CMC FUND TRUST, 485APOS, 2000-04-18

CMC FUND TRUST
485APOS, 2000-04-18

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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. 17 [ X ]

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 16

(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

J. Jerry Inskeep, Jr.
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:

[ ] 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)
[X] on July 3, 2000 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>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities, and is not soliciting an offer to buy these
securities, in any state where the offer or sale is not permitted.

PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION

[GRAPHIC LOGO OMITTED]
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 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 stability of
principal, 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.

July ____, 2000

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

RISK/RETURN SUMMARY............................................................4
OVERVIEW.......................................................................4
INVESTMENT STRATEGY............................................................4
INFORMATION ABOUT THE FUNDS....................................................5
CMC FIXED INCOME SECURITIES FUND...............................................5
GOAL..................................................................5
STRATEGY..............................................................5
PRINCIPAL RISK FACTORS................................................6
HISTORICAL PERFORMANCE................................................6
EXPENSES..............................................................6
FINANCIAL HIGHLIGHTS..................................................7
CMC HIGH YIELD FUND............................................................8
GOAL..................................................................8
STRATEGY..............................................................8
PRINCIPAL RISK FACTORS................................................9
HISTORICAL PERFORMANCE................................................9
EXPENSES.............................................................10
FINANCIAL HIGHLIGHTS.................................................11
CMC INTERNATIONAL BOND FUND...................................................12
GOAL.................................................................12
STRATEGY.............................................................12
PRINCIPAL RISK FACTORS...............................................14
HISTORICAL PERFORMANCE...............................................14
EXPENSES.............................................................14
FINANCIAL HIGHLIGHTS.................................................15
MANAGEMENT....................................................................16
INFORMATION ABOUT YOUR INVESTMENT.............................................17
YOUR ACCOUNT.........................................................17
Buying Shares...............................................17
Selling Shares..............................................17
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
Fixed Income Securities Fund and High Yield Fund..............................20
International Bond Fund.......................................................21
SUMMARY OF PRINCIPAL RISKS....................................................23
OTHER RISKS..........................................................26
Zero-Coupon Securities......................................26

2
<PAGE>
Liquidity Risk..............................................26
Derivative Risk.............................................26
FOR MORE INFORMATION..........................................................27

3
<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 develop
broad investment themes that help create a framework for industry and sector
selection. Often, themes are selected based on the review and discovery of
subtle changes in the environment, which may not be widely recognized by the
rest of the investment community. 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;
o repurchase agreements and reverse repurchase agreements;

4
<PAGE>
o debt securities issued by states or local governments and their
agencies, authorities and other instrumentalities;
o oblgations 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 a high degree of stability of principal.

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 its assets 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 Ba by Moody's,
or judged by the Adviser to be of comparable quality 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 sector rotation, the Adviser also evaluates
the desired levels of average quality, maturity, and duration of the Fund's
portfolio and the types of debt securities based on current economic and
market environment. The Adviser then works to appropriately shift emphasis
between levels of quality, maturity, coupon and types of debt securities
based on their relative attractiveness by conducting an intensive,
fundamental analysis to identify attractive securities within its target
debt securities. This investment strategy 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
temperment. In this way, the Adviser strives to anticipate and act upon
market change,

5
<PAGE>
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.

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

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

Among the principal risks of investing in the Fund, which could
adversely affect the value of its investment portfolio, yield and total
return, are:

o interest rate risk
o credit risk
o prepayment risk

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 is based on
estimates for the current first 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.
- --------------------------------------------------------------------------------

6
<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 0.35%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.30%(1)

Total Fund Operating Expenses 0.65%
Expense Reimbursement 0.20(2)
Net Expenses 0.45

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

(2) For the fiscal year ending October 31, 2000, 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

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
------ -------
$46 $144

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

Since the Fixed Income Securities Fund is new, no financial
information is presented.

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 FUNDS' 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 to identify attractive
individual securities within the targeted industries and market sectors.
This investment strategy 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

8
<PAGE>
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
o credit risk

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 High Yield 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 Lipper High Yield Bond Fund Index, which reflects
the equally weighted performance of the 30 largest mutual funds within its
category. 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

Year-By-Year Total Return As Of 12/31 Each Year

[BAR GRAPH OMITTED]
Graphic bar chart depicting "Year-By-Year Total Return as of 12/31 Each Year":

Year Total Return Percentage
---- -----------------------
1995 19.86%
1996 9.70%
1997 12.12%
1998 7.33%
1999 2.35%

Best Quarter: 2Q '95 5.72%
Worst Quarter: 3Q '98 -0.25%
-----------------------------------------------------------------------

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%

Lipper High Yield Bond Fund Index 4.78% 9.46% 8.30%

The Fund's year-to-date total return as of 6/30/00 was _____%.

*Performance for the Lipper High Yield Bond Index begins on 6/30/94.

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>
<CAPTION>

Fiscal Year Ended October 31,
-----------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................... $8.95 $9.21 $8.99 $9.06 $8.62
----- ----- ----- ----- -----
Income from investment operations:
Net investment income ................................ 0.74 0.76 0.80 0.81 0.83
Net realized and unrealized gains (losses)
on investments...................................... (0.41) (0.21) 0.32 0.03 0.53
------ ------ ----- ----- -----
Total from investment operations................. 0.33 0.55 1.12 0.84 1.36
----- ------ ----- ----- -----

Less distributions:
Dividends from net investment income.................. (0.74) (0.76) (0.80) (0.81) (0.83)
Distributions from net capital gains.................. (0.00)* (0.05) (0.10) (0.10) (0.09)
------ ------ ------ ------ ------
Total distributions.............................. (0.74) (0.81) (0.90) (0.91) (0.92)
------ ------ ------ ------ ------

Net asset value, end of year.......................... $8.54 $8.95 $9.21 $8.99 $9.06
===== ===== ===== ===== =====

Total return.......................................... 3.75% 6.00% 12.90% 9.61% 16.49%

Ratios/Supplemental data
Net assets, end of year (in thousands)................ $271,551 $263,912 $119,196 $69,614 $42,192
Ratio of expenses to average net assets............... 0.43% 0.45% 0.45% 0.50% 0.54%
Ratio of net income to average net
assets ............................................ 8.39% 8.28% 8.60% 8.90% 9.36%
Portfolio turnover rate............................... 62.27% 70.56% 68.96% 56.06% 45.64%

* 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.
</TABLE>

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 stability of principal.

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

12
<PAGE>

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. 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 Fund 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.

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

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 analysis to identify attractive securities in those
countries expected to produce the best return with reasonable risk. This
investment strategy 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.

