CMC FUND TRUST, 485BPOS, 2000-12-21

CMC FUND TRUST
485BPOS, 2000-12-21

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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. 19 [ X ]

and/or

REGISTRATION STATEMENT UNDER THE

INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 18

(Check appropriate box or boxes.)

CMC Fund Trust
(Exact Name of Registrant as Specified in Charter)

1300 S.W. Sixth Avenue, P.O. Box 1350, Portland, Oregon 97207
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (503) 222-3600

Jeff B. Curtis

1300 S.W. Sixth Avenue, P.O. 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.

<PAGE>

PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION

[LOGO]
Columbia

CMC SMALL CAP FUND
CMC SMALL/MID CAP FUND
CMC INTERNATIONAL STOCK FUND

CMC Small Cap Fund, CMC Small/Mid Cap Fund, and CMC International Stock
Fund (each a "Fund" and together the "Funds") are portfolios of CMC Fund Trust.
The Small Cap Fund and the Small/Mid Cap Fund seek to provide investors with
long-term capital appreciation. The Small Cap Fund will invest primarily in
smaller capitalization companies, and the Small/Mid Cap Fund will invest
primarily in companies with small to medium market capitalizations. The
International Stock Fund seeks to provide investors with long-term capital
appreciation by investing primarily in international stocks.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed on the adequacy of this
Prospectus. Any representation to the contrary is a criminal offense.

December 21, 2000

<PAGE>

--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------

Risk/Return Summary...........................................................3
Overview.............................................................3
Investment Strategy..................................................3
Risks of Investing in Common Stock...................................3
Information About the Funds..........................................3
CMC Small Cap Fund...................................................4
Goal........................................................4
Strategy....................................................4
Risk Factors................................................4
Historical Performance......................................5
Expenses....................................................7
Financial Highlights........................................8
CMC SMALL/MID CAP FUND...............................................9
Goal........................................................9
Strategy....................................................9
Risk Factors................................................9
Historical Performance.....................................10
Expenses...................................................10
Financial Highlights.......................................12
CMC INTERNATIONAL STOCK FUND........................................12
Goal.......................................................12
Strategy...................................................12
Risk Factors...............................................12
Historical Performance.....................................13
Expenses...................................................14
Financial Highlights.......................................16
MANAGEMENT...................................................................16
INFORMATION ABOUT YOUR INVESTMENT............................................17
Your Account........................................................17
Buying Shares..............................................17
Selling Shares.............................................18
Pricing of Shares..........................................18
Distribution and Taxes..............................................18
Income and Capital Gains Distributions.....................18
Tax Effect of Distributions and Transactions...............19
MORE ABOUT THE FUNDS.........................................................20
Investment Strategy.................................................20
Small Cap Fund and Small/Mid Cap Fund......................20
International Stock Fund...................................21
Changes to Investment Objective and Temporary Investments..22
Portfolio Turnover.........................................22
Other Risks.........................................................22
Foreign Securities.........................................23
FOR MORE INFORMATION.........................................................24

2
<PAGE>

--------------------------------------------------------------------------------
RISK/RETURN SUMMARY
--------------------------------------------------------------------------------

OVERVIEW
--------

This section introduces the Funds offered by this Prospectus.
For your convenience, concise descriptions of each Fund begin on the
next page. The descriptions provide the following information about
each Fund:

o GOAL
o STRATEGY
o RISK FACTORS
o HISTORICAL PERFORMANCE
o EXPENSES
o FINANCIAL HIGHLIGHTS

INVESTMENT STRATEGY
-------------------

Columbia Management Co., the investment adviser for the Funds
("CMC" or "Adviser"), takes a unique approach to investing, where all
Funds are managed using the expertise of the entire investment team.
Through this team effort, individual analysts and portfolio managers
have responsibility for tracking specific sectors or industries of the
market, identifying securities within those areas that are expected to
reward shareholders. Through this process the Adviser is able to
determine the emphasis to be placed on different industries and
selection of individual stocks in which the Funds may invest. In the
case of the International Stock Fund, this process enables the Adviser
to identify attractive regions, countries and industries in which to
invest. This approach is intended to uncover opportunities that offer
long-term financial reward. In building each Fund's portfolio, the
Adviser combines this top down approach with intensive bottom up
research of individual securities issues. The Small Cap and Small/Mid
Cap Funds focus on investment in small capitalization stocks and
securities, and in the case of the Small/Mid Cap Fund, both small
capitalization and medium capitalization stocks. Accordingly, these
Funds place a greater emphasis on bottom up research. Both types of
analysis, however, play an integral role in the investment process and
are explained in greater detail under "MORE ABOUT THE FUNDS, INVESTMENT
STRATEGY" in this Prospectus.

RISKS OF INVESTING IN COMMON STOCK
----------------------------------

Because the Funds invest primarily in common stocks, they are
subject to the risks associated with stock investing. Although common
stocks have historically provided long-term returns that are greater
than other types of investments, stock returns have also been volatile
over shorter periods of time. Consequently, the Funds' portfolios - and
likewise your investment in the Funds - will fluctuate in value in
response to changes in the economy and the activities, financial
prospects and results of the individual companies whose stock is held
by the Funds.

INFORMATION ABOUT THE FUNDS
---------------------------

3
<PAGE>

CMC SMALL CAP FUND

GOAL
----

What is the Fund's Investment Goal?

The Fund seeks to provide investors long-term capital
appreciation.

STRATEGY
--------

What investment strategies does the Fund use to pursue this goal?

Under normal market conditions, the Fund invests at least 65%
of its total asset value in common stocks of companies with market
capitalizations of less than 250% of the dollar-weighted median market
capitalization of the S&P Small Cap 600 Index. As of November 30, 2000,
under the above definition, companies with a market capitalization of
$2.1 billion or less would be considered small cap. Most of the assets
will be invested in U.S. common stocks. The Fund, however, may invest
in equity securities of foreign issuers when consistent with the Fund's
investment directive.

RISK FACTORS
------------

What are the principal risks of investing in the Fund?

In addition to the risks of investing in common stocks
described above under "RISKS OF INVESTING IN COMMON STOCK", investment
in small cap stocks present additional investment risks. This is
because small cap companies:

o May have limited operating histories, fewer financial
resources, and inexperienced management

o May be dependent on a small number of products or
services

o May have low trading volumes, making it difficult for the
Fund to sell a particular security, resulting in erratic
or abrupt price movements

The Fund invests in small cap companies in the technology
market sector. The risks of investing in technology related stocks may
be greater than investing in other market sectors because of:

o Competitive pressures among technology companies that
result in aggressive pricing of their products or
services

o Short product cycles due to accelerated rate of
technological developments

o Varying investor enthusiasm for technology and
technology-related stocks

<PAGE>

The price of technology stocks will likely fluctuate more than
securities of companies not dependent upon or associated with
technology because technology companies are affected by scientific and
technological developments and advancements and may be subject to
government regulation, including approval of their products.

You could lose money as a result of your investment in the
Fund. Additionally, the Fund could underperform other investments. You
should invest in this Fund only if you are willing to assume
substantial risks of significant fluctuations in the value of your
investment. An investment in this Fund should be part of a balanced
investment program. Because the Fund may invest in foreign issuers, the
Fund's total return may be affected by fluctuations in curency exchange
rates or political or economic conditions in a particlular country.

See "MORE ABOUT THE FUNDS" in this Prospectus and the Fund's
Statement of Additional Information for more information regarding the
Fund's investment strategy and risks.

HISTORICAL PERFORMANCE
----------------------

How has the Fund historically performed?

The bar chart and table on the following page illustrate the
Small Cap Fund's annual returns as well as its long term performance.
The bar chart shows how the Fund's performance has varied from year to
year. The table compares the Fund's performance over time to that of
the Russell 2000 Index, a widely recognized unmanaged index used as a
benchmark for small cap stock performance. The bar chart and table
assumes the reinvestment of dividends and distributions. The Funds'
historical performance does not indicate how the Fund will perform in
the future.

5
<PAGE>

Small Cap Fund

The bar chart shows the Year-By-Year Total Return As Of 12/31 Each Year

1990 -11.56%
1991 45.44%
1992 12.31%
1993 16.33%
1994 1.70%
1995 36.39%
1996 21.82%
1997 21.93%
1998 -1.05%
1999 60.00%

Best Quarter: 4Q '99 51.50%
Worst Quarter: 3Q '90 -28.29%
-----------------------------------------------------------------------

Average Annual Total Returns As Of 12/31/99

1 Year 5 Year 10 Year
-----------------------------------------------------------------------
CMC Small Cap Fund 60.00% 26.25% 18.55%
Russell 2000 Index 21.26% 16.69% 13.40%

The Fund's total return for the nine month period ended 9/30/00 was
15.76%.

6
<PAGE>

EXPENSES
--------

What expenses do I pay as an investor in the Fund?

The table below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. As a shareholder, you pay
no transaction fees in connection with your investment in the Fund.
Annual fund operating expenses described in the table are paid out of
the Fund's assets and are therefore reflected in the share price and
total return on the Fund.

------------------------------------------------------------------
The Fund does not charge a sales load or 12b-1 distribution fee.
------------------------------------------------------------------

--------------------------------------------------------------------------------
Fee Table

Shareholder transaction fees (fees paid directly None
from your investment)

Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)

Management Fees 0.75%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.04%

Total Fund Operating Expenses 0.79%

-----------------------------------------------------------------------

Expense Examples

These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods. The examples also assume that your investment has a 5% return
each year and that the Fund's operating expenses remain constant as a
percentage of net assets. Your actual costs may be higher or lower, but
based on these assumptions your costs would be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$81 $252 $439 $978

7
<PAGE>

FINANCIAL HIGHLIGHTS
--------------------

The financial highlights tables are intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single fund share. The total returns in each
table represent the rate of return an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Statement of Additional Information under "Financial Statements."

Small Cap Fund
<TABLE>

Year Ended October 31,

-------------------------------------------------------

2000 1999 1998 1997 1996
---- ----- ------ ------ ------

Net asset value, beginning of year............... $13.59 $9.96 $13.60 $13.01 $14.00
------ ----- ------ ------ ------

Income from investment operations:

Net investment income (loss)..................... (0.09) (0.04) (0.03) (0.01) (0.02)
Net realized and unrealized gains (losses)
on investments................................. 6.80 3.69 (2.21) 3.52 4.20
---- ---- ------ ---- ----
Total from investment operations............. 6.71 3.65 (2.24) 3.51 4.18
---- ---- ------ ---- ----

Less distributions:

Distributions from net capital gains............. (1.52) (0.02) (1.40) (2.92) (5.17)
------ ------ ------ ------ ------
Total distributions.......................... (1.52) (0.02) (1.40) (2.92) (5.17)
------ ------ ------ ------ ------

Net asset value, end of year..................... $18.78 $13.59 $ 9.96 $13.60 $13.01
====== ====== ===== ====== ======

Total return..................................... 50.49% 36.70% -16.49% 26.98% 30.30%

Ratios/Supplemental data
Net assets, end of year
(in thousands) ................................ $258,480 $240,129 $267,789 $521,770 $522,408
Ratio of expenses to average net assets.......... 0.79% 0.79% 0.77% 0.76% 0.78%
Ratio of net loss to average
net (0.39)% (0.33)% (0.20)% (0.08)% (0.14)%
assets.....................................
Portfolio turnover rate.......................... 163% 186% 159% 169% 148%

</TABLE>

NOTE: Per share amounts have been adjusted to retroactively reflect a 4 for 1
share split effective September 1, 1999.

8
<PAGE>

CMC SMALL/MID CAP FUND

GOAL
----

What is the Fund's Investment Goal?

The Fund seeks to provide investors long-term capital
appreciation.

STRATEGY
--------

What investment strategies does the Fund use to pursue this goal?

The Small/Mid Cap Fund's investment objective is to provide
long term growth of capital by investing primarily in common stocks of
companies with small and medium sized market capitalizations Under
normal market conditions, the Fund will invest at least 65% of its
assets in companies with a market capitalization equal to or less than
300 percent of the dollar weighted median market capitalization of the
S&P Mid Cap 400 Index. As of November 30, 2000, securities of a company
with a market capitalization of $8.2 billion or less would be eligible
for purchase by the Fund under this definition. Most of the assets
will be invested in U.S. common stocks. The Fund, however, may invest
in equity securities of foreign issuers when consistent with the Fund's
investment directive.

RISK FACTORS
------------

What are the principal risks of investing in the Fund?

In addition to the risks of investing in common stocks
described above under "RISKS OF INVESTING IN COMMON STOCK", investment
in small/mid cap stocks present additional investment risks. This is
because small/mid cap companies:

o May have limited operating histories, fewer financial
resources, and inexperienced management

o May be dependent on a small number of products or
services

o May have low trading volumes, making it difficult for the
Fund to sell a particular security, resulting in erratic
or abrupt price movements

The Fund invests in small cap companies in the technology
market sector. The risks of investing in technology related stocks may
be greater than investing in other market sectors because of:

o Competitive pressures among technology companies that
result in aggressive pricing of their products or
services

o Short product cycles due to accelerated rate of
technological developments

9
<PAGE>

o Varying investor enthusiasm for technology and
technology-related stocks

See "MORE ABOUT THE FUNDS" in this Prospectus and the Fund's
Statement of Additional Information for more information regarding the
Fund's investment strategy and risks.

HISTORICAL PERFORMANCE
----------------------

How has the Fund historically performed?

Because the Small/Mid Cap Fund is new, no historical performance is
presented.

EXPENSES
--------

What expenses do I pay as an investor in the Fund?

The table below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. As a shareholder, you pay
no transaction fees in connection with your investment in the Fund. The
Fund is new, so the annual fund operating expenses for the Fund are
based on estimates for the current fiscal year. In the future, the
amount of fees and expenses will depend on the actual average net
assets of the Fund during those years and a number of other factors.

------------------------------------------------------------------
The Fund does not charge a sales load or 12b-1 distribution fee.
------------------------------------------------------------------

10
<PAGE>

--------------------------------------------------------------------------------
Fee Table

Shareholder transaction fees (fees paid directly None
from your investment)

Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)

Management Fees 0. 75%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.10%(1)

Total Fund Operating Expenses 0. 85%
Expense Reimbursement 0. 05%(2)
Net Expenses 0. 80%

(1) "Other Expenses" are based on the estimated expenses that
the Fund expects to incur in its first fiscal year of
operation.

(2) For the fiscal years ending October 31, 2001, 2002 and
2003, CMC has agreed to reimburse the Fund for all
ordinary expenses of the Fund to the extent necessary to
maintain the Fund's Total Annual Fund Operating Expenses
at 0.80%.

--------------------------------------------------------------------------------

Expense Examples

These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods. The examples also assume that your investment has a 5% return
each year and that the Fund's operating expenses set forth above remain
constant as a percentage of net assets. Your actual costs may be higher
or lower, but based on these assumptions your costs would be:

1 Year 3 Years
------ -------
$82 $255

11
<PAGE>

FINANCIAL HIGHLIGHTS
--------------------

Because the Small/Mid Cap Fund is new, no financial information is
presented.

CMC INTERNATIONAL STOCK FUND

GOAL
----

What is the Fund's Investment Goal?

The Fund seeks to provide investors long-term capital
appreciation.

STRATEGY
--------

What investment strategies does the Fund use to pursue its goal?

Under normal market conditions, the Fund will invest at least
65% of its assets in equity securities of companies from at least three
countries other than the United States and may invest in companies
located anywhere in the world. While the Fund's investments are not
limited as to market capitalization, the Fund intends to invest
primarily in companies considered to be large and well-established,
based on standards of the applicable country or foreign market.

RISK FACTORS
------------

What are the principal risks of investing in the Fund?

In addition to the risks of investing in common stocks
described above under "RISKS OF INVESTING IN COMMON STOCK", investment
in foreign securities present additional investment risks. The risks
associated with foreign investing include:

o Foreign securities may be subject to greater fluctuations
in price than domestic securities

o The price of foreign securities are affected by changes
in currency exchange rates

o Foreign taxes may reduce a foreign investment's effective
yield

o A foreign security may be affected by potential political
or economic instability of the country of the issuer,
especially in emerging or developing countries

o Foreign companies are generally not subject to uniform
accounting, auditing, and financial reporting standards,
and have less governmental regulation and oversight than
U.S. companies

12
<PAGE>

o There is generally less public information available
about foreign companies

o Foreign securities are generally less liquid than U.S.
securities

See "MORE ABOUT THE FUNDS" in this Prospectus and the Fund's
Statement of Additional Information for more information regarding the
Fund's investment strategy and risks.

HISTORICAL PERFORMANCE
----------------------

How has the Fund historically performed?

The bar chart and table on the following page illustrates the
International Stock Fund's annual returns as well as its long term
performance. The bar chart shows how the Fund's performance has varied
from year to year. The table compares the International Stock Fund's
performance to that of the Morgan Stanley Capital Index (MSCI) EAFE, an
unmanaged index which reflects the movement of stock markets in Europe,
Australasia, and the Far East by representing a broad selection of
domestically listed companies within each market. The bar chart and
table assume the reinvestment of dividends and distributions. The
Fund's historical performance does not indicate how the Fund will
perform in the future.

13
<PAGE>

International Stock Fund

The bar chart shows the Year-By-Year Total Return As Of 12/31 Each Year

1995 5.52%
1996 16.77%
1997 10.18%
1998 12.17%
1999 59.02%

Best Quarter: 4Q '99 32.73%
Worst Quarter: 3Q '98 -18.24%
-----------------------------------------------------------------------

Average Annual Total Returns As Of 12/31/99

Inception
1 Year 5 Year (2/1/94)
-----------------------------------------------------------------------
CMC International Stock Fund 59.02% 19.35% 14.63%
(MSCI) EAFE Index 27.30% 16.06% 10.97%

The Fund's total return for the nine month period ended 9/30/00 was
-20.75%.

EXPENSES
--------

What expenses do I pay as an investor in the Fund?

14
<PAGE>

------------------------------------------------------------------
The Fund does not charge a sales load or 12b-1 distribution fee.
------------------------------------------------------------------

-----------------------------------------------------------------------
Fee Table

Shareholder transaction fees (fees paid directly None
from your investment)

Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)

Management Fees 0.75%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.36%

Total Fund Operating Expenses 1.11%

-----------------------------------------------------------------------

Expense Examples

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$133 $353 $612 $1,352

15
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------

International Stock Fund
<TABLE>

Year Ended October 31,
-------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............... $17.86 $12.54 $42.71 $42.46 $37.06
------ ------ ------ ------ ------

Income from investment operations:

Net investment income (loss)..................... 0.04 (0.02) 0.25 0.41 0.32
Net realized and unrealized gains (losses)
on investments................................. (0.36) 5.34 (0.78) 6.16 5.86
------ ---- ------ ---- ----
Total from investment operations............ (0.32) 5.32 (0.53) 6.57 6.18
------ ---- ------ ---- ----

Less distributions:

Dividends from net investment income............. - - - (0.46) (0.78)
Distributions from net capital gains............. (1.34) (0.00)* (29.64) (5.86) -
------ ---- ------ ---- ----

Total distributions......................... (1.34) 0.00 (29.64) (6.32) (0.78)
------ ---- ------ ---- ----

Net asset value, end of year..................... $16.20 $17.86 $12.54 $42.71 $42.46
====== ====== ====== ====== ======

Total return..................................... -3.58% 42.44% -1.24% 15.47% 16.67%

Ratios/Supplemental data

Net assets, end of year (in thousands)........... $22,975 $30,492 $15,377 $81,471 $73,542
Ratio of expenses to average net assets.......... 1.11% 1.31% 1.04% 1.05% 1.00%
Ratio of net income (loss) to average net assets. 0.12% (0.14)% 0.60% 0.88% 0.78%
Portfolio turnover rate.......................... 140% 96% 53% 127% 120%

</TABLE>
* Amount represents less than $0.01 per share.

--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------

The Funds' investment adviser is Columbia Management Co., 1300 S.W.
Sixth avenue, P.O. Box 1350, Portland, Oregon 97207-1350 ("CMC" or "Adviser").
CMC has acted as an investment adviser since 1969.

The Funds' have contracted with CMC to provide research, advice and
supervision with respect to investment matters and to determine what securities
to purchase or sell and what portion of the Funds' assets to invest. For the
fiscal year ended October 31, 2000, the Small Cap Fund and the International
Stock Fund paid CMC a management fee, expressed as a percentage of average net
assets, of 0.75%. Under its advisory contract with the Adviser, the Small/Mid
Cap Fund will pay a management fee, expressed as a percentage of average net
assets of 0.75%.

16
<PAGE>

CMC uses an investment team approach to analyze investment themes and
strategies for the Funds. Members of the investment team are responsible for the
analysis of particular industries and market sectors within those industries and
for recommendations on individual securities within those industries or market
sectors.

Richard J. Johnson, a Vice President of CMC and a Chartered Financial
Analyst, has had principal responsibility for investment decisions of the Small
Cap Fund (since April 1995). Mr. Johnson joined the Adviser in 1994 as a
portfolio analyst and member of the investment team. Before joining the Adviser,
Mr. Johnson was a portfolio manager and analyst for Provident Investment Counsel
(1990-1994).

Mr. Johnson also has principal oversight responsibility for investment
strategies developed on behalf of the Small/Mid Cap Fund and is responsible for
overseeing Steven N. Marshman who, using the expertise and input of the
Investment Team, implements on a daily basis the investment strategies for the
Fund. Mr. Marshman, a Vice president of Columbia and a Chartered Financial
Analyst, joined Columbia in 1992.

James M. McAlear, a Vice President of CMC (since 1992), has had
principal responsibility for investment decisions of the International Stock
Fund since its inception in 1994. He joined the Adviser in 1992 as a portfolio
analyst and member of the investment team. Previously, Mr. McAlear was Senior
Vice President for American Express Financial Advisers in London (1985-1992) and
Executive Director for Merrill Lynch Europe (1972-1985).

--------------------------------------------------------------------------------
INFORMATION ABOUT YOUR INVESTMENT
--------------------------------------------------------------------------------

YOUR ACCOUNT
------------

Buying Shares
-------------

Shares in the Funds are available for purchase by
institutional buyers, enabling them to invest in diversified portfolios
of either small cap securities , small/mid cap or foreign securities in
a pooled environment, rather than purchasing securities on an
individual basis.

If you want to invest in a Fund, contact a CMC representative
at 1-800-547-1037. Additionally, CMC may, at its discretion also use
the Funds as a way to diversify the portfolios of its separately
managed accounts. If the separately managed account is governed by the
rules and regulations promulgated under the Employee Retirement Income
Securities Act of 1974, any investment in the Funds will only be made
after the investment has been approved by an independent fiduciary and
certain conditions are satisfied. See the Statement of Additional
information for more detail.

The price for a Fund's shares is the Fund's net asset value
per share ("NAV"), which is generally calculated as of the close of
trading on the New York Stock Exchange (usually 4:00 p.m., Eastern
time) every day the exchange is open. Your order will be priced at the
next NAV calculated after your order is accepted by the Fund.

Although none of the Funds has a policy with respect to
initial or subsequent minimum investments, purchase orders may be
refused at the discretion of the Fund.

17
<PAGE>

Selling Shares
--------------

You may sell shares at any time. Upon redemption you will
receive the Fund's next NAV calculated after your order is accepted by
the Fund's transfer agent. Any certificates representing Fund shares
being sold must be returned with your redemption request. You can
request a redemption by calling a CMC Representative at 1-800-547-1037.
Redemption proceeds are normally transmitted in the manner specified in
the redemption request on the business day following the effective date
of the redemption. Except as provided by rules of the Securities and
Exchange Commission, redemption proceeds must be transmitted to you
within seven days of the redemption date.

Each Fund also reserves the right to make a "redemption in
kind" - pay you in portfolio securities rather than cash - if the
amount you are redeeming is large enough to affect the Fund's
operations (for example, if the redemption represents more than 1% of
the Fund's assets).

Pricing of Shares
-----------------

Each Fund's investments are valued based on their market value
using the last sales price reported on the principal securities
exchange on which the investment is traded, or, in the absence of
recorded sales, at the closing bid prices on such exchanges or over the
counter markets. If applicable to a Fund, securities trading in various
foreign markets may take place on days when the New York Stock Exchange
is closed. Further, when the New York Stock Exchange is open, the
foreign markets may be closed. Therefore, the calculation of the Fund's
NAV may not take place at the same time the prices of certain
securities held by a Fund are determined. In most cases, events
affecting the values of portfolio securities that occur between the
time their prices are determined and the close of normal trading on the
New York Stock Exchange on a day the Fund's NAV is calculated will not
be reflected in the Fund's NAV. If, however, CMC determines that a
particular event would materially affect the Fund's NAV, then CMC,
under the general supervision of the Board of Trustees, will use all
relevant information available to it to determine a fair value for the
affected portfolio securities.

DISTRIBUTION AND TAXES
----------------------

Income and Capital Gains Distributions
--------------------------------------

Each Fund pays its shareholders dividends from its net
investment income and generally distributes substantially all of its
net realized capital gains to shareholders once a year, usually in
December. The amount of capital gains distributed will depend on the
amount of capital gains realized from the sale of the Fund's portfolio
securities. Dividend and capital gain distributions are declared and
paid as cash dividends and reinvested in additional shares at the net
asset value, as calculated after payment of the distribution, at the
close of business on the dividend payment date, unless you have elected
to receive the capital gain distribution in cash.

18
<PAGE>

Tax Effect of Distributions and Transactions
--------------------------------------------

The dividends and distributions of each Fund are taxable to
most investors, unless the shareholder is exempt from federal or state
income taxes or the investment is in a tax-advantaged account. The tax
status of any distribution is the same regardless of how long you have
been in the Fund and whether you reinvest your distributions or take
them as income. In general, distributions are taxable as follows:

<TABLE>
------------------------------------------------------------------------------------
Taxability of Distributions
------------------------------------------------------------------------------------
<S> <C> <C> <C>

Type of Tax Rate for Tax Rate for
Distribution 15% Bracket 28% Bracket or Higher
------------ ----------- ---------------------

Income Dividends Ordinary Income Rate Ordinary Income Rate

Short Term Capital Gains Ordinary Income Rate Ordinary Income Rate

Long Term Capital Gains 10% 20%
------------------------------------------------------------------------------------
</TABLE>

Each Fund expects that, as a result of its investment
objective to achieve capital appreciation, its distributions will
consist primarily of capital gains. Each year the Fund's will send you
information detailing the amount of ordinary income and capital gains
distributed to you for the previous year.

The sale of shares in your account may produce a gain or loss
and is a taxable event. For tax purposes, an exchange of shares of a
Fund for shares of another fund managed by the Adviser is the same as a
sale.

----------------------------------------------------------------
Your investment in a Fund could have additional tax
consequences. Please consult your tax professional for
assistance as to the possible application of foreign,
state and local income tax laws to Fund dividends and
capital distributions.
----------------------------------------------------------------

<PAGE>

--------------------------------------------------------------------------------
MORE ABOUT THE FUNDS
--------------------------------------------------------------------------------

INVESTMENT STRATEGY
-------------------

Small Cap Fund and Small/Mid Cap Fund
-------------------------------------

In identifying attractive securities for investment in the
Funds, the Adviser begins with a bottom up, fundamental analysis of
individual companies. The bottom up analysis is intended to provide
insights about the financial condition and growth prospects of a
company whose stock is under consideration. As part of this intensive
research process, the Adviser evaluates a company's balance sheets and
income statements to draw conclusions about earnings growth and
profitability. The Adviser also examines quality of management, a
company's level of investment in research and development, as well as
the company's potential for new products or services. In addition, the
Adviser looks at sales trends and factors affecting stock price, such
as price earnings and price to book ratios. To round out the bottom up
research, the Adviser uses top down analysis to determine how macro
changes in the economy may affect the prospects for the industry in
which the company under consideration is operating. By utilizing this
investment strategy, the Funds strive to anticipate and act upon market
change, understand its effects on the risks and rewards of the Funds'
securities, and thereby generate consistent, competitive results over
the long-term.

The Funds may invest in securities convertible into common
stock. Securities convertible into common stock may include both debt
securities and preferred stock. The Funds 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.

There is no minimum aggregate market valuation for a company
to be considered an appropriate investment for either Fund. Both Funds
may invest up to 35% of the value of its total assets in the securities
of larger, more established companies when these securities offer
capital appreciation potential that is generally comparable to small or
mid cap securities.

20
<PAGE>

International Stock Fund
------------------------

For the International Stock Fund, the Adviser uses a top down
analysis to identify attractive countries, stock markets, industries,
sectors and securities for investment. As part of this approach, the
Adviser conducts an ongoing evaluation of the global economic and
investment environments to anticipate how potential change may
influence the prospects for particular global regions, countries and
the industries in those countries. This is because even small shifts in
such macroeconomic factors as interest rates, inflation, government
regulation, political activity, flows of capital and international
monetary policy can affect the overall economic health of an entire
global region or a country, including the industries in that region or
country. Once the Adviser has identified attractive regions, countries
and industries for emphasis through the top down approach, fundamental
security analysis is used to evaluate the merits of individual
companies being considered for investment. By utilizing this investment
strategy, the Adviser strives to anticipate and act upon economic and
stock market changes, thereby generating consistent, competitive
investment results over the long-term.

The Fund may invest up to 25% of its assets in smaller, less
seasoned companies when these securities offer attractive opportunities
consistent with the Fund's investment objective. These investments are
subject to the risks of investing in small cap companies discussed in
the Risk/Return Summary of the Small Cap Fund.

The Fund intends to invest principally in the equity
securities of companies located in the following countries: Australia,
Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong,
India, Ireland, Italy, Japan, Korea, Mexico, The Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland,
Thailand, and the United Kingdom.

The value of the International Stock Fund is measured in U.S.
dollars and 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 change 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. The Fund will only enter into forward
contracts for hedging and not for speculation. When required by the
Investment Company Act or the SEC, the Fund will "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 forward contracts.
Under normal market conditions, no more than 25% of the Fund's assets
may be committed to 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 resulting

<PAGE>

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.

In addition to investing directly in foreign equity
securities, the Fund may also purchase 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.

Changes to Investment Objective and Temporary Investments
---------------------------------------------------------

The investment objective of each Fund may be changed by the
Board of Trustees, without shareholder approval, upon 30 days written
notice. Additionally, under adverse market conditions, a Fund may
depart from its principal investment strategy by taking temporary
defensive positions in response to adverse economic or market
conditions. When a Fund assumes a temporary defensive position, it is
not invested in securities designed to achieve its stated investment
objective.

Portfolio Turnover
------------------

Each Fund is actively managed, which means the Fund's manager
may frequently buy and sell securities. Frequent trading increases a
Fund's turnover rate and may increase transaction costs, such as
brokerage commissions. Increased transaction costs could detract from a
Fund's performance.

OTHER RISKS
-----------

In addition to the certain risks stated in the "RISK/RETURN SUMMARY,"
there are other risks of investing in the Funds such as:

Foreign Securities. The International Stock Fund may invest a portion
of its assets in companies located in developing countries or in countries with
new or developing capital markets, such as countries in Eastern Europe and South
America or Southeast Asia. The considerations noted above concerning 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 more
developed countries. Investments in these markets may involve significantly
greater risks, as well as the potential for greater gains.

22
<PAGE>

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.

<PAGE>

--------------------------------------------------------------------------------
FOR MORE INFORMATION
--------------------------------------------------------------------------------

You can find additional information on the Funds' structure and
performance in the following documents:

o Annual/Semiannual Reports. While the Prospectus describes the
Funds' potential investments, these reports detail the Funds'
actual investments as of the report date. Reports include a
discussion by Fund management of recent market conditions,
economic trends, and Fund strategies that significantly affected a
Fund's performance during the reporting period.

o Statement of Additional Information ("SAI"). A supplement to the
Prospectus, the SAI contains further information about each Fund
and its investment restrictions, risks and polices. It also
includes the most recent annual report and the independent
accountant's report.

A current SAI for the Funds is on file with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference, which means it
is considered part of this Prospectus.

A copy of the SAI and current annual report is attached to this
Prospectus. To obtain additional copies of the SAI or copies of the current
annual/semiannual report, without charge, or to make inquiries of a Fund, you
may contact:

CMC Fund Trust
1300 S.W. Sixth Avenue
Portland, Oregon 97201
Telephone: 1-800-547-1037

Information about a Fund (including the SAI) can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. Information about the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Reports and other information regarding the Fund are also on the
SEC's Internet website at http://www.sec.gov, and copies of this information may
be obtained, after paying a duplicating fee, by electronic request at the SEC's
E-mail address at [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

SEC file number: 811-5857

24
<PAGE>

-----------------------------------------------------------------------------

CMC SMALL CAP FUND
CMC SMALL/MID CAP FUND
CMC INTERNATIONAL STOCK FUND
------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

CMC Fund Trust
1300 S.W. Sixth Avenue
P.O. Box 1350
Portland, Oregon 97207
(503) 222-3600

This Statement of Additional Information contains information relating
to CMC Fund Trust (the "Trust") and three portfolios of the Trust, CMC Small Cap
Fund, CMC Small/Mid Cap Fund and CMC International Stock Fund (each a "Fund" and
together the "Funds").

This Statement of Additional Information is not a Prospectus. It
relates to a Prospectus dated December 21, 2000 (the "Prospectus") and should be
read in conjunction with the Prospectus. Copies of the Prospectus are available
without charge upon request to the Trust or by calling 1-800-547-1037.

TABLE OF CONTENTS

Description of the Funds.....................................................2
Management...................................................................11
Investment Advisory and Other Fees Paid to Affiliates........................17
Portfolio Transactions.......................................................18
Capital Stock and Other Securities...........................................20
Purchase, Redemption and Pricing of Shares...................................20
Custodians...................................................................23
Independent Accountants......................................................23
Taxes........................................................................24
Performance..................................................................28
Financial Statements.........................................................29

December 21, 2000

<PAGE>
--------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES
---------------------------------

CMC SMALL CAP FUND

The Small Cap Fund's investment objective is capital appreciation. The
Fund's investment 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.

To achieve its investment objective, the Fund will generally invest at
least 65% of its total asset value in common stocks or securities convertible
into common stock of companies with market capitalizations of less than 250% of
the dollar-weighted median market capitalization of the S&P Small Cap 600 Index.
The S&P Small Cap 600 Index is a capitalization weighted index that measures the
performance of selected U.S. stocks with small market capitalization. As of
November 30, 2000, under the above definition, companies with a market
capitalization of $2.1 billion or less would be considered small cap. The Fund
may, however, invest from time to time up to 35% of the value of its total
assets in the securities of larger companies when the Adviser believes these
securities offer capital appreciation potential that is generally comparable to
small cap securities.

CMC SMALL/MID CAP FUND

The Small/Mid Cap Fund's investment objective is capital appreciation.
The Fund's investment 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.

2
<PAGE>

To achieve its investment objective, the Fund will generally invest at
least 65% of its total asset value in common stocks or securities convertible
into common stock of companies with small to medium-size market capitalizations
equal to or less than 300 percent of the dollar weighted median market
capitalization of the S&P Mid Cap 400 Index. Under this definition, as of
November 30, 2000, companies with a market capitalization of $8.2 billion or
less would be considered small to medium size market capitalization and be
eligible for purchase by the Fund. Investments by the Fund in companies which
grow above these medium capitalization criteria may continue to be held if the
Adviser believes they are still attractive investments and offer similar returns
as other securities held by the Fund.

CMC INTERNATIONAL STOCK FUND

The International Stock Fund's investment objective is capital
appreciation. The Fund's investment 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.

To achieve its investment objective, under normal conditions, the Fund
will invest at least 65% of the Fund's assets in equity securities, including
securities convertible into equity securities, of issuers from at least three
countries other than the United States and may invest in companies located
anywhere in the world. Generally the Fund will invets in companies that each
have an aggregate market valuation of at least $500 million or are considered
large and well-established, based on the standards of the applicable country or
foreign market. The Fund may invest in smaller, less seasoned companies when the
Adviser believes these companies offer attractive opportunities consistent with
the Fund's overall investment objective. As discussed further below, an
investment in a less seasoned company may involve greater risks than an
investment in a larger, more established company.

INVESTMENTS HELD BY THE FUNDS
-----------------------------

Under normal conditions, the Funds will invest in equity securities,
including securities convertible into equity securities. Additional information
with respect to certain securities in which the Funds may invest is set forth
below.

Options and Financial Futures Transactions
------------------------------------------

Each Fund may invest up to 5% of its net assets in premiums to purchase
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 Funds 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.
The Funds may write call options but only if such options 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

<PAGE>

securities index is covered if the Fund owns securities whose price changes, in
the opinion of the Adviser, are expected to be substantially similar to those of
the index. A call option may also be covered in any other manner in accordance
with the rules of the exchange upon which the option is traded and applicable
laws and regulations. A call option is covered if it is written on a security
the Fund owns. Each Fund may write such options on up to 25% of its net assets.

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. The Funds' investment restrictions do not limit the percentage of the
Funds' assets that may be invested in financial futures transactions. Each Fund,
however, does not intend to enter into financial futures transactions for which
the aggregate initial margin exceeds 5% 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 may 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, each Fund will be required to
deposit with its custodian, in a segregated account, cash or certain U.S.
government securities, or any other portfolio assets as permitted by the
Securities and Exchange Commission rules and regulations 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, if 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 option or futures contract when
needed; (c) the need for additional skills and techniques beyond those required
for normal portfolio management; and (d) losses on futures contracts resulting
from market movements not anticipated by the Adviser.

Foreign Securities
------------------

Both the Small Cap Fund and the Small/Mid Cap Fund may invest up to
one-third of its total assets in securities of foreign issuers in developed
foreign countries, primarily companies in

<PAGE>

Canada, Western Europe and Asia, including securities issued by foreign
governments, denominated in U.S. dollars. Investments in foreign securities may
involve a greater degree of risk than those in domestic securities. For a
discussion of the risks of investing in foreign securities, see the summary of
the International Stock Fund in the Prospectus under "RISK/RETURN SUMMARY" and
"MORE ABOUT THE FUNDS, OTHER RISKS."

Repurchase Agreements
---------------------

Each 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 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. Each Fund will enter
into repurchase agreements only with those banks or securities dealers who are
deemed creditworthy by the Adviser. 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.

Illiquid Securities
-------------------

No illiquid securities will be acquired by any of the Funds if upon the
purchase more than 10% 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 Securities and Exchange Commission
("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.

Each of the Funds 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, these securities
are considered to be liquid and thus not subject to the Fund's 10% 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

<PAGE>

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).

Convertible Securities and Warrants
-----------------------------------

Each Fund may invest in convertible debentures and convertible
preferred stock, each convertible into common stock. 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
Funds 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 Funds 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 each 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.

Investments in Small and Unseasoned Companies
---------------------------------------------

The Funds may invest in companies that are unseasoned; that is,
companies that have limited or unprofitable operating histories, limited
financial resources, and inexperienced management. In addition, small and
unseasoned companies often face competition from larger or more established
firms that have greater resources. Securities of small and unseasoned companies
are 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 need to sell them over an extended
period or below the original purchase price. Investments by the Funds in these
small or unseasoned companies may also be regarded as speculative. Each of the
Small Cap Fund and Small/Mid Cap Fund has a fundamental policy not to invest
more than 10% of its total assets in companies that have a record of less than
three years of continuous operations. The International Stock Fund limits
investments in small and unseasoned companies to 5% of its total assets.

<PAGE>

Temporary Investments
---------------------

When, as a result of market conditions, the Adviser determines a
temporary defensive position is warranted to help preserve capital, a 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. The International Stock Fund may invest in such
securities 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 of capital appreciation.

Technology Sector
-----------------

The Small Cap and Small/Mid Cap Funds may invest a significant portion
of their assets in companies in the technology sector. The Funds consider
technology to be a sector larger than any one industry. Accordingly, investments
by any Fund in companies within the technology sector will not be considered a
concentration of investments in an industry.

INVESTMENT RESTRICTIONS
-----------------------

The following is a list of investment restrictions applicable to the
Funds. 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, provided,
however, at no time will a Fund's investment in illiquid securities exceed 15%
of its net assets. The Trust may not change these restrictions without a
majority vote of the outstanding securities of the applicable Fund.

The Small Cap Fund may not:

1. Buy or sell commodities. The Fund may, however, invest in
futures contracts relating to broadly based stock indices, subject to the
restrictions set forth below in restriction 15.

2. Concentrate investments in any industry. The Fund, however, may
(a) invest up to 25% of the value of its total assets in any one industry and
(b) invest for temporary defensive purposes up to 100% 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, repurchase agreements, bonds, debentures, or other debt
securities constituting part of an issue). For purposes of this restriction, 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.

7
<PAGE>

5. Purchase illiquid securities, if upon the purchase more than 10%
of the value of the Fund's net assets would consist of these securities. See
"DESCRIPTION OF THE FUNDS, INVESTMENTS HELD BY THE FUNDS" for a complete
discussion of illiquid securities.

6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10% 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% 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% 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 does not own in the aggregate more than 10% of the outstanding
voting securities of such investment company.

9. Issue senior securities, bonds, or debentures.

10. 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 Securities Act of 1933, as amended ("1933 Act").

11. Borrow money in excess of 5% of its net asset 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% of the value of the
Fund's total assets to be invested in companies which have a record of less than
three years of 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 Fund owns the
securities sold short or owns other securities convertible into an equivalent
amount of 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% of the value of the Fund's net assets
may, at the time, be held as collateral for such sales.

15. Buy and sell puts and calls 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.

8
<PAGE>

The Small/Mid Cap Fund may not:

1. Buy or sell commodities. The Fund may, however, invest in
futures contracts relating to broadly based stock indices, subject to the
restrictions set forth below in restriction 15.

3. Buy or sell real estate.

6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10% of the outstanding voting securities of
that issuer to be held in the Fund.

9. Issue senior securities, bonds, or debentures.

11. Borrow money in excess of 5% of its net asset value. Any
borrowing must only be temporary, from banks, and for extraordinary or emergency
purposes.

9
<PAGE>

13. Invest in companies for the purpose of exercising control or
management.

The International Stock Fund may not:

1. Buy or sell commodities. However, the Fund may invest in futures
contracts or options on such contracts relating to broadly based stock indices,
subject to the restrictions set forth below in restriction 15, and may enter
into foreign currency transactions.

2. Concentrate investments in any industry. However, the Fund may
(a) invest up to 25% of the value of its assets in any one industry and (b)
invest for temporary defensive purposes up to 100% 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 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, repurchase agreements, 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.

5. Purchase illiquid securities, if upon the purchase more than 10%
of the value of the Fund's assets (taken at current value) would consist of
these securities. See "DESCRIPTION OF THE FUNDS, INVESTMENTS HELD BY THE FUNDS"
for a complete discussion of illiquid securities.

6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10% of the outstanding voting securities of
that issuer to be held by the 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% 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% of the assets of
the Fund.

10
<PAGE>

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% of the total outstanding voting stock of such company is owned by
the Fund, (ii) 5% of the Fund's total assets would be invested in any one such
company, and (iii) 10% of the 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 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%. The Fund will not make any additional investments while borrowings exceed
5% of the Fund's total assets.

12. Invest its funds in the securities of any company if the
purchase would cause more than 5% of the value of the 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 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% of the value of the 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 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.

--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------

<PAGE>

Inc., Columbia Common Stock Fund, Inc., Columbia International Stock Fund, Inc.,
Columbia Oregon Municipal Bond Fund, Inc., Columbia National Municipal Bond
Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia Short Term Bond
Fund, Inc., Columbia Special Fund, Inc., Columbia Growth Fund, Inc., Columbia
Daily Income Company, Columbia Small Cap Fund, Inc., Columbia Strategic Value
Fund, Inc., Columbia Technology Fund, Inc. and Columbia Fixed Income Securities
Fund, Inc.

J. JERRY INSKEEP, JR.,* Age 69, Chairman and Trustee of the Trust; Chairman and
Director of each of the Columbia Funds; Consultant with Columbia Management Co.
(the "Adviser"), the investment adviser of the Fund (since December 2000);
formerly President of the Trust and each of the Columbia Funds; formerly
Chairman and a Director of the Adviser, Columbia Funds Management Company
("CFMC"), Columbia Trust Company (the "Trust Company"), the Fund's transfer
agent; and formerly a Director of Columbia Financial Center Incorporated
("Columbia Financial"). Mr. Inskeep's business address is 1300 S.W. Sixth
Avenue, P.O. Box 1350, Portland, Oregon 97207.

JAMES C. GEORGE, Age 68, Trustee of the Trust (since December 1997) and Director
of each of the Columbia Funds (since June 1994). Mr. George, former investment
manager of the Oregon State Treasury (1966-1992), is an investment consultant.
Mr. George's business address is 1001 S.W. Fifth Avenue, Portland, Oregon 97204.

PATRICK J. SIMPSON, Age 56, Trustee of the Trust (since April 2000) and Director
of each of the Columbia Funds (since April 2000); attorney with Perkins Coie
LLP. Mr. Simpson's business address is 1211 S.W. Fifth Avenue, Suite 1500,
Portland, Oregon 97204.

RICHARD L. WOOLWORTH, Age 59, Trustee of the Trust and Director of each of the
Columbia Funds; Chairman of Regence BlueCross BlueShield of Oregon. Mr.
Woolworth's address is 200 S.W. Market Street, Portland, Oregon 97201.

