of the index. Call options may also be
covered in any other manner in accordance with the rules of the exchange on
which the option is traded and applicable laws and regulations. Each Fund
may write such options on up to 25 percent of its net assets.
15
<PAGE>
The Funds may engage in financial futures transactions, including
interest rate futures transactions. Financial futures contracts are
commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a
security or the cash value of a securities index, during a specified future
period at a specified price. Each Fund's investment restrictions do not
limit the percentage of a Fund's assets that may be invested in financial
futures transactions. Neither Fund, however, intends to enter into
financial futures transactions for which the aggregate initial margin
exceeds 5 percent of the net assets of the Fund after taking into account
unrealized profits and unrealized losses on any such transactions it has
entered into. The Funds may engage in futures transactions only on
commodities exchanges or boards of trade.
The Funds will not engage in transactions in index options, financial
futures contracts, or related options for speculation, but only as an
attempt to hedge against market conditions affecting the values of
securities that the Fund owns or intends to purchase. When a Fund purchases
a put on a stock index or on a stock index future not held by the Fund, the
put protects the Fund against a decline in the value of all securities held
by it to the extent that the stock index moves in a similar pattern to the
prices of the securities held. The correlation, however, between indices
and price movements of the securities in which a Fund will generally invest
will be imperfect. Each Fund expects, nonetheless, that the use of put
options that relate to such indices will, in certain circumstances, protect
against declines in values of specific portfolio securities or a Fund's
portfolio generally. Although the purchase of a put option may partially
protect a Fund from a decline in the value of a particular security or its
portfolio generally, the cost of a put will reduce the potential return on
the security or the portfolio if either increases in value.
Upon entering into a futures contract, a Fund will be required to
deposit with its custodian in a segregated account cash or certain U.S.
government securities in an amount known as the "initial margin." This
amount, which is subject to change, is in the nature of a performance bond
or a good faith deposit on the contract and would be returned to the Fund
upon termination of the futures contract, assuming all contractual
obligations have been satisfied.
The principal risks of options and futures transactions are: (1)
possible imperfect correlation between movements in the prices of options,
currencies, or futures contracts and movements in the prices of the
securities or currencies hedged or used for cover; (2) lack of assurance
that a liquid secondary market will exist for any particular options or
futures contract when needed; (3) the need for additional skills and
techniques beyond those required for normal portfolio management; (4)
losses on futures contracts resulting from market movements not anticipated
by the investment adviser; and (5) possible need to defer closing out
certain options or futures contracts to continue to qualify for beneficial
tax treatment afforded "regulated investment companies" under the Code.
Portfolio Turnover. The Funds generally will not trade in securities
for short-term profits but, when circumstances warrant, they may purchase
and sell securities without regard to the length of time they have been
held. A high portfolio turnover may increase transaction costs and may
affect taxes paid by shareholders to the extent short-term gains are
distributed. The Funds' portfolio turnover rates are shown in the table
under "Financial Highlights."
Temporary Investments. When, as a result of market conditions, a
Fund's investment adviser determines a temporary defensive position is
warranted to help preserve capital, the Fund may without limit temporarily
retain cash, denominated in domestic or foreign currencies, or invest in
prime commercial paper, high-grade debt securities, securities of the U.S.
Government and its agencies and instrumentalities, and high-quality money
market instruments, including repurchase agreements, issued by entities
organized in the United States or any foreign country, denominated in U.S.
dollars or foreign currency. When a Fund assumes a temporary defensive
position, it is not invested in securities designed to achieve its
investment objective.
Investment Restrictions. A description of other investment
restrictions and certain investment practices of the Funds is included in
the Statement of Additional Information.
16
<PAGE>
Part B-I
Reg. Nos. 33-30394/ 811-5857
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
Columbia Financial Center
1300 SW Sixth Avenue
PO Box 1350
Portland, Oregon 97207
(503) 222-3600
This Statement of Additional Information contains information relating
to CMC Fund Trust (the "Trust"), an open-end diversified management
investment company established as an Oregon business trust on August 7,
1989, and two portfolios of the Trust, CMC Small Cap Fund (the " Small Cap
Fund") and CMC International Stock Fund (the "International Stock Fund").
The "Fund" or "Funds" when used in this Statement of Additional Information
refers to these two funds. The Trust has established one other portfolio,
the CMC High Yield Fund.
This Statement of Additional Information is not a Prospectus. It
relates to a Prospectus dated December 16, 1996 (the "Prospectus") and
should be read in conjunction with the Prospectus. Copies of the Prospectus
are available without charge upon request to the Trust.
Table of Contents
Management............................................................... 2
Investment Advisory and Other Fees Paid to Affiliates.................... 4
Portfolio Transactions................................................... 5
Redemptions and Net Asset Value.......................................... 6
Custodians............................................................... 7
Independent Accountants.................................................. 8
Taxes.................................................................... 8
Performance..............................................................12
Investment Restrictions..................................................13
Additional Information Regarding Certain Investments by the Funds........16
Financial Statements.....................................................20
December 16, 1996
1
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The trustees and officers of the Trust are listed below, together with
their principal business occupations. Except as otherwise indicated, each
person listed has held his position with the Trust since inception in
August 1989. All other principal business positions have been held for more
than five years, except as follows: Columbia Small Cap Fund, Inc. since
August 1996; Columbia Real Estate Equity Fund, Inc. since April 1994;
Columbia High Yield Fund, Inc. since July 1993; Columbia International
Stock Fund, Inc. since July 1992; and Columbia Common Stock Fund, Inc. and
Columbia Balanced Fund, Inc. since July 1991; and except as otherwise
indicated. The term "Columbia Funds" refers to Columbia High Yield Fund,
Inc., Columbia Balanced Fund, Inc., Columbia Common Stock Fund, Inc.,
Columbia International Stock Fund, Inc., Columbia Municipal Bond Fund,
Inc., Columbia Real Estate Equity Fund, Inc., Columbia U.S. Government
Securities Fund, Inc., Columbia Special Fund, Inc., Columbia Growth Fund,
Inc., Columbia Daily Income Company, Columbia Small Cap Fund, Inc., and
Columbia Fixed Income Securities Fund, Inc.
J. JERRY INSKEEP, JR.,* Chairman and Trustee of the Trust; Chairman and
Director of each of the Columbia Funds; Chairman, Director, and a principal
shareholder of Columbia Management Co. (the "Adviser"), the investment
adviser of the Fund, and Columbia Funds Management Company ("CFMC");
Chairman and Director of Columbia Trust Company (the "Trust Company");
Director of Columbia Financial Center Incorporated ("Columbia Financial").
JAMES F. RIPPEY,* President and Trustee of the Trust; Director of each of
the Columbia Funds; President, Director, and a principal shareholder of the
Adviser and CFMC; President and Director of the Trust Company.
RICHARD L. WOOLWORTH, Trustee of the Trust (since July 1993); Director of
each of the Columbia Funds (since January 1992). Mr. Woolworth is Chairman
and Chief Executive Officer of Blue Cross and Blue Shield of Oregon and
Chairman and Chief Executive Officer of The Benchmark Group, health
insurers, 100 S. W. Market Street, Portland, Oregon 97201.
GEORGE L. HANSETH,* Trustee, Vice President, Assistant Secretary, and
Treasurer of the Trust; Senior Vice President, Assistant Secretary, and
Treasurer of each of the Columbia Funds; Vice President, Assistant
Secretary, Treasurer, and Director of the Adviser and CFMC; Vice President,
Treasurer, Assistant Secretary, and Director of the Trust Company;
President and Director of Columbia Financial.
JOHN A. KEMP,* Trustee and Vice President of the Trust; President and
Director of each of the Columbia Funds; Senior Vice President and Director
of the Adviser, CFMC, Columbia Financial, and the Trust Company.
ALEXANDER S. MACMILLAN III, * Trustee of the Trust (since March 1994); Vice
President of the Adviser and CFMC.
PETER C. OLSON,* Trustee of the Trust (since April 1991); Vice President of
the Adviser.
PETER T. SHAND,* Trustee of the Trust (since April 1991); Vice President of
the Adviser.
LAWRENCE S. VIEHL,* Vice President of the Trust, each of the Columbia
Funds, the Adviser, CFMC, and the Trust Company.
2
<PAGE>
JEFF B. CURTIS, * Secretary of the Trust (since April 1994); Secretary of
each of the Columbia Funds (since April 1994); General Counsel, Vice
President, and Secretary to the Adviser, CFMC, the Trust Company and
Columbia Financial (since 1993); Stoel Rives (1986-1993), a law firm in
Portland, Oregon.
*These officers and trustees are "interested persons" as defined by
the Investment Company Act of 1940 (the "1940 Act") and receive no trustee
fees or salaries from the Fund. The business address of each such person is
1300 SW Sixth Avenue, PO Box 1350, Portland, Oregon 97207.
At November 29, 1996, to the knowledge of the Trust, the following
persons owned of record or beneficially more than 5 percent of the
outstanding shares of the Small Cap Fund or the International Stock Fund:
<TABLE>
<CAPTION>
Shares Beneficially Owned
Name and Address at November 29, 1996
- --------------------------------- -------------------------
Small Cap Fund
- --------------
<S> <C> <C>
State of Oregon Stock Growth Fund
Department of the Treasury
State of Oregon
Salem, OR 97310 1,983,904 (20.57%)
Hanford Operations and Engineering
Pension Plan
3060 George Washington Way
P.O. Box 1970 H30-08
Richland, WA 99352 1,120,012 (11.61%)
International Stock Fund
- ------------------------
State of Oregon Stock Growth Fund
Department of the Treasury
State of Oregon
Salem, OR 97310 1,007,113 (58.55%)
Lumber Industry Pension Fund
2929 NW 31st Ave.
Portland, OR 97210 173,965 (10.11%)
Alaska Electrical Pension Fund
2600 Denali Street, Suite 200
Anchorage, AK 99503-2782 141,626 (8.23%)
Freightliner Corporation Pension Plan
4747 North Channel Avenue
Portland, OR 97217 87,579 (5.09%)
</TABLE>
Because the State of Oregon owns approximately 58.55% of the
International Stock Fund, it may be able to effectively control the outcome
of any matters submitted to the shareholders of either the Fund or the
Trust, including the election of trustees or revisions to any fundamental
investment policy of the Fund.
3
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES
- --------------------------------------------------------------------------------
Information regarding services performed by the Adviser to the Funds
and the formula for calculating the fees paid for those services are set
forth in the Prospectus under "Management of the Funds." Advisory fees
incurred by the Small Cap Fund were $4,126,463, $3,528,353, and $3,690,807
for fiscal 1996, fiscal 1995, and fiscal 1994, respectively. Advisory fees
incurred by the International Stock Fund were $508,330, $543,358 and
$301,661, respectively, for fiscal 1996, 1995 and that portion of fiscal
1994 the Fund was in operation.
Shareholders of the Funds will be investment advisory clients of the
Adviser, in addition to their indirect relationship to the Adviser by
virtue of their status as shareholders of a Fund. If, however, the assets
of an investment advisory client of the Adviser are invested in a Fund,
that client will pay no fee pursuant to its separate management contract
with the Adviser with respect to those assets invested in that Fund (for
the period during which the assets are invested in a Fund).
If the Adviser is deemed to be a fiduciary with respect to a
prospective shareholder of a Fund pursuant to the Employee Retirement
Income Security Act of 1974 ("ERISA"), certain conditions must be satisfied
before assets may be invested in that Fund by the Adviser on behalf of the
shareholder. These conditions have been set forth by the U. S. Department
of Labor in Prohibited Transaction Class Exemption No. 77-4 (the
"Exemption"). The Exemption permits the Adviser to direct investments of
ERISA-qualified plans to a mutual fund, such as a Fund, for which the
Adviser serves as an investment adviser if, after review of the Prospectus
and disclosure relating to fees of the Fund and fees under the advisory
contract, another fiduciary, as determined under ERISA, with respect to
that shareholder approves investments in the Fund. The second fiduciary
must be independent of and unrelated to the Adviser under standards set
forth by the U. S. Department of Labor in the Exemption.
The second, independent fiduciary that must approve investments in a
Fund by the Adviser is not engaged as a second fiduciary only in
contemplation of a possible investment in the Fund. Rather, the second,
independent fiduciary is almost always a committee appointed by the
employee benefit plan sponsor and has oversight responsibility for
appointment of CMC as an investment adviser with respect to certain plan
assets. This committee is almost always made up of one or more employees of
the plan sponsor, and, as such, these employees receive compensation from
the plan sponsor but are not compensated out of plan assets.
The Adviser is registered under the Investment Advisers Act of 1940,
is engaged principally in the business of rendering investment supervisory
services, and is responsible for payment of all executive salaries and
executive expenses and office rent of the Funds and the Trust.
Messrs. Inskeep and Rippey, Trustees and officers of the Trust, each
own approximately 41 percent of the voting securities of the Adviser and,
therefore, are considered "controlling persons" under the 1940 Act. Certain
affiliated persons of the Trust are also affiliated persons of the Adviser.
See "Management." The Adviser acts as an investment manager for
approximately $13 billion of assets of other institutions. The Funds are
intended to provide investment vehicles for certain client accounts managed
by the Adviser. An independent fiduciary of those client accounts, after
careful review of a Fund's Prospectus, Statement of Additional Information
and fees arrangement, approves the investment in the Fund. The independent
fiduciary then authorizes the Adviser to purchase and sell shares of a Fund
at its discretion for the client's portfolio, subject to certain
limitations imposed by the authorization.
4
<PAGE>
The Trust Company acts as transfer agent and dividend crediting agent
for the Funds. Its address is 1301 SW Fifth Avenue, PO Box 1350, Portland,
Oregon 97207. It issues certificates for shares of the Funds, if requested,
and records and disburses dividends for the Funds. The Trust pays the Trust
Company a per account fee of $1 per month for each shareholder account with
a Fund existing at any time during the month, with a minimum aggregate fee
of $1,500 per month per Fund. In addition, the Trust pays the Trust Company
for extra administrative services performed at cost in accordance with a
schedule set forth in the agreements between the Trust Company and the
Trust and reimburses the Trust Company for certain out-of-pocket expenses
incurred in carrying out its duties under those agreements. Certain
trustees and officers of the Trust are minority shareholders of the Trust
Company. The Trust paid $18,000 and $18,000 to the Trust Company for
services performed for fiscal 1996 under the transfer agent agreements
relating to the Small Cap Fund and the International Stock Fund,
respectively.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Each Fund will not generally invest in securities for short-term
capital appreciation but, when business and economic conditions, market
prices, or a Fund's investment policy warrant, individual security
positions may be sold without regard to the length of time they have been
held. The rate of portfolio turnover for the Small Cap Fund and the
International Stock Fund is disclosed in the prospectus under "Financial
Highlights."
Each Fund may purchase its portfolio securities through a securities
broker and pay the broker a commission, or the Fund may purchase the
securities directly from a broker which acts as principal and sells
securities directly for its own account without charging a commission. Each
Fund may also purchase securities from underwriters, the price of which
will include a commission or concession paid by the issuer to the
underwriter. The purchase price of securities purchased from dealers
serving as market makers will include the spread between the bid and asked
prices.
Prompt execution of orders at the most favorable price will be the
primary consideration of a Fund in transactions where brokerage fees are
involved. Research, statistical, and other services also may be taken into
consideration in selecting broker-dealers. These services may include:
advice concerning the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities
or the purchasers or sellers of securities; and furnishing analyses and
reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategies, and performance of accounts. While the Funds
have no arrangements or formulas as to either the allocation of brokerage
business or commission rates paid thereon, a commission in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction may be paid by a Fund if management of the Trust
determines in good faith that the commission is reasonable in relation to
the value of the brokerage and research services provided, viewed in terms
of either that particular transaction or management's overall
responsibilities with respect to a Fund.
Allocation of transactions to obtain research services for the Adviser
enables the Adviser to supplement its own research and analysis with the
statistics, information, and views of others. While it is not possible to
place a dollar value on these services, it is the opinion of the Adviser
that the receipt of such services will not reduce the overall expenses for
its research or those of its affiliated companies. The fees paid to the
Adviser by a Fund would not be reduced as a result of the receipt of such
information and services by the Fund. The receipt of research services from
brokers or dealers might be useful to the Adviser and its affiliates in
rendering investment management services to the Funds or other clients;
and, conversely, information provided by brokers or dealers who have
executed orders on behalf of other clients might be useful to the Adviser
in carrying out its obligations to the Funds. Total brokerage
5
<PAGE>
commissions paid by the Trust on transactions by the Small Cap Fund were
$1,254,580, $1,459,444, and $1,147,341 in fiscal 1996, fiscal 1995, and
fiscal 1994, respectively. Total brokerage commissions paid by the Trust on
transactions by the International Stock Fund were $437,587, $657,669 and
$393,319, respectively, for fiscal 1996, 1995 and that portion of fiscal
1994 the Fund was in operation.
The Trustees of the Trust will from time to time review whether the
recapture for the benefit of a Fund of some portion of the brokerage
commissions or similar fees paid by a Fund on portfolio transactions is
legally permissible and, if so, to determine, in the exercise of its
business judgment, whether it would be advisable for a Fund to seek such
recapture.
Investment decisions for one Fund are made independently from those of
the other Fund or accounts managed by the Adviser or mutual funds managed
by Columbia Funds Management Company, an affiliate of the Adviser. The same
security is sometimes held in the portfolio of more than one fund or
account. Simultaneous transactions are inevitable when several funds or
accounts are managed by the same investment adviser, particularly when the
same security is suitable for the investment objective of more than one
fund or account. In the event of simultaneous transactions, allocations
among the Funds or accounts will be made on an equitable basis.
Both the Trust and the Adviser have adopted a Code of Ethics (the
"Code") that sets forth general and specific standards relating to the
securities trading activities of all their employees. The purpose of the
Code is to ensure that all employees conduct their personal transactions in
a manner that does not interfere with the portfolio transactions of the
Funds or the Adviser's other clients or take unfair advantage of their
relationship with the Adviser. The specific standards in the Code include,
among others, a requirement that all employee trades be pre-cleared; a
prohibition on investing in initial public offerings; required pre-approval
of investments in private placements; a prohibition on portfolio managers
trading in a security seven days before or after a trade in the same
security by an account over which the manager exercises investment
discretion; and a prohibition on realizing any profit on the trading of a
security held less than 60 days. Certain securities and transactions, such
as mutual fund shares or U. S. Treasuries and purchases of options on
securities indexes or securities under an automatic dividend reinvestment
plan, are exempt from the restrictions in the Code because they present
little or no potential for abuse. Certain transactions involving the stocks
of large capitalization companies are exempt from the seven day black-out
period and short-term trading prohibitions because such transactions are
highly unlikely to affect the price of these stocks. In addition to the
trading restrictions, the Code contains reporting obligations that are
designed to ensure compliance and allow the Adviser's Ethics Committee to
monitor that compliance.
The Trust and the Adviser have also adopted a Policy and Procedures
Designed to Detect and Prevent Insider Trading (the "Insider Trading
Policy"). The Insider Trading Policy prohibits any employee from trading,
either personally or on behalf of others (including a client account), on
the basis of material nonpublic information. All employees are required to
certify each year that they have read and complied with the provisions of
the Code and the Insider Trading Policy.
- --------------------------------------------------------------------------------
REDEMPTIONS AND NET ASSET VALUE
- --------------------------------------------------------------------------------
Information regarding redemptions is set forth in the Prospectus under
"Redemptions." Information regarding the determination of the net asset
value per share of a Fund is set forth in the Prospectus under
"Determination of Net Asset Value."
6
<PAGE>
The Trust may suspend the determination of net asset value of a Fund
and the right of redemption for any period (1) when the New York Stock
Exchange is closed, other than customary weekend and holiday closings, (2)
when trading on the New York Stock Exchange is restricted, (3) when an
emergency exists as a result of which sale of securities owned by a Fund is
not reasonably practicable or it is not reasonably practicable for the
Trust to determine the value of the Fund's net assets, or (4) as the
Securities and Exchange Commission ("SEC") may by order permit for the
protection of security holders, provided the Trust complies with rules and
regulations of the SEC which govern as to whether the conditions prescribed
in (2) or (3) exist. The New York Stock Exchange observes the following
holidays: New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas. In the case of
suspension of the right to redeem, shareholders may withdraw their
redemption request or receive payment based upon the net asset value
computed upon the termination of the suspension.
- --------------------------------------------------------------------------------
CUSTODIANS
- --------------------------------------------------------------------------------
United States National Bank of Oregon, 321 SW Sixth Avenue, Portland,
Oregon 97208, acts as general custodian of the Trust. Morgan Stanley Trust
Company ("Morgan Stanley" or a "Custodian"), One Evertrust Plaza, Jersey
City, New Jersey 07302, has entered into a custodian agreement with the
Trust in respect of the purchase of foreign securities by the Funds. The
Custodians hold all securities and cash of the Funds, receive and pay for
securities purchased, deliver against payment securities sold, receive and
collect income from investments, make all payments covering expenses of the
Funds, and perform other administrative duties, all as directed by
authorized officers of the Trust. The Custodians do not exercise any
supervisory function in the purchase and sale of portfolio securities or
payment of dividends.
Portfolio securities purchased outside the United States by the Funds
are maintained in the custody of foreign banks, trust companies, or
depositories that have sub-custodian arrangements with Morgan Stanley (the
"foreign sub-custodians"). Each of the domestic and foreign custodial
institutions that may hold portfolio securities of the Funds has been
approved by the Trustees of the Trust in accordance with regulations under
the 1940 Act.
The Trustees of the Trust review, at least annually, whether it is in
the best interest of the Funds and their shareholders to maintain Fund
assets in each of the countries in which the Funds invest, with particular
foreign sub-custodians in those countries, pursuant to contracts between
the foreign sub-custodians and Morgan Stanley. The review includes an
assessment of the risk of holding Fund assets in that country (including
risks of expropriation or imposition of exchange controls), the operational
capability and reliability of the foreign sub-custodian, and the impact of
local laws on the custody arrangement. The Trustees of the Trust are aided
in their review by Morgan Stanley, which has assembled the network of
foreign sub-custodians used by the Funds, as well as by the Adviser and
counsel. With respect to foreign sub-custodians, however, there can be no
assurance that the Funds, and the value of their shares, will not be
adversely affected by acts of foreign governments, financial or operational
difficulties of the foreign sub-custodians, difficulties and costs of
obtaining jurisdiction over, or enforcing judgments against, the foreign
sub-custodians, or the application of foreign law to a Fund's foreign
sub-custodial arrangement. Accordingly, an investor should recognize that
the administrative risks involved in holding assets abroad are greater than
those associated with investing in the United States.
7
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Coopers & Lybrand, L.L.P., 1300 S.W. Fifth Avenue, Suite 2700,
Portland, Oregon 97201, serves as the Trust's independent accountants and,
in addition to examining the financial statements of the Trust at fiscal
year-end, is expected to assist in the preparation of the tax returns of
the Trust and in certain other matters.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
Federal Income Taxes
Each Fund intends and expects to meet continuously the tests for
qualification as a regulated investment company under Part I of Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund
believes it satisfies the tests to qualify as a regulated investment
company.
To qualify as a regulated investment company for any taxable year,
each Fund must, among other things:
(a) derive at least 90 percent of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or foreign currencies, or other
income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in
such stock, securities, or currencies (the "90 Percent Test");
(b) derive less than 30 percent of its gross income from the sale or
other disposition of any of the following, if held for less than three
months: stock, securities, foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to
the Fund's principal business of investing in stocks or securities (or
options and futures with respect to stocks or securities), or certain other
assets (the "30 Percent Test"); and
(c) diversify its holdings so that at the end of each quarter (i) 50
percent or more of the value of the assets of the Fund is represented by
cash, government securities, and other securities limited, in respect of
any one issuer of such other securities, to an amount not greater than 5
percent of the value of the assets of the Fund and 10 percent of the
outstanding voting securities of such issuer, and (ii) not more than 25
percent of the value of the assets of the Fund is invested in the
securities (other than government securities) of any one issuer or of two
or more issuers that the Fund "controls" within the meaning of Section 851
of the Code and that meet certain requirements. In addition, a Fund must
file, or have filed, a proper election with the Internal Revenue Service.
Special Aspects of 90 Percent Test with Respect to Foreign Currency.
For purposes of the 90 Percent Test, foreign currency gains that are not
directly related to a Fund's principal business of investing in stocks or
securities (or options and futures with respect to stock or securities) may
be excluded from qualifying income by regulation. No such regulations,
however, have been issued.
Unless an exception applies, a Fund may be required to recognize some
income with respect to foreign currency contracts under the mark-to-market
rules of Section 1256 of the Code even though
8
<PAGE>
that income is not realized. Special rules under Sections 1256 and 988 of
the Code determine the character of any income, gain, or loss on foreign
currency contracts.
Two possible exceptions to marking-to-market relate to hedging
transactions and mixed straddles. A hedging transaction is defined for
purposes of Section 1256 as a transaction that (1) a Fund properly
identifies as a hedging transaction, (2) is entered into in the normal
course of business primarily to reduce the risk of price changes or
currency fluctuations with respect to the Fund's investments, and (3)
results in ordinary income or loss. A mixed straddle is a straddle where
(1) at least one (but not all) of the straddle positions are Section 1256
contracts and (2) the Fund properly identifies each position forming part
of the straddle. A straddle for these purposes generally is offsetting
positions with respect to personal property. A Fund holds offsetting
positions generally if there is a substantial diminution of the Fund's risk
of loss from holding a position by reason of its holding one or more other
positions.
Special Aspects of 30 Percent Test with Respect to Foreign Currency. A
Fund may choose to defer the closing out of a forward currency contract
beyond the time when it would otherwise be advantageous to do so to avoid
realizing excessive gains on securities or currencies held less than three
months and not directly related to the Fund's principal business of
investing in stock or securities (or options and futures with respect to
stocks or securities). In the case of a designated hedge, increases and
decreases during the period of the hedge in the value of positions that are
part of the designated hedge are netted for purposes of the 30 Percent
Test. A designated hedge for these purposes is generally an option to sell
or a contract that reduces a taxpayer's risk of loss and that the taxpayer
clearly identifies.
Part I of Subchapter M of the Code will apply to a Fund during a
taxable year only if it meets certain additional requirements. Among other
things, the Fund must: (a) have a deduction for dividends paid (without
regard to capital gain dividends) at least equal to the sum of 90 percent
of its investment company taxable income (computed without any deduction
for dividends paid) and 90 percent of its tax-exempt interest in excess of
certain disallowed deductions (unless the Internal Revenue Service waives
this requirement) and (b) either (i) have been subject to Part I of
Subchapter M for all taxable years ending after November 8, 1983 or (ii) as
of the close of the taxable year have no earnings and profits accumulated
in any taxable year to which Part I of Subchapter M did not apply.
The Trust currently has three Funds. The Trust may establish
additional funds in the future. Federal income tax laws generally will
treat each fund as a separate corporation (provided that each fund consists
of a segregated portfolio of assets the beneficial interests in which are
owned by the holders of a class or series of stock that is preferred over
all other classes or series in respect of that portfolio of assets).
A regulated investment company that meets the requirements described
above is taxed only on its "investment company taxable income," which
generally equals the undistributed portion of its ordinary net income and
any excess of net short-term capital gain over net long-term capital loss.
In addition, any excess of net long-term capital gain over net short-term
capital loss that is not distributed is taxed to a Fund at corporate
capital gain tax rates. The policy of a Fund is to apply capital loss
carry-forwards as a deduction against future capital gains before making a
capital gain distribution to shareholders.
If any net long-term capital gains in excess of net short-term capital
losses are retained by a Fund, requiring federal income taxes to be paid
thereon by the Fund, the Fund may elect to treat such capital gains as
having been distributed to shareholders. In the case of such an election,
shareholders will be taxed on such amounts as long-term capital gains, will
be able to claim their proportional share of the federal income taxes paid
by the Fund on such gains as a credit against their own federal income tax
liabilities, and generally will be entitled to increase the adjusted tax
basis of their shares in the Fund by the differences between their pro rata
shares of such gains and their tax credits.
9
<PAGE>
Shareholders of each Fund are taxed on distributions of net investment
income, or of any excess of net short-term capital gain over net long-term
capital loss, as ordinary income. Income distributions to corporate
shareholders from a Fund may qualify, in whole or in part, for the federal
income tax dividends-received deduction, depending on the amount of
qualifying dividends received by the Fund by domestic corporations. The
dividends received deduction equals 70 percent of eligible dividends
received from a Fund by a shareholder. Distributions of any excess of net
long-term capital gain over net short-term capital loss from a Fund are
ineligible for the dividends-received deduction.
Distributions properly designated by a Fund as representing the excess
of net long-term capital gain over net short-term capital loss are taxable
to shareholders as long-term capital gain, regardless of the length of time
the shares of the Fund have been held by shareholders. For noncorporate
taxpayers, the highest rate that applies to long-term capital gains is
lower than the highest rate that applies to ordinary income. Any loss that
is realized and allowed on redemption of shares of a Fund less than six
months from the date of purchase of the shares and following the receipt of
a capital gain dividend will be treated as a long-term capital loss to the
extent of the capital gain dividend. For this purpose, Section 852(b)(4) of
the Code contains special rules on the computation of a shareholder's
holding period.
Distributions of taxable net investment income and net realized
capital gains will be taxable as described above, whether paid in shares or
in cash. Each distribution is accompanied by a brief explanation of the
form and character of the distribution. Within 60 days after the close of
each taxable year, each Fund issues to each shareholder a statement of the
federal income tax status of all distributions, including a statement of
the prior taxable year's distributions which the Fund has designated to be
treated as long-term capital gain.
A distribution may be taxable to a shareholder even if the
distribution reduces the net asset value of the shares held below their
cost (and is in an economic sense a return of the shareholder's capital).
This tax result is most likely when shares are purchased shortly before an
annual distribution of capital gains or other earnings.
If a Fund declares a dividend in October, November, or December
payable to shareholders of record on a certain date in such a month and
pays the dividend during January of the following year, the shareholders
will be taxed as if they had received the dividend on December 31 of the
year in which the dividend was declared. Thus, a shareholder may be taxed
on the dividend in a taxable year prior to the year of actual receipt.
A special tax may apply to a Fund if it fails to make sufficient
distributions during the calendar year. The required distributions for each
calendar year generally equal the sum of (a) 98 percent of the ordinary
income for the calendar year plus (b) 98 percent of the capital gain net
income for the one-year period that ends on October 31 during the calendar
year, plus (c) an adjustment relating to any shortfall for the prior
taxable year. If the actual distributions are less than the required
distributions, a tax of 4 percent applies to the shortfall.
The Code allows the deduction by certain individuals, trusts, and
estates of "miscellaneous itemized deductions" only to the extent that such
deductions exceed 2 percent of adjusted gross income. The limit on
miscellaneous itemized deductions will not apply, however, with respect to
the expenses incurred by any "publicly offered regulated investment
company." Each Fund believes that it is a publicly offered regulated
investment company because its shares are continuously offered pursuant to
a public offering (within the meaning of section 4 of the Securities Act of
1933 (the "1933 Act"), as amended). Therefore, the limit on miscellaneous
itemized deductions should not apply to expenses incurred by a Fund.
10
<PAGE>
Foreign Income Taxes. The International Stock Fund invests in the
securities of foreign corporations and issuers. Foreign countries may
impose income taxes, generally collected by withholding, on foreign-source
dividends and interest paid to a Fund. These foreign taxes will reduce the
International Stock Fund's distributed income. That Fund generally expects
to incur, however, no foreign income taxes on gains from the sale of
foreign stocks and securities.
The United States has entered into income tax treaties with many
foreign countries to reduce or eliminate the foreign taxes on certain
dividends and interest received from corporations in those countries. The
International Stock Fund intends to take advantage of such treaties where
possible. It is impossible to predict with certainty the effective rate of
foreign taxes that will be paid by that Fund since the amount invested in
particular countries will fluctuate and the amounts of dividends and
interest relative to total income will fluctuate.
U.S. Foreign Tax Credits or Deductions for Shareholders of the
International Stock Fund. Section 853 of the Code allows a regulated
investment company to make a special election relating to foreign income
taxes if more than 50 percent of the value of the company's total assets at
the close of its taxable year consists of stock or securities in foreign
corporations. The International Stock Fund generally expects, if necessary,
to qualify for and to make the election permitted under Section 853 of the
Code. Although the International Stock Fund intends to meet the
requirements of the Code to "pass through" such foreign taxes, there can be
no assurance that the Fund will be able to do so. The International Stock
Fund will elect under Section 853 of the Code only if it believes that it
is in the best interests of its shareholders to do so.
As a result of the Section 853 election, shareholders of the
International Stock Fund will be able to claim a credit or deduction on
their income tax returns for, and will be required to include in income in
addition to taxable distributions actually received, their pro rata
portions of the income taxes paid by the Fund to foreign countries. A
shareholder's use of the credits resulting from the election will be
subject to the limits of Section 904 of the Code. In general, those limits
will prevent a shareholder from using foreign tax credits to reduce U.S.
taxes on U.S. source income. Each shareholder should discuss the use of
foreign tax credits and the Section 904 limits with an individual tax
adviser.
No deduction for foreign taxes may be claimed under the Code by
individual shareholders who do not elect to itemize deductions on their
federal income tax returns, although such a shareholder may claim a credit
for foreign taxes and in any event will be treated as having taxable income
in the amount of the shareholder's pro rata share of foreign taxes paid by
the Fund.
Each year, the International Stock Fund will provide a statement to
each shareholder showing the amount of foreign taxes for which a credit or
a deduction may be available.
Investment in Passive Foreign Investment Companies. If a Fund invests
in certain non-U.S. corporations that receive at least 75 percent of their
annual gross income from passive sources (such as sources that produce
certain interest, dividends, royalties, capital gains, or rental income) or
hold at least 50 percent of their assets in such passive sources ("passive
foreign investment companies"), the Fund could be subject to federal income
tax and additional interest charges on "excess distributions" received from
such companies or gain from the sale of stock in such companies, even if
all income or gain actually received by a Fund is distributed to its
shareholders in a timely manner. A Fund would not be able to pass through
to its shareholders any credit or deduction for such tax. Accordingly, each
Fund expects to limit its investments in such passive foreign investment
companies and expects to attempt to undertake appropriate actions to limit
its tax liability, if any, with respect to such investments. The Internal
Revenue Service has proposed regulations that, if adopted, will allow a
regulated investment company to avoid the tax and interest charge with
respect to a passive foreign investment company by electing to mark the
stock to market each year.
11
<PAGE>
State Income Taxes
The state tax consequences of investments in the Funds are beyond the
scope of the tax discussions in the Prospectus and this Statement of
Additional Information.
Additional Information
The foregoing summary and the summary included in the Prospectus under
"Taxes" of tax consequences of investment in the Funds are necessarily
general and abbreviated. No attempt has been made to present a complete or
detailed explanation of tax matters. Furthermore, the provisions of the
statutes and regulations on which they are based are subject to change by
legislative or administrative action. State and local taxes are beyond the
scope of this discussion. Prospective investors in the Fund are urged to
consult their own tax advisers regarding specific questions as to federal,
state, or local taxes.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
The Trust may from time to time advertise or quote the total return
performance for the Funds. These figures represent historical data and are
calculated according to the SEC rules standardizing such computations. The
investment return on and the value of shares of a Fund will fluctuate so
that the shares when redeemed may be worth more or less than their original
cost.
The Trust may publish average annual total return quotations for
recent 1, 5, and 10-year periods (or a fractional portion thereof) computed
by finding the average annual compounded rates of return over the 1, 5, and
10-year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1000 payment made at the beginning of the 1, 5,
and 10-year periods (or a fractional portion
thereof)
Total return figures may also be published for recent 1, 5, and
10-year periods (or a fractional portion thereof) where the total return
figures represent the percentage return for the 1, 5, and 10-year periods
that would equate the initial amount invested to the ending redeemable
value.
If the Trust's registration statement under the 1940 Act with respect
to a Fund has been in effect less than 1, 5 or 10 years, the time period
during which the registration statement with respect to that Fund has been
in effect will be substituted for the periods stated.
12
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Prospectus sets forth the investment objectives and certain
restrictions applicable to the Funds. The following is a list of investment
restrictions applicable to each Fund. If a percentage limitation is adhered
to at the time of the investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction. The Trust may not change these
restrictions without a majority vote of the outstanding shares of the
applicable Fund.
The Small Cap Fund may not:
1. Buy or sell commodities. The Small Cap Fund may, however, invest in
futures contracts relating to broadly based stock indices, subject to the
restrictions in paragraph 15.
2. Concentrate investments in any industry. The Small Cap Fund,
however, may (a) invest up to 25 percent of the value of the total assets
in any one industry and (b) invest for temporary defensive purposes up to
100 percent of the value of the total assets in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
3. Buy or sell real estate.
4. Make loans to other persons (except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting
part of an issue). For purposes of this restriction 4, the making of a loan
by the Fund will not include the purchase of a portion of an issue of
publicly distributed bonds, debentures, or other securities, whether or not
the purchase is made upon the original issuance of the securities.
5. Purchase illiquid securities, including restricted securities and
repurchase agreements of more than seven days maturity if, as a result of
such purchase, more than 10 percent of the assets of the Fund (taken at
current value) is invested in such securities. "Illiquid securities" are
securities that may not be sold or disposed of in the ordinary course of
business within seven days at approximately the price used to determine the
Fund's net asset value and include restricted securities that are subject
to legal or contractual restrictions on resale.
6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Small Cap Fund.
7. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the value of the total assets
of the Small Cap Fund at market value to be invested in the securities of
that issuer (other than obligations of the U.S. Government and its agencies
and instrumentalities), with reference to 75 percent of the assets of the
Fund.
8. Purchase securities of other open-end investment companies. The
Fund may, however, purchase securities of closed-end investment companies
so long as the Fund and the International Stock Fund do not own in the
aggregate more than 10 percent of the outstanding voting securities of such
investment company.
9. Issue senior securities, bonds, or debentures.
13
<PAGE>
10. Underwrite securities of other issuers, except that the Small Cap
Fund may acquire portfolio securities in circumstances where, if the
securities are later publicly offered or sold by the Fund, it might be
deemed to be an underwriter for purposes of the 1933 Act.
11. Borrow money in excess of 5 percent of its net assets value. Any
borrowing must only be temporary, from banks, and for extraordinary or
emergency purposes.
12. Invest its assets in the securities of any company if the
purchase, at the time thereof, would cause more than 10 percent of the
value of the Small Cap Fund's total assets to be invested in companies
which have a record of less than three years' continuous operation,
including the operation of predecessors and parents.
13. Invest in companies for the purpose of exercising control or
management.
14. Engage in short sales of securities except to the extent that such
sales are "against the box"; that is, only to the extent the Small Cap Fund
owns the securities sold short or owns other securities convertible into an
equivalent amount of the securities sold short. Such transactions may only
be made to protect a profit in or to attempt to minimize a loss with
respect to convertible securities. In any event, no more than 10 percent of
the value of the Small Cap Fund's net assets taken at market may, at any
time, be held as collateral for such sales.
15. Buy and sell puts and calls on stock index futures or options on
stock index futures, or financial futures or options on financial futures,
unless such options are written by other persons and the options or futures
are offered through the facilities of a national securities association or
are listed on a national securities or commodities exchange.
Some of the policies described above prohibit particular practices.
Other policies (paragraphs 4, 5, 11, 12, and 14) permit specified practices
but limit the portion of the Small Cap Fund's assets that may be so
invested. (See the Prospectus for additional information.) Except for the
practices described in paragraph 5, the Small Cap Fund has no intention of
engaging in these permitted practices in the foreseeable future.
The International Stock Fund may not:
1. Buy or sell commodities. However, the International Stock Fund may
invest in futures contracts or options on such contracts relating to
broadly based stock indices, subject to the restrictions in paragraph 15,
and may enter into foreign currency transactions.
2. Concentrate investments in any industry. However, the International
Stock Fund may (a) invest up to 25 percent of the value of its assets in
any one industry and (b) invest for temporary defensive purposes up to 100
percent of the value of its assets in securities issued or guaranteed by
the United States or its agencies or instrumentalities.
3. Buy or sell real estate. However, the International Stock Fund may
purchase or hold readily marketable securities issued by companies, such as
real estate investment trusts, which deal in real estate or interests
therein.
4. Make loans to other persons, except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting
part of an issue and except to the extent the entry into repurchase
agreements in accordance with the Fund's investment restrictions may be
deemed a loan.
14
<PAGE>
5. Purchase illiquid securities, including restricted securities and
repurchase agreements of more than seven days maturity if, as a result of
such purchase, more than 10 percent of the assets of the Fund (taken at
current value) is invested in such securities. "Illiquid securities" are
securities that may not be sold or disposed of in the ordinary course of
business within seven days at approximately the price used to determine the
Fund's net asset value and include restricted securities that are subject
to legal or contractual restrictions on resale. Certain restricted
securities that can be resold to qualifying institutions pursuant to a
regulatory exemption under Rule 144A under the 1933 Act and for which a
dealer or institutional trading market exists may be deemed to be liquid
securities by the Trustees of the Trust and, therefore, are not subject to
the above investment restriction.
6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held by the International Stock Fund.
7. Purchase the securities of any issuer (including any foreign
government issuer) if the purchase, at the time thereof, would cause more
than 5 percent of the value of the total assets of the Fund at market value
to be invested in the securities of that issuer (other than obligations of
the U.S. government and its agencies and instrumentalities), with reference
to 75 percent of the assets of the International Stock Fund.
8. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization, or
by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer's commission or profit, other than
customary broker's commission, is involved and only if immediately
thereafter not more than (i) 3 percent of the total outstanding voting
stock of such company is owned by the Fund, (ii) 5 percent of the
International Stock Fund's total assets would be invested in any one such
company, and (iii) 10 percent of the International Stock Fund's total
assets would be invested in such securities.
9. Issue senior securities, bonds, or debentures.
10. Underwrite securities of other issuers, except that the
International Stock Fund may acquire portfolio securities in circumstances
where, if the securities are later publicly offered or sold by the
International Stock Fund, it might be deemed to be an underwriter for
purposes of the 1933 Act.
11. Borrow money, except temporarily for extraordinary or emergency
purposes. For all amounts borrowed, the Fund will maintain an asset
coverage of 300 percent. The International Stock Fund will not make any
additional investments while borrowings exceed 5 percent of the Fund's
total assets.
12. Invest its funds in the securities of any company if the purchase
would cause more than 5 percent of the value of the International Stock
Fund's total assets to be invested in companies which have a record of less
than three years of continuous operation, including operation of
predecessors and parents.
13. Invest in companies for the purpose of exercising control or
management.
14. Engage in short sales of securities except to the extent that the
International Stock Fund owns other securities convertible into an
equivalent amount of such securities. Such transactions may only be made to
protect a profit in or to attempt to minimize a loss with respect to
convertible securities. In any event, no more than 5 percent of the value
of the International Stock Fund's net assets taken at market may, at any
time, be held as collateral for such sales.
15
<PAGE>
15. Buy and sell puts and calls on securities, stock index futures, or
options on stock index futures, or financial futures or options on
financial futures, unless such options are written by other persons and the
options or futures are offered through the facilities of a recognized
securities association or are listed on a recognized securities or
commodities exchange or similar entity.
Some of the policies described above prohibit particular practices.
Other policies (paragraphs 5, 8, 11, 12, and 14) permit specified practices
but limit the portion of the International Stock Fund's assets that may be
so invested. Subject to the investment restriction, the International Stock
Fund expects to engage in the practices described in paragraphs 5 (illiquid
securities) and 8 (investment companies). The International Stock Fund has
no intention of engaging in the other permitted practices in the
foreseeable future.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUNDS
- --------------------------------------------------------------------------------
Additional information with respect to certain of the securities in
which a Fund may invest on a temporary basis, as described under "Temporary
Investments" in the Prospectus, is set forth below.
Certificates of Deposit
Certificates of Deposit are receipts issued by a U.S. bank in exchange
for the deposit of funds. The U.S. bank agrees to pay the amount deposited,
plus interest, to the bearer of the receipt on the date specified on the
certificate. Because the certificate is negotiable, it can be traded in the
secondary market before maturity. Under current FDIC regulations, $100,000
is the maximum insurance payable on Certificates of Deposit issued to a
Fund by any one bank. Therefore, Certificates of Deposit purchased by a
Fund may not be fully insured.
Bankers' Acceptances
Time drafts are drawn on a U.S. bank by an exporter or importer to
obtain a stated amount of funds to pay for specific merchandise or, less
frequently, foreign exchange. The draft is then "accepted" by the U.S. bank
(the drawee), which in effect unconditionally guarantees to pay the face
value of the instrument on its maturity date. The face of the instrument
specifies the dollar amount involved, the maturity date, and the nature of
the underlying transaction.
Letters of Credit
Letters of Credit are issued by banks and authorize the beneficiary to
draw drafts upon such banks for acceptance and payment under specified
conditions.
Commercial Paper
Commercial paper is an unsecured short-term note of indebtedness
issued in bearer form by business or banking firms to finance their
short-term credit needs.
Securities Rating Agencies
Subsequent to its purchase by a Fund, an issue may cease to be rated,
or its rating may be reduced below the criteria set forth for the Fund.
Neither event would require the elimination of bonds from a Fund's
portfolio, but the Adviser will consider that event in its determination of
whether the Fund should continue to hold such security in its portfolio. To
the extent the ratings accorded by Standard & Poor's Corporation ("S&P") or
Moody's Investors Services, Inc. ("Moody's") for securities may change as a
16
<PAGE>
result of changes in the rating systems, a Fund will attempt to use
comparison ratings as standards for its investments in municipal bonds in
accordance with the policies described herein.
Commercial Paper Ratings. A1 and Prime 1 are the highest commercial
paper ratings issued by S&P and Moody's, respectively.
Commercial paper rated A1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated A or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically,
the issuer's industry is well established and the issuer has a strong
position within the industry; and (6) the reliability and quality of
management are unquestioned.
Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6)
trend of earnings over a period of 10 years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparation to meet such
obligations.
Bond Ratings. Moody's -- The following is a description of Moody's
three highest bond ratings:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
S&P -- The following is a description of S&P's three highest bond
ratings:
AAA - This is the highest rating assigned by S&P's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
17
<PAGE>
Government Securities
Government securities may be either direct obligations of the U.S.
Treasury or may be the obligations of an agency or instrumentality of the
United States.
Treasury Obligations. The U.S. Treasury issues a variety of marketable
securities that are direct obligations of the U.S. Government. These
securities fall into three categories - bills, notes, and bonds
distinguished primarily by their maturity at time of issuance. Treasury
bills have maturities of one year or less at the time of issuance, while
Treasury notes currently have maturities of 1 to 10 years. Treasury bonds
can be issued with any maturity of more than 10 years.
