UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-7345
CDC Nvest Funds Trust III
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(Exact name of registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
John E. Pelletier, Esq.
CDC IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2801
Date of fiscal year end: December 31, 2003
Date of reporting period: December 31, 2003
Item 1. Reports to Stockholders.
The Registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
Harris Associates Focused Value Fund
[LOGO] CDC Nvest Funds(SM)
CDC IXIS Asset Management Distributors
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Equity Funds Annual Report
December 31, 2003
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CGM Advisor Targeted Equity Fund
(formerly CDC Nvest Targeted Equity Fund)
Harris Associates Focused Value Fund
(formerly CDC Nvest Select Fund)
Harris Associates Growth and Income Fund
(formerly CDC Nvest Growth and Income Fund)
Westpeak Capital Growth Fund
(formerly CDC Nvest Capital Growth Fund)
TABLE OF CONTENTS
Management Discussion and Performance ....................................Page 1
Fund Risks ...............................................................Page 9
Schedule of Investments .................................................Page 10
Financial Statements ....................................................Page 17
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CGM Advisor Targeted Equity Fund
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Portfolio Profile
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Objective:
Seeks long-term growth of capital through investments in equity securities of
companies whose earnings are expected to grow at a faster rate than the overall
U.S. economy
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Strategy:
Generally invests in a focused portfolio of common stocks of large-cap companies
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Inception Date:
November 27, 1968
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Manager:
G. Kenneth Heebner
Capital Growth Management Limited Partnership
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Symbols:
Class A NEFGX
Class B NEBGX
Class C NEGCX
Class Y NEGYX
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Net Asset Value Per Share:
(December 31, 2003)
Class A $7.94
Class B 7.47
Class C 7.47
Class Y 8.07
Management Discussion
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Strong performance from homebuilding stocks helped CGM Advisor Targeted Equity
Fund substantially outperform its benchmark and peer group in 2003. The total
return on the fund's Class A shares at net asset value was 42.81% for the year
ended December 31, 2003. The fund's benchmark, the S&P 500 Index, returned
28.68% for the year, while the average return on the funds in Morningstar's
Large Blend category was 26.72%.
After three years of declining stock prices, 2003 began with a sluggish economy
and uncertainty surrounding the pending Iraq war. Despite this negative climate,
the fund remained fully invested in common stocks, enabling it to move forward
swiftly when the rally began in March. For the year as a whole, stocks recovered
a good portion of the value they lost in the bear market that began three years
ago.
Homebuilding stocks were key to fund's results
Jumbo gains in homebuilding stocks drove the fund's performance in 2003. This
sector began the year at about 34% of the fund's total assets and remained its
largest position throughout the period, ending 2003 at 26%. The larger
homebuilders featured in the portfolio enjoyed a competitive edge in their
industry, helping them acquire increasingly scarce parcels of developable land
in major metropolitan areas.
One of our top holdings was home construction giant Lennar, which gained market
share through acquisitions as well as selective participation in the vibrant
California market. Other notable contributors included D.R. Horton, Centex, KB
Homes and Pulte Homes.
Technology, generic drugs and finance selections were positive
At the start of 2003, we held significant positions in healthcare, consumer
finance and retail, which we later reduced to free up assets for other areas -
specifically telecommunications and semiconductors.
Nextel Communications, the leader in push-to-talk phones, delivered vigorous
gains as investors began to recognize the company's growth potential. America
Movil, S.A., a cellular company based in Mexico, turned in solid performance.
Analog Devices, the leading manufacturer of analog chips for cell phones, and
Intel, a world leader in semiconductors, also had a positive impact.
We purchased Teva Pharmaceuticals, a leading generic drug company headquartered
in Israel, because it appeared undervalued. We sold the position later when we
felt the stock had reached fair value, but not before it made a significant
contribution to fund performance. Strong trading activity drove up the
share-price of Citigroup, a leading global financial services company. It
remains in the portfolio.
Focus on companies poised to benefit from a weaker dollar
As the year progressed, we also began to focus on profitable multinationals we
believe are likely to benefit from the weakening U.S. dollar. These included:
Altria Group, a leading tobacco company; 3M Company, a diversified,
manufacturing company; Nike, a global leader in athletic footwear; and Proctor &
Gamble, a leading consumer-products company.
Disappointing issues were eliminated
Not all news was positive in 2003. Biovail, a generic drug company, fell out of
favor due to lower-than-expected sales. Despite a new anti-cholesterol drug,
problems in other divisions caused Schering-Plough's earnings to decline.
Earnings of Seagate Technology, the top disk drive company in the U.S., were
hurt by an unexpected increase in competition. We sold all three positions.
Outlook is for global recovery to continue
Looking ahead, we expect a global recovery that will benefit many companies and
industries in different parts of the world. We will emphasize firms whose
fundamentals suggest that they will continue to provide strong earnings growth
and lead the recovery.
1
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CGM Advisor Targeted Equity Fund
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Investment Results through December 31, 2003
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Performance in Perspective
The charts comparing CGM Advisor Targeted Equity Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index, and would
incur transaction costs and other expenses even if they could.
Growth of $10,000 Investment in Class A Shares
December 31, 1993 through December 31, 2003
[CHART APPEARS HERE]
S&P
500
Class A 9 Index/4/
@ M.S.C. ----------
Month Cumulative Cumulative Cumulative
End Value/1/ Value/2/ Value
- ---------- ---------- ---------- ----------
12/31/1993 10,000 9,425 10,000
1/31/1994 10,584 9,976 10,340
2/28/1994 10,211 9,624 10,059
3/31/1994 9,598 9,046 9,621
4/30/1994 9,607 9,055 9,744
5/31/1994 9,789 9,226 9,904
6/30/1994 9,428 8,886 9,661
7/31/1994 9,756 9,195 9,979
8/31/1994 10,006 9,431 10,388
9/30/1994 9,679 9,122 10,134
10/31/1994 9,717 9,158 10,361
11/30/1994 9,158 8,631 9,984
12/31/1994 9,295 8,760 10,132
1/31/1995 9,075 8,553 10,395
2/28/1995 9,515 8,968 10,800
3/31/1995 9,808 9,244 11,119
4/30/1995 10,416 9,817 11,446
5/31/1995 11,045 10,410 11,903
6/30/1995 11,854 11,173 12,180
7/31/1995 12,390 11,677 12,584
8/31/1995 12,453 11,736 12,616
9/30/1995 12,680 11,950 13,148
10/31/1995 12,419 11,705 13,101
11/30/1995 13,011 12,263 13,676
12/31/1995 12,836 12,098 13,939
1/31/1996 13,286 12,522 14,414
2/29/1996 13,712 12,924 14,548
3/31/1996 13,712 12,924 14,688
4/30/1996 13,456 12,683 14,904
5/31/1996 13,663 12,878 15,288
6/30/1996 13,517 12,740 15,347
7/31/1996 12,726 11,995 14,669
8/31/1996 12,848 12,109 14,978
9/30/1996 13,730 12,940 15,821
10/31/1996 14,537 13,701 16,258
11/30/1996 15,669 14,768 17,486