JEFF B. CURTIS,* Age 47, President and Assistant Secretary of the Trust and each
of the Columbia Funds (since April 2000); Chief Operating Officer (since July
2000) and Secretary (April 1993 - October 1999), Director and President of
Columbia Financial (since October 1999); President and Chief Operating Officer
(since October 2000), Chairman (since March 2000), Director (since January
1999), Senior Vice President (January 1999-October 2000) and Secretary (April
1993-October 2000) of the Trust Company; President (since October 2000), Chief
Operating Officer (since July 2000), Director (since December 1997) and Senior
Vice President (January 1999-October 2000) of the Adviser and CFMC. Prior to his
current officer positions, Mr. Curtis was Vice President and General Counsel of
the Adviser, CFMC, the Trust Company and Columbia Financial (from April 1993 to
December 1998). Mr. Curtis's business address is 1300 S.W. Sixth Avenue,
Portland, Oregon 97207.

THOMAS L. THOMSEN,* Age 56, Vice President of the Trust and each of the Columbia
Funds (since April 2000); Chief Executive Officer (since October 2000),
President

<PAGE>

(December 1997-October 2000), Chief Investment Officer (since December 1997) and
Director (since 1980) of the Trust Company; Chairman (since October 2000),
Director (since 1989), President (December 1997-October 2000), Chief Investment
Officer (since December 1997) of the Adviser; Chief Executive Officer and
Chairman (since October 2000) Director (since 1982), Chief Investment Officer
(since December 1997) and President (December 1997-October 2000) of CFMC. Prior
to his current officer positions, Mr. Thomsen was Vice President of the Adviser,
CFMC and the Trust Company. Mr. Thomsen's business address is 1300 S.W. Sixth
Avenue, Portland, Oregon 97207.

MYRON G. CHILD,* Age 60, Vice President of the Trust and each of the Columbia
Funds (since April 2000); Vice President of the Trust Company (since December
1997); Vice President of the Adviser and CFMC (since December 1997). Prior to
becoming Vice President to the Adviser and CFMC, Mr. Child was Corporate
Controller (from March 1981 to November 1997). Mr. Child's business address is
1300 S.W. Sixth Avenue, Portland, Oregon 97207.

KATHLEEN M. GRIFFIN,* Age 41, Vice President of the Trust and each of the
Columbia Funds (since April 2000); Vice President of Columbia Financial (since
December 1997). Prior to becoming a Vice President of Columbia Financial, Ms.
Griffin was Manager of Shareholder Communications (from January 1995 to November
1997). Ms. Griffin's business address is 1300 S.W. Sixth Avenue, Portland,
Oregon 97207.

JEFFREY L. LUNZER,* Age 39, Vice President of the Trust and each of the Columbia
Funds (since April 2000); Vice President of the Trust Company (since April
2000), the Adviser and CFMC (since January 1999). Prior to becoming a Vice
President of the Trust Company, Adviser and CFMC, Mr. Lunzer was the Funds'
Controller (from December 1998 to December 1999). Prior to joining the Adviser
and CFMC, Mr. Lunzer was Vice President and Accounting Manager for WM
Shareholder Services, Inc., a subsidiary of Washington Mutual Bank (from 1984 to
November 1998), and Treasurer and Fund Officer of WM Group of Funds, a mutual
fund company (from 1988 to November 1998). Mr. Lunzer's business address is 1300
S.W. Sixth Avenue, Portland, Oregon 97207.

SUSAN J. WOODWORTH,* Age 48, Vice President of the Trust and each of the
Columbia Funds (since April 2000); Vice President of the Trust Company (since
December 1997). Prior to becoming Vice President of the Trust Company, Ms.
Woodworth was Manager of Mutual Fund Operations (from July 1980 to November
1997). Ms. Woodworth's business address is 1300 S.W. Sixth Avenue, Portland,
Oregon 97207.

MARK A. WENTZIEN,* Age 40, Secretary of the Trust and each of the Columbia Funds
(since April 2000); Director, Vice President, Compliance Officer and Secretary
of Columbia Financial (since January 1999); Secretary (since October 2000);
Associate Counsel of the Trust Company (since January 1999); Vice
President-Legal of the Adviser and CFMC (since July 1999), and Associate Counsel
(from April 1997 to June 1999). Prior to joining the Adviser and CFMC, Mr.
Wentzien was an attorney with the law firm of Davis Wright Tremaine LLP (from
September 1985 to April 1997). Mr. Wentzien's business address is 1300 S.W.
Sixth Avenue, Portland, Oregon 97207.

<PAGE>

*These individuals are "interested persons" as defined by the
Investment Company Act of 1940 (the "1940 Act") and receive no fees or salaries
from the Trust or the Funds.

The following table sets forth the compensation received by the
disinterested trustees of the Trust for the fiscal year ended October 31, 2000:

Total Compensation from the
Trustee Compensation From Trust Trust and Columbia Funds
------- ----------------------- ---------------------------

Richard L. Woolworth $9,000 $33,000
Thomas R. Mackenzie* $4,500 $16,000
James C. George $9,000 $32,000
Patrick J. Simpson** $4,500 $16,000

* Mr. Mackenzie retired as a trustee of the Trust in April 2000.

** Mr. Simpson was elected as Trustee of the Trust to fill the vacancy created
by the retirement of Mr. Mackenzie.

At November 30, 2000 (for CMC Small Cap and CMC International Funds)
and December 1, 2000 (for CMC Small/Mid Cap Fund), to the knowledge of the
Trust, the following persons owned of record or beneficially more than 5% of the
outstanding shares of the Funds:

Shares Beneficially Owned

Name and Address at November 30, 2000
---------------- ---------------------------

CMC Small Cap Fund

OSU Foundation - Small Cap 1,127,870 (8.30%)
850 SW 35th Street

Corvallis, OR 97333

JELD-WEN, Inc. Pension Trust 928,897 (6.83%)
3250 Lakeport Blvd.

Klamath Falls, OR 97601

14
<PAGE>

Shares Beneficially Owned
Name and Address at November 30, 2000
---------------- ---------------------------

Legacy Health System 899,459 (6.62%)
Employees Retirement Plan-Small Cap
2801 N. Grantenbein Avenue

Portland, OR 97227

Anchorage Police & Fire Retirement Fund 688,964 (5.07%)
Transit Administration, Building A
36507 Tudor Road
Anchorage, AK 99501

CMC Small/Mid Cap Fund

Lumber Industry Pension Fund 710,156 (24.14%)
Associated Administrators, Inc.
2929 N.W. 31st Avenue
Portland, Oregon 97205

Longview Fibre Company 634,805 (21.58%)
End of Fibre Way
Longview, Washington 98632

Oregon Community Foundation 500,000 (17%)
621 S.W. Morrison Street, Suite 725
Portland, Oregon 97205

Freightliner Corporation Pension Plan 473,817 (16.11%)
4747 North Channel Avenue
Portland, Oregon 97217

Lumber Employer & 296,551 (10.08%)
Western Counsel-L.P.I.W.
Pension
Associated Administrators, Inc.
2929 N.W. 31st Avenue
Portland, Oregon 97210

15
<PAGE>

Shares Beneficially Owned
Name and Address at November 30, 2000
---------------- ---------------------------

CMC International Stock Fund

Lumber Industry Pension Fund 387,858 (27.42%)
Associated Administrators, Inc.
2929 N.W. 31st Avenue

Portland, OR 97205

Freightliner Corporation Pension Plan 314,063 (22.20%)
4747 North Channel Avenue

Portland, OR 97217

Oregon Sheet Metal Worker's Pension Trust 219,847 (15.54%)
740 North Knott Street

Portland, OR 97227-2099

AECOM Technology Corp. Pension Plan 184,905 (13.07%)
3250 Wilshire Blvd., 5th Floor

Los Angeles, CA 90010

Oregon Steel Mills Inc. Pension Plan 101,663 (7.19%)
1000 S.W. Broadway Drive

Portland, OR 97205

As defined by SEC rules and regulations, the Lumber Industry Pension
Fund is a "control person" of the International Stock Fund since it owns over
25% of the voting securities of the Fund. The fact that the Lumber Industry
Pension Fund owns over 25% of the Fund's voting securities means it may be able
to impact the outcome of any matter in which shareholders are asked to vote.

16
<PAGE>
--------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES
--------------------------------------------------------------------------------

The investment adviser to the Funds is Columbia Management Co. (the
"Adviser"). The Adviser has entered into an investment contract with each Fund.
Pursuant to the investment contract the Adviser provides research, advice, and
supervision with respect to investment matters and determines what securities to
purchase or sell and what portion of the Fund's assets to invest. The Adviser
and the Trust Company are indirect wholly owned subsidiaries of FleetBoston
Financial Corporation ("Fleet"). Fleet and its affiliates provide a wide range
of banking, financial, and investment products and services to individuals and
businesses. Their principal activities include customer and commercial banking,
mortgage lending and servicing, trust administration, investment management,
retirement plan services, brokerage and clearing services, securities
underwriting, private and corporate financing and advisory activities, and
insurance services.

The Adviser provides office space and pays all executive salaries and
executive expenses of each Fund. Each 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, broker's 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 other
expenses of preparing its registration statement, prospectuses, and reports.

For its services provided to each Fund, the Adviser charges an advisory
fee, which is accrued daily and paid monthly. The advisory fee for each Fund
equals the annual rate of 0.75 of 1% 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. The Small/Mid Cap Fund commenced operations on December 1, 2000.
Advisory fees paid by the Small Cap Fund to the Adviser were $2,509,116,
$1,784,355, and $2,429,552 for fiscal years 2000, 1999, and 1998, respectively.
Advisory fees paid by the International Stock Fund to the Adviser were $303,553,
$139,065, and $395,072 for fiscal years 2000, 1999, and 1998, respectively.

The Trust Company acts as transfer agent and dividend crediting agent
for each Fund. Its address is 1301 S.W. Fifth Avenue, P.O. 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 Funds
existing at any time during the month, with a minimum aggregate fee of $1,500
per month for each 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 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. The Trust paid $18,000 on behalf of each Fund
(except the Small/Mid Cap Fund)

to the Trust Company for services performed for fiscal 2000 under the respective
transfer agent agreement relating to that Fund.

17
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
--------------------------------------------------------------------------------

Each 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 Funds may purchase their portfolio securities through a securities
broker and pay the broker a commission, or they may purchase the securities
directly from a dealer which acts as principal and sells securities directly for
its own account without charging a commission. The purchase price of securities
purchased from dealers serving as market makers will include the spread between
the bid and asked prices. The Funds may also purchase securities from
underwriters, the price of which will include a commission or discount paid by
the issuer to the underwriter.

Prompt execution of orders at the most favorable price will be the
primary consideration of the Funds in transactions where brokerage fees are
involved. Additional factors considered by the Adviser in selecting brokers to
execute a transaction include: (i) professional capability of the executing
broker and the value and quality of the brokerage services provided; (ii) size
and type of transaction; (iii) timing of the transaction in the context of
market prices and trends; (iv) nature and character of markets for the security
to be purchased or sold; (v) the broker's execution efficiency and settlement
capability; (vi) the broker's experience and financial stability and the
execution services it renders to the Adviser on a continuing basis; and (vii)
reasonableness of commission.

Research, statistical, and other services offered by the broker 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. A commission in
excess of the amount of commission another broker or dealer would have charged
for effecting a transaction may be paid by the Fund if the Adviser 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.

The Adviser receives a significant amount of proprietary research from
a number of brokerage firms, in most cases on an unsolicited basis. The Adviser
does not make any commitments to allocate brokerage for proprietary research.
The value of that research, however, is considered along with other factors in
the selection of brokers. This research is considered supplemental to the
Adviser's own internal research and does not, therefore, materially reduce the
overall expenses incurred by the Adviser for its research.

In limited circumstances, the Adviser may use a Fund's commissions to
acquire third party research and products that is not available through its full
service brokers. In these arrangements, the Adviser pays an executing broker a
commission equal to the average rate paid on all other trades and achieves what
it believes is best execution on the trade. The executing broker then uses a
portion of the commission to pay for a specific research service or product
provided to the Adviser. Proposed research to be acquired in this manner must be
approved by the Adviser's Chief

<PAGE>

Investment Officer, who is responsible for determining that the research
provides appropriate assistance to the Adviser in connection with its investment
management of the Funds and that the price paid for research services and
products with broker commissions is fair and reasonable.

The receipt of research services and products 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
Funds. The Small/Mid Cap Fund commenced operations December 1, 2000. Total
brokerage commissions paid by the Small Cap Fund for the last three fiscal years
were $496,862, $802,523, and $1,136,316 for fiscal years 2000, 1999,
and 1998, respectively. Total brokerage commissions paid by the
International Stock Fund for the last three fiscal years were $246,370,
$100,706, and $307,219 for fiscal years 2000, 1999, and 1998, respectively. Of
the commissions paid in fiscal year 2000 and in the fiscal year ended in 2000,
the Small Cap Fund paid $15,880 for third party research and products provided
by brokerage firms.

The Adviser may use research services provided by and place agency
transactions with affiliated broker-dealers, if the commissions are fair and
reasonable and comparable to commissions charged by non-affiliated qualified
brokerage firms. In addition, the Fund may purchase securities from an
underwriting syndicate in which an affiliate, primarily Robertson Stephens, is a
member of the underwriting syndicate. In any agency transaction or purchase from
an underwriting syndicate of which an affiliate is a member, the trade will be
accomplished in accordance with the rules and regulations of the 1940 Act.

Investment decisions for the Funds are made independently from those of
the other portfolios of the Trust or accounts managed by the Adviser or its
affiliate, 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 such event, the
Adviser may aggregate these orders in order to achieve best execution and, on
the average, lower brokerage commission costs. In the event of simultaneous
transactions, allocations among the Fund or accounts will be made on an
equitable basis. When the Funds participate in an aggregated order, they
participate at the average share price for all transactions in that order, with
all transaction costs shared on a pro rata basis. Notwithstanding the above, the
Adviser may execute buy and sell orders for accounts and take action in
performance of its duties with respect to any of its accounts that may differ
from actions taken with respect to another account, so long as the Adviser
shall, to the extent practical, allocate investment opportunities to accounts,
including the Funds, over a period of time on a fair and equitable basis and in
accordance with applicable law.

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 Code does not prohibit
employees from purchasing securities that may be held or purchased by the Funds,
but is intended 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 of their relationship
with the Adviser. The specific standards in the Code include, among others, a
requirement that trades of access persons 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

<PAGE>
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.

--------------------------------------------------------------------------------
CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------

The Trust may establish separate series of investment portfolios under
its Restated Declaration of Trust. The Funds, CMC Short Term Bond Fund, CMC High
Yield Fund, CMC Fixed Income Securities Fund and CMC International Bond 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, dividends and distributions. All issued and
outstanding shares of a 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 a Fund do not have cumulative
voting rights, which means that the holders of more than 50% 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.

Any reference to the phrase "vote of a majority of the outstanding
voting securities of the Fund" means the vote at any meeting of shareholders of
a Fund of (i) 67% or more of the shares present or represented by proxy at the
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (ii) more than 50% of the outstanding shares,
whichever is less.

--------------------------------------------------------------------------------
PURCHASE, REDEMPTION AND PRICING OF SHARES
--------------------------------------------------------------------------------

PURCHASES
---------

Investments in each Fund are made directly by instutional buyers, by
clients of the Adviser or by the Adviser in its role as discretionary investment
adviser over a portion of the shareholder's assets. With respect to assets of an
investment advisory client of the Adviser invested in a Fund, that client will
pay a reduced, or in the

<PAGE>

case of an employee benefit plan, no fee pursuant to its separate management
contract with the Adviser (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 a Fund pursuant to the Employee Retirement Income
Security Act of 1974 ("ERISA"), certain conditions must be satisfied before
assets may be invested in the Fund by the Adviser on behalf of the shareholder.
These conditions are 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 must not be 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 transfer agent for the Funds may, at its discretion, permit
investors to purchase shares through the exchange of securities they hold. Any
securities exchanged must meet the investment objective, policies, and
limitations of the Fund, must have a readily ascertainable market value, must be
liquid, and must not be subject to restrictions on resale. The market value of
any securities exchanged, plus any cash, must be at least $100,000. Shares
purchased in exchange for securities generally may not be redeemed or exchanged
until the transfer has settled - usually within 15 days following the purchase
by exchange. The basis of the exchange will depend upon the relative net asset
value of the shares purchased and securities exchanged. Securities accepted by a
Fund will be valued in the same manner as the Fund values its assets. Any
interest earned on securities following their delivery to the transfer agent and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription, or other rights attached to the securities
become the property of the Fund, along with the securities. Before engaging in
an exchange, investors should consult their tax advisers concerning the tax
consequences to them of the exchange.

REDEMPTIONS
-----------

<PAGE>

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 NYSE observes the following holidays: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, 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.

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 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% 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.

22
<PAGE>

PRICING OF SHARES
-----------------

The net asset value per share of each Fund is determined by the
Adviser, under procedures approved by the trustees of the Trust, as of the close
of regular trading (normally 4:00 p.m. New York time) on each day the NYSE is
open for business and at other times determined by the Board of 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.

Each Fund's securities are valued at the last sale price on the
securities exchange or national securities markets at which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities in which there were no transactions, are valued
using the last bid price. Any assets or liabilities initially expressed in a
foreign currency will, on a daily basis, be converted into U.S. dollars. Foreign
securities will be valued based upon the most recent closing price on their
principal exchange, or based upon the most recent price obtained by the Fund, if
the price is not available on an exchange, even if the close of that exchange or
price determination is earlier than the time of the Funds' NAV calculation. In
the case of such foreign security, if an event that is likely to materially
affect the value of a portfolio security occurs between the time the foreign
price is determined and the time the Fund's NAV is calculated, it may be
necessary to revalue the security in light of that event. Securities for which
market quotations are not readily available will be valued at fair market value
as determined in good faith under procedures established by and under the
general supervision of the Board of Trustees.

--------------------------------------------------------------------------------
CUSTODIANS
--------------------------------------------------------------------------------

U S Bank N.A., 321 S.W. Sixth Avenue, Portland, Oregon 97208, acts as
general custodian of the Trust (a "Custodian"). The Chase Manhattan Bank
("Chase" or a "Custodian"), 3 Chase Metrotech Center, Brooklyn, New York 11245,
has entered into a custodian agreement with the Trust in respect of the purchase
of foreign securities by each of 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 Chase (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 or a
delegate of the Trustees in accordance with regulations under the 1940 Act.

--------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------

PricewaterhouseCoopers LLP, 1300 S.W. Fifth Avenue, Suite 3100,
Portland, Oregon 97201, serves as the Trust's independent accountants and, in
addition to examining the annual

23
<PAGE>

financial statements of the Trust, assists 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, a
Fund must, among other things:

(a) derive at least 90% 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% Test"); and

(b) diversify its holdings so that at the end of each quarter (i) 50%
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% of the value
of the assets of the Fund and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% 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, 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 Funds during a
taxable year only if it meets certain additional requirements. Among other
things, a Fund must: (a) have a deduction for dividends paid (without regard to
capital gain dividends) at least equal to the sum of 90% of its investment
company taxable income (computed without any deduction for dividends paid) and
90% 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 seven portfolios, including the 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).

<PAGE>

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 each Fund at corporate capital gain tax rates. The
policy of each 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.

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. 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 the Fund six months or less 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 (October 31), 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

<PAGE>

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% of the ordinary income for the
calendar year plus (b) 98% 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% 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% 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 1933 Act. Therefore, the limit on miscellaneous
itemized deductions should not apply to expenses incurred by either Fund.

Special Aspects of 90% Test with Respect to Foreign Currency. For
purposes of the 90% 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 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.

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. For the fiscal year ended October 31, 2000, the
Fund did incur a withholding tax of $43,670.

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

<PAGE>

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.

Foreign Capital Gains Taxes. The International Stock Fund invests in
the securities of foreign corporations and issuers. Foreign countries may impose
capital gains tax on the sale of securities in certain countries at the Fund
level. The tax rates range from approximately 10% to 30%. The Fund accounts for
such foreign taxes on net realized and unrealized gains at the appropriate rate
for each jurisdiction. These foreign taxes will reduce the International Stock
Fund's distributed capital gains. For the fiscal year ended October 31, 2000,
the Fund did incur a tax on the sale of securities in India of $124,675.

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% of the value of the company's total assets at the close of its taxable year
consists of stock or securities in foreign corporations and the company
satisfies certain holding period requirements. 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.

If the International Stock Fund elects pursuant to Section 853,
shareholders of that Fund will be required to include in income (in addition to
other taxable distributions) and will be allowed a credit or deduction for,
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 the shareholder's 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.

<PAGE>

imposition of certain federal income taxes on the Fund. It is anticipated that
any taxes on a Fund with respect to investments in PFICs would be insignificant.

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.

--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------

The Trust may from time to time advertise or quote total return
performance for the Funds. 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.

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:

n
P(1+T) = 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)

<PAGE>

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. For the period ended October 31, 2000, the average annual
return for the Small Cap Fund for the 1, 5 and 10 year periods was 50.49%,
23.24% and 23.52%, respectively. For the period ended October 31, 2000, the
average annual return for the International Stock Fund for the 1 year, 5 year
periods and since inception (February 1, 1994) was -3.58%, 12.81% and 8.14%,
respectively.

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, Financial World, Forbes, Investor's Business Daily, Money, Morningstar
Mutual Funds, The Wall Street Journal and USA Today. (Lipper Analytical
Services, Inc. is an independent rating service that ranks over 1000 mutual
funds based on total return performance.) These ranking services and
publications may rank the performance of the Fund against all other funds over
specified categories.

The Funds may also compare their 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 with respect to
the International Stock Fund other suitable international indices, such as the
Morgan Stanley Capital International Europe, Australasia, Far East Index or the
FT-S&P Actuaries Europe-Pacific Index . 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.

--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

The financial statements for the CMC Small Cap Fund and the CMC
International Stock Fund for the fiscal year ended October 31, 2000, together
with the Report of Independent Accountants of PricewaterhouseCoopers LLP, are
attached hereto and incorporated by reference into this Statement of Additional
Information. There are no financial statements for CMC Small/Mid Cap Fund as the
fund is new and had not commenced performance as of October 31, 2000, the year
end for the Fund.

29
<PAGE>
CMC SMALL CAP FUND
A Portfolio of CMC Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE

We are pleased to provide you with an investment review of the CMC Small Cap
Fund. The Fund returned 50.49% for the fiscal year ended October 31, 2000. For
the same period, the Fund's benchmark, the Russell 2000 Index, returned 17.41%.

Small cap stocks began the fiscal year with very strong performance, benefiting
from continued robust economic growth, low inflation and strong corporate
profits. Leading sectors, such as technology and telecommunications performed
very well and the Fund benefited from overweighted positions in these areas.
Since mid-March 2000, however, the stock market has been in a correction phase,
and these same market leaders have suffered the most. The Fund benefited early
in the calendar year from having trimmed holdings in the technology sector, as
well as from a focus on technology companies with established, profit-producing
business models.

Markets continued to be quite volatile through the second and third quarters of
2000. Concerns about the sustainability of earnings growth rates as economic
growth showed signs of slowing have plagued the market, in addition to concerns
about the potential impact of high energy prices. The Fund has benefited
relative to the benchmark from its significant stake in energy issues.
Additionally, proceeds from sales of technology issues were used to build up
holdings in the health care sector in the spring and summer, resulting in more
favorable performance versus the Russell 2000 Index.

Historically, the strongest relative performance period for small cap stocks
compared to larger cap issues is in the November through March period. Therefore
we are focusing on companies that we believe can maintain strong earnings growth
even as economic activity cools. We are maintaining the Fund's cash position at
a somewhat higher than average level to take advantage of any further
correction.

The Fund's top ten holdings (as a percentage of net assets) as of October 31,
2000 were:

Axciom Corp. (2.4%)
Retek, Inc. (2.2%)
Tetra Tech, Inc. (2.1%)
Power-One, Inc. (2.0%)
Avocent Corp. (1.8%)
PerkinElmer Inc. (1.8%)
First Health Group Corp. (1.8%)
Amphenol Corp. (Class A) (1.7%)
Biovail Corp. (1.6%)
Sandisk Corp. (1.5%)

30
<PAGE>
We appreciate your continued confidence in the CMC Small Cap Fund.

The Investment Team

December 10, 2000

Graphic line chart depicting "Growth of $10,000 Over 10 Years" showing the
growth in dollar amounts ($10,000-$90,000) of CMC Small Cap, Russell 2000 and
S&P 500 for the period 10/31/90 to 10/31/00 to $82,688, $48,640 and $59,111,
respectively:

Average Annual Total Return
1 Year 5 Years 10 Years
------ ------- --------
CMC Small Cap 50.49% 23.24% 23.52%
Russell 2000 17.41% 12.39% 17.14%
S&P 500 6.08% 21.67% 19.44%

Past performance does not guarantee future results. Total return performance is
illustrated for the periods ended October 31, 2000. The S&P 500 and Russell 2000
are unmanaged stock indices.

31
<PAGE>
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE

We are pleased to provide you with an investment review of the CMC International
Stock Fund. For the fiscal year ended October 31, 2000, the Fund posted a total
return of -3.58% compared to a return of -2.66% for the MSCI/EAFE Index for the
same period.

International stocks began the fiscal year with very strong performance,
benefiting from continued robust economic growth worldwide, low inflation and
strong corporate profits. Leading sectors such as technology, media and
telecommunications performed very well and the Fund benefited from overweighted
positions in these areas. Since mid-March 2000, stock markets around the globe
have been in a correction phase, and previous market leaders have suffered the
most. International stocks have performed poorly in 2000 reflecting expectations
that world growth has peaked, weakness in the Euro, and disappointment, once
again, in the lack of economic progress in Japan. Japan, the largest foreign
market, declined 9% in the third quarter alone with smaller Asian countries
posting even larger losses.

Within the portfolio, we have shifted away from the telecommunications and
technology sectors throughout the year, investing the proceeds in financials,
and consumer staples such as pharmaceuticals and food producers. We have reduced
our Japanese holdings somewhat in favor of companies in Europe believing that
the Euro is highly oversold and that improvement in Japan may continue to be
slow. Moreover, the Euro is likely to gain versus the Yen.

The CMC International Stock Fund portfolio composition as of October 31, 2000
was:

% of Net Assets % of Net Assets
United Kingdom 21.1 Finland 1.5
Japan 14.1 Australia 1.4
France 11.0 Hong Kong 1.1
Germany 8.5 Ireland .9
Switzerland 8.2 Sweden .8
Netherlands 5.5
Italy 5.9 Other Assets
Canada 4.2 Less Liabilities 9.5
Spain 2.9
United States 1.8
Denmark 1.6

<PAGE>
The Fund's top ten holdings (as a percentage of net assets) as of October 31,
2000 were:

Vodafone Group PLC (United Kingdom) 2.1%
Royal Bank of Scotland Group PLC (United Kingdom) 1.6%
Sumitomo Bank Ltd. (Japan) 1.6%
Nokia Corp., ADR (Finland) 1.5%
Mitsui Fudosan Co., Ltd. (Japan) 1.5%
Nestle SA (Switzerland) 1.4%
Munich Re Group (Germany) 1.3%
Euro Aeronautic Def & Space (France) 1.3%
ING Groep NV (Netherlands) 1.2%
Mitsubishi Estate Co., Ltd. (Japan) 1.2%

We appreciate your continued confidence in the CMC International Stock Fund.

The Columbia Investment Team

December 10, 2000

Graphic line chart depicting "Growth of $10,000 Since Inception" showing the
growth in dollar amounts ($5,000-$35,000) of CMC International Stock Fund,
FT/S&P Euro Pacific, S&P 500, MSCI EAFE Index and for the period 2/1/94 to
10/31/00 to $17,022, $15,370, $33,927 and $15,942, respectively:

Average Annual Total Return
1 Year 5 Years Since Inception
------ ------- ---------------
CMC International Stock Fund -3.58% 12.81% 8.14%
FT/S&P Euro Pacific -3.73% 8.49% 6.53%
S&P 500 6.08% 21.67% 19.68%
MSCI EAFE Index -2.66% 8.94% 7.10%

Past performance does not guarantee future results. The Fund's inception date
was February 1, 1994. Index performance information is based on the period
beginning February 1, 1994. Total return performance is illustrated for the
periods ended October 31, 2000. S&P 500 and FT/S&P Euro Pacific are unmanaged
stock indices. The MSCI EAFE Index is a market capitalization weighted index
composed of companies representative of the market structure of 20 developed
market countries in Europe, Australasia and the Far East.

33
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Year)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC SMALL CAP FUND
------------------
Year Ended October 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............. $ 13.59 $ 9.96 $ 13.60 $ 13.01 $ 14.00
------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment loss........................ (0.09) (0.04) (0.03) (0.01) (0.02)
Net realized and unrealized gains (losses)
on investments........................... 6.80 3.69 (2.21) 3.52 4.20
------------ ------------ ------------ ------------ ------------
Total from investment operations..... 6.71 3.65 (2.24) 3.51 4.18
------------ ------------ ------------ ------------ ------------

Less distributions:
Distributions from net capital gains...... (1.52) (0.02) (1.40) (2.92) (5.17)
------------ ------------ ------------ ------------ ------------
Total distributions.................. (1.52) (0.02) (1.40) (2.92) (5.17)
------------ ------------ ------------ ------------ ------------

Net asset value, end of year ................... $ 18.78 $ 13.59 $ 9.96 $ 13.60 $ 13.01
============ ============ ============ ============ ============

Total return.................................... 50.49% 36.70% -16.49% 26.98% 30.30%

Ratios/Supplemental data
Net assets, end of year (in thousands).......... $258,480 $240,129 $267,789 $521,770 $522,408
Ratio of expenses to average net assets......... 0.79% 0.79% 0.77% 0.76% 0.78%
Ratio of net loss to average net assets......... (0.39)% (0.33)% (0.20)% (0.08)% (0.14)%
Portfolio turnover rate......................... 163% 186% 159% 169% 148%
</TABLE>

NOTE: Per share amounts have been adjusted to retroactively reflect a 4 for 1
share split effective September 1, 1999.

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Year)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC INTERNATIONAL STOCK FUND

Year Ended October 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
------------- ------------- ------------ ------------ ------------

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............. $ 17.86 $ 12.54 $ 42.71 $ 42.46 $ 37.06
------------- ------------- ------------ ------------ ------------
Income from investment operations:
Net investment income (loss)............... 0.04 (0.02) 0.25 0.41 0.32
Net realized and unrealized gains (losses)
on investments........................... (0.36) 5.34 (0.78) 6.16 5.86
------------- ------------- ------------ ------------ ------------
Total from investment operations..... (0.32) 5.32 (0.53) 6.57 6.18
------------- ------------- ------------ ------------ ------------

Less distributions:
Dividends from net investment income....... - - - (0.46) (0.78)
Distributions from net capital gains....... (1.34) (0.00) * (29.64) (5.86) -
------------- ------------- ------------ ------------ ------------
Total distributions.................. (1.34) (0.00) (29.64) (6.32) (0.78)
------------- ------------- ------------ ------------ ------------

Net asset value, end of year.................... $ 16.20 $ 17.86 $ 12.54 $ 42.71 $ 42.46
============= ============= ============ ============ ============

Total return.................................... -3.58% 42.44% -1.24% 15.47% 16.67%

Ratios/Supplemental data
Net assets, end of year (in thousands).......... $22,975 $30,492 $15,377 $81,471 $73,542
Ratio of expenses to average net assets......... 1.11% 1.31% 1.04% 1.05% 1.00%
Ratio of net income (loss) to average net assets 0.12% (0.14)% 0.60% 0.88% 0.78%
Portfolio turnover rate......................... 140% 96% 53% 127% 120%
</TABLE>

* Amount represents less than $0.01 per share.

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
October 31, 2000
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS (85.4%)
AIRLINES (2.1%)
ATLANTIC COAST AIRLINES HOLDINGS, INC. * 72,900 $ 2,606,175
EGL, INC. * 94,000 2,679,000
5,285,175
BANKS (2.0%)
BANK UNITED CORP. (CLASS A) 43,400 2,460,238
TCF FINANCIAL CORP. 68,700 2,778,056
5,238,294
COMPUTERS (5.7%)
AVOCENT CORP. * 67,383 4,779,982
C-COR.NET CORP. * 117,750 1,839,844
COMPUTER NETWORK TECHNOLOGY CORP. * 102,700 3,121,117
CONCURRENT COMPUTER CORP. * 144,500 2,546,812
RADISYS CORP. * 96,250 2,550,625
14,838,380
ELECTRICAL EQUIPMENT/DIVERSIFIED INDUSTRIAL (3.1%)
C&D TECHNOLOGIES, INC. 55,800 3,299,175
PERKINELMER, INC. 39,700 4,744,150
8,043,325
EXPLORATION & PRODUCTION (1.4%)
DEVON ENERGY CORP. 45,900 2,313,360
TRITON ENERGY LTD. * 40,200 1,236,150
3,549,510
FOOD & DRUG RETAIL (0.6%)
WHOLE FOODS MARKET, INC. * 34,300 1,586,375

FOOD, BEVERAGE, TOBACCO (0.5%)
ADOLPH COORS CO. (CLASS B) 18,850 1,200,509

HEALTH CARE (18.3%)
ALKERMES, INC. * 67,600 2,505,425
ALPHARMA, INC. (CLASS A) 84,700 3,287,419
AMERISOURCE HEALTH CORP. (CLASS A) * 67,800 2,945,063
ANGIOTECH PHARMACEUTICALS, INC. * 21,900 1,204,500
BARR LABORATORIES, INC. * 36,000 2,272,500
BIOVAIL CORP. * 98,400 4,138,950
ECLIPSYS CORP. * 94,300 2,328,031
FIRST HEALTH GROUP CORP. * 120,700 4,707,300
INSPIRE PHARMACEUTICALS, INC. * 51,600 1,012,650
INVITROGEN CORP. * 43,600 3,316,325
KING PHARMACEUTICALS, INC. * 66,475 2,978,911
PATTERSON DENTAL CO. * 116,900 3,660,431
SHIRE PHARMACEUTICALS GROUP PLC ADR * 59,800 3,759,925
TECHNE CORP. * 32,700 3,686,925

See accompanying notes to financial statements.

36
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--------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
TRIAD HOSPITALS, INC. * 53,900 $ 1,495,725
UNIVERSAL HEALTH SERVICES, INC. (CLASS B) * 46,400 3,891,800
47,191,880
HOTELS & GAMING (0.4%)
INTRAWEST CORP. 65,200 1,108,400

LEISURE PRODUCTS (0.7%)
CALLAWAY GOLF CO. 110,400 1,766,400

MACHINERY (0.2%)
ASTEC INDUSTRIES, INC. * 59,100 609,469

MEDICAL DEVICES (0.8%)
CIPHERGEN BIOSYSTEMS, INC. * 10,800 334,800
CYBERONICS, INC. * 50,600 1,176,450
WILSON GREATBATCH TECHNOLOGIES, INC. * 27,600 662,400
2,173,650
OIL SERVICES (10.3%)
COFLEXIP SA, ADR 25,900 1,477,919
GRANT PRIDECO, INC. * 93,900 1,743,019
HANOVER COMPRESSOR CO. * 41,200 1,344,150
MARINE DRILLING COS., INC. * 92,600 2,210,825
NATCO GROUP, INC. (CLASS A) * 1,400 9,100
NATIONAL-OILWELL, INC. * 98,700 2,886,975
NOBLE DRILLING CORP. * 81,300 3,379,031
PATTERSON ENERGY, INC. * 36,500 1,026,562
PRECISION DRILLING CORP. * 120,700 3,455,037
STOLT OFFSHORE SA * 54,500 650,594
TEEKAY SHIPPING CORP. 46,300 1,730,462
UTI ENERGY CORP. * 159,400 3,197,963
VERITAS DGC, INC. * 115,500 3,465,000
26,576,637
PERIPHERALS (2.1%)
INRANGE TECHNOLOGIES CORP. * 5,000 183,125
POWER-ONE, INC. * 73,100 5,185,531
5,368,656
POLLUTION CONTROL (2.1%)
TETRA TECH, INC. * 156,875 5,451,406

PUBLISHING/ADVERTISING (0.5%)
LAMAR ADVERTISING CO. * 28,700 1,377,600

REAL ESTATE SECURITIES (0.7%)
COUSINS PROPERTIES, INC. 68,000 1,768,000

See accompanying notes to financial statements.

37
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
RESTAURANTS (2.0%)
CALIFORNIA PIZZA KITCHEN, INC. * 62,200 $ 2,177,000
CHEESECAKE FACTORY, INC. (THE) * 29,600 1,311,650
OUTBACK STEAKHOUSE, INC. * 59,600 1,698,600
-----------
5,187,250
-----------
RETAIL (2.2%)
LINENS N' THINGS, INC. * 46,600 1,432,950
MICHAELS STORES, INC. * 93,000 2,261,062
PACIFIC SUNWEAR OF CALIFORNIA, INC. * 72,400 1,484,200
TWEETER HOME ENTERTAINMENT GROUP, INC. * 19,450 468,016
-----------
5,646,228
-----------
SEMICONDUCTORS (4.6%)
EXAR CORP. * 22,600 1,009,937
LATTICE SEMICONDUCTOR CORP. * 70,600 2,060,638
METHODE ELECTRONICS, INC. (CLASS A) 77,000 2,897,125
MIPS TECHNOLOGIES, INC. (CLASS A) * 13,550 543,694
SANDISK CORP. * 73,600 3,954,850
VIASYSTEMS GROUP, INC. * 107,000 1,518,062
-----------
11,984,306
-----------
SERVICES (5.5%)
ACXIOM CORP. * 152,700 6,146,175
GETTY IMAGES, INC. * 64,700 2,054,225
INTERNATIONAL FIBERCOM, INC. * 48,200 620,575
MULTEX.COM, INC. * 118,650 1,527,619
NOVA CORP. * 45,170 708,604
TELETECH HOLDINGS, INC. * 111,600 3,096,900
-----------
14,154,098
-----------
SOFTWARE (10.0%)
ACTUATE CORP. * 5,900 166,306
ADEPT TECHNOLOGY, INC. * 45,600 1,271,100
ADVENT SOFTWARE, INC. * 43,700 2,613,806
BINDVIEW DEVELOPMENT CORP. * 105,100 821,094
BSQUARE CORP. * 24,050 375,781
DOCUMENTUM, INC. * 39,600 3,366,000
HNC SOFTWARE, INC. * 140,600 2,855,938
MACROMEDIA, INC. * 26,900 2,072,981
MATRIXONE, INC. * 7,800 231,563
MENTOR GRAPHICS CORP. * 157,000 3,679,687
REMEDY CORP. * 75,000 1,284,375
RETEK, INC. * 146,073 5,760,754
VERITY, INC. * 49,500 1,163,250
WATCHGUARD TECHNOLOGIES, INC. * 4,300 215,000
-----------
25,877,635
-----------
See accompanying notes to financial statements.

38
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATION SERVICES (0.3%)
GT GROUP TELECOM, INC. (CLASS B) * 84,300 $ 819,291
-----------
TELECOMMUNICATION EQUIPMENT (8.7%)
ADAPTIVE BROADBAND CORP. * 71,500 1,148,469
AMPHENOL CORP. (CLASS A) * 68,200 4,381,850
ANDREW CORP. * 105,600 2,778,600
COMMSCOPE, INC. * 24,300 615,094
EFFICIENT NETWORKS, INC. * 40,800 1,711,687
IXIA * 7,600 178,125
METRICOM, INC. * 45,500 807,625
PROXIM, INC. * 54,000 3,273,750
REMEC, INC. * 63,500 1,893,094
TEKELEC * 86,150 3,171,397
TUT SYSTEMS, INC. * 34,600 1,141,800
VIRATA CORP. * 66,300 1,284,562
-----------
22,386,053
-----------
TRUCKS (0.6%)
USFREIGHTWAYS CORP. 55,800 1,436,850
-----------
TOTAL COMMON STOCKS
(COST $185,970,382) 220,625,378
-----------

CONVERTIBLE PREFERRRED STOCK (0.3%)
TELECOMMUNICATION EQUIPMENT
NANOVATION TECHNOLOGIES, INC. *
(PRIVATE PLACEMENT)
(COST $859,635) 57,309 859,635
-----------

REPURCHASE AGREEMENTS (12.1%)
J.P. MORGAN SECURITIES, INC.
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $18,906,918.
COLLATERALIZED BY U.S. TREASURY NOTES
4.625% TO 6.50%
DUE 12/31/2000 TO 05/31/2001
U.S. TREASURY BONDS
6.625% TO 11.75%
DUE 02/15/2010 TO 02/15/2027
U.S. TREASURY BILL 6.035% DUE 04/26/2001 $ 18,903,505 18,903,505

See accompanying notes to financial statements.

39
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000
PRINCIPAL
AMOUNT VALUE
----------- -----------
REPURCHASE AGREEMENTS (CONTINUED)
MERRILL LYNCH
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $12,302,221.
COLLATERALIZED BY U.S. TREASURY STRIPS
DUE 11/15/2004 TO 11/15/2023 $ 12,300,000 $ 12,300,000
-----------
TOTAL REPURCHASE AGREEMENTS
(COST $31,203,505) 31,203,505
-----------
TOTAL INVESTMENTS (97.8%)
(COST $218,033,522) 252,688,518

OTHER ASSETS LESS LIABILITES (2.2%) 5,791,426
-----------
NET ASSETS (100.0%) $ 258,479,944
===========
* NON-INCOME PRODUCING.

</TABLE>

See accompanying notes to financial statements.

40
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS (89.7%)
AUSTRALIA (1.4%)
AMP LTD. (INSURANCE) 12,750 $ 114,888
CSL LTD. (PHARMACEUTICALS) 6,400 113,807
SECURENET LTD. (SOFTWARE/COMPUTER SERVICES) * 23,200 100,379
-----------
329,074
-----------
CANADA (4.2%)
ALBERTA ENERGY CO., LTD. (OIL/GAS) 4,200 154,691
ATS AUTOMATION TOOLING SYSTEMS, INC. (ENGINEERING/
MACHINERY) * 4,900 86,948
BOMBARDIER, INC. (CLASS B) (ENGINEERING/MACHINERY) 15,800 247,774
C-MAC INDS., INC. (INFORMATION TECHNOLOGY HARDWARE) * 4,600 259,030
NORTEL NETWORKS CORP. (INFORMATION TECHNOLOGY
HARDWARE) 3,100 140,260
PRECISION DRILLING CORP. (OIL/GAS) * 2,800 79,844
-----------
968,547
-----------
DENMARK (1.6%)
DANISCO AS (FOOD PRODUCERS/PROCESSORS) 3,300 130,410
GENMAB AS (HEALTH) * 2,500 65,769
GN STORE NORD AS (TELECOMMUNICATION SERVICES) 5,000 96,803
VESTAS WIND SYSTEMS AS (ENGINEERING/MACHINERY) 1,500 81,144
-----------
374,126
-----------
FINLAND (1.5%)
NOKIA CORP., ADR (INFORMATION TECHNOLOGY HARDWARE) 8,300 354,825
-----------
FRANCE (11.0%)
ACCOR SA (LEISURE/ENTERTAINMENT/HOTELS) 3,250 131,406
ALCATEL (INFORMATION TECHNOLOGY HARDWARE) 3,100 188,932
AVENTIS SA (PHARMACEUTICALS) 2,800 201,740
AXA (INSURANCE) 1,450 191,737
BNP PARIBAS (BANKS) 2,050 176,548
CARREFOUR SA (FOOD/DRUG RETAILERS) 2,000 134,097
COFLEXIP SA, ADR (OIL/GAS) 2,800 159,775
ESTABLISSEMENTS ECONOMIQUES DU CASINO GUICHARD-
PERRACHON SA (GENERAL RETAILERS) 1,280 111,645
EUROPEAN AERONAUTIC DEFENCE AND SPACE CO.
(AERONAUTIC/DEFENSE) * 15,000 305,152
FRANCE TELECOM SA (TELECOMMUNICATION SERVICES) 1,100 114,873
GROUPE DANONE SA (FOOD PRODUCERS/PROCESSORS) 1,470 205,347
LVMH MOET HENNESSY LOUIS VUITTON SA (HOUSEHOLD
GOODS/TEXTILES) 2,750 200,468
SODEXHO ALLIANCE SA (SUPPORT SERVICES) 1,100 172,030
TOTAL FINA ELF SA (OIL/GAS) 1,650 235,806
-----------
2,529,556
-----------
See accompanying notes to financial statements.

41
<PAGE>
--------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
GERMANY (7.8%)
ADVA AG OPTICAL NETWORKING (INFORMATION
TECHNOLOGY HARDWARE) * 970 $ 71,944
ALLIANZ AG (INSURANCE) 570 193,046
BAYERISCHE HYPO- UND VEREINSBANK AG (BANKS) 2,050 112,514
BAYERISCHE MOTOREN WERKE (BMW) AG (AUTOMOBILES) 4,400 145,530
BEIERSDORF AG (PERSONAL CARE/HOUSEHOLD PRODUCTS) 1,500 143,676
DEUTSCHE BANK AG (BANKS) 2,360 193,003
DRESDNER BANK AG (BANKS) 4,300 178,963
E.ON AG (ELECTRICITY) 2,300 116,741
ERGO VERSICHERUNGS GRUPPE AG (INSURANCE) 950 131,258
HANNOVER RUECKVERSICHERUNGS AG (INSURANCE) 1,000 84,002
MUENCHENER RUECKVERSICHERUNGS-GESELLSCHAFT AG
(INSURANCE) 975 306,201
SCHERING AG (PHARMACEUTICALS) 1,910 106,854
-----------
1,783,732
-----------
HONG KONG (1.1%)
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LTD.
(MEDIA/PHOTOGRAPHY) 12,000 24,311
ESPRIT HOLDINGS LTD. (GENERAL RETAILERS) 123,000 105,670
GIORDANO INTERNATIONAL LTD. (GENERAL RETAILERS) 200,000 117,325
-----------
247,306
-----------
IRELAND (0.8%)
CRH PLC (CONSTRUCTION/BUILDING MATERIALS) 6,200 95,123
PARTHUS TECHNOLOGIES PLC (INFORMATION TECHNOLOGY
HARDWARE) * 29,000 98,960
-----------
194,083
-----------
ITALY (5.9%)
ASSICURAZIONI GENERALI S.P.A (INSURANCE) 5,690 186,895
BANCA INTESA S.P.A (BANKS) 25,400 105,283
ENI S.P.A (OIL/GAS) 19,800 107,078
LUXOTTICA GROUP S.P.A, ADR (HEALTH) 11,800 170,362
MEDIASET S.P.A (MEDIA/PHOTOGRAPHY) 3,100 44,802
RIUNIONE ADRIATICA DI SICURTA S.P.A (INSURANCE) 16,200 212,432
SAIPEM S.P.A (OIL/GAS) 29,800 155,095
SAN PAOLO-IMI S.P.A (BANKS) 8,950 144,901
TELECOM ITALIA S.P.A, ADR (TELECOMMUNICATION
SERVICES) 1,850 217,375
-----------
1,344,223
-----------
JAPAN (14.1%)
BANYU PHARMACEUTICAL CO., LTD. (PHARMACEUTICALS) 9,000 192,881
FUJISAWA PHARMACEUTICAL CO., LTD.
(PHARMACEUTICALS) 4,000 125,657

See accompanying notes to financial statements.