Obligations of Agencies and Instrumentalities. Agencies and
instrumentalities of the U.S. Government are created to fill specific
governmental roles. Their activities are primarily financed through
securities whose issuance has been authorized by Congress. Agencies and
instrumentalities include Export Import Bank, Federal Housing
Administration, Government National Mortgage Association, Tennessee Valley
Authority, Banks for Cooperatives, Farmers Home Administration, Federal
Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association, Federal Home Loan Mortgage Corp.,
U.S. Postal System, and Federal Finance Bank. Although obligations of
"agencies" and "instrumentalities" are not direct obligations of the U.S.
Treasury, payment of the interest or principal on these obligations is
generally backed directly or indirectly by the U.S. Government. This
support can range from backing by the full faith and credit of the United
States or U.S. Treasury guarantees to the backing solely of the issuing
instrumentality itself.
Mortgage-Backed Certificates
GNMA (Government National Mortgage Association) Certificates
("Certificates") are mortgage-backed securities. The Certificates evidence
part ownership of a pool of mortgage loans. The Certificates which the
Funds may purchase are of the "modified pass-through" type. "Modified
pass-through" Certificates entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of fees paid to the
servicing agent and GNMA, regardless of whether or not the mortgagor
actually makes the payment.
The GNMA Guarantee. The National Housing Act authorizes GNMA to
guarantee the timely payment of principal of and interest on securities
backed by a group (or pool) of mortgages insured by FHA or FMHA, or
guaranteed by VA. The GNMA guarantee is backed by the full faith and credit
of the United States. GNMA is also empowered to borrow without limitation
from the U.S. Treasury to make any payments required under its guarantee.
Market for GNMA Certificates. Since the inception of the GNMA
Mortgage-Backed Securities program in 1970, the amount of GNMA Certificates
outstanding has grown rapidly. The size of the market and the active
participation in the secondary market by securities dealers and many types
of investors make the GNMA Certificates a highly liquid instrument. Prices
of GNMA Certificates are readily available from securities dealers and
depend on, among other things, the level of market rates, the Certificate's
coupon rate and the prepayment experience of the pool of mortgages backing
each Certificate.
Other Pass-Through Certificates. A Fund may invest in other
pass-through securities. These are mortgage-backed securities for which the
payments on the underlying mortgages are passed from the mortgage holder
through the servicing agent, net of fees paid to the servicing agent, to a
Fund. These securities may be "modified pass-through certificates" (like
GNMA certificates) whereby a Fund would receive interest and principal
payments regardless of whether the mortgagors make the payments, or they
may be "straight pass-through certificates" whereby a Fund would receive
principal and/or interest only
18
<PAGE>
to the extent actually collected by the servicing agent. The servicing
agent may be an instrumentality or agency of the U.S. Government or may be
an institution such as a bank or savings and loan association. The
underlying mortgages may be conventional mortgages as well as mortgages
guaranteed by federal agencies or instrumentalities. Straight pass-through
securities involve additional risks because payments are not guaranteed.
However, this risk may be mitigated to the extent that the underlying
mortgages are guaranteed by a federal agency or instrumentality or by a
private insurance company. The Fund will limit its investments in other
pass-through securities to those issued by Federal National Mortgage
Association; Federal Home Loan Mortgage Corporation (Participation
Certificates); and Resolution Funding Corp. Participation Certificates.
19
<PAGE>
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
MANAGEMENT DISCUSSION OF PERFORMANCE
We are pleased to provide you with an investment discussion of CMC Small
Cap Fund's performance for the fiscal year ending October 31, 1996. The
Fund significantly outperformed its benchmark index, the Russell 2000 stock
index, by posting a total return of 30.30% for the one year ended October
31, compared to 16.62% for the index.
During the fiscal year, the Fund benefited from exposure to small cap
growth stocks, which generally outperformed cyclical issues, such as
machinery and capital spending. The technology sector (semiconductor
stocks, in particular) was underweighted during the first quarter of the
fiscal year, which benefited fund performance. Technology was then
increased throughout the remaining quarters, including exposure to
semi-conductor stocks. Other sectors of emphasis included health care,
energy and business services. In general, the Fund's strong relative
performance was attributable to good individual stock selection rather than
an emphasis on any particular sector.
During May and early June, the Fund became increasingly defensive as small
cap valuations increased sharply following a period of very strong
performance. Overextended stocks in the portfolio were trimmed or sold and
the Fund's cash position was temporarily higher than normal. This strategy
benefited the Fund as a sharp correction took place in both the small cap
market and the broader stock market during June and the first half of July.
The total correction in the small cap market was approximately 16%, as
represented by the Russell 2000 Stock Index.
We used our larger cash position to take advantage of the significantly
lower valuations of several stocks. By the end of the last fiscal quarter,
small cap stocks had rebounded by more than 12% from their low. During this
volatile period, the market was generally unforgiving toward companies with
no earnings disappointments and unwilling to reward those who could not
project positive earnings to 1998 or beyond.
Despite the volatility in the small cap market, the Fund outperformed the
Russell 2000 Stock Index in every fiscal quarter.
As of October 31, 1996, the Fund's largest sector concentrations were
technology at 20.3% of net assets, health care at 18.6%, business and
consumer services at 11.8%, consumer non-durables at 9% and energy at 5.3%.
In addition, the Fund's ten largest holdings as of October 31, 1996 were:
Orbital Sciences Corp. (2.6%)
Danka Business System plc (2.3%)
Target Therapeutics, Inc. (2.1%)
Thermedics, Inc. (1.9%)
20
<PAGE>
MICROS Systems, Inc. (1.7%)
American Management Systems, Inc. (1.7%)
Boston Chicken, Inc. (1.7%)
Harman International Industries, Inc. (1.6%)
AccuStaff, Inc. (1.5%)
Network Appliance (1.5%)
In this investment environment of low interest rates and low inflation, we
believe that our current emphasis on growth stocks will continue to reward
Fund performance. We remain optimistic but cautious for the near-term,
seeking companies that are able to grow earnings in an environment where
corporate profits are generally sluggish and vulnerable to disappointment.
We appreciate your continuing support of CMC Small Cap Fund.
The Columbia Investment Team
November 29, 1996
[Graphic line chart depicting "Growth of $10,000 Since Inception" showing
the growth in dollar amounts ($5,000-$30,000) of CMC Small Cap, Russell
2000 and S&P 500 for the period 8/30/89 to 10/31/96 to $29,143, $21,704
and $24,771, respectively:
Average Annual Total Return
1 Year 5 Years Since Inception*
------ ------- ---------------
CMC Small Cap 30.30% 18.03% 16.02%
Russell 2000 16.62% 14.80% 11.36%
S&P 500 24.09% 15.55% 13.43%
* The Fund's inception date was August 30, 1989. Index performance is
based on the periods beginning August 31, 1989. Total return performance
is illustrated for the periods ended October 31, 1996. Past performance
does not guarantee future results. The S&P 500 and Russell 2000 are
unmanaged stock indices.]
21
<PAGE>
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
We are pleased to provide you with the investment results of the CMC
International Stock Fund for the fiscal year. The Fund posted a total
return of 16.67%, which compares to a one-year total return of 10.72% for
the FT/S&P Euro Pacific Index over the same period.
Foreign stock markets generally rose during the fiscal year with many
showing excellent recovery. Early in the fiscal year, the portfolio
benefited from a heavy Japanese weighting as Japan recovered from its
mid-1995 market low. We took profits in Japan in early 1996 and increased
positions in a number of emerging markets. Several of our emerging markets
purchases rewarded the Fund during the period, including Brazil, Hong Kong
and Malaysia. Although holdings in India have been disappointing, we have a
number of blue chip stocks in India that we believe have exciting growth
prospects.
We have also increased exposure to Canada, particularly during the second
half of the fiscal year. We believe Canada's strong dollar gives the Bank
of Canada room to lower interest rates, thus benefiting Canada's financial
markets and encouraging foreign investment. Investments in European
financial companies also benefited the Fund, as their profitability
improved due to substantial declines of both short- and long-term interest
rates throughout Europe.
A major negative factor for all international portfolios during the fiscal
year was the steady recovery of the dollar, which lowers the value of a
portfolio denominated in foreign currencies. The Japanese yen, for example,
has declined 10% versus the dollar over the past 12 months. By hedging a
portion of the yen's exposure, however, the Fund was able to avoid some of
the negative effect of the currency exposure, which helped contribute to
the Fund's strong relative performance.
As of October 31, 1996, the ten largest country weightings and the ten
largest security holdings of the fund (as a percentage of net assets) were:
Country Weightings Security
Japan (21.6%) Sony Corp (2.0%)
U.K. (14.9%) British Petroleum (1.9%)
Hong Kong (6.6%) Toyota Motor Corp. (1.9%)
France (5.4%) Ericsson (LM). ADR (1.7%)
Germany (5.2%) I.N.A. S.P.A. (1.6%)
Netherlands (4.5%) British Aerospace, plc (1.6%)
Canada (3.9%) HSBC Holdings, plc (1.6%)
Italy (3.4%) Bayer AG (1.5%)
Brazil (3.1%) Guangnan Holdings (1.5%)
Malaysia (3.0%) Ciba Geigy AG (Bearer) (1.5%)
22
<PAGE>
Worldwide growth for 1997 is looking increasingly positive, as major
central banks continue to support lower interest rates. Given this
environment, we are focusing on Europe and emerging markets for the
short-term. We also have a more modest weighting in Japan than we did a
year ago.
We appreciate your continuing support of CMC International Stock Fund.
The Columbia Investment Team
November 29, 1996
[Graphic line chart depicting "Growth of $10,000 Since Inception" showing
the growth in dollar amounts ($8,000-$16,000) of CMC International Stock,
FT/S&P Euro Pacific and S&P 500 for the period 2/1/94 to 10/31/96 to
$10,869, $11,320 and $15,789, respectively:
Average Annual Total Return
1 Year Since Inception*
------ ---------------
CMC International Stock 16.67% 3.13%
FT/S&P Euro Pacific 10.72% 4.70%
S&P 500 24.09% 18.43%
* The Fund's inception date was February 1, 1994. Index performance
information is based on the period beginning January 31, 1994. Total
return performance is illustrated for the periods ended Octber 31, 1996.
Past performance does not guarantee future results. S&P 500 and FT/S&P
Euro Pacific are unmanaged stock indices.]
23
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
October 31, 1996
Shares or
Principal Amount Value (l)
---------------- --------------
<S> <C> <C>
Common Stocks (91.6%)
Aerospace (2.6%)
*Orbital Sciences Corp. ................................................ 641,000 $ 13,461,000
--------------
Banking & Finance (4.7%)
*Bank United Corp. (Class A)............................................ 81,900 2,180,587
*Credit Acceptance Corp. ............................................... 200,000 5,400,000
*Insignia Financial Group, Inc. (Class A)............................... 304,000 6,574,000
*Leasing Solutions, Inc. ............................................... 150,000 4,725,000
North Fork Bancorp, Inc. (NY).......................................... 184,000 5,819,000
--------------
24,698,587
--------------
Business & Consumer Services (11.8%)
*AccuStaff, Inc. ....................................................... 300,000 8,025,000
*American Medical Response, Inc. ....................................... 100,000 3,000,000
*Billing Information Concepts Corp. .................................... 198,600 5,188,425
*CorVel Corp. .......................................................... 80,100 2,232,787
Danka Business Systems plc Spon. ADR................................... 301,000 11,927,125
*Envoy Corp. ........................................................... 60,000 2,205,000
*Guest Supply, Inc. .................................................... 103,400 1,525,150
Harland (John H.) Co. ................................................. 230,000 7,158,750
*Keane, Inc. ........................................................... 100,000 4,637,500
*National TechTeam, Inc. ............................................... 78,000 2,106,000
*Protection One, Inc. .................................................. 465,500 5,236,875
*Romac International, Inc. ............................................. 30,400 874,000
*U.S. Office Products Co. .............................................. 200,000 5,800,000
*Vincam Group, Inc. .................................................... 11,500 365,125
*Walsh International, Inc. ............................................. 158,300 1,385,125
--------------
61,666,862
--------------
Chemical (1.1%)
*TETRA Technologies, Inc. (Del.)........................................ 280,300 5,851,262
--------------
Consumer Non-Durable (9.0%)
*American Pad & Paper Co. .............................................. 100,000 1,875,000
*Bed, Bath & Beyond, Inc. .............................................. 122,700 3,098,175
*Borders Group, Inc. ................................................... 236,500 7,449,750
*Boston Chicken, Inc. .................................................. 240,000 8,730,000
CKE Restaurants, Inc. (Del.)........................................... 37,500 1,115,625
*Designer Holdings Ltd. ................................................ 160,900 3,077,212
Harman International Industries, Inc. ................................. 162,775 8,362,566
*Home Shopping Network, Inc. ........................................... 220,000 2,227,500
K2, Inc. .............................................................. 131,000 3,013,000
*Sports & Recreation, Inc. ............................................. 250,000 2,156,250
*Williams-Sonoma, Inc. ................................................. 220,000 6,050,000
--------------
47,155,078
--------------
Consumer Staples (1.4%)
*Consolidated Cigar Holdings, Inc. ..................................... 109,200 2,975,700
*Mondavi (Robert) Corp. (Class A)....................................... 153,000 4,360,500
--------------
7,336,200
--------------
Energy (5.1%)
*Abacan Resource Corp. ................................................. 200,000 1,525,000
*Barrett Resources Corp. ............................................... 117,600 4,512,900
*Cairn Energy USA, Inc. ................................................ 400,500 4,255,312
24
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------
Shares or
Principal Amount Value (l)
---------------- --------------
Common Stocks (Continued)
Enron Global Power & Pipelines L.L.C. ................................. 100,000 $ 2,812,500
*Flores & Rucks, Inc. .................................................. 135,600 6,407,100
*Gulf Canada Resources Ltd. ............................................ 480,000 3,300,000
*Mesa, Inc. ............................................................ 125,000 578,125
*Swift Energy Co. ...................................................... 140,000 3,430,000
--------------
26,820,937
--------------
Energy Services (2.2%)
*BJ Services Co. ....................................................... 119,000 5,340,125
*Petroleum Geo-Services ASA Spon. ADR................................... 61,300 2,099,525
*Veritas DGC, Inc. ..................................................... 200,000 4,100,000
--------------
11,539,650
--------------
Entertainment & Media (1.8%)
*Golden Books Family Entertainment, Inc. ............................... 200,000 2,225,000
*United International Holdings, Inc. (Class A).......................... 289,300 3,543,925
*WMS Industries, Inc. .................................................. 150,000 3,675,000
--------------
9,443,925
--------------
Health (18.6%)
*Agouron Pharmaceuticals, Inc. ......................................... 58,600 3,354,850
*Applied Analytical Industries, Inc. ................................... 15,600 339,300
*Assisted Living Concepts, Inc. ........................................ 213,500 3,469,375
*Conceptus, Inc. ....................................................... 176,400 2,116,800
*Dura Pharmaceuticals, Inc. ............................................ 230,000 7,935,000
*Elan Corp. plc ADR..................................................... 160,000 4,440,000
*Health Management Associates, Inc. (Class A)........................... 100,000 2,200,000
*HealthCare COMPARE Corp. .............................................. 100,000 4,400,000
*ICOS Corp. ............................................................ 281,300 2,109,750
*IDEXX Laboratories, Inc. .............................................. 81,000 3,179,250
*Ligand Pharmaceuticals, Inc. (Class B)................................. 316,200 3,912,975
*NABI, Inc. ............................................................ 200,000 1,850,000
*OccuSystems, Inc. ..................................................... 162,000 4,434,750
*Phamis, Inc. .......................................................... 213,000 3,195,000
*Protein Design Labs, Inc. ............................................. 200,000 4,750,000
*Scherer (R.P.) Corp. (Del.)............................................ 100,000 4,637,500
*Target Therapeutics, Inc. ............................................. 292,400 10,818,800
*Thermedics, Inc. ...................................................... 473,600 9,827,200
*Thermotrex Corp. ...................................................... 100,000 3,550,000
United Healthcare Corp. ............................................... 200,000 7,575,000
*UroMed Corp. .......................................................... 247,500 2,505,938
*VidaMed, Inc. ......................................................... 200,000 2,125,000
*Visible Genetics, Inc. ................................................ 60,000 585,000
Vital Signs, Inc. ..................................................... 170,000 3,612,500
--------------
96,923,988
--------------
Hotels & Gaming (0.7%)
*CapStar Hotel Co. ..................................................... 195,000 3,510,000
--------------
Insurance (1.9%)
PennCorp Financial Group, Inc. ........................................ 100,000 3,462,500
Protective Life Corp. ................................................. 181,500 6,261,750
--------------
9,724,250
--------------
25
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (l)
---------------- --------------
Common Stocks (Continued)
Machinery & Capital Spending (2.1%)
*Cuno, Inc. ............................................................ 117,000 $ 1,872,000
Far East Levingston Shipbuilding Ltd. ................................. 500,000 2,306,600
*J. Ray McDermott, S.A. ................................................ 100,300 2,720,638
*Jacobs Engineering Group, Inc. ........................................ 179,000 3,960,375
--------------
10,859,613
--------------
Metal Mining & Steel (1.6%)
*Getchell Gold Corp. ................................................... 156,000 6,942,000
*Meridian Gold, Inc. (Installment Receipts) (144A)...................... 500,000 1,248,975
--------------
8,190,975
--------------
Pollution Control (2.5%)
*U.S. Filter Corp....................................................... 102,950 3,551,775
*United Waste Systems, Inc. ............................................ 150,000 5,156,250
*USA Waste Services, Inc. .............................................. 140,000 4,480,000
--------------
13,188,025
--------------
Technology (20.3%)
*Actel Corp. ........................................................... 402,800 7,200,050
*Activision, Inc. ...................................................... 106,500 1,344,562
*American Management Systems, Inc. ..................................... 277,550 8,777,519
*American Power Conversion Corp. ....................................... 300,000 6,412,500
*Cognos, Inc. .......................................................... 100,000 3,137,500
*Coherent Communications Systems Corp. ................................. 168,500 3,264,687
*Computer Products, Inc. ............................................... 150,000 2,962,500
*Control Data Systems, Inc. ............................................ 200,000 4,700,000
*Eltron International, Inc. ............................................ 106,700 3,774,513
*Engineering Animation, Inc. ........................................... 97,500 2,388,750
*Geoworks............................................................... 190,000 3,871,250
*Informix Corp. ........................................................ 100,000 2,218,750
*JDA Software Group, Inc. .............................................. 96,000 3,300,000
*MDL Information Systems, Inc. ......................................... 168,000 2,583,000
*Merix Corp. ........................................................... 100,000 2,100,000
*MICROS Systems, Inc. .................................................. 262,200 9,078,675
*Network Appliance, Inc. ............................................... 227,400 7,959,000
*OrCAD, Inc. ........................................................... 100,000 1,025,000
*P-COM, Inc. ........................................................... 180,500 3,971,000
*Proxim, Inc. .......................................................... 75,500 1,717,625
*Saville Systems plc Spon. ADR.......................................... 110,000 4,743,750
*Shiva Corp. ........................................................... 100,000 4,100,000
*SPSS, Inc. ............................................................ 110,000 3,423,750
*Sykes Enterprises, Inc. ............................................... 66,300 3,082,950
*Synopsys, Inc. ........................................................ 69,500 3,127,500
*Trident Microsystems, Inc. ............................................ 250,000 5,000,000
*Zebra Technologies Corp. (Class A)..................................... 21,000 606,375
--------------
105,871,206
--------------
Transportation (0.7%)
USFreightways Corp. ................................................... 92,300 2,019,063
Werner Enterprises, Inc. .............................................. 90,000 1,575,000
--------------
3,594,063
--------------
26
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (l)
---------------- --------------
Common Stocks (Continued)
Utilities/Communications (2.7%)
*Anicom, Inc. .......................................................... 577,000 $ 5,193,000
*Arch Communications Group, Inc. ....................................... 156,300 1,816,988
*Geotek Communications, Inc. ........................................... 500,000 3,687,500
*ICG Communications, Inc. .............................................. 177,900 3,335,625
--------------
14,033,113
--------------
Utilities/Electric/Gas (0.8%)
*AES Corp. ............................................................. 100,000 4,387,500
--------------
Total Common Stocks
(Cost $418,311,581)................................................... 478,256,234
--------------
Convertible Preferred Stocks (0.1%)
Energy (0.1%)
Mesa, Inc. (Class A) 8% Cum
(Cost $475,962)....................................................... 126,444 727,053
--------------
Total investments, excluding temporary cash investment
(Cost $418,787,543)................................................... 478,983,287
--------------
Repurchase Agreements (12.5%)
Goldman Sachs Corp.
5.602% dated 10/31/1996,
due 11/01/1996 in the
amount of $25,007,908.
Collateralized by U.S. Treasury Bond
8.125% due 08/15/2019,
U.S. Treasury Notes
6.125% to 8.000%,
due 05/15/1998 to 04/30/2001.......................................... $ 25,004,081 25,004,081
J.P. Morgan Securities, Inc.
5.585% dated 10/31/1996,
due 11/01/1996 in the
amount of $25,003,815.
Collateralized by U.S. Treasury Notes
5.125% to 8.750%,
due 10/15/1997 to 02/15/2005.......................................... 25,000,000 25,000,000
Merrill Lynch, Inc.
5.592% dated 10/31/1996,
due 11/01/1996 in the
amount of $15,202,322.
Collateralized by U.S. Treasury Strips
due 02/15/2014 to 05/15/2016.......................................... 15,200,000 15,200,000
--------------
Total Repurchase Agreements
(Cost $65,204,081) 65,204,081
--------------
27
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (l)
---------------- --------------
Total Investments (104.2%)
(Cost $483,991,624)................................................... 544,187,368
Receivables less liabilities (-4.2%)............................................ (21,779,361)
--------------
Net Assets (100.0%)............................................................. $ 522,408,007
==============
(l) See Note 1 of Notes to Financial Statements.
* Non-income producing
The accompanying notes are an integral part of the financial statements.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
October 31, 1996
Shares or
Principal Amount Value (1)
---------------- --------------
<S> <C> <C>
Common Stocks (78.6%)
Australia (0.9%)
Reinsurance Australia Corp., Ltd. (Insurance).......................... 222,000 $ 665,202
--------------
Brazil (0.9%)
Companhia Energetica de Minas Gerais SA, ADR
(Utilities - Electric)................................................ 12,368 395,034
Usinas Siderurgicas de Minas Gerais SA, ADR
(Metals, Mining & Steel).............................................. 25,000 257,500
--------------
652,534
--------------
Canada (3.9%)
Bank of Nova Scotia (Banking).......................................... 23,000 724,592
Bombardier, Inc. (Class B).............................................
(Manufacturing - Diversified Inds.)................................... 45,000 724,778
Canadian Pacific Ltd. (Transportation)................................. 16,500 418,314
Northern Telecom Ltd. (Electronics).................................... 15,000 976,437
--------------
2,844,121
--------------
Czech Republic (0.2%)
*Central European Media Enterprises Ltd. (Class A) (Media).............. 6,200 173,600
--------------
Finland (1.3%)
Finnlines Oy (Transportation).......................................... 20,000 468,719
Rautaruukki Oy (Metals, Mining & Steel)................................ 55,000 485,490
--------------
954,209
--------------
France (5.4%)
Altran Technologies SA (Engineering)................................... 933 279,571
BIC SA (Consumer Products)............................................. 2,000 300,431
Canal Plus SA (Media).................................................. 1,050 260,341
Cardif SA (Insurance).................................................. 1,200 164,512
Carrefour SA (Retail).................................................. 700 388,935
Cie Financiere de Paribas SA (Banking)................................. 4,100 264,179
Coflexip Stena Offshore Group, ADR
(Oil Equipment & Services)............................................ 15,000 337,500
Hermes International SA (Consumer Products).......................... 760 193,200
L'Oreal SA (Consumer Products)......................................... 800 271,210
Pinault-Printemps-Redoute SA (Retail).................................. 1,000 377,595
SEB SA (Consumer Products)............................................. 2,500 506,757
Synthelabo SA (Pharmaceuticals)........................................ 2,200 210,263
Total SA (Class B) (Oil Exploration & Production)...................... 5,500 430,758
--------------
3,985,252
--------------
Germany (3.5%)
Bayer AG (Chemicals)................................................... 30,000 1,134,792
Gehe AG (Wholesale Distributor)........................................ 6,200 418,060
Mannesmann AG (Machinery & Capital Spending)........................... 1,670 649,144
SGL Carbon AG (Metals, Mining & Steel)................................. 3,200 360,680
--------------
2,562,676
--------------
Ghana (0.2%)
Ashanti Goldfield Co., Ltd., GDR (Metals, Mining & Steel).............. 10,000 163,750
--------------
29
<PAGE>
- --------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (1)
---------------- --------------
Common Stocks (Continued)
Hong Kong (6.6%)
ASM Pacific Technology Ltd. (Conglomerate)............................. 109,000 $ 81,766
Cheung Kong Holdings Ltd. (Real Estate)................................ 50,000 400,942
China Overseas Land & Investment Ltd. (Conglomerate).................. 1,100,000 409,025
CITIC Pacific Ltd. (Conglomerate)...................................... 100,000 486,303
COSCO Pacific Ltd. (Container Leasing)................................. 726,000 694,845
Gold Peak Industries Holdings Ltd. (Conglomerate)...................... 300,000 186,244
Guangnan Holdings (Wholesale Distributor).............................. 1,637,000 1,111,546
HSBC Holdings plc (Banking)............................................ 56,000 1,140,743
Hutchison Whampoa Ltd. (Consumer Products)............................. 50,000 349,207
--------------
4,860,621
--------------
India (2.3%)
Bajaj Auto Ltd., GDR (Motor Vehicles & Parts).......................... 12,000 384,000
Indian Hotels Co., Ltd., The, GDR
(Entertainment & Leisure)............................................. 16,650 393,440
*Industrial Credit & Investment Corp. of India Ltd.,
The, GDR (Financial Services).......................................... 30,600 267,750
Larsen & Toubro Ltd., GDR (Engineering & Construction)................. 16,650 247,752
Tata Engineering & Locomotive Co., Ltd., GDS
(Motor Vehicles & Parts)............................................... 30,000 371,400
--------------
1,664,342
--------------
Italy (1.8%)
Bulgari S.p.A, ADR (Consumer Products)................................. 11,250 196,270
Ente Nazionale Idrocarburi S.p.A
(Oil Exploration & Production)........................................ 40,500 193,972
Fiat S.p.A (Motor Vehicles & Parts).................................... 100,000 266,007
Gucci Group NV (Consumer Products)..................................... 9,000 621,000
--------------
1,277,249
--------------
Japan (21.0%)
BRIDGESTONE CORP. (Motor Vehicles & Parts)............................. 17,000 286,945
CANON, INC. (Electronics).............................................. 17,000 325,802
DENSO CORP. (Motor Vehicles & Parts)................................... 17,000 352,703
East Japan Railway Co. (Transportation)................................ 53 243,684
Fuji Photo Film Co., Ltd. (Entertainment & Leisure).................... 14,000 402,462
Hitachi Maxell Ltd. (Electronics)...................................... 20,000 395,604
Isetan Co., Ltd. (Retail).............................................. 20,000 267,253
KAJIMA CORP. (Construction)............................................ 22,000 189,345
Kao Corp. (Consumer Products).......................................... 14,000 164,923
Kel Corp. (Electronics)................................................ 2,000 22,857
KEYENCE CORP. (Electronics)............................................ 2,000 232,088
Kinki Nippon Railway Co., Ltd. (Transportation)........................ 28,000 185,846
KOMATSU LTD. (Machinery & Capital Spending)............................ 32,000 262,189
KUBOTA CORP. (Machinery & Capital Spending)............................ 25,000 141,538
Laox Co., Ltd. (Retail)................................................ 17,600 295,525
Matsushita-Kotobuki Electronics Inds., Ltd. (Electronics).............. 7,000 161,846
Mitsubishi Corp. (Wholesale Distributor)............................... 70,000 781,538
Mitsubishi Estate Co., Ltd. (Real Estate).............................. 75,000 936,264
30
<PAGE>
- --------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (1)
---------------- --------------
Common Stocks (Continued)
Mitsubishi Heavy Inds., Ltd.
(Machinery & Capital Spending)....................................... 43,000 $ 330,769
NEC Corp. (Electronics)................................................ 21,000 228,923
Nintendo Co., Ltd. (Entertainment & Leisure)........................... 2,000 126,593
NIPPON STEEL CORP. (Metals, Mining & Steel)............................ 125,000 364,835
NIPPON TELEGRAPH & TELEPHONE CORP.
(Utilities - Communication)......................................... 42 293,538
Nippon Television Network Corp. (Media)................................ 1,100 319,121
Nomura Securities Co., Ltd., The (Financial Services).................. 35,000 578,462
NTN CORP. (Machinery & Capital Spending)............................... 48,000 291,587
NTT Data Communications Systems Corp.
(Business Services).................................................. 23 681,407
ROHM CO., LTD. (Electronics)........................................... 5,000 296,703
SANKYO CO., LTD. (Pharmaceuticals)..................................... 12,000 297,495
Sawako Corp. (Construction)............................................ 7,800 139,886
Sharp Corp. (Electronics).............................................. 30,000 456,264
SHIMIZU CORP. (Construction)........................................... 22,000 199,209
Shiseido Co., Ltd. (Pharmaceuticals)................................... 34,000 397,538
SONY CORP. (Electronics)............................................... 25,000 1,501,099
Takeda Chemical Inds., Ltd. (Pharmaceuticals).......................... 27,000 462,857
Tokio Marine & Fire Insurance Co., Ltd., The (Insurance)............... 42,000 461,539
TORAY INDUSTRIES, INC. (Chemicals)..................................... 46,000 277,820
TOYOTA MOTOR CORP. (Motor Vehicles & Parts)............................ 60,000 1,418,901
TRANS COSMOS, INC. (Business Services)................................. 6,000 224,176
USHIO, INC. (Electronics).............................................. 16,000 167,385
YOKOGAWA ELECTRIC CORP. (Electronics).................................. 34,000 301,890
--------------
15,466,409
--------------
Korea (0.6%)
*CITC Seoul Excel Trust, IDR (Investment Trust)......................... 58,000 447,180
--------------
Malaysia (3.0%)
* Konsortium Perkapalan Berhad (Transportation)..................... 50,000 330,523
Malayan Banking Berhad (Banking).................................. 75,000 742,192
Tenaga Nasional Berhad (Utilities - Electric)..................... 118,000 471,757
Timah Langat Berhad (Conglomerate)................................ 85,000 467,680
United Engineers of Malaysia Ltd. Berhad (Construction)........... 25,000 197,918
--------------
2,210,070
--------------
Netherlands (4.5%)
Aegon NV (Insurance)................................................... 12,547 639,201
Elsevier NV (Publishing)............................................... 42,000 699,173
Koninklijke Ahold NV (Retail).......................................... 5,555 324,643
NV Holdingmaatschappij de Telegraaf (Certificates)
(Publishing).......................................................... 16,000 344,746
NV Verenidge Bedrijven Nutricia (Food & Beverages)..................... 3,214 451,554
Randstad Holdings NV (Business Services)............................... 6,800 550,744
Vendex International NV (Certificates) (Retail)........................ 8,065 326,123
--------------
3,336,184
--------------
31
<PAGE>
- --------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (1)
---------------- --------------
Common Stocks (Continued)
Sweden (2.5%)
Assa Abloy AB (Class B)
(Manufacturing Consumer & Industrial Products)........................ 19,000 $ 292,530
SSAB Svenskt Stal AB (Class B) (Metals, Mining & Steel)................ 18,000 262,043
Telefonaktiebolaget LM Ericsson, ADR (Electronics)..................... 45,000 1,243,125
--------------
1,797,698
--------------
Switzerland (3.0%)
ABB AG (Bearer) (Electrical Equipment)................................. 460 571,388
Ciba-Geigy AG (Bearer) (Pharmaceuticals)............................... 900 1,109,344
SGS Societe Generale de Surveillance Holding SA (Bearer)
(Business Services)................................................... 230 524,930
--------------
2,205,662
--------------
Taiwan (0.6%)
Cathay Life Insurance Co., Ltd. (Insurance)............................ 40,000 239,826
President Enterprises Corp. (Food & Beverages)......................... 165,000 232,031
--------------
471,857
--------------
Thailand (1.5%)
PTT Exploration & Production Public Co., Ltd.
(Oil Exploration & Production)........................................ 48,000 688,941
Thai Fund, Inc., The (Investment Company).............................. 20,500 392,062
--------------
1,081,003
--------------
United Kingdom (14.9%)
Barclays plc (Banking)................................................. 32,408 508,997
British Aerospace plc (Aircraft & Aerospace)........................... 62,000 1,176,193
British Airways plc (Transportation)................................... 23,000 207,491
British Petroleum Co. plc (Energy)..................................... 132,000 1,420,812
British Sky Broadcasting Group plc (Media)............................. 58,400 550,145
Compass Group plc (Restaurants)........................................ 32,000 317,864
Electrocomponents plc (Electronics).................................... 56,000 377,072
Fairey Group plc (Manufacturing - Diversified Inds.).................. 22,000 244,863
GKN plc (Motor Vehicles & Parts)....................................... 14,129 265,739
Granada Group plc (Entertainment & Leisure)............................ 40,000 576,128
Hays plc (Business Services)........................................... 68,400 571,949
Next plc (Retail)...................................................... 70,900 646,540
PizzaExpress plc (Restaurant).......................................... 23,000 193,071
Provident Financial plc (Financial Services)........................... 76,000 569,907
Prudential Corp. plc (Insurance)....................................... 43,347 327,520
Reuters Holdings plc (Business Services)............................... 32,000 398,372
RTZ Corp. plc (Metals, Mining & Steel)................................. 35,307 564,878
Sage Group plc, The (Business Services)................................ 40,000 314,281
Siebe plc (Machinery & Capital Spending)............................... 38,102 599,668
Wetherspoon, J.D. plc (Restaurants).................................... 13,075 254,431
WPP Group plc (Business Services)...................................... 130,000 482,658
Zeneca Group plc (Pharmaceuticals)..................................... 14,000 381,176
--------------
10,949,755
--------------
32
<PAGE>
- --------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (1)
---------------- --------------
Total Common Stocks
(Cost $51,281,720).................................................... $ 57,769,374
--------------
Preferred Stocks (3.3%)
Brazil (2.2%)
Bardella Industrias Mecanicas SA
(Manufacturing - Diversified Inds.).................................. 3,000 321,230
Companhia Cervejaria Brahma SA (Food & Beverages)...................... 1,309,000 809,126
Companhia Tecidos do Norte de Minas SA (Textiles)...................... 1,000,000 335,832
DIXIE TOGA SA (Containers)............................................. 233,000 174,642
--------------
1,640,830
--------------
Germany (1.1%)
Jil Sander AG (Consumer Products)...................................... 455 300,787
Porsche AG (Motor Vehicles & Parts).................................... 700 474,317
--------------
775,104
--------------
Total Preferred Stocks
(Cost $2,042,662)..................................................... 2,415,934
--------------
Warrants (1.2%)
Germany (0.6%)
*Veba AG (04/06/1998) (Utilities - Electric)............................ 1,650 467,938
--------------
Japan (0.6%)
*Kyocera Corp. #2 (01/23/1998) (Electronics)............................ 470 387,750
*Mr. Max Corp. (02/17/1998) (Retail).................................... 5,000 47,714
--------------
435,464
--------------
Total Warrants
(Cost $977,138)....................................................... 903,402
--------------
Convertible Bond (1.6%)
Italy (1.6%)
I.N.A. S.p.A Privatisation Exchange Note
5.000% 06/28/2001 (Insurance)
(Cost $1,200,000).................................................... 1,200,000 1,198,560
--------------
Total investments, excluding temporary cash investment
(Cost $55,501,520).................................................... 62,287,270
--------------
Repurchase Agreements (12.0%)
Goldman Sachs Corp.
5.602% dated 10/31/1996,
due 11/01/1996 in the
amount of $3,654,631
Collateralized by U.S. Treasury Bond
8.125% due 08/15/2019,
U.S. Treasury Notes
6.125% to 8.000%,
due 05/15/1998 to 04/30/2001.......................................... $ 3,654,072 3,654,072
33
<PAGE>
- --------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Shares or
Principal Amount Value (1)
---------------- --------------
Repurchase Agreements (Continued)
J.P. Morgan Securities, Inc.
5.585% dated 10/31/1996,
due 11/01/1996 in the
amount of $3,600,549
Collateralized by U.S. Treasury Notes
5.125% to 8.750%,
due 10/15/1997 to 02/15/2005.......................................... $ 3,600,000 $ 3,600,000
Merrill Lynch, Inc.
5.592% dated 10/31/1996,
due 11/01/1996 in the
amount of $1,577,241
Collateralized by U.S. Treasury Strips
due 02/15/2014 to 05/15/2016.......................................... 1,577,000 1,577,000
--------------
Total Repurchase Agreements
(Cost $8,831,072)..................................................... 8,831,072
--------------
Total Investments (96.7%)
(Cost $64,332,592).................................................... 71,118,342
Cash and receivables less liabilities (3.3%).................................... 2,423,726
--------------
Net Assets (100.0%)............................................................. $ 73,542,068
==============
(1) See Note 1 of Notes to Financial Statements.
* Non-Income Producing
The accompanying notes are an integral part of the financial statements.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
October 31, 1996
CMC Small CMC International
Cap Fund Stock Fund
----------------- -----------------
<S> <C> <C>
ASSETS:
Investments at identified cost ............................................... $ 418,787,543 $ 55,501,520
- -------------------------------------------------------------------------------- ----------------- -----------------
Investments at value (Notes 1 and 2).......................................... $ 478,983,287 $ 62,287,270
Temporary cash investments, at cost (Note 1).................................. 65,204,081 8,831,072
Cash.......................................................................... 100,854
Cash denominated in foreign currencies
(cost $37,550) (Note 1)..................................................... 37,571
Receivable for:
Interest.................................................................... 258,564 45,112
Dividends................................................................... 36,800 111,346
Investments sold............................................................ 5,722,266 3,826,770
Forward foreign currency exchange contracts held at market.................. 7,081,611
----------------- -----------------
Total assets.................................................................. 550,204,998 82,321,606
----------------- -----------------
LIABILITIES:
Payable for:
Capital stock redeemed...................................................... 13,837,910
Dividends and distributions................................................. 6,837,695 26,520
Investments purchased....................................................... 6,719,554 1,560,973
Investment management fee (Note 4).......................................... 356,903 47,284
Accrued expenses ........................................................... 44,929 37,858
Forward foreign currency exchange contracts held at market.................. 7,106,903
----------------- -----------------
Total liabilities............................................................ 27,796,991 8,779,538
----------------- -----------------
Net assets applicable to outstanding shares................................... $ 522,408,007 $ 73,542,068
================= =================
Net assets consist of:
Undistributed net investment income......................................... $ 8,115
Unrealized appreciation (depreciation) on:
Investments............................................................... $ 60,195,744 6,785,750
Translation of assets and liabilities in foreign currencies............... (30,840)
Undistributed net realized gain (loss) from:
Investments............................................................. (80,744) (2,349,008)
Foreign currency transactions........................................... 25,292
Capital paid in (Note 3).................................................... 462,293,007 69,102,759
----------------- -----------------
$ 522,408,007 $ 73,542,068
================= =================
Shares of capital stock outstanding (Note 3).................................... 10,038,840 1,731,905
================= =================
Net asset value, offering and
redemption price per share (1)............................................... $ 52.04 $ 42.46
================= =================
(1) The net asset value per share is computed by dividing net assets
applicable to outstanding shares by shares of capital stock outstanding.
The accompanying notes are an integral part of the financial statements.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Fiscal Year Ended October 31, 1996
CMC Small CMC International
Cap Fund Stock Fund
--------------- -----------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest.................................................................... $ 2,479,071 $ 247,917
Dividends................................................................... 995,920 1,104,526
Foreign taxes withheld (net of reclaims).................................... (139,879)
--------------- -----------------
Total income............................................................. 3,474,991 1,212,564
--------------- -----------------
Expenses:
Investment management fees (Note 4)......................................... 4,126,463 508,330
Shareholder servicing costs (Note 4)........................................ 18,000 18,000
Reports to shareholders .................................................... 200 65
Financial information and subscriptions..................................... 387 2,544
Accounting service fees..................................................... 25,873
Custodian fees.............................................................. 23,845 66,589
Bank transaction and checking fees.......................................... 23,000 35,257
Registration fees........................................................... 228 213
Legal, insurance and auditing fees.......................................... 34,547 26,534
Other (Note 4).............................................................. 15,151 817
--------------- -----------------
Total expenses........................................................... 4,241,821 684,222
--------------- -----------------
Net investment income (loss) (Note 1)....................................... (766,830) 528,342
--------------- -----------------
Realized gain and unrealized appreciation (depreciation) from
investments and foreign currency transactions:
Net realized gain from:
Investments (Note 2)..................................................... 171,828,992 5,010,568
Foreign currency transactions (Note 1)................................... 1,127,670
--------------- -----------------
Net realized gain .................................................... 171,828,992 6,138,238
--------------- -----------------
Net unrealized appreciation (depreciation) on:
Investments (Note 1)..................................................... (24,142,743) 3,557,467
Translation of assets and liabilities in foreign currencies (Note 1)..... (302,501)
--------------- -----------------
Net unrealized appreciation (depreciation) during the period.......... (24,142,743) 3,254,966
--------------- -----------------
Net gain on investment and foreign currency transactions (Note 1)........... 147,686,249 9,393,204
--------------- ----------------
Net increase in net assets resulting from operations........................ $ 146,919,419 $ 9,921,546
=============== ================
The accompanying notes are an integral part of the financial statements.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Fiscal Year Ended October 31,
CMC Small CMC International
Cap Fund Stock Fund
------------------------------------ ------------------------------------
1996 1995 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)................... $ (766,830) $ 2,027,457 $ 528,342 $ 720,782
Net realized gain (loss) from:
Investments (Note 2)......................... 171,828,992 37,975,837 5,010,568 (5,546,911)
Foreign currency transactions
(Note 1)................................... 1,127,670 (672,552)
Change in net unrealized appreciation
(depreciation) on:
Investments.................................. (24,142,743) 54,175,558 3,557,467 (205,745)
Translation of assets and liabilities
in foreign currencies (Note 1 )............ (302,501) 257,407
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets
resulting from operations.................... 146,919,419 94,178,852 9,921,546 (5,447,019)
Distributions to shareholders:
From net investment income................... (1,453,395) (528,342) (359,577)
In excess of net investment income........... (798,682) (9,470)
From net realized gain from
investment transactions.................... (149,951,166) (37,975,837)
In excess of net realized gain from
investment transactions.................... (315,760)*
Capital share transactions, net (Note 3)......... (11,727,605) 14,781,544 (3,810,006) (9,724,562)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets........ (14,759,352) 69,215,404 4,784,516 (15,540,628)
NET ASSETS:
Beginning of period.............................. 537,167,359 467,951,955 68,757,552 84,298,180
---------------- ---------------- ---------------- ----------------
End of period (1)................................ $ 522,408,007 $ 537,167,359 $ 73,542,068 $ 68,757,552
================ ================ ================ ================
(1) Includes undistributed net investment
income (loss) of: $ - $ (18,884) $ 8,115 $ (9,470)
* On a tax basis, there was no return of capital.
The accompanying notes are an integral part of the financial statements.
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant accounting policies:
CMC Small Cap Fund and CMC International Stock Fund (the Funds) are
portfolios of CMC Fund Trust (the Trust), an open-end diversified
investment company registered under the Investment Company Act of 1940, as
amended. The Trust has established one other portfolio, CMC High Yield
Fund. Each portfolio issues a separate series of the Trust's shares and
maintains a separate investment portfolio. The policies described below are
consistently followed by the Funds for the preparation of their financial
statements in conformity with generally accepted accounting principles.
Investment valuation - The values of the Funds' equity investments are
based on the last sale prices reported by the principal securities
exchanges on which the investments are traded, or, in the absence of
recorded sales, at the closing bid prices on such exchanges or
over-the-counter markets. Temporary investments in short-term securities,
principally repurchase agreements, are valued at cost, which approximates
market.
Forward foreign currency exchange contracts - In connection with
portfolio purchases and sales of securities denominated in a foreign
currency, the CMC International Stock Fund enters into foreign currency
exchange contracts (contracts). Additionally, the CMC International Stock
Fund enters into forward contracts to hedge certain other foreign currency
denominated assets. Contracts are recorded at market value. The CMC
International Stock Fund could be exposed to risks if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably. Net realized gains arising
from such transactions amounted to $1,153,201 and are included in net
realized gain from foreign currency transactions. As of October 31, 1996,
the CMC International Stock Fund had entered into the following forward
contract resulting in net unrealized depreciation of $25,292.
<TABLE>
<CAPTION>
Net Unrealized
Currency to Currency to Settlement Appreciation
be Delivered be Received Date (U.S.$)
- -------------------------------------------------------------------------------------
<C> <C> <C> <C>
805,250,000 Japanese Yen 7,081,611 U.S. Dollars 11/29/96 $ (25,292)
</TABLE>
Foreign currency translations - The books and records of the CMC
International Stock Fund are maintained in U.S. dollars. Foreign currency
transactions are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets, and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange
prevailing on the respective dates of such transactions.
The CMC International Stock Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
investments held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
and maturities of short-term securities, sales of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the CMC
International Stock Fund's books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities, other
than investments in securities, resulting from changes in the exchange
rates.
Shareholder distributions - The Funds distribute net investment income
twice a year and any net realized gains from investment transactions
annually. Distributions to shareholders are recorded on the record date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions, net operating losses, deferral of losses
from wash sales, redemptions in kind and return of capital received from
Real Estate Investment Trusts.
Use of estimates - The preparation of the financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Federal income taxes - The Funds have made no provision for federal
income taxes on net investment income or net realized gains from sales of
securities, since it is the intention of the Funds to comply with the
provisions of the Internal Revenue Code available to certain regulated
investment companies, and to make distributions of income and security
profits sufficient to relieve them from substantially all federal income
taxes.
38
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
1. Significant accounting policies (Continued):
As of October 31, 1996, CMC International Stock Fund has a capital loss
carryover of $2,189,439 available to offset future capital gains. This
capital loss carryover expires in the year 2003. To the extent that the
capital loss carryover is used to offset any capital gains, it is unlikely
that the gains so offset will be distributed to shareholders.
Other - Investment transactions are accounted for on the date the
investments are purchased or sold. The cost of investments sold is
determined by the use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded on
the accrual basis and dividend income is recorded on the ex-dividend date.
Realized gains and losses from investment transactions and unrealized
appreciation or depreciation of investments are reported on the basis of
identified costs. The Funds, through their custodians, receive delivery of
underlying securities collateralizing repurchase agreements (included in
temporary cash investments). Market values of these securities are required
to be at least 100% of the cost of the repurchase agreements. The Funds'
investment advisor determines that the value of the underlying securities
is at all times at least equal to the resale price. In the event of default
or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings.