13
<PAGE>
PRINCIPAL RISK FACTORS
- ----------------------

What are the principal risks of investing in the Fund?

Among the principal risks of investing in the Fund, which could
adversely affect the value of its investment portfolio, yield and total
return, are:

o foreign investment risk
o currency or exchange rate risk
o interest rate risk
o credit risk
o non-diversified risk and
o emerging market risk.

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 for
the Fund is based on estimates for the current first 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.

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 1.25%(1)

Total Fund Operating Expenses 1.65%
Expense Reimbursement 1.15(2)
Net Expenses 0.50

(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 year ending October 31, 2000, 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 0.50%.

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

Expense Example

1 Year 3 Years
------ -------
$51 $160

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

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

15
<PAGE>
- --------------------------------------------------------------------------------
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. Under its
advisory contract with CMC, the Fixed Income Securities Fund and the
International Bond Fund will pay CMC a management fee, expressed as a percentage
of average net assets, of 0.35% and 0.40%, respectively. For the fiscal year
ended October 31, 1999, the High Yield Fund paid CMC a management fee of 0.40%.

CMC uses an investment team approach to analyze investment themes and
strategies for each Fund. 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. 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 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 or Business
Administration degree from the University of California at Berkeley. A Vice
President of CMC 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.

16
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------

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

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

Shares in the Funds are available for purchase by clients of CMC
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 your 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.

- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

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 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

17
<PAGE>
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 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
daily and paid annually by each of the Funds. 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

18
<PAGE>
be paid at that time. Each of the Funds generally distributes substantially
all of its net realized capital gains to shareholders once a year, ususally
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>
<CAPTION>
- -------------------------------------------------------------------------------------

Taxability of Distributions

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

Each 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 Funds 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 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.
- --------------------------------------------------------------------------------

19
<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
31 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 a bottom up company analysis. Top down analysis begins with
an overall evaluation of the investment environment, which allows the
Adviser to determine specific industries and market sectors within those
industries, 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, 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 strategy 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.

20
<PAGE>
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 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

21
<PAGE>
By using this investment strategy, 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 Fund may invest some or all of
its assets in derivative instruments. 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 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 the
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.

22
<PAGE>
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
- --------------------------------------------------------------------------------

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 conidtions 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, those rated below investment grade,
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

23
<PAGE>
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, 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

24
<PAGE>
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. A portion of the
International Bond Fund's investments, and to a lesser extent the
investments of the High Yield Fund and the Fixed Income Securities Fund,
are held in the 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.

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 investment risk associated with a
Funds' investments in issuers based in less developed and developing
countries, which are sometimes referred to as 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.

25
<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, 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
--------------

Debt securities can become difficult to sell for a variety of reasons,
such as lack of an active trading market. Foreign securities and
derivatives, 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. A description of various risks
associated with particular derivative instruments is included in
"INVESTMENT OBJECTIVES, POLICIES AND RISKS" in the Statement of Additional
Information.

26
<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 may be attached to this
Prospectus. If it is not, or 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.

27
<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").

This Statement of Additional Information is not a Prospectus. It
relates to a Prospectus dated ______________, 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
INVESTMENT OBJECTIVES, POLICIES AND RISKS...................................2
INVESTMENT RESTRICTIONS....................................................32
MANAGEMENT....................................................................36
INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES.........................38
PORTFOLIO TRANSACTIONS........................................................39
CAPITAL STOCK AND OTHER SECURITIES............................................41
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................42
PURCHASES..................................................................42
REDEMPTIONS................................................................43
PRICING OF SHARES..........................................................43
CUSTODIANS....................................................................44
INDEPENDENT ACCOUNTANTS.......................................................45
TAXES.........................................................................45
YIELD AND PERFORMANCE.........................................................50
FINANCIAL STATEMENTS..........................................................52

July __, 2000

1
<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 six portfolios established
under the Trust: the Funds, CMC Short Term Bond Fund, CMC Small 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 31 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. 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:

2
<PAGE>
Aaa - Best quality; smallest degree of investment risk.

Aa - High quality by all standards; Aa and Aaa are known as high-grade
bonds.

A - Many favorable investment attributes; considered upper medium-grade
obligations.

Baa - Medium-grade obligations; neither highly protected nor poorly
secured. Interest and principal appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time.

Ba - Speculative elements; future cannot be considered well assured.
Protection of interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future.

B - Generally lack characteristics of a desirable investment. Assurance
of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.

Caa - Poor standing, may be in default; elements of danger with respect
to principal or interest.

S&P -- The following is a description of S&P's bond ratings:

AAA - Highest rating; extremely strong capacity to pay principal and
interest.

AA - Also high-quality with a very strong capacity to pay principal and
interest; differ from AAA issues only by a small degree.

A - Strong capacity to pay principal and interest; somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.

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

3
<PAGE>
conditions would likely impair capacity or willingness to pay interest and repay
principal.

CCC - Current identifiable vulnerability to default and dependent upon
favorable business, financial, and economic conditions to meet timely payments
of interest and repayments of principal. In the event of adverse business,
financial, or economic conditions, they are not likely to have the capacity to
pay interest and repay principal.

Bonds rated BB, B, and CCC are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and CCC a higher degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

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 of 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,

4
<PAGE>
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 principal and interest 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 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, it 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

5
<PAGE>
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:

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 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 are 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.

6
<PAGE>
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. 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

7
<PAGE>
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 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

8
<PAGE>
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 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

9
<PAGE>
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 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.

10
<PAGE>
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.

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

11
<PAGE>
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.

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-

12
<PAGE>
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.

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.

13
<PAGE>
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.

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

14
<PAGE>
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.

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. 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.

15
<PAGE>
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, 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

16
<PAGE>
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.

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

17
<PAGE>
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.

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

18
<PAGE>
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.

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.

19
<PAGE>
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.

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

20
<PAGE>
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 multinational currencies, such as the euro. It is expected
that other futures contracts will be developed and traded in the future.

21
<PAGE>
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

22
<PAGE>
requirements), the current market value of the option, and other futures
positions held by a Fund.

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

23
<PAGE>
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 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

24
<PAGE>
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 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

25
<PAGE>
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
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 Trustees of the Trust. There is no limit on the portion
of a Fund's assets that may be invested in repurchase agreements with maturities
of seven days or less.

26
<PAGE>
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
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.

27
<PAGE>
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.

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 a reverse repurchase agreement (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

28
<PAGE>
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.

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

29
<PAGE>
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.

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.