42
<PAGE>
--------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
JAPAN TELECOM CO., LTD. (TELECOMMUNICATION
SERVICES) 5 $ 100,745
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
(ELECTRONIC/ELECTRICAL EQUIPMENT) 9,000 261,297
MITSUBISHI ELECTRIC CORP. (INFORMATION TECHNOLOGY
HARDWARE) 15,000 107,706
MITSUBISHI ESTATE CO., LTD. (REAL ESTATE) 25,000 265,601
MITSUBISHI HEAVY INDS., LTD. (ENGINEERING/
MACHINERY) 50,000 194,164
MITSUI FUDOSAN CO., LTD. (REAL ESTATE) 28,000 339,017
NEC CORP. (INFORMATION TECHNOLOGY HARDWARE) 7,000 133,350
NIKKO SECURITIES CO., LTD. (SPECIALTY/OTHER
FINANCE) 30,000 258,824
NOMURA SECURITIES CO., LTD., THE (SPECIALTY/OTHER
FINANCE) 6,000 127,214
OBIC CO., LTD. (SOFTWARE/COMPUTER SERVICES) 300 100,287
PIONEER CORP. (ELECTRONIC/ELECTRICAL EQUIPMENT) 5,000 154,781
SANWA BANK LTD., THE (BANKS) 20,000 177,678
SONY CORP. (HOUSEHOLD GOODS/TEXTILES) 1,000 79,863
SUMITOMO BANK LTD., THE (BANKS) 30,000 364,057
TOKYU CORP. (REAL ESTATE) 30,000 154,965
TREND MICRO, INC. (SOFTWARE/COMPUTER SERVICES) * 1,000 94,334
-----------
3,232,421
-----------
NETHERLANDS (5.5%)
AEGON NV (INSURANCE) 4,100 162,646
ASM LITHOGRAPHY HOLDING NV (INFORMATION
TECHNOLOGY HARDWARE) * 3,200 89,000
GUCCI GROUP NV (HOUSEHOLD GOODS/TEXTILES) 1,260 123,165
HEINEKEN NV (RESTAURANTS/PUBS/BREWERIES) 3,500 189,872
ING GROEP NV (INSURANCE) 4,100 281,225
KONINKLIJKE NUMICO NV (FOOD PRODUCERS/PROCESSORS) 3,030 141,517
ROYAL DUTCH PETROLEUM CO. (OIL/GAS) 2,190 129,740
STMICROELECTRONICS NV (INFORMATION TECHNOLOGY
HARDWARE) 2,800 145,425
1,262,590
SPAIN (2.9%)
BANCO BILBAO VIZCAYA ARGENTARIA, SA (BANKS) 11,600 154,373
GRUPO DRAGADOS SA (CONSTRUCTION/BUILDING
MATERIALS) 21,200 205,758
NH HOTELES SA (LEISURE/ENTERTAINMENT/HOTELS) 15,000 169,105
TELEFONICA SA, ADR (TELECOMMUNICATION SERVICES) * 2,173 125,898
-----------
655,134
-----------
SWEDEN (0.8%)
SKANDIA INSURANCE CO., LTD. (INSURANCE) 10,900 184,392
-----------
See accompanying notes to financial statements.

43
<PAGE>
--------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
SWITZERLAND (8.2%)
CHARLES VOEGELE HOLDING AG (BEARER) (GENERAL
RETAILERS) 700 $ 131,584
CIE FINANCIERE RICHEMONT AG UNITS (CLASS A) (BEARER)
(HOUSEHOLD GOODS/TEXTILES) 45 125,133
JULIUS BAER HOLDING LTD. (BEARER) (BANKS) 30 148,491
NESTLE SA (REGISTERED) (FOOD PRODUCERS/PROCESSORS) 160 331,464
NOVARTIS AG (REGISTERED) (PHARMACEUTICALS) 75 113,746
SCHINDLER HOLDING AG (PART. CERTIFICATES)
(ENGINEERING/MACHINERY) 118 172,267
SERONO SA (BEARER) (HEALTH) 150 134,894
SEZ HOLDING AG (REGISTERED) (INFORMATION
TECHNOLOGY HARDWARE) 64 37,195
SWISS RE (REGISTERED) (INSURANCE) 75 147,866
TECAN GROUP AG (REGISTERED) (HEALTH) 129 138,464
UBS AG (REGISTERED) (BANKS) 1,500 207,721
ZURICH FINANCIAL SERVICES AG (REGISTERED) (INSURANCE) 400 193,539
-----------
1,882,364
-----------
UNITED KINGDOM (21.1%)
ARM HOLDINGS PLC (INFORMATION TECHNOLOGY
HARDWARE) * 13,200 130,341
BAE SYSTEMS PLC (AEROSPACE/DEFENSE) 21,800 123,933
BALTIMORE TECHNOLOGIES PLC (SOFTWARE/COMPUTER
SERVICES) * 15,700 120,943
BARCLAYS PLC (BANKS) 6,300 180,403
BG GROUP PLC (GAS/DISTRIBUTION) 20,000 80,156
BOOKHAM TECHNOLOGY PLC (INFORMATION TECHNOLOGY
HARDWARE) * 2,900 95,550
BP AMOCO PLC, ADR (OIL/GAS) 2,320 118,175
COLT TELECOM GROUP PLC (TELECOMMUNICATION
SERVICES) * 7,000 223,624
COOKSON GROUP PLC (ENGINEERING/MACHINERY) 59,000 161,924
DIAGEO PLC (BEVERAGES) 13,500 127,520
ENTERPRISE OIL PLC (OIL/GAS) 15,000 118,709
GLAXO WELLCOME PLC (PHARMACEUTICALS) 4,200 121,001
GRANADA COMPASS PLC (RESTAURANTS/PUBS/BREWERIES)* 15,272 131,728
HSBC HOLDINGS PLC (BANKS) 17,600 250,970
LATTICE GROUP PLC (GAS/DISTRIBUTION) * 20,000 42,692
MARCONI PLC (INFORMATION TECHNOLOGY HARDWARE) 17,700 223,609
MATALAN PLC (GENERAL RETAILERS) 12,500 117,983
NDS GROUP PLC, ADR (SOFTWARE/COMPUTER SERVICES) * 1,600 120,000
PEARSON PLC (MEDIA/PHOTOGRAPHY) 8,400 225,534
PRUDENTIAL PLC (INSURANCE) 9,100 122,495

See accompanying notes to financial statements.

44
<PAGE>
--------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
----------- -----------
COMMON STOCKS (CONTINUED)
RECKITT BENCKISER PLC (PERSONAL CARE/HOUSEHOLD
PRODUCTS) 13,100 $ 172,344
ROYAL BANK OF SCOTLAND GROUP PLC (BANKS) 16,420 368,859
SCOTTISH AND SOUTHERN ENERGY PLC (ELECTRICITY) 14,700 122,312
SHELL TRANSPORT & TRADING CO. PLC (OIL/GAS) 11,000 88,571
SHELL TRANSPORT & TRADING CO., ADR (OIL/GAS) 3,000 147,562
SMITHKLINE BEECHAM PLC (PHARMACEUTICALS) 14,061 181,720
UNITED NEWS & MEDIA PLC (MEDIA/PHOTOGRAPHY) 10,500 131,506
VODAFONE GROUP PLC (TELECOMMUNICATION SERVICES) 115,528 481,047
WILLIAM MORRISON SUPERMARKETS PLC (FOOD/DRUG
RETAILERS) 45,000 116,967
WPP GROUP PLC (MEDIA/PHOTOGRAPHY) 15,400 206,852
-----------
4,855,030
-----------
UNITED STATES (1.8%)
SANTA FE INTERNATIONAL CORP. (OIL/GAS) 5,500 200,750
SCHLUMBERGER LTD. (OIL/GAS) 2,750 209,344
-----------
410,094
-----------
TOTAL COMMON STOCKS
(COST $20,378,445) 20,607,497
-----------
PREFERRED STOCK (0.8%)
GERMANY
SAP AG-SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA
PROCESSING (SOFTWARE/COMPUTER SERVICES)
(COST $174,458) 890 179,179
-----------
REPURCHASE AGREEMENTS (7.7%)
J.P. MORGAN SECURITIES, INC.
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $1,123,124.
COLLATERALIZED BY U.S. TREASURY NOTES
4.625% TO 6.50%
DUE 12/31/2000 TO 05/31/2001
U.S. TREASURY BONDS
6.625% TO 11.75%
DUE 02/15/2010 TO 02/15/2027
U.S. TREASURY BILL 6.035% DUE 04/26/2001 $ 1,122,921 1,122,921
MERRILL LYNCH
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $650,117.
COLLATERALIZED BY U.S. TREASURY STRIPS
DUE 11/15/2004 TO 11/15/2023 650,000 650,000
-----------

See accompanying notes to financial statements.

45
<PAGE>
--------------------------------------------------------------------------------
CMC INTERNATIONAL STOCK FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
----------- -----------
REPURCHASE AGREEMENTS (CONTINUED)

TOTAL REPURCHASE AGREEMENTS
(COST $1,772,921) $ 1,772,921
-----------
TOTAL INVESTMENTS (98.2%)
(COST $22,325,824) 22,559,597

OTHER ASSETS LESS LIABILITIES (1.8%) 415,174
-----------
NET ASSETS (100.0%) $ 22,974,771
===========
* NON-INCOME PRODUCING.
</TABLE>

See accompanying notes to financial statements.

46
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
STATEMENTS OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
October 31, 2000
<TABLE>
<CAPTION>
CMC CMC
Small Cap International
Fund Stock Fund
--------------------- ----------------------
<S> <C> <C>
ASSETS:
Investments at identified cost................................... $ 218,033,522 $ 22,325,824
Investments at identified cost - federal income tax purposes .... $ 219,569,008 $.22,342,191
------------------------------------------------------------------- --------------------- ----------------------

Investments at value............................................. $ 252,688,518 $ 22,559,597
Cash............................................................. - 127,930
Cash denominated in foreign currencies (cost $527,669) .......... - 529,441
Receivable for:
Capital stock sold............................................. 5,401,936 -
Investments sold............................................... 1,915,275 122,633
Interest....................................................... 138,465 7,690
Foreign tax reclaim ........................................... - 69,253
Dividends...................................................... 15,513 40,810
--------------------- ----------------------
Total assets..................................................... 260,159,707 23,457,354
--------------------- ----------------------

LIABILITIES:
Payable for:
Investments purchased.......................................... 1,438,469 219,080
Capital stock redeemed......................................... 30,098 198,648
Investment management fee ..................................... 159,902 14,781
Accrued expenses .............................................. 51,294 50,074
--------------------- ----------------------
Total liabilities............................................... 1,679,763 482,583
--------------------- ----------------------

NET ASSETS......................................................... $ 258,479,944 $ 22,974,771
===================== ======================

NET ASSETS consist of:
Paid-in capital ............................................... $ 96,505,306 $ 18,955,640
Undistributed net realized gain from investment transactions... 127,319,642 3,788,294
Unrealized appreciation (depreciation) on:
Investments.................................................. 34,654,996 233,773
Translation of assets and liabilities in foreign currencies.. - (2,936)
--------------------- ---------------------

NET ASSETS......................................................... $ 258,479,944 $ 22,974,771
===================== ======================

Shares of capital stock outstanding................................ 13,762,324 1,418,554
===================== ======================

Net asset value, offering and
redemption price per share...................................... $ 18.78 $ 16.20
===================== ======================
</TABLE>

See accompanying notes to financial statements.

47
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
Year Ended October 31, 2000
<TABLE>
<CAPTION>
CMC CMC
Small Cap International
Fund Stock Fund
---------------------- ----------------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest................................................. $ 1,002,826 $ 173,355
Dividends................................................ 336,064 368,871
Foreign withholding tax on dividend income .............. - (43,670)
---------------------- ----------------------
Total income......................................... 1,338,890 498,556
---------------------- ----------------------

Expenses:
Investment management fees .............................. 2,509,116 303,553
Custodian fees........................................... 51,464 61,033
Legal, insurance and audit fees.......................... 38,797 38,684
Transfer agent fees...................................... 18,000 18,000
Trustees' fees........................................... 10,040 892
Other expenses .......................................... 11,647 26,152
---------------------- ----------------------
Total expenses....................................... 2,639,064 448,314
---------------------- ----------------------
Net investment income (loss) ................................ (1,300,174) 50,242
---------------------- ----------------------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain(loss) from:
Investment transactions.................................. 155,799,256 3,788,338
Foreignncurrency transactions............................ - (99,138)
---------------------- ----------------------

Net realized gain .................................... 155,799,256 3,689,200
---------------------- ----------------------

Change in net unrealized appreciation or depreciation on:
Investments.............................................. (16,238,543) (5,222,799)
Translation of assets and liabilities in foreign currencies - 4,730
---------------------- ----------------------

Change in net unrealized appreciation or depreciation.. (16,238,543) (5,218,069)
---------------------- ----------------------

Net realized and unrealized gain (loss) on investments....... 139,560,713 (1,528,869)
---------------------- ----------------------

NET INCREASE (DECREASE) RESULTING
FROM OPERATIONS.............................................. $ 138,260,539 $ (1,478,627)
====================== ======================
</TABLE>

See accompanying notes to financial statements.

48
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Year Ended October 31,
<TABLE>
<CAPTION>
CMC CMC
Small Cap Fund International Stock Fund
--------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss)................. $ (1,300,174) $ (781,558) $ 50,242 $ (26,956)
Net realized gain (loss) from:
Investment transactions...................... 155,799,256 33,791,649 3,788,338 2,975,930
Foreign currency transactions................ - - (99,138) (110,239)
Change in net unrealized appreciation or
depreciation on:
Investments.................................. (16,238,543) 37,005,516 (5,222,799) 3,545,846
Translation of assets and liabilities
in foreign currencies........................ - - 4,730 (9,281)
--------------- --------------- --------------- ----------------
Net increase (decrease)
resulting from operations............... 138,260,539 70,015,607 (1,478,627) 6,375,300

Distributions to shareholders:
From net realized gain from
investment transactions................. (31,229,115) (383,387) (2,822,106) (3,136)

Net capital share transactions.................... (88,680,243) (97,292,620) (3,216,144) 8,742,456
--------------- --------------- --------------- ----------------

Net increase (decrease) in net assets............. 18,351,181 (27,660,400) (7,516,877) 15,114,620

NET ASSETS:
Beginning of year ........................... 240,128,763 267,789,163 30,491,648 15,377,028
--------------- --------------- --------------- ----------------

End of year ................................. $258,479,944 $240,128,763 $ 22,974,771 $ 30,491,648
=============== =============== =============== ================
</TABLE>

See accompanying notes to financial statements.

49
<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. The Trust has established
five other portfolios, CMC Small/Mid Cap, CMC Fixed Income Securities Fund, CMC
High Yield Fund, CMC International Bond Fund, and CMC Short Term Bond Fund,
which are not included in these financial statements. The CMC Small/Mid Cap Fund
and CMC International Bond Fund are not yet operational. 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. Portfolio securities are valued based on the last sales
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. Investment securities with less than
60 days to maturity when purchased are valued at amortized cost, which
approximates market value. Investment securities for which market quotations are
not readily available will be valued at fair market value as determined in good
faith under procedures established by and under the general supervision of the
Board of Trustees.

Repurchase agreements. The Funds may engage in repurchase agreement
transactions. The Funds, through their custodians, receive delivery of
underlying securities collateralizing 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.

Investment income and expenses. Dividend income less foreign taxes withheld (if
any) is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend, if
such information is obtained subsequent to the ex-dividend date. Interest income
is recorded on the accrual basis and includes amortization of premiums or
accretion of discounts. Expenses are recorded on the accrual basis and each Fund
bears expenses incurred specifically on its behalf as well as a portion of
general expenses incurred on behalf of the Trust and its underlying portfolios.

Forward currency exchange contracts. The CMC International Stock Fund may enter
into forward currency contracts in connection with planned purchases or sales of
securities or to hedge the US dollar value of the portfolio securities
denominated in a foreign currency. Contracts are valued at the prevailing
forward exchange rate of the underlying currencies. The gain or loss arising
from the difference between the original contract price and the closing price of
such contract is included in the net realized gains or losses from foreign
currency transactions. Fluctuations in the value of forward currency contracts
are recorded for financial reporting purposes as unrealized gains or losses. The
Fund could be exposed to risks if counterparties to the forward contracts are
unable to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably. The effect of any change in the value of a hedged
foreign currency would be offset by the corresponding change (resulting from a
change in exchange rates) in value of the securities denominated in that
currency. During the years ended October 31, 2000 and October 31, 1999, the Fund
did not enter into any such forward currency contracts.

50
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1. Significant accounting policies, continued:

Foreign currency translations. The books and records of the CMC International
Stock Fund are maintained in U.S. dollars. Foreign currencies, investments and
other assets and liabilities of the Fund are translated into US dollars at the
daily rates of exchange on the valuation date. Purchases and sales of investment
securities, dividend and interest income and certain expenses are translated at
the rate 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 on investments held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.

Reported net realized foreign currency gains or losses arise from the 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
Fund's books and the US dollar equivalents of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities, other than investments in securities, resulting
from changes in the exchange rate.

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 income and expenses during the reporting
period. Actual results could differ from those estimates.

Dividends and distributions to shareholders. Dividends from net investment
income are declared and paid annually. Distributions from any net realized gains
are generally declared and paid annually. Distributions to shareholders are
recorded on the ex-dividend date. Additional distributions of net investment
income and capital gains for each Fund may be made at the discretion of the
Board of Trustees.

Federal income taxes. Each Fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies by
distributing substantially all taxable net investment income and net realized
gains to its shareholders in a manner which results in no tax to the Fund.
Therefore, no federal income or excise tax provision is required. 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 and
passive foreign investment companies. In 2000, the CMC Small Cap Fund recognized
net capital gain of $25,836,308 from the delivery of net appreciated securities
in an in-kind redemption transaction. For Federal income tax purposes, this gain
is not recognized as taxable income to the Fund and does not need to be
distributed to shareholders. During the year ended October 31, 2000, the
following distributions were designated as long-term gains: CMC Small Cap Fund -
$1,164,356 and CMC International Stock Fund - $2,081,665.

In 2000, the Small Cap Fund recognized net capital gain of $25,836,308 from the
delivery of net appreciated securities in an in-kind redemption transaction.
For Federal income tax purposes, this gain is not recognized as taxable income
to the Fund and does not need to be distributed to shareholders.

Foreign capital gains taxes. Realized gains in certain countries may be subject
to foreign taxes at the Fund level, rates ranging from approximately 10% to 30%.
The Funds provide for such foreign taxes on net realized and unrealized gains at
the appropriate rate for each jurisdiction.

<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
2. Investment transactions:
Aggregate purchases, sales and maturities, excluding short-term investments, net
realized gain and net unrealized appreciation on investments, as of and for the
year ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
CMC CMC
Small Cap International
Fund Stock Fund
--------------- ---------------
<S> <C> <C>
Purchases:
Investment securities other than U.S. Government obligations $ 501,779,818 $ 49,572,108
=============== ===============
Sales and Maturities:
Investment securities other than U.S. Government obligations $ 651,336,700 $ 52,530,240
=============== ===============
Net Realized Gain:
Investment securities other than U.S. Government obligations $ 155,799,256 $ 3,788,338
=============== ===============
Unrealized Appreciation (Depreciation) for
federal income tax purposes:
Appreciation................................................ $ 54,235,907 $ 1,641,979
Depreciation................................................ (21,116,397) (1,424,573)
--------------- ---------------
Net unrealized appreciation .............................. $ 33,119,510 $ 217,406
=============== ===============
</TABLE>
3. Capital Stock:

At October 31, 2000, each Fund had 100 million shares of no par value capital
stock authorized. Transactions of capital shares ended were as follows:
<TABLE>
<CAPTION>
CMC Small Cap Fund CMC International Stock Fund
Year ended October 31, Year ended October 31,
--------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares:
Shares sold.............................. 7,021,087 1,948,298 1,392,510 869,316
Shares issued for reinvestment
of dividends........................... 1,829,474 28,298 132,493 181
Shares issued for share split *.......... - 13,253,670 - -
--------------- --------------- --------------- ---------------
8,850,561 15,230,266 1,525,003 869,497
Less shares redeemed..................... (12,757,166) (4,284,571) (1,813,809) (388,425)
--------------- --------------- --------------- ---------------

Net increase (decrease) in shares........ (3,906,605) 10,945,695 (288,806) 481,072
=============== =============== =============== ===============

Amounts:
Sales.................................... $122,730,857 $ 69,448,331 $ 27,764,989 $ 14,220,602
Reinvestment of dividends................ 31,229,115 384,566 2,822,106 3,243
--------------- --------------- --------------- ---------------
153,959,972 69,832,897 30,587,095 14,223,845
Less redemptions......................... (242,640,215)** (167,125,517) (33,803,239) (5,481,389)
--------------- --------------- --------------- ---------------

Net increase (decrease).................. $ (88,680,243) $(97,292,620) $ (3,216,144) $ 8,742,456
=============== =============== =============== ===============
</TABLE>
* 4 for 1 stock split effective September 1, 1999
**Includes $92,177,577 from the delivery of securities in an in-kind redemption.

52
<PAGE>
--------------------------------------------------------------------------------
CMC SMALL CAP FUND
CMC INTERNATIONAL STOCK FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

4. Transactions with affiliates and related parties:

The amounts of fees and expenses described below are shown on each Fund's
statement of operations.

The investment adviser of the Funds is Columbia Management Co. (CMC). CMC is an
indirect wholly-owned subsidiary of FleetBoston Financial Corporation (Fleet), a
publicly owned multi-bank holding company registered under the Bank Holding
Company Act of 1956.

Investment management fees were paid by each Fund monthly to CMC. The Funds'
fees are based on an annual rate of 0.75 of 1% of average daily net assets.

Trustees' fees and expenses were paid directly by each Fund to trustees having
no affiliation with the Funds other than their capacity as trustees. Other
officers and trustees received no compensation from the Funds.

The transfer agent for the Fund is Columbia Trust Company (CTC), an affiliate of
CMC and indirect wholly-owned subsidiary of Fleet. CTC is compensated based on a
per account fee of $1.00 per month, with a minimum aggregate fee of $1,500 per
month.

5. Subsequent event:

On December 8, 2000, the following capital gains distributions per share were
paid to shareholders of record on December 7, 2000:

CMC Small Cap Fund $ 12.1813
CMC International Stock Fund $ 2.7180

53
<PAGE>
PRICEWATERHOUSECOOPERS [logo]

PricewaterhouseCoopers
1300 S.W. Fifth Avenue Suite 310
Portland, OR 97201-5638
Telephone (503) 478-6000
Facsimile (503) 478-6099

Report of Independent Accountants

To the Trustees and Shareholders of
CMC Fund Trust

In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CMC Small Cap Fund and CMC
International Stock Fund (the Funds), two of the portfolios of CMC Fund Trust,
at October 31, 2000, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as financial statements) are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Portland, Oregon
December 8, 2000

54
<PAGE>
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION

[LOGO]
Columbia

CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
CMC INTERNATIONAL BOND FUND

CMC Fixed Income Securities Fund, CMC High Yield Fund and CMC
International Bond Fund (each a "Fund" and together the "Funds") are portfolios
of CMC Fund Trust. The Fixed Income Securities Fund seeks a high level of
current income by investing in a broad range of domestic investment-grade Fixed
Income Instruments with intermediate to long-term maturities. The High Yield
Fund seeks to provide investors a high level of current income by investing in
below-investment grade securities, commonly known as "junk bonds." The
International Bond Fund seeks to provide investors a high level of current
income, consistent with capital preservation by investing primarily in Fixed
Income Instruments of issuers from around the world.

As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved these securities or passed on the adequacy of this
Prospectus. Any representation to the contrary is a criminal offense.

December 21, 2000

1
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------

RISK/RETURN SUMMARY...........................................................3
OVERVIEW.............................................................3
INVESTMENT STRATEGY..................................................3
INFORMATION ABOUT THE FUNDS..........................................4
CMC FIXED INCOME SECURITIES FUND.....................................4
Goal......................................................4
Strategy..................................................4
Principal Risk Factors....................................5
Historical Performance....................................5
Expenses..................................................5
Financial Highlights......................................6
CMC HIGH YIELD FUND..................................................8
Goal......................................................8
Strategy..................................................8
Principal Risk Factors....................................8
Historical Performance....................................9
Expenses.................................................10
Financial Highlights.....................................11
CMC INTERNATIONAL BOND FUND.........................................12
Goal.....................................................12
Strategy.................................................12
Principal Risk Factors...................................13
Historical Performance...................................14
Expenses.................................................14
Financial Highlights.....................................15
MANAGEMENT...................................................................15
INFORMATION ABOUT YOUR INVESTMENT............................................16
Your Account........................................................16
Buying Shares..............................................16
Selling Shares.............................................17
Pricing of Shares..........................................17
Distribution And Taxes..............................................18
Income and Capital Gains Distributions.....................18
Tax Effect of Distributions and Transactions...............18
MORE ABOUT THE FUNDS.........................................................19
Investment Strategy.................................................19
Fixed Income Securities Fund and High Yield Fund...........19
International Bond Fund....................................20
SUMMARY OF PRINCIPAL RISKS...................................................21
Other Risks.........................................................24
Zero-Coupon Securities.....................................24
Liquidity Risk.............................................24
Derivative Risk............................................24
FOR MORE INFORMATION.........................................................25

<PAGE>

--------------------------------------------------------------------------------
RISK/RETURN SUMMARY
--------------------------------------------------------------------------------

OVERVIEW
--------

This Prospectus provides important information about the Funds offered
by this Prospectus. For your convenience, concise descriptions of each Fund
begin on the next page. The descriptions provide the following information about
each Fund:

o GOAL
o STRATEGY
o PRINCIPAL RISK FACTORS
o HISTORICAL PERFORMANCE
o EXPENSES
o FINANCIAL HIGHLIGHTS

INVESTMENT STRATEGY
-------------------

Columbia Management Co., the investment adviser for the Funds ("CMC" or
"Adviser") utilizes a top down analysis to evaluate the macro economic and
investment environment. Through this process the Adviser is able to determine
the emphasis to be placed on the different types of securities in which a Fund
may invest (for example, corporate bonds, Treasuries or mortgage pass through
securities) and the desired levels of average quality, maturity and duration of
the Fund portfolio. This approach is intended to uncover opportunities that
offer long-term financial reward. After determining what industries and market
sectors to invest in, the Adviser conducts intensive, fundamental bottom up
research to identify attractive individual securities within the targeted
industries and market sectors or in the case of the International Bond Fund,
attractive regions, countries and industries in which to invest. Both types of
analysis, however, play an integral role in the investment process, and are
explained in greater detail under "MORE ABOUT THE FUNDS, INVESTMENT STRATEGY" in
this Prospectus.

As used in this Prospectus, the term "Fixed Income Instruments,"
includes:

o securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Securities");
o corporate debt securities of U.S. and non-U.S. issuers, including
convertible securities and corporate commercial paper;
o mortgage-backed and other asset-backed securities;
o inflation-indexed bonds issued both by governments and
corporations;
o structured notes, including hybrid or "indexed" securities,
event-linked bonds and loan participations;
o delayed funding loans and revolving credit facilities;
o bank certificates of deposit, fixed time deposits and bankers'
acceptances;

3
<PAGE>

o repurchase agreements and reverse repurchase agreements;

o debt securities issued by states or local governments and their
agencies, authorities and other instrumentalities;

o obligations of non-U.S. governments or their subdivisions,
agencies and instrumentalities; and obligations of international
agencies or supranational entities

INFORMATION ABOUT THE FUNDS
---------------------------

CMC FIXED INCOME SECURITIES FUND

GOAL
----

What are the Fund's Investment Goals?

The Fund seeks to provide investors a high level of current
income consistent with capital preservation.

STRATEGY
--------

What investment strategies does the Fund use to pursue these goals?

The Fund intends to invest in a broad range of debt securities
with intermediate to long-term maturities. Under normal market
conditions, the Fund will invest at least 65% of its total asset value
in domestic investment-grade Fixed Income Instruments. A Fixed Income
Instrument is considered investment grade if it is rated either AAA,
AA, A or BBB by S&P or Aaa, Aa, A or Baa by Moody's, or judged by the
Adviser to be of comparable quality, if unrated, to the categories
listed above.

----------------------------------------------------------------
A DESCRIPTION OF FIXED INCOME SECURITIES RATINGS IS CONTAINED
IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION.
----------------------------------------------------------------

In selecting debt securities for the Fund, the Adviser uses a
top-down approach to determine sector emphasis between different types
of instruments (for example, corporate bonds, U.S. Government
obligations, or mortgage obligations). Using this approach, the Adviser
evaluates and shifts emphasis between the desired levels of average
quality, maturity, and duration of the Fund's portfolio and the types
of debt securities in which to invest based on the current economic and
market environment. This analysis is intended to give the Adviser a
better understanding of the long-term prospects of a particular
security, based on the characteristics of the existing economy and
investor temperament. In this way, the Adviser strives to anticipate
and act upon market change, understand its effect on risk and reward of
Fund securities and thereby generate consistent, competitive results
over the long term.

The Fund may invest its assets in other investments and
utilize investment techniques including, but not limited to, derivative
instruments such as options, futures contracts or swap agreements, or
in mortgage- or asset-backed securities. In addition, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions to earn income.

4
<PAGE>

PRINCIPAL RISK FACTORS
----------------------

What are the principal risk factors of investing in the Fund?

Investing in the Fund involves certain risks, including the
principal risks listed below, which could adversely affect the value of
its investment portfolio, yield and total return.

o Interest rate risk refers to the possibility that the value of the
Fund's investments will decline due to an increase in interest
rates.
o Credit risk refers to the ability of an issuer of a bond to meet
interest and principal payments when due.
o Prepayment risk is the possibility that the value of mortgage
securities and collateralized mortgage obligations held by the
Fund may be adversely affected by changes in the prepayment rates
on the underlying mortgages.

These risks could impact the total return and yield you
receive on your investment and cause the value of your investment to go
down. You could lose money as a result of your investment in the Fund.

Please see the "SUMMARY OF PRINCIPAL RISKS" section under the
heading "MORE ABOUT THE FUNDS" for a description of the principal and
other risks of investing in the Fund.

HISTORICAL PERFORMANCE
----------------------

How has the Fund historically performed?

Since the Fixed Income Fund is new, no historical performance is
presented.

EXPENSES
--------

What expenses do I pay as an investor in the Fund?

The table below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. As a shareholder, you pay
no transaction fees in connection with your investment in the Fund. The
Fund is new, so the annual fund operating expenses for the Fund are
based on estimates for the current fiscal year. In the future, the
amount of fees and expenses will depend on the actual average net
assets of the Fund during those years and a number of other factors.

5
<PAGE>

-----------------------------------------------------------------
The Fund has no sales charge (load) or 12b-1 distribution fees.
-----------------------------------------------------------------

--------------------------------------------------------------------------------
Fee Table

Shareholder transaction fees (fees paid directly None
from your investment)

Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)

Management Fees 0.35%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.22%(1)

Total Fund Operating Expenses 0.57%
Expense Reimbursement 0.17%(2)
Net Expenses 0.40%

(1) "Other Expenses" are based on the estimated expenses that
the Fund expects to incur in its first fiscal year of
operation.
(2) For the fiscal period ended October 31, 2000, and for the
fiscal years ending October 31, 2001 and 2002, CMC has
contractually agreed to reimburse the Fund for all
ordinary expenses of the Fund to the extent necessary to
maintain the Fund's Total Annual Fund Operating Expenses
at 0.40%.

--------------------------------------------------------------------------------
Expense Example

This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses set forth above remain
constant as a percentage of net assets. Your actual costs may be higher
or lower, but based on these assumptions your costs would be:

1 Year 3 Years
------ -------
$41 $128

FINANCIAL HIGHLIGHTS
--------------------

The financial highlights table is intended to help you
understand the Fund's financial performance since inception. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate of return an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Statement of Additional Information under "FINANCIAL STATEMENTS."

6
<PAGE>

CMC FIXED INCOME SECURITIES FUND
<TABLE>

For the Period September 1
through October 31, 2000 (1)(2)
-------------------------------
<S> <C>

Net asset value, beginning of period................... $ 10.00
----------------

Income from investment operations:

Net investment income ............................ 0.11

Net realized and unrealized gains

on investments ................................. 0.02
----------------

Total from investment operations............. 0.13
----------------

Less distributions:

Dividends from net investment income.............. (0.11)
----------------

Total distributions.......................... (0.11)
----------------

Net asset value, end of period......................... $ 10.02
================

Total return........................................... 1.31% (3)

Ratios/Supplemental data

Net assets, end of period (in thousands)............... $ 10,866

Ratio of net expenses to average net assets(4)......... 0.40%

Ratio of total expenses to average net assets (4)...... 1.46%

Ratio of net income to average net assets.............. 6.57%

Portfolio turnover rate................................ 103%
</TABLE>

(1) From inception of operations.
(2) Ratios and portfolio turnover rates are annualized.
(3) Not annualized.
(4) For the fiscal period ended October 31, 2000, the investment adviser
contractually agreed to reimburse ordinary expenses of the Fund, to the
extent that these expenses, together with the Fund's advisory fee, exceed
0.40% of the Fund's average daily net assets.

7
<PAGE>

CMC HIGH YIELD FUND

GOAL
----

What are the Fund's Investment Goals?

The Fund seeks to provide investors a high level of current
income. Capital appreciation is a secondary objective when consistent
with a high level of current income.

STRATEGY
--------

What investment strategies does the Fund use to pursue these goals?

The Fund invests primarily in non-investment grade corporate
debt obligations, commonly referred to as "junk bonds." Under normal
market conditions, the Fund invests at least 80% of its total assets in
high yield corporate debt obligations rated Ba or B by Moody's
Investors Services, Inc. ("Moody's") or BB or B by Standard and Poor'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 the Fund will
not invest more than 10% of the Fund's total assets in securities with
Caa or CCC ratings.

---------------------------------------------------------------
By concentrating on corporate debt obligations rated Ba or B
by Moody's or BB or B by S&P, the Fund intends to invest
primarily in "upper tier" non-investment grade securities. By
emphasizing the "upper tier" of non-investment grade
securities, the Fund seeks to provide investors with access
to higher yielding bonds without assuming all the risk
associated with the broader "junk bond" market. A DESCRIPTION
OF FIXED INCOME SECURITIES RATINGS IS CONTAINED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION.
---------------------------------------------------------------

In selecting securities for the Fund, the Adviser conducts an
ongoing evaluation of the economic and market environment. Such an
analysis helps the Adviser anticipate how economic and market change,
like movement in interest rates, inflation, government regulation and
demographics, may affect certain industries and specific market sectors
within those industries, and thereby the companies making up that
industry or market sector. After determining what industries and market
sectors to invest in, the Adviser conducts intensive, fundamental
research and analysis to identify attractive individual securities
within the targeted industries and market sectors. This analysis is
intended to give the Adviser a better understanding of the long-term
prospects of a particular security, based on the characteristics of the
existing economy and investor temperament. In this way, the Adviser
strives to anticipate and act upon market change, understand its effect
on risk and reward of Fund securities and thereby generate consistent,
competitive results over the long term.

PRINCIPAL RISK FACTORS
----------------------

What are the principal risks of investing in the Fund?

The fixed income securities held in the Fund's investment portfolio are
subject to:

o Interest rate risk which refers to the possibility that the
value of the Fund's investments will decline due to an
increase in interest rates.

<PAGE>

o Credit risk which refers to the ability of an issuer of a bond
to meet interest and principal payments when due. The
non-investment grade securities primarily purchased by the
Fund are subject to greater credit risk than investments in
higher quality, lower yielding bonds.

Both of these risks could impact the total return and yield
you receive on your investment and cause the value of your investment
to go down. You could lose money as a result of your investment in the
Fund.

Please see the "SUMMARY OF PRINCIPAL RISKS" section under the
heading "MORE ABOUT THE FUNDS" for a description of the principal and
other risks of investing in the Fund.

HISTORICAL PERFORMANCE
----------------------

How has the Fund historically performed?

The bar chart and table below illustrate the Fund's annual
returns as well as its long-term performance. The bar chart shows how
the Fund's performance has varied from year to year. The table compares
the Fund's performance over time to that of the Lehman Aggregate Bond
Index, a widely recognized unmanaged index representing the average
market-weighted performance of U.S. Treasury and aggregate securities,
investment grade corporate bonds, and mortgage-backed securities with
maturities greater than one year, and the Merrill Lynch Intermediate BB
Index, which is a market weighted index consisting of BB rated cash pay
bonds, which are U.S. dollar denominated bonds issued in the U.S.
domestic market with maturities between 1-10 years. Both the bar chart
and the table assume the reinvestment of dividends and distributions.
The Fund's historical performance does not indicate how the Fund will
perform in the future.

9
<PAGE>

High Yield Fund

The bar chart shows Year-By-Year Total Return As Of 12/31 Each Year

1995 19.86%
1996 9.70%
1997 12.12%
1998 7.33%
1999 2.35%

Best Quarter: 2Q '95 5.72%
Worst Quarter: 3Q '99 -0.87%

-----------------------------------------------------------------------

Average Annual Total Returns As Of 12/31/99

Inception
1 Year 5 Years (7/6/94)
-----------------------------------------------------------------------
CMC High Yield Fund 2.35% 10.12% 9.39%

Lehman Aggregate Bond Index -0.82% 7.73% 7.14%

Merrill Lynch Intermediate BB Index 2.02% 10.19% 9.66%

The Fund's year-to-date total return as of 9/30/00 was 4.63%.

EXPENSES
--------

What expenses do I pay as an investor in the Fund?

The table below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. As a shareholder, you pay
no transaction fees in connection with your investment in the Fund. In
the future, the amount of fees and expenses will depend on the actual
average net assets of the Fund during those years and a number of other
factors.

10
<PAGE>

-----------------------------------------------------------------
The Fund has no sales charge (load) or 12b-1 distribution fees.
-----------------------------------------------------------------
--------------------------------------------------------------------------------
Fee Table

Shareholder transaction fees (fees paid directly None
from your investment)

Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)

Management Fees 0.40%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.03%

Total Fund Operating Expenses 0.43%
--------------------------------------------------------------------------------

Expense Example

This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain constant as a
percentage of net assets. Your actual costs may be higher or lower, but
based on these assumptions your costs would be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$44 $138 $241 $542

FINANCIAL HIGHLIGHTS
--------------------

The financial highlights table is intended to help you understand the
Fund's financial performance since inception. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate of return an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Statement of Additional Information under "FINANCIAL STATEMENTS."

11
<PAGE>

<TABLE>
High Yield Fund
Year Ended October 31,
----------------------
<S> <C> <C> <C> <C> <C>
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Net asset value, beginning of year.................... $8.54 $8.95 $9.21 $8.99 $9.06
----- ----- ----- ----- -----

Income from investment operations:

Net investment income................................. 0.73 0.74 0.76 0.80 0.81
Net realized and unrealized gains (losses)
on investments...................................... (0.24) (0.41) (0.21) 0.32 0.03
------ ------ ------ ---- ----
Total from investment operations................. 0.49 0.33 0.55 1.12 0.84
---- ---- ---- ---- ----

Less distributions:

Dividends from net investment income.................. (0.73) (0.74) (0.76) (0.80) (0.81)
Distributions from net capital gains.................. - (0.00)* (0.05) (0.10) (0.10)
------ ------ ------ ---- ----
Total distributions.............................. (0.73) (0.74) (0.81) (0.90) (0.91)
------ ------ ------ ------ ------
Net asset value, end of year.......................... $8.30 $8.54 $8.95 $9.21 $8.99
===== ===== ===== ===== =====

Total return.......................................... 6.01% 3.75% 6.00% 12.90% 9.61%

Ratios/Supplemental data

Net assets, end of year (in thousands)................ $319,985 $271,551 $263,912 $119,196 $69,614
Ratio of expenses to average net assets............... 0.43% 0.43% 0.45% 0.45% 0.50%
Ratio of net income to average net assets............. 8.70% 8.39% 8.28% 8.60% 8.90%
Portfolio turnover rate............................... 56% 62% 71% 69% 56%
</TABLE>
* Amount represents less than $0.01 per share.

NOTE: Per share amounts have been adjusted to retroactively reflect a 4 for 1
share split effective September 1, 1999.

CMC INTERNATIONAL BOND FUND
GOAL
----
What is the Fund's Goal?

The Fund seeks to provide investors a high level of current
income consistent with a high degree of preservation of capital.

STRATEGY
--------
What investment strategies does the Fund use to pursue this goal?

The Fund intends to invest primarily in Fixed Income
Instruments of issuers from around the world. Generally, the Fund seeks
to achieve its goal by investing in debt securities of issuers in at
least three foreign countries, including foreign corporate issuers and
foreign governments or their subdivisions, agencies, instrumentalities,
international agencies and supranational entities. The Fund is not
limited as to countries in which it may invest and will invest in the
securities of issuers located in developed countries, as well as
securities of issuers located in developing countries and countries
with emerging securities markets. At times, the portfolio of the Fund
may be fully or heavily weighted towards securities of emerging or
developing countries. Securities may be denominated in foreign
currencies, baskets of foreign currencies (such as the euro), or the
U.S. dollar. The Fund invests at least 65% of its assets in Fixed
Income Instruments of foreign issuers. Notwithstanding the broad
investment discretion given to the Adviser in this Prospectus, the Fund
intends to invest 100% of its assets in dollar denominated Fixed Income
Instruments, 80% of which will be issued by
12
<PAGE>

foreign governments or their subdivisions, agencies, or
instrumentalities. The Fund will not deviate from this policy unless
such a change is approved by a majority of the trustees of the Fund and
shareholders of the Fund receive 30 days' prior written notice.

The average portfolio duration of the Fund varies based on the
Adviser's forecast for interest rates and, under normal market
conditions, is not expected to exceed seven years. The Fund is
non-diversified, which means that it may concentrate its assets in a
smaller number of issuers than a diversified fund.

Under normal conditions, the Fund invests substantially all
its assets in debt securities rated "B" or higher by Standard & Poors,
Inc. ("S&P"), or "B" or higher by Moody's Investor Services, Inc.
("Moody's") or, if unrated, determined by the Adviser to be of
comparable quality. The Fund will not invest in fixed income securities
rated below Caa by Moody's or CCC by S&P, and the Fund will not invest
more than 10% of the Fund's total assets in securities with Caa or CCC
ratings. For a discussion of the impact of investing in debt securities
rated BB by S&P or Ba by Moody's, see the "Summary of Principal Risks"
section under the heading "MORE ABOUT THE FUNDS" in this Prospectus.

In selecting securities for the Fund the Adviser conducts an
evaluation of the fundamental economic and market factors such as
exchange and interest rates, currency trends, credit quality, and
political and economic trends to determine which countries to invest
in. Generally, the Fund invests in issuers in those countries with
improving fundamentals and that are denominated in stable or
appreciating currencies. The Adviser will also evaluate the risks and
returns for investments in each country based on its analysis of
economic and market factors.

After selecting the countries to invest in, the Adviser
conducts intensive, fundamental research and analysis to identify
attractive securities in those countries expected to produce the best
return with reasonable risk. This analysis is intended to give the
Adviser a better understanding of the long-term prospects of a
particular security, based on the characteristics of the existing
economy and investor temperament. In this way, the Adviser strives to
anticipate and act upon market change, understand its effect on risk
and reward of Fund securities and thereby generate consistent,
competitive results over the long term.

PRINCIPAL RISK FACTORS
----------------------

What are the principal risks of investing in the Fund?

Investing in the Fund involves certain risks, including the
principal risks listed below, which could adversely affect the value of
its investment portfolio, yield and total return.

o Foreign investment risk refers to the greater risks of
investing in the securities of foreign issuers as opposed to
U.S. issuers.

<PAGE>

o Currency or exchange rate risk is the possibility of a decline
in the value of a foreign currency versus the U.S. dollar.
Such a decline will reduce the dollar value of any securities
of the Fund denominated in that currency.

o Interest rate risk is the possibility that the value of the
Fund's investments will decline due to an increase in interest
rates.

o Credit risk refers to the ability of an issuer of a bond to
meet interest and principal payments when due.

o Non-diversified risk is the risk associated with the Fund's
ability to invest a relatively high percentage of its assets
in a limited number of issuers.

o Emerging market risk refers to the increased risk from
investing in the securities of issuers based in less developed
and developing countries.

Any or all of these risks could impact the total return and
yield you receive on your investment and cause the value of your
investment to go down. You could lose money as a result of your
investment in the Fund.