2. Investment Transactions:
Aggregate purchases, sales and maturities, net realized gain and unrealized
appreciation (depreciation) of investments, excluding temporary cash
investments, for the fiscal year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
CMC Small CMC International
Cap Fund Stock Fund
----------------- -----------------
<S> <C> <C>
Purchases:
Investment securities other than U.S. Government obligations.................. $ 751,801,081 $ 75,065,049
================= =================
Sales and Maturities (1):
Investment securities other than U.S. Government obligations.................. $ 906,643,308 $ 87,749,996
================= =================
Net Realized Gain (1):
Investment securities other than U.S. Government obligations.................. $ 171,828,992 $ 5,010,568
================= =================
Unrealized Appreciation (Depreciation) as of October 31, 1996:
Appreciation.................................................................. $ 80,221,984 $ 8,679,574
Depreciation.................................................................. (20,026,240) (1,893,824)
----------------- -----------------
Net unrealized appreciation ................................................ $ 60,195,744 $ 6,785,750
================= =================
Unrealized Appreciation (Depreciation) for
federal income tax purposes as of October 31, 1996:
Appreciation.................................................................. $ 80,196,864 $ 8,660,351
Depreciation.................................................................. (20,090,879) (2,003,276)
----------------- -----------------
Net unrealized appreciation ................................................ $ 60,105,985 $ 6,657,075
================= =================
For federal income tax purposes, the cost of investments
owned at October 31, 1996................................................... $ 418,877,302 $ 55,630,195
================= =================
<FN>
(1) Includes transfers of investment securities to a shareholder in order
to satisfy redemptions in kind. The market value of investment securities
transferred during the period for CMC Small Cap Fund and CMC International
Stock Fund was $102,520,229 and $11,883,536, respectively. As a result of
the redemption in kind, CMC Small Cap Fund and CMC International Stock Fund
recognized net realized gains of $20,978,577 and $971,748, respectively.
</FN>
</TABLE>
The net realized gain for CMC Small Cap Fund includes proceeds of $220,047
from shareholder class action suits related to securities held by the Fund.
39
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
3. Capital Stock:
<TABLE>
<CAPTION>
CMC Small CMC International
Cap Fund Stock Fund
------------------- ------------------ ----------------- ------------------
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended
October 31, 1996 October 31, 1995 October 31, 1996 October 31, 1995
------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Shares:
Shares sold..................................... 1,170,133 1,462,141 581,183 310,371
Shares issued for reinvestment
of dividends.................................. 2,784,309 678,136 30,593 9,854
------------------- ------------------ ------------------ -----------------
3,954,442 2,140,277 611,776 320,225
Less shares redeemed............................ (3,508,620) (2,030,154) (734,959) (598,816)
------------------- ------------------ ----------------- -----------------
Net increase (decrease) in shares............... 445,822 110,123 (123,183) (278,591)
=================== ================== ================== =================
Amounts:
Sales...........................................$ 75,859,359 $ 80,911,048 $ 24,149,770 $ 11,344,299
Reinvestment of dividends....................... 143,113,471 37,788,898 1,300,503 362,247
------------------- ------------------ ------------------ -----------------
218,972,830 118,699,946 25,450,273 11,706,546
Less redemptions................................ (230,700,435) (103,918,402) (29,260,279) (21,431,108)
------------------- ------------------ ------------------ -----------------
Net increase (decrease).........................$ (11,727,605) $ 14,781,544 $ (3,810,006) $ (9,724,562)
=================== ================== ================= =================
Capital stock authorized (shares) 100,000,000 100,000,000
</TABLE>
4. Transactions with affiliates and related parties:
<TABLE>
<CAPTION>
CMC Small CMC International
Cap Fund Stock Fund
---------- -----------------
<S> <C> <C>
Investment management fees incurred............................................. $4,126,463 $508,330
Investment management fee computation basis
(percentage of daily net assets per annum)................................... .75 of 1% 75 of 1%
Transfer agent fee (included in shareholder servicing costs).................... $18,000 $18,000
Fees earned by trustees not affiliated with the Fund's investment
advisor or transfer agent (included in other expenses)........................ $6,539 $817
The investment advisor of the Funds is Columbia Management Co. The transfer
agent for the Funds is Columbia Trust Company, a subsidiary of Columbia
Funds Management Co. The transfer agent is compensated based on a per
account fee or a minimum of $1,500 per month.
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
4. Transactions with affiliates and related parties (Continued):
The contracts for investment advisory and transfer agent services for the
CMC Small Cap Fund and the CMC International Stock Fund must be renewed
annually by a majority vote of the Fund's shareholders or by the Trustees
of CMC Fund Trust.
Certain officers and Trustees of CMC Fund Trust are also officers and
directors of Columbia Management Co., Columbia Trust Company and Columbia
Funds Management Company. They did not receive any direct payments from the
Funds.
41
<PAGE>
Coopers & Lybrand Coopers & Lybrand L.L.P.
A Professional Services Firm
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of CMC Fund Trust:
We have audited the accompanying statement of assets and liabilities
of CMC Small Cap Fund and CMC International Stock Fund, portfolios of CMC
Fund Trust, including the schedules of investments, as of October 31, 1996,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for the periods indicated therein.
These financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1996 by correspondence with the
custodians, and confirmation by correspondence with brokers as to securities
purchased but not received at that date or other auditing procedures where
confirmations from brokers were not received. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
We have also audited the financial statements of the CMC High Yield
Fund, a portfolio of CMC Fund Trust, as of and for the year ended October
31, 1996, and we have issued an unqualified opinion thereon. The Annual
Report containing our report on the financial statements of the CMC High
Yield Fund is available from CMC Fund Trust.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of CMC Small Cap Fund and CMC International Stock Fund, portfolios
of CMC Fund Trust, as of October 31, 1996, the results of their operations
for the year then ended, the changes in their net assets for each of the
two years in the periods indicated therein in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Portland, Oregon
December 6, 1996
Coopers & Lybrand L.L.P., a registered limited liability partnership, is a
member firm of Coopers & Lybrand (International)
42
<PAGE>
Part A-II
[LOGO]
Columbia
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
1300 S.W. Sixth Avenue
Portland, Oregon 97201
503-222-3600
This Prospectus provides information on CMC Fund Trust (the "Trust"),
an open-end diversified management investment company, and one of its
portfolios, CMC High Yield Fund (the "Fund"). The Fund seeks to provide a
high level of current income by investing primarily in lower-rated fixed
income securities. Capital appreciation is a secondary investment objective
when consistent with seeking high current income. Under normal market
conditions, at least 80% of the Fund's total assets will be invested in
lower-rated fixed income securities, commonly known as "junk bonds."
Investments of this type are subject to a greater risk of loss of principal
and non-payment of interest. An investment in the Fund should represent
only a portion of a balanced investment program. Investors should carefully
assess the risks associated with an investment in the Fund. See
"Description of the Fund -- Investment Objective and Policies and --Risk
Considerations."
The Fund enables clients of Columbia Management Co. ("CMC" or
"Adviser") to invest in a diversified portfolio of lower-rated fixed income
securities rather than having to purchase individual securities for their
accounts.
This Prospectus concisely sets forth information about the Fund that
clients should know before investing and should be retained for future
reference. A Statement of Additional Information about the Fund dated
December 16, 1996 has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon request to the
Trust. The Statement of Additional Information is incorporated by reference
into this Prospectus.
THE FUND CHARGES NO SALES LOAD. SHARES OF THE FUND ARE SOLD AND
REDEEMED AT THEIR NET ASSET VALUE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
December 16, 1996
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Fund Expenses................................................................. 2
Financial Highlights.......................................................... 3
Features of the Fund.......................................................... 3
How Investments in the Fund Are Made.......................................... 4
Redemptions................................................................... 5
Determination of Net Asset Value.............................................. 5
Description of the Fund....................................................... 6
Distributions................................................................. 9
Performance Information....................................................... 9
Voting Rights.................................................................10
Taxes.........................................................................10
Management of the Fund........................................................11
Transfer Agent................................................................12
Additional Information........................................................12
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
The following table sets forth all shareholder expenses and estimated
annual operating expenses of the Fund. "Annual Fund Operating Expenses" are
the expenses incurred by the Fund for fiscal 1996. "Other Operating
Expenses" include estimates of such expenses as audit, legal, and other
business operating expenses. The purpose of this table is to assist you in
understanding the costs and expenses that an investor in the Fund will bear
directly or indirectly. See "No Sales Load," "How to Redeem," and
"Management of the Fund." If assets under separate management by CMC are
invested in the Fund, the shareholder will pay no fee pursuant to its
advisory contract with CMC with respect to those assets invested in the
Fund (for the period during which the assets are invested in the Fund).
Shareholder Transaction Expenses None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Management Fees .40%
12b-1 Fees None
Other Operating Expenses .10%
Total Fund Operating Expenses .50%
EXAMPLE OF EXPENSES
The following example illustrates the expenses you would pay on a
$1,000 investment over the periods shown assuming (1) a 5% annual rate of
return and (2) redemption at the end of each period.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$5.11 $16.03 $27.96 $62.82
This example should not be considered a representation of past or
future expenses or performance. The 5% rate of return used in the example
is required by the SEC for comparison purposes; actual expenses and
performance may be greater or less than those shown.
2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
The table below has been audited by Coopers & Lybrand, L.L.P., independent
accountants, as stated in their report appearing on page 32 in the
Statement of Additional Information. This information should be reviewed in
conjunction with the financial statements and notes thereto appearing in
the Statement of Additional Information. Additional information about the
performance of the Fund for fiscal 1996 is included in the Statement of
Additional Information under "Financial Statements."
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
----------------------------------
1996 1995 1994(1)
------ ------ ------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............. $36.24 $34.48 $35.00
------ ------ ------
Income From Investment Operations:
Net Investment Income............................ 3.23 3.31 0.94
Net Realized and Unrealized Gain (Loss)
on Investments................................. 0.10 2.11 (0.52)
------ ------ ------
Total From Investment Operations............. 3.33 5.42 0.42
------ ------ ------
Less Distributions:
Dividends (from net investment income)........... (3.23) (3.31) (0.94)
Distributions (from capital gains) .............. (0.39) (0.35)
------ ------ ------
Total Distributions ......................... (3.62) (3.66) (0.94)
------ ------ ------
Net Asset Value, End of Period ............ $35.95 $36.24 $34.48
====== ====== ======
Total Return .................................... 9.61% 16.49% 1.21%(2)
Ratios/Supplemental Data
Net Assets, End of Period (in thousands)......... $69,614 $42,192 $9,602
Ratio of Expenses to Average Net Assets.......... 0.50% 0.54% 0.54%
Ratio of Net Investment Income to Average
Net Assets .................................... 8.90% 9.36% 9.86%
Portfolio Turnover Rate ......................... 56.06% 45.64% 72.67%
<FN>
(1) From inception of operations on July 6, 1994. Ratios and portfolio
turnover rates are annualized.
(2) Not annualized.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
FEATURES OF THE FUND
- --------------------------------------------------------------------------------
The Trust enables clients of CMC to invest in a diversified portfolio
of lower-rated fixed income securities rather than purchasing such
securities on an individual basis. Although there are risks which cannot
beeliminated in owning securities, management believes the Fund offers many
advantages to CMC's clients that would not normally be available if similar
securities were purchased on an individual basis. Among those advantages
are economies of scale, diversification, and convenience. Notwithstanding
those advantages, investments by the Fund in lower-rated securities
involves special risks. See "Description of the Fund -- Risk
Considerations."
3
<PAGE>
By combining a portion of the capital of CMC clients' accounts into a
large portfolio, it is possible to offer all clients who invest in the Fund
effective access to higher yielding, lower-rated securities, as well as
professional investment supervision.
The Fund is a portfolio of the Trust, an open-end diversified
management company established as an Oregon business trust under a Restated
Declaration of Trust dated October 13, 1993, as amended ("Declaration of
Trust"). The Trust has established two other portfolios, CMC Small Cap Fund
and CMC International Stock Fund. The Trust is not required under its
Declaration of Trust to hold annual shareholder meetings, but special
meetings may be called for purposes such as electing or removing Trustees,
changing fundamental investment policies, or approving an investment
advisory contract.
The Fund is a "no-load fund," which means investors pay no sales load
and do not incur any additional expenses beyond those paid directly by the
Fund. See "Fund Expenses".
- --------------------------------------------------------------------------------
HOW INVESTMENTS IN THE FUND ARE MADE
- --------------------------------------------------------------------------------
Investments in the Fund may be made directly by an institutional
client of CMC. In addition, an independent fiduciary of a CMC client
account, after careful review of this prospectus, including Fund expenses
and its consistency with the client's written investment guidelines, may
approve the investment in the Fund and authorize CMC to invest in the Fund
at its discretion for the client's portfolio, subject to limitations
imposed by the independent fiduciary. If CMC is deemed to be a fiduciary
with respect to a shareholder of the Fund under the Employee Retirement
Income Security Act of 1974, certain conditions must be satisfied before
assets may be invested in the Fund by CMC on behalf of the shareholder. See
"Investment Advisory and Other Fees Paid to Affiliates" in the Statement of
Additional Information.
The shares of the Fund are purchased and redeemed at the net asset
value next determined after an order is received by the Fund. Net asset
value of the Fund is determined as of the close of regular trading
(normally 4:00 p.m. New York time) on each day the New York Stock Exchange
("NYSE") is open for business. See "Determination of Net Asset Value."
Orders received by the Fund are processed the day they are received.
Orders received before the close of regular trading on each day the NYSE is
open for business will be entered at the net asset value per share
calculated that day. Orders received after the close of regular trading on
each day the NYSE is open for business will be entered at the net asset
value next determined. All investments are credited to the shareholder's
account in full and fractional shares computed to the third decimal place.
Although the Fund has no policy with respect to initial or subsequent
minimum investments, purchase orders may be refused at the discretion of
the Fund.
Shares purchased are credited to the CMC client's account on the
record books of the Fund, with confirmations supplied by the Fund to the
account custodian for the CMC client.
Shareholder inquiries, including requests for certificated shares, may
be made by writing to CMC or the Fund at 1300 SW Sixth Avenue, Portland,
Oregon 97207 or by calling (503) 222-3600.
4
<PAGE>
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
Redemptions of all or any portion of a shareholder's investment can be
made at any time. Redemptions of shares are at the net asset value next
computed after receipt of a redemption order on days when the NYSE is open
for business. See "Determination of Net Asset Value." Payment will be made
within seven days of the date of redemption except as provided by the rules
of the SEC
If certificates for shares of the Fund have been issued to a
shareholder, they must be returned to the Fund, properly endorsed, before
any redemption request may be processed. Redemption proceeds are normally
transmitted in the manner specified in the redemption request on the
business day following the effective date of the redemption. Although a
shareholder may redeem shares that were recently purchased by check, the
Fund may hold the redemption proceeds until payment for the purchase of
such shares has cleared, which may take up to 15 days from the date of
purchase. No interest is paid on the redemption proceeds after the
redemption date and before the proceeds are transmitted. This holding
period does not apply to the redemption of shares recently purchased by
bank wire or with a cashier's or certified check.
The Fund reserves the right to redeem Fund shares in cash or in kind.
The Trust has elected, however, to be governed by Rule 18f-1 under the
Investment Company Act of 1940 (the "1940 Act"), pursuant to which the Fund
is obligated to redeem, during any 90-day period, shares of a shareholder
solely for cash up to the lesser of $250,000 or 1 percent of the net asset
value of the Fund. A shareholder who is redeemed in kind may incur
brokerage fees upon the sale of any securities distributed upon redemption.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of the Fund is determined by CMC, under
procedures approved by the Trustees of the Trust, as of the close of
regular trading (normally 4 p.m. New York time) on each day the NYSE is
open for business and at other times determined by the Trustees. The net
asset value per share is computed by dividing the value of all assets of
the Fund, less its liabilities, by the number of shares outstanding.
Securities will be valued according to the market value obtained in a
consistent manner from the broadest and most representative markets. These
market quotations, depending on local convention or regulation, may be last
sale price, last bid or asked price, or the mean between last bid and asked
prices as of, in each case, the close of the applicable exchange.
Securities for which market quotations are not readily available and other
assets will be valued at fair value as determined in good faith under
procedures established by and under the general supervision of the
Trustees. These procedures may include valuing portfolio securities by
reference to other securities with comparable ratings, interest rates, and
maturities and using pricing services, in each case only when these
procedures result in prices that are believed to reflect fair market value.
Fair value for debt securities with remaining maturities of less than 60
days is based on cost adjusted for amortization of discount or premium and
accrued interest (unless the Trustees believe unusual circumstances
indicate another method of determining fair value should be considered).
5
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
- --------------------------------------------------------------------------------
Investment Objective and Policies. The Fund's primary investment
objective is to provide shareholders with a high level of current income by
investing primarily in lower-rated fixed income securities. A security
purchased by the Fund for high current income may also be purchased for the
purpose of achieving the Fund's secondary investment objective of capital
appreciation. Capital appreciation may result, for example, from an
improvement in the issuer's financial condition or credit rating or from a
decline in interest rates. A fixed income security held by the Fund may
depreciate from, among other things, a decline in the issuer's financial
condition or a general rise in interest rates. See "Risk Considerations."
The Fund's objective may not be changed without a vote of a majority of the
outstanding voting securities of the Fund. There is no assurance that the
Fund will achieve its investment objective.
The Fund may invest in fixed income securities consisting of corporate
debt securities (bonds, debentures, and notes), asset-backed securities,
bank obligations, collateralized bonds, loan and mortgage obligations,
commercial paper, preferred stocks, repurchase agreements, savings and loan
obligations, and U. S. Government and agency obligations. Debt securities
and preferred stocks may be convertible into, or exchangeable for, common
stock, and may have warrants attached.
Under normal market conditions, the Fund will invest at least 80% of
its total assets in high yielding fixed income securities rated Ba or B by
Moody's Investors Service, Inc. ("Moody's") or BB or B by S&P's Corporation
("S&P"). The Fund will not invest in fixed income securities rated below
Caa by Moody's or CCC by S&P, and no more than 10% of the Fund's total
assets may be invested in securities with Caa or CCC ratings. Up to 20% of
the Fund's total assets may be invested in fixed income securities rated
Baa or better by Moody's or BBB or better by S&P. The Fund may also invest
in unrated fixed income securities when the Fund's investment adviser
believes the security is of comparable quality to that of securities
eligible for purchase by the Fund. If the credit rating of a security drops
below the rating it held when purchased by the Fund, the Fund will evaluate
the appropriateness of retaining that security.
When, as a result of market conditions, the Fund's investment adviser
determines a temporary defensive position is warranted to help preserve
capital, the Fund may without limit temporarily retain cash or invest in
prime commercial paper, high-grade debt securities, securities of the U.S.
Government and its agencies and instrumentalities, and high-quality money
market instruments, including repurchase agreements. When the Fund assumes
a temporary defensive position, it is not invested in securities designed
to achieve its investment objective of providing a high level of current
income.
Securities rated Ba or less by Moody's or BB or less by S&P, commonly
referred to as "junk bonds," are considered noninvestment grade securities,
subject to a high degree of risk, and considered speculative by the major
credit rating agencies with respect to the issuer's ability to meet
principal and interest payments. The Fund is designed for investors who are
willing to assume substantial risks of significant fluctuations in
principal value in order to achieve a high level of current income. The
Fund should represent only a portion of a balanced investment program. See
"Risk Considerations" for a description of the risks of investing in
lower-rated securities and "Additional Information" for a description of
corporate bond ratings.
The table below shows the ratings assigned to the fixed income
securities held by the Fund during 1996. The figures, expressed as a
percentage of total net assets, are dollar-weighted averages of month end
holdings for 1996. The Fund did not hold any securities unrated by either
Moody's or S&P, or securities rated above Baa/BBB or below B/B by
Moody's/S&P's during that period.
6
<PAGE>
Moody's Standard & Poor's
Rating Average Rating Average
------ ------- ------ -------
Baa 15.3% BBB 3.6%
Ba 49.9% BB 55.5%
B 29.7% B 35.0%
The securities ratings by Moody's and S&P are based largely on the
issuer's historical financial condition and the rating agency's investment
analysis at the time of the rating. As a result, the rating assigned to a
security does not necessarily reflect the issuer's current financial
condition, which may be better or worse than the rating indicates. Credit
ratings are only one factor the Fund's investment adviser relies on in
evaluating lower-rated fixed income securities. The analysis by the Fund's
investment adviser of a lower-rated security may also include consideration
of the issuer's experience and managerial strength, changing financial
condition, borrowing requirements or debt maturity schedules, regulatory
concerns, and responsiveness to changes in business conditions and interest
rates. The Fund's adviser also may consider relative values based on
anticipated cash flow, interest or dividend coverage, balance sheet
analysis, and earnings prospects. Because of the number of investment
considerations involved in investing in lower-rated securities, achievement
of the Fund's investment objective may be more dependent upon the
investment adviser's credit analysis than is the case with investing in
higher quality debt securities.
There are no limitations on the dollar weighted average maturity of
the Fund's portfolio. Although a substantial portion of the lower-rated
debt securities that may be purchased by the Fund have maturities ranging
from less than one year to 10 years, the Fund may also purchase securities
with maturities of up to 30 years. Securities will be selected on the basis
of the Fund adviser's assessment of interest rate trends and the liquidity
of various instruments under prevailing market conditions. Shifting the
average maturity of the portfolio in response to anticipated changes in
interest rates generally will be carried out through the sale of securities
and the purchase of different securities within the desired maturity range.
This may result in greater realized capital gains and losses than would be
the case if the Fund generally held all securities to maturity. Portfolio
decisions will be made solely on the basis of investment, rather than tax,
considerations.
The Fund may invest in corporate debt securities or preferred stocks
that are convertible into or exchangeable for common stock. The Fund may
also acquire common stock in the following circumstances: in connection
with the purchase of a unit of securities that includes both fixed income
securities and common stock; when fixed income securities held by the Fund
are converted by the issuer into common stock; upon the exercise of
warrants attached to fixed income securities held by the Fund; and if
purchased in the context of a corporate transaction in which the holders of
common stock will receive newly issued fixed income securities. Common
stock acquired by the Fund in these circumstances may be held by the Fund
to permit orderly disposition or to establish long-term holding periods for
income tax purposes.
The Fund may invest up to 10% of its total assets in fixed income
securities of foreign issuers, including foreign governments, denominated
in U.S. dollars. See "Additional Information" for a discussion of the risks
involved in the investment in foreign securities.
Risk Considerations. All fixed income securities are subject to two
types of risk: credit risk and interest rate risk. The credit risk relates
to the ability of the issuer to meet interest and principal payments when
due. Generally, higher yielding bonds, such as those acquired by the Fund,
are subject to credit risk to a greater extent than higher quality, lower
yielding bonds. High yield bonds may be issued in connection with corporate
restructurings, such as leveraged buyouts, mergers, acquisitions, debt
recapitalizations, or similar events. In addition, high yield bonds are
often issued by smaller, less creditworthy companies or by companies with
substantial debt. The ratings of fixed income securities by Moody's and S&P
are a generally accepted barometer of credit risk.
7
<PAGE>
Interest rate risk refers to the fluctuations in the net asset value
of any portfolio of fixed income securities resulting solely from the
inverse relationship between the price and yield of fixed income
securities; that is, when interest rates rise, bond prices generally fall
and, conversely, when interest rates fall, bond prices generally rise. The
change in net asset value depends upon several factors, including the
bond's maturity date. In general, bonds with longer maturities are more
sensitive to interest rate changes than bonds with shorter maturities.
The market for lower-rated debt securities is relatively new and until
recently its growth has paralleled a long economic expansion. Past
experience, therefore, may not provide an accurate indication of future
performance of this market, particularly during an economic recession. An
economic downturn or increase in interest rates is likely to have a greater
negative effect on the ability of the issuers of the Fund's securities to
pay principal and interest, meet projected business goals, and obtain
additional financing. These circumstances also may result in a higher
incidence of defaults compared to higher rated securities. In addition to
general economic conditions, the price of a lower-rated debt security is
more sensitive to the financial condition of the issuer than is the case
with higher rated debt securities. Consequently, the market for lower-rated
bonds often behaves more like the market for equity securities. Adverse
changes in economic conditions or an issuer's financial condition and
increases in interest rates may adversely affect the market for lower-rated
debt securities, the value of such securities in the Fund's portfolio, and,
therefore, the Fund's net asset value. As a result, investment in the Fund
is more speculative than investment in shares of a fund that invests
primarily in higher rated debt securities.
Although the Fund intends generally to purchase lower-rated securities
that have secondary markets, these markets may be less liquid and less
active than markets for higher rated securities. These factors may limit
the ability of the Fund to sell lower-rated securities at their expected
value. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower-rated
debt securities, especially in a thinly traded market. If market quotations
are not readily available for the Fund's lower-rated or nonrated
securities, these securities will be valued by a method the Fund's board of
directors believes accurately reflects fair value. Judgment plays a greater
role in valuing lower-rated debt securities than it does in valuing
securities for which more extensive quotations and last sale information
are available.
Special tax considerations are associated with investing in
lower-rated debt securities structured as zero coupon or pay-in-kind
securities. A zero coupon security has no cash coupon payments. Instead,
the issuer sells the security at a substantial discount from its maturity
value. The interest equivalent received by the investor from holding this
security to maturity is the difference between the maturity value and the
purchase price. Pay-in-kind securities are securities that pay interest in
either cash or additional securities, at the issuer's option, for a
specified period. The price of pay-in-kind securities is expected to
reflect the market value of the underlying debt plus an amount representing
accrued interest since the last payment. Zero coupon bonds and pay-in-kind
securities are more volatile than cash pay securities. The Fund accrues
taxable income on these securities prior to the receipt of cash payments.
The Fund intends to distribute substantially all of its income to its
shareholders to qualify for pass-through treatment under the tax laws and
may, therefore, need to use its cash reserves to satisfy distribution
requirements.
The Fund generally will not trade in securities for short-term profits
but, when circumstances warrant, it may purchase and sell securities
without regard to the length of time held. A high portfolio turnover may
increase transaction costs and may affect taxes paid by shareholders to the
extent short-term gains are distributed. The Fund's portfolio turnover
rates for 1996, 1995 and 1994 are shown in the table under "Financial
Highlights."
Investment Restrictions. See "Additional Information" for information
on the purchase by the Fund of repurchase agreements, illiquid securities,
when-issued securities, loan transactions, and options.
8
<PAGE>
A description of other investment restrictions and certain additional
investment practices of the Fund is included in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
Income dividends, consisting of net investment income, are declared
daily and paid monthly by the Fund. All income dividends paid by the Fund
will be reinvested in additional shares of the Fund at the net asset value
on the dividend payment date unless the account has elected to receive the
dividends in cash.
If all of your shares in the Fund are redeemed, the undistributed
dividends on the redeemed shares will be paid at that time. The Fund
generally distributes substantially all of its net realized capital gains
to shareholders once a year, usually in December. The amount distributed,
if any, will depend on the amount of capital gains realized from the sale
of the Fund's portfolio securities. Capital gain distributions are declared
and paid as cash dividends and reinvested in additional shares at the net
asset value, at the close of business on the record date, less the amount
of the distribution.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The Fund will from time to time advertise or quote its current yield,
which represents the annualization of the Fund's net investment income over
a recent 30-day period divided by the Fund's net asset value at the end of
that period. The current yield for the 30-day period ended October 31, 1996
was 8.48%. The Fund will also periodically provide average annual total
return and total return information. This information is historical data
and is not intended to indicate future performance. The return and
principal value of your investment will fluctuate, so that your shares when
redeemed may be worth more or less than their original cost. "Total return"
refers to the change in value of an investment in a Fund over a stated
period, assuming the reinvestment of any dividends and capital gains.
"Average annual total return" is a hypothetical rate of return that, if
achieved annually, would have produced the same total return if performance
had been constant over the entire period. Average annual total returns
smooth out the variations in performance but are not the same as actual
annual results. The average annual total returns for the Fund for the
following periods ended October 31, 1996 were: 9.61% for one year and
11.79% for the life of the Fund (since July 6, 1994). For additional
information on yield and total return calculations for the Fund, see the
Statement of Additional Information.
The Fund may compare its performance to other mutual funds with
similar investment objectives and to the mutual fund industry as a whole,
as quoted by ranking services and publications of general interest.
Examples of these services or publications include Lipper Analytical
Services, Inc., Barron's, Business Week, Changing Times, The Financial
Times, Financial World, Forbes, Investor's Daily, Money, Morningstar Mutual
Funds, Personal Investor, The Economist, The Wall Street Journal, and USA
Today. (Lipper Analytical Services, Inc. is an independent rating service
that ranks over 1,000 mutual funds based upon total return performance.)
These ranking services and publications may rank the performance of the
Fund against all other funds over specified periods and against funds in
specified categories.
The Fund may also compare its performance to that of a recognized
unmanaged index of investment results, including the S&P 500, Dow Jones
Industrial Average, Russell 2000, and NASDAQ stock indices and the Lehman
Brothers and Salomon bond indices. The comparative material found in
advertisements, sales literature, or in reports to shareholders may contain
past or present performance ratings. This is not to be considered
representative or indicative of future results or future performance.
9
<PAGE>
The Fund may also compare its performance to other income-producing
securities such as (i) money market funds; (ii) various bank products
(based on average rates of bank and thrift institution certificates of
deposit, money market deposit accounts, and NOW accounts as reported by the
Bank Rate Monitor and other financial reporting services, including
newspapers); and (iii) U.S. treasury bills or notes. There are differences
between these income-producing alternatives and the Fund other than their
yields, some of which are summarized below.
The yield of the Fund is not fixed and will fluctuate. The principal
value of your investment in the Fund at redemption may be more or less than
its original cost. In addition, your investment is not insured and its
yield is not guaranteed. Although the yields of bank money market deposit
accounts and NOW accounts will fluctuate, principal will not fluctuate and
is insured by the Federal Deposit Insurance Corporation up to $100,000.
Bank passbook savings accounts normally offer a fixed rate of interest, and
their principal and interest are also guaranteed and insured. Bank
certificates of deposit offer fixed or variable rates for a set term.
Principal and fixed rates are guaranteed and insured. There is no
fluctuation in principal value. Withdrawal of these deposits prior to
maturity will normally be subject to a penalty.
- --------------------------------------------------------------------------------
VOTING RIGHTS
- --------------------------------------------------------------------------------
The Trust may establish separate series of investment portfolios under
its Declaration of Trust. The Fund, CMC Small Cap Fund, and CMC
International Stock Fund are the only series established under the Trust.
Shares of each series vote together, except as provided in the Trust's
Declaration of Trust and under applicable law. It is expected that shares
of a series would vote separately by series on any changes in fundamental
investment policies relating to that series. All shares of each series of
the Trust, including the Fund, have equal rights as to voting, redemption,
and distribution. All issued and outstanding shares of the Fund are fully
paid and nonassessable. Shares have no preemptive or conversion rights.
Fractional shares have the same rights proportionately as full shares. The
shares of the Fund do not have cumulative voting rights, which means that
the holders of more than 50 percent of the shares of the Fund and any other
portfolio of the Trust, voting for the election of Trustees, can elect all
the Trustees if they choose to do so. In certain circumstances, Trustees
may be removed by action of the Trustees or the shareholders.
Under the provisions of the 1940 Act, and as used elsewhere in this
Prospectus, the phrase "vote of a majority of the outstanding voting
securities of the Fund" means the vote at any meeting of shareholders of
the Fund of (i) 67 percent or more of the shares present or represented by
proxy at the meeting, if the holders of more than 50 percent of the
outstanding shares are present or represented by proxy, or (ii) more than
50 percent of the outstanding shares, whichever is less.
Annual meetings of shareholders will not be held except as required by
the Investment Company Act of 1940 and other applicable law. A special
meeting will be held to vote on the removal of a Trustee or Trustees of the
Trust if requested in writing by the holders of not less than 10% of the
outstanding shares of the Trust.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
By qualifying and by meeting certain other requirements, the Fund will not
be subject to federal income taxes to the extent it distributes to its
10
<PAGE>
shareholders its net investment income and realized capital gains. The Fund
intends to make sufficient distributions to relieve itself from liability
for federal income taxes.
Shareholders that are subject to federal income taxes will recognize
ordinary income on distributions of net investment income or of any excess
of net short-term capital gain over net long-term capital loss.
Distributions properly designated as representing the excess of net
long-term capital gain over net short-term capital loss are taxable to
shareholders as long-term capital gain, regardless of the length of time
the shareholder held shares of the Fund.
The tax character of dividends and other distributions from the Fund
is the same whether they are paid in cash or reinvested in additional
shares of the Fund. Dividends declared in October, November, or December to
shareholders of record as of a date in one of those months and paid in the
following January will be reportable as if received by the shareholders on
December 31. Thus, the shareholders may be taxed on these dividends in the
taxable year prior to the year of actual receipt.
A distribution may be taxable to a shareholder even if the
distribution reduces the net asset value of the shares held below their
cost (and is in an economic sense a return of the shareholder's capital).
This tax result is most likely when shares are purchased shortly before an
annual distribution of capital gains or other earnings.
The Fund will mail to its shareholders annually a summary of the
federal income tax status of the Fund's distributions for the preceding
year. Additional information regarding certain income tax consequences of
investments in the Fund is set forth in the Statement of Additional
Information.
This "Taxes" section is only a brief summary of the major tax
considerations affecting the Fund and its shareholders and is not a
complete or detailed explanation of tax matters. In addition to federal
taxes, shareholders of the Fund may be subject to state and local taxes.
Accordingly, investors are urged to consult their tax advisers concerning
the tax consequences to them of investing in the Fund.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Fund is managed under the general supervision of the Trustees of
the Trust. The Trust has contracted with CMC to provide investment advisory
services to the Fund and the other series of the Trust, CMC Small Cap Fund
and CMC International Stock Fund. CMC has acted as an investment adviser
since 1969 and acts as investment manager for approximately $13 billion of
assets of other institutions. CMC is owned by its employees, including J.
Jerry Inskeep, Jr. and James F. Rippey, who are Trustees and officers of
the Trust. The address of CMC is 1300 S.W. Sixth Avenue, P.O. Box 1350,
Portland, Oregon 97207-1350.
Under the investment advisory contract with the Trust, CMC provides
research, advice, and supervision with respect to investment matters, and
determines which securities are purchased or sold. In addition, CMC
provides office space and pays all executive salaries and expenses and
ordinary office expenses of the Fund. Certain employees of CMC are also
officers of the Trust and, subject to the authority of the Trustees of the
Trust, are responsible for the overall management of the Trust. CMC will
pay all of the organizational expenses of the Fund.
The Adviser uses an investment team approach to analyze investment
themes and strategies for the Funds. Alan J. Folkman, a Senior Vice
President and director of CMC, is the Chief Investment Officer of the
Investment Team. With over 28 years of experience in the investment
management industry, Mr. Folkman supervises the Investment Team in
establishing broad investment strategies and determining portfolio
guidelines for the Funds.
11
<PAGE>
Members of the Investment Team are responsible for the analysis of
particular industries or types of fixed income securities and for
recommendations on individual securities within those industries or asset
categories. Thomas L. Thomsen, a Vice President and director of CMC, has
principal oversight responsibility for investment strategies on behalf of
the Fund. Prior to joining the Investment Team in 1978, Mr. Thomsen was a
Senior Investment Officer for the Treasury Department of the State of
Oregon (1974-1978) and a Fixed Income Portfolio Manager for First National
Bank of Oregon (1969-1973). Mr. Jeffrey L. Rippey, a Vice President of CMC,
has the responsibility of implementing on a daily basis the investment
strategies developed for the Fund. Prior to joining the Investment Team in
1981, Mr. Jeffrey Rippey worked in the Trust Department of Rainier National
Bank (1978-1981).
Members of the Investment Team and other personnel of the Trust or CMC
are permitted to trade securities for their own or family accounts, subject
to the rules of the Code of Ethics adopted by the Trust. The rules that
govern personal trading by investment personnel are based on the principal
that employees owe a fiduciary duty to conduct their trades in a manner
that is not detrimental to the Funds or their shareholders. The Trust has
adopted the recommendations of the Investment Company Institute, an
organization comprised of members of the mutual fund industry, relating to
restrictions on personal trading. For more information on the Code of
Ethics and specific trading restrictions, see the Statement of Additional
Information.
The investment advisory fee of the Fund is accrued daily and paid
monthly. The advisory fee for the Fund equals the annual rate of .40 of 1
percent of its daily net assets. The investment advisory fees incurred by
the Fund were $214,819 for fiscal 1996. The Fund assumes its costs relating
to trust matters, cost of services to shareholders, transfer and dividend
paying agent fees, custodian fees, legal and auditing expenses,
disinterested trustees' fees, taxes and governmental fees, interest,
brokers' commissions, transaction expenses, cost of stock certificates and
any other expenses (including clerical expenses) of issue, sale,
repurchase, or redemption of its shares, expenses of registering or
qualifying its shares for sale, transfer taxes, and all expenses of
preparing its registration statements, prospectuses, and reports.
- --------------------------------------------------------------------------------
TRANSFER AGENT
- --------------------------------------------------------------------------------
Columbia Trust Company (the "Trust Company") acts as transfer agent
and dividend paying agent for the Fund. The Trust Company is owned by its
employees, including J. Jerry Inskeep, Jr. and James F. Rippey, who are
also principal shareholders of CMC and Trustees and officers of the Trust.
The address of the Trust Company is 1301 S.W. Fifth Avenue, P.O. Box 1350,
Portland, Oregon 97207-1350.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund may invest in repurchase agreements,
which are agreements by which the Fund purchases a security and
simultaneously commits to resell that security to the seller (a commercial
bank or recognized securities dealer) at a stated price within a number of
days (usually not more than seven) from the date of purchase. The resale
price reflects the purchase price plus a rate of interest which is
unrelated to the coupon rate or maturity of the purchased security.
Repurchase agreements may be considered loans by the Fund collateralized by
the underlying security. The obligation of the seller to pay the stated
price is in effect secured by the underlying security. The seller will be
required to maintain the value of the collateral underlying any repurchase
agreement at a level at least equal to the price of the repurchase
agreement. In the case of default by the seller, the Fund could
12
<PAGE>
incur a loss. In the event of a bankruptcy proceeding commenced against the
seller, the Fund may incur costs and delays in realizing upon the
collateral. The Fund will enter into repurchase agreements only with those
banks or securities dealers who are deemed creditworthy pursuant to
criteria adopted by the Trustees of the Trust. There is no limit on the
portion of the Fund's assets that may be invested in repurchase agreements
with maturities of seven days or less.
Illiquid Securities. No illiquid securities will be acquired by the
Fund if upon the purchase more than 10 percent of the value of the Fund's
net assets would consist of these securities. "Illiquid securities" are
securities that may not be sold or disposed of in the ordinary course of
business within seven days at approximately the price used to determine the
Fund's net asset value. Under current interpretations of the Staff of the
SEC, the following instruments in which the Fund may invest will be
considered illiquid: (1) repurchase agreements maturing in more than seven
days; (2) restricted securities (securities whose public resale is subject
to legal restrictions); (3) options, with respect to specific securities,
not traded on a national securities exchange that are not readily
marketable; and (4) any other securities in which the Fund may invest that
are not readily marketable.
The Fund may purchase without limit, however, certain restricted
securities that can be resold to qualifying institutions pursuant to a
regulatory exemption under Rule 144A ("Rule 144A securities"). If a dealer
or institutional trading market exists for Rule 144A securities, such
securities are deemed to be liquid and thus not subject to the Fund's 10
percent limitation on the investment in restricted or other illiquid
securities. Under the supervision of the Trustees of the Trust, the Adviser
determines the liquidity of Rule 144A securities and, through reports from
the Adviser, the Trustees monitor trading activity in these securities. In
reaching liquidity decisions, the Adviser will consider, among other
things, the following factors: (1) the frequency of trades and quotes for
the security; (2) the number of dealers willing to purchase or sell the
security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the procedures for the
transfer). Because institutional trading in Rule 144A securities is
relatively new, it is difficult to predict accurately how these markets
will develop. If institutional trading in Rule 144A securities declines,
the Fund's liquidity could be adversely affected to the extent it is
invested in such securities.
Options and Financial Futures Transactions. The Fund may invest up to
5 percent of its net assets in premiums on put and call exchange-traded
options. The Fund may also purchase options on securities indices. Options
on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to
receive, on exercise of the option, an amount of cash if the closing level
of the securities index on which the option is based is greater than, in
the case of a call, or less than, in the case of a put, the exercise price
of the option.
The Fund may engage in financial futures transactions, including
interest rate futures transactions. Financial futures contracts are
commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a
security or the cash value of a securities index, during a specified future
period at a specified price. The Fund's investment restrictions do not
limit the percentage of the Fund's assets that may be invested in financial
futures transactions. The Fund, however, does not intend to enter into
financial futures transactions for which the aggregate initial margin
exceeds 5 percent of the net assets of the Fund after taking into account
unrealized profits and unrealized losses on any such transactions it has
entered into. The Fund may engage in futures transactions only on
commodities exchanges or boards of trade.
The Fund will not engage in transactions in index options, financial
futures contracts, or related options for speculation, but only as an
attempt to hedge against market conditions affecting the values of
securities that the Fund owns or intends to purchase. Additional
information on options and financial futures transactions, including the
principal risks to the Fund and its shareholders, is set forth in the
13
<PAGE>
Statement of Additional Information under "Additional Information Regarding
Certain Investments by the Fund."
Foreign Securities. The Fund may invest up to 10% of its total assets
in fixed income securities of foreign issuers, including securities issued
by foreign governments, denominated in U.S. dollars. Foreign securities may
be subject to foreign taxes that would reduce their effective yield.
Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is
recoverable, the unrecovered portion of any foreign withholding taxes would
reduce the income the Fund receives from its foreign investments. Foreign
investments involve certain other risks, including possible political or
economic instability, the possibility of currency exchange controls,
reduced availability of public information about a foreign company, and the
lack of uniform accounting, auditing, and financial reporting standards
comparable to those applicable to domestic companies. In addition, with
respect to certain foreign countries, there is a possibility of
expropriation, nationalization, confiscatory taxation, or diplomatic
developments that could affect investments in those countries. Finally, in
the event of default on a foreign debt obligation, it may be more difficult
for the Fund to obtain or enforce a judgment against the issuers of the
obligation.
Loan Transactions. The Fund may lend portfolio securities to qualified
institutional investors for the short-term purpose of realizing additional
income. The aggregate value of all securities loaned may not exceed 33 1/3%
of the Fund's total assets, and such loans will be collateralized by cash,
cash equivalents, or an irrevocable letter of credit in accordance with
regulations adopted by the SEC. For more information on loan transactions,
see the Statement of Additional Information.
Bond Ratings. Moody's -- The following is a description of Moody's
bond ratings:
Aaa - Best quality; smallest degree of investment risk.
Aa - High quality by all standards; Aa and Aaa are known as high-grade
bonds.
A - Many favorable investment attributes; considered upper
medium-grade obligations.
Baa - Medium-grade obligations; neither highly protected nor poorly
secured. Interest and principal appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time.
Ba - Speculative elements; future cannot be considered well assured.
Protection of interest and principal payments may be very moderate and not
well safeguarded during both good and bad times over the future.
B - Generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa - Poor standing, may be in default; elements of danger with
respect to principal or interest.
S&P -- The following is a description of S&P's bond ratings:
AAA - Highest rating; extremely strong capacity to pay principal and
interest.
AA - Also high-quality with a very strong capacity to pay principal
and interest; differ from AAA issues only by a small degree.
A - Strong capacity to pay principal and interest; somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.
14
<PAGE>
BBB - Adequate capacity to pay principal and interest; normally
exhibit adequate protection parameters, but adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay principal and interest than for higher rated bonds.
Bonds rated AAA, AA, A, and BBB are considered investment grade bonds.
BB - Less near-term vulnerability to default than other speculative
grade debt; face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payment.
B - Greater vulnerability to default but presently have the capacity
to meet interest payments and principal repayments; adverse business,
financial, or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC - Current identifiable vulnerability to default and dependent upon
favorable business, financial, and economic conditions to meet timely
payments of interest and repayments of principal. In the event of adverse
business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
Bonds rated BB, B, and CCC are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and CCC a
higher degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
Investment Restrictions. A description of other investment
restrictions and certain investment practices of the Funds is included in
the Statement of Additional Information.
15
<PAGE>
Part B-II
Reg. Nos. 33-30394/ 811-5857
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
Columbia Financial Center
1300 SW Sixth Avenue
PO Box 1350
Portland, Oregon 97207
(503) 222-3600
This Statement of Additional Information contains information relating
to CMC Fund Trust (the "Trust"), an open-end diversified management
investment company established as an Oregon business trust on August 7,
1989, and a portfolio of the Trust, CMC High Yield Fund (the "Fund"). The
Trust has two other portfolios, CMC Small Cap Fund and CMC International
Stock Fund.
This Statement of Additional Information is not a Prospectus. It
relates to a Prospectus dated December 16, 1996 (the "Prospectus") and
should be read in conjunction with the Prospectus. Copies of the Prospectus
are available without charge upon request to the Trust.
Table of Contents
Management.................................................................. 2
Investment Advisory and Other Fees Paid to Affiliates....................... 3
Portfolio Transactions...................................................... 5
Redemptions and Net Asset Value............................................. 6
Custodians.................................................................. 6
Independent Accountants..................................................... 7
Taxes....................................................................... 7
Yield and Performance....................................................... 10
Investment Restrictions..................................................... 11
Additional Information Regarding Certain Investments by the Fund............ 13
Financial Statements........................................................ 19
December 16, 1996
1
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The trustees and officers of the Trust are listed below, together with
their principal business occupations. Except as otherwise indicated, each
person listed has held his position with the Trust since inception in
August 1989. All other principal business positions have been held for more
than five years, except as follows: Columbia Small Cap Fund, Inc. since
August 1996; Columbia Real Estate Equity Fund, Inc. since April 1994;
Columbia High Yield Fund, Inc. since July 1993; Columbia International
Stock Fund, Inc. since July 1992; and Columbia Common Stock Fund, Inc. and
Columbia Balanced Fund, Inc. since July 1991; and except as otherwise
indicated. The term "Columbia Funds" refers to Columbia High Yield Fund,
Inc., Columbia Balanced Fund, Inc., Columbia Common Stock Fund, Inc.,
Columbia International Stock Fund, Inc., Columbia Municipal Bond Fund,
Inc., Columbia Real Estate Equity Fund, Inc., Columbia U.S. Government
Securities Fund, Inc., Columbia Special Fund, Inc., Columbia Growth Fund,
Inc., Columbia Daily Income Company, Columbia Small Cap Fund, Inc. and
Columbia Fixed Income Securities Fund, Inc.
J. JERRY INSKEEP, JR.,* Chairman and Trustee of the Trust; Chairman and
Director of each of the Columbia Funds; Chairman, Director, and a principal
shareholder of Columbia Management Co. (the "Adviser"), the investment
adviser of the Fund, and Columbia Funds Management Company ("CFMC");
Chairman and Director of Columbia Trust Company (the "Trust Company");
Director of Columbia Financial Center Incorporated ("Columbia Financial").
JAMES F. RIPPEY,* President and Trustee of the Trust; Director of each of
the Columbia Funds; President, Director, and a principal shareholder of the
Adviser and CFMC; President and Director of the Trust Company.