12/31/1996 15,516 14,624 17,140
1/31/1997 16,917 15,944 18,211
2/28/1997 16,636 15,680 18,354
3/31/1997 15,929 15,013 17,599
4/30/1997 16,836 15,868 18,650
5/31/1997 17,663 16,648 19,786
6/30/1997 18,451 17,390 20,672
7/31/1997 20,238 19,075 22,317
8/31/1997 19,198 18,094 21,067
9/30/1997 20,181 19,021 22,220
10/31/1997 19,390 18,275 21,478
11/30/1997 19,169 18,067 22,473
12/31/1997 19,169 18,067 22,858
1/31/1998 19,482 18,361 23,111
2/28/1998 21,194 19,975 24,778
3/31/1998 22,557 21,260 26,047
4/30/1998 23,422 22,076 26,309
5/31/1998 23,054 21,728 25,857
6/30/1998 24,288 22,891 26,907
7/31/1998 24,416 23,013 26,621
8/31/1998 19,758 18,622 22,772
9/30/1998 19,899 18,755 24,231
10/31/1998 21,902 20,643 26,202
11/30/1998 23,726 22,361 27,790
12/31/1998 25,572 24,101 29,391
1/31/1999 27,305 25,735 30,620
2/28/1999 25,346 23,889 29,668
3/31/1999 25,954 24,462 30,855
4/30/1999 25,864 24,377 32,050
5/31/1999 25,031 23,592 31,294
6/30/1999 26,877 25,331 33,030
7/31/1999 26,247 24,737 31,999
8/31/1999 26,201 24,695 31,841
9/30/1999 24,648 23,231 30,968
10/31/1999 25,594 24,122 32,927
11/30/1999 26,562 25,034 33,597
12/31/1999 29,454 27,760 35,575
1/31/2000 27,151 25,590 33,788
2/29/2000 29,561 27,861 33,148
3/31/2000 29,882 28,164 36,391
4/30/2000 28,758 27,104 35,296
5/31/2000 27,606 26,019 34,572
6/30/2000 27,713 26,120 35,425
7/31/2000 26,830 25,287 34,871
8/31/2000 28,100 26,485 37,037
9/30/2000 27,084 25,527 35,081
10/31/2000 27,140 25,580 34,933
11/30/2000 26,886 25,340 32,179
12/31/2000 28,112 26,496 32,336
1/31/2001 25,620 24,147 33,484
2/28/2001 24,809 23,382 30,431
3/31/2001 24,178 22,788 28,503
4/30/2001 25,229 23,778 30,718
5/31/2001 24,719 23,297 30,924
6/30/2001 24,886 23,455 30,171
7/31/2001 24,162 22,773 29,874
8/31/2001 22,171 20,897 28,004
9/30/2001 20,030 18,878 25,742
10/31/2001 20,150 18,992 26,233
11/30/2001 22,292 21,010 28,246
12/31/2001 23,559 22,204 28,493
1/31/2002 24,283 22,887 28,077
2/28/2002 23,167 21,835 27,536
3/31/2002 23,559 22,204 28,571
4/30/2002 23,619 22,261 26,839
5/31/2002 23,378 22,034 26,641
6/30/2002 22,624 21,323 24,744
7/31/2002 20,120 18,963 22,815
8/31/2002 20,120 18,963 22,965
9/30/2002 18,883 17,797 20,469
10/31/2002 18,431 17,371 22,270
11/30/2002 17,978 16,944 23,581
12/31/2002 16,772 15,807 22,196
1/31/2003 16,772 15,807 21,614
2/28/2003 16,651 15,694 21,290
3/31/2003 17,043 16,063 21,497
4/30/2003 18,129 17,087 23,268
5/31/2003 19,697 18,565 24,493
6/30/2003 20,029 18,878 24,806
7/31/2003 19,637 18,508 25,243
8/31/2003 20,150 18,991 25,736
9/30/2003 20,391 19,219 25,462
10/31/2003 22,925 21,607 26,903
11/30/2003 23,830 22,460 27,139
12/31/2003 23,950 22,573 28,563
Average Annual Total Returns -- December 31, 2003
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Since
1 Year 5 Years 10 Years Inception
------ ------- -------- ---------
Class A (Inception 11/27/68)
Net Asset Value/1/ 42.81% -1.30% 9.13% --
With Maximum Sales Charge/2/ 34.58 -2.46 8.48 --
Class B (Inception 2/28/97)
Net Asset Value/1/ 41.48 -2.05 -- 4.66%
With CDSC/3/ 36.48 -2.34 -- 4.66
Class C (Inception 9/1/98)
Net Asset Value/1/ 41.75 -2.05 -- 1.84
With Maximum Sales Charge and CDSC/3/ 39.42 -2.24 -- 1.65
Class Y (Inception 6/30/99)
Net Asset Value/1/ 43.34 -- -- -2.11
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Since Since Since
Class B Class C Class Y
1 Year 5 Years 10 Years Incept./7/ Incept./7/ Incept./7/
------ ------- -------- ---------- ---------- ----------
Comparative Performance
S&P 500 Index/4/ 28.68% -0.57% 11.07% 6.69% 3.18% -3.18%
Morningstar Large Blend Avg./5/ 26.72 -0.43 9.24 5.58 3.21 -2.79
Lipper Multi-Cap Core Funds Avg./6/ 29.89 2.49 9.79 6.94 6.06 0.32
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those noted. Class Y shares are
available to certain institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Portfolio Facts
- --------------------------------------------------------------------------------
% of Net Assets
as of
------------------
Fund Composition 12/31/03 6/30/03
- --------------------------------------------------------
Common Stocks 99.5 99.6
- --------------------------------------------------------
Short Term Investments and Other 0.5 0.4
% of Net Assets
as of
------------------
Ten Largest Holdings 12/31/03 6/30/03
- --------------------------------------------------------
D.R. Horton, Inc. 8.3 6.9
- --------------------------------------------------------
Lennar Corp., Class A 8.1 7.6
- --------------------------------------------------------
Deere & Co. 5.3 --
- --------------------------------------------------------
Altria Group, Inc. 5.3 6.1
- --------------------------------------------------------
America Movil SA de CV (ADR) 5.3 --
- --------------------------------------------------------
3M Co. 5.2 4.9
- --------------------------------------------------------
Citigroup, Inc. 5.2 4.2
- --------------------------------------------------------
Total SA (ADR) 4.9 --
- --------------------------------------------------------
Centex Corp. 4.8 4.8
- --------------------------------------------------------
International Game Technology Corp. 4.7 --
% of Net Assets
as of
------------------
Five Largest Industries 12/31/03 6/30/03
- --------------------------------------------------------
Home Construction, Furnishings
& Appliances 25.9 29.1
- --------------------------------------------------------
Semiconductors 8.8 4.7
- --------------------------------------------------------
Pharmaceuticals 6.6 11.7
- --------------------------------------------------------
Oil & Gas 6.2 4.9
- --------------------------------------------------------
Heavy Machinery 5.3 --
Portfolio holdings and asset allocations will vary.
See page 9 for information on the possible risks associated with an investment
in this fund.
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 5.75%.
/3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase.
/4/ S&P 500 Index is an unmanaged index of U.S. common stock performance.
/5/ Morningstar Large Blend Average is the average performance without sales
charges of funds with similar investment objectives as calculated by
Morningstar, Inc.
/6/ Lipper Multi-Cap Core Funds Average is the average performance without
sales charges of mutual funds with a similar current investment style or
objective as calculated by Lipper Inc.
/7/ The since-inception performance comparisons shown for each Class of fund
shares are calculated as follows: Class B from 2/28/97; Class C from
9/30/98 and Class Y from 6/30/99.
2
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Harris Associates Focused Value Fund
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Portfolio Profile
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Objective:
Seeks long-term capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Focuses on 15 to 20 stocks of mid- to large-cap U.S. companies
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Inception Date:
March 15, 2001
- --------------------------------------------------------------------------------
Managers:
William C. Nygren
Floyd J. Bellman
Harris Associates L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A NRSAX
Class B NRSBX
Class C NRSCX
- --------------------------------------------------------------------------------
Net AssetValue Per Share:
(December 31, 2003)
Class A $11.79
Class B 11.55
Class C 11.55
Management Discussion
- --------------------------------------------------------------------------------
Growing optimism about the economy and a swift end to active combat in Iraq
sparked a dramatic stock market rally that ran from March through year-end. In
this robust market environment, Harris Associates Focused Value Fund's total
return for the year ended December 31, 2003 was 27.60%, based on the net asset
value of Class A shares. Performance was in line with the fund's benchmark, the
S&P 500 Index, which returned 28.68% for the period, and with the 28.40% average
return on Morningstar's Large Value Funds category.