Please see the "SUMMARY OF PRINCIPAL RISKS" section under the
heading "MORE ABOUT THE FUNDS" for a description of the principal and
other risks of investing in the Fund.

HISTORICAL PERFORMANCE
----------------------

How has the Fund historically performed?

Since the International Bond Fund is new, no historical performance is
presented.

EXPENSES
--------

What expenses do I pay as an investor in the Fund?

The table below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. As a shareholder, you pay
no transaction fees in connection with your investment in the Fund. The
International Bond Fund is new, so the annual fund operating expenses
are based on estimates for the current fiscal year. In the future, the
amount of fees and expenses will depend on the actual average net
assets of the Fund during those years and a number of other factors.

-----------------------------------------------------------------
The Fund has no sales charge (load) or 12b-1 distribution fees.
-----------------------------------------------------------------

14
<PAGE>

--------------------------------------------------------------------------------
Fee Table

Shareholder transaction fees (fees paid directly None
from your investment)

Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)

Management Fees 0.40%
Distribution and/or Service (12b-1) Fees None
Other Expenses 1.03%(1)

Total Fund Operating Expenses 1.43%
Expense Reimbursement 0.98%(2)
Net Expenses 0.45%

(1) "Other Expenses" are based on the estimated expenses
that the Fund expects to incur in its first fiscal year
of operation.

(2) For the fiscal period ended October 31, 2000, and for
the fiscal years ended October 31, 2001 and 2002, CMC
has contractually agreed to reimburse the Fund for all
ordinary expenses of the Fund to the extent necessary to
maintain the Fund's Total Annual Fund Operating Expenses
at 0.45%.

--------------------------------------------------------------------------------

Expense Example

1 Year 3 Years
------ -------
$46 $144

FINANCIAL HIGHLIGHTS
--------------------

Since the International Bond Fund is new, no financial information is
presented.

--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------

The Funds' investment adviser is Columbia Management Co., 1300 S.W.
Sixth Avenue, P.O. Box 1350, Portland, Oregon 97207-1350 ("Adviser" or "CMC").
CMC has acted as an investment adviser since 1969.

The Funds have contracted with CMC to provide research, advice and
supervision with respect to investment matters and to determine what securities
to purchase or sell and what portion of the Fund's assets to invest. The CMC
Intermediate Bond Fund is new. Under its advisory contract with CMC, the
International Bond Fund

<PAGE>

will pay CMC an annual management fee, expressed as a percentage of average net
assets, of 0.40%. For the fiscal year ended October 31, 2000, the High Yield
Fund paid CMC an annual management fee, expressed as a percentage of average net
assets, of 0.40%. For the period from September 1, 2000 (inception) through
October 31, 2000 the Fixed Income Securities Fund paid CMC an annual management
fee, expressed as a percentage of average net assets, of 0.35%.

CMC uses an investment team approach to analyze the macro economic and
investment environment and to determine which securities sectors and the desired
levels of portfolio quality, duration and maturity to emphasize. Members of the
fixed income investment team are responsible for the analysis of particular
industries and market sectors within those industries, and for recommendations
on individual securities within those industries and market sectors, based upon
the investment team's conclusions. In the case of the International Bond Fund,
the fixed income investment team shall be responsible for the analysis of
particular foreign countries, and the industries and asset types within those
foreign countries.

Mr. Leonard A. Aplet and Mr. Jeffrey L. Rippey will have responsibility
for implementing, on a daily basis, the investment strategies for the Fixed
Income Securities Fund. Mr. Aplet, Vice President of Columbia (since 1990) and a
Chartered Financial Analyst, joined CMC in 1987. Previously, he was an employee
of the Farmers Home Administration (1976-1985). Mr. Aplet received a Master of
Business Administration degree from the University of California at Berkeley. A
Vice President of CMC (since 1981) and a Chartered Financial Analyst, Mr. Rippey
joined Columbia in 1981. Before joining Columbia, Mr. Rippey worked in the Trust
Department of Ranier National Bank (1978-1981). Mr. Rippey is a 1978 graduate of
Pacific Lutheran University. Mr. Rippey has had responsibility for investment
decisions of the High Yield Fund since its inception in July 1994. Mr. Rippey
and Mr. Aplet will have responsibility for implementing on a daily basis the
investment strategies developed for the International Bond Fund.

--------------------------------------------------------------------------------
INFORMATION ABOUT YOUR INVESTMENT
--------------------------------------------------------------------------------

YOUR ACCOUNT
------------

Buying Shares
-------------

Shares in the Funds are available for purchase by
institutional buyers enabling them to invest in a diversified portfolio
of foreign debt securities, high quality fixed income securities and
lower-rated fixed income securities in a pooled environment, rather
than purchasing securities on an individual basis.

If you want to invest directly in a Fund, contact a CMC
representative at 1-800-547-1037. In addition, CMC, in its role as a
discretionary investment adviser, may allocate a portion of a client's
investment portfolio into the Funds. If such investment is for the
benefit of an employee benefit plan, an independent fiduciary for a CMC
client account, after careful review of this Prospectus, including a
Fund's expenses and consistency with the client's written investment
guidelines, must approve the investment in the Fund. Upon approving the
investment, the independent fiduciary will authorize CMC to invest a
portion of the client's portfolio in a Fund, at CMC's discretion,
subject to limitations imposed by the independent fiduciary.

16
<PAGE>

----------------------------------------------------------------
If CMC is considered to be a fiduciary of your assets,
including the account with 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 your behalf. See the Statement of Additional
Information for more detail.
----------------------------------------------------------------

Although none of the Funds has a policy with respect to
initial or subsequent minimum investments, purchase orders may be
refused at the discretion of a Fund.

Selling Shares
--------------

You may sell shares at any time. Upon redemption you will
receive the Fund's NAV next calculated after your order is accepted by
the Fund's transfer agent. Any certificates representing Fund shares
being sold must be returned with your redemption request. You can
request a redemption by calling your CMC representative at
1-800-547-1037. Redemption proceeds are normally transmitted in the
manner specified in the redemption request on the business day
following the effective date of the redemption. Except as provided by
rules of the Securities and Exchange Commission, redemption proceeds
must be transmitted to you within seven days of the redemption date.

The Funds also reserve the right to make a "redemption in
kind" - pay you in portfolio securities rather than cash - if the
amount you are redeeming is large enough to affect the Fund's
operations (for example, if the redemption represents more than 1% of
the Fund's assets).

Pricing of Shares
-----------------

The Funds use market value to value their securities as quoted
by dealers who are market makers in these securities or by an
independent pricing service, unless the Adviser determines that a fair
value determination should be made using procedures and guidelines
established by and under the general supervision of the Funds' Board of
Trustees. 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. The Funds constantly monitor the price received
from market makers and their pricing service and, at times, will price
its securities using procedures established by and under the general
supervision of the Funds' Board of Trustees. Debt securities with
remaining maturities of less than 60 days will generally be valued
based on amortized cost.

Foreign securities are normally priced using data reflecting
the earlier closing of the principal markets for those securities.
Information that becomes known to a Fund after a foreign security has
been priced, but before the NAV has been calculated, will not generally
be used to adjust the NAV calculated that day.

Investments initially valued in currencies other than the U.S.
dollar are converted to U.S. dollars using exchange rates obtained from
pricing services. As a result, the NAV of a Fund's shares may be
affected by changes in the value of currencies in relation to the U.S.
dollar. The value of securities traded in markets outside the United
States or denominated in

17
<PAGE>

currencies other than the U.S. dollar may be affected significantly on
a day that the New York Stock Exchange is closed and an investor is not
able to purchase, redeem or exchange shares of the Funds.

DISTRIBUTION AND TAXES
----------------------

Income and Capital Gains Distributions
--------------------------------------

Income dividends, consisting of net investment income, are
declared and paid monthly by the Fixed Income Securities Fund and the
High Yield Fund and declared and paid annually by the International
Bond Fund. All income dividends paid by the Funds will be reinvested in
additional shares of the Fund at the net asset value on the dividend
payment date, unless you have elected to receive the dividends in cash.
If all of your shares in a Fund are redeemed, the undistributed
dividends on the redeemed shares will be paid at that time. Each of the
Funds generally distributes substantially all of its net realized
capital gains to shareholders once a year, usually in December. The
amount distributed will depend on the amount of capital gains realized
from the sale of a Fund's portfolio securities. Capital gain
distributions are declared and paid as cash dividends and reinvested in
additional shares at the net asset value, as calculated after payment
of the distribution, at the close of business on the dividend payment
date, unless you have elected to receive the distribution in cash.

Tax Effect of Distributions and Transactions
--------------------------------------------

The dividends and distributions of the Funds are taxable to
most investors, unless the shareholder is exempt from state or federal
income taxes or your investment is in a tax-advantaged account. The tax
status of any distribution is the same regardless of how long you have
been in a Fund and whether you reinvest your distributions or take them
as income. In general, distributions are taxable as follows:
<TABLE>

---------------------------------------------------------------------------------
Taxability of Distributions
<S> <C> <C> <C>
Type of Tax Rate for Tax Rate for
Distribution 15% Bracket 28% Bracket or Higher
------------ ----------- ---------------------

Income Dividends Ordinary Income Rate Ordinary Income Rate

Short Term Capital Gains Ordinary Income Rate Ordinary Income Rate

Long Term Capital Gains 10% 20%
---------------------------------------------------------------------------------
</TABLE>

Each Fund expects that, as a result of its investment
objective to achieve current income, its distributions will consist
primarily of income dividends. Each year the Funds will send you
information detailing the amount of ordinary income and capital gains
distributed to you for the previous year.

----------------------------------------------------------------
Your investment in the Fund could have additional tax
consequences. Please consult your tax professional for
assistance as to the possible application of foreign, state
and local income tax laws to Fund dividends and capital
distributions.
----------------------------------------------------------------

<PAGE>

--------------------------------------------------------------------------------
MORE ABOUT THE FUNDS
--------------------------------------------------------------------------------

INVESTMENT STRATEGY
-------------------

The specific investment objectives for each Fund are described in the
sections titled "Strategy" under the heading "INFORMATION ABOUT THE FUNDS" in
this Prospectus. What follows is an explanation of the overall investment
strategies used to achieve each Fund's investment objective. There is no
assurance that the Funds will achieve their investment objectives. For
information about a Fund's specific investment practices, see the chart on page
29 of the Statement of Additional Information, which is part of this Prospectus.

Fixed Income Securities Fund and High Yield Fund
------------------------------------------------

In selecting investments, and to supplement any credit rating
analysis supplied by Moody's and S&P, the Adviser uses a top down
analysis, supplemented by, in the case of corporate debt securities, a
bottom up company analysis. Top down analysis begins with an overall
evaluation of the investment environment, which allows the Adviser to
determine the specific types of fixed income instruments, and desired
levels of portfolio quality, maturity and duration to emphasize in a
Fund. Factors the Adviser considers in its top down analysis include:

o economic growth
o inflation
o interest rates
o federal reserve policy
o corporate profits
o demographics
o money flows.

Once individual sectors, types of instruments and desired
portfolio characteristics have been identified, in the case of
corporate debt securities, the Adviser employs fundamental analysis to
select individual securities. Fundamental analysis includes the
evaluation of:

o a company's financial condition
o quality of management
o industry dynamics
o earnings growth and profit margins
o sales trends
o potential for new product development
o financial ratios
o investment in research and development.

By utilizing this investment process the Adviser strives to
anticipate and act upon market change, understand its effect on the
risks and rewards of a Fund's securities, and thereby generate
consistent, competitive results over the long term.

Either Fund may depart from its principal investment strategy
by taking temporary defensive positions in response to adverse market,
economic or political conditions. When a

<PAGE>

Fund assumes a temporary defensive position, it is not invested in
securities designed to achieve its stated investment objective.

International Bond Fund
-----------------------

In selecting investments, and to supplement the credit rating
analysis supplied by Moody's and S&P, the Adviser uses a top down
analysis to identify attractive countries, industries, sectors and
securities for investment. As part of this approach, the Adviser
conducts an evaluation of the global economic and investment
environments to anticipate how potential change may influence the
prospects for particular global regions, countries and industries in
those countries. This is because even small shifts in such
macroeconomic factors as interest rates, inflation, government
regulation, political activity, flows of capital and international
monetary policy can affect the overall economic health of an entire
global region or a country, including the industries in that region or
country. The Adviser's top down analysis also includes overall
evaluation of fundamental global economic and market factors, which
allows the Adviser to determine specific foreign countries to invest
in. Economic and market factors considered by the Adviser include:

o political and economic trends
o a foreign country's monetary and fiscal policies, and its
trade and account balances
o interest rates
o exchange rates and currency trends
o prospects for inflation.

Once the Adviser has identified attractive regions, countries
and industries to invest in, the Adviser employs fundamental analysis
to evaluate the merits of individual sectors (such as corporate,
government, asset-backed) and individual securities in those sectors
expected to produce the best return with reasonable risk. The Adviser's
fundamental analysis includes an evaluation of:

o a company's financial condition
o quality of management
o earnings growth and profit margins
o political stability of foreign government
o financial ratios
o sales trends
o creditworthiness of foreign government, issuer or guarantor
o long-term economic outlook for foreign country.

By using this investment process, the Adviser strives to
anticipate and act upon economic and market change, understand its
effect on the risks and rewards of Fund securities, and thereby
generate consistent, competitive results over the long term.

The Fund may, but is not required to, use derivative
instruments for risk management purposes or as part of its investment
strategies. Generally, derivatives are financial contracts whose value
depends upon, or is derived from, the value of an underlying asset,
reference rate or index, and may relate to stocks, bonds, interest
rates, currencies or currency exchange rates, commodities and related
indices. Examples of derivative instruments include options contracts,
futures contracts, options on futures contracts and swap agreements.
The portfolio manager may decide not to employ any of these strategies,
and there is no assurance that any derivatives strategy used by the
Fund will succeed. A description of these and other

20
<PAGE>

derivative instruments that the Fund may use are described under
"INVESTMENT OBJECTIVES, POLICIES AND RISKS" in the Statement of
Additional Information.

The value of the Fund is maintained in U.S. dollars and 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. The Fund will only enter into forward contracts for
hedging and not for purposes of speculation. When 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 forward contracts.
Under normal market conditions, no more than 25 percent of the Fund's
assets may be committed to currency exchange contracts.

The 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 resulting from a change in the
relationship between the U.S. dollar and the relevant foreign currency
during the period between the date a debt security is purchased or sold
and the date on which payment is made or received.

The Fund may depart from its principal investment strategy by
taking temporary defensive positions in response to adverse market,
political or economic conditions. When the Fund assumes a temporary
defensive position, it is not invested in securities designed to
achieve its stated investment objective.

SUMMARY OF PRINCIPAL RISKS
--------------------------

The principal risks of investing in a Fund, as stated above in the
"Risk/Return Summary," are described in greater detail in this section. These
risks are more likely to have a material effect on the Funds than other factors
potentially affecting the Funds. The section "INVESTMENT OBJECTIVES, POLICIES
AND RISKS" in the Statement of Additional Information contains more information
about these and other risks.

CREDIT RISK refers to the ability of the issuer of a bond to
meet interest and principal payments when due. The High Yield Fund and
the International Bond Fund may invest in both investment grade and
non-investment grade securities, although the High Yield Fund will
invest primarily in non-investment grade securities. The Fixed Income
Securities Fund may only invest in investment grade securities.
Investment grade securities are those issued by the U.S. Government,
its agencies, and instrumentalities, as well as those rated as shown
below by the following rating agencies:

-----------------------------------------------------------------------
Investment-Grade Securities

Long-Term Short-Term
Debt Security Debt Security
Rating Agency

Standard & Poors (S&P) At least BBB At least A-3 or SP-2

Moody's Investors At least Prime-3 or
Services, Inc. (Moody's) At least Baa MIG 4/FMIG4
-----------------------------------------------------------------------

<PAGE>

The Funds may also invest in securities unrated by these agencies if
CMC determines the security to be of equivalent investment quality to
an investment grade security. Investment-grade securities are subject
to some credit risk. Bonds in the lowest-rated investment-grade
category have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to weaken the ability
of the issuer to make principal and interest payments on these bonds
than is the case for higher-rated bonds.

Generally, higher yielding bonds are rated below investment
grade and are subject to greater credit risk than higher quality, lower
yielding bonds. High yield bonds, commonly referred to as junk bonds,
may be issued in connection with corporate restructurings, such as
leveraged buyouts, mergers, acquisitions, debt recapitalizations, or
similar events. High yield bonds are often issued by smaller, less
creditworthy companies or by companies with substantial debt. Since the
price of a high yield bond is generally very sensitive to the financial
conditions of the issuer, the market for high yield bonds can behave
more like the equity market. Adverse changes in economic conditions, an
issuer's financial condition, and increases in interest rates may
negatively affect the market for lower-rated debt securities, more than
higher-rated debt securities. In addition, the secondary markets for
lower-rated securities may be less liquid and less active than markets
for higher-rated securities, which may limit the ability of the Fund to
sell lower-rated securities at their expected value.

The ratings of securities provided by Moody's and S&P are
estimates by the rating agencies of the credit quality of the
securities. The ratings may not take into account every risk related to
whether interest or principal will be repaid on a timely basis. See the
Fund's Statement of Additional Information for a complete discussion of
bond ratings.

INTEREST RATE risk refers to the possibility that the value of
a Fund's investments will decline due to an increase in interest rates.

----------------------------------------------------------------
When interest rates go up, the value of a Fund's portfolio
will likely decline because fixed income securities in the
portfolio are paying a lower interest rate than what investors
could obtain in the current market. When interest rates go
down, the value of a Fund's portfolio will likely rise,
because fixed income securities in the portfolio are paying a
higher interest rate than newly issued fixed income
securities.
----------------------------------------------------------------

The amount of change in the value of a Fund's portfolio depends upon
several factors, including the maturity date of the fixed income
securities in the portfolio. In general, the price of fixed income
securities with longer maturities are more sensitive to interest rate
changes than the price of fixed income securities with shorter
maturities.

FOREIGN INVESTMENT RISK. Securities of foreign issuers may be
subject to greater fluctuations in price than domestic securities. The
price of foreign securities are affected by changes in the currency
exchange rates. Potential political or economic instability of the
country of the issuer, especially in emerging or developing countries,
could cause rapid and extreme changes in the value of the International
Bond Fund's assets. Each of the High Yield Fund and the Fixed Income
Securities Fund may invest up to 10% of its assets in securities of
foreign issuers. Foreign countries have different accounting, auditing
and financial reporting standards, and foreign issuers are subject to
less governmental regulation and oversight than U.S. issuers. Also,
many countries where the International Bond Fund, and to a lesser
extent the High Yield Fund and the Fixed Income Securities Fund, invest
are not as politically or economically developed as the United States.
Acts of foreign governments interfering in capital markets, such as
capital or currency controls,

22
<PAGE>

nationalization of companies or industries, expropriation of assets, or
imposition of punitive taxes would have an adverse effect on the Funds.

In addition, additional costs may be incurred in connection
with the Funds' 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.

CURRENCY RISK and EXCHANGE RATE RISK refer to a decline in the
value of a foreign currency versus the U.S. dollar, which reduces the
dollar value of securities denominated in that currency. To the extent
any of the Funds hold non-dollar denominated securities, the Fund will
be subject to the risk that those currencies will decline in value
relative to the U.S. dollar. Currency trends are unpredictable.

PREPAYMENT RISK. Prepayment risk refers to the possibility
that the mortgage securities and collateralized mortgage obligations
held primarily by the Fixed Income Securities Fund may be adversely
affected by changes in the prepayment rates on the underlying
mortgages. Principal on individual mortgages underlying mortgage-backed
securities and collateralized mortgage obligations can be prepaid at
any time. Unscheduled or early payments on the underlying mortgages may
shorten the securities's effective maturities and reduce their growth
potential. A decline in interest rates may lead to a faster rate of
repayment of the underlying mortgages and, accordingly, expose the Fund
to a lower rate of return upon reinvestment.

NON-DIVERSIFIED RISK. Because the International Bond Fund is
non-diversified, it may invest a relatively high percentage of its
assets in a limited number of issuers. Accordingly, the Fund's
investment returns may be more likely to be impacted by changes in the
market value and returns of any one portfolio holding.

EMERGING MARKET RISK refers to the increased investment risk
associated with a Funds' investments in issuers based in less developed
and developing countries, which are sometimes referred to as emerging
markets. The International Bond Fund, and to a much lesser extent the
High Yield Fund and the Fixed Income Securities Fund, may invest in the
securities of issuers located in emerging markets. Investments in these
countries are subject to severe and abrupt price declines. Certain
countries have experienced hyperinflation and devaluation of their
currencies versus the U.S. dollar, which have adversely affected
returns to U.S. investors. In addition, securities of issuers located
in these markets may present credit, currency, liquidity, legal,
political and other risks different from risks associated with
investing in developed countries.

The Funds' investments can change over time and, accordingly,
the Funds may become subject to additional principal and other risks.
See "OTHER RISKS" in this section and the Funds' Statement of
Additional Information for more information regarding the risks of
investing in the Funds.

<PAGE>

OTHER RISKS
-----------

In addition to the risks stated in each Fund's "RISK/RETURN SUMMARY"
and described in greater detail above under the section "SUMMARY OF PRINCIPAL
RISKS", there are other risks of investing in the Funds, some of which are
described below:

Zero-Coupon Securities
----------------------

The High Yield Fund may invest in lower-rated debt securities
structured as zero-coupon securities. A zero-coupon security does not
pay periodic interest. Instead, the issuer sells the security at a
substantial discount from its stated value at maturity. The interest
equivalent received by the investor from holding this security to
maturity is the difference between the stated maturity value and the
purchase price. The Fund accrues taxable income on zero-coupon
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.

Liquidity Risk
--------------

The International Bond Fund may purchase debt securities which
can become difficult to sell for a variety of reasons, such as lack of
an active trading market. Foreign securities and derivatives purchased
by the International Bond Fund, and in particular bonds of issuers
based in emerging or developing countries, are especially exposed to
liquidity risk. Because some of these debt securities in developing
countries do not trade frequently, when they do trade, their price may
be substantially higher or lower than had been expected.

Derivative Risk
---------------

The International Bond Fund and the Fixed Income Securities
Fund, and to a lesser extent the High Yield Fund, may invest their
assets in derivative instruments. The Fund's use of derivative
instruments involves risks different from, or possibly greater than,
the risks associated with investing directly in securities and other
more traditional investments. To the extent the Funds use these
instruments, they may be exposed to additional volatility and potential
losses. The Adviser must use different skills and abilities to manage
the increased risks associated with investments in derivative
securities. A description of various risks associated with particular
derivative instruments is included in "INVESTMENT OBJECTIVES, POLICIES
AND RISKS" in the Statement of Additional Information.

<PAGE>

--------------------------------------------------------------------------------
FOR MORE INFORMATION
--------------------------------------------------------------------------------

You can find additional information on the Funds' structure and their
performance in the following documents:

o Annual/Semiannual Reports. While the Prospectus describes the
Funds' potential investments, these reports detail the Funds'
actual investments as of the report date. Reports include a
discussion by the Funds' management of recent market
conditions, economic trends, and strategies that significantly
affected the Funds' performance during the reporting period.

o Statement of Additional Information ("SAI"). A supplement to
the Prospectus, the SAI contains further information about the
Funds and their investment restrictions, risks and polices. It
also includes the most recent annual report and the
independent accountant's report.

A current SAI for the Funds is on file with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference, which means it
is considered part of this Prospectus.

A copy of the SAI and the current annual report is attached to this
Prospectus. To obtain additional copies of the SAI or copies of the current
annual/semiannual report, without charge, or to make inquiries of the Funds, you
may contact:

CMC Fund Trust
1300 S.W. Sixth Avenue
Portland, Oregon 97201
Telephone: 1-800-547-1037

Information about the Funds (including the SAI) can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C. Information about the
operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Reports and other information regarding the Funds are also on
the SEC's Internet website at http://www.sec.gov, and copies of this information
may be obtained, after paying a duplicating fee, by electronic request at the
SEC's E-mail address at [email protected] or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102.

SEC file number: 811-5857

25
<PAGE>
================================================================================

CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
CMC INTERNATIONAL BOND FUND
Portfolios of CMC Fund Trust

================================================================================

STATEMENT OF ADDITIONAL INFORMATION

CMC Fund Trust
1300 S.W. Sixth Avenue
P.O. Box 1350
Portland, Oregon 97207
(503) 222-3600

This Statement of Additional Information contains information relating
to CMC Fund Trust (the "Trust") and three portfolios of the Trust, CMC Fixed
Income Securities Fund, CMC High Yield Fund and CMC International Bond Fund
(each a "Fund" and together the "Funds").

TABLE OF CONTENTS

Description Of The Funds......................................................2
Investment Objectives, Policies And Risks..................................2
Investment Restrictions...................................................30
Management...................................................................34
Investment Advisory And Other Fees Paid To Affiliates........................37
Portfolio Transactions.......................................................39
Capital Stock And Other Securities...........................................40
Purchase, Redemption And Pricing Of Shares...................................41
Purchases.................................................................41
Redemptions...............................................................42
Pricing Of Shares.........................................................42
Custodians...................................................................43
Independent Accountants......................................................44
Taxes........................................................................44
Yield And Performance........................................................48
Financial Statements.........................................................50

December 21, 2000

<PAGE>

--------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
--------------------------------------------------------------------------------

The Trust is an Oregon business trust established under a Restated
Declaration of Trust, dated October 13, 1993, as amended. The Trust is an
open-end, management investment company comprised of separate portfolios, each
of which is treated as a separate fund. There are seven portfolios established
under the Trust: the Funds, CMC Short Term Bond Fund, CMC Small Cap Fund, CMC
Small/Mid Cap Fund, and CMC International Stock Fund. With the exception of the
International Bond Fund, each Fund is diversified, which means that, with
respect to 75% of its total assets, those Funds will not invest more than 5% of
their assets in the securities of any single issuer. The International Bond Fund
is non-diversified, which means that the Fund may invest a greater percentage of
its assets in the securities of a single issuer (such as bonds issued by a
single foreign government or corporate issuer) than the other funds in the
Trust. Because the International Bond Fund may invest in a relatively small
number of issuers, it will be more susceptible to risks associated with a single
economic, political or regulatory occurrence than a more diversified fund might
be. The investment adviser for the Funds is Columbia Management Co. (the
"Adviser"). See the section entitled "INVESTMENT ADVISORY AND OTHER FEES PAID TO
AFFILIATES" for further discussion regarding the Adviser.

INVESTMENT OBJECTIVES, POLICIES AND RISKS
-----------------------------------------

The investment objectives and principal investment strategies and
policies of the Funds are described in the Prospectus. None of the Fund's
objectives may be changed without a vote of its outstanding voting securities.
There is no assurance that the Funds will achieve their investment objectives.
What follows is additional information regarding securities in which a Fund may
invest and investment practices in which it may engage. To determine whether a
Fund purchases such securities or engages in such practices, and to what extent,
see the chart on page 29 of this Statement of Additional Information.

Corporate Debt Securities
-------------------------

The Funds' investments in U.S. dollar or foreign currency-denominated
corporate debt securities of U.S. and foreign issues are limited to corporate
debt securities rated B or higher by Moody's and S&P, or, if unrated, are in the
Adviser's opinion comparable in quality, although both the International Bond
Fund and the High Yield Fund may each invest up to 10% of its assets in
corporate debt securities noted Caa by Moody's or CCC by S&P. These include
corporate bonds, debentures, notes, convertible securities and other similar
corporate debt instruments. The following is a description of the bond ratings
used by Moody's and S&P. Subsequent to its purchase by the Fund, a security 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 a Fund should continue to hold such security in its portfolio.

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.

<PAGE>

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.

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.

<PAGE>

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.

High Yield Securities ("Junk Bonds")
------------------------------------

Investment in securities rated below investment grade (i.e., rated Ba
or lower by Moody's or BB or lower by S&P) are described as "speculative" by
both Moody's and S&P ("high yield securities" or "junk bonds"). Investment in
high yield securities generally provides greater income and increased
opportunity for capital appreciation than investments in higher quality
securities, but they also typically entail greater price volatility and
principal and income risk. These high yield securities are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Analysis of the creditworthiness of
issuers of debt securities that are high yield may be more complex than for
issuers of high quality debt securities. The High Yield Fund and International
Bond Fund may invest up to 10% of its assets in corporate debt securities rated
Caa by Moody's or CCC by S&P. In no event, however, may either Fund invest in
corporate debt securities rated lower than Caa or CCC.

High yield securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of high yield securities have been found to be less
sensitive to interest-rate changes than higher-rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in high yield security prices because the advent
of a recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If an issuer of high
yield securities defaults, in addition to risking payment of all or a portion of
interest and principal, a Fund may incur additional expenses to seek recovery.
In the case of high yield securities structured as zero-coupon or pay-in-kind
securities, their market prices are affected to a greater extent by interest
rate changes, and therefore tend to be more volatile than securities which pay
interest periodically and in cash.

The secondary market on which high yield securities are traded may be
less liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which a Fund could
sell a high yield security, and could adversely affect the daily net asset value
of the shares. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the values and liquidity of high yield
securities, especially in a thinly-traded market. When secondary markets for
high yield securities are less liquid than the market for higher grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
The Adviser seeks to minimize the risks of investing in high yield securities
through diversification, in-depth credit analysis and attention to current
developments and trends in both the economy and financial markets.

The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest

<PAGE>

payments, not the market value risk of high yield securities. Also, credit
rating agencies may fail to change credit ratings in a timely fashion to reflect
events since the security was last rated. The Adviser does not rely solely on
credit ratings when selecting securities for the Funds, and develops its own
independent analysis of issuer credit quality. If a credit rating agency changes
the rating of a portfolio security held by a Fund, the Fund may retain the
portfolio security if the Adviser deems it in the best interest of shareholders.

Convertible Securities
----------------------

A convertible debt security is a bond, debenture, note, or other
security that entitles the holder to acquire common stock or other equity
securities of the same or a different issuer. A convertible security generally
entitles the holder to receive interest paid or accrued until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities have characteristics similar to non-convertible debt
securities. Convertible securities rank senior to common stock in a
corporation's capital structure and, therefore, generally entail less risk than
the corporation's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security.

Because of the conversion feature, the price of the convertible
security will normally fluctuate in some proportion to changes in the price of
the underlying asset, and as such is subject to risks relating to the activities
of the issuer and/or general market and economic conditions. The income
component of a convertible security may tend to cushion the security against
declines in the price of the underlying asset. However, the income component of
convertible securities causes fluctuations based upon changes in interest rates
and the credit quality of the issuer. In addition, convertible securities are
often lower-rated securities.

The convertible security may be subject to redemption at the option of
the issuer at a predetermined price. If a convertible security held by a Fund is
called for redemption, the Fund would be required to permit the issuer to redeem
the security and convert it to underlying common stock, or would sell the
convertible security to a third party, which may have an adverse effect on the
Fund's ability to achieve its investment objective. A Fund generally would
invest in convertible securities for their favorable price characteristics and
total return potential and would normally not exercise an option to convert.

Foreign Securities
------------------

The International Bond Fund will invest in obligations of foreign
governments or their subdivisions, agencies, and instrumentalities and in debt
securities of foreign corporate issuers. The International Bond Fund may also
invest in debt securities issued by supranational organizations such as the
World Bank, the European Investment Bank, and the Asian Development Bank. The
High Yield Fund and the Fixed Income Securities Fund may invest up to 10% of
their assets in foreign securities, however the High Yield Fund may not invest
in securities issued by a foreign government. Any of these securities may be
denominated in foreign currency or U.S. dollars, or may be traded in U.S.
dollars in the United States although the underlying security is usually
denominated in a foreign currency.

Investing in foreign securities involve certain risks such as:

5
<PAGE>

o interest rate risk
o credit risk
o exchange rate risk
o currency fluctuations
o political, economic and social instability in the country of the
issuer, such as expropriation of assets or nationalization of
industries.

As a result, securities held by a Fund may be subject to greater
fluctuations in price than securities issued by U.S. corporations or issued or
guaranteed by the U.S. government, its instrumentalities or agencies. The prices
of foreign securities denominated in foreign currency are affected by changes in
the currency exchange rates. Potential political or economic instability of the
country of the issuer, especially in developing or less developed countries
(which are sometimes referred to as emerging markets), could cause rapid and
extreme changes in the value of a Fund's assets. Foreign countries have
different accounting, auditing and financial reporting standards, and foreign
issuers are subject to less governmental regulation and oversight than U.S.
issuers. Also, many countries where a Fund invests are not as politically or
economically developed as the U.S. Acts of foreign governments interfering in
capital markets, such as capital or currency controls, nationalization of
companies or industries, expropriation of assets, or imposition of punitive
taxes would have an adverse effect on the Funds.

In addition, a portion of a Fund's investments may be held in the
foreign currency of the country where the investment is made. These securities
are subject to the risk that those currencies will decline in value relative to
the U.S. dollar. Currency trends are unpredictable.

Another risk of investing in foreign securities is that additional
costs may be incurred in connection with a 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 a 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.

Securities traded in countries with emerging securities market may be
subject to risks in addition to the risks typically posed by global investing
due to the inexperience of financial intermediaries, the lack of modern
technology, the lack of a sufficient capital base to expand business operations,
and political and economic instability. Investments in these countries are
subject to severe and abrupt price declines. Certain countries have experienced
hyperinflation and devaluation of their currencies versus the U.S. dollar, which
have adversely affected returns to U.S. investors. In addition, securities of
issuers located in these markets may present credit, currency, liquidity, legal,
political and other risks different from risks associated with investing in
developed countries.

The Funds may also invest in mortgage-backed securities issued or
guaranteed by foreign government entities, and Brady Bonds, which are long-term
bonds issued by government entities in developing countries as part of a
restructuring of their commercial loans. A Brady bond is created when an
outstanding commercial bank loan to a government or private entity is exchanged
for a new bond in connection with a debt restructuring plan. Brady bonds may be
collateralized or uncollateralized and issued in various currencies (usually in
the U.S. dollar, however). They are often fully collateralized as to principal
in U.S.

<PAGE>

Treasury zero coupon bonds. Even with this collateralization feature, however,
Brady bonds are often considered speculative, below investment-grade investments
because the timely payment of interest is the responsibility of the issuing
party (the foreign country or entity), and the value of the bonds can fluctuate
significantly based on the issuer's ability or perceived ability to make these
payments. Brady bonds may be structured with floating rate or low fixed-rate
coupons.

Brady bonds have been issued only recently, and accordingly do not have
a long payment history. Brady bonds involve various risk factors including
residual risk and the history of defaults with respect to commercial bank loans
by public and private entities of countries issuing Brady bonds. There can be no
assurance that Brady bonds in which a Fund may invest will not be subject to
restructuring arrangements or to requests for new credit, which may cause the
Fund to suffer a loss of interest or principal on any of its holdings.

Investment in sovereign debt can involve a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the principal and/or interest when due in accordance
with the terms of the debt. A governmental entity's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
governmental entity's policy toward the International Monetary Fund, and the
political constraints to which a governmental entity may be subject.
Governmental entities may also depend on expected disbursements from foreign
governments, multilateral agencies and others to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the governmental entity, which may further
impair such debtor's ability or willingness to service its debts in a timely
manner. Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt (including the Funds) may be requested to participate
in the rescheduling of such debt and to extend further loans to governmental
entities. There is no bankruptcy proceeding by which sovereign debt on which
governmental entities have defaulted may be collected in whole or in part.

The International Bond Fund's investments, and to a lesser extent the
investments of the High Yield Fund and Fixed Income Securities Fund, in foreign
currency denominated debt obligations and hedging activities will likely produce
a difference between its book income and its taxable income. This difference may
cause a portion of a Fund's income distributions to constitute returns of
capital for tax purposes or require a Fund to make distributions exceeding book
income to qualify as a regulated investment company for federal tax purposes.

Bank Obligations
----------------

Bank obligations in which each of the Funds may invest include
certificates of deposit, bankers' acceptances, and fixed time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time

<PAGE>

and earning a specified return. Bankers' acceptances are negotiable drafts or
bills of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may be subject to early withdrawal penalties which vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits. The Funds will not invest in fixed time deposits which (1)
are not subject to prepayment or (2) provide for withdrawal penalties upon
prepayment (other than overnight deposits) if, in the aggregate, more than 15%
of its net assets would be invested in such deposits, repurchase agreements
maturing in more than seven days and other illiquid assets.

Obligations of foreign banks involve somewhat different investment
risks than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.

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.

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

<PAGE>

present or may arise as a result of public interest questions and preparation to
meet such obligations.

Foreign Currency Transactions
-----------------------------

A Fund may engage in foreign currency transactions either on a spot
(cash) basis at the rate prevailing in the currency exchange market at the time
or through forward currency contracts ("forwards") with terms generally of less
than one year. A Fund may engage in these transactions to protect against
uncertainty in the level of future foreign exchange rates in the purchase and
sale of foreign securities. A forward involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts may be bought or sold to protect a Fund against
a possible loss resulting from an adverse change in the relationship between
foreign currencies and the U.S. dollar or to increase exposure to a particular
foreign currency. Open positions in forwards used for non-hedging purposes will
be covered by the segregation with the Trust's custodian of assets determined to
be liquid by the Adviser in accordance with procedures established by the Board
of Trustees, and are marked to market daily. Although forwards are intended to
minimize the risk of loss due to a decline in the value of the hedged
currencies, at the same time, they tend to limit any potential gain which might
result should the value of such currencies increase. Forwards will be used
primarily to adjust the foreign exchange exposure of a Fund with a view to
protecting the portfolio from adverse currency movements, based on the Adviser's
outlook, and a Fund might be expected to enter into such contracts in the
following circumstances:

Lock In. When management desires to lock in the U.S. dollar price on
the purchase or sale of a security denominated in a foreign currency.

Cross Hedge. If a currency is expected to decrease against another
currency, a Fund may sell the currency expected to decrease and purchase a
currency which is expected to increase against the currency sold in an amount
approximately equal to some or all of that Fund's portfolio holdings denominated
in the currency sold.

Direct Hedge. If the Adviser wants to eliminate substantially all of
the risk of owning a particular currency, or if the Adviser believes the
portfolio may benefit from price appreciation in a given country's bonds but
does not want to hold the currency, it may employ a direct hedge back into the
U.S. dollar. In either case, a Fund would enter into a forward contract to sell
the currency in which a portfolio security is denominated and purchase U.S.
dollars at an exchange rate established at the time it initiated the contract.
The cost of the direct hedge transaction may offset most, if not all, of the
yield advantage offered by the foreign security, but a Fund would hope to
benefit from an increase (if any) in the value of the bond.

Proxy Hedge. The Adviser might choose to use a proxy hedge, which is
less costly than a direct hedge. In this case, a Fund, having purchased a bond,
will sell a currency whose value is believed to be closely linked to the
currency in which the bond is denominated. Interest rates prevailing in the
country whose currency was sold would be expected to be closer to those in the
U.S. and lower than those of bonds denominated in the currency of the original
holding. The type of hedging entails greater risk than a direct hedge because it
is

<PAGE>

dependent on a stable relationship between the two currencies paired as proxies,
and because the relationships can be very unstable at times.

Forward contracts involve other risks, including, but not limited to,
significant volatility in currency markets. In addition, currency moves may not
occur exactly as the Adviser expected, so use of forward contracts could
adversely affect a Fund's total return.

Costs of Hedging. When a Fund purchases a foreign bond with a higher
interest rate than is available on U.S. bonds of a similar maturity, the
additional yield on the foreign bond could be substantially lost if a Fund were
to enter into a direct hedge by selling the foreign currency and purchasing the
U.S. dollar. This is what is known as the "cost" of hedging. Proxy hedging
attempts to reduce this cost through an indirect hedge back to the U.S. dollar.

Hedging costs are treated as capital transactions and are not,
therefore, deducted from a Fund's dividend distribution and are not reflected in
its yield. Instead these costs will, over time, be reflected in a Fund's net
asset value per share.

Hedging may result in the application of the mark-to-market and
straddle provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). These provisions could result in an increase or decrease in the amount
of taxable dividends paid by a Fund and could affect whether dividends paid by
that Fund are classified as capital gains or ordinary income.

U.S. 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.

10
<PAGE>

Mortgage-Backed Securities and Mortgage Pass-Through Securities
---------------------------------------------------------------

The Funds may also invest in mortgage-backed securities, which are
interests in pools of mortgage loans, including mortgage loans made by savings
and loan institutions, mortgage bankers, commercial banks and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations as further described
below. The Funds may also invest in debt securities which are secured with
collateral consisting of mortgage-backed securities (see "Collateralized
Mortgage Obligations"), and in other types of mortgage-related securities.

Because principal may be prepaid at any time, mortgage-backed
securities involve significantly greater price and yield volatility than
traditional debt securities. A decline in interest rates may lead to a faster
rate of repayment of the underlying mortgages and expose the Funds to a lower
rate of return upon reinvestment. To the extent that mortgage-backed securities
are held by a Fund, the prepayment right will tend to limit to some degree the
increase in net asset value of the Fund because the value of the mortgage-backed
securities held by the Fund may not appreciate as rapidly as the price of
non-callable debt securities. When interest rates rise, mortgage prepayment
rates tend to decline, thus lengthening the life of mortgage-related securities
and increasing their price volatility, affecting the price volatility of a
Fund's shares.

Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by repayments of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of
fees or costs which may be incurred. Some mortgage-related securities (such as
securities issued by the Government National Mortgage Association) are described
as "modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.

The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the U.S. Government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks, and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages. These guarantees, however, do not apply to the market
value or yield of mortgage-backed securities or to the value of a Fund's shares.
Also, GNMA securities often are purchased at a premium over the maturity value
of the underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.

<PAGE>

corporation owned entirely by private stockholders. It is subject to regulation
by the Secretary of Housing and Urban Development. FNMA purchases conventional
(i.e., not insured or guaranteed by any government agency) mortgages from a list
of approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA, but are not backed by the
full faith and credit of the U.S. Government.

FHLMC is a corporate instrumentality of the U.S. Government and was
created by Congress in 1970 for the purpose of increasing the availability of
mortgage credit for residential housing. Its stock is owned by the twelve
Federal Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the U.S.
Government.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers, and other secondary market issuers also
create pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers, and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets a Fund's investment
quality standards. There is no assurance that the private insurers or guarantors
can meet their obligations under the insurance policies or guarantee
arrangements. A Fund may buy mortgage-related securities without insurance or
guarantees if, through an examination of the loan experience and practices of
the originators/services and poolers, the Adviser determines that the securities
meet the Fund's quality standards. Although the market for such securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable.

Collateralized Mortgage Obligations ("CMOs")
--------------------------------------------

The Funds may invest in CMOs, which are hybrids between mortgage-backed
bonds and mortgage pass-through securities. Similar to a bond, interest and
prepaid principal are paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.

<PAGE>

Investors holding the longer maturity classes receive principal only after the
first class has been retired. An investor is partially protected against a
sooner than desired return of principal by the sequential payments. The prices
of certain CMOs, depending on their structure and the rate of prepayments, can
be volatile. Some CMOs may also not be as liquid as other securities.

In a typical CMO transaction, a corporation issues multiple series
(e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are
used to purchase mortgages or mortgage pass-through certificates ("Collateral").
The Collateral is pledged to a third party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B, and C bonds all bear current
interest. Interest on the Series Z Bond is accrued and added to principal and a
like amount is paid as principal on the Series A, B, or C Bond currently being
paid off. When the Series A, B, and C Bonds are paid in full, interest and
principal on the Series Z Bond begins to be paid currently. With some CMOs, the
issuer serves as a conduit to allow loan originators (primarily builders or
savings and loan associations) to borrow against their loan portfolios.

A Fund will invest only in those CMOs whose characteristics and terms
are consistent with the average maturity and market risk profile of the other
fixed income securities held by that Fund.

Other Mortgage-Backed Securities
--------------------------------

The Adviser expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investment in
addition to those described above. The mortgages underlying these securities may
include alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may differ
from customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Adviser will, consistent
with a Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.

Other Asset-Backed Securities
-----------------------------

The securitization techniques used to develop mortgage-backed
securities are being applied to a broad range of assets. Through the use of
trusts and special purpose corporations, various types of assets, including
automobile loans, computer leases and credit card and other types of
receivables, are being securitized in pass-through structures similar to
mortgage pass-through structures described above or in a structure similar to
the CMO structure. Consistent with a Fund's investment objectives and policies,
the Fund may invest in these and other types of asset-backed securities that may
be developed in the future. In general, the collateral supporting these
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments with interest rate fluctuations.

<PAGE>

debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. There is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of direct parties. To reduce the effect
of failures by obligors on underlying assets to make payments, the securities
may contain elements of credit support which fall into two categories: (i)
liquidity protection, and (ii) protection against losses resulting from ultimate
default by an obligor or the underlying assets. Liquidity protection refers to
the making of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against losses results from payment of the
insurance obligations on at least a portion of the assets in the pool. This
protection may be provided through guarantee policies or letters of credit
obtained by the issuer or sponsor from third parties, through various means of
structuring the transaction or through a combination of such approaches. None of
the Funds will pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or failure
of the credit support could adversely affect the return on an investment in such
a security.

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 a Fund becomes fixed as
a result of a ceiling or cap provision, the interest income received by that
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.

Loan Participations and Assignments
-----------------------------------

Each Fund may purchase participations in loans to corporations or
governments, including governments of less-developed countries. Such
indebtedness may be secured or unsecured. Loan participations typically
represent direct participation in a loan to a corporate borrower or government,
and generally are offered by banks or other financial institutions or lending
syndicates. A Fund may participate in such syndications, or can buy part of a
loan, becoming a part lender. When purchasing loan participations, a Fund
assumes the credit risk associated with the borrower and may assume the credit
risk associated with an interposed bank or other financial intermediary. The
participation interests in which a Fund intends to invest may not be rated by
any nationally recognized rating service such as Moody's or S&P.