30
<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>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Securities and Investment Practices
- ---------------------------------------------------------------------------------------------------------------
CMC FISF CMC HYF CMC IBF
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Grade Securities + O +
- ---------------------------------------------------------------------------------------------------------------
High Yield Securities NF + +
- ---------------------------------------------------------------------------------------------------------------
U.S. Government Securities + * O
- ---------------------------------------------------------------------------------------------------------------
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 +
- ---------------------------------------------------------------------------------------------------------------
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
</TABLE>

31
<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%
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% 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% 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.

32
<PAGE>
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").

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%, (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) and (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.

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.

33
<PAGE>
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.

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, 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% of
the outstanding securities of that issuer together own more than 5% of such
securities.

9. Purchase securities of other open-end investment companies.

10. Issue senior securities, bonds, or debentures.

11. Underwrite securities of other issuers, except the Fund may acquire
portfolio securities in circumstances where, if the securities are later
publicly offered or sold by the Fund, it might be deemed to be an underwriter
for purposes of the 1933 Act.

12. Borrow money except as a temporary measure for extraordinary or
emergency purposes. Its borrowings may not exceed 5 percent of the gross assets
of the Fund valued at the lesser of cost or market value, nor may it pledge,
mortgage, or hypothecate assets valued at market to an extent greater than 10
percent of the gross assets valued at cost of the Fund.

13. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's total
assets to be invested in companies which, including predecessors and parents,
have a record of less than three years of continuous operation.

34
<PAGE>
14. Invest in companies to exercise control or management.

15. Buy any securities or other property on margin, except for
short-term credits necessary for clearing transactions and except that margin
payments and other deposits in connection with transactions in options, futures,
and forward contracts shall not be deemed to constitute purchasing securities on
margin.

16. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such securities.
These short sales may only be made to protect a profit in or to attempt to
minimize a loss with respect to convertible securities. In any event no more
than 10 percent of the Fund's net assets valued at market may, at any time, be
held as collateral for such sales.

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:

35
<PAGE>
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").

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

Each 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

36
<PAGE>
years, except as follows: 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 U.S. Government Securities Fund, Inc., Columbia Special Fund,
Inc., Columbia Growth Fund, Inc., Columbia Daily Income Company, Columbia Small
Cap Fund, Inc., and Columbia Fixed Income Securities Fund, Inc.

J. JERRY INSKEEP, JR.,* Age 68, Chairman and Trustee of the Trust; Chairman,
President, and Director of each of the Columbia Funds; Consultant with Fleet
Boston Corporation (since December 1997); formerly Chairman and a Director of
Columbia Management Co. (the "Adviser"), the investment adviser of the Fund,
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 67, 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 (1962-1992), is an investment consultant.
Mr. George's business address is 1001 S.W. Fifth Avenue, Portland, Oregon 97204.

[New director and officers to be named]

RICHARD L. WOOLWORTH, Age 58, Trustee of the Trust; Director of each of the
Columbia Funds; Chairman and Chief Executive Officer of Blue Cross and Blue
Shield of Oregon; and Chairman and Chief Executive Officer of the Regence Group,
health insurers. Mr. Woolworth's address is 100 S. W. Market Street, Portland,
Oregon 97201.

*Mr. Inskeep is each an "interested person" as defined by the
Investment Company Act of 1940 (the "1940 Act") and receive no trustee fees or
salaries from the Trust or the Fund.

The following table sets forth the compensation received by the
disinterested trustees of the Trust for the fiscal year ended October 31, 1999.

Total Compensation from the
Trustee Compensation From Trust Trust and Columbia Funds
<S> <C> <C>

Richard L. Woolworth $9,000 $32,000
Thomas R. Mackenzie $9,000 $31,000
James C. George $9,000 $31,000
</TABLE>

37
<PAGE>
At November 30, 1999, 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:

Shares Beneficially Owned
Name and Address at March 31, 2000
- ---------------- -------------------------

HIGH YIELD FUND

Carpenters Pension Trust Fund 4,979,474 13.9%
For Southern California
So. Calif.-Nevada Regional Council of Carpenters
520 South Virgil Avenue
Los Angeles, CA 90020

Willamette Industries, Inc. & 2,042,504 5.7%
Associated Companies
Salaried Employees Retirement Plan
First Interstate Bank Tower
3800 Wells Fargo Center
Portland, OR 97201

Lumber Industry Pension Fund 1,987,036 5.6%
Associated Administrators, Inc.
2929 N.W. 31st Avenue
Portland, OR 97210

Operating Engineers Employers 1,940,225 5.4%
Retirement Fund
P.O. Box 34203
Seattle, WA 98124

PacifiCorp - Fixed 1,848,114 5.2%
825 N.E. Multnomah
Portland, OR 97232-4116

- --------------------------------------------------------------------------------
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 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 Fleet Boston 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.

38
<PAGE>
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 of the Funds, the Adviser charges an
advisory fee, which is accrued daily and paid monthly. The advisory fee for each
Fund equals the annual rate of 0.40 of 1 percent of its daily net assets. The
Fixed Income Fund and International Bond Fund are new and have not paid any
advisory fees. Advisory fees paid by the High Yield Fund to the Adviser were
$1,140,751, $853,566 and $354,620 for fiscal year 1999, fiscal year 1998, and
fiscal year 1997, 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 $18,000 to the
Trust Company for services performed for the fiscal year 1999 under the transfer
agent agreement relating to the High Yield Fund.

- --------------------------------------------------------------------------------
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.

39
<PAGE>
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 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 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

40
<PAGE>
adviser and its affiliates, particularly when the same security is suitable for
the investment objective of more than one fund or account. 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.

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 all employee trades be pre-cleared; a prohibition on investing
in initial public offerings; required pre-approval of an investment in private
placements; a prohibition on portfolio managers trading in a security seven days
before or after a trade in the same security by an account over which the
manager exercises investment discretion; and a prohibition on realizing any
profit on the trading of a security held less than 60 days. Certain securities
and transactions, such as mutual fund shares or U.S. Treasuries and purchases of
options on securities indexes or securities under an automatic dividend
reinvestment plan, are exempt from the restrictions in the Code because they
present little or no potential for abuse. Certain transactions involving the
stocks of large capitalization companies are exempt from the seven day black-out
period and short-term trading prohibitions because such transactions are highly
unlikely to affect the price of these stocks. In addition to the trading
restrictions, the Code contains reporting obligations that are designed to
ensure compliance and allow the Adviser's Ethics Committee to monitor that
compliance.

The Trust and the Adviser have also adopted a Policy and Procedures
Designed to Detect and Prevent Insider Trading (the "Insider Trading Policy").
The Insider Trading Policy prohibits any employee from trading, either
personally or on behalf of others (including a client account), on the basis of
material nonpublic information. All employees are required to certify each year
that they have read and complied with the provisions of the Code and the Insider
Trading Policy.