Technology and healthcare led returns in 2003
Novell, which provides identity-management and web services software, was one of
the fund's strongest performer. Investors anticipated a boost in technology
spending as the economy improved, and Novell was a clear beneficiary. This
allowed us to sell the position on strength when shares met our target level. We
also sold Guidant, a maker of arterial stents and other cardiac-assist devices,
when we felt it had risen to full valuation.
Chiron, a principal supplier of flu vaccine, was an outstanding performer in
healthcare. It remains in the portfolio, along with Omnicare, another strong
performer. Omnicare manages pharmaceutical costs and services for long-term care
facilities. The growth of the nursing home business is driven by demographics
more than by the economy, and this company's potential to trim its customers'
operating costs should provide steady earnings.
Media and travel-related businesses also did well
Time Warner rose as new management instituted restructuring measures, while
cable programmer Liberty Media benefited from renewed interest in media stocks
and better operating results. Marriott International, which we bought when the
outlook for travel was at a low, rose sharply in 2003.
Housing sales benefited financial-services companies
H&R Block delivered handsome returns as the housing boom brought unexpected
strength to its mortgage origination business. We also expect H&R Block's
tax-preparation business to recover if job growth begins to reflect the economic
expansion. Housing also contributed to earnings growth at Washington Mutual,
although fears of rising interest rates surfaced late in the year, causing the
company's shares to give back some of their gains. We continue to favor
Washington Mutual because of its increased retail banking focus and the
relatively predictable revenues generated by its large mortgage-servicing
portfolio.
Company-specific factors affected some stocks
Price competition hurt Valassis Communications, which produces advertising
inserts for newspapers. Valassis bounced back when industry prices seemed to
stabilize, but we are watching trends closely. Earlier in the year, we took
modest losses in Electronic Data Systems, an information technology services
giant.
A number of stocks that performed well in absolute terms lagged the
market averages. For example, when the Justice Department raised concerns over
First Data Corp.'s proposed takeover of a competitor, some of the stock's
earlier gains dissipated. SunGard, which makes processing hardware and software
for financial services firms, failed to meet the high expectations raised by the
surge in demand for its shares earlier in the year. Other gainers that fell
short of the year's high performance standards included grocery-chain Kroger,
tool-maker Black and Decker, and long-distance provider Sprint. Gains in
retailers J.C. Penney and TJX, which owns the Marshall's and T.J. Maxx chains,
also lagged the market averages.
Finding value will become more challenging in 2004
Because so many stocks rose so much in 2003, issues that meet our strict value
criteria will be harder to find. We think the maturing economic recovery will
create disparities in performance between and within market sectors, which
should favor our bottom-up, value-driven approach that evaluates the investment
merits of individual stocks in light of their market price.
3
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Harris Associates Focused Value Fund
- --------------------------------------------------------------------------------
Investment Results through December 31, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Harris Associates Focused Value Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
Growth of $10,000 Investment in Class A Shares
March 15, 2001 (inception) through December 31, 2003
[CHART APPEARS HERE]
S&P
500
Class A Index/4/
@ M.S.C. ----------
Month Cumulative Cumulative Cumulative
End Value/1/ Value/2/ Value
- ---------- ---------- ---------- ----------
3/15/2001 10,000 9,425 10,000
3/31/2001 10,090 9,510 10,000
4/30/2001 10,420 9,821 10,777
5/31/2001 10,690 10,075 10,849
6/30/2001 10,990 10,358 10,585
7/31/2001 11,310 10,660 10,481
8/31/2001 10,870 10,245 9,825
9/30/2001 10,240 9,651 9,032
10/31/2001 10,000 9,425 9,204
11/30/2001 10,680 10,066 9,910
12/31/2001 10,960 10,330 9,997
1/31/2002 10,890 10,264 9,851
2/28/2002 10,600 9,990 9,661
3/31/2002 10,910 10,283 10,024
4/30/2002 10,860 10,235 9,416
5/31/2002 10,930 10,301 9,347
6/30/2002 10,080 9,500 8,681
7/31/2002 9,620 9,067 8,005
8/31/2002 9,960 9,387 8,057
9/30/2002 8,570 8,077 7,181
10/31/2002 8,970 8,454 7,813
11/30/2002 9,470 8,925 8,273
12/31/2002 9,240 8,709 7,787
1/31/2003 9,010 8,492 7,583
2/28/2003 8,890 8,379 7,469
3/31/2003 8,990 8,473 7,542
4/30/2003 9,510 8,963 8,163
5/31/2003 10,120 9,538 8,593
6/30/2003 10,340 9,745 8,703
7/31/2003 10,260 9,670 8,856
8/31/2003 10,680 10,066 9,029
9/30/2003 10,560 9,953 8,933
10/31/2003 11,200 10,556 9,439
11/30/2003 11,690 11,018 9,522
12/31/2003 11,790 11,112 10,021
Average Annual Total Returns -- December 31, 2003
- --------------------------------------------------------------------------------
Class A (Inception 3/15/01) 1 Year/7/ Since Inception/7/
--------- ------------------
Net Asset Value/1/ 27.60% 6.06%
With Maximum Sales Charge/2/ 20.31 3.84
Class B (Inception 3/15/01)
Net Asset Value/1/ 26.64 5.29
With CDSC/3/ 21.64 4.30
Class C (Inception 3/15/01)
Net Asset Value/1/ 26.64 5.29
With Maximum Sales Charge and CDSC/3/ 24.42 4.91
-------------------------------------------------------------------------------
Since
Class A, B, C
1 Year Inception/8/
------ -------------
Comparative Performance
S&P 500 Index/4/ 28.68% 0.08%
Morningstar Large Value Fund Avg./5/ 28.40 1.54
Lipper Multi Cap Core Funds Avg./6/ 29.89 0.98
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Portfolio Facts
- --------------------------------------------------------------------------------
% of Net Assets
as of
------------------
Fund Composition 12/31/03 6/30/03
- --------------------------------------------------------
Common Stocks 91.6 91.2
- --------------------------------------------------------
Short Term Investments and Other 8.4 8.8
% of Net Assets
as of
------------------
Ten Largest Holdings 12/31/03 6/30/03
- --------------------------------------------------------
Washington Mutual, Inc. 16.1 17.6
- --------------------------------------------------------
H&R Block, Inc. 8.6 7.9
- --------------------------------------------------------
Yum! Brands, Inc. 5.4 5.2
- --------------------------------------------------------
First Data Corp. 5.1 4.5
- --------------------------------------------------------
Burlington Resources, Inc. 4.5 4.0
- --------------------------------------------------------
Omnicare, Inc. 4.3 3.7
- --------------------------------------------------------
Knight-Ridder, Inc. 4.3 4.6
- --------------------------------------------------------
Bristol-Myers Squibb Co. 4.2 3.2
- --------------------------------------------------------
Time Warner, Inc. 4.2 4.2
- --------------------------------------------------------
TJX Cos., Inc. 4.1 2.4
% of Net Assets
as of
------------------
Five Largest Industries 12/31/03 6/30/03
- --------------------------------------------------------
Banking 16.1 17.6
- --------------------------------------------------------
Commercial Services 12.4 9.8
- --------------------------------------------------------
Media - Broadcasting & Publishing 10.8 12.6
- --------------------------------------------------------
Pharmaceuticals 8.5 3.3
- --------------------------------------------------------
Retailers 6.6 5.2
Portfolio holdings and asset allocations will vary.