RICHARD L. WOOLWORTH, Trustee of the Trust (since July 1993); Director of
each of the Columbia Funds (since January 1992). Mr. Woolworth is Chairman
and Chief Executive Officer of Blue Cross and Blue Shield of Oregon and
Chairman and Chief Executive Officer of The Benchmark Group, health
insurers, 100 S. W. Market Street, Portland, Oregon 97201.
GEORGE L. HANSETH,* Trustee, Vice President, Assistant Secretary, and
Treasurer of the Trust; Senior Vice President, Assistant Secretary, and
Treasurer of each of the Columbia Funds; Vice President, Assistant
Secretary, Treasurer, and Director of the Adviser and CFMC; Vice President,
Treasurer, Assistant Secretary, and Director of the Trust Company;
President and Director of Columbia Financial.
JOHN A. KEMP,* Trustee and Vice President of the Trust; President and
Director of each of the Columbia Funds; Senior Vice President and Director
of the Adviser, CFMC, Columbia Financial, and the Trust Company.
ALEXANDER S. MACMILLAN III, * Trustee of the Trust (since March 1994); Vice
President of the Adviser and CFMC.
PETER C. OLSON,* Trustee of the Trust (since April 1991); Vice President of
the Adviser.
PETER T. SHAND,* Trustee of the Trust (since April 1991); Vice President of
the Adviser.
LAWRENCE S. VIEHL,* Vice President of the Trust, each of the Columbia
Funds, the Adviser, CFMC, and the Trust Company.
2
<PAGE>
JEFF B. CURTIS,* Secretary of the Trust (since April 1994); Secretary of
each of the Columbia Funds (since April 1994); General Counsel, Vice
President, and Secretary to the Adviser, CFMC, the Trust Company, and
Columbia Financial (since April 1993); Stoel Rives (1986-1993), a law firm
in Portland, Oregon.
*These officers and trustees are "interested persons" as defined by
the Investment Company Act of 1940 (the "1940 Act") and receive no trustee
fees or salaries from the Fund. The business address of each such person is
1300 SW Sixth Avenue, PO Box 1350, Portland, Oregon 97207.
At November 29, 1996, to the knowledge of the Trust, the following
persons owned of record or beneficially more than 5 percent of the
outstanding shares of the Fund:
Shares Beneficially Owned
Name and Address at November 29, 1996
- -------------------------------------- -------------------------
Locals 302 & 612 Operating Engineers 294,697 (15.11%)
Employers Retirement Plan
P.O. Box 34203
Seattle, WA 98124
Lumber Industry Pension Fund 226,547 (11.61%)
2929 NW 31st Ave.
Portland, OR 97210
Tektronix Master Retirement Trust 218,925 (11.22%)
Tektronix Inc., Corporate Headquarters
M/S 63-844
P.O. Box 1000
Wilsonville, OR 97070
TPM-WCIW Pension Trust 109,756 (5.63%)
P.O. Box 5434
Spokane, WA 99205
Legacy Fixed Income Investment Fund 107,029 (5.49%)
Legacy Health Systems
Corporate Financial Administrative Services
1919 N.W. Lovejoy
Portland, OR 97209
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES
- --------------------------------------------------------------------------------
Information regarding services performed by the Adviser to the Fund
and the formula for calculating the fees paid for those services are set
forth in the Prospectus under "Management of the Fund." Advisory fees
incurred by the Fund were $214,819, $106,597 and $8,766 for fiscal 1996,
1995 and that portion of fiscal 1994 the Fund was in operation,
respectively.
Shareholders of the Fund will be investment advisory clients of the
Adviser, in addition to their indirect relationship to the Adviser by
virtue of their status as shareholders of the Fund. If, however, the
3
<PAGE>
assets of an investment advisory client of the Adviser are invested in the
Fund, that client will pay no fee pursuant to its separate management
contract with the Adviser with respect to those assets invested in the Fund
(for the period during which the assets are invested in the Fund).
If the Adviser is deemed to be a fiduciary with respect to a
prospective shareholder of the Fund pursuant to the Employee Retirement
Income Security Act of 1974 ("ERISA"), certain conditions must be satisfied
before assets may be invested in that Fund by the Adviser on behalf of the
shareholder. These conditions have been set forth by the U. S. Department
of Labor in Prohibited Transaction Class Exemption No. 77-4 (the
"Exemption"). The Exemption permits the Adviser to direct investments of
ERISA-qualified plans to a mutual fund, such as the Fund, for which the
Adviser serves as an investment adviser if, after review of the Prospectus
and disclosure relating to fees of the Fund and fees under the advisory
contract, another fiduciary, as determined under ERISA, with respect to
that shareholder approves investments in the Fund. The second fiduciary
must be independent of and unrelated to the Adviser under standards set
forth by the U. S. Department of Labor in the Exemption.
The second, independent fiduciary that must approve investments in the
Fund by the Adviser is not engaged as a second fiduciary only in
contemplation of a possible investment in the Fund. Rather, the second,
independent fiduciary is almost always a committee appointed by the
employee benefit plan sponsor and has oversight responsibility for
appointment of CMC as an investment adviser with respect to certain plan
assets. This committee is almost always made up of one or more employees of
the plan sponsor, and, as such, these employees receive compensation from
the plan sponsor but are not compensated out of plan assets.
The Adviser is registered under the Investment Advisers Act of 1940,
is engaged principally in the business of rendering investment supervisory
services, and is responsible for payment of all executive salaries and
executive expenses and office rent of the Fund and the Trust.
Messrs. Inskeep and Rippey, who are Trustees and officers of the
Trust, each own approximately 41 percent of the voting securities of the
Adviser and, therefore, are considered "controlling persons" under the 1940
Act. Certain affiliated persons of the Trust are also affiliated persons of
the Adviser. See "Management." The Adviser acts as an investment manager
for approximately $13 billion of assets of other institutions. The Funds
are intended to provide investment vehicles for certain client accounts
managed by the Adviser. An independent fiduciary of those client accounts,
after careful review of the Fund's Prospectus, Statement of Additional
Information, and fees arrangement, approves the investment in the Fund. The
independent fiduciary then authorizes the Adviser to purchase and sell
shares of the Fund at its discretion for the client's portfolio, subject to
certain limitations imposed by the authorization.
The Trust Company acts as transfer agent and dividend crediting agent
for the Fund. Its address is 1301 SW Fifth Avenue, PO Box 1350, Portland,
Oregon 97207. It issues certificates for shares of the Fund, if requested,
and records and disburses dividends for the Fund. The Trust pays the Trust
Company a per account fee of $1 per month for each shareholder account with
the Fund existing at any time during the month, with a minimum aggregate
fee of $1,500 per month. In addition, the Trust pays the Trust Company for
extra administrative services performed at cost in accordance with a
schedule set forth in the agreement between the Trust Company and the Trust
and reimburses the Trust Company for certain out-of-pocket expenses
incurred in carrying out its duties under that agreement. Certain trustees
and officers of the Trust are minority shareholders of the Trust Company.
The Trust paid $18,000 to the Trust Company for services performed for
fiscal 1996 under the transfer agent agreement relating to the Fund.
4
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
The Fund will not generally invest in securities for short-term
capital appreciation but, when business and economic conditions, market
prices or the Fund's investment policy warrant, individual security
positions may be sold without regard to the length of time they have been
held. The portfolio turnover rate for the Fund is disclosed in the
prospectus under "Financial Highlights."
The Fund may purchase its portfolio securities through a securities
broker and pay the broker a commission, or the Fund may purchase the
securities directly from a broker which acts as principal and sells
securities directly for its own account without charging a commission. The
Fund may also purchase securities from underwriters, the price of which
will include a commission or concession paid by the issuer to the
underwriter. The purchase price of securities purchased from dealers
serving as market makers will include the spread between the bid and asked
prices.
Prompt execution of orders at the most favorable price will be the
primary consideration of the Fund in transactions where brokerage fees are
involved. Research, statistical, and other services also may be taken into
consideration in selecting broker-dealers. These services may include:
advice concerning the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities
or the purchasers or sellers of securities; and furnishing analyses and
reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategies, and performance of accounts. While the Fund
has no arrangements or formulas as to either the allocation of brokerage
business or commission rates paid thereon, a commission in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction may be paid by the Fund if management of the
Trust determines in good faith that the commission is reasonable in
relation to the value of the brokerage and research services provided,
viewed in terms of either that particular transaction or management's
overall responsibilities with respect to the Fund.
Allocation of transactions to obtain research services for the Adviser
enables the Adviser to supplement its own research and analysis with the
statistics, information, and views of others. While it is not possible to
place a dollar value on these services, it is the opinion of the Adviser
that the receipt of such services will not reduce the overall expenses for
its research or those of its affiliated companies. The fees paid to the
Adviser by the Fund would not be reduced as a result of the receipt of such
information and services by the Fund. The receipt of research services from
brokers or dealers might be useful to the Adviser and its affiliates in
rendering investment management services to the Fund or other clients; and,
conversely, information provided by brokers or dealers who have executed
orders on behalf of other clients might be useful to the Adviser in
carrying out its obligations to the Fund.
Investment decisions for the Fund are made independently from those of
the other portfolios of the Trust or accounts managed by the Adviser or
Columbia Funds Management Company. The same security is sometimes held in
the portfolio of more than one fund or account. Simultaneous transactions
are inevitable when several funds or accounts are managed by the same
investment adviser, particularly when the same security is suitable for the
investment objective of more than one fund or account. In the event of
simultaneous transactions, allocations among the Fund or accounts will be
made on an equitable basis.
Both the Trust and the Adviser have adopted a Code of Ethics (the
"Code") that sets forth general and specific standards relating to the
securities trading activities of all their employees. The purpose of the
Code is to ensure that all employees conduct their personal transactions in
a manner that does not interfere with the portfolio transactions of the
Fund or the Adviser's other clients or take unfair advantage
5
<PAGE>
of their relationship with the Adviser. The specific standards in the Code
include, among others, a requirement that all employee trades be
pre-cleared; a prohibition on investing in initial public offerings;
required pre-approval of an investment in private placements; a prohibition
on portfolio managers trading in a security seven days before or after a
trade in the same security by an account over which the manager exercises
investment discretion; and a prohibition on realizing any profit on the
trading of a security held less than 60 days. Certain securities and
transactions, such as mutual fund shares or U. S. Treasuries and purchases
of options on securities indexes or securities under an automatic dividend
reinvestment plan, are exempt from the restrictions in the Code because
they present little or no potential for abuse. Certain transactions
involving the stocks of large capitalization companies are exempt from the
seven day black-out period and short-term trading prohibitions because such
transactions are highly unlikely to affect the price of these stocks. In
addition to the trading restrictions, the Code contains reporting
obligations that are designed to ensure compliance and allow the Adviser's
Ethics Committee to monitor that compliance.
The Trust and the Adviser have also adopted a Policy and Procedures
Designed to Detect and Prevent Insider Trading (the "Insider Trading
Policy"). The Insider Trading Policy prohibits any employee from trading,
either personally or on behalf of others (including a client account), on
the basis of material nonpublic information. All employees are required to
certify each year that they have read and complied with the provisions of
the Code and the Insider Trading Policy.
- --------------------------------------------------------------------------------
REDEMPTIONS AND NET ASSET VALUE
- --------------------------------------------------------------------------------
Information regarding redemptions is set forth in the Prospectus under
"Redemptions". Information regarding the determination of the net asset
value per share of the Fund is set forth in the Prospectus under
"Determination of Net Asset Value."
The Trust may suspend the determination of net asset value of the Fund
and the right of redemption for any period (1) when the New York Stock
Exchange is closed, other than customary weekend and holiday closings, (2)
when trading on the New York Stock Exchange is restricted, (3) when an
emergency exists as a result of which sale of securities owned by the Fund
is not reasonably practicable or it is not reasonably practicable for the
Trust to determine the value of the Fund's net assets, or (4) as the
Securities and Exchange Commission ("SEC") may by order permit for the
protection of security holders, provided the Trust complies with rules and
regulations of the SEC which govern as to whether the conditions prescribed
in (2) or (3) exist. The New York Stock Exchange observes the following
holidays: New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas. In the case of
suspension of the right to redeem, shareholders may withdraw their
redemption request or receive payment based upon the net asset value
computed upon the termination of the suspension.
- --------------------------------------------------------------------------------
CUSTODIANS
- --------------------------------------------------------------------------------
United States National Bank of Oregon, 321 SW Sixth Avenue, Portland,
Oregon 97208, acts as general custodian of the Trust (a "Custodian").
Morgan Stanley Trust Company ("Morgan Stanley" or a "Custodian"), One
Evertrust Plaza, Jersey City, New Jersey 07302, has entered into a
custodian agreement with the Trust in respect of the purchase of foreign
securities by the Fund. The Custodians hold all securities and cash of the
Fund, receive and pay for securities purchased, deliver against payment
securities sold, receive and collect income from investments, make all
payments covering expenses of the
6
<PAGE>
Fund, and perform other administrative duties, all as directed by
authorized officers of the Trust. The Custodians do not exercise any
supervisory function in the purchase and sale of portfolio securities or
payment of dividends.
The Fund is authorized to invest up to 10% of its total assets in
fixed income securities of foreign issuers, denominated in U.S. dollars.
Portfolio securities purchased outside the United States by the Fund are
maintained in the custody of foreign banks, trust companies, or
depositories that have sub-custodian arrangements with Morgan Stanley (the
"foreign sub-custodians"). Each of the domestic and foreign custodial
institutions that may hold portfolio securities of the Fund has been
approved by the Trustees of the Trust in accordance with regulations under
the 1940 Act.
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Coopers & Lybrand, L.L.P., 1300 S.W. Fifth Avenue, Suite 2700,
Portland, Oregon 97201, serves as the Trust's independent accountants and,
in addition to examining the financial statements of the Trust at fiscal
year-end, is expected to assist in the preparation of the tax returns of
the Trust and in certain other matters.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
Federal Income Taxes
The Fund intends and expects to meet continuously the tests for
qualification as a regulated investment company under Part I of Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund
believes it satisfies the tests to qualify as a regulated investment
company.
To qualify as a regulated investment company for any taxable year, the
Fund must, among other things:
(a) derive at least 90 percent of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or foreign currencies, or other
income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in
such stock, securities, or currencies (the "90 Percent Test");
(b) derive less than 30 percent of its gross income from the sale or
other disposition of any of the following, if held for less than three
months: stock, securities, foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to
the Fund's principal business of investing in stocks or securities (or
options and futures with respect to stocks or securities), or certain other
assets (the "30 Percent Test"); and
(c) diversify its holdings so that at the end of each quarter (i) 50
percent or more of the value of the assets of the Fund is represented by
cash, government securities, and other securities limited, in respect of
any one issuer of such other securities, to an amount not greater than 5
percent of the value of the assets of the Fund and 10 percent of the
outstanding voting securities of such issuer, and (ii) not more than 25
percent of the value of the assets of the Fund is invested in the
securities (other than government securities) of any one issuer or of two
or more issuers that the Fund "controls" within the meaning of
7
<PAGE>
Section 851 of the Code and that meet certain requirements. In addition,
the Fund must file, or have filed, a proper election with the Internal
Revenue Service.
Part I of Subchapter M of the Code will apply to the Fund during a
taxable year only if it meets certain additional requirements. Among other
things, the Fund must: (a) have a deduction for dividends paid (without
regard to capital gain dividends) at least equal to the sum of 90 percent
of its investment company taxable income (computed without any deduction
for dividends paid) and 90 percent of its tax-exempt interest in excess of
certain disallowed deductions (unless the Internal Revenue Service waives
this requirement) and (b) either (i) have been subject to Part I of
Subchapter M for all taxable years ending after November 8, 1983 or (ii) as
of the close of the taxable year have no earnings and profits accumulated
in any taxable year to which Part I of Subchapter M did not apply.
The Trust currently has three portfolios, including the Fund. The
Trust may establish additional funds in the future. Federal income tax laws
generally will treat each fund as a separate corporation (provided that
each fund consists of a segregated portfolio of assets the beneficial
interests in which are owned by the holders of a class or series of stock
that is preferred over all other classes or series in respect of that
portfolio of assets).
A regulated investment company that meets the requirements described
above is taxed only on its "investment company taxable income," which
generally equals the undistributed portion of its ordinary net income and
any excess of net short-term capital gain over net long-term capital loss.
In addition, any excess of net long-term capital gain over net short-term
capital loss that is not distributed is taxed to the Fund at corporate
capital gain tax rates. The policy of the Fund is to apply capital loss
carry-forwards as a deduction against future capital gains before making a
capital gain distribution to shareholders.
If any net long-term capital gains in excess of net short-term capital
losses are retained by the Fund, requiring federal income taxes to be paid
thereon by the Fund, the Fund may elect to treat such capital gains as
having been distributed to shareholders. In the case of such an election,
shareholders will be taxed on such amounts as long-term capital gains, will
be able to claim their proportional share of the federal income taxes paid
by the Fund on such gains as a credit against their own federal income tax
liabilities, and generally will be entitled to increase the adjusted tax
basis of their shares in the Fund by the differences between their pro rata
shares of such gains and their tax credits.
Shareholders of the Fund are taxed on distributions of net investment
income, or of any excess of net short-term capital gain over net long-term
capital loss, as ordinary income. Income distributions from the Fund are
unlikely to qualify for the dividends-received deduction for corporate
shareholders because the income of the Fund consists largely or entirely of
interest rather than dividends. Distributions of any excess of net
long-term capital gain over net short-term capital loss from the Fund are
ineligible for the dividends-received deduction.
The Fund may purchase zero coupon bonds and payment-in-kind ("PIK")
bonds. With respect to zero coupon bonds, the Fund recognizes
original-issue-discount income ratably over the life of the bond even
though the Fund receives no payments on the bond until the bond matures.
With respect to PIK bonds, the Fund recognizes interest income equal to the
fair market value of the bonds distributed as interest. Because the Fund
must distribute 90 percent of its income to remain qualified as a
registered investment company, the Fund may need to use its cash reserves
or be forced to liquidate a portion of its portfolio to generate cash to
distribute to its shareholders with respect to original-issue-discount
income from zero coupon bonds and interest income from PIK bonds.
The Fund may invest up to 10 percent of its total assets in the
securities of foreign corporations and issuers. Foreign countries may
impose income taxes, generally collected by withholding, on foreign-
8
<PAGE>
source dividends and interest paid to the Fund. These foreign taxes will
reduce the Fund's distributed income. The Fund generally expects to incur,
however, no foreign income taxes on gains from the sale of foreign
securities. The United States has entered into income tax treaties with
many foreign countries to reduce or eliminate the foreign taxes on certain
dividends and interest received from corporations in those countries. The
Fund intends to take advantage of such treaties where possible. It is
impossible to predict with certainty in advance the effective rate of
foreign taxes that will be paid by the Fund since the amount invested in
particular countries will fluctuate and the amounts of dividends and
interest relative to total income will fluctuate.
Distributions properly designated by the Fund as representing the
excess of net long-term capital gain over net short-term capital loss are
taxable to shareholders as long-term capital gain, regardless of the length
of time the shares of the Fund have been held by shareholders. For
noncorporate taxpayers, the highest rate that applies to long-term capital
gains is lower than the highest rate that applies to ordinary income. Any
loss that is realized and allowed on redemption of shares of the Fund less
than six months from the date of purchase of the shares and following the
receipt of a capital gain dividend will be treated as a long-term capital
loss to the extent of the capital gain dividend. For this purpose, Section
852(b)(4) of the Code contains special rules on the computation of a
shareholder's holding period.
Distributions of taxable net investment income and net realized
capital gains will be taxable as described above, whether paid in shares or
in cash. Each distribution is accompanied by a brief explanation of the
form and character of the distribution. Within 60 days after the close of
each taxable year, the Fund issues to each shareholder a statement of the
federal income tax status of all distributions, including a statement of
the prior taxable year's distributions which the Fund has designated to be
treated as long-term capital gain.
A distribution may be taxable to a shareholder even if the
distribution reduces the net asset value of the shares held below their
cost (and is in an economic sense a return of the shareholder's capital).
This tax result is most likely when shares are purchased shortly before an
annual distribution of capital gains or other earnings.
If the Fund declares a dividend in October, November, or December
payable to shareholders of record on a certain date in such a month and
pays the dividend during January of the following year, the shareholders
will be taxed as if they had received the dividend on December 31 of the
year in which the dividend was declared. Thus, a shareholder may be taxed
on the dividend in a taxable year prior to the year of actual receipt.
A special tax may apply to the Fund if it fails to make sufficient
distributions during the calendar year. The required distributions for each
calendar year generally equal the sum of (a) 98 percent of the ordinary
income for the calendar year plus (b) 98 percent of the capital gain net
income for the one-year period that ends on October 31 during the calendar
year, plus (c) an adjustment relating to any shortfall for the prior
taxable year. If the actual distributions are less than the required
distributions, a tax of 4 percent applies to the shortfall.
The Code allows the deduction by certain individuals, trusts, and
estates of "miscellaneous itemized deductions" only to the extent that such
deductions exceed 2 percent of adjusted gross income. The limit on
miscellaneous itemized deductions will not apply, however, with respect to
the expenses incurred by any "publicly offered regulated investment
company." The Fund believes that it is a publicly offered regulated
investment company because its shares are continuously offered pursuant to
a public offering (within the meaning of section 4 of the Securities Act of
1933 (the "1933 Act"), as amended). Therefore, the limit on miscellaneous
itemized deductions should not apply to expenses incurred by the Fund.
9
<PAGE>
State Income Taxes
The state tax consequences of investments in the Fund are beyond the
scope of the tax discussions in the Prospectus and this Statement of
Additional Information.
Additional Information
The foregoing summary and the summary included in the Prospectus under
"Taxes" of tax consequences of investment in the Fund are necessarily
general and abbreviated. No attempt has been made to present a complete or
detailed explanation of tax matters. Furthermore, the provisions of the
statutes and regulations on which they are based are subject to change by
legislative or administrative action. State and local taxes are beyond the
scope of this discussion. Prospective investors in the Fund are urged to
consult their own tax advisers regarding specific questions as to federal,
state, or local taxes.
- --------------------------------------------------------------------------------
YIELD AND PERFORMANCE
- --------------------------------------------------------------------------------
The Trust may from time to time advertise or quote current yield and
total return performance for the Fund. These figures represent historical
data and are calculated according to SEC rules standardizing such
computations. The investment return on and the value of shares of the Fund
will fluctuate so that the shares when redeemed may be worth more or less
than their original cost.
Current yield of the Fund is calculated by dividing the net investment
income per share earned during an identified 30-day period by the maximum
offering price per share on the last day of the same period, according to
the following formula:
6
Yield = 2 [(a-b + 1) -1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period.
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day
of the period.
The Fund uses generally accepted accounting principles in determining
actual income paid, and these principles differ in some instances from SEC
rules for computing income for the above yield calculations. Therefore, the
quoted yields as calculated above may differ from the actual dividends
paid.
The Trust may publish average annual total return quotations for
recent 1, 5, and 10-year periods (or a fractional portion thereof) computed
by finding the average annual compounded rates of return over the 1, 5, and
10-year periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
10
<PAGE>
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1000 payment made at the beginning of the 1, 5,
and 10-year periods (or a fraction portion
thereof)
Total return figures may also be published for recent 1, 5, and
10-year periods (or a fractional portion thereof) where the total return
figures represent the percentage return for the 1, 5, and 10-year periods
that would equate the initial amount invested to the ending redeemable
value.
If the Trust's registration statement under the 1940 Act with respect
to the Fund has been in effect less than 1, 5 or 10 years, the time period
during which the registration statement with respect to that Fund has been
in effect will be substituted for the periods stated.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Prospectus sets forth the investment objectives and certain
restrictions applicable to the Fund. The following is a list of investment
restrictions applicable to the Fund. If a percentage limitation is adhered
to at the time of the investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction. The Trust may not change these
restrictions without a majority vote of the outstanding shares of the Fund.
The Fund may not:
1. Buy or sell commodities or commodity futures contracts.
2. Concentrate investments in any industry. However, it may invest up
to 25 percent of the value of its total assets in any one industry and more
than 25 percent of the value of its total assets in cash, cash equivalents,
or securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities. Commitments to purchase securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities on a
"when-issued" basis may not exceed 20 percent of the total assets of the
Fund. Emphasis on investments in securities of a particular industry will
be shifted whenever the Adviser determines that such action is desirable
for investment reasons. The Trustees will periodically review these
decisions of the Adviser.
3. Buy or sell real estate. However, the Fund may purchase or hold
securities issued by companies, such as real estate investment trusts, that
deal in real estate or interests therein, and participation interests in
pools of real estate mortgage loans.
4. Make loans to other persons (except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting
part of an issue). The Fund may lend portfolio securities to broker-dealers
or other institutional investors if, as a result thereof, the aggregate
value of all securities loaned does not exceed 33 1/3 percent of its total
assets.
11
<PAGE>
5. Purchase illiquid securities, including restricted securities and
repurchase agreements of more than seven days maturity, if upon the
purchase more than 10 percent of the value of the Fund's net assets would
consist of these securities. "Illiquid securities" are securities that may
not be sold or disposed of in the ordinary course of business within seven
days at approximately the price used to determine the Fund's net asset
value and include restricted securities that are subject to legal or
contractual restrictions on resale. Certain restricted securities that can
be resold to qualifying institutions pursuant to a regulatory exemption
under Rule 144A of the 1933 Act and for which a dealer or institutional
trading market exists may be deemed to be liquid securities by the Trustees
of the Fund and, therefore, are not subject to the above investment
restriction.
6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting
securities of that issuer to be held in the Fund.
7. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the value of its total assets
at market value to be invested in the securities of that issuer (other than
obligations of the U.S. Government and its instrumentalities), with
reference to 75 percent of the assets of the Fund.
8. Purchase or retain securities of an issuer if those officers or
directors of the Fund or the Adviser who individually own more than 1/2 of
1% of the outstanding securities of that issuer together own more than 5%
of such securities.
9. Purchase securities of other open-end investment companies.
10. Issue senior securities, bonds, or debentures.
11. Underwrite securities of other issuers, except the Fund may
acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Fund, it might be deemed to be an
underwriter for purposes of the 1933 Act.
12. Borrow money except as a temporary measure for extraordinary or
emergency purposes. Its borrowings may not exceed 5 percent of the gross
assets of the Fund valued at the lesser of cost or market value, nor may it
pledge, mortgage, or hypothecate assets valued at market to an extent
greater than 10 percent of the gross assets valued at cost of the Fund.
13. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years of continuous operation.
14. Invest in companies to exercise control or management.
15. Buy any securities or other property on margin, except for
short-term credits necessary for clearing transactions and except that
margin payments and other deposits in connection with transactions in
options, futures, and forward contracts shall not be deemed to constitute
purchasing securities on margin.
16. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such
securities. These short sales may only be made to protect a profit in or to
attempt to minimize a loss with respect to convertible securities. In any
event no more than 10 percent of the Fund's net assets valued at market
may, at any time, be held as collateral for such sales.
12
<PAGE>
17. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.
Some of the practices described above prohibit particular practices.
Certain policies described in paragraphs 4, 5, 12, 13, and 16 permit
specified practices but limit the portion of the Fund's assets that may be
so invested. Except for the practices described in paragraph 5, the Fund
has no current intention of engaging in any of these permitted practices in
the foreseeable future.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUND
- --------------------------------------------------------------------------------
Securities held by the Fund may include a variety of fixed income debt
securities, such as bonds, debentures, notes, equipment trust certificates,
short-term obligations (those having maturities of 12 months or less), such
as prime commercial paper and bankers' acceptances, domestic certificates
of deposit, obligations of or guaranteed by the U.S. Government and its
agencies or instrumentalities, Government National Mortgage Association
("GNMA") mortgage-backed certificates and other similar securities
representing ownership in a pool of loans ("pass-through securities"), and
repurchase agreements with banks or securities dealers relating to these
securities. Portfolio securities may have variable or "floating" interest
rates. Information regarding certain of these securities is included below.
Investments may also be made in fixed income preferred stocks. Debt
securities and preferred stocks may be convertible into, or exchangeable
for, common stocks, and may have warrants attached.
Depending on prevailing market conditions, debt securities may be
purchased at a discount from face value, producing a yield of more than the
coupon rate, or at a premium over face value, producing a yield of less
than the coupon rate. In making investment decisions, the Fund's Adviser
will consider factors other than current yield, such as preservation of
capital, maturity, and yield to maturity. Common stocks acquired through
exercise of conversion rights or warrants or acceptance of exchange or
similar offers will not be retained in the portfolio. Orderly disposition
of these equity securities will be made consistent with management's
judgment as to the best obtainable price.
To achieve its investment objective, the Fund generally will invest at
least 80% of its total assets in high yielding fixed income securities
rated Ba or lower by Moody's or BB or lower by S&P. The Fund may not invest
in any fixed income securities rated below Caa by Moody's or CCC by S&P,
and no more than 10% of the Fund's total assets may be invested in fixed
income securities rated Caa or CCC. The Fund may also invest in unrated
fixed income securities when the Fund's Adviser believes the security is of
comparable quality to that of securities eligible for purchase by the Fund.
Securities rated Ba or less by Moody's or BB or less by S&P, commonly
referred to as "junk bonds," are considered noninvestment grade securities,
subject to a high degree of risk, and considered speculative by the major
credit rating agencies with respect to the issuer's ability to meet
principal and interest payments. The Fund is designed for investors who are
willing to assume substantial risks of significant fluctuations in
principal value in order to achieve a high level of current income. The
Fund should represent only a portion of a balanced investment program. See
the Prospectus under "Description of the Fund -- Risk Considerations" for a
description of the risks of investing in lower-rated securities and under
"Additional Information" for a description of corporate bond ratings.
Additional information with respect to certain of the securities in
which the Fund may invest is set forth below.
13
<PAGE>
Certificates of Deposit
Certificates of Deposit are receipts issued by a U.S. bank in exchange
for the deposit of funds. The U.S. bank agrees to pay the amount deposited,
plus interest, to the bearer of the receipt on the date specified on the
certificate. Because the certificate is negotiable, it can be traded in the
secondary market before maturity. Under current FDIC regulations, $100,000
is the maximum insurance payable on Certificates of Deposit issued to the
Fund by any one bank. Therefore, Certificates of Deposit purchased by the
Fund may not be fully insured.
Bankers' Acceptances
Time drafts are drawn on a U.S. bank by an exporter or importer to
obtain a stated amount of funds to pay for specific merchandise or, less
frequently, foreign exchange. The draft is then "accepted" by the U.S. bank
(the drawee), which in effect unconditionally guarantees to pay the face
value of the instrument on its maturity date. The face of the instrument
specifies the dollar amount involved, the maturity date, and the nature of
the underlying transaction.
Letters of Credit
Letters of Credit are issued by banks and authorize the beneficiary to
draw drafts upon such banks for acceptance and payment under specified
conditions.
Commercial Paper
Commercial paper is an unsecured short-term note of indebtedness
issued in bearer form by business or banking firms to finance their
short-term credit needs.
Securities Rating Agencies
Subsequent to its purchase by the Fund, an issue may cease to be
rated, or its rating may be reduced below the criteria set forth for the
Fund. Neither event would require the elimination of bonds from the Fund's
portfolio, but the Adviser will consider that event in its determination of
whether the Fund should continue to hold such security in its portfolio. To
the extent the ratings accorded by Standard & Poor's Corporation ("S&P") or
Moody's Investors Services, Inc. ("Moody's") for securities may change as a
result of changes in the rating systems, the Fund will attempt to use
comparison ratings as standards for its investments in municipal bonds in
accordance with the policies described herein.
Commercial Paper Ratings. A1 and Prime 1 are the highest commercial
paper ratings issued by S&P and Moody's, respectively.
Commercial paper rated A1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated A or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically,
the issuer's industry is well established and the issuer has a strong
position within the industry; and (6) the reliability and quality of
management are unquestioned.
Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6)
trend of earnings over a period of 10 years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which
14
<PAGE>
may be present or may rise as a result of public interest questions and
preparation to meet such obligations.
Bond Ratings. See the Prospectus under "Additional Information -- Bond
Ratings" for a description of the ratings used by Moody's and S&P.
Government Securities
Government securities may be either direct obligations of the U.S.
Treasury or may be the obligations of an agency or instrumentality of the
United States.
Treasury Obligations. The U.S. Treasury issues a variety of marketable
securities that are direct obligations of the U.S. Government. These
securities fall into three categories - bills, notes, and bonds
distinguished primarily by their maturity at time of issuance. Treasury
bills have maturities of one year or less at the time of issuance, while
Treasury notes currently have maturities of 1 to 10 years. Treasury bonds
can be issued with any maturity of more than 10 years.
Obligations of Agencies and Instrumentalities. Agencies and
instrumentalities of the U.S. Government are created to fill specific
governmental roles. Their activities are primarily financed through
securities whose issuance has been authorized by Congress. Agencies and
instrumentalities include Export Import Bank, Federal Housing
Administration, Government National Mortgage Association, Tennessee Valley
Authority, Banks for Cooperatives, Farmers Home Administration, Federal
Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association, Federal Home Loan Mortgage Corp.,
U.S. Postal System, and Federal Finance Bank. Although obligations of
"agencies" and "instrumentalities" are not direct obligations of the U.S.
Treasury, payment of the interest or principal on these obligations is
generally backed directly or indirectly by the U.S. Government. This
support can range from backing by the full faith and credit of the United
States or U.S. Treasury guarantees to the backing solely of the issuing
instrumentality itself.
Mortgage-Backed Certificates
GNMA Certificates ("Certificates") are mortgage-backed securities. The
Certificates evidence part ownership of a pool of mortgage loans. The
Certificates which the Fund may purchase are of the "modified pass-through"
type. "Modified pass-through" Certificates entitle the holder to receive
all interest and principal payments owed on the mortgage pool, net of fees
paid to the servicing agent and GNMA, regardless of whether or not the
mortgagor actually makes the payment.
The GNMA Guarantee. The National Housing Act authorizes GNMA to
guarantee the timely payment of principal of and interest on securities
backed by a group (or pool) of mortgages insured by FHA or FMHA, or
guaranteed by VA. The GNMA guarantee is backed by the full faith and credit
of the United States. GNMA is also empowered to borrow without limitation
from the U.S. Treasury to make any payments required under its guarantee.
Market for GNMA Certificates. Since the inception of the GNMA
Mortgage-Backed Securities program in 1970, the amount of GNMA Certificates
outstanding has grown rapidly. The size of the market and the active
participation in the secondary market by securities dealers and many types
of investors make the GNMA Certificates a highly liquid instrument. Prices
of GNMA Certificates are readily available from securities dealers and
depend on, among other things, the level of market rates, the Certificate's
coupon rate and the prepayment experience of the pool of mortgages backing
each Certificate.
Other Pass-Through Certificates. A Fund may invest in other
pass-through securities. These are mortgage-backed securities for which the
payments on the underlying mortgages are passed from the
15
<PAGE>
mortgage holder through the servicing agent, net of fees paid to the
servicing agent, to the Fund. These securities may be "modified
pass-through certificates" (like GNMA certificates) whereby the Fund would
receive interest and principal payments regardless of whether the
mortgagors make the payments, or they may be "straight pass-through
certificates" whereby the Fund would receive principal and/or interest only
to the extent actually collected by the servicing agent. The servicing
agent may be an instrumentality or agency of the U.S. Government or may be
an institution such as a bank or savings and loan association. The
underlying mortgages may be conventional mortgages as well as mortgages
guaranteed by federal agencies or instrumentalities. Straight pass-through
securities involve additional risks because payments are not guaranteed.
However, this risk may be mitigated to the extent that the underlying
mortgages are guaranteed by a federal agency or instrumentality or by a
private insurance company. The Fund will limit its investments in other
pass-through securities to those issued by Federal National Mortgage
Association; Federal Home Loan Mortgage Corporation (Participation
Certificates); and Resolution Funding Corp. Participation Certificates.
Floating or Variable Rate Securities
Floating or variable rate securities have interest rates that
periodically change according to the rise and fall of a specified interest
rate index or a specific fixed-income security that is used as a benchmark.
The interest rate typically changes every six months, but for some
securities the rate may fluctuate weekly, monthly, or quarterly. The index
used is often the rate for 90 or 180-day Treasury Bills. Variable-rate and
floating-rate securities may have interest rate ceilings or caps that fix
the interest rate on such a security if, for example, a specified index
exceeds a predetermined interest rate. If an interest rate on a security
held by the Fund becomes fixed as a result of a ceiling or cap provision,
the interest income received by the Fund will be limited by the rate of the
ceiling or cap. In addition, the principal values of these types of
securities will be adversely affected if market interest rates continue to
exceed the ceiling or cap rate.
Collateralized Mortgage Obligations ("CMOs")
CMOs are obligations fully collateralized by a portfolio of mortgages
or mortgage-related securities. Payments of principal and interest on the
mortgages are passed through to the holders of the CMOs on the same
schedule as they are received, although certain classes of CMOs have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the type of CMOs in which the Fund
invests, the investment may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities. CMOs may also
be less marketable than other securities. The Fund will invest only in
those CMO's whose characteristics and terms are consistent with the average
maturity and market risk profile of the other securities held by the Fund.
Loan Transactions
Loan transactions involve the lending of securities to a broker-dealer
or institutional investor for its use in connection with short sales,
arbitrage, or other securities transactions. Loans of portfolio securities
of the Fund will be made (if at all) in strictest conformity with
applicable federal and state rules and regulations. The purpose of a
qualified loan transaction is to afford the Fund the opportunity to
continue to earn income on the securities loaned and at the same time to
earn income on the collateral held by it.
Management of the Fund understands that it is the view of the Staff of
the SEC that the Fund is permitted to engage in loan transactions only if
the following conditions are met: (1) the Fund must receive at least 100
percent collateral in the form of cash, cash equivalents, e.g., U.S.
Treasury bills or notes, or an irrevocable letter of credit; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the level of
the collateral; (3) the Fund must be able to terminate the loan, after
notice, at any time; (4) the Fund must receive reasonable
16
<PAGE>
interest on the loan or a flat fee from the borrower, as well as amounts
equivalent to any dividends, interest, or other distributions on the
securities loaned and any increase in market value; (5) the Fund may pay
only reasonable custodian fees in connection with the loan; (6) voting
rights on the securities loaned may pass to the borrower; however, if a
material event affecting the investment occurs, the Trustees must be able
to terminate the loan and vote proxies or enter into an alternative
arrangement with the borrower to enable the Trustees to vote proxies.
Excluding items (1) and (2), these practices may be amended from time to
time as regulatory provisions permit.
While there may be delays in recovery of loaned securities or even a
loss of rights in collateral supplied if the borrower fails financially,
loans will be made only to firms deemed by a Fund's management to be of
good standing and will not be made unless, in the judgment of the Fund's
management, the consideration to be earned from such loans would justify
the risk. Such loan transactions are referred to in this section as
"qualified loan transactions."
Options and Financial Futures Transactions
The Fund may invest up to 5 percent of its net assets in premiums on
put and call exchange-traded options. A call option gives the holder
(buyer) the right to purchase a security at a specified price (the exercise
price) at any time until a certain date (the expiration date). A put option
gives the buyer the right to sell a security at the exercise price at any
time until the expiration date. The Fund may also purchase options on
securities indices. Options on securities indices are similar to options on
a security except that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index gives the
holder the right to receive, on exercise of the option, an amount of cash
if the closing level of the securities index on which the option is based
is greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the option. The Fund may enter into closing
transactions, exercise its options, or permit the options to expire. The
Fund may only write call options that are covered. A call option is covered
if written on a security the Fund owns. The Fund may write such options on
up to 25 percent of its net assets.
The Fund may engage in financial futures transactions, including
interest rate futures transactions. Financial futures contracts are
commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a
security or the cash value of a securities index, during a specified future
period at a specified price. The Fund's investment restrictions do not
limit the percentage of the Fund's assets that may be invested in financial
futures transactions. The Fund, however, does not intend to enter into
financial futures transactions for which the aggregate initial margin
exceeds 5 percent of the net assets of the Fund after taking into account
unrealized profits and unrealized losses on any such transactions it has
entered into. The Fund may engage in futures transactions only on
commodities exchanges or boards of trade.
The Fund will not engage in transactions in index options, financial
futures contracts, or related options for speculation, but only as an
attempt to hedge against market conditions affecting the values of
securities that the Fund owns or intends to purchase. When the Fund
purchases a put on a stock index or on a stock index future not held by the
Fund, the put protects the Fund against a decline in the value of all
securities held by it to the extent that the stock index moves in a similar
pattern to the prices of the securities held. The correlation, however,
between indices and price movements of the securities in which the Fund
will generally invest may be imperfect. The Fund expects, nonetheless, that
the use of put options that relate to such indices will, in certain
circumstances, protect against declines in values of specific portfolio
securities or the Fund's portfolio generally. Although the purchase of a
put option may partially protect the Fund from a decline in the value of a
particular security or its portfolio generally, the cost of a put will
reduce the potential return on the security or the portfolio if either
increases in value.
17
<PAGE>
Upon entering into a futures contract, the Fund will be required to
deposit with its custodian in a segregated account cash or certain U.S.
government securities in an amount known as the "initial margin." This
amount, which is subject to change, is in the nature of a performance bond
or a good faith deposit on the contract and would be returned to the Fund
upon termination of the futures contract, assuming all contractual
obligations have been satisfied.
The principal risks of options and futures transactions are: (a)
possible imperfect correlation between movements in the prices of options,
currencies, or futures contracts and movements in the prices of the
securities or currencies hedged or used for cover; (b) lack of assurance
that a liquid secondary market will exist for any particular options or
futures contract when needed; (c) the need for additional skills and
techniques beyond those required for normal portfolio management; (d)
losses on futures contracts resulting from market movements not anticipated
by the investment adviser; and (e) possible need to defer closing out
certain options or futures contracts to continue to qualify for beneficial
tax treatment afforded "regulated investment companies" under the Code.
18
<PAGE>
CMC HIGH YIELD FUND
A Portfolio of CMC Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
We are pleased to report the performance of the CMC High Yield Fund for the
fiscal year ending October 31, 1996. The Fund posted a total return of
9.61% which compares to one year total returns of 5.37% for the Lehman
Government/Corporate Bond Index and 11.71% for the Lipper High Yield Bond
Index over the same period.
Throughout most of the Fund's fiscal year, interest rates were rising, due
to fears of modestly rising inflation and expectations of Federal Reserve
restraint. However, since a strong economy helps to reduce the default rate
in the high yield market, non-investment grade bonds ("junk bonds" or "high
yield bonds") generally outperformed investment-grade bonds all year. This
favorable environment for high yield bonds and a rising stock market are
responsible for the Fund's performance.
In keeping with its focus on the most conservative portion of the high
yield market, the CMC High Yield Fund invests primarily in bonds rated BB
or B by Moody's Investors Services. As a result the Fund outperformed
investment-grade bonds during the fiscal year but did not perform as well
compared to the high yield bond market in general, where bonds rated below
B performed the best. The Fund continues to place great emphasis on
thorough credit analysis and careful security selection.
On October 31, 1996, the Fund had a duration of 4.2 years and we expect to
maintain the portfolio's average maturity in the intermediate range. Top
sector holdings included media and hotels/gaming, and the Fund's top ten
holdings as of October 31, 1996 were:
Tele-Communications, Inc.(3.5%)
Ryerson Tull, Inc. (3.3%)
Rogers Communication, Inc. (3.1%)
Gulf Canada Resources, Ltd. (3.0%)
Freeport-McMoRan Resource Partners L.P. (2.8%)
La Quinta Inns, Inc. (2.8%)
Tenet Healthcare Corp. (2.8%)
HMH Properties, Inc. (2.8%)
Viacom, Inc. (2.7%)
Stone Consolidated Corp (2.6%)
19
<PAGE>
Looking ahead, we anticipate a steady level of economic growth that,
combined with benign inflationary pressures, should continue to provide a
favorable environment for high yield securities and reward long-term
investors in the Fund.
We appreciate your continuing investment in CMC High Yield Fund.
The Columbia Investment Team
November 29, 1996
[Graphic line chart depicting "Growth of $10,000 Since Inception" showing
the growth in dollar amounts ($9,500-$13,000) of CMC High Yield, Lehman
Gov't/Corp Bond and Lipper High Yield Bond for the period 7/6/94 to
10/31/96:
Average Annual Total Return
1 Year Since Inception*
------ ---------------
CMC High Yield 9.61% 11.79%
Lehman Gov't/Corp Bond 5.37% 9.16%
Lipper High Yield Bond 11.71% 10.89%
* Performance for CMC High Yield Fund and the Lehman Government/Corporate
Bond Index begin with the Fund's inception date on 7/6/94. Performance
for the Lipper High Yield Bond Fund Index begins on 6/30/94. Total
return performance is illustrated for the periods ended October 31,
1996 (for CMC $12,923; for Lehman $12,684; and for Lipper $12,234).
Past performance does not guarantee future results. The Lehman
Gov't/Corp Bond Index is an unmanaged bond index. The Lipper High Yield
Bond Fund Index reflects equally-weighted performance of the 30 largest
mutual funds within its category.]
20
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
October 31, 1996
Principal
Amount Value (1)
--------------- ---------------
<S> <C> <C>
U.S. Treasury Bond (1.2%)
8.000% 11/15/2021
(Cost $785,203)........................................................ $ 700,000 $ 804,062
---------------
Corporate Bonds (95.3%)
Basic Industry (11.0%)
Chemicals (2.8%)
Freeport-McMoRan Resource Partners L.P.
Senior Subordinated Notes
8.750% 02/15/2004.................................................. 1,950,000 1,969,500
---------------
Forest Products (2.6%)
Stone Consolidated Corp.
Senior Secured Note
10.250% 12/15/2000................................................. 1,700,000 1,797,750
---------------
Metals/Mining (5.6%)
AK Steel Corp.
Senior Note
10.750% 04/01/2004................................................. 1,500,000 1,620,000
Ryerson Tull, Inc.
Notes
8.500% 07/15/2001.................................................. 2,250,000 2,261,250
---------------
3,881,250
---------------
Total Basic Industry................................................... 7,648,500
---------------
Consumer Related (22.0%)
Hotel/Gaming (12.1%)
California Hotel Finance Corp.
Senior Subordinated Notes
11.000% 12/01/2002................................................. 1,250,000 1,303,125
HMH Properties, Inc.
Senior Secured Note
9.500% 05/15/2005.................................................. 1,900,000 1,914,250
Harrahs Operating, Inc.
Senior Subordinated Notes
10.875% 04/15/2002................................................. 1,500,000 1,599,375
La Quinta Inns, Inc.
Senior Subordinated Notes
9.250% 05/15/2003.................................................. 1,850,000 1,928,625
Station Casinos, Inc.
Senior Subordinated Notes
9.625% 06/01/2003.................................................. 1,750,000 1,706,250
---------------
8,451,625
---------------
21
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Principal
Amount Value (1)
--------------- ---------------
Corporate Bonds (Continued)
Healthcare (8.2%)
Abbey Healthcare Group, Inc.