- --------------------------------------------------------------------------------
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, 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 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

41
<PAGE>
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.

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

PURCHASES
- ---------

Shareholders of the Funds are investment advisory clients of the
Adviser. Investments in each Fund are made directly by clients of the Adviser 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 investment objective, policies, and
limitations of the Fund, must have a

42
<PAGE>
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

43
<PAGE>
(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 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
- --------------------------------------------------------------------------------

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

44
<PAGE>
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 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.

45
<PAGE>
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 six 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).

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. 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

46
<PAGE>
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.

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 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

47
<PAGE>
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 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

48
<PAGE>
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.

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 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.

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.

49
<PAGE>
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:

Yield = 2 [(a-b + 1)^6 -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.

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,
1999 was 9.00%.

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:

50
<PAGE>
P(1+T)^n = ERV

Where: P = a hypothetical initial payment of $1000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical
$1000 payment made at the beginning of the 1,
5, and 10-year periods (or a fraction portion
thereof)

Total return figures may also be published for recent 1, 5, and 10-year
periods (or a fractional portion thereof) where the total return figures
represent the percentage return for the 1, 5, and 10-year periods that would
equate the initial amount invested to the ending redeemable value. If the
Trust's registration statement under the 1940 Act with respect to 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, 1999 the
average annual return for the High Yield Fund for the 1-year and 5-year periods
and since inception (July 6, 1994) was 3.75%, 9.65% and 9.33%, respectively.

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 Business Week, The Financial Times, Financial World, Forbes, Investor's
Business Daily, Money, Morningstar Mutual Funds, Personal Investor, The
Economist, The Wall Street Journal and USA Today. (Lipper Analytical Services,
Inc. is an independent rating service that ranks over 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

51
<PAGE>
are differences between these income-producing alternatives and the Funds other
than their yields, some of which are summarized below.

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, 1999, together with the Independent Accountant's Report of
PricewaterhouseCoopers LLP, are attached hereto and incorporated by reference
into this Statement of Additional Information.

<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, 1999, the Fund had a total return of
3.75%. In comparison, the Lipper High Yield Bond Index had a total return of
7.38%, and the Lehman Aggregate Index reported a return of 0.53% for the same
period.

The high yield market began the fiscal year on a positive note thanks to a sound
U.S. economy and strong stock market performance. Treasury yields rose at the
close of 1998, narrowing the difference in yields between Treasuries and high
yield bonds, and prices for high yield bonds rose. The favorable environment
continued into 1999 as persistent economic growth steered investors away from
U.S. Treasuries and toward riskier, more aggressive investments, such as junk
bonds. High yield bonds became the best performing securities of all domestic
fixed income assets in the second quarter of the reporting period and maintained
their momentum through the third fiscal quarter, outperforming the
investment-grade market. Higher energy prices prompted an increase in the
portfolio's energy weighting, which allowed the Fund to maintain its steady
performance.

In the final fiscal quarter, greater volatility in the stock and bond markets
elevated investor nervousness. Yields rose modestly, driving down bond prices.
Furthermore, high yield bonds significantly underperformed investment-grade
alternatives. In a strong economy, the lowest quality junk bonds tend to perform
the best. Keeping with its more conservative nature, the CMC High Yield Fund
focuses on the "upper tier" of non-investment-grade bonds; while the Fund
outperformed investment-grade bonds during the fiscal year, it did not perform
as well as the broader junk bond market. During this challenging time, the Fund
benefited from its holdings in the telecommunications, broadcasting, cable TV
and energy sectors.

In addition to a positive economic outlook, yields on high yield bonds are above
historical averages compared to Treasuries. We believe that high yield bonds
will continue to offer substantial return potential for investors with a higher
risk tolerance.

On October 31, 1999, the Fund had a duration of 4.15 years and a weighted
average maturity of 6.58 years. The Fund's top ten holdings (as a percentage of
net assets) as of October 31, 1999 were:

Unisys Corp. (2.5%)
Healthsouth Corp. (2.5%)
Lenfest Communications, Inc. (2.4%)
Westpoint Stevens, Inc. (2.4%)
Outdoor Systems, Inc. (2.3%)
Newpark Resources, Inc. (2.3%)
Adelphia Communications Corp. (2.3%)
Lamar Media Corp. (2.2%)
Fox/Liberty Networks L.L.C. (2.2%)
Comcast Corp. (2.2%)

53
<PAGE>
We appreciate your continued confidence in CMC High Yield Fund.

The Columbia Investment Team

December 3, 1999

[Graphic line chart depicting "Growth of $10,000 Since Inception" showing the
growth in dollar amounts ($9,000-$17,000) of CMC High Yield Fund, Lipper High
Yield Bond and Lehman Aggregate Bond for the period 7/6/94 to 10/31/99 to
$16,044, $15,055 and $14,683, respectively]:

<TABLE>
<CAPTION>
Average Annual Total Return
--------------------------------------
1 Year 5 Years Since Inception
------ ------- ---------------
<S> <C> <C> <C>
CMC High Yield 3.75% 9.65% 9.33%
Lipper Current High Yield 7.38% 8.53% 8.02%
Lehman Aggregate Bond 0.53% 7.94% 7.52%
</TABLE>

Past performance does not guarantee future results. Performance for CMC High
Yield Fund and the Lehman Aggregate Index begin with the Fund's inception date
on 7/6/94. Performance for the Lipper High Yield Bond Fund Index begins on
7/1/94. Total return performance is illustrated for the periods ended October
31, 1999. 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 Lipper High Yield Bond Fund Index reflects equally-weighted
performance of the 30 largest mutual funds within its category.

54
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------------------------------------------

CMC HIGH YIELD FUND
-------------------

Year Ended October 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 8.95 $ 9.21 $ 8.99 $ 9.06 $ 8.62
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income.......................... 0.74 0.76 0.80 0.81 0.83
Net realized and unrealized gains (losses)
on investments............................... (0.41) (0.21) 0.32 0.03 0.53
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 0.33 0.55 1.12 0.84 1.36
---------- ---------- ---------- ---------- ----------

Less distributions:
Dividends from net investment income........... (0.74) (0.76) (0.80) (0.81) (0.83)
Distributions from net capital gains........... (0.00)* (0.05) (0.10) (0.10) (0.09)
---------- ---------- ---------- ---------- ----------
Total distributions........................ (0.74) (0.81) (0.90) (0.91) (0.92)
---------- ---------- ---------- ---------- ----------

Net asset value, end of year...................... $ 8.54 $ 8.95 $ 9.21 $ 8.99 $ 9.06
========== ========== ========== ========== ==========