See page 9 for information on the possible risks associated with an investment
in this fund.
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 5.75%.
/3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase.
/4/ S&P 500 Index is an unmanaged index of U.S. common stock performance
/5/ Morningstar Large Value Fund Average is the average performance without
sales charges of funds with similar investment objectives as calculated by
Morningstar, Inc.
/6/ Lipper Multi Cap Core Funds Average is the average performance without
sales charges of funds with similar investment objectives as calculated by
Lipper Inc.
/7/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/8/ The since-inception performance comparisons shown are calculated from
3/31/01.
4
- --------------------------------------------------------------------------------
Harris Associates Growth and Income Fund
- --------------------------------------------------------------------------------
Portfolio Profile
- --------------------------------------------------------------------------------
Objective:
Seeks opportunities for long-term capital growth and income
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in common stock of large- and mid-cap companies in any
industry
- --------------------------------------------------------------------------------
Inception Date:
May 6, 1931
- --------------------------------------------------------------------------------
Managers:
Robert M. Levy
Edward S. Loeb
Michael J. Mangan
Harris Associates L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A NEFOX
Class B NEGBX
Class C NECOX
Class Y NEOYX
- --------------------------------------------------------------------------------
Net Asset Value Per Share:
(December 31, 2003)
Class A $12.25
Class B 11.64
Class C 11.63
Class Y 12.54
Effective March 1, 2004, the fund's name will change to Harris Associates Large
Cap Value Fund
Management Discussion
- --------------------------------------------------------------------------------
With the end of full-scale conflict in Iraq and improving economic numbers in
the U.S., a broad-based rally carried stock prices higher through most of 2003.
The breadth of this year's market rise benefited most stocks, and many recorded
significant gains.
For the year ended December 31, 2003, Class A shares of Harris Associates Growth
and Income Fund provided a total return of 30.04% at net asset value. These
results were in line with the 30.03% return on the Russell 1000 Value Index, the
fund's benchmark, and ahead of the 26.72% average return on the funds in
Morningstar's Large Blend Funds category.
Economically sensitive issues performed well
The beginning of the economic recovery was good for media stocks in general, and
Time Warner's restructuring progress helped drive up its stock. Cable programmer
Liberty Media and ad agency Interpublic Group both benefited from prospects for
a rebound in advertising.
Other standouts in 2003 included Cendant, whose Avis and Budget car rental units
benefited from a rebound in travel. Cendant's Century 21 and Coldwell Banker
divisions also profited from the wave of mortgage refinancings and continued
strong sales of new homes.
Opportunistic purchases also enhanced performance
We purchased Home Depot in January, when the price of its shares fell in
response to price competition. Home Depot's subsequent rebound had a strong,
positive impact on fund results this year. The fund also benefited when shares
of Xerox Corp. rebounded from depressed levels, thanks to improved finances and
strong acceptance of its newest color products.
Price weakness in consumer staples provided opportunities
Kraft Foods and supermarket-chain Safeway declined as the economy gained
momentum and investor interest shifted to growth stocks. Kraft was also hurt by
competition from low-priced, private-label products. Safeway grappled with loss
of market share and other setbacks. We took advantage of price declines to add
to the fund's holdings in both stocks.
Healthcare yielded mixed results
Strong sales of Guidant's defibrillators and other cardiac-assist technologies
overcame competitive weakness resulting from its arterial stent technology,
driving the stock sharply higher. However, shares of pharmaceutical giant Merck
fell when two promising drugs failed late-stage trials. We used the price
weakness to add to the fund's holdings in Merck. Many drug companies have
suffered from concern over possible regulatory changes and loss of sales to
low-priced generic equivalents of profitable drugs. We think the aging U.S.
population is a long-term positive for drug stocks, along with recent changes to
Medicare.
Washington Mutual rose, then pulled back
Shares of Washington Mutual, a leading mortgage originator and the fund's
largest holding at mid-year, gave back a portion of its 2003 gains in the fourth
quarter. The expanding economy threatened to push up interest rates and stifle
the housing boom. However, retail banking is the fastest-growing part of its
business, and Washington Mutual has a large mortgage-servicing portfolio; both
businesses generate stable, growing income, so we continue to like the stock.
Good value will become harder to find in 2004
The broad-based price rally in 2003 should make attractively valued stocks
harder to find next year. As the economic recovery matures, we believe the
market will separate into winning and losing segments that should favor our
bottom-up investment style - one that evaluates the investment merits of
individual companies in light of the price of their stocks.
5
- --------------------------------------------------------------------------------
Harris Associates Growth and Income Fund
- --------------------------------------------------------------------------------
Investment Results through December 31, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Harris Associates Growth and Income Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
Growth of $10,000 Investment in Class A Shares
December 31, 1993 through December 31, 2003
[CHART APPEARS HERE]
Russell
1000
Value
Class A Index /4/
@ M.S.C. ----------
Month Cumulative Cumulative Cumulative
End Value /1/ Value /2/ Value
- ---------- ---------- ---------- ----------
12/31/1993 10,000 9,425 10,000
1/31/1994 10,363 9,767 10,376
2/28/1994 10,055 9,477 10,022
3/31/1994 9,636 9,081 9,649
4/30/1994 9,715 9,156 9,834
5/31/1994 9,905 9,336 9,947
6/30/1994 9,683 9,126 9,709
7/31/1994 9,970 9,397 10,011
8/31/1994 10,393 9,795 10,299
9/30/1994 10,146 9,562 9,958
10/31/1994 10,306 9,713 10,097
11/30/1994 9,954 9,381 9,690
12/31/1994 10,099 9,519 9,802
1/31/1995 10,352 9,756 10,104
2/28/1995 10,693 10,079 10,504
3/31/1995 10,991 10,359 10,735
4/30/1995 11,326 10,674 11,075
5/31/1995 11,693 11,021 11,540
6/30/1995 11,967 11,278 11,696
7/31/1995 12,385 11,673 12,103
8/31/1995 12,500 11,781 12,274
9/30/1995 13,048 12,298 12,718
10/31/1995 12,920 12,177 12,592
11/30/1995 13,351 12,584 13,230
12/31/1995 13,646 12,861 13,562
1/31/1996 14,073 13,264 13,985
2/29/1996 14,148 13,335 14,091
3/31/1996 14,219 13,402 14,330
4/30/1996 14,267 13,447 14,385
5/31/1996 14,485 13,653 14,565
6/30/1996 14,175 13,360 14,577
7/31/1996 13,470 12,695 14,026
8/31/1996 13,794 13,001 14,427
9/30/1996 14,500 13,666 15,001
10/31/1996 14,946 14,087 15,581
11/30/1996 16,274 15,339 16,711
12/31/1996 15,994 15,074 16,497
1/31/1997 16,789 15,824 17,297
2/28/1997 16,997 16,019 17,551
3/31/1997 16,257 15,323 16,920
4/30/1997 17,112 16,128 17,631
5/31/1997 18,210 17,163 18,616
6/30/1997 19,103 18,004 19,415