Senior Subordinated Notes
9.500% 11/01/2002.................................................. $ 1,000,000 $ 1,035,000
HEALTHSOUTH Rehabilitation Corp.
Senior Subordinated Notes
9.500% 04/01/2001.................................................. 1,200,000 1,263,000
Quorum Health Group, Inc.
Senior Subordinated Notes
8.750% 11/01/2005.................................................. 1,500,000 1,515,000
Tenet Healthcare Corp.
Senior Subordinated Notes
10.125% 03/01/2005................................................. 1,750,000 1,920,625
---------------
5,733,625
---------------
Other (1.7%)
Westpoint Stevens, Inc.
Senior Note
8.750% 12/15/2001.................................................. 650,000 656,500
Senior Subordinated Debenture
9.375% 12/15/2005.................................................. 500,000 505,000
---------------
1,161,500
---------------
Total Consumer Related................................................. 15,346,750
---------------
Energy (15.3%)
Global Marine, Inc.
Notes
12.750% 12/15/1999................................................. 715,000 770,412
Gulf Canada Resources Ltd.
Subordinated Debentures
9.625% 07/01/2005.................................................. 2,000,000 2,115,000
Kelley Oil & Gas Corp. (144A)
Senior Subordinated Notes
10.375% 10/15/2006................................................. 1,400,000 1,403,500
Louis Dreyfus Natural Gas Corp.
Senior Subordinated Notes
9.250% 06/15/2004.................................................. 750,000 796,905
Maxus Energy Corp.
Notes
9.875% 10/15/2002.................................................. 1,650,000 1,683,000
Noble Drilling Corp.
Senior Notes
9.250% 10/01/2003.................................................. 1,235,000 1,302,925
9.125% 07/01/2006.................................................. 700,000 738,500
Nuevo Energy Co.
Senior Subordinated Notes
9.500% 04/15/2006.................................................. 1,000,000 1,030,000
22
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Principal
Amount Value (1)
--------------- ---------------
Corporate Bonds (Continued)
Santa Fe Energy Resource, Inc.
Senior Subordinated Debentures
11.000% 05/15/2004................................................. $ 750,000 $ 825,000
---------------
Total Energy........................................................... 10,665,242
---------------
Housing Related (2.6%)
USG Corp.
Series B Senior Notes
9.250% 09/15/2001.................................................. 1,700,000 1,795,625
---------------
Manufacturing (11.3%)
American Standard, Inc.
Senior Subordinated Discount
Debenture Step-Up Coupon
0.000% to 06/01/1998,
then 10.500% to 06/01/2005........................................... 1,500,000 1,387,500
Coltec Industries, Inc.
Senior Notes
9.750% 04/01/2000.................................................. 745,000 774,800
Exide Corp.
Senior Notes
10.000% 04/15/2005................................................. 400,000 406,000
Mark IV Industries, Inc.
Senior Subordinated Notes
7.750% 04/01/2006.................................................. 1,500,000 1,459,950
Rohr, Inc.
Senior Note
11.625% 05/15/2003................................................. 800,000 878,000
SPX Corp.
Senior Subordinated Notes
11.750% 06/01/2002................................................. 1,500,000 1,653,750
Wolverine Tube, Inc.
Senior Subordinated Notes
10.125% 09/01/2002................................................. 1,250,000 1,328,125
---------------
Total Manufacturing.................................................... 7,888,125
---------------
Media (23.3%)
American Radio Systems Corp.
Senior Subordinated Notes
9.000% 02/01/2006.................................................. 750,000 716,250
Heritage Media Corp.
Senior Subordinated Notes
8.750% 02/15/2006.................................................. 1,750,000 1,653,750
Jones Intercable, Inc.
Senior Notes
9.625% 03/15/2002.................................................. 1,150,000 1,178,750
23
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Principal
Amount Value (1)
--------------- ---------------
Corporate Bonds (Continued)
Lenfest Communications, Inc.
Senior Secured Notes
8.375% 11/01/2005.................................................. $ 1,500,000 $ 1,368,750
Rogers Communications, Inc.
Debenture
10.875% 04/15/2004................................................. 2,100,000 2,163,000
SFX Broadcasting, Inc.
Series B Senior Subordinated Notes
10.750% 05/15/2006................................................. 1,500,000 1,537,500
Tele-Communications, Inc.
Debentures
7.875% 08/01/2013.................................................. 2,800,000 2,449,300
Time Warner, Inc.
Debentures
9.125% 01/15/2013.................................................. 300,000 326,865
United International Holdings, Inc.
Senior Note with Warrants
0.000% 11/15/1999.................................................. 1,850,000 1,338,938
Viacom, Inc.
Subordinated Debenture
8.000% 07/07/2006.................................................. 2,000,000 1,870,000
Young Broadcasting, Inc.
Gtd. Senior Subordinated Notes
11.750% 11/15/2004................................................. 1,500,000 1,590,000
---------------
Total Media............................................................ 16,193,103
---------------
Retail (3.5%)
Supermarkets (0.4%)
Stop & Shop Cos., Inc.
Senior Subordinated Notes
9.750% 02/01/2002.................................................. 250,000 275,000
---------------
Other (3.1%)
Ethan Allen, Inc.
Senior Notes
8.750% 03/15/2001.................................................. 800,000 819,000
Federated Department Stores, Inc.
Senior Notes
10.000% 02/15/2001................................................. 1,200,000 1,312,620
---------------
2,131,620
---------------
Total Retail........................................................... 2,406,620
---------------
Transportation (2.2%)
Greenwich Air Services
Senior Notes
10.500% 06/01/2006................................................. 1,500,000 1,567,500
---------------
24
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
Principal
Amount Value (1)
--------------- ---------------
Corporate Bonds (Continued)
Utilities (4.1%)
Electrics (2.1%)
California Energy, Inc.
Senior Secured Note
9.875% 06/30/2003.................................................. $ 1,400,000 $ 1,443,750
---------------
Telecommunications (2.0%)
MFS Communications, Inc.
Senior Discount Notes
0.000% to 01/15/2001,
then 8.875% to 01/15/2006............................................ 2,000,000 1,415,000
---------------
Total Utilities........................................................ 2,858,750
---------------
Total Corporate Bonds
(Cost $65,207,050)................................................... 66,370,215
---------------
Total investments, excluding temporary cash investment
(Cost $65,992,253)................................................... 67,174,277
Repurchase Agreement (1.3%)
Goldman Sachs Corp.
5.602% dated 10/31/1996,
due 11/01/1996 in the
amount of $913,452
Collateralized by U.S. Treasury Bond
8.125% due 08/15/2019,
U.S. Treasury Notes
6.125% to 8.000%, due
05/15/1998 to 04/30/2001
(Cost $913,312)...................................................... 913,312 913,312
---------------
Total Investments (97.8%)
(Cost $66,905,565)................................................... 68,087,589
Receivables less liabilities (2.2%)............................................. 1,526,088
---------------
Net Assets (100.0%)............................................................. $ 69,613,677
===============
(1) See Note 1 of Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
October 31, 1996
<S> <C>
ASSETS:
Investments at identified cost ............................................... $ 65,992,253
- -------------------------------------------------------------------------------- ----------------
Investments at value (Notes 1 and 2).......................................... $ 67,174,277
Temporary cash investment, at cost (Note 1)................................... 913,312
Receivable for:
Interest.................................................................... 1,630,226
----------------
Total assets.................................................................. 69,717,815
----------------
LIABILITIES:
Payable for:
Dividends and distributions................................................. 55,165
Investment management fee (Note 4).......................................... 22,957
Accrued expenses ........................................................... 26,016
----------------
Total liabilities............................................................. 104,138
----------------
Net assets applicable to outstanding shares................................... $ 69,613,677
================
Net assets consist of:
Unrealized appreciation on investments...................................... $ 1,182,024
Undistributed net realized gain from investments............................ 5,027
Capital paid in (Note 3).................................................... 68,426,626
----------------
$ 69,613,677
================
Shares of capital stock outstanding (Note 3).................................... 1,936,251
================
Net asset value, offering and
redemption price per share (1)............................................... $ 35.95
================
<FN>
(1) The net asset value per share is computed by dividing net assets
applicable to outstanding shares by shares of capital stock
outstanding.
</FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Fiscal Year Ended October 31, 1996
<S> <C>
INVESTMENT INCOME:
Income:
Interest.................................................................. $ 5,047,666
---------------
Expenses:
Investment management fees (Note 4)....................................... 214,819
Shareholder servicing costs (Note 4)...................................... 18,000
Reports to shareholders................................................... 65
Financial information and subscriptions................................... 3,041
Custodian fees............................................................ 2,057
Bank transaction and checking fees........................................ 1,473
Registration fees......................................................... 4,368
Legal, insurance and auditing fees........................................ 19,709
Other (Note 4)............................................................ 4,646
---------------
Total expenses......................................................... 268,178
---------------
Net investment income (Note 1)............................................ 4,779,488
---------------
Realized gain and unrealized (depreciation) from
investment transactions:
Net realized gain from investments (Note 2)............................... 747,251
Net unrealized depreciation on investments during the period (Note 1)..... (226,346)
---------------
Net gain on investments (Note 1).......................................... 520,905
---------------
Net increase in net assets resulting from operations...................... $ 5,300,393
===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Fiscal Year Ended October 31,
--------------- ---------------
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income ................................................... $ 4,779,488 $ 2,471,065
Net realized gain from investments (Note 2).............................. 747,251 402,706
Change in net unrealized appreciation (depreciation)
on investments......................................................... (226,346) 1,507,468
--------------- ---------------
Net increase in net assets resulting from operations..................... 5,300,393 4,381,239
Distributions to shareholders:
From net investment income............................................... (4,779,488) (2,471,065)
From net realized gain from investment transactions...................... (742,224) (401,049)
Capital share transactions, net (Note 3)..................................... 27,643,483 31,080,871
--------------- ---------------
Net increase in net assets............................................... 27,422,164 32,589,996
NET ASSETS:
Beginning of period.......................................................... 42,191,513 9,601,517
--------------- ---------------
End of period ............................................................... $ 69,613,677 $ 42,191,513
=============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant accounting policies:
CMC High Yield Fund (the Fund) is a portfolio of CMC Fund Trust (the
Trust), an open-end diversified investment company registered under the
Investment Company Act of 1940, as amended. The Trust has established two
other portfolios, CMC Small Cap Fund and CMC International Stock Fund. Each
portfolio issues a separate series of the Trust's shares and maintains a
separate investment portfolio. The policies described below are
consistently followed by the Fund for the preparation of its financial
statements in conformity with generally accepted accounting principles.
Investment valuation - The Fund's investments are carried at values
deemed best to reflect their fair values as determined in good faith by or
under the supervision of the Trustees. These values are based on market
value as quoted by dealers who are market makers in these securities or by
an independent pricing service unless unusual circumstances indicate that
another method of determining fair value should be considered. Market
values are based on the average of bid and ask prices, or by reference to
other securities with comparable ratings, interest rates and maturities.
Temporary investments in short-term securities, principally repurchase
agreements, are valued at cost, which approximates market.
Shareholder distributions - The Fund distributes net investment income
monthly and any net realized gains from investments transactions annually.
Distributions to shareholders are recorded on the record date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
net operating losses and deferral of losses from wash sales.
Use of estimates - The preparation of the financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Federal income taxes - The Fund has made no provisions for federal
income taxes on net investment income or net realized gains from sales of
investment securities, since it is the intention of the Fund to comply with
the provisions of the Internal Revenue Code available to certain regulated
investment companies, and to make distributions of income and security
profits sufficient to relieve it from substantially all federal income
taxes.
Other - Investment transactions are accounted for on the date the
investments are purchased or sold. The cost of investments sold is
determined by the use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Realized gains and losses from investment transactions
and unrealized appreciation or depreciation of investments are reported on
the basis of identified costs. The Fund, through its custodian, receives
delivery of underlying securities collateralizing repurchase agreements
(included in temporary cash investments). Market values of these securities
are required to be at least 100% of the cost of the repurchase agreement.
The Fund's investment advisor determines that the value of the underlying
securities is at all times at least equal to the resale price. In the event
of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
The Fund invests in lower rated debt securities, which may be more
susceptible to adverse economic conditions than other investment grade
holdings. These securities are often subordinated to the prior claims of
other senior lenders, and uncertainties exist as to an issuer's ability to
meet principal and interest payments. At October 31, 1996, 99% of the
Fund's portfolio was invested in securities rated Ba (53%) or B (46%) by
Moody's Investor Services, Inc; the remaining 1% of the portfolio was
invested in a U.S. Treasury Bond.
29
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
2. Investment transactions:
Aggregate purchases, sales and maturities, net realized gain and unrealized
appreciation of investments, excluding temporary cash investments, for the
fiscal year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases:
Investment securities other than U.S. Government obligations................. $ 51,518,953
U.S. Government obligations.................................................. 2,590,344
----------------
Total purchases......................................................... $ 54,109,297
================
Sales and Maturities:
Investment securities other than U.S. Government obligations................. $ 26,939,661
U.S. Government obligations.................................................. 1,823,434
----------------
Total sales and maturities.............................................. $ 28,763,095
================
Net Realized Gain:
Investment securities other than U.S. Government obligations................. $ 18,293
U.S. Government obligations.................................................. 728,958
----------------
Total net realized gain................................................. $ 747,251
================
Unrealized Appreciation (Depreciation) as of October 31, 1996:
Appreciation.................................................................. $ 1,501,589
Depreciation.................................................................. (319,565)
----------------
Net unrealized appreciation............................................. $ 1,182,024
================
Unrealized Appreciation (Depreciation) for
federal income tax purposes as of October 31, 1996:
Appreciation.................................................................. $ 1,496,920
Depreciation.................................................................. (319,565)
----------------
Net unrealized appreciation................................................. $ 1,177,355
================
For federal income tax purposes, the cost of
investments owned at October 31, 1996........................................... $ 65,996,922
================
</TABLE>
3. Capital Stock:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year
Ended Ended
October 31, 1996 October 31, 1995
---------------- ----------------
<S> <C> <C>
Shares:
Shares sold................................................................ 1,124,256 1,184,564
Shares issued for reinvestment of dividends................................ 145,259 73,708
---------------- ----------------
1,269,515 1,258,272
Less shares redeemed....................................................... (497,533) (372,501)
---------------- ----------------
Net increase in shares..................................................... 771,982 885,771
================ ================
Amounts:
Sales...................................................................... $ 40,435,000 $ 41,440,000
Reinvestment of dividends.................................................. 5,234,319 2,630,871
---------------- ----------------
45,669,319 44,070,871
Less redemptions........................................................... (18,025,836) (12,990,000)
---------------- ----------------
Net increase............................................................... $ 27,643,483 $ 31,080,871
================ ================
Capital stock authorized (shares) 100,000,000
</TABLE>
30
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
4. Transactions with affiliates and related parties:
<TABLE>
<CAPTION>
<S> <C>
Investment management fees incurred............................................. $214,819
Investment management fee
computation basis (percentage of daily net assets
per annum).................................................................... .40 of 1%
Transfer agent fee (included in shareholder
servicing costs).............................................................. $18,000
Fees earned by trustees not affiliated with the Fund's
investment advisor or transfer agent (included in other expenses)............. $644
</TABLE>
The investment advisor of the Funds is Columbia Management Co. The transfer
agent for the Funds is Columbia Trust Company, a subsidiary of Columbia
Funds Management Company. The transfer agent is compensated based on a per
account fee or a minimum of $1,500 per month. The contracts for investment
advisory and transfer agent services must be renewed annually by a majority
vote of the Fund's shareholders or by the Trustees of CMC Fund Trust.
Certain officers and trustees of CMC Fund Trust are also officers and
directors of Columbia Management Co., Columbia Trust Company and Columbia
Funds Management Company. They did not receive any direct payments from the
Fund.
31
<PAGE>
Coopers & Lybrand Coopers & Lybrand L.L.P.
A Professional Services Firm
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of CMC Fund Trust:
We have audited the accompanying statement of assets and liabilities
of CMC High Yield Fund, a portfolio of CMC Fund Trust, including the
schedule of investments, as of October 31, 1996, and the related statement
of operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1996 by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
We have also audited the financial statements of the CMC Small Cap
Fund and the CMC International Stock Fund, portfolios of CMC Fund Trust, as
of and for the year ended October 31, 1996, and we have issued an
unqualified opinion thereon. The Annual Report containing our report on the
financial statements of the CMC Small Cap Fund and the CMC International
Stock Fund is available from CMC Fund Trust.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of CMC High Yield Fund, a portfolio of CMC Fund Trust, as of
October 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Portland, Oregon
December 6, 1996
Coopers & Lybrand L.L.P., a registered limited liability partnership, is a
member firm of Coopers & Lybrand (International)
32
<PAGE>
CMC FUND TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Index to Financial Statements.
CMC Small Cap Fund -- Included in the Statement of Additional
Information CMC International Stock Fund -- Included in the
Statement of Additional Information CMC High Yield Fund --
Included in the Statement of Additional Information
(b) Exhibits:
(1A) Restated Declaration of Trust.
(1B) Amendment to Restated Declaration of Trust.
(2) Bylaws.
(4A) Specimen Stock Certificate for CMC Small Cap Fund.
(4B) Specimen Stock Certificate for CMC International Stock
Fund.
(4C) Specimen Stock Certificate for CMC High Yield Fund.
(5A) Investment Advisory Contract for CMC Small Cap Fund.
(5B) Investment Advisory Contract for CMC International Stock
Fund.
(5C) Investment Advisory Contract for CMC High Yield Fund.
(8A) Custodian Contract between United States National Bank of
Oregon and CMC Fund Trust.
(8B) Custodian Contract between CMC Fund Trust and Morgan
Stanley Trust Company.
(9A) Transfer Agent Agreement for CMC Small Cap Fund.
(9B) Transfer Agent Agreement for CMC International Stock
Fund.
(9C) Transfer Agent Agreement for CMC High Yield Fund.
(11) Consent of Coopers & Lybrand, L.L.P., Independent
Accountants, relating to financial statements of CMC
Small Cap Fund, CMC International Stock Fund, and CMC
High Yield Fund.
(12) See paragraph (a) of this Item 24.
C-1
<PAGE>
(17) Powers of Attorney. Power of Attorney for Messrs.
Inskeep, Hanseth, Kemp and Rippey was included in the
initial filing of the Registrant's registration
statement.
(27A) Financial Data Schedule for CMC Small Cap Fund.
(27B) Financial Data Schedule for CMC International Stock Fund.
(27C) Financial Data Schedule for CMC High Yield Fund.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
The Registrant has an investment advisory contract with Columbia
Management Co., an Oregon corporation (the "Adviser"). Columbia Daily
Income Company, Columbia Growth Fund, Inc., Columbia Special Fund, Inc.,
Columbia Fixed Income Securities Fund, Inc., Columbia Municipal Bond Fund,
Inc., Columbia Real Estate Equity Fund, Inc., Columbia U.S. Government
Securities Fund, Inc., Columbia Balanced Fund, Inc., Columbia Common Stock
Fund, Inc., Columbia International Stock Fund, Inc., Columbia Small Cap
Fund, Inc. and Columbia High Yield Fund, Inc., each an Oregon corporation,
have investment advisory contracts with Columbia Funds Management Company,
an Oregon corporation ("CFMC"). J. Jerry Inskeep, Jr. and James F. Rippey,
Trustees and officers of the Registrant, own 14.9% and 27.2%, respectively,
of the voting securities of CFMC; 33.4% each of the voting securities of
Columbia Financial Center Incorporated, an Oregon corporation; 41.1% each
of the voting securities of the Adviser; and 3.6% and .08%, respectively,
of the voting securities of Columbia Trust Company. CFMC owns 79% of the
voting securities of Columbia Trust Company. See "Management" in the
Statement of Additional Information.
Item 26. Number of Holders of Securities
-------------------------------
CMC Small Cap Fund -- At November 29, 1996, all outstanding
shares of CMC Small Cap Fund were held by 76 shareholders.
CMC International Stock Fund -- At November 29, 1996, all
outstanding shares of CMC International Stock Fund were held by 22
shareholders.
CMC High Yield Fund -- At November 29, 1996, all outstanding
shares of CMC High Yield Fund were held by 29 shareholders.
Item 27. Indemnification
---------------
Under the Declaration of Trust and Bylaws of the Registrant, any
trustee or officer of the Registrant may be indemnified by the Registrant
against all expenses incurred by the trustee or officer in connection with
any claim, action, suit or proceeding, civil or criminal, by reason of his
or her being a trustee or officer of the Registrant, to the fullest extent
not prohibited by law and the Investment Company Act of 1940 (the "1940
Act") and related regulations and interpretations of the Securities and
Exchange Commission ("SEC").
Insofar as reimbursement or indemnification for expenses
incurred by a director or officer in legal proceedings arising under the
Securities Act of 1933 (the "1933 Act") may be permitted by the above
provisions or otherwise, the Registrant has been advised that in the
opinion of the SEC such reimbursement or indemnification is against public
policy as expressed in the Act and therefore unenforceable. In the event
that any claim for indemnification under the above provisions is asserted
by an officer or trustee in connection with the securities being
registered, the Registrant, unless in the opinion of its counsel the matter
has already been settled by controlling precedent, will (except insofar as
such
C-2
<PAGE>
claim seeks reimbursement of expenses paid or incurred by an officer or
trustee in the successful defense of any such action, suit or proceeding or
claim, issue, or matter therein) submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
The Registrant's trustees and officers are named insureds under
an insurance policy issued by ICI Mutual Insurance Company.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Information regarding the businesses of Columbia Management Co.
and its officers and directors is set forth under "Management of the Fund"
in the Prospectus and under "Management" and "Investment Advisory and Other
Fees Paid to Affiliates" in the Statement of Additional Information and is
incorporated herein by reference. Columbia Trust Company also acts as
trustee and/or agent for the investment of the assets of pension and profit
sharing plans in pooled accounts.
Item 29. Principal Underwriters
----------------------
Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
The records required to be maintained under Section 31(a) of the
1940 Act and Rules 31a-1 to 31a-3 thereunder are maintained by CMC Fund
Trust, Columbia Management Co., and Columbia Trust Company at 1300 SW Sixth
Avenue, Portland, Oregon 97201. Records relating to the Registrant's
portfolio securities are also maintained by United States National Bank of
Oregon, 321 SW Sixth Avenue, Portland, Oregon 97208 and Morgan Stanley
Trust Company, One Evertrust Plaza, Jersey City, New Jersey 07302.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) The Registrant hereby undertakes to promptly call a meeting
of the shareholders of the Registrant for the purpose of voting in the
removal of any trustee of the Registrant when requested in writing by
shareholders of at least 10 percent of the outstanding shares of the
Registrant. The Registrant undertakes to assist its shareholders in
communicating with other shareholders of the Registrant to the extent
required by Section 16 of the 1940 Act or any regulations promulgated
thereunder.
(b) The Registrant hereby undertakes, upon request and without
charge, to furnish a copy of the Registrant's annual report to shareholders
to each person to whom a prospectus is delivered.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Portland and State of Oregon on
the 16th day of December, 1996.
CMC FUND TRUST
By: GEORGE L. HANSETH
-------------------------------
George L. Hanseth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 16th day of December,
1996 by the following persons in the capacities indicated.
(i) Principal executive officer:
* JAMES F. RIPPEY President and Trustee
- -------------------------------------------
James F. Rippey
(ii) Principal accounting and
financial officer:
GEORGE L. HANSETH Vice President
- -------------------------------------------- and Trustee
George L. Hanseth
(iii) Trustees:
* J. JERRY INSKEEP, JR. Chairman and
- ------------------------------------------- and Trustee
J. Jerry Inskeep, Jr.
* RICHARD L. WOOLWORTH Trustee
- -------------------------------------------
Richard L. Woolworth
C-4
<PAGE>
* JOHN A. KEMP Trustee
- -------------------------------------------
John A. Kemp
* ALEXANDER S. MACMILLAN Trustee
- -------------------------------------------
Alexander S. Macmillan
* PETER C. OLSON Trustee
- -------------------------------------------
Peter C. Olson
* PETER T. SHAND Trustee
- -------------------------------------------
Peter T. Shand
*By: GEORGE L. HANSETH
--------------------------------------
George L. Hanseth
Attorney-In-Fact
C-5
<PAGE>
CMC FUND TRUST
EXHIBIT INDEX
Exhibit Description
- ------- -----------
(1A) Restated Declaration of Trust.
(1B) Amendment to the Restated Declaration of Trust.
(2) Bylaws.
(4A) Specimen Stock Certificate for CMC Small Cap Fund.
(4B) Specimen Stock Certificate for CMC International Stock Fund.
(4C) Specimen Stock Certificate for CMC High Yield Fund.
(5A) Investment Advisory Contract for CMC Small Cap Fund.
(5B) Investment Advisory Contract for CMC International Stock Fund.
(5C) Investment Advisory Contract for CMC High Yield Fund.
(8A) Custodian Contract between United States National Bank of Oregon
and CMC Fund Trust.
(8B) Custodian Contract between CMC Fund Trust and Morgan Stanley
Trust Company.
(9A) Transfer Agent Agreement for CMC Small Cap Fund.
(9B) Transfer Agent Agreement for CMC International Stock Fund.
(9C) Transfer Agent Agreement for CMC High Yield Fund.
(11) Consent of Coopers & Lybrand, L.L.P., Independent Accountants
relating to financial statements of CMC Small Cap Fund, CMC
International Stock Fund and CMC High Yield Fund.
(12) See paragraph (a) of this Item 24.
(17) Powers of Attorney. Power of Attorney for Messrs. Inskeep,
Hanseth, Kemp and Rippey was included in the initial filing of
the Registrant's registration statement.
(27A) Financial Data Schedule for CMC Small Cap Fund.
(27B) Financial Data Schedule for CMC International Stock Fund.
(27C) Financial Data Schedule for CMC High Yield Fund.
C-6
Exhibit 1.A
RESTATED DECLARATION OF TRUST
CMC FUND TRUST
October 13, 1993
This RESTATED DECLARATION OF TRUST is made at Portland, Oregon,
on October 13, 1993 by the majority of Trustees hereunder. The Trustees
direct that this Restated Declaration of Trust be filed with the Secretary
of State of Oregon pursuant to Oregon Revised Statutes 128.575.
The Trustees declare that all money and property contributed to
the trust fund created by this Declaration of Trust shall be held and
managed by the Trustees as set forth below.
ARTICLE I
Name and Definitions
--------------------
1.01 Name. This Trust shall be known as the "CMC Fund Trust," and the
Trustees shall conduct the business of the Trust under that name or any
other name they choose. The registered agent for the Trust in Oregon is
John A. Kemp, 1300 SW Sixth Avenue, PO Box 1350, Portland, Oregon 97207, or
any other person designated by the Trustees.
1.02 Definitions. When used in this Declaration of Trust, unless
otherwise required by the context or specifically provided:
1.02-1 "Bylaws" shall mean the Bylaws of the Trust, as amended
from time to time;
1.02-2 "Commission" and "Principal Underwriter" shall have the
meanings given them in the 1940 Act;
1.02-3 "Declaration of Trust" shall mean this Declaration of
Trust, as amended or restated from time to time;
1.02-4 "1940 Act" refers to the Investment Company Act of 1940
and the rules and regulations thereunder, as amended from time to time;
1.02-5 "Shareholder" means a record owner of Shares;
1
<PAGE>
1.02-6 "Shares" means the equal proportionate units of interest
into which the beneficial interest in the Trust or in the Trust property
belonging to any Series of the Trust (as the context requires) is divided
from time to time and includes fractions of Shares;
1.02-7 "Series" refers to each Series of Shares established and
designated in accordance with the provisions of Article III;
1.02-8 "Trust" means the Oregon business trust established by
this Declaration of Trust, as amended from time to time; and
1.02-9 "Trustees" means the Trustees of the Trust named in
Article IV or elected or appointed in accordance with Article IV.
ARTICLE II
Purpose of Trust
----------------
The purpose of the Trust is to provide investors a managed
investment company registered under the 1940 Act and investing one or more
Series primarily in securities and debt instruments.
ARTICLE III
Shares
------
3.01 Division of Beneficial Interest. The beneficial interest in the
Trust shall be divided into an unlimited number of Shares. Subject to the
provisions of 3.06, each Share shall have voting rights as provided in
Article V, and holders of Shares of any Series shall be entitled to receive
dividends when and as declared in the manner provided in 6.01. No Share
shall have any priority or preference over any other Share of the same
Series with respect to dividends or distributions upon termination of the
Trust or of that Series pursuant to 8.04. All dividends and distributions
shall be made ratably among all Shareholders of a Series from the assets
belonging to that Series according to the number of Shares of that Series
held of record by the Shareholder on the record date for any dividend or on
the date of termination, as the case may be. Shareholders have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust. The Trustees may from time to time divide
or combine the Shares of any Series into a greater or lesser number of
Shares of that Series without changing the proportionate beneficial
interest of the
2
<PAGE>
Shares of that Series in the assets belonging to that Series or in any way
affecting the rights of the Shares of any other Series.
3.02 Ownership of Shares. The ownership of Shares shall be recorded on
the books of the Trust or a transfer or similar agent for the Trust. These
books shall be maintained separately for the Shares of each Series. No
certificates certifying the ownership of Shares shall be issued except as
the Trustees determine. The Trustees may make rules for the transfer of
Shares of each Series and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent shall be conclusive as
to who are the Shareholders of each Series and as to the number of Shares
of each Series held by each Shareholder.
3.03 Investments in the Trust. The Trustees may accept investments in
the Trust from the persons, at the times, on the terms, and for the
consideration they authorize. After the date of the initial contribution of
capital, the number of Shares to represent the initial contribution may in
the Trustees' discretion be considered as outstanding and the amount
received by the Trustees on account of the contribution shall be treated as
an asset of the Trust. Subsequent investments in the Trust shall be
credited to each Shareholder's account in the form of full and fractional
Shares at the net asset value per Share next determined after the
investment is received; provided, however, that the Trustees may, in their
sole discretion, impose a sales charge upon investments in the Trust.
3.04 Status of Shares. Shares are personal property giving only the
rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. The death of a
Shareholder during the existence of the Trust shall not operate to
terminate the Trust nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees; the representative shall have only the
rights of the deceased Shareholder under this Trust. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or any right to call for a partition or division
of the property or for an accounting, nor shall the ownership of the Shares
constitute the Shareholders as partners. Neither the Trust, the Trustees,
nor any officer, employee, or agent of the Trust shall have any power to
bind personally any Shareholders, nor, except as specifically provided
herein, to call upon any Shareholder for the payment of any sum of money or
assessment other than as the Shareholder may personally agree to pay
pursuant to a subscription for Shares or otherwise.
3.05 Power of Trustees to Change Provisions Relating to Shares.
3
<PAGE>
3.05-1 Notwithstanding any other provision of this Declaration of
Trust and without limiting the power of the Trustees to amend the
Declaration of Trust, the Trustees have the power to amend this Declaration
of Trust, as the Trustees determine in their sole discretion, without the
need for Shareholder action, to add to, delete, replace, or otherwise
modify any provisions relating to the Shares contained in this Declaration
of Trust, provided that before adopting any amendment without Shareholder
approval the Trustees shall determine that Shareholder approval is not
otherwise required by the 1940 Act or other applicable law.
3.05-2 Without limiting the generality of 3.05-1, the Trustees
may amend the Declaration of Trust to:
(a) create one or more Series of Shares (in addition to any
Series already existing) with rights, preferences, and eligibility
requirements for investment as the Trustees determine and reclassify any or
all outstanding Shares as shares of particular Series in accordance with
these eligibility requirements;
(b) amend any of the provisions set forth in paragraphs (a)
through (i) of 3.06-2;
(c) combine one or more Series of Shares into a single
Series on terms and conditions the Trustees determine;
(d) change or eliminate any eligibility requirements for
investment in Shares of any Series, including without limitation to provide
for the issue of Shares of any Series in connection with any merger or
consolidation of the Trust with another trust or company or any acquisition
by the Trust of part or all of the assets of another trust or investment
company;
(e) change the designation of any Series of Shares;
(f) change the method of allocating dividends among the
various Series of Shares;
(g) allocate any specific assets or liabilities of the Trust
or any specific items of income or expense of the Trust to one or more
Series of Shares; and
(h) specifically allocate assets to any or all Series of
Shares or create one or more additional Series of Shares that are preferred
over all other Series of Shares in respect of assets specifically allocated
thereto or any dividends paid by the Trust with respect to any net income,
however determined, earned from
4
<PAGE>
the investment and reinvestment of any assets so allocated or otherwise and
provide for any special voting or other rights with respect to that Series.
3.06 Establishment and Designation of Series.
3.06-1 Except as set forth in 3.06-3, the establishment and
designation of any Series of Shares shall be effective upon the resolution
by a majority of the Trustees, setting forth the establishment and
designation and the relative rights and preferences of the Series. The
establishment and designation shall be set forth in an amendment to this
Declaration of Trust as provided in 8.05.
3.06-2 Shares of each Series established pursuant to 3.06, unless
otherwise provided in the resolution establishing the Series, shall have
the following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received
by the Trust for the issue or sale of Shares of a Series, together with all
assets in which that consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof from whatever source derived,
including, without limitation, any proceeds derived from the sale,
exchange, or liquidation of those assets, and any funds or payments derived
from any reinvestment of those proceeds in whatever form, shall irrevocably
belong to that Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account of the Trust.
Such consideration, assets, income, earnings, profits, and proceeds and any
funds or payments derived from any reinvestment of such proceeds, in
whatever form, are referred to as "assets belonging to" that Series. If
there are any assets, income, earnings, profits, proceeds, funds, or
payments which are not readily identifiable as belonging to any particular
Series, the Trustees shall allocate those general assets to, between, or
among any one or more of the Series in a manner and on a basis they, in
their sole discretion, deem fair and equitable, and any general assets so
allocated to a particular Series shall belong to that Series. Each
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of each Series for all purposes.
(b) Liabilities Belonging to Series. The assets belonging to
each Series shall be charged with the liabilities of the Trust in respect
of that Series and all expenses, costs, charges, and reserves attributable
to that Series, and any general liabilities of the Trust that are not
readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to, among, or between any one or more
of the Series in a manner and on a basis the Trustees in their sole
discretion deem fair and equitable. The liabilities, expenses, costs,
charges, and reserves so charged to a Series are referred to as
"liabilities belonging to" that Series. Each allocation of liabilities,
expenses, costs, charges, and reserves by the
5
<PAGE>
Trustee shall be conclusive and binding upon the holders of each Series for
all purposes. In no circumstances shall the assets allocated or belonging
to a Series be charged with liabilities belonging to any other Series. All
persons who have extended credit that has been allocated to a particular
Series or who have a claim or contract that has been allocated to any
particular Series shall look only to the assets of that particular Series
for payment of the credit, claim, or contract.
(c) Dividends, Distributions, Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration, including without
limitation Article VI, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
Series) with respect to, nor any redemption or repurchase of, the Shares of
any Series shall be effected by the Trustees other than from the assets
belonging to that Series. No Shareholder of any particular Series shall
have any right or claim against the assets belonging to any other Series
(except as a Shareholder of that other Series). The Trustees shall have
full discretion, to the extent consistent with the 1940 Act, to determine
which items shall be treated as income and which items as capital; and each
determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Voting. On any matter submitted to a vote of the
Shareholders, all Shares of all Series shall be voted together except (i)
when required by the 1940 Act, Shares shall be voted by individual Series
and (ii) when the Trustees determine that the matter affects only the
interests of one or more Series, then only the Shareholders of that Series
shall be entitled to vote thereon. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote. There shall be
no cumulative voting in the election of Trustees. Shares may be voted in
person or by proxy. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required or permitted by
law, this Declaration of Trust, or any Bylaws of the Trust to be taken by
Shareholders.
(e) Equality. Each Share of a Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to that Series), and each Share of a
Series shall be equal to each other Share of that Series.
(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that
Series, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares, and termination of the Trust.
6
<PAGE>
(g) Exchange Privilege. The Trustees shall have the
authority to provide that the holders of Shares of any Series shall have
the right to exchange those Shares for Shares of one or more other Series
of Shares in accordance with requirements and procedures established by the
Trustees.
(h) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine the assets and liabilities
belonging to any two or more Series into assets and liabilities belonging
to a single Series.
(i) Elimination of Series. At any time when there are no
Shares outstanding of a Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and to
rescind its establishment and designation, such amendment to be effected in
the manner provided in 3.05 and 8.05.
3.06-3 Subject to the relative rights and preferences and other
terms of this Declaration of Trust, the Trustees authorize the
establishment of the first Series to be designated as follows: CMC Small
Cap Fund.
3.06-4 Subject to the relative rights and preferences and other
terms of this Declaration of Trust, the Trustees authorize the
establishment of the second Series to be designated as follows: CMC
International Stock Fund.
ARTICLE IV
The Trustees
------------
4.01 Number, Election, and Tenure.
4.01-1 The number of Trustees shall be eight unless that number
is changed by resolution adopted by a majority of Trustees.
The names and addresses of the Trustees are as follows:
Name Address
---- -------
George L. Hanseth 1300 SW 6th Avenue
Portland, OR 97207
J. Jerry Inskeep, Jr. 1300 SW 6th Avenue
Portland, OR 97207
7
<PAGE>
John A. Kemp 1300 SW 6th Avenue
Portland, OR 97207
Peter C. Olson 1300 SW 6th Avenue
Portland, OR 97207
James F. Rippey 1300 SW 6th Avenue
Portland, OR 97207
Peter T. Shand 1300 SW 6th Avenue
Portland, OR 97207
Robert A. Unger 1300 SW 6th Avenue
Portland, OR 97207
Richard L. Woolworth 1300 SW 6th Avenue
Portland, OR 97207
4.01-2 The Trustees may fill vacancies in the number of Trustees,
subject to compliance with Section 16(a) of the 1940 Act. Each Trustee
shall serve during the existence of the Trust until he dies, resigns, or is
removed or, if sooner, until the next meeting of Shareholders called to
elect Trustees and until the election of his successor. Notwithstanding the
foregoing,
(a) any Trustee may resign his trust by written instrument
signed by him and delivered to the other Trustees, which shall take effect
upon delivery or upon a later date as specified;
(b) any Trustee may be removed at any time by written
instrument, signed by at least two-thirds of the number of Trustees prior
to removal, specifying the date when removal shall become effective;
(c) any Trustee who requests in writing to be retired or who
has become incapacitated by illness or injury may be retired by written
instrument signed by a majority of the other Trustees, specifying the date
of his retirement; and
(d) any Trustee may be removed at any special meeting of the
Shareholders by a vote of two-thirds of the outstanding Shares.
8
<PAGE>
4.01-3 Except to the extent expressly provided in a written
agreement with the Trust, no Trustee resigning or removed shall have any
right to any compensation for any period following his resignation or
removal or any right to damages on account of removal.
4.01-4 The Shareholders may fix the number of Trustees and elect
Trustees at any meeting of Shareholders called by the Trustees for that
purpose.
4.02 Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of any or all
of the Trustees shall not annul the Trust or revoke any agency created
pursuant to the terms of this Declaration of Trust. Whenever a vacancy in
the number of Trustees occurs, until the vacancy is filled as provided in
4.01, the Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration of Trust. A written
instrument certifying the existence of the vacancy signed by a majority of
the Trustees shall be conclusive evidence of the vacancy. In the event of
the death, declination, resignation, retirement, removal, or incapacity of
all the Trustees within a short period of time and without the opportunity
for at least one Trustee to appoint additional Trustees to fill vacancies,
the Trust's investment adviser, or investment advisers jointly if there is
more than one, may appoint new Trustees.
4.03 Powers.
4.03-1 Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and they shall
have all powers necessary, appropriate, or convenient to carry out that
responsibility, including the power to engage in securities transactions of
all kinds on behalf of the Trust, including, but not limited to, those
transactions described in any registration statement filed by the Trust
with the Commission. Without limiting the foregoing, the Trustees may adopt
Bylaws not inconsistent with this Declaration of Trust providing for the
regulation and management of the affairs of the Trust and may amend and
repeal them to the extent the Bylaws do not reserve that right to the
Shareholders; they may appoint and remove the officers and appoint and
terminate the agents as they consider appropriate; they may appoint from
their own number and establish and terminate one or more committees
consisting of two or more trustees that may exercise the powers and
authority of the Trustees to the extent the Trustees determine; they may
employ one or more custodians of the assets of the Trust and may authorize
the custodians to employ subcustodians and to deposit all or any part of
the assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank, retain a transfer agent or a Shareholder
servicing agent, or both, provide for the distribution of Shares by the
Trust, through one or more
9
<PAGE>
Principal Underwriters or otherwise, set record dates for the determination
of Shareholders with respect to various matters, and in general delegate
the authority they consider desirable to any officer of the Trust,
committee of the Trustees, agent or employee of the Trust, custodian,
transfer or Shareholder servicing agent, or Principal Underwriter. Any
determination as to what is in the interests of the Trust made by the
Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration of Trust, the presumption shall be in favor of a grant of
power to the Trustees.
4.03-2 The Trustees shall not be limited to investing in
obligations maturing before the possible termination of the Trust or one or
more of its Series. The Trustees shall not in any way be bound or limited
by any present or future law or custom in regard to investment by
fiduciaries. The Trustees shall not be required to obtain any court order
to deal with any assets of the Trust or take any other action hereunder.
4.04 Payment of Expenses by the Trust. The Trustees are authorized to
pay or cause to be paid out of the principal or income of the Trust all
expenses, fees, charges, taxes, and liabilities incurred or arising in
connection with the Trust or in connection with the management of the
Trust, including, but not limited to, the Trustees' compensation and the
expenses and charges for the services of the Trust's officers, employees,
investment adviser or manager, Principal Underwriter, auditors, counsel,
custodian, transfer agent, Shareholder servicing agent, and any other
agents or independent contractors and any other expenses and charges the
Trustees deem necessary or proper to incur.
4.05 Payment of Expenses by Shareholders. The Trustees shall have the
power, as frequently as they determine, to cause each Shareholder or each
Shareholder of a Series to pay directly, in advance or arrears, for charges
of the Trust's custodian or transfer, Shareholder servicing, or similar
agent, an amount fixed from time to time by the Trustees, by setting off
such charges due from the Shareholder from declared but unpaid dividends
owed the Shareholder or by reducing the number of Shares in the account of
the Shareholder by that number of full and the fractional Shares that
represents the outstanding amount of the charges due from the Shareholder.
4.06 Ownership of Assets of the Trust. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trustees.
4.07 Service Contracts.
10
<PAGE>
4.07-1 Subject to any requirements and restrictions set forth in
the Bylaws, the Trustees may:
(a) contract for exclusive or nonexclusive advisory or
management services for the Trust or for any Series with Columbia
Management Co. or any other corporation, trust, association, or other
organization (the "Manager"); and the contract may contain terms the
Trustees determine, including without limitation authority for the Manager
to determine without prior consultation with the Trustees what investments
shall be purchased, held, sold, or exchanged and what portion, if any, of
the assets of the Trust shall be held uninvested and to make changes in the
Trust's investments;
(b) contract with Columbia Financial Center Incorporated,
the Manager, or any other corporation, trust, association, or other
organization, appointing it exclusive or nonexclusive distributor or
Principal Underwriter for the Shares of one or more of the Series; and
(c) contract with Columbia Trust Company or any other
corporation, trust, association, or other organization, appointing it or
them the transfer agent or shareholder servicing agent for the Trust or one
or more of its Series.
4.07-2 Subject to applicable law, the fact that:
(a) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, Principal Underwriter, distributor, affiliate, or agent
of or for any corporation, trust, association, or other organization or for
any parent or affiliate of any organization with which an advisory or
management contract, Principal Underwriter's or distributor's contract, or
transfer, shareholder servicing, or other agency contract may have been or
may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust or that
(b) any corporation, trust, association, or other
organization with which an advisory or management contract or Principal
Underwriter's or distributor's contract, or transfer, shareholder
servicing, or other agency contract may have been or may hereafter be made
also has an advisory or management contract, Principal Underwriter's or
distributor's contract, or transfer, Shareholder servicing, or other agency
contract with one or more other corporations, trusts, associations, or
other organizations, or has other business or interests
11
<PAGE>
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee, or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust or its
Shareholders.
4.08 Trustees and Officers as Shareholders. Subject to any
restrictions that may be contained in the Bylaws, any Trustee, officer, or
other agent of the Trust may acquire, own, and dispose of Shares to the
same extent as if he were not a Trustee, officer, or agent; and the
Trustees may issue and sell or cause to be issued and sold Shares to and
buy Shares from any such person or any firm or company in which he is
interested, subject only to the general limitations herein as to the sale
and purchase of Shares.
4.09 Action by the Trustees. The Trustees shall act by majority vote
of the Trustees present at a meeting at which a quorum is present,
including a meeting by telephonic conference, duly called or by written
consent without a meeting signed by a majority of all Trustees, unless the
1940 Act requires that action be taken only at a meeting of the Trustees.
At any meeting of the Trustees, a majority of the Trustees shall constitute
a quorum. Subject to the requirements of the 1940 Act, the Trustees by
majority vote may delegate to any one of their number their authority to
approve particular matters or take particular actions on behalf of the
Trust.
4.10 Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of that
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking, or
other services and payment for those services by the Trust.
ARTICLE V
Shareholder Voting Powers and Meetings
--------------------------------------
5.01 Voting Powers.
5.01-1 Subject to the provisions of 3.06-2(d), the Shareholders
shall have power to vote only
(a) for the election of Trustees as provided in 4.01;
(b) to the same extent as the shareholders of an Oregon
business corporation as to whether or not a court action, proceeding, or
claim should or should not be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders;
12
<PAGE>
(c) with respect to the termination of the Trust or any
Series to the extent and as provided in 8.01; and
(d) with respect to any additional matters relating to the
Trust as required by this Declaration of Trust, the Bylaws, or any
registration of the Trust with the Commission (or any successor agency) or
any state, or as the Trustees consider necessary or desirable.
5.01-2 Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. Shares may be voted in person
or by proxy. At any time when no Shares of a Series are outstanding, the
Trustees may exercise all rights of Shareholders of that Series with
respect to matters affecting that Series or take any action required by
law, this Declaration of Trust, or the Bylaws to be taken by the
Shareholders.
5.02 Meetings. Meetings of the Shareholders may be called by the
Trustees for the purpose of electing Trustees as provided in 4.01 and for
other purposes prescribed by law, this Declaration of Trust, or the Bylaws.
Meetings of the Shareholders may also be called by the Trustees from time
to time for taking action upon any other matter deemed by the Trustees to
be necessary or desirable.
5.03 Quorum and Required Vote. Except when a larger quorum is required
by applicable law, the Bylaws, or this Declaration of Trust, 30 percent of
the Shares entitled to vote shall constitute a quorum at a Shareholders
meeting. When any one or more Series is to vote as a single class separate
from any other Series, 30 percent of the Shares of a Series entitled to
vote shall constitute a quorum of that Series. Subject to the provisions of
3.06-2(d), when a quorum is present, action on a matter by a voting group
is approved if the votes cast favoring the action exceed the votes cast
opposing the action, and a plurality shall elect a Trustee, except when a
greater number of affirmative votes is required by any provision of this
Declaration of Trust, the Bylaws, or applicable law.