Total return...................................... 3.75% 6.00% 12.90% 9.61% 16.49%

Ratios/Supplemental data
Net assets, end of year (in thousands)............ $ 271,551 $ 263,912 $ 119,196 $ 69,614 $ 42,192
Ratio of expenses to average net assets........... 0.43% 0.45% 0.45% 0.50% 0.54%
Ratio of net income to average net assets......... 8.39% 8.28% 8.60% 8.90% 9.36%
Portfolio turnover rate........................... 62.27% 70.56% 68.96% 56.06% 45.64%

* 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
</TABLE>

55
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------------------
OCTOBER 31, 1999

PRINCIPAL
AMOUNT VALUE
------------- -------------
<S> <C> <C>
CORPORATE BONDS (96.3%)
INDUSTRIAL (77.0%)
BASIC INDUSTRY & MANUFACTURING (7.9%)
FOREST PRODUCTS (0.6%)
STONE CONTAINER CORP.
SENIOR NOTES
11.500% 10/01/2004 $ 1,600,000 $ 1,672,000
-------------
MANUFACTURING (6.5%)
BALL CORP.
SENIOR NOTES
7.750% 08/01/2006 2,450,000 2,388,750
BALL CORP.
SENIOR SUBORDINATED NOTES
8.250% 08/01/2008 4,340,000 4,231,500
SILGAN HOLDINGS, INC.
SENIOR SUBORDINATED DEBENTURES
9.000% 06/01/2009 2,715,000 2,572,462
TITAN WHEEL INTERNATIONAL, INC.
SENIOR SUBORDINATED NOTES
8.750% 04/01/2007 2,075,000 1,867,500
WESTPOINT STEVENS, INC.
SENIOR NOTES
7.875% 06/15/2005 6,950,000 6,463,500
-------------
17,523,712
-------------
METALS/MINING (0.8%)
RYERSON TULL, INC.
NOTES
8.500% 07/15/2001 2,250,000 2,301,640
-------------

TOTAL BASIC INDUSTRY & MANUFACTURING 21,497,352
-------------
BUSINESS & CONSUMER SERVICES (30.5%)
SERVICES & PUBLISHING (8.0%)
ALLIED WASTE NORTH AMERICA, INC.
SENIOR NOTES, SERIES B
7.625% 01/01/2006 2,800,000 2,446,500
AVIATION SALES CO.
SENIOR SUBORDINATED NOTES
8.125% 02/15/2008 1,185,000 948,000
IRON MOUNTAIN, INC.
SENIOR SUBORDINATED NOTES
10.125% 10/01/2006 5,000,000 5,125,000

See Accompanying Notes to Financial Statements
</TABLE>

56
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
------------- -------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
PIERCE LEAHY CORP.
SENIOR SUBORDINATED NOTES
11.125% 07/15/2006 $ 3,112,000 $ 3,290,940
UNITED STATIONERS SUPPLY CO.
SENIOR SUBORDINATED NOTES
8.375% 04/15/2008 5,065,000 4,571,162
USA WASTE SERVICES, INC.
NOTES
6.125% 07/15/2001 5,500,000 5,166,865
-------------
21,548,467
-------------
ENTERTAINMENT & MEDIA (22.5%)
ADELPHIA COMMUNICATIONS CORP.
SENIOR NOTES, SERIES B
10.500% 07/15/2004 5,965,000 6,114,125
CAPSTAR BROADCASTING CORP.
SENIOR SUBORDINATED NOTES, SERIES B
10.750% 05/15/2006 1,442,000 1,600,620
CENTURY COMMUNICATIONS CORP.
SENIOR DISCOUNT NOTES
0.000% 03/15/2003 6,985,000 4,915,694
CINEMARK USA, INC.
SENIOR SUBORDINATED NOTES, SERIES B
9.625% 08/01/2008 3,075,000 2,690,625
COMCAST CORP.
SENIOR SUBORDINATED DEBENTURES
9.500% 01/15/2008 5,825,000 6,037,263
CSC HOLDINGS, INC.
SENIOR SUBORDINATED NOTES
9.250% 11/01/2005 700,000 701,750
FOX/LIBERTY NETWORKS L.L.C.
SENIOR NOTES
8.875% 08/15/2007 5,975,000 6,064,625
HOLLINGER INTERNATIONAL PUBLISHING, INC.
SENIOR NOTES
8.625% 03/15/2005 4,160,000 4,056,000
JACOR COMMUNICATIONS CO.
SENIOR SUBORDINATED NOTES, SERIES B
8.750% 06/15/2007 5,225,000 5,251,125
LAMAR MEDIA CORP.
SENIOR SUBORDINATED NOTES
9.625% 12/01/2006 5,960,000 6,079,200
LENFEST COMMUNICATIONS, INC.
SENIOR NOTES
8.375% 11/01/2005 6,200,000 6,463,810

See Accompanying Notes to Financial Statements
</TABLE>

57
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
------------- -------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
NEWS CORPORATION LTD.
SENIOR SUBORDINATED NOTES
8.750% 02/15/2006 $ 2,250,000 $ 2,311,875
OUTDOOR SYSTEMS, INC.
SENIOR SUBORDINATED NOTES
9.375% 10/15/2006 5,990,000 6,259,550
PRIMEDIA, INC.
SENIOR NOTES
10.250% 06/01/2004 2,600,000 2,639,000
-------------
61,185,262
-------------

TOTAL BUSINESS & CONSUMER SERVICES 82,733,729
-------------

CONSUMER CYCLICAL (14.1%)
AUTO & AUTO PARTS (4.7%)
AMERICAN AXLE & MANUFACTURING, INC.
SENIOR SUBORDINATED NOTES
9.750% 03/01/2009 3,000,000 2,970,000
FEDERAL MOGUL CORP.
NOTES
7.750% 07/01/2006 1,960,000 1,837,422
HAYES WHEELS INTERNATIONAL, INC.
SENIOR SUBORDINATED NOTES, SERIES B
9.125% 07/15/2007 4,465,000 4,252,912
LEAR CORP. (144A)
SENIOR NOTES
7.960% 05/15/2005 3,800,000 3,719,250
-------------
12,779,584
-------------
HOTELS & GAMING (4.2%)
HARRAHS OPERATING, INC.
SENIOR SUBORDINATED NOTES
7.875% 12/15/2005 5,700,000 5,429,250
INTERNATIONAL GAME TECHNOLOGY
SENIOR NOTES
7.875% 05/15/2004 3,950,000 3,792,000
STATION CASINOS, INC.
SENIOR SUBORDINATED NOTES
9.750% 04/15/2007 2,175,000 2,207,625
-------------
11,428,875
-------------
HOUSING RELATED (1.0%)
WEBB (DEL) CORP.
SENIOR SUBORDINATED DEBENTURES
9.000% 02/15/2006 2,990,000 2,631,200
-------------