7/31/1997 20,307 19,139 20,875
8/31/1997 19,728 18,593 20,131
9/30/1997 20,946 19,741 21,348
10/31/1997 20,027 18,876 20,752
11/30/1997 20,891 19,690 21,669
12/31/1997 21,341 20,114 22,302
1/31/1998 21,466 20,232 21,986
2/28/1998 23,190 21,857 23,466
3/31/1998 24,497 23,089 24,902
4/30/1998 24,623 23,207 25,068
5/31/1998 24,289 22,892 24,696
6/30/1998 25,304 23,849 25,013
7/31/1998 24,914 23,482 24,572
8/31/1998 21,147 19,931 20,915
9/30/1998 22,200 20,923 22,115
10/31/1998 23,804 22,435 23,828
11/30/1998 24,883 23,452 24,939
12/31/1998 26,447 24,926 25,787
1/31/1999 27,213 25,649 25,993
2/28/1999 26,559 25,032 25,626
3/31/1999 26,926 25,378 26,157
4/30/1999 28,522 26,882 28,600
5/31/1999 28,395 26,762 28,285
6/30/1999 29,281 27,597 29,107
7/31/1999 28,416 26,782 28,254
8/31/1999 28,032 26,420 27,206
9/30/1999 26,896 25,349 26,255
10/31/1999 27,973 26,365 27,766
11/30/1999 28,055 26,442 27,549
12/31/1999 28,946 27,282 27,682
1/31/2000 27,436 25,858 26,779
2/29/2000 26,510 24,986 24,789
3/31/2000 28,663 27,015 27,814
4/30/2000 28,191 26,570 27,490
5/31/2000 27,322 25,751 27,780
6/30/2000 27,681 26,089 26,511
7/31/2000 27,511 25,929 26,843
8/31/2000 29,358 27,670 28,336
9/30/2000 28,016 26,405 28,596
10/31/2000 28,093 26,478 29,298
11/30/2000 26,420 24,901 28,211
12/31/2000 26,829 25,286 29,624
1/31/2001 26,848 25,304 29,738
2/28/2001 25,253 23,801 28,911
3/31/2001 23,833 22,462 27,889
4/30/2001 25,779 24,296 29,257
5/31/2001 25,818 24,333 29,914
6/30/2001 24,923 23,490 29,251
7/31/2001 24,067 22,683 29,189
8/31/2001 22,588 21,289 28,019
9/30/2001 20,701 19,511 26,047
10/31/2001 21,440 20,207 25,823
11/30/2001 22,958 21,638 27,324
12/31/2001 22,919 21,601 27,968
1/31/2002 22,802 21,491 27,753
2/28/2002 22,199 20,923 27,797
3/31/2002 22,802 21,491 29,112
4/30/2002 22,160 20,886 28,114
5/31/2002 22,063 20,794 28,255
6/30/2002 20,740 19,547 26,632
7/31/2002 19,417 18,300 24,157
8/31/2002 19,903 18,759 24,339
9/30/2002 17,218 16,228 21,633
10/31/2002 17,860 16,833 23,236
11/30/2002 19,066 17,970 24,699
12/31/2002 18,327 17,273 23,627
1/31/2003 17,880 16,851 23,055
2/28/2003 17,315 16,320 22,440
3/31/2003 17,529 16,521 22,477
4/30/2003 19,183 18,080 24,456
5/31/2003 20,623 19,437 26,034
6/30/2003 21,070 19,859 26,360
7/31/2003 20,876 19,675 26,752
8/31/2003 21,576 20,336 27,169
9/30/2003 21,109 19,896 26,904
10/31/2003 22,102 20,831 28,551
11/30/2003 22,880 21,564 28,938
12/31/2003 23,833 22,463 30,722
Average Annual Total Returns -- December 31, 2003
- --------------------------------------------------------------------------------
Since
1 Year/8/ 5 Years/8/ 10 Years/8/ Inception/8/
--------- ---------- ----------- ------------
Class A (Inception 5/6/31)
Net Asset Value/1/ 30.04% -2.06% 9.07% --
With Maximum Sales Charge/2/ 22.62 -3.21 8.43 --
Class B (Inception 9/13/93)
Net Asset Value/1/ 29.05 -2.81 8.31 --
With CDSC/3/ 24.05 -3.13 8.31 --
Class C (Inception 5/1/95)
Net Asset Value/1/ 29.08 -2.79 -- 8.18%
With Maximum Sales Charge and CDSC/3/ 26.81 -2.99 -- 8.05
Class Y (Inception 11/18/98)
Net Asset Value/1/ 30.76 -1.58 -- -0.04
Since Since
Class C Class Y
1 Year 5 Years 10 Years Incept./7/ Incept./7/
------ ------- -------- ---------- ----------
Comparative Performance
Russell 1000 Value Index/4/ 30.03% 3.56% 11.88% 12.08% 4.19%
Morningstar Large Blend Average/5/ 26.72 -0.43 9.24 9.07 0.70
Lipper Large Cap Core Funds Average/6/ 25.60 -1.74 8.78 8.55 -0.46
All returns represents past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares are
available to certain institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Portfolio Facts
- --------------------------------------------------------------------------------
% of Net Assets
as of
------------------
Fund Composition 12/31/03 6/30/03
- --------------------------------------------------------
Common Stocks 95.9 94.5
- --------------------------------------------------------
Short Term Investments and Other 4.1 5.5
% of Net Assets
as of
------------------
Ten Largest Holdings 12/31/03 6/30/03
- --------------------------------------------------------
Liberty Media Corp.-Class A 4.2 4.5
- --------------------------------------------------------
Home Depot, Inc. 4.0 4.0
- --------------------------------------------------------
Time Warner, Inc. 3.9 3.8
- --------------------------------------------------------
Washington Mutual, Inc. 3.8 4.6
- --------------------------------------------------------
McDonald's Corp. 3.6 3.5
- --------------------------------------------------------
Xerox Corp. 3.5 0.3
- --------------------------------------------------------
Honeywell International, Inc. 3.4 2.9
- --------------------------------------------------------
First Data Corp. 3.3 2.7
- --------------------------------------------------------
Gap (The), Inc. 3.3 3.0
- --------------------------------------------------------
Waste Management, Inc. 3.3 3.0
% of Net Assets
as of
------------------
Five Largest Industries 12/31/03 6/30/03
- --------------------------------------------------------
Media - Broadcasting & Publishing 13.4 12.0
- --------------------------------------------------------
Beverages, Food & Tobacco 12.9 10.3
- --------------------------------------------------------
Building Materials 6.8 2.8
- --------------------------------------------------------
Pharmaceuticals 6.7 5.8
- --------------------------------------------------------
Banking 5.9 7.3
Portfolio holdings and asset allocations will vary.
See page 9 for information on the possible risks associated with
an investment in this fund.
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 5.75%.
/3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase.
/4/ Russell 1000 Value Index is an unmanaged index of the largest 1,000 U.S.
companies within the Russell 3000.
/5/ Morningstar Large Blend Average is an average performance of funds with
similar investment objectives as calculated without sales charges by
Morningstar, Inc.
/6/ Lipper Large Cap Core Funds Average is the average performance of mutual
funds with a similar current investment style or objective as calculated
without sales charges by Lipper Inc.
/7/ The since-inception performance comparisons shown for each Class of fund
shares are calculated as follows: Class C from 5/31/95 and Class Y from
11/30/98.
/8/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
6
- --------------------------------------------------------------------------------
Westpeak Capital Growth Fund
- --------------------------------------------------------------------------------
Portfolio Profile
- --------------------------------------------------------------------------------
Objective:
Seeks long-term growth of capital
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in common stocks of large- and mid-cap companies in any
industry
- --------------------------------------------------------------------------------
Inception Date:
August 3, 1992
- --------------------------------------------------------------------------------
Manager:
Westpeak Global Advisors, L.P. Team Management
- --------------------------------------------------------------------------------
Symbols:
Class A NEFCX
Class B NECBX
Class C NECGX
- --------------------------------------------------------------------------------
Net Asset Value Per Share:
(December 31, 2003)
Class A $10.87
Class B 9.52
Class C 9.50
Management Discussion
- --------------------------------------------------------------------------------
In March of 2003, the stock market began to reverse a three-year downtrend.