5.04 Action by Written Consent. Any action taken by Shareholders may
be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion as required by
any express provision of this Declaration of Trust, the Bylaws, or
applicable law) and holding a majority of the Shares of any Series entitled
to vote separately on the matter (or such larger proportion as required by
any express provision of this Declaration of Trust, the Bylaws, or
applicable law) consent to the action in writing and such written consents
13
<PAGE>
are filed with the records of the Trust. The consent shall be treated for
all purposes as a vote taken at a meeting of Shareholders.
5.05 Additional Provisions. The Bylaws may include further provisions
for Shareholder votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions, and Redemptions
-----------------------------------------------
6.01 Determination of Net Asset Value, Net Income, and Distributions.
Subject to 3.06, the Trustees, in their absolute discretion, may prescribe
and shall set forth in the Bylaws or in a duly adopted resolution of the
Trustees such bases and time for determining the net asset value of a Share
of any Series, per Share net income attributable to the Shares of any
Series, or the declaration and payment of dividends and distributions on
the Shares of any Series, as they deem necessary or desirable.
6.02 Redemptions and Repurchases.
6.02-1 The Trust shall purchase any Shares offered by any
Shareholder for redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust or a person
designated by the Trust that the Trust purchase such Shares or in
accordance with other procedures for redemption as the Trustees authorize;
and the Trust will pay for the Shares the net asset value thereof, as
determined in accordance with the Bylaws, any duly adopted resolution of
the Trustees, and applicable law, next determined. Payment for Shares shall
be made by the Trust to the Shareholder within seven days after the date on
which the request is made in proper form. The obligation set forth in this
Section 6.02 is subject to the provision that if any time the New York
Stock Exchange is closed for other than weekends or holidays, or if
permitted by the rules of the Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable
for the Trust to dispose of the investments of the applicable Series or to
determine fairly the value of the net assets belonging to the Series or
during any other period permitted by order of the Commission for the
protection of investors, such obligations may be suspended or postponed by
the Trustees.
6.02-2 The redemption price may in any case be paid wholly or
partly in kind if the Trustees determine that such payment is advisable and
in the interest of the remaining Shareholders of the Series of which the
Shares are being redeemed. Subject to the foregoing, the fair value,
selection, and quantity of securities or other property paid or delivered
as all or part of the redemption price may be determined by or under
authority of the Trustees. In no case shall the Trust be liable for any
14
<PAGE>
delay of any corporation or other person in transferring securities
selected for delivery as all or part of any payment in kind.
6.03 Redemptions at the Option of the Trust. The Trust shall have the
right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in 6.01 (i) if at that time the
Shareholder owns Shares of any Series having an aggregate net asset value
of less than an amount determined from time to time by the Trustees or (ii)
to the extent the Shareholder owns Shares equal to or in excess of a
percentage, determined from time to time by the Trustees, of the
outstanding Shares of the Trust or of any Series.
ARTICLE VII
Limitations of Liability; Indemnification
-----------------------------------------
7.01 Limitation of Liability of Trustees.
7.01-1 The Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee,
manager, or Principal Underwriter of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee; but nothing
herein contained shall protect any Trustee against any liability to which
he would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office.
7.01-2 Every note, bond, contract, instrument, certificate, or
undertaking and every other act or thing issued, executed, or done by or on
behalf of the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been issued, executed, or done
only in or with respect to their or his capacity as Trustees or Trustee,
and such Trustees or Trustee shall not be personally liable thereon.
7.02 Indemnification of Trustees. The Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase insurance for
and to provide by resolution or in the Bylaws for indemnification out of
Trust assets for liability and for all expenses reasonably incurred or paid
or expected to be paid by a Trustee, officer, employee, or agent of the
Trust in connection with any claim, action, suit, or proceeding in which he
becomes involved by virtue of his capacity or former capacity with the
Trust. The provisions, including any exceptions and limitations concerning
indemnification, may be set forth in detail in the Bylaws or in a
resolution of the Trustees.
15
<PAGE>
7.03 Trustees, Shareholders, etc. Not Personally Liable; Notice.
7.03-1 All persons extending credit to, contracting with, or
having any claim against the Trust or any Series shall look only to the
assets of the Trust or, to the extent that the liability of the Trust may
have been expressly or implicitly limited by contract to the assets
belonging to a particular Series, only to the assets belonging to the
relevant Series, for payment under such credit, contract, or claim; and
neither the Shareholders, the Trustees, nor any of the Trust's officers,
employees, or agents, whether past, present, or future, shall be personally
liable therefor. Nothing in this Declaration of Trust shall protect any
Trustee against any liability to which such Trustee would otherwise be
subject by reason or wilful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of the office of
Trustee.
7.03-2 Every note, bond, contract, instrument, certificate, or
undertaking made or issued on behalf of the Trust by the Trustees, by any
officers or officer, or otherwise may include a notice that this
Declaration of Trust is on file with the Secretary of State of Oregon and
may recite that the note, bond, contract, instrument, certificate, or
undertaking was executed or made by or on behalf of the Trust or by them as
Trustee or Trustees or as officers or officer or otherwise and not
individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon
the assets and property of the Trust or upon the assets belonging to the
Series for the benefit of which the Trustees have caused the note, bond,
contract, instrument, certificate, or undertaking to be made or issued, and
may contain such further recital as he or they may deem appropriate, but
the omission of any such recital shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholders or any other person
individually.
7.04 Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for
his own wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of the office of Trustee,
and for nothing else, and shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of
Trust, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The
Trustees shall not be required to give any bond, as such, nor any surety if
a bond is required.
7.05 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any
16
<PAGE>
transaction made or to be made by the Trustees or to see to the application
of any payments made or property transferred to the Trust or upon its
order.
7.06 Indemnification of Shareholders. If any Shareholder or former
Shareholder is held personally liable solely by reason of being or having
been a Shareholder with respect to one or more Series and not because of
the Shareholder's acts or omissions or for some other reason, the
Shareholder or former Shareholder (or the Shareholder's heirs, executors,
administrators, or other legal representatives, or, in the case of a
corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets of such Series to be held harmless from
and indemnified against all loss and expense arising from that liability.
ARTICLE VIII
Miscellaneous
-------------
8.01 Termination of Trust or Series.
8.01-1 Unless terminated as provided in this Declaration, the
Trust shall continue without limitation of time. The Trust may be
terminated at any time by vote of at least two-thirds of the Shares of each
Series entitled to vote, voting separately by Series, or by the Trustees by
written notice to the Shareholders. Any Series may be terminated at any
time by vote of at least two-thirds of the Shares of that Series or by the
Trustees by written notice to the Shareholders of that Series.
8.01-2 Upon termination of the Trust (or any Series, as the case
may be), after paying or otherwise providing for all charges, taxes,
expenses, and liabilities belonging, severally, to each Series (or the
applicable Series, as the case may be), whether due or accrued or
anticipated as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets belonging, severally, to each Series (or the
applicable Series, as the case may be) to distributable form in cash or
shares or other securities, or any combination thereof, and distribute the
proceeds belonging to each Series (or the applicable Series, as the case
may be) to the Shareholders of that Series, as a Series, ratably according
to the number of Shares of that Series held by the several Shareholders on
the date of termination.
8.02 Merger, Consolidation, Etc. The Trustees may cause the Trust or
one or more of its Series to be merged into or consolidated with another
trust or company, or its assets or the assets belonging to one or more
Series to be sold, or the Shares exchanged under or pursuant to any state
or federal statute, if any, or otherwise to the extent permitted by law.
Such merger, consolidation, sale of assets, or share
17
<PAGE>
exchange must be authorized by vote of a majority of the outstanding Shares
of the Trust as a whole or any affected Series, as may be applicable;
provided that in all respects not governed by statute or applicable law,
the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger, consolidation, sale of
assets, or share exchange.
8.03 Filing of Copies, Reference, Headings. The original or a copy of
this instrument and of each amendment shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment shall be filed by the Trust with the
Secretary of State of Oregon and with any other governmental office where
filing may be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any amendments
have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely
on a copy certified by an officer of the Trust to be a copy of this
instrument or of any amendments. Headings are placed for convenience of
reference only and shall not be taken as a part hereof or control or affect
the meaning, construction, or effect of this instrument. This instrument
may be executed in any number of counterparts each of which shall be deemed
an original.
8.04 Applicable Law. This Declaration of Trust is created under and is
to be governed by and construed and administered according to the laws of
the State of Oregon.
8.05 Amendments. This Declaration of Trust may be amended at any time
by an instrument in writing signed by a majority of the Trustees.
8.06 Trust Only. The Trust is an association known as a business trust
and is subject to the provisions of ORS 128.560 through 128.600. The
Trustees intend to create only the relationship of Trustee and beneficiary
between the Trustees and each Shareholder. The Trustees do not intend to
create a general partnership, limited partnership, joint stock association,
corporation, bailment, or any form of legal relationship other than a
trust. Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
8.07 Each Series A "Fund". Each Series established pursuant to this
Declaration of Trust is intended to be a "fund" as defined in Section
851(h)(2) of the Internal Revenue Code of 1986, as amended, and any
successor provision of future law. In construing the provisions of this
Declaration of Trust, the presumption shall be in favor of an
interpretation consistent with that definition.
18
<PAGE>
8.08 Application of Oregon Business Corporation Act.
8.08-1 Except as provided by applicable law or otherwise
expressly in this Declaration, the Trust shall not be subject to any
provisions of the Oregon Business Corporation Act or any other rights and
duties existing under the common law or statutes of any state applicable to
domestic and foreign corporations.
8.08-2 ORS 128.580 provides as follows:
"Any business trust shall be subject to such provisions
of law, now or hereafter enacted, with respect to
domestic and foreign corporations, respectively, as
relate to the issuance of securities, filing of
required statements or reports, service of process,
general grants of power to act, right to sue and be
sued, limitation of individual liability of
shareholders and rights to acquire, mortgage, sell,
lease, operate and otherwise to deal in real and
personal property."
8.09 Use of the Name "Columbia" and "CMC". Columbia Management Co.
("CMC") has consented to the use by the Trust of the identifying name
"Columbia" and "CMC" in the name of the Trust. The consent is conditioned
upon the employment of CMC, its successors, or any affiliate thereof as
Manager of the Trust. As between CMC and the Trust, CMC controls the use of
the name of the Trust insofar as the name contains "Columbia" or "CMC." The
name or identifying words "Columbia" and "CMC" may be used from time to
time in other connections and for other purposes by CMC or affiliated
entities. CMC may require the Trust to cease using "Columbia" and "CMC" in
the name of the Trust if the Trust ceases to employ, for any reason, CMC,
an affiliate, or any successor as Manager of the Trust.
19
<PAGE>
CMC FUND TRUST
AMENDMENT TO DECLARATION OF TRUST
The undersigned officer of CMC Fund Trust (the "Trust") certifies
that the Restated Declaration of Trust of the Trust in the form attached as
Exhibit A was adopted by the Trustees of the Trust effective October 13,
1993:
Dated: October 19, 1993.
GEORGE L. HANSETH
-------------------------------------
George L. Hanseth,
Trustee, Vice President and Secretary
20
Exhibit 1.B
CMC FUND TRUST
AMENDMENT NO. 1
TO
RESTATED DECLARATION OF TRUST
The undersigned officer of CMC Fund Trust (the "Trust") certifies that
the following amendments to the Restated Declaration of Trust dated October
13, 1993 of the Trust were duly adopted by the Trustees of the Trust
effective March 8, 1994.
1. Section 4.01-1 of the Trust is amended to read in its entirety as
follows:
"4.01-1 The number of Trustees shall be eight unless that
number is changed by resolution adopted by a majority of
Trustees.
The names and addresses of the Trustees are as
follows:
Name Address
---- -------
George L. Hanseth 1300 SW Sixth Avenue
Portland, OR 97207
J. Jerry Inskeep, Jr. 1300 SW Sixth Avenue
Portland, OR 97207
John A. Kemp 1300 SW Sixth Avenue
Portland, OR 97207
Alexander S. Macmillan 1300 SW Sixth Avenue
Portland, OR 97207
Peter C. Olson 1300 SW Sixth Avenue
Portland, OR 97207
James F. Rippey 1300 SW Sixth Avenue
Portland, OR 97207
Peter T. Shand 1300 SW Sixth Avenue
Portland, OR 97207
Richard L. Woolworth 1300 SW Sixth Avenue
Portland, OR 97207"
2. Section 3.06 is amended to add a new Section 3.06-5 to read in
its entirety as follows:
"3.06-5 Subject to the relative rights and preferences and
other terms of this Declaration of Trust, the Trustees
authorize the establishment of the third Series to be
designated as follows: CMC High Yield Fund."
Dated: March 8, 1994
GEORGE L. HANSETH
-----------------------------------
George L. Hanseth,
Vice President and Secretary
Exhibit 2
BYLAWS
OF
CMC FUND TRUST
An Oregon Business Trust
ARTICLE I
OFFICES
1.01 Principal Office. The Trustees shall fix the location of the
principal executive office of the Trust at any place in or out of Oregon.
1.02 Other Offices. The Trustees may at any time establish branch or
subordinate offices at any place or places where the Trust intends to do
business.
ARTICLE II
SHAREHOLDERS MEETINGS AND VOTING
2.01 Place of Meetings. Meetings of the shareholders shall be held at
any place in or out of Oregon designated by the Trustees. If a meeting
place is not designated by the Trustees, the meeting shall be held at the
principal executive office of the Trust.
2.02 Call of Meeting. A meeting of the shareholders may be called at
any time by the Trustees or the President and shall be called by any
officer of the Trust if required by the Investment Company Act of 1940.
2.03 Notice of Meetings. Written or printed notice stating the date,
time and place of the shareholders meeting and the purposes for which the
meeting is called shall be delivered by the Trust to each shareholder
entitled to vote at the meeting not earlier than 70 days nor less than 10
days before the meeting date. Notice that is mailed shall be deemed
delivered when mailed to the shareholder with postage prepaid at the
shareholder's address shown in the Trust's record of shareholders.
2.04 Waiver of Notice. A shareholder may at any time waive any notice
required by law, these Bylaws or the Declaration of Trust. The waiver shall
be in writing, be
<PAGE>
signed by the shareholder entitled to notice and be delivered to the Trust
for inclusion in the minute book for the Trust. A shareholder's attendance
at a meeting waives objection to (i) lack of notice or defective notice of
the meeting, unless the shareholder at the beginning of the meeting objects
to holding the meeting or transacting business at the meeting, and (ii)
consideration of a particular matter at the meeting that is not within the
purposes described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
2.05 Fixing of Record Date. The Trustees may fix a date as the record
date to determine the shareholders entitled to notice of a shareholders'
meeting, vote, take any other action or receive payment of any share or
cash dividend or other distribution. This date shall not be earlier than 70
days or, in the case of a meeting, later than 10 days before the meeting or
action requiring a determination of shareholders. The record date for any
meeting, vote or other action of the shareholders may be different for each
series of shares established under the Declaration of Trust. If not
otherwise fixed by the Trustees, the record date to determine shareholders
entitled to notice of and to vote at a shareholders meeting is the close of
business on the day before the notice is first mailed or delivered to
shareholders. If not otherwise fixed by the Trustees, the record date to
determine shareholders entitled to receive payment of any share or cash
dividend or other distribution is the close of business on the day the
Trustees authorize the share or cash dividend or other distribution.
2.06 Quorum; Adjournment
2.06-1 Shares entitled to vote and shares of a series entitled to
vote as a separate voting group may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter. Except
where a larger quorum is required by applicable law, the Declaration of
Trust or these Bylaws, 30 percent of the votes entitled to be cast on the
matter by the shares, or the shares of a series entitled to vote as a
separate voting group, constitutes a quorum for action on that matter.
2.06-2 A majority of votes represented at the meeting, although
less than a quorum, may adjourn the meeting from time to time to a
different time and place without further notice to any shareholder of any
adjournment. At an adjourned meeting at which a quorum is present, any
business may be transacted that might have been transacted at the meeting
originally held.
2
<PAGE>
2.06-3 Once a share is represented for any purpose at a meeting,
it shall be present for quorum purposes for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or must
be set for the adjourned meeting. A new record date must be set if the
meeting is adjourned to a date more than 120 days after the date fixed for
the original meeting.
2.07 Voting Requirements; Action without Meeting.
2.07-1 If a quorum exists, action on a matter, other than the
election of Trustees, by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing
the action, unless a greater number of affirmative votes is required by law
or the Declaration of Trust. Unless otherwise provided in the Declaration
of Trust, Trustees are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
2.07-2 Action required or permitted by law, the Declaration of
Trust or the Bylaws to be taken at a shareholders meeting may be taken
without a meeting if the action is taken by shareholders holding a majority
of the shares entitled to vote on the action. The action must be evidenced
by one or more written consents describing the action taken, signed by a
majority of the shareholders holding the required number of shares entitled
to vote on the action and delivered to the Secretary for inclusion in the
minute book of the Trust. Shareholder action taken by written consent is
effective when the last shareholder required to approve the action signs
the consent, unless the consent specifies an earlier or later effective
date.
2.08 Proxies. A shareholder may vote shares in person or by proxy. A
shareholder may appoint a proxy by signing an appointment form either
personally or by the shareholder's attorney-in-fact. An appointment of a
proxy is effective when received by the Secretary or other officer of the
Trust authorized to tabulate votes. An appointment is valid for 11 months
unless a different period is provided in the appointment form. An
appointment is revocable by the shareholder unless the appointment form
states that it is irrevocable. A proxy with respect to shares held in the
name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them.
2.09 Acceptance of Votes. If the name signed on a vote, consent,
waiver or proxy appointment corresponds to the name of a shareholder or
purports to be executed on behalf of a shareholder, the Trust, if acting in
good faith, is entitled to
3
<PAGE>
accept the vote, consent, waiver or proxy appointment and give it effect as
the act of the shareholder. The Trust is entitled to reject a vote,
consent, waiver or proxy appointment if the officer of the Trust authorized
to tabulate votes, acting in good faith, has reasonable basis for doubt
about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
ARTICLE III
TRUSTEES
3.01 Powers. Subject to the applicable provisions of the Declaration
of Trust and these Bylaws relating to action required to be approved by the
shareholders, the business and affairs of the Trust shall be managed and
all powers shall be exercised by or under the direction of the Trustees.
3.02 Number and Qualification of Trustees. The number of Trustees
shall be five unless that number is changed by a resolution adopted by a
majority of the Trustees. Each Trustee shall serve during the existence of
the Trust until he or she dies, resigns or is removed or, if sooner, until
the next meeting of shareholders called to elect Trustees and until
election of a successor.
3.03 Vacancies. Subject to compliance with Section 16(a) of the
Investment Company Act of 1940, vacancies in the number of Trustees may be
filled by a majority of the remaining Trustees, though less than a quorum,
or by a sole remaining Trustee, unless the Trustees call a meeting of
shareholders for the purposes of electing Trustees. If at any time less
than a majority of the Trustees holding office at that time were so elected
by the holders of the outstanding voting securities of the Trust, the
Trustees shall cause to be held as promptly as possible, and in any event
within 60 days, a meeting of the shareholders for the purpose of electing
Trustees to fill any existing vacancies in the number of Trustees, unless
the period is extended by order of the Securities and Exchange Commission.
3.04 Regular Meetings. A regular meeting of the Trustees shall be held
without notice at the time and place fixed by resolution of the Trustees.
3.05 Special Meetings. Special meetings of the Trustees may be called
by or at the request of the President or any two Trustees. The person or
persons authorized to call special meetings of the Trustees may fix any
place in or out of Oregon as the place for holding any special meeting of
the Trustees called by them.
4
<PAGE>
3.06 Notice. Notice of the date, time and place of any special meeting
of the Trustees shall be given not later than the business day prior to the
meeting by notice communicated in person, by telephone, telegraph,
teletype, other form of wire or wireless communication, mail or private
carrier. If written, notice shall be effective at the earliest of (a) when
received, (b) five days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postpaid and correctly addressed, or
(c) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested and the receipt is signed by or on
behalf of the addressee. Notice by all other means shall be deemed
effective when received by or on behalf of the Trustee. Notice of any
regular or special meeting need not describe the purposes of the meeting
unless required by law.
3.07 Waiver of Notice. A Trustee may at any time waive any notice
required by law, these Bylaws or the Declaration of Trust. Except as set
forth below, the waiver must be in writing, be signed by the Trustee
entitled to the notice, specify the meeting for which notice is waived and
be filed with the minute book of the Trust. A Trustee's attendance at or
participation in a meeting waives any required notice to the Trustee of the
meeting unless the Trustee at the beginning of the meeting, or promptly
upon the Trustee's arrival, objects to holding the meeting or transacting
business at the meeting and does not thereafter vote for or assent to
action taken at the meeting.
3.08 Quorum. A majority of the number of Trustees fixed in accordance
with 3.02 of these Bylaws shall constitute a quorum for the transaction of
business at any meeting of the Trustees. If less than a quorum is present
at a meeting, a majority of the Trustees present may adjourn the meeting
from time to time without further notice.
3.09 Manner of Acting. The act of the majority of the Trustees present
at a meeting at which a quorum is present shall be the act of the Trustees,
unless a different number is required by law, the Declaration of Trust or
these Bylaws.
3.10 Meeting by Telephone Conference; Action without Meeting.
3.10-1 Trustees may participate in a regular or special meeting
by, or conduct the meeting through, use of any means of communications by
which all Trustees participating may simultaneously hear each other during
the meeting. Participation in a meeting by this means shall constitute
presence in person at the meeting.
5
<PAGE>
3.10-2 Unless the Investment Company Act of 1940 requires that
action be taken at a meeting of Trustees, any action that is required or
permitted to be taken at a meeting of the Trustees may be taken without a
meeting if one or more written consents describing the action taken are
signed by a majority of the Trustees entitled to vote on the matter and
included in the minute book of the Trust. The action shall be effective
when the last Trustee signs the consent, unless the consent specifies an
earlier or later effective date.
3.11 Compensation. By resolution of the Trustees, the Trustees may be
paid reasonable compensation for services as Trustees and their expenses of
attending meetings of the Trustees.
3.12 Presumption of Assent. A Trustee who is present at a meeting of
the Trustees or a committee of the Trustees shall be deemed to have
assented to the action taken at the meeting unless (a) the Trustee's
dissent or abstention from the action is entered in the minutes of the
meeting, (b) the Trustee delivers a written notice of dissent or abstention
to the action to the presiding officer of the meeting before any
adjournment or to the Trust immediately after the adjournment of the
meeting or (c) the Trustee objects at the beginning of the meeting or
promptly upon the Trustee's arrival to the holding of the meeting or
transacting business at the meeting. The right to dissent or abstain is not
available to a Trustee who voted in favor of the action.
3.13 Removal. Any Trustee may be removed at any time by written
instrument, signed by at least two-thirds of the number of Trustees prior
to removal, specifying the effective date of removal. Any Trustee may be
removed at any special meeting of the shareholders by a vote of two-thirds
of the outstanding shares.
3.14 Resignation. Any Trustee may resign by delivering a signed
written notice to the other Trustees. Unless the notice specifies a later
effective date, a resignation notice shall be effective upon the earlier of
(a) receipt, (b) five days after its deposit in the United States mails, if
mailed postpaid and correctly addressed, or (c) on the date shown on the
return receipt, if sent by registered or certified mail, return receipt
requested, and the receipt is signed by addressee. Once delivered, a
resignation notice is irrevocable unless revocation is permitted by the
Trustees.
6
<PAGE>
ARTICLE IV
COMMITTEES
4.01 Committees of Trustees. The Trustees may create by resolution
adopted by a majority of the authorized number of Trustees one or more
committees, each consisting of two or more Trustees, to serve at the
pleasure of the Trustees. The Trustees may designate one or more Trustees
as alternate members of any committee who may replace any absent member at
any meeting of the committee. Subject to the provisions of the Investment
Company Act of 1940, any committee shall have the authority of the Trustees
to the extent provided in the resolution of the Trustees.
4.02 Meetings and Action of Committees. Meetings and actions of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these Bylaws, with such changes in the context
thereof as are necessary to substitute the committee and its members for
the Trustees, except that (1) the time of regular meetings of committees
may be determined either by resolution of the Trustees or by resolution of
the committee and (2) written consents describing action taken by a
committee without a meeting pursuant to 3.10-2 shall be signed by all
members of the committee. Special meetings of committees may also be called
by resolution of the Trustees, and notice of special meetings of committees
shall also be given to all alternate members who shall have the right to
attend all meetings of the committee. The Trustees may adopt rules for the
governance of any committee not inconsistent with the provision of these
Bylaws.
ARTICLE V
OFFICERS
5.01 Officers. The officers of the Trust shall be a President and a
Secretary, who shall be appointed by the Trustees at their first meeting.
The Trustees and the President, to the extent permitted by resolution of
the Trustees, may appoint one or more Vice Presidents, a Treasurer and any
other officers, assistant officers and agents. Any two or more offices may
be held by the same person.
5.02 Compensation. The Trust may pay its officers reasonable
compensation for their services as fixed from time to time by the Trustees
or by the President with respect to officers appointed by the President.
7
<PAGE>
5.03 Term. The term of office of all officers commences upon their
appointment and continues until their successors are appointed or until
their resignation or removal.
5.04 Removal. Any officer or agent appointed by the Trustees or the
President may be removed by the Trustees at any time with or without cause.
Any officer or agent appointed by the President may be removed by the
President at any time with or without cause.
5.05 President. Unless otherwise determined by the Trustees, the
President shall be the chief executive officer of the Trust and, subject to
the control of the Trustees, shall be responsible for the general operation
of the Trust. He shall have any other duties and responsibilities
prescribed by the Trustees.
5.06 Vice Presidents. Each Vice President shall perform duties and
responsibilities prescribed by the Trustees or the President. The Trustees
or the President may confer a special title upon a Vice President.
5.07 Secretary.
5.07-1 The Secretary shall record and keep the minutes of all
meetings of the Trustees and shareholders in one or more books provided for
that purpose and perform any duties prescribed by the Trustees or the
President.
5.07-2 Any assistant secretary shall have the duties prescribed
from time to time by the Trustees, the President or the Secretary. In the
absence or disability of the Secretary, the Secretary's duties shall be
performed by an assistant secretary.
5.08 Treasurer. The Treasurer, if that office is filled, shall have
charge and custody and be responsible for all funds and securities of the
Corporation and shall have other duties as prescribed from time to time by
the Trustees or the President.
ARTICLE VI
INDEMNIFICATION
The Trust shall indemnify to the fullest extent not prohibited by
law any current or former Trustee, or officer of the Trust who is made, or
threatened to be made, a party to an action, suit or proceeding, whether
civil, criminal,
8
<PAGE>
administrative, investigative or other (including an action, suit or
proceeding by or in the right of the Trust) by reason of the fact that such
person is or was a Trustee, officer, employee or agent of the Trust, or
serves or served at the request of the Trust as a trustee, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise. The Trust shall pay for or reimburse the reasonable
expenses incurred by any such current or former Trustee or officer in any
such proceeding in advance of the final disposition of the proceeding to
the fullest extent not prohibited by law. No amendment to these Bylaws that
limits the Trust's obligation to indemnify any person shall have any effect
on such obligation for any act or omission that occurs prior to the later
to occur of the effective date of the amendment or the date notice of the
amendment is given to the person. This Article shall not be deemed
exclusive of any other provisions for indemnification or advancement of
expenses of Trustees, officers, employees and agents that may be included
in the Declaration of Trust or any statute, bylaw, agreement, general or
specific action of the Trustees, vote of shareholders or other document or
arrangement. The right to and amount and manner of providing
indemnification under this Article shall be determined subject to any
limitations pursuant to Oregon law and the Investment Company Act of 1940
and regulations thereunder, including interpretations thereof by the
Securities and Exchange Commission in effect at the time of the
determination.
ARTICLE VII
RECORDS AND REPORTS
7.01 Maintenance and Inspection of Shareholder Records. This Trust
shall keep at its principal executive office or at the office of its
transfer agent, if appointed, a record of its shareholders setting forth
the names and addresses of all shareholders and the number and series of
shares held by each shareholder.
7.02 Maintenance and Inspection of Bylaws. The Trust shall keep at its
principal executive office the original or a copy of these Bylaws as
amended, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
7.03 Maintenance and Inspection of Other Records. The accounting books
and records and minutes of proceedings of the shareholders and the Trustees
and any committee or committees of the Trustees shall be kept at the
principal executive office of the Trust or at any other place designated by
the Trustees.
9
<PAGE>
The minutes shall be kept in written form and the accounting books and
records shall be kept either in written form or in any other form capable
of being converted into written form. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and
under what conditions and regulations the accounts or minute books of the
Trust shall be opened to the inspection of the shareholders. No shareholder
shall have the right to inspect the accounts or minute books or any
document of the Trust except as conferred by law or otherwise by the
Trustees or by resolution of the shareholders.
7.04 Inspection by Trustees. Every Trustee shall have the absolute
right at any reasonable time to inspect all books, records, and documents
of every kind and the physical properties of the Trust. This inspection by
a Trustee may be made in person or by an agent or attorney and the right of
inspection incudes the right to copy and make extracts of documents.
ARTICLE VIII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
8.01 Contracts. Except as otherwise provided by law, the Trustees may
authorize any officers or agents to execute and deliver any contract or
other instrument in the name of and on behalf of the Trust, and this
authority may be general or confined to specific instances.
8.02 Loans. The Trust shall not borrow money and no evidence of
indebtedness shall be issued in its name unless authorized by the Trustees.
The authority may be general or confined to specific instances.
8.03 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money and notes and other evidences of indebtedness issued in
the name of the Trust shall be signed in the manner and by the officers or
agents of the Trust designated by the Trustees.
8.04 Deposits. All funds of the Trust not otherwise employed shall be
deposited to the credit of the Trust in those banks, trust companies or
other depositaries as the Trust or officers of the Trust designated by the
Trust select; or be invested as authorized by the Trustees.
10
<PAGE>
ARTICLE IX
GENERAL MATTERS
9.01 Severability. A determination that any provision of these Bylaws
is for any reason inapplicable, invalid, illegal or otherwise ineffective
shall not affect or invalidate any other provision of these Bylaws.
9.02 Amendments. These Bylaws may be amended or repealed and new
Bylaws may be adopted by the Trustees; provided, however, that any
amendment of these Bylaws shall be approved by vote of a majority of
outstanding shares of the Trust entitled to vote if required by law.
Adopted: August 7, 1989
11
NUMBER [LOGO] SHARES
CMC SMALL CAP FUND
A SERIES PORTFOLIO OF CMC FUND TRUST
AN OREGON BUSINESS TRUST
This Certifies that
*SEE REVERSE FOR
CERTAIN DEFINITIONS
is the owner of
fully paid and non-assessable Shares of the CMC Small Cap Fund transferable
on the books of the Fund by the holder thereof in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by the transfer agent.
Witness the facsimile signatures of its duly authorized officers.
Dated:
SECRETARY
CORPORATE
SEAL
PRESIDENT
COUNTERSIGNED:
BY TRANSFER AGENT
- -------------------------------------------------------------------
Authorized Officer
<PAGE>
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY A COMMERCIAL BANK OR BY A
SECURITIES FIRM HAVING MEMBERSHIP ON A RECOGNIZED NATIONAL SECURITIES
EXCHANGE, WHOSE SIGNATURE(S) IS KNOWN TO THE TRANSFER AGENT OF THE
CORPORATION.
For value received, __________________ hereby sell, assign and
transfer unto
- --------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
- --------------------------------------------------------------------------
___________________________________________________________________ Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ______________________________ Attorney
to transfer the said stock on the books of the within-named Fund with full
power of substitution in the premises.
Dated, _____________________ 19 ____
------------------------------------------------------------
Owner
------------------------------------------------------------
Signature of Co-Owner, if any
IMPORTANT: BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) GUARANTEED BY: ___________________________________________
*The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-______ Custodian-_______
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors
JT TEN - as joint tenants with right of survivorship
and not as tenants in common Act _______________
(State)
Additional abbreviations may also be used though not in the above list.
- ------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
NUMBER [LOGO] SHARES
CMC INTERNATIONAL STOCK FUND
A SERIES PORTFOLIO OF CMC FUND TRUST,
AN OREGON BUSINESS TRUST
This Certifies that
*SEE REVERSE FOR
CERTAIN DEFINITIONS
is the owner of
fully paid and non-assessable Shares of the CMC International Stock Fund,
transferable on the books of the Fund by the holder thereof in person or by
duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the
transfer agent.
Witness the facsimile signatures of its duly authorized officers.
Dated:
SECRETARY
CORPORATE
SEAL
PRESIDENT
COUNTERSIGNED:
BY TRANSFER AGENT
- -------------------------------------------------------------------
Authorized Officer
<PAGE>
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY A COMMERCIAL BANK OR BY A
SECURITIES FIRM HAVING MEMBERSHIP ON A RECOGNIZED NATIONAL SECURITIES
EXCHANGE, WHOSE SIGNATURE(S) IS KNOWN TO THE TRANSFER AGENT OF THE
CORPORATION.
For value received, __________________ hereby sell, assign and
transfer unto
- --------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
- --------------------------------------------------------------------------
___________________________________________________________________ Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ______________________________ Attorney
to transfer the said stock on the books of the within-named Fund with full
power of substitution in the premises.
Dated, _____________________ 19 ____
------------------------------------------------------------
Owner
------------------------------------------------------------
Signature of Co-Owner, if any
IMPORTANT: BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) GUARANTEED BY: ______________________________________________
*The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-______ Custodian-_______
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors
JT TEN - as joint tenants with right of survivorship
and not as tenants in common Act _____________
(State)
Additional abbreviations may also be used though not in the above list.
- ------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
NUMBER [LOGO] SHARES
CMC HIGH YIELD FUND
A SERIES PORTFOLIO OF CMC FUND TRUST,
AN OREGON BUSINESS TRUST
This Certifies that
*SEE REVERSE FOR
CERTAIN DEFINITIONS
is the owner of
fully paid and non-assessable Shares of the CMC High Yield Fund,
transferable on the books of the Fund by the holder thereof in person or by
duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the
transfer agent.
Witness the facsimile signatures of its duly authorized officers.
Dated:
SECRETARY
CORPORATE
SEAL
PRESIDENT
COUNTERSIGNED:
BY TRANSFER AGENT
- -------------------------------------------------------------------
Authorized Officer
<PAGE>
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY A COMMERCIAL BANK OR BY A
SECURITIES FIRM HAVING MEMBERSHIP ON A RECOGNIZED NATIONAL SECURITIES
EXCHANGE, WHOSE SIGNATURE(S) IS KNOWN TO THE TRANSFER AGENT OF THE
CORPORATION.
For value received, __________________hereby sell, assign and
transfer unto
- --------------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
- --------------------------------------------------------------------------
___________________________________________________________________ Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ______________________________ Attorney
to transfer the said stock on the books of the within-named Fund with full
power of substitution in the premises.
Dated, _____________________ 19 ____
------------------------------------------------------------
Owner
------------------------------------------------------------
Signature of Co-Owner, if any
IMPORTANT: BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) GUARANTEED BY: ___________________________________________
*The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-______ Custodian-_______
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors
JT TEN - as joint tenants with right of survivorship
and not as tenants in common Act ____________
(State)
Additional abbreviations may also be used though not in the above list.
- ------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
EXHIBIT 5.A
CMC FUND TRUST
CMC SMALL CAP FUND
INVESTMENT ADVISORY CONTRACT
This Agreement is made the 8th day of August, 1989 between CMC
FUND TRUST, an Oregon business trust (the "Fund"), and COLUMBIA MANAGEMENT
CO., an Oregon corporation having its principal place of business in
Portland, Oregon (the "Adviser"). The Fund has established its first Series
of shares, referred to as "CMC Small Cap Fund," (the "Series") and this
Agreement relates to services to be performed by the Adviser with respect
to that Series.
The parties agree as follows:
1. Duties of Adviser. With respect to the Series, the Adviser shall
regularly provide the Fund with research, advice, and supervision with
respect to investment matters and shall furnish continuously an investment
program, recommend what securities shall be purchased or sold and what
portion of the Fund's assets shall be held invested or uninvested, subject
always to the provisions of the Investment Company Act of 1940 (the "Act")
and the Fund's Declaration of Trust and Bylaws, and amendments thereto,
which amendments shall be furnished to the Adviser by the Fund. The Adviser
shall take any steps necessary or appropriate to carry out its decisions in
regard to the foregoing matters and the general conduct of the business of
the Fund. The Adviser may take into consideration receipt of research and
statistical information and other services rendered to the Fund in the
allocation of commissions from portfolio brokerage business.
2. Allocation of Charges and Expenses.
(a) With respectto the Series, the Adviser shall pay or reimburse
the Fund for payments made by the Fund for all executive salaries and
executive expenses, office rent of the Fund, ordinary office expenses
(other than the expense of clerical services relating to the administration
of the Fund), and for any other expenses that, if otherwise borne by the
Fund, would cause the Fund to "be deemed to be acting as a distributor of
securities of which it is the issuer, other than through an underwriter,"
pursuant to Rule 12b-1 under the Act. The Adviser shall provide investment
advisory, statistical and research facilities and all clerical services
relating to research, statistical, and investment work with respect to the
Series.
<PAGE>
(b) The Adviser shall not be required to pay any expenses of the
Fund other than those enumerated in this Agreement. The Fund will assume
all other costs, including the cost of its custodian, legal, auditing, and
accounting expenses, disinterested directors' fees, taxes, and governmental
fees, interest, brokers' commissions, transaction expenses, cost of stock
certificates, and any other expenses (including clerical expenses) of
issue, sale, repurchase, or redemption of shares, expenses of registering
or qualifying shares for sale, transfer taxes, and all expenses of
preparing the Fund's registration statement and prospectus, and the cost of
printing and delivering to shareholders prospectuses and reports.
3. Compensation of the Adviser. For the services to be rendered, the
facilities to be furnished, and the payments to be made by the Adviser, as
provided in Sections 1 and 2 hereof, for each calendar month the Fund shall
pay to the Adviser a fee computed at the annual rate of .75 percent of the
daily net assets. If the asset value is not required to be determined on
any particular business day, then for the purposes of this Section 3, the
asset value of a share as last determined shall be deemed to be the asset
value of a share as of the close of business on that day. If there is no
business day in any calendar month, the fee shall be computed on the basis
of the asset value of a share as last determined, multiplied by the average
number of shares outstanding on the last day of the month (exclusive of
shares held by the Fund, if any).
4. Covenants of the Adviser. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor
any officer, director, or employee of the Adviser shall act as a principal.
The Adviser covenants that it and its employees will comply with investment
restrictions of the Fund's Bylaws applicable to them. If the Adviser or any
of its affiliates give any advice to clients concerning the shares of the
Fund, it will act solely as investment counsel for the clients and not on
behalf of the Fund.
5. Limitation on Liability of Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this agreement relates, except
a loss resulting from willful malfeasance, bad faith, or gross negligence
on the part of the Adviser in the performance of its duties or from
reckless disregard by the Adviser of its obligations and duties under this
Agreement.
2
<PAGE>
6. Duration and Termination of this Agreement.
(a) This Agreement shall remain in force for two years from the
date hereof, and it may be continued from year to year thereafter if
approved annually by a vote of a majority of the Fund's shareholders or by
its trustees and in either case a vote of a majority of the trustees who
are not parties to this Agreement or interested persons of any such party
cast in person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement may be terminated at any time without the
payment of any penalty by vote of the trustees of the Fund, by vote of a
majority of the outstanding shares of the Fund, by the Adviser, on 60 days
written notice to the other party.
(c) This Agreement shall automatically terminate if it is
assigned. The Adviser shall notify the Fund of any change in the officers
or directors of the Adviser within a reasonable time after the change. The
terms "assignment," "vote of a majority of the outstanding voting
securities", and "interested persons" shall have the meanings specified in
the Act.
7. Applicable to Specific Series. The Adviser agrees that, with
respect to any obligation of the Fund under this Agreement, the Adviser
shall look only to the assets of the Series to which this Agreement
relates.
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed as of the day and year first written above.
CMC FUND TRUST
By J. JERRY INNSKEEP, JR.
--------------------------------
Title: President
----------------------------
COLUMBIA MANAGEMENT CO.
By JAMES F. RIPPEY
--------------------------------
Title: President
----------------------------
3
Exhibit 5.B
CMC FUND TRUST
CMC INTERNATIONAL STOCK FUND
INVESTMENT ADVISORY CONTRACT
This Agreement is made the 26th day of October, 1993 between CMC FUND
TRUST, an Oregon business trust, (the "Fund") and COLUMBIA MANAGEMENT CO.,
an Oregon corporation having its principal place of business in Portland,
Oregon (the "Adviser"). The Fund is registered as an open-end investment
company pursuant to the Investment Company Act of 1940 (the "Act"). The
Adviser is registered as an investment adviser pursuant to the Investment
Advisers Act of 1940. The Fund has established a second series of shares,
referred to as "CMC International Stock Fund" (the "Series"), and this
Agreement relates to services to be performed by the Adviser with respect
to that Series.
The parties agree as follows:
1. Duties of Adviser. With respect to the Series, the Adviser shall
regularly provide the Fund with research, advice, and supervision with
respect to investment matters and shall furnish continuously an investment
program, recommend what securities shall be purchased or sold and what
portion of the Fund's assets shall be held invested or uninvested, subject
always to the provisions of the Act and the Fund's Declaration of Trust and
Bylaws, and amendments thereto, which amendments shall be furnished to the
Adviser by the Fund. The Adviser shall take any steps necessary or
appropriate to carry out its decisions in regard to the foregoing matters
and the general conduct of the business of the Fund. The Adviser may take
into consideration receipt of research and statistical information and
other services rendered to the Fund in the allocation of commissions from
portfolio brokerage business.
2. Allocation of Charges and Expenses.
(a) With respect to the Series, the Adviser shall pay or reimburse the
Fund for payments made by the Fund for all executive salaries and executive
expenses, office rent of the Fund, ordinary office expenses (other than the
expense of clerical services relating to the administration of the Fund),
and for any other expenses that, if otherwise borne by the Fund, would
cause the Fund to "be deemed to be acting as a distributor of securities of
which it is the issuer, other than through an underwriter," pursuant to
Rule 12b-1 under the Act. The Adviser shall provide investment advisory,
statistical, and research facilities and all clerical services relating to
research, statistical, and investment work with respect to the Series.
1
<PAGE>
(b) The Adviser shall not be required to pay any expenses of the Fund
other than those enumerated in this Agreement. The Fund will assume all
other costs, including the cost of its custodian, legal, auditing, and
accounting expenses, disinterested directors' fees, taxes, and governmental
fees, interest, brokers' commissions, transaction expenses, cost of stock
certificates, and any other expenses (including clerical expenses) of
issue, sale, repurchase, or redemption of shares, expenses of registering
or qualifying shares for sale, transfer taxes, and all expenses of
preparing the Fund's registration statement and prospectus, and the cost of
printing and delivering to shareholders prospectuses and reports.
3. Compensation of the Adviser. For the services to be rendered, the
facilities to be furnished, and the payments to be made by the Adviser, as
provided in Sections 1 and 2 hereof, for each calendar month the Fund shall
pay to the Adviser a fee computed at the annual rate of .75 of 1 percent of
daily net assets of the Series. If the asset value is not required to be
determined on any particular business day, then for the purposes of this
Section 3, the asset value of a share as last determined shall be deemed to
be the asset value of a share as of the close of business on that day. If
there is no business day in any calendar month, the fee shall be computed
on the basis of the asset value of a share as last determined, multiplied
by the average number of shares outstanding on the last day of the month.
4. Covenants of the Adviser. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor
any officer, director, or employee of the Adviser shall act as a principal.
The Adviser covenants that it and its employees will comply with investment
restrictions of the Fund's Bylaws applicable to them. If the Adviser or any
of its affiliates give any advice to clients concerning the shares of the
Fund, it will act solely as investment counsel for the clients and not on
behalf of the Fund.
5. Limitation on Liability of Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this agreement relates, except
a loss resulting from willful malfeasance, bad faith, or gross negligence
on the part of the Adviser in the performance of its duties or from
reckless disregard by the Adviser of its obligations and duties under this
Agreement.
6. Duration and Termination of this Agreement.
(a) This Agreement shall remain in force for two years from the date
hereof, and it may be continued from year to year thereafter if approved
annually by a vote of a majority of the Fund's shareholders or by its
trustees and in either case a vote of a majority of the trustees who are
not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
2
<PAGE>
(b) This Agreement may be terminated at any time without the payment
of any penalty by vote of the trustees of the Fund, by vote of a majority
of the outstanding shares of the Fund, or by the Adviser, on 60 days
written notice to the other party.
(c) This Agreement shall automatically terminate if it is assigned.
The Adviser shall notify the Fund of any change in the officers or
directors of the Adviser within a reasonable time after the change. The
terms "assignment," "vote of a majority of the outstanding voting
securities", and "interested persons" shall have the meanings specified in
the Act.
7. Applicable to Specific Series. The Adviser agrees that, with
respect to any obligation of the Fund under this Agreement, the Adviser
shall look only to the assets of the Series to which this Agreement
relates.
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed as of the day and year first written above.
CMC FUND TRUST
By GEORGE L. HANSETH
--------------------------------
Title: Vice President
COLUMBIA MANAGEMENT CO.
By JOHN A. KEMP
--------------------------------
Title: Senior Vice President
3
Exhibit 5.C
CMC FUND TRUST
CMC HIGH YIELD FUND
INVESTMENT ADVISORY CONTRACT
This Agreement is made the 29th day of April, 1994 between CMC FUND
TRUST, an Oregon business trust, (the "Fund") and COLUMBIA MANAGEMENT CO.,
an Oregon corporation having its principal place of business in Portland,
Oregon (the "Adviser"). The Fund is registered as an open-end investment
company pursuant to the Investment Company Act of 1940 (the "Act"). The
Adviser is registered as an investment adviser pursuant to the Investment
Advisers Act of 1940. The Fund has established a third series of shares,
referred to as "CMC High Yield Fund" (the "Series"), and this Agreement
relates to services to be performed by the Adviser with respect to that
Series.
The parties agree as follows:
1. Duties of Adviser. With respect to the Series, the Adviser shall
regularly provide the Fund with research, advice, and supervision with
respect to investment matters and shall furnish continuously an investment
program, recommend what securities shall be purchased or sold and what
portion of the Fund's assets shall be held invested or uninvested, subject
always to the provisions of the Act and the Fund's Declaration of Trust and
Bylaws, and amendments thereto, which amendments shall be furnished to the
Adviser by the Fund. The Adviser shall take any steps necessary or
appropriate to carry out its decisions in regard to the foregoing matters
and the general conduct of the business of the Fund. The Adviser may take
into consideration receipt of research and statistical information and
other services rendered to the Fund in the allocation of commissions from
portfolio brokerage business.