A loan is often administered by an agent bank acting as agent for all
holders. The agent bank administers the terms of the loan, as specified in the
loan agreement. In addition,

<PAGE>

the agent bank is normally responsible for the collection of principal and
interest payments from the corporate borrower and the apportionment of these
payments to the credit of all institutions which are parties to the loan
agreement. Unless, under the terms of the loan or other indebtedness, a Fund has
direct recourse against the borrower, the Fund may have to rely on the agent
bank or other financial intermediary to apply appropriate credit remedies
against a borrower.

Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of principal and
interest. If a Fund does not receive scheduled interest or principal payments in
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protection than an unsecured loan
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the borrower's obligation, or that the collateral can be liquidated.

Loan participations and assignments may not be readily marketable and
may be subject to restrictions on resale. Investments in loans through direct
assignment of the financial institution's interests with respect to the loan may
involve additional risks to a Fund. If a loan is foreclosed, for example, the
Fund could be come part owner of any collateral, and would bear the costs and
liabilities associated with owning and disposing of the collateral.

Lending of Portfolio Securities
-------------------------------

Each Fund may lend securities to a broker-dealer or institutional
investor for the investor's use in connection with short sales, arbitrage, or
other securities transactions. Lending of a Fund's portfolio securities will be
made (if at all) in conformity with applicable federal and state rules and
regulations. The purpose of a qualified lending transaction is to afford a 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. The principal risk of a
transaction involving the lending of portfolio securities is the potential
insolvency of the broker-dealer or, other borrower.

Management of the Funds understands that it is the view of the Staff of
the SEC that a 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) a Fund must be able to
terminate the loan, after notice, at any time; (4) a Fund must receive
reasonable 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) a 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.

15
<PAGE>

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 the Adviser to be of good standing and will
not be made unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk.

Derivative Instruments
----------------------

In pursuing its investment objective each Fund may purchase and sell
(write) both put options and call options on securities and securities indexes,
and the International Bond Fund and the Fixed Income Securities Fund may enter
into interest rate, and index futures contracts and purchase and sell options on
such futures contracts ("futures options") for hedging purposes or as part of
its overall investment strategies. In addition, the International Bond Fund, and
to a lesser extent the Fixed Income Securities Fund may also purchase and sell
foreign currency futures contracts and related options. The Funds may purchase
and sell such foreign currency options for purposes of increasing exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
country to another. The International Bond Fund and Fixed Income Securities Fund
also may enter into swap agreements with respect to interest rates and indexes
of securities, and to the extent it may invest in foreign currency-denominated
securities, may enter into swap agreements with respect to foreign currencies.
The Funds may invest in structured notes. If other types of financial
instruments, including other types of options, future contracts, or futures
options are traded in the future, the Fund may also use those instruments,
provided that the Trustees determine that their use is consistent with the
Fund's investment objective and does not violate a Fund's investment
restrictions.

The value of some derivative instruments in which a Fund may invest may
be particularly sensitive to changes in prevailing interest rates, and, like the
other investments of the Fund, the ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Adviser to forecast
interest rates and other economic factors correctly. If the Adviser incorrectly
forecasts such factors and has taken positions in derivative instruments
contrary to prevailing market trends, the Fund could be exposed to the risk of
loss.

A Fund might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If the Adviser
incorrectly forecasts interest rates, market values, or other economic factors
in utilizing a derivatives strategy for the Fund, the Fund might have been in a
better position if it had not entered into the transaction at all. Also,
suitable derivative transactions may not be available in all circumstances. The
use of these strategies involves certain special risks, including a possible
imperfect correlation, or even no correlation, between price movements of
derivative instruments and price movements of related investments. While some
strategies involving derivative instruments can reduce the risk of loss, they
can also reduce the opportunity for gain or even result in losses by offsetting
favorable price movements in related investments or otherwise, due to the
possible inability of the Fund to purchase or sell a portfolio security at a
time that otherwise would be favorable or the possible need to sell a portfolio
security at a disadvantageous time because the Fund is required to maintain
asset coverage or offsetting positions in connection with transactions in
derivative instruments and the possible inability of the Fund to close out or to
liquidate its derivatives positions. In addition, the Fund's use of such
instruments may cause the Fund to realize higher amounts of short-term capital
gains (generally taxed at ordinary income tax rates) than if it had not used
such instruments.

16
<PAGE>

Options on Securities and Indexes. A Fund may, to the extent specified
herein or in the Prospectus, purchase and sell both put and call options on
fixed income or other securities or indexes in standardized contracts traded on
foreign or domestic securities exchanges, boards of trade, or similar entities,
or quoted on NASDAQ or on a regulated foreign over-the-counter market, and
agreements, sometimes called cash puts, which may accompany the purchase of a
new issue of bonds from a dealer.

An option on a security (or index) is a contract that gives the holder
of the option, in return for a premium, the right to buy from (in the case of a
call) or sell to (in the case of a put) the writer of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise, the writer of an
option on an index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified multiplier for the
index option. (An index is designed to reflect features of a particular
financial or securities market, a specific group of financial instruments or
securities, or certain economic indicators.)

A Fund will write call options and put options only if they are
"covered." In the case of a call option on a security, the option is "covered"
if the Fund owns the security underlying the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or, if additional cash consideration is required, cash or other assets
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees, in such amount are segregated by its custodian) upon
conversion or exchange of other securities held by the Fund. For a call option
on an index, the option is covered if the Fund maintains with its custodian
assets, in an amount equal to the contract value of the index, determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees. A call option is also covered if the Fund holds a call on the same
security or index as the call written in which the exercise price of the call
held is (i) equal to or less than the exercise price of the call written or (ii)
greater than the exercise price of the call written, provided the difference is
maintained by the Fund in segregated assets determined to be liquid by the
Adviser in accordance with procedures established by the Board of Trustees. A
put option on a security or an index is "covered" if the Fund segregates assets
that are determined to be liquid by the Adviser in accordance with procedures
established by the Board of Trustees and that are equal to the exercise price. A
put option is also covered if the Fund holds a put on the same security or index
as the put written in which the exercise price of the put held is (i) equal to
or greater than the exercise price of the put written or (ii) less than the
exercise price of the put written, provided the difference is maintained by the
Fund in segregated assets determined to be liquid by the Adviser in accordance
with procedures established by the Board of Trustees.

If an option written by the Fund expires unexercised, the Fund realizes
a capital gain equal to the premium received at the time the option was written.
If an option purchased by the Fund expires unexercised, the Fund realizes a
capital loss equal to the premium paid. Before the earlier of exercise or
expiration, an exchange-traded option may be closed out by an offsetting
purchase or sale of an option of the same series (type, exchange, underlying
security or index, exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be effected when the
Fund desires.

17
<PAGE>

A Fund may sell put or call options it has previously purchased, which
could result in a net gain or loss depending on whether the amount realized on
the sale is more or less than the premium and other transaction costs paid on
the put or call option that is sold. Before exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option of the same
series. The Fund will realize a capital gain from a closing purchase transaction
if the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the market
value of a put or a call option include supply and demand, interest rates, the
current market price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying security or
index, and the time remaining until the expiration date.

The premium paid for a put or call option purchased by the Fund is an
asset of the Fund. The premium received for an option written by the Fund is
recorded as a deferred credit. The value of an option purchased or written is
marked to market daily and is valued at the closing price on the exchange on
which it is traded or, if not traded on an exchange or no closing price is
available, at the mean between the last bid and asked prices.

A Fund may write covered straddles consisting of a combination of a
call and a put written on the same underlying security. A straddle will be
covered when sufficient assets are deposited to meet the Fund's immediate
obligations. The Fund may use the same liquid assets to cover both the call and
put options when the exercise price of the call and put are the same or the
exercise price of the call is higher than that of the put. In such cases, the
Fund will also segregate liquid assets equivalent to the amount, if any, by
which the put is "in the money."

Risks Associated with Options on Securities and Indexes. There are
several risks associated with transactions in options on securities and on
indexes. For example, there are significant differences between the securities
and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when, and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.

During the option period, the covered call writer has, in return for
the premium on the option, given up the opportunity to profit from a price
increase in the underlying security above the exercise price but, as long as its
obligation as a writer continues, has retained the risk of loss should the price
of the underlying security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security at the exercise price. If a put
or call option purchased by the Fund is not sold when it has remaining value,
and if the market price of the underlying security remains equal to or greater
than the exercise price (in the case of a put), or remains less than or equal to
the exercise price (in the case of a call), the Fund will lose its entire
investment in the option. Also, when a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security.

18
<PAGE>

There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option may expire worthless. If the Fund
were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security unless the option
expired without being exercised. As the writer of a covered call option, the
Fund foregoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call option above the
sum of the premium and the exercise price of the call.

If trading were suspended in an option purchased by the Fund, the Fund
would not be able to close out the option. If restrictions on exercise were
imposed, the Fund might be unable to exercise an option it has purchased. Except
to the extent that a call option on an index written by the Fund is covered by
an option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; however, such losses may be mitigated by changes
in the value of the Fund's securities during the period the option was
outstanding.

Foreign Currency Options. A Fund may buy or sell put and call options
on foreign currencies either on exchanges or in the over-the-counter market. A
put option on a foreign currency gives the purchaser of the option the right to
sell a foreign currency at the exercise price until the option expires. A call
option on a foreign currency gives the purchaser of the option the right to
purchase the currency at the exercise price until the option expires. Currency
options traded on U.S. or other exchanges may be subject to position limits that
may limit the ability of the Fund to reduce foreign currency risk using such
options. Over-the-counter options differ from traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller, and generally do not have as much market liquidity as exchange-traded
options.

Futures Contracts and Options on Futures Contracts. The International
Bond Fund and the Fixed Income Securities Fund may invest in interest rate
futures contracts and options thereon, and may also invest in foreign currency
futures contracts and options thereon.

An interest rate, foreign currency, or index futures contract provides
for the future sale by one party and the future purchase by another party of a
specified quantity of a financial instrument, foreign currency, or the cash
value of an index at a specified price and time. A futures contract on an index
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. Although the value of an index might be a
function of the value of certain specified securities, no physical delivery of
these securities is made. A public market exists in futures contracts covering a
number of indexes as well as financial instruments and foreign currencies,
including the S&P 500, the S&P Midcap 400, the Nikkei 225, the NYSE composite,
U.S. Treasury notes, GNMA Certificates, three-month U.S. Treasury bills, 90-day
commercial paper, bank certificates of deposit, Eurodollar certificates of
deposit, the Australian dollar, the Canadian dollar, the British pound, the
German mark, the Japanese yen, the French franc, the Swiss franc, the Mexican
peso, and certain

<PAGE>

multinational currencies, such as the euro. It is expected that other futures
contracts will be developed and traded in the future.

A Fund may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities and
indexes (discussed above). A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a long
position in the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true.

To comply with applicable rules of the Commodity Futures Trading
Commission ("CFTC") under which the Trust and the Funds avoid being deemed a
"commodity pool" or a "commodity operator," the Funds intend generally to limit
their use of futures contracts and futures options to "bona fide hedging"
transactions, as such term is defined in applicable regulations,
interpretations, and practice. For example, a Fund might use futures contracts
to hedge against anticipated changes in interest rates that might adversely
affect either the value of the Fund's securities or the price of the securities
that the Fund intends to purchase. A Fund's hedging activities may include sales
of futures contracts as an offset against the effect of expected increases in
interest rates and purchases of futures contracts as an offset against the
effect of expected declines in interest rates. Although other techniques could
be used to reduce a Fund's exposure to interest rate fluctuations, a Fund may be
able to hedge its exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.

A Fund will only enter into futures contracts and futures options that
are standardized and traded on a U.S. or foreign exchange, board of trade, or
similar entity, or quoted on an automated quotation system.

When a purchase or sale of a futures contract is made by a Fund, that
Fund is required to deposit with its custodian (or broker, if legally permitted)
a specified amount of assets determined to be liquid by the Adviser in
accordance with procedures established by the Board of Trustees ("initial
margin"). The margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term of the
contract. Margin requirements on foreign exchanges may be different than U.S.
exchanges. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract that is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. A Fund expects to earn interest income on its initial margin
deposits. A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day a Fund pays or
receives cash, called "variation margin," equal to the daily change in the value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by a Fund but is instead a
settlement between a Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing daily net asset value, a Fund will
mark to market its open futures positions.

A Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by a Fund.

<PAGE>

Although some futures contracts call for making or taking delivery of
the underlying securities, generally these obligations are closed out before
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, a Fund realizes a capital
loss. Conversely, if an offsetting sale price is more than the original purchase
price, a Fund realizes a capital gain, or if it is less, a Fund realizes a
capital loss. The transaction costs must also be included in these calculations.

A Fund may write covered straddles consisting of a call and a put
written on the same underlying futures contract. A straddle will be covered when
sufficient assets are deposited to meet a Fund's immediate obligations. A Fund
may use the same liquid assets to cover both the call and put options when the
exercise price of the call and put are the same or the exercise price of the
call is higher than that of the put. In such cases, a Fund will also segregate
liquid assets equivalent to the amount, if any, by which the put is "in the
money."

Limitations on Use of Futures and Futures Options. In general, the
International Bond Fund and the Fixed Income Securities Fund intend to enter
into positions in futures contracts and related options only for "bona fide
hedging" purposes. With respect to positions in futures and related options that
do not constitute bona fide hedging positions, a Fund will not enter into a
futures contract or futures option contract if, immediately thereafter, the
aggregate initial margin deposits relating to such positions plus premiums paid
by it for open futures option positions, less the amount by which any such
options are "in-the-money," would exceed 5 percent of that Fund's net assets. A
call option is "in-the-money" if the value of the futures contract that is the
subject of the option exceeds the exercise price. A put option is "in-the-money"
if the exercise price exceeds the value of the futures contract that is the
subject of the option.

When purchasing a futures contract, a Fund will maintain with its
custodian (and mark to market on a daily basis) assets determined to be liquid
by the Adviser in accordance with procedures established by the Board of
Trustees, that when added to the amounts deposited with a futures commission
merchant as margin, are equal to the market value of the futures contract.
Alternatively, a Fund may "cover" its position by purchasing a put option on the
same futures contract with a strike price as high as or higher than the price of
the contract held by a Fund.

When selling a futures contract, a Fund will maintain with its
custodian (and mark to market on a daily basis) assets that are determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees and that are equal to the market value of the instruments underlying
the contract. Alternatively, a Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based) or by holding a call option
permitting that Fund to purchase the same futures contract at a price no higher
than the price of the contract written by that Fund (or at a higher price if the
difference is maintained in liquid assets with the Trust's custodian).

When selling a call option on a futures contract, a Fund will maintain
with its custodian (and mark to market on a daily basis) assets determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees and that, when added to the amounts deposited with a futures commission
merchant as margin, equal the total market

21
<PAGE>

value of the futures contract underlying the call option. Alternatively, a Fund
may cover its position by entering into a long position in the same futures
contract at a price no higher than the strike price of the call option, by
owning the instruments underlying the futures contract, or by holding a separate
call option permitting a Fund to purchase the same futures contract at a price
not higher than the strike price of the call option sold by that Fund.

When selling a put option on a futures contract, a Fund will maintain
with its custodian (and mark to market on a daily basis) assets that are
determined to be liquid by the Adviser in accordance with procedures established
by the Board of Trustees and that equal the purchase price of the futures
contract, less any margin on deposit. Alternatively, a Fund may cover the
position either by entering into a short position in the same futures contract
or by owning a separate put option permitting it to sell the same futures
contract so long as the strike price of the purchased put option is the same as
or higher than the strike price of the put option sold by that Fund.

To the extent that securities with maturities greater than one year are
used to segregate assets to cover a Fund's obligations under futures contracts
and related options, such use will not eliminate the risk of a form of leverage,
which may tend to exaggerate the effect on net asset value of any increase or
decrease in the market value of a Fund's portfolio and may require liquidation
of portfolio positions when it is not advantageous to do so. However, any
potential risk of leverage resulting from the use of securities with maturities
greater than one year may be mitigated by the overall duration limit on a Fund's
portfolio securities. Thus the use of a longer term security may require a Fund
to hold offsetting short-term securities to balance that Fund's portfolio such
that the Fund's duration does not exceed the maximum permitted in the Fund's
Prospectus.

The requirements for qualification as a regulated investment company
also may limit the extent to which a Fund may enter into futures, futures
options, or forward contracts. See "Taxes."

Risks Associated with Futures and Futures Options. There are several
risks associated with the use of futures contracts and futures options as
hedging techniques. A purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in Fund securities being hedged. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given hedge
not to achieve its objectives. The degree of imperfection of correlation depends
on circumstances such as variations in speculative market demand for futures and
futures options on securities, including technical influences in futures trading
and futures options, and differences between the financial instruments being
hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether, when, and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.

Futures contracts on U.S. government securities historically have
reacted to an increase or decrease in interest rates in a manner similar to that
in which the underlying U.S. government securities reacted. Thus the anticipated
spread between the price of the futures contract and the hedged security may be
distorted due to differences in the nature of the

<PAGE>

markets. The spread also may be distorted by differences in initial and
variation margin requirements, the liquidity of such markets, and the
participation of speculators in such markets.

Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses, because
the limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.

There can be no assurance that a liquid market will exist at a time
when a Fund seeks to close out a futures or a futures option position, and that
Fund would remain obligated to meet margin requirements until the position is
closed. In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue to exist.

Additional Risks of Options on Securities, Futures Contracts, Options
on Futures Contracts, and Forward Currency Exchange Contracts and Options
Thereon. Many options on securities, futures contracts, options on futures
contracts, and options on currencies purchased or sold by a Fund will be traded
on foreign exchanges. Such transactions may not be regulated as effectively as
similar transactions in the United States, may not involve a clearing mechanism
and related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political, legal, and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Trust's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

When-Issued, Delayed Delivery and Forward Commitment Transactions
-----------------------------------------------------------------

Each of the Funds may purchase or sell securities on a when-issued,
delayed delivery or forward commitment basis. When-issued, delayed delivery or
forward commitment transactions arise when securities are purchased or sold by a
Fund with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous price and yield to a Fund at the time
of entering into the transaction. When such purchases are outstanding, a Fund
will segregate cash or other liquid assets, determined in accordance with
procedures established by the Board of Trustees, in an amount equal to or
greater than the purchase price. The securities so purchased are subject to
market fluctuation and at the time of delivery of the securities the value may
be more or less than the purchase price. Generally, no income or interest
accrues on the securities a Fund has committed to purchase prior to the time
delivery of the securities is made. A Fund may earn income, however, on

<PAGE>

securities it has segregated. Subject to the segregation requirement, a Fund may
purchase securities on a when-issued, delayed delivery or forward commitment
basis without limit. A Fund's net asset value may be subject to increased
volatility if the Fund commits a large percentage of its assets to the purchase
of securities on this basis.

Repurchase Agreements
---------------------

A Fund may invest in repurchase agreements, which are agreements by
which a 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. A Fund will enter into repurchase agreements only
with those banks or securities dealers who are deemed creditworthy pursuant to
criteria adopted by the Adviser. 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.

Illiquid Securities
-------------------

No illiquid securities will be acquired by a 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 a Fund's net asset value. Under
current interpretations of the Staff of the SEC, the following instruments in
which a 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 a Fund may invest that
are not readily marketable.

Each of the Funds 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 Funds' 10 percent limitation
on the investment in restricted or other illiquid securities. Under the
supervision of the Trustees of the Trust, a Fund's 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

24
<PAGE>

markets will develop. If institutional trading in Rule 144A securities declines,
a Fund's liquidity could be adversely affected to the extent it is invested in
such securities.

Dollar Roll Transactions
------------------------

A Fund may enter into "dollar roll" transactions, which consist of the
sale by a Fund to a bank or broker-dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment to
purchase from the counterparty similar, but not identical, securities at a
future date and at the same price. The counterparty receives all principal and
interest payments, including prepayments, made on the security while it is the
holder. A Fund receives a fee from the counterparty as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed over a
period of several months with a new purchase and repurchase price fixed and a
cash settlement made at each renewal without physical delivery of securities.

A Fund will not use such transactions for leveraging purposes and,
accordingly, will segregate cash, U.S. Government securities or other high grade
debt obligations in an amount sufficient to meet their purchase obligations
under the transactions.

Dollar rolls may be treated for purposes of the Investment Company Act
of 1940, as amended (the "1940 Act"), as borrowings of a Fund because they
involve the sale of a security coupled with an agreement to repurchase. Like all
borrowings, a dollar roll involves costs to a Fund. For example, while a Fund
receives a fee as consideration for agreeing to repurchase the security, that
Fund forgoes the right to receive all principal and interest payments while the
counterparty holds the security. These payments to the counterparty may exceed
the fee received by a Fund, thereby effectively charging the Fund interest on
its borrowing. Further, although a Fund can estimate the amount of expected
principal prepayment over the term of the dollar roll, a variation in the actual
amount of prepayment could increase or decrease the cost of the Fund's
borrowing.

The entry into dollar rolls involves potential risks of loss which are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, a Fund's right to purchase from
the counterparty might be restricted. Additionally, a Fund may be required to
purchase securities in connection with a dollar roll at a higher price than may
otherwise be available on the open market. Since, as noted above, the
counterparty is required to deliver a similar, but not identical security to a
Fund, the security which the Fund is required to buy under the dollar roll may
be worth less than an identical security.

25
<PAGE>

Borrowing
---------

A Fund may borrow from a bank for temporary administrative purposes.
This borrowing may be unsecured. Provisions of the Investment Company Act of
1940 ("1940 Act") require a Fund to maintain continuous asset coverage (that is,
total assets including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed, with an exception for borrowings not in excess of
5% of the Fund's total assets made for temporary administrative purposes. Any
borrowings for temporary administrative purposes in excess of 5% of a Fund's
total assets must maintain continuous asset coverage. If the 300% asset coverage
should decline as a result of market fluctuations or other reasons, a Fund may
be required to sell some of its portfolio holdings within three days to reduce
the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
The High Yield Fund's borrowings, however, may not exceed 5% of its gross assets
at any time. As previously noted, a Fund also may enter into certain
transactions, including reverse repurchase agreements, mortgage dollar rolls,
and sale-buybacks, that can be viewed as constituting a form of borrowing or
financing transaction by the Fund. To the extent a Fund covers its commitment
under such transactions (or economically similar transaction) by the segregation
of assets determined in accordance with procedures adopted by the Trustees,
equal in value to the amount of the Fund's commitment to repurchase, such an
agreement will not be considered a "senior security" by the Fund and therefore
will not be subject to the 300% asset coverage requirement otherwise applicable
to borrowings by the Fund. Borrowing will tend to exaggerate the effect on net
asset value of any increase or decrease in the market value of a Fund's
portfolio. Money borrowed will be subject to interest costs which may or may not
be recovered by appreciation of the securities purchased. A Fund also may be
required to maintain minimum average balances in connection with such borrowing
or to pay a commitment or other fee to maintain a line of credit; either of
these requirements would increase the cost of borrowing over the stated interest
rate.

Short Sales
-----------

Except for the High Yield Fund, a Fund may make short sales of
securities as part of its overall portfolio management strategies involving the
use of derivative instruments and to offset potential declines in long positions
in similar securities. A short sale is a transaction in which a Fund sells a
security it does not own in anticipation that the market price of that security
will decline.

When a Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. A Fund may have to pay a fee to borrow particular securities and is often
obligated to pay over any accrued interest and dividends on such borrowed
securities.

If the price of the security sold short increases between the time of
the short sale and the time a Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. The successful use of short selling may be adversely
affected by imperfect correlation between movements in the price of the security
sold short and the securities being hedged.

<PAGE>

To the extent that a Fund engages in short sales, it will provide
collateral to the broker-dealer and (except in the case of short sales "against
the box") will maintain additional asset coverage in the form of segregated
assets determined to be liquid by the Adviser in accordance with procedures
established by the Board of Trustees. None of the Funds intends to enter into
short sales (other than those "against the box") if immediately after such sale
the aggregate of the value of all collateral plus the amount of the segregated
assets exceeds one-third of the value of a Fund's net assets. This percentage
may be varied by action of the Trustees. A short sale is "against the box" to
the extent that a Fund contemporaneously owns, or has the right to obtain at no
added cost, securities identical to those sold short. A Fund will engage in
short selling to the extent permitted by the 1940 Act and rules and
interpretations thereunder.

Investments in Small and Unseasoned Companies
---------------------------------------------

Unseasoned and small 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
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, a Fund may need to sell them over an extended period or
below the original purchase price. Investments by a Fund in these small or
unseasoned companies may be regarded as speculative.

Zero Coupon and 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 accrued interest, since the last payment. Zero-coupon and pay-in-kind
securities are more volatile than cash pay securities. A Fund accrues income on
these securities prior to the receipt of cash payments. The Funds intend to
distribute substantially all of their income to their shareholders to qualify
for pass-through treatment under the tax laws and may, therefore, need to use
its cash reserves to satisfy distribution requirements.

27
<PAGE>

Duration and Portfolio Turnover
-------------------------------

A Fund's average portfolio duration will vary based on the Adviser's
forecast for interest rates. Under normal market conditions, the average
portfolio duration for the International Bond Fund is not expected to exceed
seven years. There are no limitations on the average portfolio duration for the
High Yield Fund or the Fixed Income Securities Fund. Securities will be selected
on the basis of the Adviser's assessment of interest rate trends and the
liquidity of various instruments under prevailing market conditions. Shifting
the average portfolio duration of the portfolio in response to anticipated
changes in interest rates will generally be carried out through the sale of
securities and the purchase of different securities within the desired duration
range. This may result in a greater level of realized capital gains and losses
than if a Fund held all securities to maturity.

A change in the securities held by a Fund is known as "portfolio
turnover." The portfolio turnover rate is generally the percentage computed by
dividing the lesser of portfolio purchases or sales (excluding all securities,
including options, whose maturities or expiration date at acquisition were one
year or less) by the monthly average value of the securities owned by a Fund
during the particular fiscal year. High portfolio turnover (e.g., greater than
100%) involves correspondingly greater expenses to a Fund, such as brokerage
commissions or dealer mark-ups and other transaction costs, which are borne
directly by the Fund. In addition, high portfolio turnover may also mean that a
proportionately greater amount of distributions to shareholders will be taxed as
ordinary income rather than long-term capital gains.

<PAGE>
Chart of Securities and Investment Practices

Set forth below is a chart detailing the specific securities and
investment practices for each of the Funds. Each of these practices is discussed
in detail in the sections of this Statement of Additional Information preceding
this chart.
<TABLE>

---------------------------------------------------------------------------------------------------------------
Securities and Investment Practices 1
---------------------------------------------------------------------------------------------------------------
CMC FISF CMC HYF CMC IBF
------------------------------------------------------- ----------------- ------------------- -----------------
<S> <C> <C> <C>
Investment Grade Securities + O +
------------------------------------------------------- ----------------- ------------------- -----------------
High Yield Securities NF + +
------------------------------------------------------- ----------------- ------------------- -----------------
U.S. Government Securities + * *
------------------------------------------------------- ----------------- ------------------- -----------------
Foreign Government Securities O X +
------------------------------------------------------- ----------------- ------------------- -----------------
Domestic Bank Obligations * * *
------------------------------------------------------- ----------------- ------------------- -----------------
Commercial Paper * * *
------------------------------------------------------- ----------------- ------------------- -----------------
Mortgage Backed Securities + O O
------------------------------------------------------- ----------------- ------------------- -----------------
CMOs + O O
------------------------------------------------------- ----------------- ------------------- -----------------
Asset Backed Securities + O O
------------------------------------------------------- ----------------- ------------------- -----------------
Floating or Variable Rate + O O
------------------------------------------------------- ----------------- ------------------- -----------------
Loan Transactions O O O
------------------------------------------------------- ----------------- ------------------- -----------------
Options + + +
------------------------------------------------------- ----------------- ------------------- -----------------
Financial Futures + X +
------------------------------------------------------- ----------------- ------------------- -----------------
Foreign Fixed Income Securities O O +
------------------------------------------------------- ----------------- ------------------- -----------------
Currency Contracts
------------------------------------------------------- ----------------- ------------------- -----------------
Hedging O O +
------------------------------------------------------- ----------------- ------------------- -----------------
Speculation O O NF
------------------------------------------------------- ----------------- ------------------- -----------------
Repurchase Agreements * * *
------------------------------------------------------- ----------------- ------------------- -----------------
Restricted/Illiquid (excluding 144A from definition O, 10% O, 10% O, 10%
of illiquid)
------------------------------------------------------- ----------------- ------------------- -----------------
Convertible Securities O O O
------------------------------------------------------- ----------------- ------------------- -----------------
Unseasoned/less than three years operating history O O O
------------------------------------------------------- ----------------- ------------------- -----------------
Dollar Roll Transactions O O O
------------------------------------------------------- ----------------- ------------------- -----------------
When-Issued Securities O O O
------------------------------------------------------- ----------------- ------------------- -----------------
Zero Coupon/Pay in Kind O O O
------------------------------------------------------- ----------------- ------------------- -----------------
Borrowing * * *
------------------------------------------------------- ----------------- ------------------- -----------------

+ Permitted - Part of principal investment strategy
X Fundamental policy/not permitted
O Permitted - Not a principal investment strategy
* Temporary Investment or cash management purposes
% Percentage of total or net assets that fund may invest
NF Non-Fundamental policy - will not engage in

1 Notwithstanding the securities and investment practices set forth herein, the International Bond Fund will invest
100% of its assets in dollar denominated Fixed Income Instruments (as described in the Prospectus), 80% of which will
be issued by foreign governments or their subdivisions, agencies, or instrumentalities. The Fund will not deviate from
this policy unless such a change is approved by a majority of the trustees of the Fund and shareholders of the Fund
receive 30 days' prior written notice.
</TABLE>
29
<PAGE>

INVESTMENT RESTRICTIONS
-----------------------

The following is a list of investment restrictions applicable to the
Funds. 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, provided,
however, at no time will a Fund's investment in illiquid securities exceed 15
percent of its net assets. The Trust may not change these restrictions without a
majority vote of the outstanding securities of the applicable Fund.

The Fixed Income Securities Fund may not:

1. Buy or sell commodities or commodities contracts or oil, gas or
mineral programs, except that the Fund may purchase, sell or enter into
financial futures contracts and options on future contracts, foreign currency
forward contracts, foreign currency options, or any interest rate,
securities-related or foreign currency related hedging instrument, including
swap agreements and other derivative instruments, subject to compliance with any
applicable provisions of the federal securities or commodities laws.

2. Concentrate more than 25 percent of the value of its total assets in
any one industry (the SEC takes the position that investments in government
securities of a single foreign country represent investments in a separate
industry for these purposes).

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, repurchase agreements 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.

5. Purchase illiquid securities if upon the purchase more than 10
percent of the value of the Fund's net assets would consist of such illiquid
securities. See "DESCRIPTION OF THE FUNDS, INVESTMENT OBJECTIVES, POLICIES AND
RISKS HELD BY THE FUNDS" for a complete discussion of illiquid securities.

6. Purchase or retain securities of an issuer, any of whose officers or
directors or security holders is an officer or director of the Fund or of its
adviser if, or so long as, the officers and directors of the Fund and of its
adviser together own beneficially more than 5 percent of any class of securities
of the issuer.

7. Purchase securities of other open-end investment companies, except
as permitted by Section 12(d)(1)(A) of the 1940 Act.

8. 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 Securities Act of 1933, as amended (the "1933 Act").

<PAGE>

9. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks, but only
if immediately after each borrowing there is asset coverage of 300 percent, (ii)
enter into transactions in options futures, options on futures, and other
derivative instruments as described in the Prospectus and this Statement of
Additional Information (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on a
when-issued or delayed delivery basis, collateral arrangements with respect to
initial or variation margin deposit for futures contracts and commitments
entered into under swap agreements or other derivative instruments, will not be
deemed to be pledges of the Fund's assets), (iii) enter into reverse repurchase
agreements, dollar roll transactions or economically similar transactions to the
extent its commitment under such transaction is covered by the segregation of
assets, and (iv) borrow money as a temporary measure for extraordinary or
emergency purposes provided that such borrowings do not exceed 5 percent of the
gross assets of the Fund valued at the lesser of cost or market value, and the
Fund does not 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.

10. 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.

11. Invest in companies to exercise control or management.

12. Buy any securities or other property on margin except for use of
short-term credit necessary for clearance of purchases and sales of portfolio
securities, but it may make margin deposits in connection with transactions in
options, futures, and options on futures or purchase or sell puts or calls, or
confirmations thereof.

13. Engage in short sales, except as permitted in this Statement of
Additional Information.

The High Yield 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.

<PAGE>

5. Purchase illiquid securities, if upon the purchase more than 10
percent of the value of the Fund's net assets would consist of these securities.
See "DESCRIPTION OF THE FUNDS, INVESTMENT OBJECTIVES, POLICIES AND RISKS HELD BY
THE FUNDS" for a complete discussion of illiquid securities.

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
percent of the outstanding securities of that issuer together own more than 5
percent 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

<PAGE>

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.

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.

The International Bond Fund may not:

7. Purchase securities of other open-end investment companies, except
as permitted by Section 12(d)(1)(A) of the 1940 Act.

9. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks, but only
if immediately after each

<PAGE>

borrowing there is asset coverage of 300 percent, (ii) enter into transactions
in options futures, options on futures, and other derivative instruments as
described in the Prospectus and this Statement of Additional Information (the
deposit of assets in escrow in connection with the writing of covered put and
call options and the purchase of securities on a when-issued or delayed delivery
basis, collateral arrangements with respect to initial or variation margin
deposit for futures contracts and commitments entered into under swap agreements
or other derivative instruments, will not be deemed to be pledges of the Fund's
assets), (iii) enter into reverse repurchase agreements, dollar roll
transactions or economically similar transactions to the extent its commitment
under such transaction is covered by the segregation of assets, and (iv) borrow
money as a temporary measure for extraordinary or emergency purposes provided
that such borrowings do not exceed 5 percent of the gross assets of the Fund
valued at the lesser of cost or market value, and the Fund does not 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.

11. Invest in companies to exercise control or management.

13. Engage in short sales, except as permitted in the Fund's Statement
of Additional Information.

--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------

The Trust is managed under the general supervision of the Trustees of
the Trust. The trustees and officers of the Trust are listed below, together
with their principal business occupations. All principal business positions have
been held for more than five years, except as follows: Columbia Strategic Value
Fund, Inc. and Columbia Technology Fund, Inc. since October 2000; Columbia
National Municipal Bond Fund, Inc. since January 1999; Columbia Small Cap Fund,
Inc. since August 1996; 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 Oregon Municipal Bond Fund, Inc., Columbia National Municipal Bond
Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia Short Term Bond
Fund, Inc., Columbia Special Fund, Inc., Columbia Growth Fund, Inc., Columbia
Daily Income Company, Columbia Small Cap Fund, Inc., Columbia Strategic Value
Fund, Inc., Columbia Technology Fund, Inc., and Columbia Fixed Income Securities
Fund, Inc.

<PAGE>

Columbia Trust Company (the "Trust Company"), the Fund's transfer agent; and
formerly a Director of Columbia Financial Center Incorporated ("Columbia
Financial"). Mr. Inskeep's business address is 1300 S.W. Sixth Avenue, P.O. Box
1350, Portland, Oregon 97207.

JEFF B. CURTIS,* Age 47, President and Assistant Secretary of the Trust and each
of the Columbia Funds (since April 2000); Chief Operating Officer (since July
2000) and Secretary (April 1993-October 1999), Director and President of
Columbia Financial (since October 1999); President and Chief Operating Officer
(since October 2000), Chairman (since March 2000), Director (since January
1999), Senior Vice President (January 1999-October 2000) and Secretary (April
1993-October 2000) of the Trust Company; President (since October 2000), Chief
Operating Officer (since July 2000), Director (since December 1997) and Senior
Vice President (January 1999-October 2000) of the Adviser and CFMC. Prior to his
current officer positions, Mr. Curtis was Vice President and General Counsel of
the Adviser, CFMC, the Trust Company and Columbia Financial (from April 1993 to
December 1998). Mr. Curtis's business address is 1300 S.W. Sixth Avenue,
Portland, Oregon 97207.

THOMAS L. THOMSEN,* Age 56, Vice President of the Trust and each of the Columbia
Funds (since April 2000); Chief Executive Officer (since October 2000),
President (December 1997-October 2000), Chief Investment Officer (since December
1997) and Director (since 1980) of the Trust Company; Chairman (since October
2000), Director (since 1989), President (December 1997-October 2000), Chief
Investment Officer (since December 1997) of the Adviser; Chief Executive Officer
and Chairman (since October 2000) Director (since 1982), Chief Investment
Officer (since December 1997) and President (December 1997-October 2000) of
CFMC. Prior to his current officer positions, Mr. Thomsen was Vice President of
the Adviser, CFMC and the Trust Company. Mr. Thomsen's business address is 1300
S.W. Sixth Avenue, Portland, Oregon 97207.

<PAGE>

of Shareholder Communications (from January 1995 to November 1997). Ms.
Griffin's business address is 1300 S.W. Sixth Avenue, Portland, Oregon 97207.

*These individuals are "interested persons" as defined by the
Investment Company Act of 1940 (the "1940 Act") and receive no fees or salaries
from the Trust or the Funds.

The following table sets forth the compensation received by the
disinterested trustees of the Trust for the fiscal year ended October 31, 2000.

Total Compensation from the
Trustee Compensation From Trust Trust and Columbia Funds
------- ----------------------- ---------------------------
Richard L. Woolworth $9,000 $33,000
Thomas R. Mackenzie* $4,500 $16,000
James C. George $9,000 $32,000
Patrick J. Simpson** $4,500 $16,000

* Mr. Mackenzie retired as a trustee of the Trust in April 2000.
**Mr. Simpson was elected as Trustee of the Trust to fill the vacancy created by
the retirement of Mr. Mackenzie.

At November 30, 2000 to the knowledge of the Trust, the following
persons owned of record or beneficially more than 5 percent of the outstanding
shares of the Funds:

36
<PAGE>

Shares Beneficially Owned
Name and Address At November 30, 2000
----------------

----------------------------

HIGH YIELD FUND

Carpenters Pension Trust Fund 4,974,545 (12.90%)
For Southern California
So. Calif.-Nevada Regional Council of Carpenters
520 South Virgil Avenue
Los Angeles, CA 90020

Boilermaker-Blacksmith National 2,983,019 (7.74%)
Pension Fund
754 Minnesota Avenue, Suite 522
Kansas City, KS 66101

FIXED INCOME SECURITIES FUND

The Sherwood Trust 554,883 (51.16%)
7 West Main
Walla Walla, WA 99362

Teamsters Local #142 Pension Fund 270,985 (25.00%)
1300 Clark Road
Gary, IN 46404

Thomas R. Mackenzie 134,232 (12.38%)
P.O. Box 69039
Portland, OR
97201

Linus J. Niedermeyer, Sr. 63,173 (5.80%)
5911 S.W. Virginia Avenue
Portland, OR 97201

As defined by SEC rules and regulations, The Sherwood Trust and the
Teamsters Local #142 Pension Fund are "control persons" of the Fund, since they
each own over 25% of the voting securities of the Fund. The fact that they each
own over 25% of the Fund's voting securities means each may be able to impact
the outcome of any matter in which shareholders are asked to vote. In fact, The
Sherwood Trust holds enough of the Fund's voting securities to actually control
the outcome of any matter presented to the shareholders for a vote.

--------------------------------------------------------------------------------

INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES
--------------------------------------------------------------------------------

The investment adviser to each of the Funds is Columbia Management Co.
(the "Adviser"). The Adviser has entered into an investment contract with each
Fund. Pursuant

<PAGE>

to the investment contract the Adviser provides research, advice, and
supervision with respect to investment matters and determines what securities to
purchase or sell and what portion of the Funds' assets to invest.

The Adviser and the Trust Company are indirect wholly owned
subsidiaries of FleetBoston Financial Corporation ("Fleet"). Fleet and its
affiliates provide a wide range of banking, financial, and investment products
and services to individuals and businesses. Their principal activities include
customer and commercial banking, mortgage lending and servicing, trust
administration, investment management, retirement plan services, brokerage and
clearing services, securities underwriting, private and corporate financing and
advisory activities, and insurance services.

For its services provided to each of the Funds, the Adviser charges an
advisory fee, which is accrued daily and paid monthly. The advisory fee for the
Fixed Income Fund equals the annual rate of 0.35 of 1 percent of its daily net
assets, and the advisory fee for the High Yield Fund and International Bond Fund
equals the annual rate of 0.40 of 1 percent of its daily net assets. The
International Bond Fund has not commenced operations yet and therefore has not
paid any advisory fees. Advisory fees paid by the Fixed Income Securities Fund
to the Advisor were $4,796 for the period from September 1, 2000 (inception)
through October 31, 2000. The Adviser has agreed to reimburse the Fixed Income
Securities Fund to the extent Total Fund Operating Expenses exceed 0.40%. If the
Adviser had not agreed to reimburse the Fund for such expenses, Total Fund
Operating Expenses for the Fund would have been 0.57%. Advisory fees paid by the
High Yield Fund to the Adviser were $1,255,523, $1,140,751, and $ 853,566 for
fiscal years 2000, 1999, and 1998, respectively.

The Trust Company acts as transfer agent and dividend crediting agent
for the Funds. Its address is 1301 S.W. Fifth Avenue, P.O. 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
on behalf of each fund 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. 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. The Trust paid $3,000 to the Trust
Company for services performed for the period September 1, 2000 (inception)
through October 31, 2000 under the transfer agent agreement relating to the
Fixed Income Securities Fund. The Trust paid $18,000 to the Trust Company for
services performed for the fiscal year 2000 under the transfer agent agreement
relating to the High Yield Fund. The International Bond Fund has not commenced
operations yet and therefore the Trust has not paid the Trust Company for
services.

<PAGE>

--------------------------------------------------------------------------------

PORTFOLIO TRANSACTIONS
--------------------------------------------------------------------------------

The Funds 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.

There is generally no stated commission in the case of fixed income
securities, which are traded in the over-the-counter markets, but the price paid
by a Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by a Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by a Fund
of negotiated brokerage commissions. Such brokerage commissions vary among
different brokers, and a particular broker may charge different commissions
according to such factors as the difficulty and size of the transaction.

Prompt execution of orders at the most favorable price will be the
primary consideration of a Fund in transactions where fees or commissions are
involved. Additional factors considered in the process of selecting a
broker-dealer to execute a transaction include: (i) professional capability of
the executing broker-dealer and the value and quality of the services provided
by the broker-dealer; (ii) size and type of the transaction; (iii) timing of the
transaction in the context of market prices and trends; (iv) nature and
character of markets for the security purchased or sold; (v) the broker-dealer's
execution efficiency and settlement capability; (vi) the executing
broker-dealer's stability and the execution services it renders to the Adviser
on a continuing basis; and (vii) reasonableness of commission. 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.

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 a 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 a Fund. As permitted by
Section 28(e) of the Securities and Exchange Act of 1934, the Adviser may cause
a Fund to pay a broker-dealer which provides "brokerage and research services"
(as defined in the Act) to the Adviser an amount of undisclosed commission for
effecting a securities transaction for the Trust in excess of the commission
which another broker-dealer would have charged for effecting that transaction.

The Adviser may use research services provided by, and place agency
transactions with, affiliated broker-dealers if the commissions are fair and
reasonable and comparable to

<PAGE>

commissions charged by non-affiliated qualified brokerage firms. In addition, a
Fund may purchase securities from an underwriting syndicate in which an
affiliate of the Adviser is a member of the underwriting syndicate. In any
agency transaction or purchase from an underwriting syndicate of which an
affiliate, primarily Robertson Stephens is a member, the trade will be
accomplished in accordance with the rules and regulations of the Investment
Company Act of 1940.

Investment decisions for a Fund are made independently from those of
the other portfolios of the Trust or accounts managed by the Adviser or its
affiliate, Columbia Funds Management Company. The same security is sometimes
held in the portfolio of more than one fund or account. Simultaneous or closely
timed transactions in the same security are likely when several funds or
accounts are managed by the same investment adviser and its affiliates,
particularly when the same security is suitable for the investment objective of
more than one fund or account. In such event, the Adviser may aggregate these
orders in order to achieve best execution and, on the average, lower brokerage
commission costs. In the event of these transactions, allocations among the
Fund, other portfolios of the Trust and other accounts will be made on an
equitable basis. When the Funds participate in an aggregated order, they
participate at the average share price for all transactions in that order, with
all transaction costs shared on a pro rata basis. Notwithstanding the above, the
Adviser may execute buy and sell orders for accounts and take action in
performance of its duties with respect to any of its accounts that may differ
from actions taken with respect to another account, so long as the Adviser
shall, to the extent practical, allocate investment opportunities to accounts,
including the Funds, over a period of time on a fair and equitable basis and in
accordance with applicable law.

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 Code does not prohibit
employees from purchasing securities that may be held or purchased by a Fund,
but is intended 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 of their relationship
with the Adviser. The specific standards in the Code include, among others, a
requirement that trades of access persons 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.

--------------------------------------------------------------------------------
CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------

The Trust may establish separate series of investment portfolios under
its Restated Declaration of Trust. The Funds, CMC Small Cap Fund, CMC
International Stock Fund, CMC Small/Mid Cap Fund, and CMC Short Term Bond 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

<PAGE>

changes in fundamental investment policies relating to that series. All shares
of each series of the Trust, including each Fund, have equal rights as to
voting, redemption, dividends and distributions. All issued and outstanding
shares of each 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 each Fund do not have cumulative voting rights, which
means that the holders of more than 50 percent of the shares of each 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.