Prices of many stocks appeared to be selling at bargain prices, and with
interest rates at 45-year lows, many investors seemed willing to emerge from the
sidelines. However, a lottery ticket mentality appeared to dominate the market.
Investments in volatile stocks of companies with uncertain earnings generally
outperformed quality firms with sustained, rising earnings trends - the stocks
that are the mainstay of Westpeak Capital Growth Fund.
Consequently, for the year ended December 31 2003, the total return on Class A
shares of the fund was 26.69% at net asset value. The fund's benchmark, the
Russell 1000 Growth Index, returned 29.75% for the same period, and the average
return on the funds in Morningstar's Large Growth Fund category was 28.55%.
Industry emphasis was a net positive
The environment was favorable for the broad market in nine of the final ten
months of the year. Small-cap growth stocks outperformed large-cap growth
issues, on average, and leadership rotated from growth to value and back again
for most of 2003. Since the fund remains fully invested in equity securities at
all times, it participated fully in the market upswing.
To varying degrees during the year, the fund emphasized consumer staples,
technology and energy stocks - all sectors that did well. Within the consumer
staples category, our emphasis was on medical companies. However, many medical
companies experienced difficulties in 2003, including portfolio holdings Merck
and MedImmune. Within technology, our emphasis on semiconductors and computer
hardware benefited the fund. Our emphasis on oil services also helped, but
untimely positioning in department stores and in the heavy electrical equipment
industry detracted from results for the year.
Portfolio focuses on quality earnings
Four of our top-performing stocks were Intel Corp., Cisco Systems, Capital One
Financial and Dell Inc. Intel remains our top-ranked semiconductor stock,
reflecting its profitability and fundamental outlook. Cisco also remains among
our top-ranked computer hardware stocks, primarily reflecting its strong
profitability and earnings expectations. Capital One did especially well during
the first three quarters of 2003, but we began trimming the position when the
stock's rank in our earnings-quality model began to slide. Dell is another
example of a company we emphasized early in the year, which benefited the fund,
but we gradually started to trim the position when its earnings began to fall
short of expectations.
Despite quality earnings, prices of some stocks lagged
Although Merck underperformed for the period, it remains one of the
highest-ranking drug stocks on our candidate list, primarily due to its
attractive valuation, modest use of debt and history of consistent earnings.
MedImmune is a similar story. We believe both stocks continue to be attractive
because of their valuations and consistent earnings history. Even though the
price performance of Microsoft was disappointing in 2003, we have continued to
maintain a relatively large position in the stock. Microsoft's attractive
valuations, profitability and growth prospects are the characteristics we seek
for the fund's portfolio. We believe the position will reward shareholders in
time. We sold financial-service provider MBNA Corp. early in the year, but our
timing was unfortunate because it did well for several months thereafter.
Quality growth stocks may return to favor in 2004
While we continue to expect growth stocks to perform well in the coming year, we
believe leadership will eventually shift away from the speculative stocks and
toward quality companies with attractive valuations and solid growth potential.
However, we are also moderating our strategies slightly, in an effort to ensure
that Westpeak Capital Growth Fund reaps as much benefit as possible in a
volatile price environment.
7
- --------------------------------------------------------------------------------
Westpeak Capital Growth Fund
- --------------------------------------------------------------------------------
Investment Results through December 31, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Westpeak Capital Growth Fund's performance to a benchmark
index provide you with a general sense of how the fund performed. To put this
information in context, it may be helpful to understand the differences between
the two. The fund's total return for the period shown below appears with and
without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
Growth of $10,000 Investment in Class A Shares
December 31, 1993 through December 31, 2003
[CHART APPEARS HERE]
Russell
1000
Growth
Class A Index /4/
@ M.S.C. ----------
Month Cumulative Cumulative Cumulative
End Value /1/ Value /2/ Value
- ---------- ---------- ---------- ----------
12/31/1993 10,000 9,425 10,000
1/31/1994 10,314 9,721 10,232
2/28/1994 10,046 9,468 10,045
3/31/1994 9,509 8,962 9,559
4/30/1994 9,496 8,950 9,603
5/31/1994 9,457 8,913 9,748
6/30/1994 9,051 8,530 9,460
7/31/1994 9,398 8,857 9,783
8/31/1994 9,797 9,234 10,328
9/30/1994 9,633 9,079 10,188
10/31/1994 10,052 9,474 10,427
11/30/1994 9,614 9,061 10,093
12/31/1994 9,836 9,271 10,262
1/31/1995 9,915 9,345 10,482
2/28/1995 10,308 9,715 10,921
3/31/1995 10,648 10,036 11,239
4/30/1995 10,812 10,191 11,485
5/31/1995 11,113 10,474 11,885
6/30/1995 11,854 11,172 12,344
7/31/1995 12,384 11,672 12,857
8/31/1995 12,607 11,882 12,871
9/30/1995 13,033 12,283 13,464
10/31/1995 12,825 12,088 13,473
11/30/1995 13,136 12,381 13,997
12/31/1995 12,862 12,122 14,077
1/31/1996 13,099 12,346 14,548
2/29/1996 13,441 12,668 14,814
3/31/1996 13,316 12,550 14,833
4/30/1996 13,979 13,176 15,223
5/31/1996 14,398 13,571 15,755
6/30/1996 14,203 13,386 15,777
7/31/1996 13,225 12,464 14,852
8/31/1996 13,728 12,938 15,236
9/30/1996 14,867 14,012 16,345
10/31/1996 14,859 14,005 16,444
11/30/1996 15,600 14,703 17,678
12/31/1996 15,054 14,189 17,332
1/31/1997 15,906 14,991 18,548
2/28/1997 15,468 14,579 18,422
3/31/1997 14,312 13,489 17,425
4/30/1997 14,929 14,071 18,582
5/31/1997 16,242 15,308 19,923
6/30/1997 16,695 15,735 20,721
7/31/1997 17,867 16,839 22,553
8/31/1997 17,046 16,066 21,233
9/30/1997 17,561 16,551 22,278
10/31/1997 16,852 15,883 21,455
11/30/1997 17,293 16,298 22,366
12/31/1997 17,648 16,633 22,617
1/31/1998 17,789 16,767 23,293
2/28/1998 19,010 17,917 25,045
3/31/1998 19,860 18,718 26,043
4/30/1998 20,213 19,051 26,404
5/31/1998 19,727 18,593 25,655
6/30/1998 20,753 19,560 27,226
7/31/1998 20,558 19,376 27,046
8/31/1998 17,294 16,300 22,987
9/30/1998 18,332 17,277 24,752
10/31/1998 19,671 18,540 26,742
11/30/1998 20,852 19,653 28,776
12/31/1998 22,780 21,470 31,371
1/31/1999 23,926 22,550 33,213
2/28/1999 22,581 21,283 31,695
3/31/1999 23,077 21,750 33,365
4/30/1999 23,529 22,176 33,407
5/31/1999 23,099 21,770 32,381
6/30/1999 24,322 22,923 34,649
7/31/1999 23,782 22,414 33,548
8/31/1999 23,991 22,611 34,096
9/30/1999 23,641 22,282 33,379
10/31/1999 25,288 23,834 35,900
11/30/1999 26,039 24,542 37,837
12/31/1999 28,413 26,780 41,773
1/31/2000 26,810 25,269 39,814
2/29/2000 27,929 26,323 41,760
3/31/2000 30,167 28,432 44,749
4/30/2000 29,272 27,589 42,620
5/31/2000 27,905 26,300 40,474
6/30/2000 29,744 28,034 43,541
7/31/2000 28,974 27,308 41,726
8/31/2000 31,239 29,443 45,504
9/30/2000 28,353 26,723 41,200
10/31/2000 27,370 25,796 39,250
11/30/2000 23,678 22,317 33,464
12/31/2000 22,867 21,552 32,405
1/31/2001 23,961 22,584 34,644