2. Allocation of Charges and Expenses.
(a) With respect to the Series, the Adviser shall pay or reimburse the
Fund for payments made by the Fund for all executive salaries and executive
expenses, office rent of the Fund, ordinary office expenses (other than the
expense of clerical services relating to the administration of the Fund),
and for any other expenses that, if otherwise borne by the Fund, would
cause the Fund to "be deemed to be acting as a distributor of securities of
which it is the issuer, other than through an underwriter," pursuant to
Rule 12b-1 under the Act. The Adviser shall provide investment advisory,
statistical, and research facilities and all clerical services relating to
research, statistical, and investment work with respect to the Series.
1
<PAGE>
(b) The Adviser shall not be required to pay any expenses of the Fund
other than those enumerated in this Agreement. The Fund will assume all
other costs, including the cost of its custodian, legal, auditing, and
accounting expenses, disinterested directors' fees, taxes, and governmental
fees, interest, brokers' commissions, transaction expenses, cost of stock
certificates, and any other expenses (including clerical expenses) of
issue, sale, repurchase, or redemption of shares, expenses of registering
or qualifying shares for sale, transfer taxes, and all expenses of
preparing the Fund's registration statement and prospectus, and the cost of
printing and delivering to shareholders prospectuses and reports.
3. Compensation of the Adviser. For the services to be rendered, the
facilities to be furnished, and the payments to be made by the Adviser, as
provided in Sections 1 and 2 hereof, for each calendar month the Fund shall
pay to the Adviser a fee computed at the annual rate of .40 of 1 percent of
daily net assets of the Series. If the asset value is not required to be
determined on any particular business day, then for the purposes of this
Section 3, the asset value of a share as last determined shall be deemed to
be the asset value of a share as of the close of business on that day. If
there is no business day in any calendar month, the fee shall be computed
on the basis of the asset value of a share as last determined, multiplied
by the average number of shares outstanding on the last day of the month.
4. Covenants of the Adviser. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor
any officer, director, or employee of the Adviser shall act as a principal.
The Adviser covenants that it and its employees will comply with investment
restrictions of the Fund's Bylaws applicable to them. If the Adviser or any
of its affiliates give any advice to clients concerning the shares of the
Fund, it will act solely as investment counsel for the clients and not on
behalf of the Fund.
5. Limitation on Liability of Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this agreement relates, except
a loss resulting from willful malfeasance, bad faith, or gross negligence
on the part of the Adviser in the performance of its duties or from
reckless disregard by the Adviser of its obligations and duties under this
Agreement.
6. Duration and Termination of this Agreement.
(a) This Agreement shall remain in force for two years from the date
hereof, and it may be continued from year to year thereafter if approved
annually by a vote of a majority of the Fund's shareholders or by its
trustees and in either case a vote of a majority of the trustees who are
not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
2
<PAGE>
(b) This Agreement may be terminated at any time without the payment
of any penalty by vote of the trustees of the Fund, by vote of a majority
of the outstanding shares of the Fund, or by the Adviser, on 60 days
written notice to the other party.
(c) This Agreement shall automatically terminate if it is assigned.
The Adviser shall notify the Fund of any change in the officers or
directors of the Adviser within a reasonable time after the change. The
terms "assignment," "vote of a majority of the outstanding voting
securities", and "interested persons" shall have the meanings specified in
the Act.
7. Applicable to Specific Series. The Adviser agrees that, with
respect to any obligation of the Fund under this Agreement, the Adviser
shall look only to the assets of the Series to which this Agreement
relates.
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed as of the day and year first written above.
CMC FUND TRUST
By GEORGE L. HANSETH
-------------------------------------
Title: Vice President
COLUMBIA MANAGEMENT CO.
By JOHN A. KEMP
-------------------------------------
Title: Senior Vice President
3
Exhibit 8.A
RESTATED CUSTODIAN CONTRACT
CMC FUND TRUST
This Restated Custodian Contract made this 26th day of April,
1994, between CMC Fund Trust, an Oregon business trust (hereinafter called
the "Company"), and United States National Bank of Oregon, a national
banking association organized under the laws of the United States of
America and having its place of business in the City of Portland, Oregon,
(hereinafter called the "Custodian") is to become effective, except as
otherwise provided herein, on the effective date of the Registration
Statement of the Company under the Securities Act of 1933. The Company is
authorized to issue separate series of shares of beneficial interests in
The Company (a "Series"). The Company may establish separate accounts with
the Custodian with respect to a Series.
Section 1. The Company agrees to deliver to the Custodian all
securities and cash owned by it, and all dividend checks or other income,
payments of principal or capital distributions received by the Company with
respect to all securities owned by the Company from time to time and the
cash consideration due to the Company for such new stock of the Company as
may be issued from time to time.
Section 2. The Custodian is hereby authorized by the Company to
receive, hold and deal with, subject to the terms hereof, all securities,
cash, whether representing principal deposits or income, and property of
any other nature which will be, from time to time hereafter, delivered to
it by or for the account of the Company, or purchased with cash on deposit
hereunder, exercising the same care in the safekeeping thereof as it
exercises with respect to other accounts of similar character.
Section 3. The Custodian shall keep books and records of all cash
deposited hereunder, subdivided into principal and income accounts, and all
other property and securities deposited hereunder.
Section 4. The Custodian shall hold for the account of the
Company either in the name of the Company, the name of a nominee of the
Company, the name of the Custodian, the name of a nominee of the Custodian,
in bearer form, in a securities depository, or the Federal Reserve Book
Entry System, all securities or other property delivered to or received by
it for the account of the Company. All securities received by the Custodian
may be in "street" or other good delivery form.
Section 5. The Custodian shall receive and receipt for moneys due
to the Company. Funds held by the Custodian may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies and in such amounts as it may in its
discretion deem necessary or desirable; provided, however, that every other
bank or trust company and the funds to be deposited with each shall be
approved by vote of the Trustees of the Company. Such funds shall be so
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in such capacity.
Section 6. The Custodian is hereby appointed attorney-in-fact of
the Company to endorse for credit to the account of the Company when
collected, all checks, drafts or other orders for the payment of money
drawn to, or to the order of, the Company, or to the order of the Custodian
for the account of the Company. All cash, whether principal or income, and
other assets held by the Custodian shall be subject to written orders of
the Company or its officers and/or trustees for any of the following
purposes:
- 1 -
<PAGE>
a. For the purchase of securities or other property to be
retained in the custody of the Custodian, or of other
property in which assets of the Company are to be invested,
provided that, in every case where payment is made by the
Custodian in advance of receipt of the securities
purchased, except as provided in Section 8 hereof or except
where authorized by resolution of the Company, the
Custodian shall be absolutely liable to the Company for
such securities to the same extent as if the securities had
been received by the Custodian;
b. For the redemption of shares of capital stock of the
Company;
c. For the payment of dividends or other cash distributions to
shareholders;
d. For payment of taxes, expenses, fees and other liabilities
incurred in connection with the operation of the Company
including registration and qualification costs and other
expenses of issuing stock or changing its capital
structure, whether or not such expenses shall be in whole
or in part capitalized or treated as deferred expenses;
e. For the making of any disbursements authorized by the
Trustees pursuant to the By-Law's, copies of which shall be
certified to the Custodian by an officer of the Company,
provided, however, the Custodian shall have no duty or
responsibility to determine whether such disbursements are
made in accordance with said By-Laws;
f. For the payment of any expense or liability incurred by the
Company;
g. For any other purpose as herein specifically provided. All
written orders calling for the disbursement of cash shall
specify the person, firm, corporation or entity to whom
payment is to be made and the purpose for which such
payment is made. The Custodian may in its discretion
without express authority from the Company make payments to
itself or others for minor expenses (defined as out of
pocket expenses for postage, insurance and similar
expenses) of handling securities or other similar items
relating to its duties under this Contract, all such
payments to be accounted for to the Company.
Section 7. The Custodian shall collect all income and other
payments with respect to securities held hereunder as of the record date
for such income or other payments. The Custodian shall also execute
ownership and other certificates and affidavits for all Federal and State
tax purposes in connection therewith and in connection with transfers of
securities. The Custodian shall hold all such income collected by it
hereunder. Without limiting the generality of the foregoing, the Custodian
shall detach and present for payment all coupons and other income items
requiring presentation as and when they become due and shall collect
dividends and interest when due on securities held hereunder.
Section 8. Upon receipt of an order, (to be confirmed in writing)
of the Company, or its officers and/or trustees stating that the Company
has purchased securities or other property in which assets of the Company
are permitted to be invested, specifying the securities or other
transaction being consummated and other information required by Section 6
hereof, and directing payment for such securities or other property, the
Custodian shall, insofar as it has available funds, pay for and hold for
the account of the Company any such securities or other property described
in the written order. The
- 2 -
<PAGE>
Custodian may not make payments for securities or other property until
receipt of such securities or property by the Custodian except that such
payments may be made in advance of receipt of such securities or other
property in connection with conversion, exchange or surrender of securities
owned or subscribed to, in connection with subscriptions to underwritten
offerings with respect to which an initial deposit is required in order to
participate in such offering, or where, as the result of an adjudicatory
proceeding advance payment is required to obtain the release of such
securities or other property. Whenever possible, confirmation of the
broker, dealer or other seller shall be furnished the Custodian.
Section 9. The Custodian shall release and deliver securities or
other property owned by the Company in the following cases only:
a. Upon sale of such securities for the account of the Company
and receipt of payment therefor, such delivery to be
preceded by receipt of a written order of the Company or
its officers and/or trustees, stating that the Company has
sold securities or other property in which assets of the
Company are invested, specifying the securities or property
sold, the prices received therefore the broker or dealer
through whom the transaction is being consummated and other
information required by Section 6 thereof, and directing
delivery of the securities or other property on deposit
with the Custodian;
b. To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash is to be
delivered to the Custodian;
c. To the issuer thereof or its agent for transfer in the name
of the Company or the Custodian or a nominee of either, or
for exchange for a different number of bonds or
certificates representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
d. To the broker selling the same, for examination, in
accordance with the "street delivery" custom;
e. To a securities depository to be held for the account of
the Custodian or to a Federal Reserve Bank to be held for
the Custodian in the Federal Reserve Book Entry System;
f. Subject to receipt of a written order of the Company or its
officers and/or trustees, for exchange or conversion
pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any
such case, the new securities and cash, if any, are to be
delivered to the Custodian;
g. Subject to receipt of a written order of the Company or its
officers and/or trustees, in the case of warrants, rights,
or similar securities, the surrender thereof in the
exercise of such warrants, rights or similar securities.
- 3 -
<PAGE>
Whenever possible, confirmation of the broker or dealer shall be
furnished to the Custodian.
Section 10. Unless and until otherwise directed by a written
order of the Company or its officers and/or trustees, the Custodian shall:
a. Surrender securities in temporary form or interim receipts
for definitive securities;
b. Credit to the proper account of the Company all
distributions received with respect to the securities;
c. Make, execute, acknowledge and deliver any and all
documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry
out the powers herein granted;
d. Employ suitable agents or custodians;
e. Notify the Company of matured and uncollected principal and
interest. Upon receipt of information with respect to
investments held hereunder, notify the Company: of
securities called for redemption, of sinking funds
available for the redemption of securities, of the
expiration of conversion privileges, of the organization of
protective committees, of subscription or conversion
rights, and of mergers, consolidations, reorganizations,
recapitalizations, or similar proceedings; and
f. Do all acts, whether or not expressly authorized, which it
may deem necessary or proper for the protection of the
property held hereunder.
Section 11. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company as its agent to carry out such of the provisions of section 6, 8,
9, and 10 of this Contract as the Custodian may from time to time direct;
provided, however, that the appointment of such agent shall not relieve the
Custodian of any of its responsibilities hereunder.
Section 12. The Company shall make such arrangements with the
Transfer Agent of the Company as will enable the Custodian to receive the
cash consideration due to the Company for such new or previously issued
stock as may be issued or sold from time to time by the Company.
Section 13. The Company agrees to furnish the Custodian all
instruments necessary to enable the Custodian to carry out the foregoing
instructions with respect to collection of income on securities registered
in the name of the Company, or its nominee.
Section 14. The Custodian agrees to prepare and deliver to the
Company all such statements and reports with respect to income and
principal of the account as shall be reasonably required, but shall not be
required to prepare income or other tax returns with respect to the
securities of the Company, or the income received thereon, and agrees to
use its best efforts to carry out the written orders of the Company or its
officers and/or trustees, but it shall have no duty to take any action in
any way relating to the account except as herein provided or to determine
the proper application of any disbursement of cash made on receipt of a
written order or resolution.
- 4 -
<PAGE>
Section 15. When instructed by the Company or its officers and/or
trustees, the Custodian shall deliver to the Transfer Agent or the Company,
checks or funds in the amount of the redemption price which will be based
on the net asset value of the shares redeemed.
Section 16. Upon receipt of a written order of the Company
specifying:
a. The amount of cash or securities or both, payable or
distributable as dividends or other distributions to the
shareholders, and
b. That all necessary action authorizing such payment or
distribution has been taken in accordance with the By-Laws
of the Company;
accompanied by a certified copy of resolution of the company or the
officers and/or trustees authorizing such payment or distribution and
establishing record and payment dates, the Custodian shall pay and deliver
to the Company, or the dividend disbursing agent of the Company checks or
funds for amounts so certified to be payable and distributable as dividends
or other distributions.
Section 17. As soon as possible after and as of the close of
business each day on which transactions in the custodian account occur, the
Custodian shall transmit to the Company advice's which shall show:
a. All cash received and disbursed;
b. All securities received and the prices paid therefor;
c. All securities sold and delivered and the prices received
therefor;
d. All other transactions and the cash, securities and other
property, paid or delivered, received or credited, in
connection therewith.
Additionally, the Custodian shall furnish a monthly statement reflecting
all transactions in the account to the Company.
Section 18. The Custodian shall have no duty or responsibility
whatsoever relating to moneys, securities or other property received by the
Company and not deposited with the Custodian.
The Custodian shall not be liable to anyone, except such
liability as may be expressly assumed under this Contract, for any act or
omission of the Company, or of any agent of the Company designated by two
or more of its officers and/or trustees, or for any decision or act or
omission to act or anything whatsoever in connection with this Contract,
except its own willful default or gross negligence.
The Custodian may at the expense of the Company consult with the
legal counsel representing the Company and shall not be liable for any
action taken or suffered in good faith in accordance with the opinion of
such counsel.
Any of this Custodian Contract notwithstanding, the Custodian
shall not be required to take any action, even when so directed by the
Company, or to do anything which, in the opinion of the Custodian, shall be
likely to involve it in any liability, loss or expense, unless the
Custodian shall first receive security or indemnity in form and amount
satisfactory to it against any and all such liability, loss or expense.
- 5 -
<PAGE>
The Custodian shall not incur any personal liability of any
nature in connection with any act done or omitted to be done in good faith
in the administration of this account or in carrying out any directions of
the Company or its officers and/or trustees issued in accordance with this
Contract, and the Custodian shall be indemnified and saved harmless by the
Company from and against any and all such personal liability to which the
Custodian may be subjected by reason of any such act or conduct in its
official capacity, including all expenses reasonably incurred in its
defense in case the Company fails to provide such defense, unless such act
or conduct is the result of the Custodian's own negligence, willful
misconduct or lack of good faith.
Section 19. The Custodian shall be entitled to compensation for
its services as agreed upon by the Company and the Custodian from time to
time as set forth in Exhibit A attached hereto.
Section 20. Upon receipt of notice from the Company or a
shareholder that a check issued by the Custodian pursuant to this Contract
has not been received by the payee thereof, or has been lost or misplaced
by said payee, the Custodian shall issue a new check on receipt of such
indemnity as it may reasonably require.
Section 21. From time to time special situations, not
contemplated under the terms of this Contract, may arise. An officer of the
Company and the Custodian will then negotiate as to the acts to be
performed and the compensation to be paid in such situations.
Section 22. This contract shall be effective as of its execution,
and shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid, to the other party, such termination
to take effect not sooner than sixty (60) days after date of such delivery
or mailing; provided, however, that the Company shall not amend or
terminate this Contract in contravention of any applicable Federal or State
regulations, or any provision of the By-Laws of the Company as the same may
from time to time be amended and further provided that the Company may at
any time by action of its Trustees substitute another bank or trust company
for the Custodian by giving notice as above to the Custodian.
In connection with the operations of this Contract, the Custodian
and the Company may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract, any such
interpretive or additional provisions to be signed by both parties and
annexed hereto, provided that the Company shall not agree to any such
interpretive or additional provisions which shall contravene any applicable
Federal or State regulations, or any provision of the By-Laws as the same
may from time to time be amended.
Section 23. Upon termination hereof the Company shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
If a successor Custodian is appointed by the Trustees, the
Custodian shall, upon termination, deliver to such successor Custodian at
the office of the Custodian, duly endorsed and in form for transfer, all
securities then held hereunder and all funds or other properties of the
Company deposited with or held by it hereunder.
- 6 -
<PAGE>
If no such successor Custodian is appointed, the Custodian
shall, in like manner, at its office, upon receipt of a certified copy of a
vote of the Trustees, deliver such securities, funds and other properties
in accordance with such vote.
In the event that no written order designating a successor
Custodian or certified copy of a vote of the Trustees shall have been
delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to deliver
to a bank or trust company of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published
report of not less than $2,000,000 all securities, funds and other
properties held by the Custodian and all instruments held by it relative
thereto and all other property held by it under this Contract.
In the event that securities, funds and other properties remain
in the possession of the Custodian after the date of termination hereof
owing to failure of the Trustees to procure the certified copy above
referred to, or to appoint a successor Custodian, the Custodian shall be
entitled to fair compensation for its services during such period and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
Section 24. Any written order to be given to the Custodian by the
Company shall be signed by any two of its officers and/or trustees. The
Company will certify to the Custodian the names of the officers and
trustees and any change therein, and the Custodian shall not be charged
with knowledge thereof until it receives such certification. No written
order of the Company shall direct payment of any money or delivery of any
securities to the Company, or shall direct payment of money or delivery of
securities for purposes not specifically set forth in this Contract, unless
accompanied by a copy of a resolution of the Trustees specifying the amount
of such payment or the securities to be delivered, the purpose for which
the payment or delivery is made declaring such purpose to be a proper
company purpose and naming the person or persons to whom such payment or
delivery is to be made.
Custodian shall not be liable for any action taken by it when
directed in writing as herein provided and may rely on continuance in
office of any person until otherwise notified in writing.
Section 25. Evidence required of anyone under this Contract may
be by certificate, affidavit, endorsement or any other written instrument
which the person acting in reliance thereon believes to be pertinent,
reliable and genuine, and to have been signed, made or presented by the
proper and duly authorized party or parties.
Whenever the Custodian shall deem it necessary that a matter be
proved prior to taking, suffering or omitting any action, such matter shall
be deemed to be conclusively proved by the certificate of any two officers
or trustees delivered to the Custodian, but the Custodian, in its
discretion, may in lieu of such certification accept, or may require such
other or further evidence as it may deem necessary or sufficient.
Section 26. This Contract shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the state of
Oregon.
- 7 -
<PAGE>
Section 27. Nothing contained in the By-Laws of the Company
except as specifically set forth in this Contract shall be deemed to impose
any powers, duties or responsibilities on the Custodian other than those
set forth in this Contract. The Company, by any one of its officers will
certify to the Custodian any changes in the By-Laws of the Company and the
Custodian shall not be charged with knowledge thereof until it receives
such certification. The Company warrants that no directions, orders,
instructions, notices or certificates shall be issued to the Custodian by
an officer or trustee other than in accordance with the terms and
provisions of the By-Laws of the Company, and the Custodian shall have no
duty to question the authority for or the propriety of any such directions,
orders, instructions, notices or certificates.
Nothing herein contained, however, shall be construed to relieve
the Custodian from faithfully performing its duties under this Contract,
and the Custodian shall be responsible for any action taken by it not in
accordance with this Contract.
Section 28. All directions, orders, instructions, notices,
accountings, reports and other written communications required to be given
under this Contract shall be addressed to the parties at their respective
addresses shown below or such other addresses as each may hereafter
designate in writing delivered to the other:
IN WITNESS WHEREOF, the parties hereto have caused this Contract
to be signed by their duly authorized officers;
CMC FUND TRUST
By: GEORGE L. HANSETH
-----------------------------------
Vice President
1300 S.W. Sixth Avenue
Portland, OR 97201
UNITED STATES NATIONAL BANK OF OREGON
By: RUTH TAYLOR
-----------------------------------
Vice President
555 S.W. Oak
Portland, OR 97208
- 8 -
<PAGE>
ESTABLISHMENT OF SEPARATE ACCOUNT
Pursuant to the terms of the Restated Custodian Contract dated
April 26, 1994 between CMC Fund Trust and United States National Bank of
Oregon (the "Custodian"), the Custodian shall establish an account with the
designation "CMC HIGH YIELD FUND". The account shall be subject to the
terms and conditions set forth in the Restated Custodian Contract.
Dated: 7/5/94
--------
CMC FUND TRUST
By: GEORGE L. HANSETH
-----------------------------------
Vice President
1300 S.W. Sixth Avenue
Portland, OR 97201
UNITED STATES NATIONAL BANK OF OREGON
By: RUTH TAYLOR
-----------------------------------
Vice President
555 S.W. Oak
Portland, OR 97208
<PAGE>
ESTABLISHMENT OF SEPARATE ACCOUNT
Pursuant to the terms of the Restated Custodian Contract dated
June 30, 1994 between CMC Fund Trust and United States National Bank of
Oregon (the "Custodian"), the Custodian shall establish an account with the
designation "CMC SMALL CAP FUND". The account shall be subject to the terms
and conditions set forth in the Restated Custodian Contract.
Dated: 7/5/94
--------
CMC FUND TRUST
By: GEORGE L. HANSETH
-----------------------------------
Vice President
1300 S.W. Sixth Avenue
Portland, OR 97201
UNITED STATES NATIONAL BANK OF OREGON
By: RUTH TAYLOR
-----------------------------------
Vice President
555 S.W. Oak
Portland, OR 97208
<PAGE>
ESTABLISHMENT OF SEPARATE ACCOUNT
Pursuant to the terms of the Restated Custodian Contract dated
April 26, 1994 between CMC Fund Trust and United States National Bank of
Oregon (the "Custodian"), the Custodian shall establish an account with the
designation "CMC INTERNATIONAL STOCK FUND". The account shall be subject to
the terms and conditions set forth in the Restated Custodian Contract.
Dated: 8/29/94
---------
CMC FUND TRUST
By: GEORGE L. HANSETH
-----------------------------------
Vice President
1300 S.W. Sixth Avenue
Portland, OR 97201
UNITED STATES NATIONAL BANK OF OREGON
By: RUTH TAYLOR
-----------------------------------
Vice President
555 S.W. Oak
Portland, OR 97208
<PAGE>
CMC Small Cap Fund
2147300
Annual Minimum Fee: $2,500.00
Market Value: .00004
Security Transactions: $12.50
Miscellaneous Charges:
All out-of-pocket expenses including telephone, postage, express mail,
Federal Express, transfer fees, messenger services, global settlement fees,
global holding charges by other banks, charges made by other banks or
Federal Reserve Bank.
Fees will be calculated monthly and charged against account assets. A
summary of fee's taken will also be provided to the Client for review.
The above fee schedule is guaranteed for a period of two years.
Effective December 1, 1995
#56829
<PAGE>
CMC High Yield Fund
2405800
Annual Minimum Fee: $2,500.00
Market Value: .00004
Security Transactions: $12.50
Miscellaneous Charges:
All out-of-pocket expenses including telephone, postage, express mail,
Federal Express, transfer fees, messenger services, global settlement fees,
global holding charges by other banks, charges made by other banks or
Federal Reserve Bank.
Fees will be calculated monthly and charged against account assets. A
summary of fee's taken will also be provided to the Client for review.
The above fee schedule is guaranteed for a period of two years.
Effective December 1, 1995
#56869
<PAGE>
CMC International Stock Fund
2417100
Annual Minimum Fee: $2,500.00
Market Value: .00004
Security Transactions: $12.50
Miscellaneous Charges:
All out-of-pocket expenses including telephone, postage, express mail,
Federal Express, transfer fees, messenger services, global settlement fees,
global holding charges by other banks, charges made by other banks or
Federal Reserve Bank.
Fees will be calculated monthly and charged against account assets. A
summary of fee's taken will also be provided to the Client for review.
The above fee schedule is guaranteed for a period of two years.
Effective December 1, 1995
#56871
Exhibit 8.B
CUSTODY AGREEMENT
This Custody Agreement is dated June 4, 1993 between MORGAN STANLEY
TRUST COMPANY, a New York State chartered trust company (the "Custodian"),
and CMC Fund Trust (the "Client").
1. The Client hereby appoints the Custodian as a custodian of
securities and other property owned or under the control of the Client
which are delivered to the Custodian, or any Subcustodian as appointed
below, from time to time to be held in custody for the benefit of the
Client. The Client instructs the Custodian to establish on the books and
records of the Custodian [an] [one or more] account[s] (the "Account[s]")
in the name of the Client. The Custodian shall record in the Account[s] and
shall have general responsibility for the safekeeping of all securities
("Securities"), cash and other property (all such Securities, cash and
other Property being collectively the "Property") of the Client so
delivered for custody. It is understood that the specific procedures the
Custodian will use in carrying out its responsibilities under this
Agreement are set forth in the procedures manual (the "Procedures Manual")
prepared by the Custodian and delivered to the Client, as such Procedures
Manual may be amended from time to time by the Custodian by written notice
to the Client. The Client acknowledges that the Procedures Manual
constitutes an integral part of this Agreement.
2. The Property may be held in custody and deposit accounts that have
been established by the Custodian with one or more domestic or foreign
banks, or through the facilities of one or more clearing agencies or
central securities depositories, as listed on Exhibit A hereto (the
"Subcustodians"), as such Exhibit may be amended from time to time by the
Custodian by written notice to the Client. The Custodian may hold Property
for all of its customers with a Subcustodian in a single account that is
identified as belonging to the Custodian for the benefit of its customers.
Any Subcustodian may hold Property in a securities depository and may
utilize a clearing agency. The Client agrees that the Property may be
physically held outside the United States. The Custodian shall not be
liable for any loss resulting from the physical presence of any Property in
a foreign country including, but not limited to, losses resulting from
nationalization, expropriation, exchange controls or acts of war or
terrorism. Except as provided in the previous sentence, the liability of
the Custodian for losses incurred by the Client in respect of Securities
shall not be affected by the Custodian's use of Subcustodians.
3. With respect to Property held by a Subcustodian pursuant to Section
2:
- 1 -
<PAGE>
(a) The Custodian will identify on its books as belonging to the
Client any Property held by a Subcustodian for the Custodian's
account;
(b) The Custodian will hold Property through a Subcustodian only if
(i) such Subcustodian and any securities depository or clearing
agency in which such Subcustodian holds Property, or any of their
creditors, may not assert any right, charge, security interest, lien,
encumbrance or other claim of any kind to such Property except a
claim of payment for its safe custody or administration and (ii)
beneficial ownership of such Property may be freely transferred
without the payment of money or value other than for safe custody or
administration;
(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any property held by the
Subcustodian other than property of the Custodian's customers and as
held solely for the benefit of customers of the Custodian; and
(d) In the event that the Subcustodian holds Property in a securities
depository or clearing agency, such Subcustodian will be required by
its agreement with the Custodian to identify on its books such
Property as being held for the account of the Custodian as a
custodian for its customers.
4. The Custodian shall allow the Client's accountants reasonable
access to the Custodian's records relating to the Property held by the
Custodian as such accountants may reasonably require in connection with
their examination of the Client's affairs. The Custodian shall also obtain
from any Subcustodian (and will require each Subcustodian to use reasonable
efforts to obtain from any securities depository or clearing agency in
which it deposits Property) an undertaking, to the extent consistent with
local practice and the laws of the jurisdiction or jurisdictions to which
such Subcustodian, securities depository or clearing agency is subject, to
permit independent public accountants such reasonable access to the records
of such Subcustodian, securities depository or clearing agency as may be
reasonably required in connection with the examination of the Client's
affairs or to take such other action as the Custodian in its judgment may
deem sufficient to ensure such reasonable access.
5. The Custodian shall provide such reports and other information to
the Client and to such persons as the Client directs as the Custodian and
the Client may agree from time to time.
6. The Custodian shall make or cause any Subcustodian to make payments
from monies being held in the Account[s] only:
(a) upon the purchase of Securities and then, to the extent
consistent with practice in the jurisdiction in which settlement
occurs, upon the delivery of such Securities;
(b) for payments to be made in connection with the conversion,
exchange or surrender
<PAGE>
of Securities;
(c) upon a request of the Client that the Custodian return monies
being held in the Account[s];
(d) upon a request of the Client that monies be exchanged for or used
to purchase monies denominated in a different currency and then only
upon receipt of such exchanged or purchased monies;
(e) as provided in Section 8 and 12 hereof,
(f) upon termination of this Custody Agreement as hereinafter set
forth; and
(g) for any other purpose upon receipt of instructions of the Client.
Except as provided in the last two sentences of this Section 6 and as
provided in Section 8, all payments pursuant to this Section 6 will
be made only upon receipt by the Custodian of Authorized Instructions
(as hereinafter defined) from the Client which shall specify the
purpose for which the payment is to be made. In the event that it is
not possible to make a payment in accordance with Authorized
Instructions of the Client, the Custodian shall proceed in accordance
with the procedures set forth in the Procedures Manual. Any payment
pursuant to subsection (f) of this Section 6 will be made in
accordance with Section 16.
7. The Custodian shall make or cause any Subcustodian to make
transfers, exchanges or deliveries of Securities only:
(a) upon sale of such Securities and then, to the extent consistent
with practice in the jurisdiction in which settlement occurs, upon
receipt of payment therefor;
(b) upon exercise of conversion, subscription, purchase, exchange or
other similar rights pertaining to such Securities and, if applicable
to such exercise and if consistent with practice in the applicable
jurisdiction, only on receipt of substitute or additional securities
to be received upon such exercise;
(c) as provided in Section 8 hereof;
(d) upon the termination of this Custody Agreement as hereinafter set
forth; and
(e) for any other purpose upon receipt of instructions of the Client.
Except as provided in the last two sentences of this Section 7 and as
provided in Section 8, all transfers, exchanges or deliveries of Securities
pursuant to this Section 7 will be made only upon receipt by the Custodian
of Authorized Instructions of the Client which shall specify the purpose
for which the transfer, exchange or delivery is to be made. In the event
that it is not possible to transfer Securities in accordance with
Authorized Instructions of the Client, the Custodian shall proceed in
accordance with the procedures set forth in the Procedures Manual. Any
transfer or delivery pursuant to subsection (d) of this Section 7 will be
made in accordance with Section 16.
<PAGE>
8. In the absence of Authorized Instructions from the Client to the
contrary, the Custodian may, and may authorize any Subcustodian to:
(a) make payments to itself or others for expenses of handling
Property or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
the Client;
(b) receive and collect all income and principal with respect to
Securities and to credit cash receipts to the Account[s];
(c) exchange Securities when the exchange is purely ministerial
(including, without limitation, the exchange of interim receipts or
temporary securities for securities in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the securities themselves);
(d) surrender Securities at maturity or when called for redemption
upon receiving payment therefor;
(e) execute in the Client's name such ownership and other
certificates as may be required to obtain the payment of income from
Securities;
(f) pay or cause to be paid, from the Account[s], any and all taxes
and levies in the nature of taxes imposed on Property by any
governmental authority in connection with custody of and transactions
in such Property;
(g) endorse for collection, in the name of the Client, checks, drafts
and other negotiable instruments; and
(h) in general, attend to all nondiscretionary details in connection
with the custody, sale, purchase, transfer and other dealings with
the Property.
9. "Authorized Instructions" of the Client shall mean instructions
received by telecopy, tested telex, electronic link or other electronic
means or by such other means as may be agreed in writing in advance between
the Client and the Custodian. The Custodian shall be entitled to act, and
shall have no liability for acting, in accordance with the terms of this
Agreement or upon any instructions, notice, request, consent, certificate
or other instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Client.
10. Securities which must be held in registered form may be registered
in the name of the Custodian's nominee or, in the case of Securities in the
custody of an entity other than the Custodian, in the name of such entity's
nominee. The Client agrees to hold the Custodian and Subcustodians and any
such nominee harmless from any liability arising out of any such person
acting as a holder of record of such Securities. The Custodian may without
notice to the Client cause any Securities to cease to be registered in the
name of any such nominee and to be registered in the name of the Client.
<PAGE>
11. All cash received by the Custodian for the Account[s] shall be
held by the Custodian as a short-term credit balance in favor of the Client
and, if the Custodian and the Client have agreed in writing in advance that
such credit balances shall bear interest, the Client shall earn interest at
the rates and times as agreed between the Custodian and the Client. The
Client understands that any such credit balances will not be accompanied by
the benefit of any governmental insurance.
12. From time to time, the Custodian may arrange or extend short-term
credit for the Client which is (i) necessary in connection with payment and
clearance of securities and foreign exchange transactions or (ii) pursuant
to an agreed schedule, as and if set forth in the Procedures Manual, of
credits for dividends and interest payments on Securities. All such
extensions of credit shall be repayable by the Client on demand. The
Custodian shall be entitled to charge the Client interest for any such
credit extension at rates to be agreed upon from time to time. In addition
to any other remedies available, the Custodian shall be entitled to a right
of set-off against the Property to satisfy the repayment of such credit
extensions and the payment of accrued interest thereon. The Custodian's may
act as the Client's agent or act as a principal in foreign exchange
transactions at such rates as are agreed from time to time between the
Client and the Custodian.
13. The Client represents that (i) the execution, delivery and
performance of this Agreement (including, without limitation, the ability
to obtain the short-term extensions of credit in accordance with Section
12) are within the Client's power and authority and have been duly
authorized by all requisite action (corporate or otherwise) and (ii) this
Agreement and each extension of short-term credit extended or arranged for
the benefit of the Client in accordance with Section 12 will at all times
constitute a legal, valid and binding obligation of the Client and be
enforceable against the Client in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and subject to
the effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
The Custodian represents that the execution, delivery and performance
of this Agreement is within the Custodian's power and authority and has
been duly authorized by all requisite action of the Custodian. This
Agreement constitutes the legal, valid and binding obligation of the
Custodian enforceable against the Custodian in accordance with its terms,
except as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and subject to
the effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
14. The Custodian shall be responsible for the performance of only
such duties as are
<PAGE>
set forth in this Agreement or the Procedures Manual or contained in
Authorized Instructions given to the Custodian which are not contrary to
the provisions of any relevant law or regulation. The Custodian shall not
be liable to the Client or to any other person for any action taken or
omitted to be taken by it in connection with this Agreement in the absence
of negligence or willful misconduct on the part of the Custodian. Upon the
request of the Custodian, the Client agrees to deliver to the Custodian a
duly executed power of attorney, in form and substance satisfactory to the
Custodian, authorizing the Custodian to take any action or execute any
instrument on behalf of the Client as necessary or advisable to accomplish
the purposes of this Agreement.
15. The Client agrees to pay to the Custodian from time to time such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon from time to time and the Custodian's out-of-pocket or
incidental expenses. The Client hereby agrees to hold the Custodian
harmless from any liability or loss resulting from any taxes or other
governmental charges, and any expenses related thereto, which may be
imposed or assessed with respect to the Account[s] or any Property held
therein. The Custodian is and any Subcustodians are authorized to charge
the Account[s] for such items and the Custodian shall have a lien, charge
and security interest on any and all Property for any amount owing to the
Custodian from time to time under this Agreement.
If the Client is a U.S. person as defined in Rule 902 promulgated by
the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Act"), the Client recognizes that, in connection
with the Client's election from time to time to participate in
distributions of securities (whether pursuant to rights offerings, warrant
subscriptions, mergers, reorganizations or otherwise) which have not been
registered pursuant to the Act, the Custodian may inform the issuer and its
agents that the acquiror of the securities is a U.S. person. The Custodian
shall not be responsible to the Client for the consequences of any issuer's
or agent's refusal to permit the Client to acquire such securities, and the
Client shall hold the Custodian harmless from liability to the issuer and
its agents in connection with any such election by the Client.
16. This Agreement may be terminated by the Client or the Custodian by
[ ] days written notice to the other, sent by registered mail. If notice of
termination is given, the Client shall, within [ ] days following the
giving of such notice, deliver to the Custodian a statement in writing
specifying the successor custodian or other person to whom the Custodian
shall transfer the Property. In either event the Custodian, subject to the
satisfaction of any lien it may have, will transfer the Property to the
person so specified. If the Custodian does not receive such statement the
Custodian, at its election, may transfer the Property to a bank or
<PAGE>
trust company established under the laws of the United States or
any state thereof to be held and disposed of pursuant to the provisions of
this Agreement or may continue to hold the Property until such a statement
is delivered to the Custodian. In such event the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian remains in possession of any Property and the provisions of this
Agreement relating to the duties and obligations of the Custodian shall
remain in full force and effect; provided, however, that the Custodian
shall no longer settle any transactions in securities for the Account[s].
17. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the Client's
account, including in dealings with affiliates of the Custodian. In the
event the Custodian or any Subcustodian is requested or required to
disclose any confidential information concerning the Property, the
Custodian shall to the extent practicable and legally permissible, promptly
notify the Client of such request or requirement so that the Client may
seek a protective order or waive the Custodian's or such Subcustodian's
compliance with this Section 17. In the absence of such a waiver, if the
Custodian or such Subcustodian is compelled, in the opinion of its counsel,
to disclose any confidential information, the Custodian or such
Subcustodian may disclose such information to such persons as, in the
opinion of counsel, is so required.
18. Any notice or other communication from the Client to the
Custodian, unless otherwise provided by this Agreement, shall be sent by
certified or registered mail to Morgan Stanley Trust Company, One
Pierrepont Plaza, Brooklyn, New York, 11201, Attention: President, and any
notice from the Custodian to the Client is to be mailed postage prepaid,
addressed to the Client at the address appearing below, or as it may
hereafter be changed on the Custodian's records in accordance with notice
from the Client.
19. The Custodian may assign all of its rights and obligations
hereunder to any other entity which is qualified to act as custodian under
the terms of this Agreement and majority owned, directly or indirectly, by
Morgan Stanley Group Inc., and upon the assumption of the rights and
obligations hereunder by such entity, such entity shall succeed to all of
the rights and obligations of, and be substituted for, the Custodian
hereunder as if such entity had been originally named as Custodian herein.
The Custodian shall give prompt written notice to the Client upon the
effectiveness of any such assignment.
This Agreement shall bind the successors and assigns of the Client
and the Custodian and shall be governed by the laws of the State of New
York applicable to contracts executed in and to be performed in that state.
------------------------------
<PAGE>
By GEORGE L. HANSETH
---------------------------
Name: George L. Hanseth
Title: Vice President
Address for record: 1301 SW 5th Avenue
------------------------------
P.O. Box 1350
------------------------------
Portland, Oregon 97207
------------------------------
Accepted:
MORGAN STANLEY TRUST COMPANY
By DAVID ROLLANO
------------------------------------
Authorized Signature
<PAGE>
Appendix A
Current Fee Schedule for Columbia Management Company Small Cap Fund, Inc.
This letter describes Morgan Stanley Trust Company's ("Morgan Stanley")
compensation under this revised fee schedule dated June 7, 1993 with
Columbia Management Company Small Cap Fund, Inc.
Morgan Stanley's compensation shall be as follows:
Transaction Custody Rate
Country/Product Rate (Basis Points)
- --------------- ---- --------------
Australia $75 14
Austria $50 11
Belgium $50 11
Canada $75 8
Denmark $35 14
Finland $35 20
France $75 15
Germany $35 8
Hong Kong $75 15
Ireland $80 12
Italy $80 12
Japan $30 6
Malaysia $100 15
Mexico $125 30
Netherlands $50 12
New Zealand $75 15
Norway $35 10
Singapore $80 12
South Africa $75 9
Spain $80 21
Sweden $50 11
Switzerland $35 12
United Kingdom $50 10
United States $35 4
Eurobonds $35 6
Euro CDs $120 per CD/month
Transactions are defined in the Morgan Stanley Trust Company Billing Guide,
as is the method of calculating custody.
All new business will be separately negotiated. You are requested to
contact your client executive if you are trading in new countries or in new
products. If your client executive is not notified ahead of time, you will
be charged at the MSTC generic rates for each respective new country/new
product.
In-Kind transactions will not be charged.
<PAGE>
Appendix A
Columbia Management Company Small Cap Fund, Inc.
Cash movements will not be charged.
Registration/transfer fees will be charged where incurred by Morgan
Stanley.
Stamp taxes/duties will be charged where incurred by Morgan Stanley.
All fees are calculated and billed monthly in arrears.
The fees are due for renegotiation two years from the date of the
Agreement, and they will remain effective until renegotiation is complete.
MSTC agrees to limit the transaction fees charged to Columbia Management
Company Small Cap Fund Inc. (the Fund) to 100 per month for the first three
months following the launch date of the Fund. Beyond the third month MSTC
will resume charging for all transactions as described in your Billing
Guide.
For further assistance, please contact Lee Williams, your client executive,
at (718) 754-2734, or Alice Malina, your billing representative, at (718)
754-2704.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
MORGAN STANLEY TRUST COMPANY
MARKET COVERAGE/CENTRAL DEPOSITORY LIST
APRIL 1993
COUNTRY AGENT CENTRAL DEPOSITORY
- ------- ----- ------------------
<S> <C> <C>
Argentina Citibank N.A. Caja de Valores
Australia Australia and New Zealand Bank CHESS**
Austria Euroclear OKB
Belgium Banque Bruxelles Lambert CIK
Brazil Banco de Boston BOVESPA
Rio de Janeiro Stock Exchange
Canada Toronto Dominion Bank CDS
Chile Citibank N.A. N/A
China Hongkong & Shanghai Bank. Corp.
Shenzhen Exchange: Citibank, N.A.
Standard Chartered Bank
Hongkong & Shanghai Bank. Corp.
Shanghai Exchange: Shanghai Exchange
Colombia Cititrust N/A
Denmark Euroclear VP
Finland Euroclear N/A
France Banque Indosuez SICOVAM
Germany BHF Bank DKV
Greece Citibank N.A. N/A
Hong Kong Hongkong & Shanghai Bank. Corp. CCASS
Hungary Euroclear (see Austria) OKB
Citibank Budapest N/A
India* Hongkong & Shanghai Bank. Corp. N/A
Indonesia Hongkong & Shanghai Bank. Corp. N/A
Ireland Allied Irish Bank N/A
Israel Bank Hapoalim SECH
Italy Barclays Bank Monte Titoii S.p.A.
Japan Morgan Stanley International JASDEC
Mutual Fund Clients: Mitsubishi Bank Ltd
Jordan Arab Bank N/A
Korea Standard Chartered Bank KCD
Malaysia Oversea Chinese Banking Corp. MCD**
Mexico Citibank N.A. S.D. Indeval
Netherlands ABN Amro Bank NECIGEF
New Zealand Bank of New Zealand N/A
Norway Euroclear VPS
Registered Shares: Christiana Bank
</TABLE>
Page 1 of 3
<PAGE>
<TABLE>
<CAPTION>
COUNTRY AGENT CENTRAL DEPOSITORY
- ------- ----- ------------------
<S> <C> <C>
Pakistan Standard Chartered Bank SCD**
Peru Citibank N.A. N/A
Phillippines Hongkong & Shanghai Bank. Corp. N/A
Poland Bank Polska Kasa Opieki S.A. NDS
Mutual Fund Clients: Citibank NDS
Portugal Banco Comercial Portugues N/A
Singapore Oversea Chinese Banking Corp. CDP
Spain Banco Santander SCLV
Sri Lanka Hongkong & Shanghai Bank. Corp. CDS
Sweden Euroclear VPC
Switzerland JP Morgan SEGA
Taiwan* Hongkong & Shanghai Bank. Corp. TSCD
Thailand Standard Chartered Bank SDC
Turkey Citibank N.A. N/A
United Kingdom Barclays Bank PLC N/A
USA DTC DTC
National Westminster N/A
Uruguay Citibank N.A. N/A
Venezuela Citibank N.A. N/A
*Not operational until sub-custody agreement is secured.
**These central depositories are not in operation as of yet.
</TABLE>
Page 2 of 3
<PAGE>
<TABLE>
<CAPTION>
Guide to Central Depository Abbreviations
-----------------------------------------
Country Mnemonic Central Depository
- ------- -------- ------------------
<S> <C> <C>
Australia** CHESS Clearing House Electronic Subregister System
Austria OKB OsterreicheKontrollbank
Belgium CIK Caisse Interprofessionelle de Depots et de Virements de Titres
Brazil BOVESPA Sao Paulo Stock Exchange
Canada CDS The Canadian Depository for Securities
Denmark VP Vaerdipapircentralen
French SICOVAM Societe Interprofessionelle pour la Compensation des Valeurs
Mobilieres
Germany DKV Deutscher Kassenverein AG
Hong Kong CCASS Central Clearing and Settlement System
Hungary OKB OsterreicheKontrollbank (of Austria)
Israel SECH Stock Exchange Clearing House
Japan JASDEC Japan Securities Depository Center
Korea KCD Korean Central Depository
Malaysia** MCD Malaysian Central Depository
Netherlands NECIGEF Netherlands Central Institute for Giral Effectenclearing
Norway VPS Verdipapirsentralen
Pakistan** SCD Securities Central Depository Co.
Poland NDS National Depository of Securities
Singapore CDP Central Depository Pte Ltd
Spain SCLV Servicio de Compensacion y Liquidacion de Valores
Sri Lanka CDS Central Depository System Pvt Ltd.
Sweden VPC Vardipapperscentralen
Switzerland SEGA Schweizerische EffektenGiro AG
Taiwan* TSCD Taiwan Securities Depository Co.
Thailand SDC Share Depository Center
*Not operational until sub-custody agreement is secured.
**These central depositories are not in operation as of yet.
</TABLE>
Page 3 of 3
Exhibit 9.A
CMC FUND TRUST
CMC SMALL CAP FUND
TRANSFER AGENT AGREEMENT
August 8, 1989
This Agreement is made between CMC FUND TRUST ("Fund"), an Oregon
business trust, and COLUMBIA TRUST COMPANY ("Agent"), an Oregon
corporation, as of August 8, 1989.
Fund is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), whose shares are
registered for sale under the Securities Act of 1933, as amended (the "1933
Act");
Fund has established its first Series of shares (the "Series"),
referred to as "CMC Small Cap Fund"; and
Fund desires to have Agent serve as transfer agent and dividend
disbursing agent for Fund with respect to the Series, and AGent is willing
to serve as transfer agent and dividend disbursing agent for Fund with
respect to the Series.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, Fund and Agent agree as follows:
1. Appointment. Fund hereby appoints Agent as transfer agent for the
shares of the Fund, as described in the Declaration of Trust of the Fund,
(the "Stock") and dividend disbursing agent for Fund, and Agent agrees to
serve as transfer agent and dividend disbursing agent under the terms and
conditions hereinafter set forth.