Any reference to the phrase "vote of a majority of the outstanding
voting securities of the Fund" means the vote at any meeting of shareholders of
a 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.

PURCHASES
---------

Investments in each Fund are made directly by institutional buyers or
by the Adviser in its role as discretionary investment adviser for a portion of
the shareholder's assets. However, with respect to assets of an investment
advisory client of the Adviser invested in a Fund, that client will pay no fee
pursuant to its separate management contract with the Adviser (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 a Fund pursuant to the Employee Retirement Income
Security Act of 1974 ("ERISA"), certain conditions must be satisfied before
assets may be invested in the Fund by the Adviser on behalf of the shareholder.
These conditions are 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 a 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 must not be 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 transfer agent for the Funds may, at its discretion, permit
investors to purchase shares through the exchange of securities they hold. Any
securities exchanged must meet the

<PAGE>

investment objective, policies, and limitations of the Fund, must have a readily
ascertainable market value, must be liquid, and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least $100,000. Shares purchased in exchange for securities
generally may not be redeemed or exchanged until the transfer has settled -
usually within 15 days following the purchase by exchange. The basis of the
exchange will depend upon the relative net asset value of the shares purchased
and securities exchanged. Securities accepted by a Fund will be valued in the
same manner as the Fund values its assets. Any interest earned on securities
following their delivery to the transfer agent and prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription, or
other rights attached to the securities become the property of the Fund, along
with the securities. Before engaging in an exchange, investors should consult
their tax advisers concerning the tax consequences to them of the exchange.

REDEMPTIONS
-----------

Redemptions of all or any portion of a shareholder's investment can be
made at any time. Redemption of shares are at the net asset value next computed
after receipt of a redemption order on a day the New York Stock Exchange
("NYSE") is open for business. Payment will be made within seven days of the
date of redemption, except as provided by the rules of the SEC. 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 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, Martin Luther King, Jr.'s Birthday,
Presidents' Day, 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.

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 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.

PRICING OF SHARES
-----------------

The net asset value per share of each Fund is determined by the
Adviser, under procedures approved by the trustees of the Trust, as of the close
of regular trading (normally 4:00 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.

Each Fund's portfolio securities and other assets for which market
quotations are readily available are stated at market value. Market value is
determined on the basis of last

<PAGE>

reported sales prices, or if no sales are reported, as is the case for most
securities traded over-the-counter, at the average between representative bid
and asked quotations obtained from a third party pricing service or from
established market makers. Fixed income securities, including those to be
purchased under firm commitment agreements (other than obligations having a
maturity of 60 days or less), are normally valued on the basis of quotations
obtained from brokers and dealers or pricing services, which take into account
appropriate factors such as institutional-sized trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data. Short-term investments having a maturity
of 60 days or less are valued at amortized cost, when the Board of Trustees
determines that amortized cost is their fair value.

Any assets or liabilities initially expressed in a foreign currency
will, on a daily basis, be converted into U.S. dollars. Foreign securities will
be valued based upon the most recent closing price on their principal exchange,
or based upon the most recent price obtained by the Fund, if the price is not
available on an exchange, even if the close of that exchange or price
determination is earlier than the time of the Fund's NAV calculation. In the
case of such foreign security, if an event that is likely to materially affect
the value of a portfolio security occurs between the time the foreign price is
determined and the time a Fund's NAV is calculated, it may be necessary to
revalue the security in light of that event. Such a determination would be made
by the Fund's valuation committee using procedures approved by the Board of
Trustees.

Certain fixed income securities for which daily market quotations are
not readily available, or for which the Adviser believes accurate quotations
have not been received from the pricing service, may be valued by the Adviser,
pursuant to guidelines established by the Board of Trustees, with reference to
fixed income securities whose prices are more readily obtainable and whose
durations are comparable to the securities being valued. Subject to the
foregoing, other securities for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Trustees.

--------------------------------------------------------------------------------
CUSTODIANS
--------------------------------------------------------------------------------

43
<PAGE>

--------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------

PricewaterhouseCoopers LLP, 1300 S.W. Fifth Avenue, Suite 3100,
Portland, Oregon 97201, serves as the Trust's independent accountants and, in
addition to examining the annual financial statements of the Trust, assists 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 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, a
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"); and

(b) 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, 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 Funds during a
taxable year only if it meets certain additional requirements. Among other
things, a 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 seven portfolios, including the 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).

44
<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 from a 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 a Fund are ineligible for the
dividends-received deduction.

The International Bond Fund will invest at least 65 percent of its
total assets in the securities of foreign corporations and foreign governmental
issuers. Foreign countries may impose income taxes, generally collected by
withholding, on foreign-source dividends and interest paid to the Fund. See
"Foreign Income Taxes" in this section for more information.

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.

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

<PAGE>

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 1933 Act). Therefore, the limit on miscellaneous
itemized deductions should not apply to expenses incurred by any of the Funds.

Futures Contracts, Options and Foreign Currency Transactions. 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.

Some of the options, futures contracts, forward contracts and swap
agreements used by the Funds may be "Section 1256 contracts." Any gain or loss
on Section 1256 contracts generally is treated as long-term capital gain or loss
to the extent of 60 percent of such gain or loss, and short-term capital gain or
loss to the extent of 40 percent of such gain or loss. (Special rules in Section
988 of the Code may require certain foreign currency gain or loss from such
contracts to be treated as ordinary gain or loss.) Also, Section 1256 contracts
held by a Fund at the end of each taxable year generally are "marked to market,"
so that a Fund may be required to recognize income with respect to unrealized
gain or loss.

Generally, the hedging transactions and certain other transactions in
options, futures and forward contracts undertaken by a Fund may be considered
"straddles." Section 1092 of the Code defines a "straddle" as 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. In some
cases, the straddle rules also could apply in connection with swap agreements.
The straddle rules may affect the character of gain or loss realized by a Fund.
In addition, loss realized by a Fund on positions that are part of a straddle
may be deferred, rather than taken into account in the tax year when realized. A
Fund may make one or more elections available under the Code with respect to
straddles. An election may affect the amount, character or timing of the
recognition of gain or loss from the affected straddle positions. For example,
the mark-to-market requirement under Section 1256 does

<PAGE>

not apply to certain hedging transactions that a Fund identifies, or to certain
straddles with respect to which the Fund makes an election.

Foreign Income Taxes. The International Bond 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
Bond Fund's distributed income. The Fund generally expects to incur, however, no
foreign income taxes on gains from the sale of foreign securities. The Fund does
not expect to pass through to its shareholders any foreign income taxes paid.

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
Bond 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 the 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 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 and the company satisfies certain holding
period requirements. The International Bond Fund generally expects, if
necessary, to qualify for and to make the election permitted under Section 853
of the Code. Although the International Bond 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 Bond 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.

If the International Bond Fund elects pursuant to Section 853,
shareholders of that Fund will be required to include in income (in addition to
other taxable distributions) and will be allowed a credit or deduction for,
their pro rata portions of the qualifying 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 the shareholder's tax
adviser.

Each year, the International Bond 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 an entity that is classified as a "passive foreign investment company"
("PFIC") for federal income tax purposes, the application of certain provisions
of the Code applying to PFICs could result in the imposition of certain federal
income taxes and interest charges on the Fund. It is anticipated that any taxes
on the Fund with respect to investments in PFICs would be insignificant.

<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 an investment in any of 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 any of the Funds 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 Funds. 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 a Fund will fluctuate so that
the shares when redeemed may be worth more or less than their original cost.

Current yield of a 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/cd + 1) -1]

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.

Each Fund uses generally accepted accounting principles in determining
its 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
current yield of the High Yield Fund for the 30-day period ended October 31,
2000 was 9.64%. The current yield of the Fixed Income Securities Fund for the
30-day period ended October 31, 2000 was 6.61%.

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

<PAGE>

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:
n
P(1+T) = 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 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. For the period ended October 31, 2000 the
average annual return for the High Yield Fund for the 1-year and 5-year periods
and since inception (July 6, 1994) was 6.01%, 7.61% and 8.80%, respectively. For
the period September 1, 2000 (inception) through October 31, 2000 the total rate
of return (not annualized) for the Fixed Income Securities Fund was 1.31%.

The Funds 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, Financial World, Forbes, Investor's Business Daily, Money, Morningstar
Mutual Funds, The Wall Street Journal and USA Today. (Lipper Analytical
Services, Inc. is an independent rating service that ranks over 1000 mutual
funds based on total return performance.) These ranking services and
publications may rank the performance of the Funds against all other funds over
specified categories.

The Funds 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 Lipper Analytical 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.

The Funds 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 banks 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 Funds other than their yields, some of which are summarized
below.

49
<PAGE>

The yield of each of the Funds is not fixed and will fluctuate. The
principal value of 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.

--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

The financial statements for the High Yield Fund for the fiscal year
ended October 31, 2000, and the Fixed Income Securities Fund for the period from
inception September 1, 2000 through October 31, 2000, together with the
Report of Independent Accountants of PricewaterhouseCoopers LLP, are attached
hereto and incorporated by reference into this Statement of Additional
Information. There are no financial statements for the International Bond Fund
as the fund is new and had not commenced performance as of October 31, 2000, the
fiscal year end of the Fund.

50
<PAGE>
CMC HIGH YIELD FUND
A Portfolio of CMC Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE

We are pleased to provide you with an investment review of the CMC High Yield
Fund. For the fiscal year ended October 31, 2000, the Fund had a total return of
6.01%. In comparison, the Lehman Aggregate Bond Index had a total return of
7.30%, and the Merrill Lynch Intermediate BB Index reported a return of 1.53%
for the same period.

The high yield market began the fiscal year on a positive note as
robust economic growth, low inflation and strong corporate profits continued to
drive market gains. As evidence began to mount during the spring and summer that
economic growth was slowing, lower quality corporate issues underperformed. As a
result, the high yield market suffered this year compared to investment grade
alternatives as investor interest turned to safer havens such as government
bonds and stocks in the utility and healthcare sectors. During the year, the
Fund's focus on higher quality, non-investment grade bonds benefited performance
relative to the broader high yield market. In addition, the Fund's emphasis on
issues in the energy, gaming, electric utilities and diversified media sectors
and de-emphasis on the struggling telecommunications and retail sectors boosted
returns.

Yields on high yield bonds are currently at historically high levels compared to
Treasuries. This reflects expectations that slower economic growth will lead to
slower growth in corporate profits and concerns that the Fed will not
successfully engineer a soft landing. Nevertheless, at this time, high yield
bonds appear to offer substantial return potential for investors with a longer
time horizon and a higher risk tolerance. Looking ahead, our focus continues to
be on companies that demonstrate the ability to maintain strong operating
fundamentals in an environment of slower growth.

On October 31, 2000, the Fund had a duration of 3.91 years and a weighted
average maturity of 6.0 years. The Fund's top ten holdings (as a percentage of
net assets) as of October 31, 2000 were:

USA Waste Services, Inc. (2.5%)
Park Place Entertainment Corp. (2.4%)
HCA - The Healthcare Co. (2.4%)
Lear Corp. (2.3%)
Precision Castparts Corp. (2.2%)
Vintage Petroleum, Inc. (2.2%)
American Axle & Manufacturing (2.2%)
Harrahs Operating, Inc. (2.2%)
International Game Technology (2.1%)
Lamar Media Corp. (2.1%)

<PAGE>
We appreciate your continued confidence in the CMC High Yield Fund.

The Columbia Investment Team

December 10, 2000

Graphic line chart depicting "Growth of $10,000 Since Inception" showing the
growth in dollar amounts ($9,000-$18,000) of CMC High Yield Fund, Merrill Lynch
Intermediate BB Index and Lehman Aggregate Bond Index for the period 7/6/94 to
10/31/00 to $17,008, $15,946, and $15,757, respectively:

Average Annual Total Return
1 Year 5 Year Since Inception
------ ------ ---------------
CMC High Yield 6.01% 7.61% 8.80%
Merrill Lynch
Intermediate BB Index 1.53% 6.57% 8.36%
Lehman Aggregate Bond 7.30% 6.33% 7.48%

Past performance does not guarantee future results. Performance for CMC High
Yield Fund, Merrill Lynch Intermediate BB Index and the Lehman Aggregate Index
begin with the Fund's inception date on 7/6/94. Total return performance is
illustrated for the periods ended October 31, 2000. The Lehman Aggregate Bond
Index represents average market-weighted performance of U.S. Treasury and
aggregate securities, investment-grade corporate bonds and mortgage-backed
securities with maturities greater than one year. The Merrill Lynch Intermediate
BB Index is a market weighted index consisting of BB rated cash pay bonds,
which are U.S. dollar denominated bonds issued in the U.S. domestic market with
maturities between 1-10 years.

<PAGE>
--------------------------------------------------------------------------------
CMC Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout the Period)
--------------------------------------------------------------------------------

CMC FIXED INCOME SECURITIES FUND
--------------------------------
September 1
through
October 31,
2000 (1)(2)
---------------

Net asset value, beginning of period................. $ 10.00
---------------

Income from investment operations:
Net investment income .......................... 0.11
Net realized and unrealized gains (losses)
on investments ............................... 0.02
---------------
Total from investment operations........... 0.13
---------------

Less distributions:
Dividends from net investment income............ (0.11)
---------------
Total distributions........................ (0.11)
---------------

Net asset value, end of period....................... $ 10.02
===============

Total return......................................... 1.31% (3)

Ratios/Supplemental data
Net assets, end of period (in thousands)............. $ 10,866
Ratio of net expenses to average net assets(4)....... 0.40%
Ratio of total expenses to average net assets (4).... 1.46%
Ratio of net income to average net assets............ 6.57%
Portfolio turnover rate.............................. 103%

(1) From inception of operations.
(2) Ratios and portfolio turnover rates are annualized.
(3) Not annualized.
(4) For the fiscal period ended October 31, 2000, the investment adviser has
contractually agreed to reimburse ordinary expenses of the Fund, to the
extent that these expenses, together with the Fund's advisory fee, exceed
0.40% of the Fund's average daily net assets.

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
CMC Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC HIGH YIELD FUND
-------------------

Year Ended October 31,
---------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------- -------------- ------------- -------------- -------------

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............. $ 8.54 $ 8.95 $ 9.21 $ 8.99 $ 9.06
------------- -------------- ------------- -------------- -------------
Income from investment operations:
Net investment income ..................... 0.73 0.74 0.76 0.80 0.81
Net realized and unrealized gains (losses)
on investments .......................... (0.24) (0.41) (0.21) 0.32 0.03
------------- -------------- ------------- -------------- -------------
Total from investment operations...... 0.49 0.33 0.55 1.12 0.84
------------- -------------- ------------- -------------- -------------

Less distributions:
Dividends from net investment income...... (0.73) (0.74) (0.76) (0.80) (0.81)
Distributions from net capital gains...... - (0.00) * (0.05) (0.10) (0.10)
------------- -------------- ------------- -------------- -------------
Total distributions................... (0.73) (0.74) (0.81) (0.90) (0.91)
------------- -------------- ------------- -------------- -------------

Net asset value, end of year.................... $ 8.30 $ 8.54 $ 8.95 $ 9.21 $ 8.99
============= ============== ============= ============== =============

Total return.................................... 6.01% 3.75% 6.00% 12.90% 9.61%

Ratios/Supplemental data
Net assets, end of year (in thousands).......... $ 319,985 $ 271,551 $ 263,912 $ 119,196 $ 69,614
Ratio of expenses to average net assets......... 0.43% 0.43% 0.45% 0.45% 0.50%
Ratio of net income to average net assets....... 8.70% 8.39% 8.28% 8.60% 8.90%
Portfolio turnover rate......................... 56% 62% 71% 69% 56%
</TABLE>

* Amount represents less than $0.01 per share.

NOTE: Per share amounts have been adjusted to retroactively reflect a 4 for 1
share split effective September 1, 1999.

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC FIXED INCOME SECURITIES FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000

PRINCIPAL
AMOUNT VALUE
----------- -----------

<S> <C> <C>
U.S. GOVERNMENT SECURITIES (52.9%)
U.S. TREASURY NOTES & BONDS (11.7%)
U.S. TREASURY BONDS
8.875% 08/15/2017 ** $ 365,000 $ 474,044
8.125% 08/15/2019 ** 300,000 370,359
6.25% 08/15/2023 ** 245,000 252,427
U.S. TREASURY INFLATION INDEX BOND
3.375% 01/15/2007 179,852 175,130
-----------
1,271,960
-----------
U.S. AGENCY BONDS (2.4%)
FEDERAL HOME LOAN BANK
6.875% 07/18/2002 50,000 50,336
FEDERAL NATIONAL MORTGAGE ASSOCIATION
6.000% 05/15/2008 215,000 206,501
-----------
256,837
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (15.2%)
7.00% 01/15/2028 - 10/15/2030 370,289 365,082
7.50% 11/15/2029 - 10/15/2030 328,011 329,344
8.00% 12/15/2029 - 09/15/2030 938,039 954,161
-----------
1,648,587
-----------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) (1.9%)
8.00% 07/01/2030 199,514 202,383
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (14.2%)
6.50% 07/01/2029 - 09/01/2029 726,867 698,928
7.00% 01/01/2030 - 11/25/2030 * 398,700 390,574
7.50% 10/01/2029 - 11/25/2030 * 459,330 458,805
-----------
1,548,307
-----------
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (7.5%)
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2116 CL. VC
6.00% 11/15/2014 50,000 45,879
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2207 CL. VD
7.00% 12/15/2014 100,000 97,656
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 1574 CL. O
6.50% 09/15/2023 100,000 92,046
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2114 CL. PF
6.00% 04/15/2027 90,000 83,707
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2113 CL. QE
6.00% 11/15/2027 40,000 37,219

See accompanying notes to financial statements.

55
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
U.S. GOVERNMENT SECURITIES (CONTINUED)
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2132 CL. PD
6.00% 11/15/2027 $ 60,000 $ 55,751
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2131 CL. BE
6.00% 11/15/2027 40,000 37,148
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2186 CL. PG
6.00% 07/15/2028 70,000 65,046
FNMA GTD. REMIC PASS THRU CTF.
REMIC TR. 1998-61 CL. PK
6.00% 12/25/2026 100,000 93,159
FNMA GTD. REMIC PASS THRU CTF.
REMIC TR. 1999-60 CL. CG
6.00% 10/18/2028 70,000 64,644
GNMA GTD. REMIC PASS THRU SECS.
REMIC TR. 1999-14 CL. VD
6.00% 03/20/2014 70,000 64,690
GNMA GTD. REMIC PASS THRU SECS.
REMIC TR. 2000-15 CL. PD
7.50% 05/20/2026 80,000 80,909
-----------
817,854
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $5,740,226) 5,745,928
-----------
CORPORATE NOTES AND BONDS (35.8%)
INDUSTRIAL (23.2%)
ALCOA, INC.
6.75% 01/15/2028 75,000 66,797
CANADIAN NATIONAL RAILWAY CO.
SERIES 1997-A2
7.195% 01/02/2016 75,000 68,893
CATERPILLAR FINANCIAL SERVICES CORP.
6.875% 08/01/2004 200,000 198,042
COMPUTER SCIENCES CORP.
7.50% 08/08/2005 50,000 50,454
CONOCO, INC.
5.90% 04/15/2004 200,000 194,020
DAIMLERCHRYSLER N.A. HOLDINGS CORP.
7.125% 04/10/2003 150,000 150,456
DEERE (JOHN) CAPITAL CORP.
5.35% 10/23/2001 200,000 196,682

See accompanying notes to financial statements.

56
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
DIAGEO CAPITAL PLC
6.625% 06/24/2004 $ 75,000 $ 73,861
DOW CHEMICAL CO.
7.375% 11/01/2029 50,000 48,040
FORD MOTOR CREDIT CO.
6.70% 07/16/2004 75,000 73,465
7.375% 10/28/2009 25,000 24,274
FORT JAMES CORP.
6.625% 09/15/2004 75,000 71,482
HEWLETT-PACKARD CO.
7.15% 06/15/2005 200,000 200,322
HONEYWELL INTERNATIONAL, INC.
7.50% 03/01/2010 40,000 41,250
INTERNATIONAL BUSINESS MACHINES CORP.
5.375% 02/01/2009 150,000 132,954
INTERNATIONAL PAPER CO. (144A)
8.00% 07/08/2003 100,000 101,294
PHILLIPS PETROLEUM CO.
8.50% 05/25/2005 70,000 73,765
PRECISION CASTPARTS CORP.
8.75% 03/15/2005 125,000 127,512
PROCTER & GAMBLE CO.
5.25% 09/15/2003 200,000 192,634
TIME WARNER, INC.
7.975% 08/15/2004 75,000 76,717
TYCO INTERNATIONAL GROUP S.A.
6.25% 06/15/2003 125,000 121,509
UNITED TECHNOLOGIES CORP.
6.50% 06/01/2009 40,000 38,078
VASTAR RESOURCES, INC.
6.50% 04/01/2009 125,000 121,367
WMX TECHNOLOGIES, INC.
6.70% 05/01/2001 75,000 74,125
-----------
2,517,993
-----------
FINANCIAL (9.3%)
BANK ONE CORP.
7.875% 08/01/2010 50,000 50,207
CHASE MANHATTAN CORP.
MEDIUM TERM NOTES, SERIES C
6.75% 12/01/2004 75,000 74,291
CIT GROUP, INC.
7.25% 08/15/2005 75,000 73,433

See accompanying notes to financial statements.

57
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
COLONIAL REALTY L.P.
MEDIUM TERM NOTES
7.16% 01/17/2003 $ 75,000 $ 73,521
EQUITABLE COS., INC.
9.00% 12/15/2004 45,000 47,669
FIRST INDUSTRIAL L.P.
7.15% 05/15/2027 200,000 196,478
FIRST UNION NATIONAL BANK
7.80% 08/18/2010 50,000 49,823
GOLDMAN SACHS GROUP, INC.
7.50% 01/28/2005 125,000 124,970
LEHMAN BROTHERS HOLDINGS, INC.
6.50% 10/01/2002 75,000 73,877
MORGAN STANLEY DEAN WITTER & CO.
7.75% 06/15/2005 75,000 76,733
NORWEST FINANCIAL, INC.
5.375% 09/30/2003 100,000 95,708
SIMON PROPERTY GROUP L.P.
6.625% 06/15/2003 75,000 72,686
-----------
1,009,396
-----------
UTILITIES (3.3%)
COASTAL CORP.
6.50% 05/15/2006 75,000 72,257
EDISON MISSION ENERGY
7.73% 06/15/2009 25,000 24,115
MCI WORLDCOM, INC.
7.55% 04/01/2004 60,000 60,499
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORP.
6.55% 11/01/2018 35,000 31,226
TCI COMMUNICATIONS, INC.
8.00% 08/01/2005 50,000 50,629
TXU EASTERN FUNDING CO.
6.45% 05/15/2005 75,000 70,768
VODAFONE GROUP PLC (144A)
7.75% 02/15/2010 50,000 50,765
-----------
360,259
-----------
TOTAL CORPORATE NOTES AND BONDS
(COST $3,897,380) 3,887,648
-----------

NON-CORPORATE BONDS (1.5%)
BRITISH COLUMBIA PROVINCE
5.375% 10/29/2008 30,000 27,327

See accompanying notes to financial statements.

58
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
NON-CORPORATE BONDS (CONTINUED)
KOREA DEVELOPMENT BANK
6.50% 11/15/2002 $ 10,000 $ 9,731
7.125% 04/22/2004 40,000 38,804
QUEBEC PROVINCE
6.50% 01/17/2006 45,000 44,142
7.125% 02/09/2024 45,000 43,823
-----------

TOTAL NON-CORPORATE BONDS
(COST $162,622) 163,827
-----------

OTHER SECURITIZED LOANS (7.7%)
ASSET BACKED SECURITIES (5.5%)
CONTIMORTGAGE HOME EQUITY LOAN TRUST
SERIES 1996-2 CL. A6
7.25% 06/15/2011 62,958 62,853
IMC HOME EQUITY LOAN TRUST
SERIES 1997-3 CL. A6
7.52% 08/20/2028 40,000 39,410
NEW CENTURY HOME EQUITY LOAN TRUST
SERIES 1997-NC5 CL. A5
7.13% 10/25/2028 110,000 108,803
NEW CENTURY HOME EQUITY LOAN TRUST
SERIES 1999-NCA CL. A7
7.32% 07/25/2029 70,884 70,897
THE MONEY STORE RESIDENTIAL TRUST
SERIES 1997-II CL. A4
7.385% 03/15/2029 160,000 160,279
WIMLT SERIES 1997-2 CL. A5
7.255% 05/25/2028 160,000 159,163
-----------
601,405
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.5%)
RESIDENTIAL ASSET SECURITIZATION TRUST
SERIES 1999-A1 CL. A1
6.75% 03/25/2029 61,377 59,617
-----------

COMMERCIAL MORTGAGE BACKED SECURITIES (1.7%)
CREDIT SUISSE FIRST BOSTON
MORTGAGE SECURITIES CORP.
SERIES 1998-C1 CL. A1B
6.48% 05/17/2008 70,000 67,420
NATIONSLINK FUNDING CORP.
SERIES 1999-SL CL. A5
6.888% 06/10/2007 90,000 88,547

See accompanying notes to financial statements.

59
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
OTHER SECURITIZED LOANS (CONTINUED)
PRUDENTIAL SECURITIES SECURED FINANCING CORP.
SERIES 1999-C2 CL. A2
7.193% 04/15/2009 $ 25,000 $ 25,011
-----------
180,978
-----------
TOTAL OTHER SECURITIZED LOANS
(COST $837,157) 842,000
-----------

REPURCHASE AGREEMENTS (7.0%)
J.P. MORGAN SECURITIES, INC.
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $466,838.
COLLATERALIZED BY U.S. TREASURY NOTES
4.625% TO 6.50%
DUE 12/31/2000 TO 05/31/2001
U.S. TREASURY BONDS
6.625% TO 11.75%
DUE 02/15/2010 TO 02/15/2027
U.S. TREASURY BILL 6.035% DUE 04/26/2001 466,754 466,754
MERRILL LYNCH
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $295,053.
COLLATERALIZED BY U.S. TREASURY STRIPS
DUE 11/15/2004 TO 11/15/2023 295,000 295,000
-----------

TOTAL REPURCHASE AGREEMENTS
(COST $761,754) 761,754
-----------

TOTAL INVESTMENTS (104.9%)
(COST $11,399,139) 11,401,157

OTHER ASSETS LESS LIABILITIES (-4.9%) (535,289)
-----------

NET ASSETS (100.0%) $10,865,868
===========
</TABLE>
* Security purchased on when-issued basis.
** A portion of this security was segregated at the custodian to cover a
when-issued security

See accompanying notes to financial statements.

60
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000
PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (95.1%)
<S> <C> <C>
AEROSPACE (2.2%)
PRECISION CASTPARTS CORP.
SENIOR NOTES
8.75% 03/15/2005 $ 7,000,000 $ 7,140,700
-----------
AUTOMOTIVE/AUTO PARTS (5.6%)
AMERICAN AXLE & MANUFACTURING, INC.
SENIOR SUBORDINATED NOTES
9.75% 03/01/2009 8,000,000 7,040,000
HAYES WHEELS INTERNATIONAL, INC.
SENIOR SUBORDINATED NOTES, SERIES B
9.125% 07/15/2007 4,465,000 3,594,325
LEAR CORP.
SENIOR NOTES, SERIES B
7.96% 05/15/2005 7,800,000 7,262,291
-----------
17,896,616
-----------
BROADCASTING (2.0%)
HERITAGE MEDIA CORP.
SENIOR SUBORDINATED NOTES
8.75% 02/15/2006 6,500,000 6,337,500
-----------
CABLE TV (8.2%)
CENTURY COMMUNICATIONS CORP.
SENIOR DISCOUNT NOTES
0.00% 03/15/2003 6,985,000 5,238,750
CHARTER COMMUNICATIONS HOLDINGS L.L.C./
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP.
SENIOR NOTES
8.25% 04/01/2007 1,500,000 1,342,500
10.00% 04/01/2009 6,450,000 6,304,875
CSC HOLDINGS, INC.
SENIOR SUBORDINATED NOTES
9.25% 11/01/2005 5,200,000 5,278,000
CSC HOLDINGS, INC.
SENIOR NOTES
7.875% 12/15/2007 1,000,000 958,500
CSC HOLDINGS, INC.
SENIOR DEBENTURES, SERIES B
8.125% 08/15/2009 1,000,000 978,990
ROGERS CABLESYSTEMS LTD.
SENIOR SECURED SECOND PRIORITY DEBENTURES
10.00% 12/01/07 1,000,000 1,040,000

See accompanying notes to financial statements.
61
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CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
ROGERS COMMUNICATIONS, INC.
SENIOR NOTES
8.875% 07/15/2007 $ 5,000,000 $ 5,037,500
-----------
26,179,115
CONSUMER PRODUCTS (1.9%) -----------
THE SCOTTS CO. (144A)
SENIOR SUBORDINATED NOTES
8.625% 01/15/2009 6,450,000 6,192,000
-----------
CONTAINERS (2.8%)
BALL CORP.
SENIOR NOTES
7.75% 08/01/2006 2,450,000 2,303,000
BALL CORP.
SENIOR SUBORDINATED NOTES
8.25% 08/01/2008 4,740,000 4,455,600
SILGAN HOLDINGS, INC.
SENIOR SUBORDINATED DEBENTURES
9.00% 06/01/2009 2,715,000 2,304,356
-----------
9,062,956
DIVERSIFIED MEDIA (5.9%) -----------
FOX/LIBERTY NETWORKS L.L.C.
SENIOR NOTES
8.875% 08/15/2007 5,975,000 6,004,875
LAMAR MEDIA CORP.
SENIOR SUBORDINATED NOTES
9.625% 12/01/2006 6,660,000 6,709,950
OUTDOOR SYSTEMS, INC.
SENIOR SUBORDINATED NOTES
9.375% 10/15/2006 5,990,000 6,279,676
-----------
18,994,501
ELECTRIC (5.8%) -----------
AES CORP.
SENIOR SUBORDINATED NOTES
10.25% 07/15/2006 4,700,000 4,782,250
CALPINE CORP.
SENIOR NOTES
7.625% 04/15/2006 3,500,000 3,372,635
10.50% 05/15/2006 1,000,000 1,029,240
8.75% 07/15/2007 3,000,000 2,997,300

See accompanying notes to financial statements.
62
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CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
CMS ENERGY X-TRAS (144A)
PASS THRU TRUST I
SENIOR UNSECURED NOTES
7.00% 01/15/2005 $ 7,235,000 $ 6,475,325
-----------
18,656,750
ENERGY (9.4%) -----------
GULF CANADA RESOURCES LTD.
SENIOR SUBORDINATED DEBENTURES
9.625% 07/01/2005 5,750,000 5,915,313
NEWPARK RESOURCES, INC.
SENIOR SUBORDINATED NOTES, SERIES B
8.625% 12/15/2007 6,630,000 6,132,750
PRIDE INTERNATIONAL, INC.
SENIOR NOTES
10.00% 06/01/2009 3,975,000 4,114,125
R&B FALCON CORP.
SENIOR NOTES, SERIES B
6.50% 04/15/2003 1,500,000 1,425,000
RBF FINANCE CO.
SENIOR SECURED NOTES
11.00% 03/15/2006 2,000,000 2,280,000
SANTA FE SNYDER CORP.
SENIOR NOTES
8.05% 06/15/2004 3,000,000 2,973,066
VINTAGE PETROLEUM, INC.
SENIOR SUBORDINATED NOTES
9.75% 06/30/2009 6,750,000 7,070,625
-----------
29,910,879
ENVIRONMENTAL (4.4%) -----------
ALLIED WASTE NORTH AMERICA, INC.
SENIOR NOTES, SERIES B
7.625% 01/01/2006 6,750,000 5,906,250
USA WASTE SERVICES, INC.
NOTES
6.125% 07/15/2001 8,200,000 8,026,816
-----------
13,933,066
GAMING (8.6%) -----------
HARRAHS OPERATING, INC.
SENIOR SUBORDINATED NOTES
7.875% 12/15/2005 7,200,000 6,984,000
INTERNATIONAL GAME TECHNOLOGY
SENIOR NOTES
7.875% 05/15/2004 6,950,000 6,776,250

See accompanying notes to financial statements.
63
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CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
PARK PLACE ENTERTAINMENT CORP.
SENIOR SUBORDINATED NOTES
9.375% 02/15/2007 $ 7,500,000 $ 7,556,250
STATION CASINOS, INC.
SENIOR SUBORDINATED NOTES
10.125% 03/15/2006 500,000 501,250
9.75% 04/15/2007 5,700,000 5,685,750
-----------
27,503,500
HEALTHCARE (5.1%) -----------
HCA-THE HEALTHCARE CO.
NOTES
6.91% 06/15/2005 8,000,000 7,550,000
TENET HEALTHCARE CORP.
SENIOR NOTES
8.625% 12/01/2003 3,250,000 3,270,313
8.00% 01/15/2005 3,000,000 2,958,750
TENET HEALTHCARE CORP.
SENIOR SUBORDINATED NOTES, SERIES B
8.125% 12/01/2008 2,500,000 2,412,500
-----------
16,191,563
HOMEBUILDERS/REAL ESTATE (2.4%) -----------
TOLL CORP.
SENIOR SUBORDINATED NOTES
7.75% 09/15/2007 5,200,000 4,836,000
WEBB (DEL) CORP.
SENIOR SUBORDINATED DEBENTURES
9.00% 02/15/2006 2,990,000 2,705,950
-----------
7,541,950
MISCELLANEOUS (3.9%) -----------
UNITED RENTALS, INC.
SENIOR SUBORDINATED NOTES, SERIES B
9.50% 06/01/2008 4,000,000 3,300,000
8.80% 08/15/2008 3,000,000 2,385,000
UNITED RENTALS, INC.
SENIOR UNSECURED NOTES, SERIES B
9.25% 01/15/2009 1,000,000 820,000
UNITED STATIONERS SUPPLY CO.
SENIOR SUBORDINATED NOTES
8.375% 04/15/2008 6,400,000 5,952,000
-----------
12,457,000
-----------

See accompanying notes to financial statements.
64
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CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
PAPER/FOREST PRODUCTS (2.4%)
BUCKEYE TECHNOLOGIES, INC.
SENIOR SUBORDINATED NOTES
8.50% 12/15/2005 $ 5,975,000 $ 5,855,500
STONE CONTAINER CORP.
SENIOR NOTES
11.50% 10/01/2004 1,600,000 1,624,000
-----------
7,479,500
PUBLISHING/PRINTING (1.1%) -----------
PRIMEDIA, INC.
SENIOR NOTES
10.25% 06/01/2004 3,550,000 3,585,500
-----------
REIT'S (3.0%)
COLONIAL REALTY L.P.
MEDIUM TERM NOTES
7.16% 01/17/2003 2,425,000 2,377,179
7.05% 12/15/2003 2,000,000 1,934,320
HEALTH CARE PROPERTY INVESTORS, INC.
NOTES
6.875% 06/08/2005 2,675,000 2,439,118
SIMON PROPERTY GROUP, INC.
NOTES
6.75% 02/09/2004 3,000,000 2,884,680
-----------
9,635,297
RESTAURANTS (1.6%) -----------
TRICON GLOBAL RESTAURANTS, INC.
SENIOR NOTES
7.45% 05/15/2005 5,450,000 5,173,854
-----------
SERVICES (2.1%)
IRON MOUNTAIN, INC.
SENIOR SUBORDINATED NOTES
10.125% 10/01/2006 3,500,000 3,543,750
PIERCE LEAHY CORP.
SENIOR SUBORDINATED NOTES
11.125% 07/15/2006 3,112,000 3,224,810
-----------
6,768,560
SHIPPING (1.7%) -----------
TEEKAY SHIPPING CORP.
GTD. 1ST PFD. SHIP. MTG. NOTES
8.32% 02/01/2008 5,775,000 5,515,125
-----------

See accompanying notes to financial statements.
65
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CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
SPECIALTY RETAILERS (1.8%)
* FLOORING AMERICA, INC.
SENIOR SUBORDINATED NOTES, SERIES B
12.75% 10/15/2002 $ 2,293,000 $ 596,180
ZALE CORP.
SENIOR NOTES, SERIES B
8.50% 10/01/2007 5,650,000 5,198,000
-----------
5,794,180
TECHNOLOGY (1.8%) -----------
UNISYS CORP.
SENIOR NOTES
11.75% 10/15/2004 5,550,000 5,772,000
-----------
TELECOMMUNICATIONS (11.4%)
CROWN CASTLE INTERNATIONAL CORP.
SENIOR NOTES
10.75% 08/01/2011 6,475,000 6,604,500
FLAG LTD.
SENIOR NOTES
8.25% 01/30/2008 6,210,000 5,216,400
LEVEL 3 COMMUNICATIONS, INC.
SENIOR NOTES
9.125% 05/01/2008 5,465,000 4,426,650
LEVEL 3 COMMUNICATIONS, INC.
SENIOR DISCOUNT NOTES
0.00% TO 12/01/2003 THEN 10.50% TO 12/01/2008 3,700,000 1,998,000
MCLEODUSA, INC.
SENIOR NOTES
9.25% 07/15/2007 3,000,000 2,790,000
9.50% 11/01/2008 4,000,000 3,720,000
METROMEDIA FIBER NETWORK, INC.
SENIOR NOTES, SERIES B
10.00% 11/15/2008 6,600,000 5,874,000
NEXTLINK COMMUNICATIONS, INC.
SENIOR DISCOUNT NOTES
0.00% TO 04/15/03 THEN 9.45% TO 04/15/08 3,450,000 1,932,000
NEXTLINK COMMUNICATIONS, INC.
SENIOR NOTES
10.75% 11/15/2008 4,500,000 3,937,500
-----------
36,499,050
-----------
TOTAL CORPORATE NOTES AND BONDSSHIPPING (1.7%)
(COST $319,257,728) 304,221,162
-----------

See accompanying notes to financial statements.
66
<PAGE>
--------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
NON-CORPORATE BONDS (1.1%)
UNITED MEXICAN STATES
NOTES
9.875% 02/01/2010
(COST $3,610,915) $ 3,500,000 $ 3,640,000
-----------
REPURCHASE AGREEMENT (2.8%)
J.P. MORGAN SECURITIES, INC.
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $8,844,405.
COLLATERALIZED BY U.S. TREASURY NOTES
4.625% TO 6.50%
DUE 12/31/2000 TO 05/31/2001
U.S. TREASURY BONDS
6.625% TO 11.75%
DUE 02/15/2010 TO 02/15/2027
U.S. TREASURY BILL 6.035% DUE 04/26/2001
(COST $8,842,808) 8,842,808 8,842,808
-----------
TOTAL INVESTMENTS (99.0%)
(COST $331,711,451) 316,703,971

OTHER ASSETS LESS LIABILITIES (1.0%) 3,280,913
-----------
NET ASSETS (100.0%) $ 319,984,884
===========

* Flooring America, Inc., filed a bankruptcy petition for reorganization on June 15, 2000.
Effective on that date, interest is not being accrued.
</TABLE>

See accompanying notes to financial statements.
67
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
Portfolios of CMC Fund Trust
STATEMENTS OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
October 31, 2000
<TABLE>
<CAPTION>
CMC CMC
Fixed Income High Yield
Securities Fund Fund
-------------------- --------------------
<S> <C> <C>
ASSETS:
Investments at identified cost ................................. $ 11,399,139 $ 331,711,451
Investments at identified cost - federal income tax purposes ... $ 11,399,139 $ 331,772,413
---------------------------------------------------------------------------------------- --------------------

Investments at value............................................ $ 11,401,157 $ 316,703,971
Receivable for:
Interest...................................................... 134,949 7,936,906
Investments sold.............................................. 183,344 3,165,535
Expense reimbursement......................................... 14,581 -
-------------------- --------------------
Total assets.................................................... 11,734,031 327,806,412
-------------------- --------------------

LIABILITIES:
Payable for:
Investments purchased......................................... 851,496 6,820,418
Capital stock redeemed........................................ - 580,000
Dividends .................................................... - 282,181
Investment management fee .................................... 2,901 108,316
Accrued expenses ............................................. 13,766 30,613
-------------------- --------------------
Total liabilities.............................................. 868,163 7,821,528
-------------------- --------------------

NET ASSETS........................................................ $.10,865,868 $ 319,984,884
==================== ====================

NET ASSETS consist of:
Paid-in capital............................................... $ 10,859,995 $ 348,882,961
Undistributed net realized gain (accumulated net realized losses)
from investment transactions.................................. 3,855 (13,890,597)
Unrealized appreciation (depreciation) on investments ........ 2,018 (15,007,480)
-------------------- --------------------

NET ASSETS........................................................ $ 10,865,868 $ 319,984,884
==================== ====================

Shares of capital stock outstanding............................... 1,084,630 38,573,519
==================== ====================

Net asset value, offering and
redemption price per share..................................... $ 10.02 $ 8.30
==================== ====================
</TABLE>

See accompanying notes to financial statements.

68
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
Portfolios of CMC Fund Trust
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC CMC
Fixed Income High Yield
Securities Fund Fund
----------------------- ----------------------
September 1 (*)
through Year ended
October 31, 2000 October 31, 2000
----------------------- ----------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income .................................................. $ 95,473 $ 28,639,978
----------------------- ----------------------

Expenses:
Investment management fees ..................................... 4,796 1,255,523
Legal, insurance and audit fees................................. 11,400 41,058
Transfer agent fees............................................. 3,000 18,000
Custodian fees.................................................. 444 15,288
Trustees' fees.................................................. 422 12,429
Other expenses ................................................. - 1,015
----------------------- ----------------------
Total expenses.............................................. 20,062 1,343,313
Expenses reimbursed by investment adviser ...................... (14,581) -
----------------------- ----------------------
Net expenses................................................ 5,481 1,343,313
----------------------- ----------------------
Net investment income .............................................. 89,992 27,296,665
----------------------- ----------------------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain(loss) from investment transactions................ 3,855 (5,670,003)

Change in net unrealized appreciation or depreciation on investments 2,018 (2,503,127)
----------------------- ----------------------

Net realized and unrealized gain (loss) on investments.............. 5,873 (8,173,130)
----------------------- ----------------------

NET INCREASE RESULTING FROM OPERATIONS................................... $ 95,865 $ 19,123,535
======================= ======================
</TABLE>

* From inception of operations.

See accompanying notes to financial statements.

69
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
Portfolios of CMC Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

CMC
Fixed Income
Securities Fund CMC High Yield Fund
---------------- ------------------------------
September 1 (*) Year ended October 31,
through ------------------------------
October 31, 2000 2000 1999
---------------- ------------- -------------
<S> <C> <C> <C>
Operations:
Net investment income ................ $ 89,992 $ 27,296,665 $ 23,728,765
Net realized gain (loss) from investment
transactions.......................... 3,855 (5,670,003) (8,196,069)

Change in net unrealized appreciation or
depreciation on investments......... 2,018 (2,503,127) (5,232,093)
------------- ------------- -----------

Net increase resulting from operations 95,865 19,123,535 10,300,603
--
Distributions to shareholders:
From net investment income ........... (89,992) (27,296,665) (23,728,765)
From net realized gain from
investment transactions.......... - - (66,855)

Net capital share transactions............. 10,859,995 56,607,434 21,134,041
------------- ------------- -----------

Net increase in net assets................. 10,865,868 48,434,304 7,639,024

NET ASSETS:
Beginning of period .................. - 271,550,580 263,911,556
------------- ------------- -------------

End of period ........................ $ 10,865,868 $ 319,984,884 $ 271,550,580
============= ============= =============

</TABLE>

* From inception of operations.

See accompanying notes to financial statements.

70
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. Significant accounting policies:

CMC Fixed Income Securities Fund and CMC High Yield 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. The Trust has
established five other portfolios, CMC Small Cap Fund, CMC International Stock
Fund, CMC Small Mid Cap Fund, CMC Short Term Bond Fund and CMC International
Bond Fund, which are not included in this financial statement. The CMC Small Mid
Cap Fund and CMC International Bond Fund are not yet operational. 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 its financial statements in conformity with
generally accepted accounting principles.

Investment valuation. Portfolio securities are valued based on market value as
quoted by dealers who are market makers in these securities, by independent
pricing services, or by the adviser using a methodology approved by the Board of
Trustees. 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. Investment securities with less than 60 days to maturity when
purchased are valued at amortized cost, which approximates market value.
Investment securities for which market quotations are not readily available will
be valued at fair market value as determined in good faith under procedures
established by and under the general supervision of the Board of Trustees.

Repurchase agreements. The Funds may engage in repurchase agreement
transactions. The Funds, through the custodian, receive delivery of underlying
securities collateralizing 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.

Investment transactions. Investment transactions are accounted for as of the
date the investments are purchased or sold. Net realized gains and losses are
determined on the identified cost basis, which is also used for federal income
tax purposes. Securities purchased on a when-issued or forward-delivery basis
may settle a month or more after trade date; interest income is not accrued
until settlement date. Each Fund segregates liquid assets of the Fund with a
current value at least equal to the amount of its when-issued purchase
commitments.

Investment income and expenses. Interest income is recorded on the accrual basis
and includes amortization of premiums or accretion of discounts. Expenses are
recorded on the accrual basis and each Fund bears expenses incurred specifically
on its behalf as well as a portion of general expenses incurred on behalf of the
Trust and its underlying portfolios.

Dividends and distributions to shareholders. Dividends from net investment
income are declared daily and paid monthly. Distributions from any net realized
gains are generally declared and paid annually. Distributions to shareholders
are recorded on the ex-dividend date. Additional distributions of net investment
income and capital gains by the Funds may be made at the discretion of the Board
of Trustees.