See Accompanying Notes to Financial Statements
</TABLE>

58
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
------------- -------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
RETAIL (3.0%)
MAXIM GROUP, INC.
SENIOR SUBORDINATED NOTES, SERIES B
9.250% 10/15/2007 $ 3,100,000 $ 2,573,000
ZALE CORP.
SENIOR NOTES, SERIES B
8.500% 10/01/2007 5,650,000 5,480,500
-------------
8,053,500
-------------
OTHER (1.2%)
TRICON GLOBAL RESTAURANTS, INC.
SENIOR NOTES
7.450% 05/15/2005 3,500,000 3,381,875
-------------

TOTAL CONSUMER CYCLICAL 38,275,034
-------------

CONSUMER STAPLES (7.6%)
HEALTH CARE (6.2%)
CONMED CORP.
SENIOR SUBORDINATED NOTES
9.000% 03/15/2008 4,110,000 3,719,550
HEALTHSOUTH CORP.
SENIOR SUBORDINATED NOTES
9.500% 04/01/2001 6,843,000 6,654,818
QUORUM HEALTH GROUP, INC.
SENIOR SUBORDINATED NOTES
8.750% 11/01/2005 1,325,000 1,212,375
TENET HEALTHCARE CORP.
SENIOR NOTES
8.625% 12/01/2003 2,250,000 2,193,750
TENET HEALTHCARE CORP.
SENIOR SUBORDINATED NOTES, SERIES B
8.125% 12/01/2008 3,500,000 3,132,500
-------------
16,912,993
-------------
HOUSEHOLD PRODUCTS (1.4%)
THE SCOTTS CO. (144A)
SENIOR SUBORDINATED NOTES
8.625% 01/15/2009 3,950,000 3,732,750
-------------

TOTAL CONSUMER STAPLES 20,645,743
-------------

ENERGY (12.0%)
GULF CANADA RESOURCES LTD.
SENIOR SUBORDINATED DEBENTURES
9.625% 07/01/2005 5,750,000 5,821,875

See Accompanying Notes to Financial Statements
</TABLE>

59
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
------------- -------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
NEWPARK RESOURCES, INC.
SENIOR SUBORDINATED NOTES, SERIES B
8.625% 12/15/2007 $ 6,630,000 $ 6,165,900
PRIDE INTERNATIONAL, INC.
SENIOR NOTES
10.000% 06/01/2009 3,975,000 3,984,938
R&B FALCON CORP.
SENIOR NOTES, SERIES B
6.500% 04/15/2003 1,500,000 1,338,750
RBF FINANCE CO.
SENIOR SECURED NOTES
11.000% 03/15/2006 2,000,000 2,120,000
SANTA FE SNYDER CORP.
SENIOR NOTES
8.050% 06/15/2004 6,000,000 5,895,000
VINTAGE PETROLEUM, INC.
SENIOR SUBORDINATED NOTES
9.750% 06/30/2009 3,000,000 3,015,000
WESTERN GAS RESOURCES, INC. (144A)
SENIOR SUBORDINATED NOTES
10.000% 06/15/2009 4,250,000 4,356,250
-------------

TOTAL ENERGY 32,697,713
-------------

TECHNOLOGY (2.5%)
UNISYS CORP.
SENIOR NOTES
11.750% 10/15/2004 6,050,000 6,715,500
-------------
TRANSPORTATION (2.4%)
ALLIED HOLDING, INC.
SENIOR NOTES, SERIES B
8.625% 10/01/2007 3,500,000 3,045,000
TEEKAY SHIPPING CORP.
GTD. 1ST PFD. SHIP. MTG. NOTES
8.320% 02/01/2008 3,925,000 3,414,750
-------------
TOTAL TRANSPORTATION 6,459,750
-------------

TOTAL INDUSTRIAL 209,024,821
-------------

FINANCIAL - REIT'S (1.5%)
COLONIAL REALTY L.P.
MEDIUM TERM NOTES
7.160% 01/17/2003 2,425,000 2,350,116
7.050% 12/15/2003 2,000,000 1,908,200
-------------

See Accompanying Notes to Financial Statements
</TABLE>

60
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
------------- -------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
TOTAL FINANCIAL - REIT'S $ 4,258,316
-------------

UTILITIES (17.8%)
ELECTRIC (7.4%)
AES CORP.
SENIOR SUBORDINATED NOTES
10.250% 07/15/2006 $ 4,700,000 4,747,000
AES CORP.
SENIOR SUBORDINATED EXCHANGE NOTES
8.375% 08/15/2007 1,500,000 1,365,000
CALPINE CORP.
SENIOR NOTES
7.625% 04/15/2006 3,500,000 3,310,510
8.750% 07/15/2007 2,500,000 2,483,550
CMS ENERGY X-TRAS (144A)
PASS THRU TRUST I
SENIOR UNSECURED NOTES
7.000% 01/15/2005 6,235,000 5,885,528
NIAGARA MOHAWK POWER CORP.
SENIOR NOTES, SERIES D
7.250% 10/01/2002 2,268,293 2,272,081
-------------
20,063,669
-------------
TELECOMMUNICATIONS (10.4%)
CROWN CASTLE INTERNATIONAL CORP.
SENIOR NOTES
9.000% 05/15/2011 4,500,000 4,286,250
FLAG LTD.
SENIOR NOTES
8.250% 01/30/2008 5,710,000 5,053,350
LEVEL 3 COMMUNICATIONS, INC.
SENIOR NOTES
9.125% 05/01/2008 3,465,000 3,222,450
LEVEL 3 COMMUNICATIONS, INC.
SENIOR DISCOUNT NOTES
0.000% TO 12/01/2003 THEN 10.50% TO 12/01/2008 3,700,000 2,164,500
MCLEODUSA, INC.
SENIOR NOTES
9.500% 11/01/2008 5,000,000 4,987,500
METROMEDIA FIBER NETWORK, INC.
SENIOR NOTES, SERIES B
10.000% 11/15/2008 3,000,000 2,940,000

See Accompanying Notes to Financial Statements
</TABLE>

61
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------------------

PRINCIPAL
AMOUNT VALUE
------------- -------------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
NEXTLINK COMMUNICATIONS, INC.
SENIOR DISCOUNT NOTES
0.000% TO 04/15/03 THEN 9.45% TO 04/15/08 $ 3,450,000 $ 2,052,750
NEXTLINK COMMUNICATIONS, INC.
SENIOR NOTES
10.750% 11/15/2008 3,500,000 3,543,750
28,250,550