<PAGE>
2. Documents. Fund has furnished Agent copies of Fund's Declaration of
Trust, investment advisory contract, custodian contract, all account
applications forms, and other eocuments relating to shareholders' accounts
and a certified copy of the resolutions of Fund's Trustees adopting Fund's
form of stock certificate and approving the appointment of Agent hereunder.
Fund shall furnish promptly to Agent a copy of any amendment or supplement
to the above-mentioned documents and any additional documents necessary for
Agent to perform its functions hereunder.
3. Authorized Shares. Fund certifies to Agent that, as of the date
hereof, Fund is authorized to issue an unlimited number of shares.
4. Services to be Performed. Agent shall be responsible for performing
the duties of transfer agent and dividend disbursing agent for Fund, which
duties are more fully set forth in Schedule A to this Agreement. All
computer programs and procedures developed by Agent to perform services
required under this Agreement shall remain the exclusive property of Agent.
5. Maintenance of Records; Confidentiality. All records maintained by
Agent as required on Schedule A shall remain the exclusive property of Fund
and shall be preserved and retained by Agent while this Agreement remains
in effect. Agent shall make available during regular business hours all
records and other data created and maintained pursuant to this Agreement
2
<PAGE>
for reasonable audit and inspection by the Fund or any person retained by
Fund. Agent shall treat all records and other information with respect to
Fund with confidence.
6. Compensation. As compensation for the performance of the services
described in parts I and II of Schedule A, Agent shall receive from Fund a
per account fee in the amount set forth in Schedule B, but in no vent less
than $1,500 per month. These fees will be charged for any account in
existence during any part of a month, and the fees will be charged for any
part of a month preceding termination of this Agreement. As compensation
for the performance of extra charge services described in part III of
Schedule A, Agent shall be paid by Fund at the rates listed on Schedule B.
Upon request of the Agent, the hourly rates listed on Schedule B may be
adjusted, subject to approval by the Fund's Trustees in accordance with
paragraph 17.
7. Expenses. Fund agrees to pay directly or reimburse Agent for
postage and the procurement or printing of share certificates, statements,
envelopes, checks, reports, tax forms, proxies, or other forms of printed
material required in the performance of its services to Fund under this
Agreement, and Agent agrees that Fund may purchase these materials directly
for use by Agent, subject to prior approval by Agent as to the
compatibility of any materials with Agent's data processing equipment. Fund
agrees to pay directly or reimburse Agent for all freight and other
delivery charges and insurance
3
<PAGE>
or bonding charges incurred by Agent in delivering certificates to
shareholders and any and all other out-of-pocket expenses and charges
incurred by Agent in performing services under this Agreement.
8. Monthly Statement. At the end of each month during the term of this
Agreement and upon termination of this Agreement, Agent will render an
itemized statement to Fund for its fees and expenses under this Agreement.
Payment by Fund is due 10 days from the date the statement is received.
9. Compliance With Governmental Rules and Regulations.
9.1 Agent represents that it is registered with the Securities
and Exchange Commission as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended, and will notify the Fund
promptly if its registration is revoked or if any proceeding is commenced
before the Securities and Exchange Commission with may lead to revocation.
Agent shall be responsible for compliance with all laws, rules, and
regulations of governmental authorities having jurisdiction over transfer
agents and their activities.
9.2 Except for the accuracy of information furnished to Fund by
Agent, Fund assumes full responsibility for the preparation, contents, and
distribution of its prospectuses and for compliance with all applicable
requirements of the 1933 Act, the 1940 Act, and any other laws, rules, or
regulations of governmental authorities with jurisdiction over Fund.
4
<PAGE>
10. References to Agent. Fund shall not circulate any printed matter
that contains any reference to Agent without the prior written approval of
Agent, except printed matter that identifies Agent as transfer agent and
dividend disbursing agent for Fund.
11. Acts of God, National Emergency, etc. Agent shall not be liable
for loss of data, delays, or errors occurring by reasons of circumstances
beyond its control, including but not limited to acts of civil or military
authority, national emergencies, fire, flood, catastrophe, acts of God,
insurrection, war, riot, failure of transportation, communication, or power
supply, or machine breakdown. Agent shall use its best efforts to minimize
the likelihood of damage, loss of data, delays, or errors resulting from
such uncontrollable events, and if damage, loss of data, delays, or errors
occur, Agent shall use its best efforts to mitigate the effects of the
occurrence.
12. Standard of Care. Agent shall at all times act in good faith and
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement and to absorb all costs for time,
materials, or other expenses necessary to correct any errors made by Agent.
Agent shall not be liable for any loss or damage due to its errors unless
the errors are caused by its gross negligence, bad faith, or willful
misconduct or that of its employees or agents. Fund agrees to pay Agent, at
the rates set forth in
5
<PAGE>
Schedule B, for any excess work required by Agent due to the errors of
Fund's employees or representatives or due to incorrect data furnished to
Agent by Fund, Fund's investment adviser, or Fund's custodian.
13. Instructions and Opinion of Counsel. At any time Agent may apply
to an officer of Fund for instructions and consult counsel for Fund or its
own counsel on any matter arising in connection with this Agreement. Agent
shall not be liable for any action taken or omitted by it in good faith in
accordance with such instructions or with the advice or opinion of such
counsel.
14. Indemnification. Fund shall indemnify and hold Agent harmless from
all loss, cost, damage, and expense, including reasonable expenses for
counsel, incurred by Agent resulting from any claim, demand, action, or
suit in connection with the performance of its duties hereunder or as the
result of acting upon any instruction, advice, or opinion obtained pursuant
to paragraph 13 hereof, upon any other instruction reasonably believed by
Agent to have been properly executed by a duly authorized officer of Fund,
or upon any information, data, records, or documents provided to Agent by
Fund, Fund's investment adviser, or Fund's custodian. This indemnification
shall not apply to actions or omissions constituting gross negligence, bad
faith, or willful misconduct of Agent, its employees, or agents. Prior to
confessing any claim against it which may be subject to this
indemnification, Agent shall give
6
<PAGE>
Fund reasonable opportunity to defend against that claim in its own name or
in the name of the Agent.
15. Fidelity Bond. Agent will maintain in force throughout the
duration of this Agreement a fidelity bond that complies with applicable
regulatory requirements, written by a reputable bonding company, covering
theft, embezzlement, forgery, and other acts of malfeasance by Agent, its
employees, or agents in connection with services performed for Fund.
16. Duration and Termination.
16.1 This Agreement shall remain in force until two years from
the date hereof and may be continued from year to year thereafter if
approved annually by a vote of a majority of the Fund's shareholders (as
determined in accordance with the requirements of the 1940 Act) or by its
Trustees and in either case a vote of a majority of the Trustees who are
not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on approval.
16.2 This Agreement may be terminated at any time without the
payment of any penalty by vote of the Trustees of Fund or by vote of a
majority of the outstanding shares of Fund on 60 days written notice to the
other party. This Agreement may be terminated by Agent upon 180 days
written notice thereof to Fund. Any termination in accordance with this
Agreement shall not affect the rights and obligations of the parties under
paragraphs 11, 12, 13 and 14 hereof. Immediately upon
7
<PAGE>
termination of this Agreement, all records and other data in the possession
of Agent which are the property of Fund shall be furnished to Fund in
computer written data forms as requested by Fund.
16.3 This Agreement shall automatically terminate if it is
assigned, the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the 1940 Act. Agent shall notify Fund of any change
in the officers or directors of Agent within a reasonable time after the
change.
17. Amendments. This Agreement may be amended with the written consent
of Agent and Fund if the amendment has been approved by the Trustees of
Fund, including a majority of the disinterested Trustees.
18. Applicable to Specific Series. Agent agrees that, with respect to
any obligation of Fund under this Agreement, Agent shall look only to the
assets of the Series.
19. Notices. Any notice shall be officially given when sent by
registered or certified mail by either party to the following addresses,
provided that either party may notify the other of any changed address to
which such notices should be mailed hereunder:
If to Fund: CMC Fund Trust
1300 SW Sixth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
8
<PAGE>
If to Agent: Columbia Trust Company
1301 SW Fifth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Oregon.
21. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes any agreements previously entered into by
them, and may be amended only by written agreement, duly executed on behalf
of the respective parties in accordance with paragraph 17.
IN WITNESS WHEREOF, the parties hereto cause this Agreement to be
duly executed and to become effective as of the date first written above.
CMC FUND TRUST
By J. JERRY INNSKEEP, JR.
-----------------------------------
COLUMBIA TRUST COMPANY
By JAMES F. RIPPEY
-----------------------------------
9
<PAGE>
SCHEDULE A
I. Shareholder Services
A. Maintain all shareholder records on electronic data
processing equipment, including:
1. Share balances
2. Account transaction history
3. Names and addresses
4. Certificate records
5. Distribution records
6. Transfer records
7. Over-all control records
B. New Accounts
1. Deposit all moneys received into transfer
account maintained for the Custodian
2. Set up account according to shareholders'
instructions as to:
a. Amount of shares purchased
b. Whether to deliver stock certificates to
shareholders
C. Additional Purchases
1. Deposit moneys received into a transfer account
maintained for the Custodian
2. Issue shareholder confirmations
D. Redemptions - Full and Partial
1. Redeem shares upon shareholder request
2. Issue checks for the amount of redemption
3. Issue and mail shareholder confirmations
E. Transfer shares as requested, which includes obtaining
necessary papers and documents to satisfy transfer
requirements. On irregular transfers requiring special legal
opinions, such special legal fees, if any, are to be paid for
by the Fund.
<PAGE>
F. Prepare and mail certificates as requested by
shareholders
G. Process changes, corrections of addresses and
registrations
H. Compute distributions, dividends and capital gains
1. Reinvest in additional shares as requested by
shareholders
2. Issue checks as requested by shareholders
3. Advise each shareholder of amount of dividends
received and tax status annually
I. Handle replacement of lost certificates
J. Produce transcripts of shareholder account history as
required
K. Maintain the controls associated with the computer
programs and manual systems to arrive at the
Company's total shares outstanding
L. Receive mail and perform other administrative
functions relating to transfer agent work
II. Reports and Schedules
A. Daily
1. Name and address changes
2. Name and address additions and deletions
3. Transaction Register
a. Purchases
b. Redemptions
c. Transfer and adjustments
4. Cash reconciliation - Cash received for day
5. Check reconciliation - checks issued for day
6. Transaction reconciliation
a. Amount received
2
<PAGE>
b. Total shares purchased
c. Number of purchase transactions
d. Dollar amount redeemed
e. Shares redeemed
f. Number of accounts redeeming
g. Checks issued for redemptions
B. Monthly/Daily
1. Balance list of shareholders in account number
sequence
a. Number of shares outstanding for which
stock certificates were issued
b. Number of shares outstanding for which
stock certificates were not issued
c. Total shares outstanding (a + b)
2. a. Purchases, sales and adjustments
b. Certificates issued
c. Certificates, redemptions and transfers
d. Certificates reconciliations by certificate
number
C. Monthly
1. Sales by states for month
D. Periodically
1. Alphabetical account listing
III. Extra Charge Services
A. Mailing labels or other mailing services to
shareholders
B. Services in connection with any stock splits
C. The computer system is designed to produce almost any
display of statistical management or accounting data
3
<PAGE>
in almost any format desired by the management,
auditors or directors. The parameters of reporting
are only limited to the data contained on disc. With
sufficient notice this information is available to
management in accordance with charges as itemized in
Schedule B.
4
<PAGE>
CMC FUND TRUST
CMC SMALL CAP FUND
SCHEDULE B
BASIC FEE
$1.00 per account per month
TIME AND MATERIAL FOR EXTRA SERVICES
Computer....................................................At Cost
Key punch...................................................At Cost
Clerical....................................................At Cost
Programming and Direct
Technical Management.....................................At Cost
Travel and per diem expenses
(Chargeable only when authorized
in advance by Fund)......................................At Cost
Mailing Services............................................At Cost
Permanent file supplies, forms,
microfilm, microfiche....................................At Cost
Any of the above services when performed outside regular working hours of
Agent may be billed at 150 percent of the above.
5
Exhibit 9.B
CMC FUND TRUST
CMC INTERNATIONAL STOCK FUND
TRANSFER AGENT AGREEMENT
October 26, 1993
This Agreement is made between CMC FUND TRUST ("Fund"), an Oregon
business trust, and COLUMBIA TRUST COMPANY ("Agent"), an Oregon
corporation, as of October 26, 1993.
Fund is an investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), whose shares are registered for
sale under the Securities Act of 1933, as amended (the "1933 Act");
Fund has established a Series of shares (the "Series"), referred to as
"CMC International Stock Fund"; and
Fund desires to have Agent serve as transfer agent and dividend
disbursing agent for Fund with respect to the Series, and Agent is willing
to serve as transfer agent and dividend disbursing agent for Fund with
respect to the Series.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, Fund and Agent agree as follows:
1. Appointment. Fund hereby appoints Agent as transfer agent for the
shares of the Fund, as described in the Declaration of Trust of the Fund,
(the "Stock") and dividend disbursing agent for Fund, and Agent agrees to
serve as transfer agent and dividend disbursing agent under the terms and
conditions hereinafter set forth.
2. Documents. Fund has furnished Agent copies of Fund's Declaration of
Trust, investment advisory contract, custodian contract, all account
applications forms, and other eocuments relating to shareholders' accounts
and a certified copy of the resolutions of Fund's Trustees adopting Fund's
form of stock certificate and approving the appointment of Agent hereunder.
Fund shall furnish promptly to Agent a copy of any amendment or supplement
to the above-mentioned documents and any additional documents necessary for
Agent to perform its functions hereunder.
3. Authorized Shares. Fund certifies to Agent that, as of the date
hereof, Fund is authorized to issue an unlimited number of shares.
1
<PAGE>
4. Services to be Performed. Agent shall be responsible for performing
the duties of transfer agent and dividend disbursing agent for Fund, which
duties are more fully set forth in Schedule A to this Agreement. All
computer programs and procedures developed by Agent to perform services
required under this Agreement shall remain the exclusive property of Agent.
5. Maintenance of Records; Confidentiality. All records maintained by
Agent as required on Schedule A shall remain the exclusive property of Fund
and shall be preserved and retained by Agent while this Agreement remains
in effect. Agent shall make available during regular business hours all
records and other data created and maintained pursuant to this Agreement
for reasonable audit and inspection by the Fund or any person retained by
Fund. Agent shall treat all records and other information with respect to
Fund with confidence.
6. Compensation. As compensation for the performance of the services
described in parts I and II of Schedule A, Agent shall receive from Fund a
per account fee in the amount set forth in Schedule B, but in no event less
than $1,500 per month. These fees will be charged for any account in
existence during any part of a month, and the fees will be charged for any
part of a month preceding termination of this Agreement. As compensation
for the performance of extra charge services described in part III of
Schedule A, Agent shall be paid by Fund at the rates listed on Schedule B.
Upon request of the Agent, the hourly rates listed on Schedule B may be
adjusted, subject to approval by the Fund's Trustees in accordance with
paragraph 17.
7. Expenses. Fund agrees to pay directly or reimburse Agent for
postage and the procurement or printing of share certificates, statements,
envelopes, checks, reports, tax forms, proxies, or other forms of printed
material required in the performance of its services to Fund under this
Agreement, and Agent agrees that Fund may purchase these materials directly
for use by Agent, subject to prior approval by Agent as to the
compatibility of any materials with Agent's data processing equipment. Fund
agrees to pay directly or reimburse Agent for all freight and other
delivery charges and insurance or bonding charges incurred by Agent in
delivering certificates to shareholders and any and all other out-of-pocket
expenses and charges incurred by Agent in performing services under this
Agreement.
8. Monthly Statement. At the end of each month during the term of this
Agreement and upon termination of this Agreement, Agent will render an
itemized statement to Fund for its fees and expenses under this Agreement.
Payment by Fund is due 10 days from the date the statement is received.
9. Compliance With Governmental Rules and Regulations.
9.1 Agent represents that it is registered with the Securities
and Exchange Commission as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended, and will notify the Fund
promptly if its
2
<PAGE>
registration is revoked or if any proceeding is commenced before the
Securities and Exchange Commission with may lead to revocation. Agent shall
be responsible for compliance with all laws, rules, and regulations of
governmental authorities having jurisdiction over transfer agents and their
activities.
9.2 Except for the accuracy of information furnished to Fund by
Agent, Fund assumes full responsibility for the preparation, contents, and
distribution of its prospectuses and for compliance with all applicable
requirements of the 1933 Act, the 1940 Act, and any other laws, rules, or
regulations of governmental authorities with jurisdiction over Fund.
10. References to Agent. Fund shall not circulate any printed matter
that contains any reference to Agent without the prior written approval of
Agent, except printed matter that identifies Agent as transfer agent and
dividend disbursing agent for Fund.
11. Acts of God, National Emergency, etc. Agent shall not be liable
for loss of data, delays, or errors occurring by reasons of circumstances
beyond its control, including but not limited to acts of civil or military
authority, national emergencies, fire, flood, catastrophe, acts of God,
insurrection, war, riot, failure of transportation, communication, or power
supply, or machine breakdown. Agent shall use its best efforts to minimize
the likelihood of damage, loss of data, delays, or errors resulting from
such uncontrollable events, and if damage, loss of data, delays, or errors
occur, Agent shall use its best efforts to mitigate the effects of the
occurrence.
12. Standard of Care. Agent shall at all times act in good faith and
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement and to absorb all costs for time,
materials, or other expenses necessary to correct any errors made by Agent.
Agent shall not be liable for any loss or damage due to its errors unless
the errors are caused by its gross negligence, bad faith, or willful
misconduct or that of its employees or agents. Fund agrees to pay Agent, at
the rates set forth in Schedule B, for any excess work required by Agent
due to the errors of Fund's employees or representatives or due to
incorrect data furnished to Agent by Fund, Fund's investment adviser, or
Fund's custodian.
13. Instructions and Opinion of Counsel. At any time Agent may apply
to an officer of Fund for instructions and consult counsel for Fund or its
own counsel on any matter arising in connection with this Agreement. Agent
shall not be liable for any action taken or omitted by it in good faith in
accordance with such instructions or with the advice or opinion of such
counsel.
14. Indemnification. Fund shall indemnify and hold Agent harmless from
all loss, cost, damage, and expense, including reasonable expenses for
counsel, incurred by Agent resulting from any claim, demand, action, or
suit in connection with the performance of its duties hereunder or as the
result of acting upon any
3
<PAGE>
instruction, advice, or opinion obtained pursuant to paragraph 13 hereof,
upon any other instruction reasonably believed by Agent to have been
properly executed by a duly authorized officer of Fund, or upon any
information, data, records, or documents provided to Agent by Fund, Fund's
investment adviser, or Fund's custodian. This indemnification shall not
apply to actions or omissions constituting gross negligence, bad faith, or
willful misconduct of Agent, its employees, or agents. Prior to confessing
any claim against it which may be subject to this indemnification, Agent
shall give Fund reasonable opportunity to defend against that claim in its
own name or in the name of the Agent.
15. Fidelity Bond. Agent will maintain in force throughout the
duration of this Agreement a fidelity bond that complies with applicable
regulatory requirements, written by a reputable bonding company, covering
theft, embezzlement, forgery, and other acts of malfeasance by Agent, its
employees, or agents in connection with services performed for Fund.
16. Duration and Termination.
16.1 This Agreement shall remain in force until two years from
the date hereof and may be continued from year to year thereafter if
approved annually by a vote of a majority of the Fund's shareholders (as
determined in accordance with the requirements of the 1940 Act) or by its
Trustees and in either case a vote of a majority of the Trustees who are
not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on approval.
16.2 This Agreement may be terminated at any time without the
payment of any penalty by vote of the Trustees of Fund or by vote of a
majority of the outstanding shares of Fund on 60 days written notice to the
other party. This Agreement may be terminated by Agent upon 180 days
written notice thereof to Fund. Any termination in accordance with this
Agreement shall not affect the rights and obligations of the parties under
paragraphs 11, 12, 13 and 14 hereof. Immediately upon termination of this
Agreement, all records and other data in the possession of Agent which are
the property of Fund shall be furnished to Fund in computer written data
forms as requested by Fund.
16.3 This Agreement shall automatically terminate if it is
assigned, the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the 1940 Act. Agent shall notify Fund of any change
in the officers or directors of Agent within a reasonable time after the
change.
17. Amendments. This Agreement may be amended with the written consent
of Agent and Fund if the amendment has been approved by the Trustees of
Fund, including a majority of the disinterested Trustees.
4
<PAGE>
18. Applicable to Specific Series. Agent agrees that, with respect to
any obligation of Fund under this Agreement, Agent shall look only to the
assets of the Series.
19. Notices. Any notice shall be officially given when sent by
registered or certified mail by either party to the following addresses,
provided that either party may notify the other of any changed address to
which such notices should be mailed hereunder:
If to Fund: CMC Fund Trust
1300 SW Sixth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
If to Agent: Columbia Trust Company
1301 SW Fifth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Oregon.
21. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes any agreements previously entered into by
them, and may be amended only by written agreement, duly executed on behalf
of the respective parties in accordance with paragraph 17.
IN WITNESS WHEREOF, the parties hereto cause this Agreement to be
duly executed and to become effective as of the date first written above.
CMC FUND TRUST
By GEORGE L. HANSETH
--------------------------------
COLUMBIA TRUST COMPANY
By JOHN A. KEMP
--------------------------------
5
<PAGE>
SCHEDULE A
I. Shareholder Services
A. Maintain all shareholder records on electronic data processing
equipment, including:
1. Share balances
2. Account transaction history
3. Names and addresses
4. Certificate records
5. Distribution records
6. Transfer records
7. Over-all control records
B. New Accounts
1. Deposit all moneys received into transfer account maintained
for the Custodian
2. Set up account according to shareholders' instructions as
to:
a. Amount of shares purchased
b. Whether to deliver stock certificates to shareholders
C. Additional Purchases
1. Deposit moneys received into a transfer account maintained
for the Custodian
2. Issue shareholder confirmations
D. Redemptions - Full and Partial
1. Redeem shares upon shareholder request
2. Issue checks for the amount of redemption
3. Issue and mail shareholder confirmations
E. Transfer shares as requested, which includes obtaining necessary
papers and documents to satisfy transfer requirements. On
irregular
6
<PAGE>
transfers requiring special legal opinions, such special legal
fees, if any, are to be paid for by the Fund.
F. Prepare and mail certificates as requested by shareholders
G. Process changes, corrections of addresses and registrations
H. Compute distributions, dividends and capital gains
1. Reinvest in additional shares as requested by shareholders
2. Issue checks as requested by shareholders
3. Advise each shareholder of amount of dividends received and
tax status annually
I. Handle replacement of lost certificates
J. Produce transcripts of shareholder account history as required
K. Maintain the controls associated with the computer programs and
manual systems to arrive at the Company's total shares
outstanding
L. Receive mail and perform other administrative functions relating
to transfer agent work
II. Reports and Schedules
A. Daily
1. Name and address changes
2. Name and address additions and deletions
3. Transaction Register
a. Purchases
b. Redemptions
c. Transfer and adjustments
4. Cash reconciliation - Cash received for day
5. Check reconciliation - checks issued for day
7
<PAGE>
6. Transaction reconciliation
a. Amount received
b. Total shares purchased
c. Number of purchase transactions
d. Dollar amount redeemed
e. Shares redeemed
f. Number of accounts redeeming
g. Checks issued for redemptions
B. Monthly/Daily
1. Balance list of shareholders in account number sequence
a. Number of shares outstanding for which stock
certificates were issued
b. Number of shares outstanding for which stock
certificates were not issued
c. Total shares outstanding (a + b)
2. a. Purchases, sales and adjustments
b. Certificates issued
c. Certificates, redemptions and transfers
d. Certificates reconciliations by certificate number
C. Monthly
1. Sales by states for month
D. Periodically
1. Alphabetical account listing
III. Extra Charge Services
A. Mailing labels or other mailing services to shareholders
B. Services in connection with any stock splits
C. The computer system is designed to produce almost any display of
statistical management or accounting data in almost any format
desired by the management, auditors or directors. The parameters
of reporting are only limited to the data contained on disc. With
sufficient notice this information is available to management in
accordance with charges as itemized in Schedule B.
8
<PAGE>
CMC FUND TRUST
CMC INTERNATIONAL STOCK FUND
SCHEDULE B
BASIC FEE
$1.00 per account per month
TIME AND MATERIAL FOR EXTRA SERVICES
Computer.........................................................At Cost
Key punch........................................................At Cost
Clerical.........................................................At Cost
Programming and Direct
Technical Management..........................................At Cost
Travel and per diem expenses
(Chargeable only when authorized
in advance by Fund)...........................................At Cost
Mailing Services.................................................At Cost
Permanent file supplies, forms,
microfilm, microfiche.........................................At Cost
Any of the above services when performed outside regular working hours of
Agent may be billed at 150 percent of the above.
9
Exhibit 9.C
CMC FUND TRUST
CMC HIGH YIELD FUND
TRANSFER AGENT AGREEMENT
April 29, 1994
This Agreement is made between CMC FUND TRUST ("Fund"), an Oregon
business trust, and COLUMBIA TRUST COMPANY ("Agent"), an Oregon
corporation, as of April 29, 1994.
Fund is an investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), whose shares are registered for
sale under the Securities Act of 1933, as amended (the "1933 Act");
Fund has established a Series of shares (the "Series"), referred to as
"CMC High Yield Fund"; and
Fund desires to have Agent serve as transfer agent and dividend
disbursing agent for Fund with respect to the Series, and Agent is willing
to serve as transfer agent and dividend disbursing agent for Fund with
respect to the Series.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, Fund and Agent agree as follows:
1. Appointment. Fund hereby appoints Agent as transfer agent for the
shares of the Fund, as described in the Declaration of Trust of the Fund,
(the "Stock") and dividend disbursing agent for Fund, and Agent agrees to
serve as transfer agent and dividend disbursing agent under the terms and
conditions hereinafter set forth.
2. Documents. Fund has furnished Agent copies of Fund's Declaration of
Trust, investment advisory contract, custodian contract, all account
applications forms, and other eocuments relating to shareholders' accounts
and a certified copy of the resolutions of Fund's Trustees adopting Fund's
form of stock certificate and approving the appointment of Agent hereunder.
Fund shall furnish promptly to Agent a copy of any amendment or supplement
to the above-mentioned documents and any additional documents necessary for
Agent to perform its functions hereunder.
3. Authorized Shares. Fund certifies to Agent that, as of the date
hereof, Fund is authorized to issue an unlimited number of shares.
1
<PAGE>
4. Services to be Performed. Agent shall be responsible for performing
the duties of transfer agent and dividend disbursing agent for Fund, which
duties are more fully set forth in Schedule A to this Agreement. All
computer programs and procedures developed by Agent to perform services
required under this Agreement shall remain the exclusive property of Agent.
5. Maintenance of Records; Confidentiality. All records maintained by
Agent as required on Schedule A shall remain the exclusive property of Fund
and shall be preserved and retained by Agent while this Agreement remains
in effect. Agent shall make available during regular business hours all
records and other data created and maintained pursuant to this Agreement
for reasonable audit and inspection by the Fund or any person retained by
Fund. Agent shall treat all records and other information with respect to
Fund with confidence.
6. Compensation. As compensation for the performance of the services
described in parts I and II of Schedule A, Agent shall receive from Fund a
per account fee in the amount set forth in Schedule B, but in no event less
than $1,500 per month. These fees will be charged for any account in
existence during any part of a month, and the fees will be charged for any
part of a month preceding termination of this Agreement. As compensation
for the performance of extra charge services described in part III of
Schedule A, Agent shall be paid by Fund at the rates listed on Schedule B.
Upon request of the Agent, the hourly rates listed on Schedule B may be
adjusted, subject to approval by the Fund's Trustees in accordance with
paragraph 17.
7. Expenses. Fund agrees to pay directly or reimburse Agent for
postage and the procurement or printing of share certificates, statements,
envelopes, checks, reports, tax forms, proxies, or other forms of printed
material required in the performance of its services to Fund under this
Agreement, and Agent agrees that Fund may purchase these materials directly
for use by Agent, subject to prior approval by Agent as to the
compatibility of any materials with Agent's data processing equipment. Fund
agrees to pay directly or reimburse Agent for all freight and other
delivery charges and insurance or bonding charges incurred by Agent in
delivering certificates to shareholders and any and all other out-of-pocket
expenses and charges incurred by Agent in performing services under this
Agreement.
8. Monthly Statement. At the end of each month during the term of this
Agreement and upon termination of this Agreement, Agent will render an
itemized statement to Fund for its fees and expenses under this Agreement.
Payment by Fund is due 10 days from the date the statement is received.
9. Compliance With Governmental Rules and Regulations.
9.1 Agent represents that it is registered with the Securities
and Exchange Commission as a transfer agent under Section 17A of the
Securities
2
<PAGE>
Exchange Act of 1934, as amended, and will notify the Fund promptly if its
registration is revoked or if any proceeding is commenced before the
Securities and Exchange Commission with may lead to revocation. Agent shall
be responsible for compliance with all laws, rules, and regulations of
governmental authorities having jurisdiction over transfer agents and their
activities.
9.2 Except for the accuracy of information furnished to Fund by
Agent, Fund assumes full responsibility for the preparation, contents, and
distribution of its prospectuses and for compliance with all applicable
requirements of the 1933 Act, the 1940 Act, and any other laws, rules, or
regulations of governmental authorities with jurisdiction over Fund.
10. References to Agent. Fund shall not circulate any printed matter
that contains any reference to Agent without the prior written approval of
Agent, except printed matter that identifies Agent as transfer agent and
dividend disbursing agent for Fund.
11. Acts of God, National Emergency, etc. Agent shall not be liable
for loss of data, delays, or errors occurring by reasons of circumstances
beyond its control, including but not limited to acts of civil or military
authority, national emergencies, fire, flood, catastrophe, acts of God,
insurrection, war, riot, failure of transportation, communication, or power
supply, or machine breakdown. Agent shall use its best efforts to minimize
the likelihood of damage, loss of data, delays, or errors resulting from
such uncontrollable events, and if damage, loss of data, delays, or errors
occur, Agent shall use its best efforts to mitigate the effects of the
occurrence.
12. Standard of Care. Agent shall at all times act in good faith and
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement and to absorb all costs for time,
materials, or other expenses necessary to correct any errors made by Agent.
Agent shall not be liable for any loss or damage due to its errors unless
the errors are caused by its gross negligence, bad faith, or willful
misconduct or that of its employees or agents. Fund agrees to pay Agent, at
the rates set forth in Schedule B, for any excess work required by Agent
due to the errors of Fund's employees or representatives or due to
incorrect data furnished to Agent by Fund, Fund's investment adviser, or
Fund's custodian.
13. Instructions and Opinion of Counsel. At any time Agent may apply
to an officer of Fund for instructions and consult counsel for Fund or its
own counsel on any matter arising in connection with this Agreement. Agent
shall not be liable for any action taken or omitted by it in good faith in
accordance with such instructions or with the advice or opinion of such
counsel.
14. Indemnification. Fund shall indemnify and hold Agent harmless from
all loss, cost, damage, and expense, including reasonable expenses for
counsel,
3
<PAGE>
incurred by Agent resulting from any claim, demand, action, or suit in
connection with the performance of its duties hereunder or as the result of
acting upon any instruction, advice, or opinion obtained pursuant to
paragraph 13 hereof, upon any other instruction reasonably believed by
Agent to have been properly executed by a duly authorized officer of Fund,
or upon any information, data, records, or documents provided to Agent by
Fund, Fund's investment adviser, or Fund's custodian. This indemnification
shall not apply to actions or omissions constituting gross negligence, bad
faith, or willful misconduct of Agent, its employees, or agents. Prior to
confessing any claim against it which may be subject to this
indemnification, Agent shall give Fund reasonable opportunity to defend
against that claim in its own name or in the name of the Agent.
15. Fidelity Bond. Agent will maintain in force throughout the
duration of this Agreement a fidelity bond that complies with applicable
regulatory requirements, written by a reputable bonding company, covering
theft, embezzlement, forgery, and other acts of malfeasance by Agent, its
employees, or agents in connection with services performed for Fund.
16. Duration and Termination.
16.1 This Agreement shall remain in force until two years from
the date hereof and may be continued from year to year thereafter if
approved annually by a vote of a majority of the Fund's shareholders (as
determined in accordance with the requirements of the 1940 Act) or by its
Trustees and in either case a vote of a majority of the Trustees who are
not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on approval.
16.2 This Agreement may be terminated at any time without the
payment of any penalty by vote of the Trustees of Fund or by vote of a
majority of the outstanding shares of Fund on 60 days written notice to the
other party. This Agreement may be terminated by Agent upon 180 days
written notice thereof to Fund. Any termination in accordance with this
Agreement shall not affect the rights and obligations of the parties under
paragraphs 11, 12, 13 and 14 hereof. Immediately upon termination of this
Agreement, all records and other data in the possession of Agent which are
the property of Fund shall be furnished to Fund in computer written data
forms as requested by Fund.
16.3 This Agreement shall automatically terminate if it is
assigned, the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the 1940 Act. Agent shall notify Fund of any change
in the officers or directors of Agent within a reasonable time after the
change.
4
<PAGE>
17. Amendments. This Agreement may be amended with the written consent
of Agent and Fund if the amendment has been approved by the Trustees of
Fund, including a majority of the disinterested Trustees.
18. Applicable to Specific Series. Agent agrees that, with respect to
any obligation of Fund under this Agreement, Agent shall look only to the
assets of the Series.
19. Notices. Any notice shall be officially given when sent by
registered or certified mail by either party to the following addresses,
provided that either party may notify the other of any changed address to
which such notices should be mailed hereunder:
If to Fund: CMC Fund Trust
1300 SW Sixth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
If to Agent: Columbia Trust Company
1301 SW Fifth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President
20. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Oregon.
21. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes any agreements previously entered into by
them, and may be amended only by written agreement, duly executed on behalf
of the respective parties in accordance with paragraph 17.
IN WITNESS WHEREOF, the parties hereto cause this Agreement to be
duly executed and to become effective as of the date first written above.
CMC FUND TRUST
By GEORGE L. HANSETH
--------------------------------
COLUMBIA TRUST COMPANY
By JOHN A. KEMP
--------------------------------
5
<PAGE>
SCHEDULE A
I. Shareholder Services
A. Maintain all shareholder records on electronic data processing
equipment, including:
1. Share balances
2. Account transaction history
3. Names and addresses
4. Certificate records
5. Distribution records
6. Transfer records
7. Over-all control records
B. New Accounts
1. Deposit all moneys received into transfer account maintained
for the Custodian
2. Set up account according to shareholders' instructions as
to:
a. Amount of shares purchased
b. Whether to deliver stock certificates to shareholders
C. Additional Purchases
1. Deposit moneys received into a transfer account maintained
for the Custodian
2. Issue shareholder confirmations
D. Redemptions - Full and Partial
1. Redeem shares upon shareholder request
2. Issue checks for the amount of redemption
3. Issue and mail shareholder confirmations
6
<PAGE>
E. Transfer shares as requested, which includes obtaining necessary
papers and documents to satisfy transfer requirements. On
irregular transfers requiring special legal opinions, such
special legal fees, if any, are to be paid for by the Fund.
F. Prepare and mail certificates as requested by shareholders
G. Process changes, corrections of addresses and registrations
H. Compute distributions, dividends and capital gains
1. Reinvest in additional shares as requested by shareholders
2. Issue checks as requested by shareholders
3. Advise each shareholder of amount of dividends received and
tax status annually
I. Handle replacement of lost certificates
J. Produce transcripts of shareholder account history as required
K. Maintain the controls associated with the computer programs and
manual systems to arrive at the Company's total shares
outstanding
L. Receive mail and perform other administrative functions relating
to transfer agent work
II. Reports and Schedules
A. Daily
1. Name and address changes
2. Name and address additions and deletions
3. Transaction Register
a. Purchases
b. Redemptions
c. Transfer and adjustments
7
<PAGE>
4. Cash reconciliation - Cash received for day
5. Check reconciliation - checks issued for day
6. Transaction reconciliation
a. Amount received
b. Total shares purchased
c. Number of purchase transactions
d. Dollar amount redeemed
e. Shares redeemed
f. Number of accounts redeeming
g. Checks issued for redemptions
B. Monthly/Daily
1. Balance list of shareholders in account number sequence
a. Number of shares outstanding for which stock
certificates were issued
b. Number of shares outstanding for which stock
certificates were not issued
c. Total shares outstanding (a + b)
2. a. Purchases, sales and adjustments
b. Certificates issued
c. Certificates, redemptions and transfers
d. Certificates reconciliations by certificate number
C. Monthly
1. Sales by states for month
D. Periodically
1. Alphabetical account listing
III. Extra Charge Services
A. Mailing labels or other mailing services to shareholders
B. Services in connection with any stock splits
C. The computer system is designed to produce almost any display of
statistical management or accounting data in almost any format
desired by the management, auditors or directors. The parameters
of reporting are only limited to the data contained on disc. With
sufficient notice this information is available to management in
accordance with charges as itemized in Schedule B.
8
<PAGE>
CMC FUND TRUST
CMC INTERNATIONAL STOCK FUND
SCHEDULE B
BASIC FEE
$1.00 per account per month
TIME AND MATERIAL FOR EXTRA SERVICES
Computer.........................................................At Cost
Key punch........................................................At Cost
Clerical.........................................................At Cost
Programming and Direct
Technical Management..........................................At Cost
Travel and per diem expenses
(Chargeable only when authorized
in advance by Fund)...........................................At Cost
Mailing Services.................................................At Cost
9
<PAGE>
Permanent file supplies, forms,
microfilm, microfiche.........................................At Cost
Any of the above services when performed outside regular working hours of
Agent may be billed at 150 percent of the above.
10
Coopers & Lybrand Coopers & Lybrand L.L.P.
A Professional Services Firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of CMC Fund Trust:
We consent to the inclusion in Post-Effective Amendment No. 11 to the
Registration Statement of CMC Fund Trust on Form N-1A (File No. 33-30394)
of our reports dated December 6, 1996, on our audits of the financial
statements and the financial highlights of the CMC Small Cap Fund, CMC
International Stock Fund, and CMC High Yield Fund, portfolios of CMC Fund
Trust, which reports are included in the Annual Reports to Shareholders for
the year ended October 31, 1996, which is included in the Registration
Statement. We also consent to the reference to our Firm under the caption
"Independent Accountants".
COOPERS & LYBRAND L.L.P.
Portland, Oregon
December 6, 1996
Coopers & Lybrand L.L.P., a registered limited liability partnership, is a
member firm of Coopers & Lybrand (International)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and
appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and
George L. Hanseth as the undersigned's true and lawful attorney and agent,
with full power of substitution and resubstitution for and in the name,
place and stead of the undersigned, in any and all capacities, to sign the
Registration Statement on Form N-1A for the registration of shares of CMC
Fund Trust, and any and all amendments (including post-effective
amendments) thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each attorney and agent full power and authority
to do any and all acts and things necessary or advisable to be done, as
fully and to all intents and purposes as the undersigned might or could do
in person, hereby ratifying and confirming all that the attorney and agent,
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Dated: March 10, 1994
ALEXANDER S. MACMILLAN
-----------------------------------
Alexander S. Macmillan
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and
appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and
George L. Hanseth as the undersigned's true and lawful attorney and agent,
with full power of substitution and resubstitution for and in the name,
place and stead of the undersigned, in any and all capacities, to sign the
Registration Statement on Form N-1A for the registration of shares of CMC
Fund Trust, and any and all amendments (including post-effective
amendments) thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each attorney and agent full power and authority
to do any and all acts and things necessary or advisable to be done, as
fully and to all intents and purposes as the undersigned might or could do
in person, hereby ratifying and confirming all that the attorney and agent,
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Dated: October 27, 1993
RICHARD L. WOOLWORTH
-----------------------------------
Richard L. Woolworth
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and
appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and
George L. Hanseth as the undersigned's true and lawful attorney and agent,
with full power of substitution and resubstitution for and in the name,
place and stead of the undersigned, in any and all capacities, to sign the
Registration Statement on Form N-1A for the registration of shares of CMC
Fund Trust, and any and all amendments (including post-effective
amendments) thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each attorney and agent full power and authority
to do any and all acts and things necessary or advisable to be done, as
fully and to all intents and purposes as the undersigned might or could do
in person, hereby ratifying and confirming all that the attorney and agent,
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Dated: December 16, 1991
PETER T. SHAND
-----------------------------------
Peter T. Shand
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and
appoints each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and
George L. Hanseth as the undersigned's true and lawful attorney and agent,
with full power of substitution and resubstitution for and in the name,
place and stead of the undersigned, in any and all capacities, to sign the
Registration Statement on Form N-1A for the registration of shares of CMC
Fund Trust, and any and all amendments (including post-effective
amendments) thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each attorney and agent full power and authority
to do any and all acts and things necessary or advisable to be done, as
fully and to all intents and purposes as the undersigned might or could do
in person, hereby ratifying and confirming all that the attorney and agent,
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Dated: December 16, 1991
PETER C. OLSON
-----------------------------------
Peter C. Olson
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED ANNUAL REPORT OF CMC SMALL CAP FUND (A PORTFOLIO OF CMC FUND TRUST)
DATED OCTOBER 31, 1996, AND THE AUDITED ANNUAL REPORT OF CMC SMALL CAP FUND
(A PORTFOLIO OF CMC FUND TRUST) DATED OCTOBER 31, 1995, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000854126
<NAME> CMC FUND TRUST
<SERIES>
<NUMBER> 01
<NAME> CMC SMALL CAP FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 418,787,543
<INVESTMENTS-AT-VALUE> 478,983,287
<RECEIVABLES> 6,017,630
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 65,204,081
<TOTAL-ASSETS> 550,204,998
<PAYABLE-FOR-SECURITIES> 6,719,554
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,077,437
<TOTAL-LIABILITIES> 27,796,991
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 462,293,007
<SHARES-COMMON-STOCK> 10,038,840
<SHARES-COMMON-PRIOR> 9,593,018
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (80,744)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 60,195,744
<NET-ASSETS> 522,408,007
<DIVIDEND-INCOME> 995,920
<INTEREST-INCOME> 2,479,071
<OTHER-INCOME> 0
<EXPENSES-NET> (4,241,821)
<NET-INVESTMENT-INCOME> (766,830)
<REALIZED-GAINS-CURRENT> 171,828,992
<APPREC-INCREASE-CURRENT> (24,142,743)
<NET-CHANGE-FROM-OPS> 146,919,419
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (149,951,166)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,170,133
<NUMBER-OF-SHARES-REDEEMED> (3,508,620)
<SHARES-REINVESTED> 2,784,309
<NET-CHANGE-IN-ASSETS> (14,759,352)
<ACCUMULATED-NII-PRIOR> (18,884)
<ACCUMULATED-GAINS-PRIOR> (259,916)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,126,463
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,241,821
<AVERAGE-NET-ASSETS> 544,970,926
<PER-SHARE-NAV-BEGIN> 56.00
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> 16.79
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (20.67)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 52.04
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED ANNUAL REPORT OF CMC INTERNATIONAL STOCK FUND (A PORTFOLIO OF CMC
FUND TRUST) DATED OCTOBER 31, 1996, AND THE AUDITED ANNUAL REPORT OF CMC
INTERNATIONAL STOCK FUND (A PORTFOLIO OF CMC FUND TRUST) DATED OCTOBER 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000854126
<NAME> CMC FUND TRUST
<SERIES>
<NUMBER> 02
<NAME> CMC INTERNATIONAL STOCK FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 55,501,520
<INVESTMENTS-AT-VALUE> 62,287,270
<RECEIVABLES> 11,064,839
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,969,497
<TOTAL-ASSETS> 82,321,606
<PAYABLE-FOR-SECURITIES> 1,560,973
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,218,565
<TOTAL-LIABILITIES> 8,779,538
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,102,759
<SHARES-COMMON-STOCK> 1,731,905
<SHARES-COMMON-PRIOR> 1,855,088
<ACCUMULATED-NII-CURRENT> 8,115
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,323,716)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,754,910
<NET-ASSETS> 73,542,068
<DIVIDEND-INCOME> 964,647
<INTEREST-INCOME> 247,917
<OTHER-INCOME> 0
<EXPENSES-NET> (684,222)
<NET-INVESTMENT-INCOME> 528,342
<REALIZED-GAINS-CURRENT> 6,138,238
<APPREC-INCREASE-CURRENT> 3,254,966
<NET-CHANGE-FROM-OPS> 9,921,546
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,327,024)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 581,183
<NUMBER-OF-SHARES-REDEEMED> (734,959)
<SHARES-REINVESTED> 30,593
<NET-CHANGE-IN-ASSETS> 4,784,516
<ACCUMULATED-NII-PRIOR> (9,470)
<ACCUMULATED-GAINS-PRIOR> (6,713,954)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 508,330
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 684,222
<AVERAGE-NET-ASSETS> 68,083,717
<PER-SHARE-NAV-BEGIN> 37.06
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> 5.86
<PER-SHARE-DIVIDEND> (.78)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 42.46
<EXPENSE-RATIO> .01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED ANNUAL REPORT OF CMC HIGH YIELD FUND (A PORTFOLIO OF CMC FUND
TRUST) DATED OCTOBER 31, 1996, AND THE AUDITED ANNUAL REPORT OF CMC HIGH
YIELD FUND (A PORTFOLIO OF CMC FUND TRUST) DATED OCTOBER 31, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000854126
<NAME> CMC FUND TRUST
<SERIES>
<NUMBER> 03
<NAME> CMC HIGH YIELD FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 65,992,253
<INVESTMENTS-AT-VALUE> 67,174,277
<RECEIVABLES> 1,630,226
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 913,312
<TOTAL-ASSETS> 69,717,815
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 104,138
<TOTAL-LIABILITIES> 104,138
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 68,426,626
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,027
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,182,024
<NET-ASSETS> 69,613,677
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,047,666
<OTHER-INCOME> 0
<EXPENSES-NET> (268,178)
<NET-INVESTMENT-INCOME> 4,779,488
<REALIZED-GAINS-CURRENT> 747,251
<APPREC-INCREASE-CURRENT> (226,346)
<NET-CHANGE-FROM-OPS> 5,300,393
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,779,488)
<DISTRIBUTIONS-OF-GAINS> (742,224)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,124,256
<NUMBER-OF-SHARES-REDEEMED> (497,533)
<SHARES-REINVESTED> 145,259
<NET-CHANGE-IN-ASSETS> 27,422,164
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7,467)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 214,819
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (268,178)
<AVERAGE-NET-ASSETS> 53,705,693
<PER-SHARE-NAV-BEGIN> 36.24
<PER-SHARE-NII> 3.23
<PER-SHARE-GAIN-APPREC> .10
<PER-SHARE-DIVIDEND> (3.23)
<PER-SHARE-DISTRIBUTIONS> (.39)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 35.95
<EXPENSE-RATIO> .005
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