71
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. Significant accounting policies, continued:

As of October 31, 2000, the High Yield Fund had $8,196,069 and $5,633,565 in
capital loss carryovers available to offset future capital gains, which expire
in the years 2007 and 2008, respectively. To the extent that the capital loss
carryovers are used to offset any capital gains, it is unlikely that the gains
so offset will be distributed to shareholders.

Other. The High Yield 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 claim of other
senior lenders, and uncertainties exist as to an issuer's ability to meet
principal and interest payments. As of October 31, 2000, 100% of the High Yield
Fund's portfolio (less short term investments) was invested in securities rated
Baa (10%), Ba (54%), or B (36%), by Moody's Investor Services, Inc.

The Fund currently holds Flooring America, Inc., 12.75% Senior Subordinate
Notes, Series B, due 10/15/2002, which represents less than 1% of the Fund's
portfolio. Flooring America filed a bankruptcy petition for reorganization on
June 15, 2000 an effective on that date, the fund stopped accruing income on the
bonds. Prior to the bankruptcy petition the Fund received payments for interest
and a partial tender of the Bonds. Creditors of Flooring America have filed a
petition to return these payments. The Fund has joined other bondholders and is
vigorously defending the litigation. If the fund is required to return the
payments, the potential loss to the Fund as of October 31, 2000 is approximately
$0.03 per share.

72
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

2. Investment transactions:
Aggregate purchases, sales and maturities, excluding short-term investments, net
realized gain (loss) and net unrealized appreciation (depreciation) on
investments, as of and for the year ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
CMC Fixed Income CMC High Yield
Securities Fund Fund
------------------ -----------------
<S> <C> <C>
Purchases:
Investment securities other than U.S. Government obligations.. $ 4,891,928 $ 181,179,289
U.S. Government obligations................................... 6,923,009 8,944,710
------------------ -----------------
Total purchases......................................... $ 11,814,937 $ 190,123,999
================== =================

Sales and Maturities:
Investment securities other than U.S. Government obligations.. $ 269,242 $ 138,134,881
U.S. Government obligations................................... 1,186,691 8,961,930
------------------ -----------------
Total sales and maturities.............................. $ 1,455,933 $ 147,096,811
================== =================

Net Realized Gain (Loss):
Investment securities other than U.S. Government obligations.. $ 913 $ (5,687,223)
U.S. Government obligations................................... 2,942 17,220
------------------ -----------------
Total net realized gain (loss).......................... $ 3,855 $ (5,670,003)
================== =================

Unrealized Appreciation (Depreciation) for federal income tax purposes:
Appreciation.................................................. $ 29,473 $.1,957,254
Depreciation.................................................. (27,455) (17,025,697)
------------------ -----------------
Net unrealized appreciation (depreciation) ................. $ 2,018 $ (15,068,443)
================== =================
</TABLE>

3. Capital Stock:
At October 31, 2000 each Fund had 100 million shares of no par value capital
stock authorized. Transactions of capital shares were as follows:
<TABLE>
<CAPTION>
CMC Fixed Income
Securities Fund CMC High Yield Fund
------------------ ---------------------------------------
September 1 ( * )
through Year ended October 31,
---------------------------------------
October 31, 2000 2000 1999
------------------ ------------------ -----------------
<S> <C> <C> <C>
Shares:
Shares sold.......................... 1,075,649 21,094,859 5,902,583
of dividends....................... 8,981 2,868,478 857,664
Shares issued for share split ** .... - - 21,102,520
------------------ ------------------ -----------------
1,084,630 23,963,337 27,862,767
Less shares redeemed................. - (17,201,988) (3,424,068)
------------------ ------------------ -----------------

Net increase in shares............... 1,084,630 6,761,349 24,438,699
================== ================== =================

Amounts:
Sales................................ $ 10,770,003 $ 178,587,770 $ 104,966,000
Reinvestment of dividends............ 89,992 24,157,535 20,865,739
------------------ ------------------ -----------------
10,859,995 202,745,305 125,831,739
Less redemptions..................... - (146,137,871) (104,697,698)
------------------ ------------------ -----------------

Net increase ........................ $ 10,859,995 $ 56,607,434 $ 21,134,041
================== ================== =================
</TABLE>
* From inception of operations.
** 4 for 1 stock split effective September 1, 1999

80
<PAGE>
--------------------------------------------------------------------------------
CMC FIXED INCOME SECURITIES FUND
CMC HIGH YIELD FUND
Portfolios of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

4. Transactions with affiliates and related parties:

The amounts of fees and expenses described below are shown on each Fund's
statement of operations.

Investment management fees were paid by each Fund monthly to CMC. The Funds'
fees are based on an annual rate of average daily net assets of 0.35 of 1% for
the Fixed Income Securities Fund and 0.40 of 1% for the High Yield Fund.

For the fiscal period ended October 31, 2000 and the years ended October 31,
2001 and 2002, CMC has contractually agreed to reimburse ordinary expenses of
the Fixed Income Securities Fund, to the extent that these expenses, together
with the, advisory fee exceed 0.40% of the Fund's average daily net assets.

<PAGE>
PRICEWATERHOUSECOOPERS [logo]

PricewaterhouseCoopers
1300 S.W. Fifth Avenue Suite 310
Portland, OR 97201-5638
Telephone (503) 478-6000
Facsimile (503) 478-6099

Report of Independent Accountants

To the Trustees and Shareholders of
CMC Fund Trust

In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CMC High Yield Fund and CMC Fixed
Income Securities Fund (the Funds), two of the portfolios of CMC Fund Trust, at
October 31, 2000, the results of the operations of the CMC High Yield Fund 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 each of the five years in
the period then ended, and the results of the operations, changes in net assets
and financial highlights of the CMC Fixed Income Securities Fund for the period
September 1, 2000 (commencement of operations) through October 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as financial statements) are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Portland, Oregon
December 8, 2000

82
<PAGE>

PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION

[LOGO]
Columbia

CMC SHORT TERM BOND FUND

The CMC Short Term Bond Fund (the "Fund") is a portfolio of CMC Fund
Trust seeking to provide investors a high level of current income, consistent
with stability of principal by investing primarily in high quality, short term
fixed income securities.

As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved these securities or passed on the adequacy of this
Prospectus. Any representation to the contrary is a criminal offense.

December 21, 2000

<PAGE>

--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------

Risk/Return Summary..........................................................2
Goal................................................................2
Strategy ...........................................................2
Risk Factors........................................................3
Historical Performance..............................................4
Expenses ...........................................................4
Financial Highlights.........................................................6
Management...................................................................7
Information About Your Investment............................................7
Your Account........................................................7
Buying Shares..............................................7
Selling Shares.............................................8
Pricing of Shares..........................................9
Distribution and Taxes..............................................9
Income and Capital Gains Distributions.....................9
Tax Effect of Distributions and Transactions...............9
More About the Fund..........................................................10
Investment Strategy.................................................10
Other Risks.........................................................12
Mortgage Related Securities and CMOs.......................12
Asset Backed Securities....................................12
For More Information.........................................................13

--------------------------------------------------------------------------------
RISK/RETURN SUMMARY
--------------------------------------------------------------------------------

GOAL
----

What is the Fund's Goal?

The Fund seeks to provide investors a high level of current
income consistent with a high degree of stability of principal.

STRATEGY
--------

What investment strategies does the Fund use to pursue this goal?

The Fund intends to invest primarily in high quality, short
term fixed income securities. The Fund's average portfolio duration
will not exceed three years. Under normal conditions, the Fund will
invest in:

2
<PAGE>

o Obligations of the U.S. Government, its agencies or
instrumentalities

o Corporate debt securities rated either AAA, AA, A or BBB by
Standard and Poor's, Inc. ("S&P") or Aaa, Aa, A or Baa by Moody's
Investor Services, Inc. ("Moody's")

o Unrated securities judged to be of comparable quality to the
securities listed above

To achieve its investment objective of a high level of current
income consistent with a high degree of stability of principal, at
least 50% of the Fund's assets will be invested in:

o Obligations of the U.S. Government, its agencies or
instrumentalities

o Corporate debt securities rated in the two highest ratings
categories by S&P (AAA or AA) or Moody's (Aaa or Aa)

----------------------------------------------------------------
A DESCRIPTION OF CORPORATE DEBT SECURITIES RATINGS IS
CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION.
----------------------------------------------------------------

In selecting securities for the Fund, Columbia Management Co.,
the investment adviser for the Fund ("CMC" or "Adviser"), conducts an
ongoing evaluation of the economic and market environment to determine
the emphasis to be placed by the Adviser on the different types of
securities in which the Fund may invest (for example, corporate bonds,
Treasuries or mortgage pass through securities). The Adviser will also
evaluate the desired levels of average quality, maturity and duration
of the Fund's portfolio based upon the current economic and market
environment. After selecting the types of securities and the desired
level of quality, maturity and duration of the portfolio, the Fund
conducts intensive, fundamental analysis to identify attractive
securities within its target securities. This investment strategy is
intended to give CMC a better understanding of the long-term prospects
of a particular security, based on the characteristics of the existing
economy and investor temperament. In this way, the Adviser strives to
anticipate and act upon market change, understand its effect on risk
and reward of Fund securities and thereby generate consistent,
competitive results over the long-term.

RISK FACTORS
------------

What are the principal risks of investing in the Fund?

The fixed income securities held in the Fund's investment
portfolio are subject to interest rate risk and credit risk, both of
which could impact the total return you receive on your investment and
cause the value of your investment to go down. You could lose money as
a result of your investment in the Fund.

3
<PAGE>

INTEREST RATE RISK refers to the possibility that the value of
the Fund's investments will decline due to an increase in interest
rates.

----------------------------------------------------------------
When interest rates go up, the value of the Fund's portfolio
will likely decline because fixed income securities in the
portfolio are paying a lower interest rate than what investors
could obtain in the current market. When interest rates go
down, the value of the Fund's portfolio will likely rise,
because fixed income securities in the portfolio are paying a
higher interest rate than newly issued fixed income
securities.
----------------------------------------------------------------

The amount of change in the value of the Fund's portfolio depends upon
several factors, including the maturity date of the fixed income
securities in the portfolio. In general, the price of fixed income
securities with longer maturities are more sensitive to interest rate
changes than the price of fixed income securities with shorter
maturities.

CREDIT RISK refers to the ability of the issuer of the bond to
meet interest and principal payments when due. Although the Fund
intends to invest primarily in high-quality, short term fixed income
securities, the Fund may invest in lower-rated securities, primarily
securities rated BBB by S&P or Baa by Moody's. Securities rated BBB by
S&P or Baa by Moody's are neither highly protected nor poorly secured.
These securities normally pay higher yields, but involve potentially
greater price variability than higher-quality securities. These
securities are regarded as having adequate capacity to repay principal
and pay interest, although adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to do so.

----------------------------------------------------------------
By concentrating on short term, high quality fixed income
securities, the Fund offers less current yield than securities
of lower quality (rated below BBB/Baa) or longer maturity.
Lower quality securities, however, are generally less liquid.
Furthermore, lower quality securities and securities with
longer maturities tend to have greater credit risk and
interest rate risk; consequently longer term, lower quality
securities generally exhibit more price volatility.
----------------------------------------------------------------

See "MORE ABOUT THE FUND" in this Prospectus and the Fund's
Statement of Additional Information for more information regarding the
Fund's investment strategy and risks.

HISTORICAL PERFORMANCE
----------------------

How has the Fund historically performed?

The bar chart and table below illustrate the Fund's annual
returns as well as its long term performance. The bar chart shows how
the Fund's performance has varied from year to year. The table compares
the Fund's performance over time to that of the Merrill 1-5 Gov't/Corp
Bond Index, a widely recognized unmanaged index representing average
market-weighted performance of U.S. Treasury and agency securities and
investment-grade corporate bonds with maturities between one and five
years. Both the bar chart and the table assume the reinvestment of
dividends and distributions. The Fund's historical performance does not
indicate how the Fund will perform in the future.

The bar chart below illustrates the Fund's 1 year total return of 2.60%
as of 12/31/99.

Best Quarter 3Q '98 3.19%
Worst Quarter 2Q '99 0.15%
-----------------------------------------------------------------------

Average Annual Total Returns As Of 12/31/99

Inception
1 Year (2/2/98)
-----------------------------------------------------------------------
CMC Short Term Bond Fund 2.60% 4.58%
Merrill 1-5 Gov't/Corp Bond Index 2.19% 4.49%

The Fund's year-to-date total return as of 9/30/00 was 6.03%.

EXPENSES
--------

What expenses do I pay as an investor in the Fund?

<PAGE>

described in the table are paid out of Fund assets and are therefore
reflected in the share price.

-----------------------------------------------------------------
The fund has no sales charge (load) or 12b-1 distribution fees.
-----------------------------------------------------------------

------------------------------------------------------------------------
Fee Table

Shareholder transaction fees (fees paid directly None
from your investment)

Annual Fund Operating Expenses (expenses that
are paid out of Fund assets)

Management Fees 0.25%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.28%(1)

Total Fund Operating Expenses 0.53%
Expenses Reimbursement 0.08%(2)
Net Expenses 0.45%

1Other expenses include an administrative fee paid by each
shareholder of the Fund for specialized reports provided by
the Adviser analyzing the Fund's portfolio and performance,
market conditions and economic indicators. For these services,
each shareholder pays the Adviser an annual fee calculated as
a percentage of the shareholder's net assets in the Fund. The
annual fee ranges from 0.05% to 0.20%. The maximum fee of
0.20% has been included in the Fee Table.

2For the fiscal period ended October 31, 2000, the Adviser
assumed ordinary recurring expenses of the Fund so that the
actual Total Fund Operating Expenses paid by the Fund, not
including the administrative fee paid by each shareholder, was
0.25%.

------------------------------------------------------------------------

Expense Example

This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other
mutual funds. The example assumes that you invest $10,000 in
the Fund for the time periods indicated and then sell all of
your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and
that the Fund's operating expenses remain constant as a
percentage of net assets. Your actual costs may be higher or
lower, but based on these assumptions your costs would be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$26 $80 $141 $318

<PAGE>

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

The financial highlights table is intended to help you understand the
Fund's financial performance since inception. Certain information reflects
financial results for a single fund share. The total return in the table
represents the rate of return an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Statement of Additional Information under "FINANCIAL STATEMENTS."

<TABLE>
Year Ended February 2, to
October 31, October 31,
--------------------- --------------

2000 1999 1998 (1)(2)
---- ---- -----------
<S> <C> <C> <C>
Net asset value, beginning of period ................. $11.72 $12.09 $12.00
------ ------ ------
Income from investment operations:
Net investment income ................................ 0.77 0.72 0.54
Net realized and unrealized gains (losses)
on investments...................................... 0.01 (0.37) 0.09
---- ------ ----
Total from investment operations................. 0.78 0.35 0.63
---- ---- ----

Less distributions:
Dividends from net investment income.................. (0.77) (0.72) (0.54)
Distributions from net capital gains.................. - (0.00)* -
----- ------ -----
Total distributions.............................. (0.77) (0.72) (0.54)
------ ------ ------

Net asset value, end of period........................ $11.73 $11.72 $12.09
====== ====== ======

Total return.......................................... 6.92% 2.96% 5.38%(3)

Ratios/supplemental data
Net assets, end of period (in thousands).............. $82,809 $144,821 $42,692
Ratio of net expenses to average net assets (4)....... 0.25% 0.25% 0.25%
Ratio of total expenses to average net assets(4) ..... 0.33% 0.32% 0.38%
Ratio of net income to average net assets............. 6.56% 6.22% 5.97%
Portfolio turnover rate............................... 86% 128% 132%

</TABLE>

* Amount represents less than $0.01 per share.

From inception of operations.

(2) Ratios and portfolio turnover rates are annualized.
(3) Not annualized.
(4) The investment adviser has contractually agreed to reimburse ordinary
expenses of the Fund, to the extent that these expenses, together with
the Fund's advisory fee, exceed 0.25% of the Fund's average daily net
assets. Expenses do not include an administrative fee, ranging from
between 0.05% and 0.20%, paid to the investment adviser by each
shareholder.

6
<PAGE>

--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------

The Fund's investment adviser is Columbia Management Co., 1300 S.W.
Sixth avenue, P.O. Box 1350, Portland, Oregon 97207-1350 ("Adviser" or "CMC").
CMC has acted as an investment adviser since 1969.

The Fund has contracted with CMC to provide research, advice and
supervision with respect to investment matters and to determine what securities
to purchase or sell and what portion of the Fund's assets to invest. For the
fiscal year ended October 31, 2000, the Fund paid CMC a management fee,
expressed as a percentage of average net assets, of 0.25%.

CMC uses an investment team approach to analyze investment themes and
strategies for the Fund. Members of the investment team are responsible for the
analysis of particular industries and asset types and for recommendations on
individual securities within those industries and asset types. Mr. Leonard A.
Aplet, a Vice President of CMC and a Chartered Financial Analyst, has since
inception of the Fund (February 1998) had responsibility for implementing on a
daily basis the investment strategies developed for the Fund. Mr. Aplet joined
the Adviser in 1987 as a portfolio analyst and member of the investment team.
Mr. Aplet received a Masters of Business Administration from the University of
California at Berkeley prior to joining the investment team.

--------------------------------------------------------------------------------
INFORMATION ABOUT YOUR INVESTMENT
--------------------------------------------------------------------------------

YOUR ACCOUNT
------------

Buying Shares
-------------

Shares in the Fund are available for purchase by clients of
CMC enabling them to invest in a diversified portfolio of high quality
fixed income securities in a pooled environment, rather than purchasing
securities on an individual basis. Each investor enters into an
Administrative Services Agreement (an "Agreement") with CMC under which
CMC agrees to provide certain shareholder services, including
attendance at client meetings, preparation of a variety of client or
shareholder reports, and performance of other administrative tasks.
Each investor pays a fee under the Agreement that is expressed as a
percentage of assets it has invested in the Fund. This is in addition
to any fees that CMC or any CMC affiliate may receive from the Fund for
services rendered to the Fund.

If you want to directly invest in the Fund, contact your CMC
representative at 1-800-547-1037. In addition, CMC, in its role as
discretionary investment adviser, may allocate a portion of a client's
investment portfolio into the Fund. If such investment is for the
benefit of an employee benefit plan, an independent fiduciary for a CMC
client account, after careful review of this Prospectus, including the
Fund's expenses and consistency with the client's written investment
guidelines, must approve the investment in the Fund. Upon approving the
investment, the independent fiduciary will authorize CMC to invest a
portion of the client's portfolio in the Fund, at CMC's discretion,
subject to limitations imposed by the independent fiduciary.

7
<PAGE>

The price for Fund shares is the Fund's net asset value per
share ("NAV"), which is generally calculated as of the close of trading
on the New York Stock Exchange (usually 4:00 p.m., Eastern time) every
day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the Fund.

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.

Selling Shares
--------------

You may sell shares at any time. Upon redemption you will
receive the Fund's NAV next calculated after your order is accepted by
the Fund's transfer agent. Any certificates representing Fund shares
being sold must be returned with your redemption request. You can
request a redemption by calling your CMC Representative at
1-800-547-1037. Redemption proceeds are normally transmitted in the
manner specified in the redemption request on the business day
following the effective date of the redemption. Except as provided by
rules of the Securities and Exchange Commission, redemption proceeds
must be transmitted to you within seven days of the redemption date.

The Fund also reserves the right to make a "redemption in
kind" - pay you in portfolio securities rather than cash - if the
amount you are redeeming is large enough to affect the Fund's
operations (for example, if the redemption represents more than 1% of
the Fund's assets).

8
<PAGE>
Pricing of Shares
-----------------

The Fund uses market value to value its securities as quoted
by dealers who are market makers in these securities or by an
independent pricing service, unless the Adviser determines that a fair
value determination should be made using procedures and guidelines
established by and under the general supervision of the Fund's Board of
Trustees. 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. The Fund constantly monitors the price received
from market makers and its pricing service and, at times, will manually
price its securities using procedures established by and under the
general supervision of the Fund's Board of Trustees. Debt securities
with remaining maturities of less than 60 days will generally be valued
based on amortized cost.

DISTRIBUTION AND TAXES
----------------------

Income and Capital Gains 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 you have 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 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, as calculated
after payment of the distribution, at the close of business on the
dividend payment date, unless you have elected to receive the
distribution in cash.

Tax Effect of Distributions and Transactions
--------------------------------------------

The dividends and distributions of the Fund are taxable to
most investors, unless the shareholder is exempt from state or federal
income taxes or your investment is in a tax-advantaged account. The tax
status of any distribution is the same regardless of how long you have
been in the Fund and whether you reinvest your distributions or take
them as income. In general, distributions are taxable as follows:

<TABLE>
------------------------------------------------------------------------------------
Taxability of Distributions

Type of Tax Rate for Tax Rate for
Distribution 15% Bracket 28% Bracket or Higher
------------ ----------- ---------------------
<S> <C> <C> <C>

Income Dividends Ordinary Income Rate Ordinary Income Rate

Short Term Capital Gains Ordinary Income Rate Ordinary Income Rate

Long Term Capital Gains 10% 20%
------------------------------------------------------------------------------------
</TABLE>

The Fund expects that, as a result of its investment objective
to achieve a high level of current income, its distributions will
consist primarily of income dividends. Each year the Fund will send you
information detailing the amount of ordinary income and capital gains
distributed to you for the previous year.

----------------------------------------------------------------
Your investment in the Fund could have additional tax
consequences. Please consult your tax professional for
assistance as to the possible application of state and local
income tax laws to Fund dividends and capital distributions.
----------------------------------------------------------------

<PAGE>

--------------------------------------------------------------------------------
MORE ABOUT THE FUND
--------------------------------------------------------------------------------

INVESTMENT STRATEGY
-------------------

In addition to corporate debt securities and U.S. Government and agency
obligations as described above, the Fund may invest in mortgage and other
asset-backed securities, bank obligations, collateralized bonds, loan and
mortgage obligations, commercial paper, preferred stocks, repurchase agreements,
and savings and loan obligations.

Mortgage-backed securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect, "passing through" monthly payments made
by the individual borrowers on the mortgage loans which underlie the securities
(net of fees paid to the issuer or guarantor of the securities).

Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by the Government National Mortgage Association ("GNMA"))
or guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are
supported only by the discretionary authority of the U.S. Government to purchase
the agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported with various credit enhancements such
as pool insurance, guarantees issued by governmental entities, a letter of
credit from a bank or senior/subordinated structures.

The Fund will usually invest some portion of its assets in
Collateralized Mortgage Obligations ("CMOs") issued by U.S. agencies or
instrumentalities or in privately issued CMOs that carry an investment grade
rating. CMOs are hybrid instruments with characteristics of both mortgage-backed
bonds and mortgage pass-through securities. Similar to a mortgage pass-through,
interest and prepaid principal on a CMO are paid, in most cases, monthly. CMOs
may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, or FNMA. CMOs are structured in multiple classes, with each class
bearing a different stated maturity or interest rate. The Fund will invest in
those CMOs whose characteristics and terms are consistent with the average
maturity and market risk profile of the other fixed income securities held by
the Fund.

The Fund is permitted to invest in asset-backed securities, subject to
the Fund's rating and quality requirements. Through the use of trusts and
special purpose subsidiaries, various types of assets, including home equity and
automobile loans and credit card and other types of receivables, as well as
purchase contracts, financing leases and sales agreements entered into by
municipalities, are being securitized in pass-through structures similar to the

<PAGE>

mortgage pass-through structures described above. Consistent with the Fund's
investment objective policies and quality standards, the Fund may invest in
these and other types of asset-backed securities which may be developed in the
future.

Due to the inverse relationship between the price of a security and the
interest rate of that security (that is, when interest rates rise, the price of
fixed income securities generally fall and, conversely, when interests rates
fall, the price of fixed income securities generally rise) the value of the
Fund's portfolio will fluctuate with changes in interest rates. The Fund will
attempt to reduce the risk of principal fluctuations by adjusting the average
portfolio duration. In periods of rising interest rates and falling fixed income
prices, the Fund may maintain a shorter duration to reduce the impact of a
decline in the value of fixed income securities in the Fund's portfolio.
Conversely, during times of falling rates and rising prices, a longer average
portfolio duration of up to three years may be sought.

In selecting investments, the Adviser uses a top down analysis,
supplemented by a bottom up analysis. Top down analysis begins with an overall
evaluation of the investment environment, and allows the Adviser to determine
specific industries, market sectors within those industries, specific types of
fixed income instruments (for example corporate bonds, treasuries or mortgage
pass through securities) and desired levels of portfolio quality, maturity and
duration to emphasize. Factors the Adviser considers in its top down analysis
include:

o economic growth
o inflation
o interest rates
o federal reserve policy
o corporate profits
o demographics
o money flows

Once individual sectors, types of instruments and markets have been
identified, in the case of corporate bonds, the Adviser employs fundamental
analysis to select individual securities. Fundamental analysis includes the
evaluation of a company's:

o financial condition
o quality of management
o earnings growth and profit margins
o sales trends
o potential for new product development
o dividend payment history and potential
o financial ratios
o investment in research and development

By utilizing the investment strategy, the Adviser strives to anticipate
and act upon market changes, understand its effect on the risks and rewards of
Fund securities, and thereby generate consistent, competitive results over the
long-term.

11
<PAGE>

OTHER RISKS
-----------

In addition to the risks stated in the "RISK/RETURN SUMMARY", there are
other risks of investing in the Fund, which are described below:

Mortgage Related Securities and CMOs
------------------------------------

Mortgage related securities and CMOs are subject to risks relating to
cash flow uncertainty; that is, the risk that actual prepayment on the
underlying mortgages will not correspond to the prepayment rate assumed by the
Fund. Unscheduled or early payments on the underlying mortgages may shorten the
securities' effective maturities and reduce their growth potential. A decline in
interest rates may lead to a faster rate of repayment of the underlying mortgage
and expose the Fund to a lower rate of return on reinvestment. To the extent
that mortgage backed securities are held by the Fund, the prepayment right of
mortgages may limit the increase in net asset value of the Fund because the
value of the mortgage-backed securities held by the Fund may not appreciate as
rapidly as the price of non-callable debt securities. Additionally, the Fund may
agree to purchase or sell these securities with payment and delivery taking
place at a future date.

Asset Backed Securities
-----------------------

In addition to prepayment risk as described above, asset back
securities do not usually contain the benefit of a complete security interest in
the related collateral.

12
<PAGE>

--------------------------------------------------------------------------------
FOR MORE INFORMATION
--------------------------------------------------------------------------------

You can find additional information on the Fund's structure and its
performance in the following documents:

o Annual/Semiannual Reports. While the Prospectus describes the
Fund's potential investments, these reports detail the Fund's
actual investments as of the report date. Reports include a
discussion by Fund management of recent market conditions,
economic trends, and Fund strategies that significantly
affected the Fund's performance during the reporting period.

o Statement of Additional Information ("SAI"). A supplement to
the Prospectus, the SAI contains further information about the
Fund and its investment restrictions, risks and polices. It
also includes the most recent annual report and the
independent accountant's report.

A current SAI for the Fund is on file with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference, which means it
is considered part of this Prospectus.

CMC Fund Trust
1300 S.W. Sixth Avenue
Portland, Oregon 97201
Telephone: 1-800-547-1037

Information about the Fund (including the SAI) can be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. Information about the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Reports and other information regarding the Fund are also on the
SEC's Internet website at http://www.sec.gov, and copies of this information may
be obtained, after paying a duplicating fee, by electronic request at the SEC's
E-mail address at [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

SEC file number: 811-5857

<PAGE>
------------------------------------------------------------------------------

CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust

------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

CMC Fund Trust
1300 S.W. Sixth Avenue
P.O. Box 1350
Portland, Oregon 97207
(503) 222-3600

This Statement of Additional Information contains information relating
to CMC Fund Trust (the "Trust") and a portfolio of the Trust, CMC Short Term
Bond Fund (the "Fund").

TABLE OF CONTENTS

Description of the Fund......................................................2
Management...................................................................14
Investment Advisory and Other Fees Paid to Affiliates........................17
Portfolio Transactions.......................................................19
Capital Stock and Other Securities...........................................21
Purchase, Redemption and Pricing of Shares...................................21
Custodians...................................................................24
Independent Accountants......................................................24
Taxes........................................................................24
Yield and Performance........................................................28
Financial Statements.........................................................29

December 21, 2000

<PAGE>

--------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
--------------------------------------------------------------------------------

INVESTMENT OBJECTIVE, POLICIES AND RISKS
----------------------------------------

The Fund's primary investment objective is to provide shareholders with
a high level of current income consistent with a high degree of stability of
principal. The Fund's objective may not be changed without a vote of the
outstanding voting securities of the Fund. There is no assurance that the Fund
will achieve its investment objective.

To achieve its investment objective, the Fund expects to invest at
least 50% of its assets in:

(i) U.S. Government securities, including bonds, notes and bills
issued by the U.S. Treasury, and securities issued by agencies and
instrumentalities of the U.S. Government;

(ii) corporate debt securities rated, at the time of purchase, in
one of the two highest ratings categories of Standard & Poor's ("S&P")
(AAA or AA) or Moody's Investor's Services, Inc. ("Moody's") (Aaa or
Aa);

(iii) or, if not rated, judged to be of comparable quality.

Subject to the above restrictions, the Fund may invest in investment
grade debt securities, meaning securities which, at the time of purchase, are
rated Baa or higher by Moody's, BBB or higher by S&P, or, if unrated, believed
to be equivalent to securities with those ratings. Although bonds rated Baa or
BBB are believed to have adequate capacity to pay principal and interest, they
have speculative characteristics because they lack certain protective elements.
In addition, the price of such bonds may be more sensitive to adverse economic
changes or individual corporate developments than bonds with higher investment
ratings. The Fund will evaluate the appropriateness, in light of the existing
circumstances, of retaining any security whose credit rating drops below Baa or
BBB after its purchase by the Fund. Finally, up to 10% of the Fund's assets may
be invested in lower grade securities (rated Ba or B by Moody's or BB or B by
S&P), commonly referred to as "junk bonds," when the Adviser believes these
securities present attractive investment opportunities despite their speculative
characteristics. Bond ratings are described below under "INVESTMENTS HELD BY THE
FUND."

The Fund's average portfolio duration may not exceed 3 years.
Securities will be selected on the basis of the Adviser's assessment of interest
rate trends and the liquidity of various instruments under prevailing market
conditions. Shifting the average portfolio duration of the portfolio in

<PAGE>

response to anticipated changes in interest rates will generally be carried out
through the sale of securities and the purchase of different securities within
the desired duration range. This may result in a greater level of realized
capital gains and losses than if the Fund held all securities to maturity.

Depending upon the 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 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 the Adviser's judgement as to the best obtainable price.

INVESTMENTS HELD 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. 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. The Fund may invest in high quality government and foreign
corporate fixed income securities. Additional information with respect to
certain of the securities in which the Fund may invest is set forth below.

Securities Rating Agencies
--------------------------

The following is a description of the bond ratings used by Moody's and
S&P. Subsequent to its purchase by the Fund, a security 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.

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.

<PAGE>

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.

Bonds rated AAA, AA, A, and BBB are considered investment grade bonds.

<PAGE>

Certificates of Deposit
-----------------------

Certificates of Deposit are receipts issued by a U.S. bank in exchange
for the deposit of funds. The 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.

Commercial Paper Ratings. A1 and Prime 1 are the highest commercial
paper ratings issued by S&P and Moody's respectively.

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.

<PAGE>

Mortgage-Backed Securities and Mortgage Pass-Through Securities
---------------------------------------------------------------

The Fund may also invest in mortgage-backed securities, which are
interests in pools of mortgage loans, including mortgage loans made by savings
and loan institutions, mortgage bankers, commercial banks and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations as further described
below. The Fund may also invest in debt securities which are secured with
collateral consisting of mortgage-backed securities (see "Collateralized
Mortgage Obligations"), and in other types of mortgage-related securities.

Because principal may be prepaid at any time, mortgage-backed
securities involve significantly greater price and yield volatility than
traditional debt securities. A decline in interest rates may lead to a faster
rate of repayment of the underlying mortgages and expose the Fund to a lower
rate of return upon reinvestment. To the extent that mortgage-backed securities
are held by the Fund, the prepayment right will tend to limit to some degree the
increase in net asset value of the Fund because the value of the mortgage-backed
securities held by the Fund may not appreciate as rapidly as the price of
non-callable debt securities. When interest rates rise, mortgage prepayment
rates tend to decline, thus lengthening the life of mortgage-related securities
and increasing their price volatility, affecting the price volatility of the
Fund's shares.

<PAGE>

Government National Mortgage Association) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.

The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the U.S. Government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks, and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages. These guarantees, however, do not apply to the market
value or yield of mortgage-backed securities or to the value of the Fund's
shares. Also, GNMA securities often are purchased at a premium over the maturity
value of the underlying mortgages. This premium is not guaranteed and will be
lost if prepayment occurs.

Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to regulation by the Secretary of Housing and Urban Development. FNMA
purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers which include state
and federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA, but are not backed by the full faith and credit of the U.S. Government.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers, and other secondary market issuers also
create pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers, and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Fund's investment
quality standards. There is no assurance that the private insurers or guarantors
can meet their obligations under the insurance policies or guarantee
arrangements. The Fund may buy mortgage-related securities without insurance or
guarantees if,

<PAGE>

through an examination of the loan experience and practices of the
originators/services and poolers, the Adviser determines that the securities
meet the Fund's quality standards. Although the market for such securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable.

Collateralized Mortgage Obligations ("CMOs")
--------------------------------------------

The Fund may invest in CMOs, which are hybrids between mortgage-backed
bonds and mortgage pass-through securities. Similar to a bond, interest and
prepaid principal are paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.

CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially protected against a sooner than desired return
of principal by the sequential payments. The prices of certain CMOs, depending
on their structure and the rate of prepayments, can be volatile. Some CMOs may
also not be as liquid as other securities.

The Fund will invest only in those CMOs whose characteristics and terms
are consistent with the average maturity and market risk profile of the other
fixed income securities held by the Fund.

Other Mortgage-Backed Securities
--------------------------------

8
<PAGE>

investors, the Adviser will, consistent with the Fund's investment objective,
policies and quality standards, consider making investments in such new types of
mortgage-related securities.

Other Asset-Backed Securities
-----------------------------

The securitization techniques used to develop mortgage-backed
securities are being applied to a broad range of assets. Through the use of
trusts and special purpose corporations, various types of assets, including
automobile loans, computer leases and credit card and other types of
receivables, are being securitized in pass-through structures similar to
mortgage pass-through structures described above or in a structure similar to
the CMO structure. Consistent with the Fund's investment objectives and
policies, the Fund may invest in these and other types of asset-backed
securities that may be developed in the future. In general, the collateral
supporting these securities is of shorter maturity than mortgage loans and is
less likely to experience substantial prepayments with interest rate
fluctuations.

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the benefit
of any security interest in the related assets. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of state and
federal consumer credit laws, many of which give debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due.
There is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of direct parties. To reduce the effect
of failures by obligors on underlying assets to make payments, the securities
may contain elements of credit support which fall into two categories: (i)
liquidity protection, and (ii) protection against losses resulting from ultimate
default by an obligor or the underlying assets. Liquidity protection refers to
the making of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against losses results from payment of the
insurance obligations on at least a portion of the assets in the pool. This
protection may be provided through guarantee policies or letters of credit
obtained by the issuer or sponsor from third parties, through various means of
structuring the transaction or through a combination of such approaches. The
Fund will not pay any additional or separate fees for credit support. The degree
of credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the return on an investment in such a
security.

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

<PAGE>

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.

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 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% 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
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.

Foreign Fixed Income 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.

10
<PAGE>

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 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 Adviser. 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% 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% 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.

11
<PAGE>

Dollar Roll Transactions
------------------------

The Fund may enter into "dollar roll" transactions, which consist of
the sale by the Fund to a bank or broker-dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment to
purchase from the counterparty similar, but not identical, securities at a
future date and at the same price. The counterparty receives all principal and
interest payments, including prepayments, made on the security while it is the
holder. The Fund receives a fee from the counterparty as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed over a
period of several months with a new purchase and repurchase price fixed and a
cash settlement made at each renewal without physical delivery of securities.

The Fund will not use such transactions for leveraging purposes and,
accordingly, will segregate cash, U.S. Government securities or other high grade
debt obligations in an amount sufficient to meet their purchase obligations
under the transactions. The Funds will also maintain asset coverage of at least
300% for all outstanding firm commitments, dollar rolls and other borrowings.

Dollar rolls may be treated for purposes of the Investment Company Act
of 1940, as amended (the "1940 Act"), as borrowings of the Fund because they
involve the sale of a security coupled with an agreement to repurchase. Like all
borrowings, a dollar roll involves costs to the Fund. For example, while the
Fund receives a fee as consideration for agreeing to repurchase the security,
the Fund forgoes the right to receive all principal and interest payments while
the counterparty holds the security. These payments to the counterparty may
exceed the fee received by the Fund, thereby effectively charging the Fund
interest on its borrowing. Further, although the Fund can estimate the amount of
expected principal prepayment over the term of the dollar roll, a variation in
the actual amount of prepayment could increase or decrease the cost of the
Fund's borrowing.

The entry into dollar rolls involves potential risks of loss which are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the Fund may be
required to purchase securities in connection with a dollar roll at a higher
price than may otherwise be available on the open market. Since, as noted above,
the counterparty is required to deliver a similar, but not identical security to
the Fund, the security which the Fund is required to buy under the dollar roll
may be worth less than an identical security.

<PAGE>

INVESTMENT RESTRICTIONS
-----------------------

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, provided,
however, at no time will the Fund's investment in illiquid securities exceed 15%
of its net assets. The Trust may not change these restrictions without a
majority vote of the outstanding securities 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 (a)
invest up to 25% of the value of its total assets in any one industry, (b)
invest up to 100% of the value of its total assets in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, and (c)
invest for defensive purposes up to 80% of the value of its total assets in
certificates of deposit (C/D's) and banker's acceptances with maturities not
greater than one year. C/D's and banker's acceptances will be limited to
domestic banks which have total assets in excess of $1 billion and are subject
to regulatory supervision by the U.S. Government or state governments.
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%
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.

5. Purchase illiquid securities, if upon the purchase more than 10%
of the value of the Fund's net assets would consist of such illiquid securities.
See "DESCRIPTION OF THE FUND, INVESTMENTS HELD BY THE FUND" for a complete
discussion of illiquid securities.

6. Purchase the securities of any issuer if the purchase, at the
time thereof, would cause more than 10% 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% 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% of the assets of the Fund.

<PAGE>

8. Purchase or retain securities of an issuer, any of whose
officers or directors or security holders is an officer or director of the Fund
or of its adviser if, or so long as, the officers and directors of the Fund and
of its adviser together own beneficially more than 5% of any class of securities
of the issuer.

9. Purchase securities of other open-end investment companies,
except as permitted by Section 12(d)(1)(A) of the 1940 Act.

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 Securities Act of 1933, as amended (the "1933 Act").

12. Borrow money except as a temporary measure for extraordinary or
emergency purposes. Its borrowings may not exceed 5% 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% of the
gross assets of the Fund valued at cost.

13. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5% 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 or purchase or
sell puts or calls, or confirmations thereof.

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% of the Fund's net assets valued at market may, at any time, be held as
collateral for such sales.

--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------

The Fund is managed under the general supervision of the Trustees of
the Trust. The trustees and officers of the Trust are listed below, together
with their principal business occupations. All principal business positions have
been held for more than five years, except as follows: Columbia Strategic Value
Fund, Inc. and Columbia Technology Fund, Inc. since October 2000; Columbia
National Municipal Bond Fund, Inc. since January 1999; Columbia Small Cap Fund,
Inc. since August 1996; 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 National Municipal Bond Fund, Inc.,
Columbia Real Estate Equity Fund, Inc., Columbia Short

<PAGE>

Term Bond Fund, Inc., Columbia Special Fund, Inc., Columbia Growth Fund, Inc.,
Columbia Daily Income Company, Columbia Small Cap Fund, Inc., Columbia Fixed
Income Securities Fund, Inc., Columbia Strategic Value Fund, Inc. and Columbia
Technology Fund, Inc.

JEFF B. CURTIS,* Age 47, President and Assistant Secretary of the Trust and each
of the Columbia Funds (since April 2000); Chief Operating Officer (since July
2000) and Secretary (April 1993-October 1999), Director and President of
Columbia Financial (since October 1999); President and Chief Operating Officer
(since October 2000), Chairman (since March 2000), Director (since January
1999), Senior Vice President (January 1999-October 2000) and Secretary (April
1993-October 2000) of the Trust Company; President (since October 2000), Chief
Operating Officer (since July 2000), Director (since December 1997) and Senior
Vice President (January 1999-October 2000) of the Adviser and CFMC. Prior to his
current officer positions, Mr. Curtis was Vice President and General Counsel of
the Adviser, CFMC, the Trust Company and Columbia Financial (from April 1993 to
December 1998). Mr. Curtis's business address is 1300 S.W. Sixth Avenue,
Portland, Oregon 97207.

<PAGE>

officer positions, Mr. Thomsen was Vice President of the Adviser, CFMC and the
Trust Company. Mr. Thomsen's business address is 1300 S.W. Sixth Avenue,
Portland, Oregon 97207.

*These individuals are "interested persons" as defined by the
Investment Company Act of 1940 (the "1940 Act") and receive no fees or salaries
from the Trust or the Funds.

The following table sets forth the compensation received by the
disinterested trustees of the Trust for the fiscal year ended October 31, 2000:

16
<PAGE>

Total Compensation from the
Trustee Compensation From Trust Trust and Columbia Funds
------- ----------------------- -------------------------

Richard L. Woolworth $9,000 $33,000
Thomas R. Mackenzie* $4,500 $16,000
James C. George $9,000 $32,000
Patrick J. Simpson** $4,500 $16,000

*Mr. Mackenzie retired as trustee of the Trust in April 2000.
**Mr. Simpson was elected as Trustee of the Trust to fill the vacancy created by
the retirement of Mr. Mackenzie.

At December 20, 2000, to the knowledge of the Trust, the following
persons owned of record or beneficially more than 5% of the outstanding shares
of the Fund:

Shares Beneficially Owned

Name and Address at December 20, 2000
---------------- --------------------------

Honzel Ltd. Partnership 2,855,277 (43,48%)
12929 S.W. Forest Meadows

Lake Oswego, OR 97034

Legacy Health System Fixed Income II 1,294,950 (19.72%)
1919 N.W. Lovejoy

Portland, OR 97209

Oregon Health Sciences Foundation 612,119 (9.32%)
1121 S.W. Salmon Street, Suite 200

Portland, OR 97205

As defined by SEC rules and regulations, the Oregon Health Sciences
Foundation is a "control person" of the Fund, since it owns over 25% of the
voting securities of the Fund. The fact that it owns over 25% of the Fund's
voting securities means it may be able to impact the outcome of any matter in
which shareholders are asked to vote.

--------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES
--------------------------------------------------------------------------------

The investment adviser to the Fund is Columbia Management Co. (the
"Adviser"). The Adviser has entered into an investment contract with the Fund.
Pursuant to the investment contract the Adviser provides research, advice, and
supervision with respect to investment matters and determines what securities to
purchase or sell and what portion of the Fund's assets to invest.

<PAGE>

The Adviser provides office space and pays all executive salaries and
executive expenses of the Fund. 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, broker's 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 other
expenses of preparing its registration statement, prospectuses, and reports.

For its services provided to the Fund, the Adviser charges an advisory
fee, which is accrued daily and paid monthly. The advisory fee for the Fund
equals the annual rate of 0.25 of 1% of its daily net assets. Advisory fees paid
by the Fund to the Adviser were $229,355, $259,716, and $67,403 for fiscal years
2000, 1999 and the period from inception, February 2, 1998, through October 31,
1998, respectively. The Adviser has agreed to reimburse the Fund to the extent
Total Fund Operating Expenses, not including the administrative fee described
below, exceed 0.25%. If the Adviser had not agreed to reimburse the Fund for
such expenses, Total Fund Operating Expenses for the Fund, not including the
Administrative fee described below, would have been 0.33%.

In addition to the investment advisory fee payable by the Fund to the
Adviser, each shareholder enters into an Administrative Services Agreement (the
"Agreement") with the Adviser. Pursuant to this Agreement, the Adviser agrees to
provide certain administrative services to each shareholder and charges each
shareholder a fee for those services based on the level of shareholder assets
invested in the Fund. The fees range from 0.05% to 0.20%.

The Trust Company acts as transfer agent and dividend crediting agent
for the Fund. Its address is 1301 S.W. Fifth Avenue, P.O. 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. The Trust paid $18,000 to the Trust Company for
services performed for the fiscal year ended October 31, 2000 under the transfer
agent agreement relating to the Fund.

<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.

There is generally no stated commission in the case of fixed income
securities, which are traded in the over-the-counter markets, but the price paid
by the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Fund of negotiated brokerage commissions. Such brokerage commissions vary among
different brokers, and a particular broker may charge different commissions
according to such factors as the difficulty and size of the transaction.

Prompt execution of orders at the most favorable price will be the
primary consideration of the Fund in transactions where fees or commissions are
involved. Additional factors considered in the process of selecting a
broker-dealer to execute a transaction include: (i) professional capability of
the executing broker-dealer and the value and quality of the services provided
by the broker-dealer; (ii) size and type of the transaction; (iii) timing of the
transaction in the context of market prices and trends; (iv) nature and
character of markets for the security purchased or sold; (v) the broker-dealer's
execution efficiency and settlement capability; (vi) the executing
broker-dealer's stability and the execution services it renders to the Adviser
on a continuing basis; and (vii) reasonableness of commission. 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.