TOTAL UTILITIES 48,314,219

TOTAL CORPORATE BONDS
(COST $274,101,710) 261,597,356

REPURCHASE AGREEMENT (3.3%)
J.P. MORGAN SECURITIES, INC.
5.282% DATED 10/29/1999,
DUE 11/01/1999 IN THE
AMOUNT OF $8,937,929.
COLLATERALIZED BY
U.S. TREASURY BONDS
6.125% TO 10.375%
DUE 11/15/2009 TO 8/15/2029
U.S. TREASURY NOTES
5.875% TO 6.250%
DUE 5/31/2000 TO 6/30/2000
(COST $8,936,637) 8,936,637 8,936,637
-------------

TOTAL INVESTMENTS (99.6%)
(COST $283,038,347 ) 270,533,993

OTHER ASSETS LESS LIABILITIES (0.4%) 1,016,587
-------------

NET ASSETS (100.0%) $ 271,550,580
=============

See Accompanying Notes to Financial Statements
</TABLE>

62
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------
October 31, 1999

<S> <C>
ASSETS:
Investments at identified cost ............................................. $ 274,101,710
Investments at identified cost - federal income tax purposes................ $ 274,126,235
- ------------------------------------------------------------------------------ --------------

Investments at value ....................................................... $ 261,597,356
Temporary cash investment, at value ........................................ 8,936,637
Receivable for:
Interest.................................................................. 6,540,076
Investments sold.......................................................... 15,000
--------------
Total assets................................................................ 277,089,069
--------------

LIABILITIES:
Payable for:
Investments purchased..................................................... 5,175,930
Dividends and distributions............................................... 245,259
Investment management fee................................................. 87,288
Accrued expenses ......................................................... 30,012
--------------
Total liabilities........................................................... 5,538,489
--------------

NET ASSETS ................................................................... $ 271,550,580
==============

NET ASSETS consist of:
Unrealized depreciation on investments.................................... $ (12,504,354)
Accumulated net realized loss from investment transactions................ (8,220,593)
Capital paid in .......................................................... 292,275,527
--------------

NET ASSETS ................................................................... $ 271,550,580
==============

Shares of capital stock outstanding .......................................... 31,812,170
==============

Net asset value, offering and
redemption price per share ................................................ $ 8.54
==============

See Accompanying Notes to Financial Statements
</TABLE>

63
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------
Year Ended October 31, 1999

<S> <C>
INVESTMENT INCOME:

Interest income ......................................................... $ 24,949,219
--------------

Expenses:
Investment management fees........................................... 1,140,751
Legal, insurance and audit fees...................................... 27,301
Transfer agent fees.................................................. 18,000
Custodian fees....................................................... 12,978
Trustees' fees....................................................... 9,065
Other expenses ...................................................... 12,359
--------------
Total expenses................................................... 1,220,454
--------------

Net investment income ................................................... 23,728,765
--------------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss from investment transactions........................... (8,196,069)

Change in net unrealized appreciation or depreciation on investments..... (5,232,093
--------------

Net realized and unrealized loss on investments.......................... (13,428,162
--------------

NET INCREASE RESULTING FROM OPERATIONS........................................ $ 10,300,603
==============

See Accompanying Notes to Financial Statements
</TABLE>

64
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Year Ended October 31, 1999

1999 1998
-------------- --------------
<S> <C> <C>
Operations:
Net investment income .............................................. $ 23,728,765 $ 17,447,259
Net realized gain (loss) from investment transactions .............. (8,196,069) 1,542,274
Change in net unrealized appreciation or depreciation
on investments................................................... (5,232,093) (9,721,765)
-------------- --------------

Net increase resulting from operations.............................. 10,300,603 9,267,768

Distributions to shareholders:
From net investment income.......................................... (23,728,765) (17,447,259)
From net realized gain from investment transactions................. (66,855) (1,530,874)

Net capital share transactions......................................... 21,134,041 154,425,524
-------------- --------------

Net increase in net assets............................................. 7,639,024 144,715,159

NET ASSETS:
Beginning of year .................................................. 263,911,556 119,196,397
-------------- --------------

End of year ........................................................ $ 271,550,580 $ 263,911,556
============== ==============

See Accompanying Notes to Financial Statements
</TABLE>

65
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. Significant accounting policies:

CMC High Yield Fund (the Fund) is a portfolio of CMC Fund Trust (the Trust), an
open-end diversified investment company registered under the Investment Company
Act of 1940. The Trust has established three other portfolios, CMC Small Cap
Fund, CMC International Stock Fund and CMC Short Term Bond Fund, which are not
included in this financial statement. Each portfolio issues a separate series of
the Trust's shares and maintains a separate investment portfolio. The policies
described below are consistently followed by the Fund for the preparation of its
financial statements in conformity with generally accepted accounting
principles.

Investment valuation. Portfolio securities are valued based on market value as
quoted by dealers who are market makers in these securities or by independent
pricing services. 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 not currently quoted as described above will be priced at
fair market value as determined in good faith in a manner prescribed by the
Board of Trustees.

Repurchase agreements. The Fund may engage in repurchase agreement transactions.
The Fund, through their custodians, receives delivery of underlying securities
collateralizing repurchase agreements (included in temporary cash investments).
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.

Interest and dividend income. Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date. Amortization of
discounts or accretion of premiums is recorded over the life of the instrument.

Dividends and distributions to shareholders. Dividends from net investment
income are declared daily and paid monthly. Distributions from any net realized
gains are declared and paid annually.

Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for net operating
losses and deferral of losses from wash sales.

Use of estimates. The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

Federal income taxes. The Fund has made no provision for federal income taxes on
net investment income or realized gains from sales of investment securities,
since it is the intention of the Fund to comply with the provisions of the
Internal Revenue Code available to certain regulated investment companies, and
to make distributions of income and security profits sufficient to relieve them
from substantially all federal income taxes.

As of October 31, 1999, the Fund had $8,196,069 in capital loss carryovers
available to offset future capital gains. These capital loss carryovers expire
in the year 2007. 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.

66
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. Significant accounting policies, continued:

Other. Investment transactions are accounted for on the date the investments are
purchased or sold. The cost of investments sold is determined by the use of the
specific identification method for both financial reporting and income tax
purposes. Realized gains and losses from investments are reported on the basis
of identified costs.

The Fund invests in lower rated debt securities, which may be more susceptible
to adverse economic conditions than other investment grade holdings. These
securities are often subordinated to the prior claim of other senior lenders,
and uncertainties exist as to an issuer's ability to meet principal and interest
payments. As of October 31, 1999, 100% of the Fund's portfolio was invested in
securities rated Baa (3%), Ba (54%), B (42%), or Caa (1%), by Moody's Investor
Services, Inc.