2/28/2001 20,708 19,517 28,763
3/31/2001 18,777 17,697 25,633
4/30/2001 21,316 20,090 28,875
5/31/2001 21,073 19,861 28,450
6/30/2001 20,743 19,550 27,791
7/31/2001 19,648 18,519 27,096
8/31/2001 18,067 17,028 24,880
9/30/2001 16,211 15,279 22,396
10/31/2001 16,956 15,981 23,571
11/30/2001 18,432 17,372 25,836
12/31/2001 18,189 17,143 25,787
1/31/2002 18,112 17,071 25,332
2/28/2002 17,457 16,453 24,280
3/31/2002 18,051 17,013 25,120
4/30/2002 17,045 16,065 23,070
5/31/2002 16,679 15,720 22,512
6/30/2002 15,307 14,427 20,429
7/31/2002 14,118 13,306 19,306
8/31/2002 14,133 13,320 19,364
9/30/2002 12,639 11,912 17,355
10/31/2002 13,554 12,774 18,947
11/30/2002 13,996 13,191 19,977
12/31/2002 13,081 12,329 18,597
1/31/2003 12,745 12,013 18,145
2/28/2003 12,806 12,070 18,062
3/31/2003 13,066 12,314 18,398
4/30/2003 13,828 13,033 19,759
5/31/2003 14,590 13,751 20,745
6/30/2003 14,727 13,881 21,030
7/31/2003 14,926 14,067 21,554
8/31/2003 15,109 14,240 22,090
9/30/2003 15,170 14,297 21,853
10/31/2003 15,901 14,987 23,081
11/30/2003 16,084 15,160 23,322
12/31/2003 16,573 15,621 24,129
Average Annual Total Returns -- December 31, 2003
- --------------------------------------------------------------------------------
Since
1 Year 5 Years 10 Years Inception
------ ------- -------- ---------
Class A (Inception 8/3/92)
Net Asset Value/1/ 26.69% -6.16% 5.18% --
With Maximum Sales Charge/2/ 19.45 -7.27 4.56 --
Class B (Inception 9/13/93)
Net Asset Value/1/ 25.93 -6.85 4.36 --
With CDSC/3/ 20.93 -7.12 4.36 --
Class C (Inception 12/30/94)
Net Asset Value/1/ 25.66 -6.89 -- 5.10%
With Maximum Sales Charge and CDSC/3/ 23.36 -7.08 -- 4.98
- --------------------------------------------------------------------------------
Since
Class C
1 Year 5 Years 10 Years Incept./7/
------ ------- -------- ----------
Comparative Performance
Russell 1000 Growth Index/4/ 29.75% -5.11% 9.21% 9.97%
Morningstar Large Growth Fund Avg./5/ 28.55 -3.20 7.96 9.11
Lipper Large Cap Core Funds Avg./6/ 25.60 -1.74 8.78 9.87
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Portfolio Facts
- --------------------------------------------------------------------------------
% of Net Assets
as of
Fund Composition 12/31/03 6/30/03
- --------------------------------------------------------
Common Stocks 99.1 99.2
- --------------------------------------------------------
Short Term Investments and Other 0.9 0.8
% of Net Assets
as of
Ten Largest Holdings 12/31/03 6/30/03
- --------------------------------------------------------
Intel Corp. 5.8 6.1
- --------------------------------------------------------
Microsoft Corp. 5.7 7.6
- --------------------------------------------------------
Pfizer, Inc. 4.9 4.9
- --------------------------------------------------------
Cisco Systems, Inc. 4.8 4.7
- --------------------------------------------------------
General Electric Co. 3.7 4.6
- --------------------------------------------------------
Fannie Mae 2.8 2.4
- --------------------------------------------------------
UnitedHealth Group, Inc. 2.7 2.6
- --------------------------------------------------------
Johnson & Johnson 2.3 2.4
- --------------------------------------------------------
New Century Financial Corp. 2.3 0.0
- --------------------------------------------------------
McKesson Corp. 2.2 0.0
% of Net Assets
as of
Five Largest Industries 12/31/03 6/30/03
- --------------------------------------------------------
Pharmaceuticals 10.8 16.1
- --------------------------------------------------------
Semiconductors 9.1 10.3
- --------------------------------------------------------
Software 9.0 10.1
- --------------------------------------------------------
Retailers 8.1 4.2
- --------------------------------------------------------
Financial Services 7.2 8.7
Portfolio holdings and asset allocations will vary.
See page 9 for information on the possible risks associated with an investment
in this fund.
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes maximum sales charge of 5.75%.
/3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase.
/4/ Russell 1000 Growth Index is an unmanaged index measuring the performance
of the largest 1000 U.S. growth companies within the Russell 3000.
/5/ Morningstar Large Growth Fund Average is the average performance without
sales charges of funds with similar investment objectives as calculated by
Morningstar, Inc.
/6/ Lipper Large Cap Core Funds Average is the average performance without
sales charges of funds with similar investment objectives as calculated by
Lipper Inc.
/7/ The since-inception performance comparisons shown for Class C shares is
calculated from 12/31/94.
8
- --------------------------------------------------------------------------------
Fund Risks
- --------------------------------------------------------------------------------
The views expressed in this report reflect those of the portfolio managers as of
the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because these funds are actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
Any mutual fund investment involves risk. The following notes describe some of
the risks of the CDC Nvest Funds discussed in this report. These risks may
affect the value of your investment. See the funds' prospectus for details.
The Funds
CGM Advisor Targeted Equity Fund invests primarily in a focused portfolio of
common stocks of large companies. It may also invest in foreign securities and
REITs.
Harris Associates Focused Value Fund invests primarily in a concentrated
portfolio of value stocks.
Harris Associates Growth and Income Fund may invest in growth stocks or value
stocks of large- and mid-size companies. It may also invest in foreign
securities.
Westpeak Capital Growth Fund invests primarily in common stocks of
growth-oriented companies. Its focus is primarily on large- and mid-cap
companies, but it may also invest in small-cap stocks.
The Risks
Small-cap stocks represent ownership of less well known, untried companies with
little or no track record; they may have limited financial and management
resources. Small-cap stocks may also be more volatile in price than the overall
market and less liquid than large-cap stocks.
Emerging growth stocks represent ownership of small, rapidly growing companies
that are typically more volatile than the overall market. These stocks expose
investors to the risks of small-cap stocks.
Growth stocks tend to be more sensitive to market movements because their stock
prices are based on future expectations, which may not be realized.
Value stocks may fall out of favor with investors and underperform the broader
market; there is no guarantee that they will return to favor.
Concentrating on few stocks allows changes in the value of a single security (up
or down) to have a greater impact on the fund's performance than it would if the
fund were more broadly diversified. This means fund shares may be more volatile
in price and more vulnerable to losses.
Foreign and emerging market securities convey special risks, including
political, economic, regulatory and currency risks, as well as differing
accounting standards. Emerging markets may be more subject to these risks than
developed markets.
Real Estate Investment Trusts (REITs) may change in price with underlying real
estate values, rising interest rates, limited diversification of holdings. They
may also incur other mortgage-related risks, such as pre-payment risks.