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. As permitted
by Section 28(e) of the Securities and Exchange Act of 1934, the Adviser may
cause the Fund to pay a broker-dealer which provides "brokerage and research
services" (as defined in the Act) to the Adviser an amount of undisclosed
commission for effecting a securities transaction for the Trust in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.

The Adviser may use research services provided by, and place agency
transactions with, affiliated broker-dealers if the commissions are fair and
reasonable and comparable to commissions

<PAGE>

charged by non-affiliated qualified brokerage firms. In addition, the Fund may
purchase securities from an underwriting syndicate in which an affiliate is a
member of the underwriting syndicate. In any agency transaction or purchase from
an underwriting syndicate of which an affiliate, primarily Robertson Stephens,
is a member, the trade will be accomplished in accordance with the rules and
regulations of the Investment Company Act of 1940.

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 Code does not prohibit
employees from purchasing securities that may be held or purchased by the Fund,
but is intended 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 of their relationship
with the Adviser. The specific standards in the Code include, among others, a
requirement that trades of access persons 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.

20
<PAGE>

--------------------------------------------------------------------------------
CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------

The Trust may establish separate series of investment portfolios under
its Restated Declaration of Trust. The Fund, CMC Small Cap Fund, CMC
International Stock Fund, CMC High Yield Fund, CMC Fixed Income Securities Fund,
CMC International Fund and CMC Small/Mid Cap 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, dividends and distributions. 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% 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.

Any reference to 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% or more of the shares present or represented by proxy at the
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (ii) more than 50% of the outstanding shares,
whichever is less.

PURCHASES

Shareholders of the Fund are investment advisory clients of the
Adviser. Investments in the Fund are made directly by clients of the Adviser or
by the Adviser in its role as discretionary investment adviser for a portion of
shareholder's assets. However, with respect to assets of an investment advisory
client of the Adviser invested in the Fund, that client will pay a reduced, or
in the case of an employee benefit plan, no fee pursuant to its separate
management contract with the Adviser (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 the Fund by the Adviser on behalf of the shareholder.
These conditions are 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.

<PAGE>

The transfer agent for the Fund may, at its discretion, permit
investors to purchase shares through the exchange of securities they hold. Any
securities exchanged must meet the investment objective, policies, and
limitations of the Fund, must have a readily ascertainable market value, must be
liquid, and must not be subject to restrictions on resale. The market value of
any securities exchanged, plus any cash, must be at least $100,000. Shares
purchased in exchange for securities generally may not be redeemed or exchanged
until the transfer has settled - usually within 15 days following the purchase
by exchange. The basis of the exchange will depend upon the relative net asset
value of the shares purchased and securities exchanged. Securities accepted by
the Fund will be valued in the same manner as the Fund values its assets. Any
interest earned on securities following their delivery to the transfer agent and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription, or other rights attached to the securities
become the property of the Fund, along with the securities. Before engaging in
an exchange, investors should consult their tax advisers concerning the tax
consequences to them of the exchange.

REDEMPTIONS
-----------

Redemptions of all or any portion of a shareholder's investment can be
made at any time. Redemption of shares are at the net asset value next computed
after receipt of a redemption order on a day the New York Stock Exchange
("NYSE") is open for business. Payment will be made within seven days of the
date of redemption, except as provided by the rules of the SEC. 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, Martin Luther King, Jr.'s Birthday,
Presidents' Day, 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.

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% 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.

<PAGE>

PRICING OF SHARES
-----------------

The net asset value per share of the Fund is determined by the Adviser,
under procedures approved by the trustees of the Trust, as of the close of
regular trading (normally 4:00 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.

The Fund's portfolio securities and other assets for which market
quotations are readily available are stated at market value. Market value is
determined on the basis of last reported sales prices, or if no sales are
reported, as is the case for most securities traded over-the-counter, at the
average between representative bid and asked quotations obtained from a third
party pricing service or from established market makers. Fixed income
securities, including those to be purchased under firm commitment agreements
(other than obligations having a maturity of 60 days or less), are normally
valued on the basis of quotations obtained from brokers and dealers or pricing
services, which take into account appropriate factors such as
institutional-sized trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data. Short-term investments having a maturity of 60 days or less are valued at
amortized cost, when the Board of Trustees determines that amortized cost is
their fair value.

23
<PAGE>

--------------------------------------------------------------------------------
CUSTODIANS
--------------------------------------------------------------------------------

U S Bank N.A., 321 S.W. Sixth Avenue, Portland, Oregon 97208, acts as
general custodian of the Trust (a "Custodian"). The Chase Manhattan Bank
("Chase" or a "Custodian"), 3 Chase Metrotech Center, Brooklyn, New York 11245,
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 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 Chase (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 or a
delegate of the Trustees in accordance with regulations under the 1940 Act.

--------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
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:

<PAGE>

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% of its investment
company taxable income (computed without any deduction for dividends paid) and
90% 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 seven 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.

<PAGE>

The Fund may invest up to 10% of its total assets 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 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 (October 31), 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.

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 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% of the ordinary income for the
calendar year plus (b) 98% 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% applies to
the shortfall.

<PAGE>

The Code allows the deduction by certain individuals, trusts, and
estates of "miscellaneous itemized deductions" only to the extent that such
deductions exceed 2% 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 1933 Act. Therefore, the limit on miscellaneous
itemized deductions should not apply to expenses incurred by the Fund.

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 an 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.

27
<PAGE>

--------------------------------------------------------------------------------
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/cd + 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
its 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
current yield of the Fund for the 30 day period ended October 31, 2000 was
6.73%.

n
P(1+T) = 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)

28
<PAGE>

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. For the period ended October 31, 2000, the
total return for the Fund for the 1 year period and since inception (February 2,
1998) was 6.92% and 5.65%, respectively.

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,
Financial World, Forbes, Investor's Business Daily, Money, Morningstar Mutual
Funds, The Wall Street Journal and USA Today. (Lipper Analytical Services, Inc.
is an independent rating service that ranks over 1000 mutual funds based on
total return performance.) These ranking services and publications may rank the
performance of the Fund against all other funds over 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 Lipper Analytical 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.

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 banks 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 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.

--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

The financial statements for the Fund for the fiscal year ended October
31, 2000, together with the Report of Independent Accountants of
PricewaterhouseCoopers LLP, are attached hereto and incorporated by reference
into this Statement of Additional Information.

29
<PAGE>
CMC SHORT TERM BOND FUND
A Portfolio of CMC Trust
MANAGEMENT DISCUSSION OF FUND PERFORMANCE

We are pleased to provide you with an investment review of the CMC Short Term
Bond Fund. For the fiscal year ended October 31, 2000, the Fund returned 6.92%.
This performance compares favorably to the Merrill Lynch 1-5 Gov't/Corp. Index
return of 6.29% and the Lipper Short/Intermediate Investment Grade Fund Index
return of 5.98% for the same period.

In the last two months of 1999, the first two months of the Fund's fiscal year,
yields rose along with expectations that the Federal Reserve would raise
interest rates more aggressively in response to continued strong economic growth
and low unemployment. Shorter issues performed well compared to longer maturity
bonds and the Fund benefited relative to longer funds. In January 2000, the
announcement that the Treasury would buyback outstanding issues in light of the
growing budget surplus prompted a rally in long U.S. Treasury securities. At the
same time, yields on short issues rose in the first quarter of 2000, as the
Federal Reserve signaled its intent to take more aggressive action aimed at
slowing economic activity to a more sustainable pace. This caused the yield
curve to "invert", meaning that longer bonds were yielding less than short
bonds. The Fed did raise interest rates 1.00% in a series of three moves taken
at their February, March and May meetings. During the summer, economic growth
finally showed signs of moderating, improving prospects that the Federal Reserve
tightening cycle was nearing an end.

The Fund benefited during the year, relative to the market, from its
overweighting in short mortgage and asset-backed securities. The Fund's large
weighting in floating rate securities, whose income increased along with short
term rates, also contributed to outperformance versus its benchmark. The average
duration of the Fund was maintained at about 2.3 years throughout the period.
Given this relatively short duration, the Fund is expected to have less risk of
price fluctuation during periods of interest rate volatility than fixed income
funds with a longer duration.

The Fund seeks to provide investors with a high level of current income
consistent with stability of principal by investing in high quality, short-term
fixed-income securities. The Fund is managed to minimize credit risk and market
value fluctuations, while striving to maintain liquidity for shareholders.

Thank you for your continued confidence in the CMC Short Term Bond Fund.

The Columbia Investment Team

December 10, 2000

30
<PAGE>

Graphic line chart depicting "Growth of $10,000 Since Inception" showing the
growth in dollar amounts ($9,000-$11,600) of CMC Short Term Bond Fund, Merrill
1-5 Gov't/Corp Index and Lipper Short/Int. Inv. Grade Fund Index for the period
2/2/98 to 10/31/00 to $11,600, $11,539, and $11,348, respectively:

Average Annual Total Return
1 Year Since Inception
CMC Short Term Bond 6.92% 5.65%
Merrill 1-5 Gov't/Corp Index 6.29% 5.44%
Lipper Short/Int. Inv. Grade Fund Index 5.98% 4.80%

Past performance does not guarantee future results. The Fund's inception date
was 2/2/98. The Merrill Index and the Lipper Index are based on the periods
beginning February 1, 1998. Total return performance is illustrated for the
periods ended October 31, 2000. The Merrill 1-5 Year Gov't/Corp Index represents
average market-weighted performance of U.S. Treasury and agency securities and
investment-grade corporate bonds with maturities between one and five years. The
Lipper Index represents average performance of the 30 largest short intermediate
term investment grade debt funds tracked by Lipper Analytical Services, Inc.

31
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
February 2,
to
Year ended October 31, October 31,
-----------------------------
2000 1999 1998 (1)(2)
------------- ------------ ------------

<S> <C> <C> <C>
Net asset value, beginning of period............ $11.72 $12.09 $12.00
------------- ------------ ------------
Income from investment operations:
Net investment income...................... 0.77 0.72 0.54
Net realized and unrealized gains (losses)
on investments........................... 0.01 (0.37) 0.09
------------- ------------ ------------
Total from investment operations. 0.78 0.35 0.63
------------- ------------ ------------

Less distributions:
Dividends from net investment income...... (0.77) (0.72) (0.54)
Distributions from net capital gains...... - (0.00)* -
------------- ------------ ------------
Total distributions.............. (0.77) (0.72) (0.54)
------------- ------------ ------------

Net asset value, end of period.................. $11.73 $11.72 $12.09
============= ============ ============

Total return.................................... 6.92% 2.96% 5.38% (3)

Ratios/Supplemental data
Net assets, end of period (in thousands)........ $82,809 $144,821 $42,692
Ratio of net expenses to average net assets (4). 0.25% 0.25% 0.25%
Ratio of total expenses to average net assets (4) 0.33% 0.32% 0.38%
Ratio of net income to average net assets....... 6.56% 6.22% 5.97%
Portfolio turnover rate......................... 86% 128% 132%
</TABLE>

* Amount represents less than $0.01 per share.

(1) From inception of operations.
(2) Ratios and portfolio turnover rates are annualized.
(3) Not annualized.
(4) The investment adviser has contractually agreed to reimburse ordinary
expenses of the Fund, to the extent that these expenses, together with the
Fund's advisory fee, exceed 0.25% of the Fund's average daily net assets.
Expenses do not include an administrative fee paid to the adviser by each
shareholder in an amount, ranging between 0.05% and 0.20%, depending upon
the size of the account.

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
OCTOBER 31, 2000
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C>
U.S. GOVERNMENT SECURITIES (14.4%)
U.S. TREASURY NOTES AND BONDS (2.1%)
U.S. TREASURY INFLATION INDEX BOND
3.375% 01/15/2007 $ 1,825,767 $ 1,777,840
-----------
U.S. AGENCY BONDS (0.9%)
FEDERAL HOME LOAN BANK
6.875% 07/18/2002 750,000 755,040
-----------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) (0.9%)
8.00% 07/01/2030 - 10/01/2030 529,652 537,266
8.75% 02/01/2001 - 08/01/2001 152,033 152,793
10.25% 09/01/2009 11,477 11,975
-----------
702,034
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (4.9%)
6.00% 02/01/2029 1,510,069 1,416,634
6.50% 09/01/2030 169,719 163,195
7.00% 01/01/2030 146,101 142,723
7.50% 08/01/2013 - 06/01/2015 2,332,352 2,349,844
-----------
4,072,396
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (2.0%) -----------
FHLMC GNMA MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 24 CL. J
6.25% 11/25/2023 420,000 398,191
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 1767 CL. H
7.50% 09/15/2022 900,000 909,279
FHLMC MULTICLASS MTG. PARTN. CTFS.
GTD. SERIES 2057 CL. PD
6.75% 11/15/2026 350,000 338,117
-----------
1,645,587
OTHER GOVERNMENT AGENCY (3.6%) -----------
A.I.D., MOROCCO *
6.688% 05/01/2023 400,000 392,000
SMALL BUSINESS ADMINISTRATION *
7.125% 10/25/2021 - 06/25/2022 1,387,608 1,392,436
7.25% 07/25/2021 - 11/25/2021 296,040 297,437
7.625% 01/25/2017 921,399 930,613
-----------
3,012,486
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $11,944,547) 11,965,383
-----------

See accompanying notes to financial statements.

33
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------

CORPORATE NOTES AND BONDS (36.7%)
INDUSTRIAL (20.7%)
ALCOA INC.
7.25% 08/01/2005 $ 800,000 $ 810,464
CATERPILLAR FINANCIAL SERVICES CORP.
6.875% 08/01/2004 500,000 495,105
COMPUTER SCIENCES CORP.
7.50% 08/08/2005 1,000,000 1,009,080
COX COMMUNICATIONS, INC.
7.00% 08/15/2001 850,000 847,960
COX ENTERPRISES, INC. (144A)
8.00% 02/15/2007 325,000 327,222
DAIMLERCHRYSLER N.A. HOLDINGS CORP.
7.125% 04/10/2003 300,000 300,912
DEERE (JOHN) CAPITAL CORP.
5.35% 10/23/2001 450,000 442,534
DIAGEO CAPITAL PLC
6.625% 06/24/2004 625,000 615,506
DOW CHEMICAL CO.
7.00% 08/15/2005 400,000 397,584
FEDERATED DEPARTMENT STORES, INC.
6.125% 09/01/2001 425,000 417,358
FORD MOTOR CREDIT CO.
7.25% 01/15/2003 300,000 300,759
5.75% 02/23/2004 150,000 143,241
6.70% 07/16/2004 50,000 48,976
GENERAL ELECTRIC CAPITAL CORP.
MEDIUM TERM NOTES
5.65% 03/31/2003 750,000 731,437
HEWLETT-PACKARD CO.
7.15% 06/15/2005 900,000 901,451
IBM CREDIT CORP.
MEDIUM TERM NOTES
6.64% 10/29/2001 1,250,000 1,246,725
ICI WILMINGTON, INC.
6.75% 09/15/2002 900,000 885,906
INTERNATIONAL PAPER CO. (144A)
8.00% 07/08/2003 400,000 405,176
KROGER CO., SERIES B
6.34% 06/01/2001 700,000 695,290
MCDONALD'S CORP.
6.00% 06/23/2002 950,000 937,109
PEPSI BOTTLING HOLDINGS, INC. (144A)
5.375% 02/17/2004 1,000,000 956,717

See accompanying notes to financial statements.

34
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
PHILLIPS PETROLEUM CO.
8.50% 05/25/2005 $ 825,000 $ 869,369
PRECISION CASTPARTS CORP.
8.75% 03/15/2005 700,000 714,070
PROCTER & GAMBLE CO.
5.25% 09/15/2003 150,000 144,476
TIME WARNER, INC.
7.975% 08/15/2004 575,000 588,165
TYCO INTERNATIONAL GROUP S.A.
6.125% 06/15/2001 750,000 743,288
USA WASTE SERVICES, INC.
6.125% 07/15/2001 900,000 880,992
WMX TECHNOLOGIES, INC.
6.70% 05/01/2001 250,000 247,085
-----------
17,103,957
-----------
FINANCIAL (10.2%)
ASSOCIATES CORP. N.A.
5.80% 04/20/2004 150,000 144,090
BANK OF AMERICA CORP.
6.625% 06/15/2004 1,625,000 1,598,415
CHASE MANHATTAN CORP.
MEDIUM TERM NOTES, SERIES C
6.75% 12/01/2004 900,000 891,495
CIT GROUP, INC.
MEDIUM TERM NOTES
5.80% 03/26/2002 150,000 146,422
6.375% 11/15/2002 525,000 514,894
COLONIAL REALTY L.P.
MEDIUM TERM NOTES
7.16% 01/17/2003 125,000 122,535
COMMERCIAL CREDIT CO.
6.625% 06/01/2015 1,100,000 1,095,743
EOP OPERATING L.P.
6.376% 02/15/2002 700,000 690,165
GOLDMAN SACHS GROUP, INC.
7.50% 01/28/2005 125,000 124,970
INTERNATIONAL LEASE FINANCE CORP.
6.00% 06/15/2003 525,000 512,180
LEHMAN BROTHERS, INC.
7.00% 10/01/2002 600,000 596,292
MORGAN STANLEY DEAN WITTER & CO.
7.75% 06/15/2005 800,000 818,488

See accompanying notes to financial statements.

35
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
CORPORATE NOTES AND BONDS (CONTINUED)
NORWEST FINANCIAL, INC.
6.375% 09/15/2002 $ 125,000 $ 123,731
SIMON PROPERTY GROUP L.P.
6.625% 06/15/2003 350,000 339,203
WELLS FARGO & CO.
7.25% 08/24/2005 750,000 755,730
-----------
8,474,353
-----------
UTILITIES (5.8%)
ARIZONA PUBLIC SERVICE CO.
5.875% 02/15/2004 1,075,000 1,033,473
COASTAL CORP.
6.50% 05/15/2006 125,000 120,427
FPL GROUP CAPITAL, INC.
6.875% 06/01/2004 150,000 148,002
IDAHO POWER CO.
MEDIUM TERM NOTES
6.85% 10/01/2002 290,000 290,534
KINDER MORGAN ENERGY PARTNERS L.P.
8.00% 03/15/2005 500,000 512,305
MCI WORLDCOM, INC.
7.55% 04/01/2004 1,125,000 1,134,360
TCI COMMUNICATIONS, INC.
7.25% 08/01/2005 500,000 491,550
8.00% 08/01/2005 125,000 126,572
TXU EASTERN FUNDING CO.
6.45% 05/15/2005 500,000 471,787
VODAFONE AIRTOUCH PLC (144A)
7.625% 02/15/2005 500,000 507,250
-----------
4,836,260
-----------
TOTAL CORPORATE NOTES AND BONDS
(COST $30,516,998) 30,414,570
-----------
NON-CORPORATE BONDS (1.9%)
KINGDOM OF SPAIN
7.00% 07/19/2005 800,000 808,903
KOREA DEVELOPMENT BANK
6.50% 11/15/2002 170,000 165,430
7.125% 04/22/2004 570,000 552,957
QUEBEC PROVINCE
7.00% 01/30/2007 85,000 84,796
-----------
TOTAL NON-CORPORATE BONDS
(COST $1,610,827) 1,612,086
-----------

See accompanying notes to financial statements.

36
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
OTHER SECURITIZED LOANS (39.8%)
ASSET BACKED SECURITIES (27.0%)
ABFS MORTGAGE LOAN TRUST
SERIES 1997-2 CL. A5
7.125% 01/15/2029 $ 300,000 $ 294,375
ADVANTA MORTGAGE LOAN TRUST
SERIES 1994-1 CL. A2
6.30% 07/25/2025 35,572 35,051
AFC HOME EQUITY LOAN TRUST
SERIES 1993-1 CL. A
5.90% 05/20/2008 366,039 359,742
CITYSCAPE HOME EQUITY LOAN TRUST
SERIES 1996-3 CL. A8
7.65% 09/25/2025 1,470,000 1,485,045
CITYSCAPE HOME EQUITY LOAN TRUST
SERIES 1997-B CL. A7
7.41% 05/25/2028 593,844 594,709
CITYSCAPE HOME LOAN OWNER TRUST
SERIES 1997-3 CL. A5
7.89% 07/25/2018 1,250,000 1,264,047
CITYSCAPE HOME LOAN OWNER TRUST
SERIES 1997-4 CL. A4
7.44% 10/25/2018 1,000,000 996,052
CONTIMORTGAGE HOME EQUITY LOAN TRUST
SERIES 1997-3 CL. A8
7.58% 08/15/2028 2,000,000 2,003,600
CONTIMORTGAGE HOME EQUITY LOAN TRUST
SERIES 1999-3 CL. A6
7.68% 12/25/2029 190,000 187,832
CROWN HOME EQUITY LOAN TRUST
SERIES 1996-1 CL. A5
7.30% 04/25/2027 450,000 448,728
FIRSTPLUS HOME LOAN OWNER TRUST
SERIES 1997-3 CL. A7
7.22% 11/10/2020 75,000 75,024
GE CAPITAL MORTGAGE SERVICES, INC.
SERIES 1995-HE1 CL. A6
7.50% 09/25/2010 101,407 101,966
GREEN TREE FINANCIAL CORP.
SERIES 1995-5 CL. A4
6.60% 09/15/2026 43,693 43,712
GREEN TREE FINANCIAL CORP.
SERIES 1996-4 CL. A7
7.90% 06/15/2027 1,209,606 1,241,209

See accompanying notes to financial statements.

37
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
OTHER SECURITIZED LOANS (CONTINUED)
IMC HOME EQUITY LOAN TRUST
SERIES 1995-3 CL. A5
7.50% 04/25/2026 $ 1,280,000 $ 1,287,443
IMC HOME EQUITY LOAN TRUST
SERIES 1997-3 CL. A6
7.52% 08/20/2028 310,000 305,429
KEYCORP STUDENT LOAN TRUST *
SERIES 1996-A CL. A2
6.994% 08/27/2025 1,902,623 1,876,871
LEHMAN HOME EQUITY LOAN TRUST *
SERIES 1996-3 CL. A2
6.85% 12/15/2027 725,652 725,709
MERIT SECURITIES CORP.
SERIES 13 CL. A4
7.88% 12/28/2033 275,000 279,298
OAKWOOD MORTGAGE INVESTORS, INC.
SERIES 1996-C CL. A3
6.75% 04/15/2027 47,193 47,081
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
SERIES 1998-AQ1 CL. A4
6.74% 06/25/2028 1,810,000 1,795,855
SLM STUDENT LOAN TRUST *
SERIES 1998-1 CL. A1
7.054% 01/25/2007 2,577,515 2,579,513
SOUTHERN PACIFIC SECURED ASSETS CORP.
SERIES 1996-2 CL. A5
7.69% 04/25/2025 270,000 270,374
UCFC FUNDING CORP.
SERIES 1997-1 CL. A3
7.055% 09/15/2013 972,856 970,623
UCFC HOME EQUITY LOAN TRUST
SERIES 1994-B1 CL. A5
7.90% 08/10/2015 2,134,000 2,131,642
UCFC HOME EQUITY LOAN TRUST
SERIES 1998-D CL. AF7
6.315% 04/15/2030 950,000 917,144
-----------
22,318,074
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (10.0%)
CMC SECURITIES CORP. IV
SERIES 1997-2 CL. 1A12
7.25% 11/25/2027 550,000 538,835

See accompanying notes to financial statements.

38
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
OTHER SECURITIZED LOANS (CONTINUED)
FIRST NATIONWIDE TRUST
SERIES 1999-1 CL. 2A6
6.50% 03/25/2029 $ 1,035,109 $ 997,009
FIRST NATIONWIDE TRUST
SERIES 2000-1 CL. 2A3
8.00% 10/25/2030 130,000 130,671
OCWEN RESIDENTIAL MBS CORP.
SERIES 1998-R1 CL. A1
7.00% 10/25/2040 1,418,642 1,385,617
PNC MORTGAGE SECURITIES CORP.
SERIES 1997-4 CL. 2PP2
7.50% 07/25/2027 530,000 527,064
RESIDENTIAL ACCREDIT LOANS, INC.
SERIES 2000-QS8 CL. A1
8.00% 07/25/2030 944,431 950,012
RESIDENTIAL ASSET SECURITIZATION TRUST
SERIES 1998-A3 CL. A
6.50% 04/25/2013 2,364,440 2,302,728
STRUCTURED ASSET SECURITIES CORP.
SERIES 1999-ALS2 CL. A2
6.75% 07/25/2029 1,508,015 1,476,807
-----------
8,308,743
-----------
COMMERCIAL MORTGAGE BACKED SECURITIES (2.8%)
LB COMMERCIAL CONDUIT MORTGAGE TRUST *
SERIES 1995-C2 CL. A
7.218% 08/25/2004 412,490 413,337
MORGAN STANLEY CAPITAL I, INC.
SERIES 1997-C1 CL. A1C
7.63% 02/15/2020 1,092,500 1,121,640
NOMURA ASSET SECURITIES CORP.
SERIES 1996-MD5 CL. A1B
7.12% 04/13/2036 530,000 531,429
NOMURA ASSET SECURITIES CORP. *
SERIES 1994-MD1 CL. A1B
8.379% 03/15/2018 266,800 266,167
-----------
2,332,573
-----------
TOTAL OTHER SECURITIZED LOANS
(COST $33,014,147) 32,959,390
-----------

See accompanying notes to financial statements.

39
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
----------- -----------
MUNICIPAL BONDS (0.8%)
MULTNOMAH COUNTY SCHOOL DISTRICT
#1J PORTLAND
5.75% 06/15/2005
(COST $650,000) $ 650,000 $ 620,919
-----------
REPURCHASE AGREEMENT (5.1%)
J.P. MORGAN SECURITIES, INC.
6.59% DATED 10/31/2000, DUE 11/01/2000 IN
THE AMOUNT OF $4,200,476.
COLLATERALIZED BY U.S. TREASURY NOTES
4.625% TO 6.50%
DUE 12/31/2000 TO 05/31/2001
U.S. TREASURY BONDS
6.625% TO 11.75%
DUE 02/15/2010 TO 02/15/2027
U.S. TREASURY BILL 6.035% DUE 04/26/2001
(COST $4,199,718) 4,199,718 4,199,718
-----------
TOTAL INVESTMENTS (98.7%)
(COST $81,936,237) 81,772,066

OTHER ASSETS LESS LIABILITIES (1.3%) 1,036,922
-----------
NET ASSETS (100.0%) $ 82,808,988
===========
* VARIABLE RATE SECURITY - THE RATE REPORTED IS THE
RATE IN EFFECT AS OF OCTOBER 31, 2000
</TABLE>

See accompanying notes to financial statements.

40
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
October 31, 2000

<S> <C>
ASSETS:
Investments at identified cost .................................. $ 81,936,237
Investments at identified cost - federal income tax purposes..... $ 81,936,237
--------------------------------------------------------------------------------------------

Investments at value ............................................ $ 81,772,066
Receivable for:
Interest....................................................... 916,693
Investments sold............................................... 157,671
Expense reimbursement.......................................... 31,500
----------------------
Total assets..................................................... 82,877,930
----------------------

LIABILITIES:
Payable for:
Investments purchased ......................................... 19,982
Investment management fee ..................................... 17,460
Accrued expenses............................................... 31,500
----------------------
Total liabilities................................................ 68,942
----------------------

NET ASSETS......................................................... $ 82,808,988
======================

NET ASSETS consist of:
Paid-in capital ............................................... $ 86,314,080
Accumulated net realized loss from investment transactions..... (3,340,921)
Unrealized depreciation on investments......................... (164,171)
----------------------

NET ASSETS ........................................................ $ 82,808,988
======================

Shares of capital stock outstanding ............................... 7,059,815
======================

Net asset value, offering and
redemption price per share ..................................... $ 11.73
======================
</TABLE>

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
Year ended October 31, 2000

INVESTMENT INCOME:
<S> <C>
Interest income ....................................................... $ 6,247,468
----------------------

Expenses:
Investment management fees ........................................ 229,355
Legal, insurance and audit fees.................................... 30,221
Transfer agent fees................................................ 18,000
Custodian fees..................................................... 9,165
Trustees' fees..................................................... 3,217
Other expenses .................................................... 9,871
----------------------
Total expenses................................................. 299,829
Expenses reimbursed by investment adviser ......................... (70,474)
----------------------
Net expenses................................................... 229,355
----------------------

Net investment income ................................................. 6,018,113
----------------------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss from investment transactions......................... (1,866,663)

Change in net unrealized appreciation or depreciation on investments... 1,145,388
----------------------

Net realized and unrealized loss on investments........................ (721,275)
----------------------

NET INCREASE RESULTING FROM OPERATIONS...................................... $ 5,296,838
======================

</TABLE>

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

Year Ended October 31,
--------------------------------------------
2000 1999
------------------- --------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 6,018,113 $ 6,294,017
Net realized loss from investment transactions............... (1,866,663) (1,466,380)
Change in net unrealized appreciation or depreciation
on investments............................................ 1,145,388 (1,625,941)
------------------- --------------------

Net increase resulting from operations....................... 5,296,838 3,201,696

Distributions to shareholders:
From net investment income................................... (6,018,113) (6,294,017)
From net realized gain from investment transactions.......... - (23,085)

Net capital share transactions .................................... (61,290,694) 105,244,125
------------------- --------------------

Net increase (decrease) in net assets.............................. (62,011,969) 102,128,719

NET ASSETS:
Beginning of year............................................ 144,820,957 42,692,238
------------------- --------------------

End of year ................................................ $ 82,808,988 $ 144,820,957
=================== ====================

</TABLE>

See accompanying notes to financial statements.

<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. Significant accounting policies:

CMC Short Term Bond 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. The Trust has established six other portfolios,
CMC Small Cap Fund, CMC International Stock Fund, CMC Small Mid Cap Fund, CMC
International Bond Fund, CMC Fixed Income Securities Fund, and CMC High Yield
Fund, which are not included in their financial statements. The CMC Small Mid
Cap Fund and CMC International Bond Fund are not yet operational. 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.

Repurchase agreements. The Fund may engage in repurchase agreement transactions.
The Fund, through the custodian, receives delivery of underlying securities
collateralizing repurchase agreements. 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.

Investment transactions. Investment transactions are accounted for as of the
date the investments are purchased or sold. Net realized gains and losses are
determined on the identified cost basis, which is also used for federal income
tax purposes. Securities purchased on a when-issued or forward delivery basis
may settle a month or more after trade date; interest income is not accrued
until settlement date. The Fund segregates liquid assets with a current value at
least equal to the amount of its when-issued purchase commitments.

Investment income and expenses. Interest income is recorded on the accrual basis
and includes amortization of premiums or accretion of discounts. Expenses are
recorded on the accrual basis and the Fund bears expenses incurred specifically
on its behalf as well as a portion of general expenses incurred on behalf of the
Trust and its underlying portfolios.

Dividends and distributions to shareholders. Dividends from net investment
income are declared daily and paid monthly. Distributions from any net realized
gains are generally declared and paid annually. Distributions to shareholders
are recorded on the ex-dividend date. Additional distributions of net investment
income and capital gains for the Fund may be made at the discretion of the Board
of Trustees.

Federal income taxes. The Fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies by
distributing substantially all taxable net investment income and net realized
gains to its shareholders in a manner which results in no tax to the Fund.
Therefore, no federal income or excise tax provision is required. 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 deferral of
losses from wash sales. As of October 31, 2000, the Fund had $1,470,297 and
$1,870,624 in capital loss carryovers available to offset future capital gains.
These capital loss carryovers expire in the years 2007 and 2008, respectively.
To the extent that the capital loss carryovers are used to offset any capital
gains, it is unlikely that the gains so offset will be distributed to
shareholders.

45
<PAGE>
--------------------------------------------------------------------------------
CMC SHORT TERM BOND FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

2. Investment transactions:
Aggregate purchases, sales and maturities, excluding short-term investments, net
realized loss and net unrealized depreciation on investments, as of and for the
year ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases:
Investment securities other than U.S. Government obligations.. $ 32,957,046
U.S. Government obligations................................... 26,235,446
---------------------
Total purchases.......................................... $ 59,192,492
=====================

Sales and Maturities:
Investment securities other than U.S. Government obligations. $ 57,391,492
U.S. Government obligations.................................. 42,998,729
---------------------
Total sales and maturities.............................. $ 100,390,221
=====================

Net Realized Loss:
Investment securities other than U.S. Government obligations. $ (1,234,004)
U.S. Government obligations.................................. (632,659)
---------------------
Total net realized loss................................. $ (1,866,663)
=====================

Unrealized Appreciation (Depreciation) for
federal income tax purposes:
Appreciation.................................................. $ 544,502
Depreciation.................................................. (708,673)
---------------------
Net unrealized depreciation................................. $ (164,171)
=====================
</TABLE>

3. Capital Stock:

At October 31, 2000, there were 100 million shares of no par value capital stock
authorized. Transactions of capital shares were as follows:
<TABLE>
<CAPTION>

Year ended October 31,
--------------------------------------------
2000 1999
-------------------- ---------------------
<S> <C> <C>
Shares:
Shares sold.................................. 1,843,663 9,524,355
Shares issued for reinvestment of dividends.. 511,931 533,140
-------------------- ---------------------
2,355,594 10,057,495
Less shares redeemed......................... (7,654,570) (1,229,286)
-------------------- ---------------------
Net increase (decrease) in shares............ (5,298,976) 8,828,209
==================== =====================

Amounts:
Sales * ..................................... $ 21,363,496 $ 113,449,649
Reinvestment of dividends.................... 5,956,747 6,311,455
-------------------- ---------------------
27,320,243 119,761,104
Less redemptions............................. (88,610,937) (14,516,979)
-------------------- ---------------------
Net increase (decrease)...................... $ (61,290,694) $ 105,244,125
==================== =====================
</TABLE>

*Includes $9,071,530 from the delivery of securities in an in-kind transfer.

4. Transactions with affiliates and related parties:

The amounts of fees and expenses described below are shown on the Fund's
statement of operations.

The investment adviser of the Fund is Columbia Management Co. (CMC). CMC is an
indirect wholly-owned subsidiary of FleetBoston Financial Corporation (Fleet), a
publicly owned multi-bank holding company registered under the Bank Holding
Company Act of 1956.

Investment management fees were paid monthly to CMC by the Fund. The fees are
based on an annual rate of 0.25 of 1% of average daily net assets.

In addition to the investment management fee, each shareholder enters into a
written administrative services agreement with CMC for an annual fee ranging
between 0.05% and 0.20%, depending on the size of the investment in the Fund.
CMC provides each shareholder specialized reports regarding the Fund's portfolio
and performance, market conditions and economic indicators.

For the years ended October 31, 2000 and 1999, CMC has contractually agreed to
reimburse ordinary expenses of the Fund, to the extent that these expenses,
together with the Fund's advisory fee, exceed 0.25% of the Fund's average daily
net assets.

Trustees' fees and expenses were paid directly by the Fund to trustees having no
affiliation with the Fund other than their capacity as trustees. Other officers
and trustees received no compensation from the Fund.

<PAGE>
PRICEWATERHOUSECOOPERS [logo]

PricewaterhouseCoopers
1300 S.W. Fifth Avenue Suite 310
Portland, OR 97201-5638
Telephone (503) 478-6000
Facsimile (503) 478-6099

Report of Independent Accountants

To the Trustees and Shareholders of
CMC Fund Trust

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CMC Short Term Bond Fund (the
Fund), one of the portfolios of CMC Fund Trust, at October 31, 2000, the results
of its operations for the year then ended, the changes in its net assets and the
financial highlights for each of the two years in the period then ended and for
its financial highlights for the period February 2, 1998 (commencement of
operations) through October 31, 1998, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as financial statements) are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Portland, Oregon
December 8, 2000

48
<PAGE>
CMC FUND TRUST

PART C

OTHER INFORMATION

Item 23. Exhibits
--------

(a1) Restated Declaration of Trust.(1)

(a2) Amendment to Restated Declaration of Trust.(1)

(a3) Amendment No. 2 to Restated Declaration of Trust.(2)

(a4) Amendment No. 3 to Restated Declaration of Trust.(3)

(a5) Form of Amendment No. 4 Restated Declaration of Trust.(4)

(b) Bylaws.(1)

(c1) Specimen Stock Certificate for CMC Small Cap Fund.(1)

(c2) Specimen Stock Certificate for CMC International Stock Fund.
(1)

(c3) Specimen Stock Certificate for CMC High Yield Fund.(1)

(c4) Specimen Stock Certificate for CMC Short Term Bond Fund.(2)

(c5) Specimen Stock Certificate for CMC International Bond Fund.
(3)

(c6) Specimen Stock Certificate for CMC Fixed Income Securities
Fund.(3)

(c7) Specimen Stock Certificate for CMC Small/Mid Cap Fund.(4)

(d1) Investment Advisory Contract for CMC Small Cap Fund.(4)

(d2) Investment Advisory Contract for CMC International Stock
Fund.(4)

(d3) Investment Advisory Contract for CMC High Yield Fund.(4)

(d4) Investment Advisory Contract for CMC Short Term Bond Fund.
(2)

(d5) Investment Advisory Contract for CMC International Bond
Fund.(3)

(d6) Investment Advisory Contract for CMC Fixed Income Securities
Fund.(3)

C-1
<PAGE>

(d7) Form of Investment Advisory Contract for CMC Small/Mid Cap
Fund.(6)

(e) Underwriting Contracts - Not Applicable.

(f) Not Applicable.

(g1) Custodian Contract between U.S. Bank, N.A. and CMC Fund
Trust.(6)

(g2) Form of Custodian Contract between CMC Fund Trust and The
Chase Manhattan Bank.(6)

(h1) Transfer Agent Agreement for CMC Small Cap Fund.(4)

(h2) Transfer Agent Agreement for CMC International Stock Fund.
(4)

(h3) Transfer Agent Agreement for CMC High Yield Fund.(4)

(h4) Transfer Agent Agreement for CMC Short Term Bond Fund.(2)

(h5) Transfer Agent Agreement for CMC International Bond Fund.(3)

(h6) Transfer Agent Agreement for CMC Fixed Income Securities
Fund.(3)

(h7) Form of Transfer Agent Agreement for CMC Small/Mid Cap Fund.
(6)

(h8) Form of Administrative Services Agreement.(4)

(i) Opinion of Counsel - Not Applicable.

(j) Consent of Accountants.*

(k) Omitted Financial Statements - Not Applicable.

(l) Not Applicable.

(m) 12b-1 Plan - Not Applicable.

(n) Rule 18f-3 Plan - Not Applicable.

(o) Not Applicable.

(p) Code of Ethics.(6)

C-2
<PAGE>

(q) Powers of Attorney for Messrs. George, Inskeep, Lunzer,
Simpson and Woolworth.(6)

(1) Incorporated herein by reference to Post-Effective Amendment No.
11 to Registrant's Registration Statement on Form N-1A, File No.
33-30394, filed December 16, 1996.

(2) Incorporated herein by Reference to Post-Effective Amendment No.
12 to Registrant's Registration Statement on Form N-1A, File No.
33-30394, filed September 2, 1997.

(3) Incorporated herein by Reference to Post-Effective Amendment No.
17 to Registrant's Registration Statement on Form N-1A, File No.
33-30394, filed April 18, 2000.

(4) Incorporated herein by Reference to Post-Effective Amendment No.
13 to Registrant's Registration Statement on Form N-1A, File No.
33-30394, filed December 24, 1997.

(5) Incorporated herein by Reference to Post-Effective Amendment No.
16 to Registrant's Registration Statement on Form N-1A, File No.
33-30394, filed December 20, 1999.

(6) Incorporated herein by Reference to Post-Effective Amendment No.
18 to Registrant's Registration Statement on Form N-1A, File No.
33-30394, filed August 1, 2000.

*Filed herewith.

Item 24. 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 Oregon Municipal Bond Fund, Inc.,
Columbia Real Estate Equity Fund, Inc., Columbia Short Term Bond Fund, Inc.,
Columbia Balanced Fund, Inc., Columbia Common Stock Fund, Inc., Columbia
International Stock Fund, Inc., Columbia Small Cap Fund, Inc., Columbia National
Municipal Bond Fund., Inc., Columbia Strategic Value Fund, Inc., Columbia
Technology 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"). FleetBoston Financial Corporation
("Fleet") is a publicly owned multibank holding company registered under the
Bank Holding Company Act of 1956. CFMC, the Adviser, Columbia Trust Company and
Columbia Financial Center Incorporated are indirect wholly owned subsidiaries of
Fleet. See "Management" and "Investment Advisory and Other Fees paid to
Affiliates" in the Statement of Additional Information.

Item 25. 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").

C-3
<PAGE>

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 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 26. 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" 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 27. Principal Underwriters
----------------------

Not applicable.

Item 28. 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 S.W. Sixth Avenue,
Portland, Oregon 97201. Records relating to the Registrant's portfolio
securities are also maintained by U.S. Bank N.A., 321 S.W. Sixth Avenue,
Portland, Oregon 97208 and The Chase Manhattan Bank, 3 Chase Metrotech Center,
Brooklyn, New York 11245.

Item 29. Management Services
-------------------

Not applicable.

Item 30. Undertakings
------------

Not applicable.

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<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 of
the requirements for effectiveness of this Registration Statement under 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 21st day of
December, 2000.

CMC FUND TRUST

By: JEFF B. CURTIS
----------------------------------

Jeff B. Curtis
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below on
the 21st day of December, 2000 by the following persons in the capacities
indicated.

(i) Principal executive officer:

JEFF B. CURTIS President
----------------------------------------------

Jeff B. Curtis

(ii) Principal accounting and
financial officer:

JEFFREY L. LUNZER Vice President
----------------------------------------------
Jeffrey L. Lunzer

(iii) Trustees:

* JAMES C. GEORGE Trustee
----------------------------------------------
James C. George

C-5
<PAGE>

* J. JERRY INSKEEP, JR. Trustee
----------------------------------------------
J. Jerry Inskeep, Jr.

* PATRICK J. SIMPSON Trustee
----------------------------------------------
Patrick J. Simpson

* RICHARD L. WOOLWORTH Trustee
----------------------------------------------
Richard L. Woolworth

*By: JEFF B. CURTIS
-----------------------------------------

Jeff B. Curtis
Attorney-In-Fact

C-6
<PAGE>

CMC FUND TRUST

EXHIBIT INDEX

Exhibit Description
------- -----------

(a1) Restated Declaration of Trust.(1)

(a2) Amendment to Restated Declaration of Trust.(1)

(a3) Amendment No. 2 to Restated Declaration of Trust.(2)

(a4) Amendment No. 3 to Restated Declaration of Trust.(3)

(a5) Form of Amendment No. 4 to Restated Declaration of Trust.(6)

(b) Bylaws.(1)

(c1) Specimen Stock Certificate for CMC Small Cap Fund.(1)

(c2) Specimen Stock Certificate for CMC International Stock Fund.(1)

(c3) Specimen Stock Certificate for CMC High Yield Fund.(1)

(c4) Specimen Stock Certificate for CMC Short Term Bond Fund.(2)

(c5) Specimen Stock Certificate for CMC International Bond Fund.(3)

(c6) Specimen Stock Certificate for CMC Fixed Income Securities Fund.
(3)

(c7) Specimen Stock Certificate for CMC Small/Mid Cap Fund.(6)

(d1) Investment Advisory Contract for CMC Small Cap Fund.(4)

(d2) Investment Advisory Contract for CMC International Stock Fund.
(4)

(d3) Investment Advisory Contract for CMC High Yield Fund.(4)

(d4) Investment Advisory Contract for CMC Short Term Bond Fund.(2)

(d5) Investment Advisory Contract for CMC International Bond Fund.(3)

(d6) Investment Advisory Contract for CMC Fixed Income Securities
Fund.(3)

(d7) Form of Investment Advisory Contract for CMC Small/Mid Cap Fund.
(6)

C-7
<PAGE>
(e) Underwriting Contracts - Not Applicable.

(f) Not Applicable.

(g1) Custodian Contract between U.S. Bank, N.A. and CMC Fund Trust.
(6)

(g2) Form of Custodian Contract between CMC Fund Trust and The Chase
Manhattan Bank.(6)

(h1) Transfer Agent Agreement for CMC Small Cap Fund.(4)

(h2) Transfer Agent Agreement for CMC International Stock Fund.(4)

(h3) Transfer Agent Agreement for CMC High Yield Fund.(4)

(h4) Transfer Agent Agreement for CMC Short Term Bond Fund.(2)

(h5) Transfer Agent Agreement for CMC International Bond Fund.(3)

(h6) Transfer Agent Agreement for CMC Fixed Income Securities Fund.
(3)

(h7) Form of Transfer Agent Agreement for CMC Small/Mid Cap Fund.(6)

(h8) Form of Administrative Services Agreement.(4)

(i) Opinion of Counsel - Not Applicable.

(j) Consent of Accountants.*

(k) Omitted Financial Statements - Not Applicable.

(l) Not Applicable.

(m) 12b-1 Plan - Not Applicable.

(n) Rule 18f-3 Plan - Not Applicable.

(o) Not Applicable.

(p) Code of Ethics.(6)

(q) Powers of Attorney for Messrs. George, Inskeep, Lunzer, Simpson
and Woolworth.(6)

(1) Incorporated herein by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A, File No. 33-30394, filed
December 16, 1996.

C-8
<PAGE>
(2) Incorporated herein by Reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A, File No. 33-30394, filed
September 2, 1997.

(3) Incorporated herein by Reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A, File No. 33-30394, filed
April 18, 2000.

(4) Incorporated herein by Reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A, File No. 33-30394, filed
December 24, 1997.

(5) Incorporated herein by Reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A, File No. 33-30394, filed
December 20, 1999.

(6) Incorporated herein by Reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A, File No. 33-30394, filed
August 1, 2000.

*Filed herewith.

C-9