67
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

2. Investment transactions:

Aggregate purchases, sales and maturities, net realized loss and net unrealized
depreciation on investments, excluding short-term investments, as of and for the
year ended October 31, 1999 were as follows:

<TABLE>
<CAPTION>
<S> <C>
Purchases:
Investment securities other than U.S. Government obligations........... $ 155,883,968
U.S. Government obligations............................................ 18,698,750
---------------
Total purchases................................................... $ 174,582,718
===============
Sales and Maturities:
Investment securities other than U.S. Government obligations........... $ 140,163,575
U.S. Government obligations............................................ 18,521,406
---------------
Total sales and maturities........................................ $ 158,684,981
===============
Net Realized Loss:
Investment securities other than U.S. Government obligations........... $ (8,018,725)
U.S. Government obligations............................................ (177,344)
---------------
Total net realized loss .......................................... $ (8,196,069)
===============
Unrealized Appreciation (Depreciation) for
federal income tax purposes:
Appreciation............................................................ $ 780,815
Depreciation............................................................ (13,309,694)
---------------
Net unrealized depreciation........................................... $ (12,528,879)
===============
</TABLE>

3. Capital Stock:

<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Shares:
Shares sold................................................ 5,902,583 5,056,688
Shares issued for reinvestment of dividends................ 857,664 449,779
Shares issued for share split*............................. 21,102,520 -
-------------- --------------
27,862,767 5,506,467
Less shares redeemed....................................... (3,424,068) (1,367,967)
-------------- --------------
Net increase in shares..................................... 24,438,699 4,138,500
============== ==============
Amounts:
Sales...................................................... $ 104,966,000 $ 188,362,556
Reinvestment of dividends.................................. 20,865,739 16,572,230
-------------- --------------
125,831,739 204,934,786
Less redemptions........................................... (104,697,698) (50,509,262)
-------------- --------------
Net increase............................................... $ 21,134,041 $ 154,425,524
============== ==============

Capital stock authorized (shares) 100,000,000

* 4 for 1 stock split effective September 1, 1999.
</TABLE>

68
<PAGE>
- --------------------------------------------------------------------------------
CMC HIGH YIELD FUND
A Portfolio of CMC Fund Trust
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

4. Transactions with affiliates and related parties:

Investment management fees incurred............................. $ 1,140,751

Investment management fee computation basis
(percentage of daily net assets per annum).................... 0.40 of 1%

Transfer agent fee.............................................. $ 18,000

Fees earned by trustees not affiliated with the Fund's
investment adviser or transfer agent.......................... $ 9,065

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

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

The contracts for investment advisory and transfer agent services must be
renewed annually by a majority vote of the Fund's shareholders or by the
Trustees.

J. Jerry Inskeep, Jr., an officer and trustee of the Trust, is affiliated with
Fleet but receives no compensation or other payments from the Trust.

69
<PAGE>
PRICEWATERHOUSECOOPERS

PricewaterhouseCoopers
1300 SW Fifth Avenue
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 High Yield Fund (the Fund), one
of the portfolios of CMC Fund Trust, at October 31, 1999, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

December 3, 1999

70
<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) Form of Amendment No. 3 to Restated Declaration of Trust.*

(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.*

(c6) Specimen Stock Certificate for CMC Fixed Income Securities
Fund.*

(d1) Investment Advisory Contract for CMC Small Cap Fund.(3)

(d2) Investment Advisory Contract for CMC International Stock
Fund.(3)

(d3) Investment Advisory Contract for CMC High Yield Fund.(3)

(d4) Investment Advisory Contract for CMC Short Term Bond Fund.(2)

(d5) Form of Investment Advisory Contract for CMC International Bond
Fund.*

(d6) Form of Investment Advisory Contract for CMC Fixed Income
Securities Fund.*

(e) Underwriting Contracts - Not Applicable.

C-1
<PAGE>
(f) Not Applicable.

(g1) Custodian Contract between U.S. Bank, N.A. and CMC Fund Trust.*

(g2) Form of Custodian Contract between CMC Fund Trust and The Chase
Manhattan Bank.*

(h1) Transfer Agent Agreement for CMC Small Cap Fund.(3)

(h2) Transfer Agent Agreement for CMC International Stock Fund.(3)

(h3) Transfer Agent Agreement for CMC High Yield Fund.(3)

(h4) Transfer Agent Agreement for CMC Short Term Bond Fund.(2)

(h5) Form of Transfer Agent Agreement for CMC International Bond
Fund.*

(h6) Form of Transfer Agent Agreement for CMC Fixed Income Securities
Fund.*

(h7) Form of Administrative Services Agreement.(3)

(i) Opinion of Counsel.*

(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.(4)

(q) Powers of Attorney for Messrs. George and Mackenzie.(3) Powers
of Attorney for Messrs. Inskeep and Woolworth.(1)

(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-2
<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.
13 to Registrant's Registration Statement on Form N-1A, File No.
33-30394, filed December 24, 1997.

(4) 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.

*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 U.S. Government Securities
Fund, Inc., Columbia Balanced Fund, Inc., Columbia Common Stock Fund, Inc.,
Columbia International Stock Fund, Inc., Columbia Small Cap Fund, Inc., Columbia
National Municipal Bond 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"). Fleet Boston 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").

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

C-3
<PAGE>
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.

C-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the 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 17th day of March, 2000.

CMC FUND TRUST

By: J. JERRY INSKEEP, JR.
-----------------------------------------
J. Jerry Inskeep, Jr.
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 17th day of March, 2000 by
the following persons in the capacities indicated.

(i) Principal executive officer:

* J. JERRY INSKEEP, JR. President, Chairman, and Trustee
- -------------------------------------
J. Jerry Inskeep, Jr.

(ii) Principal accounting and
financial officer:

J. JERRY INSKEEP, JR. President, Chairman, and Trustee
- -------------------------------------
J. Jerry Inskeep, Jr.

(iii) Trustees:

* RICHARD L. WOOLWORTH Trustee
- -------------------------------------
Richard L. Woolworth

C-5
<PAGE>
* JAMES C. GEORGE Trustee
- -------------------------------------
James C. George

* THOMAS R. MACKENZIE Trustee
- -------------------------------------
Thomas R. Mackenzie

*By: J. JERRY INSKEEP, JR.
---------------------------
J. Jerry Inskeep, Jr.
Attorney-In-Fact

C-6
<PAGE>
CMC FUND TRUST

EXHIBIT INDEX

Exhibit Description
- ------- -----------