- --------------------------------------------------------------------------------
NOT FDIC INSURED . MAY LOSE VALUE . NO BANK GUARANTEE
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
CGM Advisor Targeted Equity Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2003
Shares Description Value (a)
- -------------------------------------------------------------------------------
Common Stocks -- 99.5% of Total Net Assets
Beverages, Food & Tobacco -- 5.3%
765,000 Altria Group, Inc. $ 41,631,300
------------
Biotechnology -- 2.2%
187,000 Genentech, Inc.(c) 17,497,590
------------
Building Materials -- 2.2%
309,000 Lowe's Cos., Inc.(d) 17,115,510
------------
Communications -- 5.2%
1,520,000 America Movil SA de CV (ADR) 41,556,800
------------
Computers -- 0.9%
200,000 Dell, Inc.(c) 6,792,000
------------
Cosmetics & Personal Care -- 4.1%
324,000 Procter & Gamble Co. 32,361,120
------------
Entertainment & Leisure -- 4.7%
1,045,000 International Game Technology 37,306,500
------------
Financial Services -- 5.2%
850,000 Citigroup, Inc. 41,259,000
------------
Heavy Machinery -- 5.3%
650,000 Deere & Co. 42,282,500
------------
Home Construction, Furnishings & Appliances -- 25.9%
355,000 Centex Corp. 38,215,750
1,527,200 D.R. Horton, Inc. 66,066,672
665,900 Lennar Corp., Class A 63,926,400
396,300 Pulte Homes, Inc. 37,101,606
------------
205,310,428
------------
Industrial - Diversified -- 5.2%
487,000 3M Co. 41,409,610
------------
Internet -- 1.0%
120,000 eBay, Inc.(c) 7,750,800
------------
Oil & Gas -- 6.2%
240,000 Exxon Mobil Corp. 9,840,000
420,000 Total SA (ADR) 38,854,200
------------
48,694,200
------------
Pharmaceuticals -- 6.6%
500,000 Pfizer, Inc. 17,665,000
815,000 Wyeth Corp. 34,596,750
------------
52,261,750
------------
Semiconductors -- 8.8%
725,000 Analog Devices, Inc. 33,096,250
1,125,000 Intel Corp.(d) 36,225,000
------------
69,321,250
------------
Telephone Systems -- 4.3%
1,200,000 Nextel Communications, Inc., Class A(c) 33,672,000
------------
Textiles, Clothing & Fabrics -- 4.5%
525,000 Nike, Inc., Class B(d) 35,941,500
------------
Transportation -- 1.9%
205,000 United Parcel Service, Inc., Class B 15,282,750
------------
Total Common Stocks (Identified Cost $596,060,329) 787,446,608
------------
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------
Short Term Investments -- 3.3%
$1,499,522 Repurchase Agreement with Investors Bank & Trust
Co. dated 12/31/2003 at 0.75% to be repurchased at
$1,499,584 on 1/02/2004, collateralized by
$24,249,121 Government National Mortgage
Association Bond, 5.625%, due 10/20/2023 valued at
$1,574,498 $ 1,499,522
1,126,084 Bank of Montreal, 1.06%, due 1/15/2004(e) 1,126,084
3,542,213 Bank of Nova Scotia, 1.08%, due 3/03/2004(e) 3,542,213
1,574,317 BNP Paribas, 0.97%, due 1/07/2004(e) 1,574,317
787,158 BNP Paribas, 1.00%, due 1/21/2004(e) 787,158
787,158 Den Danske Bank, 1.08%, due 1/20/2004(e) 787,158
4,329,371 Fleet National Bank, 1.00%, due 1/21/2004(e) 4,329,371
314,863 Harris Trust & Savings Bank, 1.05%, due
1/29/2004(e) 314,863
92,097 Merrill Lynch Premier Institutional Fund(e) 92,097
5,037,814 Merrimac Cash Fund, Premium Class(e) 5,037,814
393,579 Prefco, 1.091%, due 1/16/2004(e) 393,579
2,361,475 Royal Bank of Scotland, 1.08%, due 1/15/2004(e) 2,361,475
787,158 Sheffiled Receivables Corp., 1.081%,
due 1/28/2004(e) 787,158
393,579 Sheffiled Receivables Corp., 1.091%,
due 1/06/2004(e) 393,579
1,574,317 Southtrust Bank, 1.08%, due 1/16/2004(e) 1,574,317
1,574,317 The Bank of the West, 1.075%, due 1/14/2004(e) 1,574,317
Total Short Term Investments (Identified Cost
$26,175,022) ------------
26,175,022
------------
Total Investments -- 102.8%
(Identified Cost $622,235,351) (b) 813,621,630
Other assets less liabilities (22,106,375)
------------
Total Net Assets -- 100% $791,515,255
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2003, the net unrealized appreciation on
investments based on cost of $622,801,420 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $190,894,038
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (73,828)
------------
Net unrealized appreciation $190,820,210
============
At December 31, 2003, the Fund had a capital loss carryover of
approximately $327,887,176 of which $132,783,707 expires on December 31,
2009 and $195,103,469 expires on December 31, 2010. These amounts may be
available to offset future realized capital gains, if any, to the extent
provided by regulations.
At December 31, 2003, there was no undistributed ordinary income or
long-term capital gains except for unrealized appreciation/depreciation
disclosed on a tax basis.
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31,
2003.
(e) Represents investments of securities lending collateral.
ADR An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank
representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States.
See accompanying notes to financial statements.
10
- --------------------------------------------------------------------------------
Harris Associates Focused Value Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2003
Shares Description Value (a)
- -------------------------------------------------------------------------------
Common Stocks -- 91.6% of Total Net Assets
Banking -- 16.1%
1,314,000 Washington Mutual, Inc. $ 52,717,680
------------
Biotechnology -- 4.1%
235,300 Chiron Corp.(c) 13,409,747
------------
Commercial Services -- 12.4%
505,900 H&R Block, Inc.(d) 28,011,683
108,500 Moody's Corp. 6,569,675
203,000 Valassis Communications, Inc.(c)(d) 5,958,050
------------
40,539,408
------------
Computers -- 4.0%
472,100 SunGard Data Systems, Inc.(c) 13,081,891
------------
Food Retailers -- 4.0%
710,000 Kroger Co. (The)(c)(d) 13,142,100
------------
Lodging -- 2.6%
179,700 Marriott International, Inc., Class A 8,302,140
------------
Media - Broadcasting & Publishing -- 10.8%
181,400 Knight-Ridder, Inc. 14,034,918
649,400 Liberty Media Corp., Class A(c) 7,721,366
758,700 Time Warner, Inc.(c) 13,649,013
------------
35,405,297
------------
Oil & Gas -- 4.5%
267,000 Burlington Resources, Inc.(d) 14,786,460
------------
Pharmaceuticals -- 8.5%
480,100 Bristol-Myers Squibb Co. 13,730,860
351,000 Omnicare, Inc. 14,176,890
------------
27,907,750
------------
Restaurants -- 5.4%
513,900 Yum! Brands, Inc.(c) 17,678,160
------------
Retailers -- 6.6%
312,200 J.C. Penney Co., Inc. 8,204,616
611,900 TJX Cos., Inc. 13,492,395
------------
21,697,011
------------
Software -- 5.1%
402,700 First Data Corp. 16,546,943
------------
Telephone Systems -- 3.9%
779,700 Sprint Corp. (FON Group)(d) 12,802,674
------------
Tools -- 3.6%
241,300 Black & Decker Corp.(d) 11,900,916
------------
Total Common Stocks (Identified Cost $245,816,626) 299,918,177
------------
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------
Short Term Investments -- 14.2%
$27,447,303 Repurchase Agreement with Investors Bank &
Trust Co. dated 12/31/2003 at 0.75% to be
repurchased at $27,448,447 on 1/02/2004,
collateralized by $23,964,164 Federal National
Mortgage Association Bond, 3.646%, due 4/01/2033
valued at $24,306,130 and $4,476,859 Government
National Mortgage Association Bond, 3.50%, due
8/20/2029 valued at $4,513,538 $ 27,447,303
872,781 Bank of Montreal, 1.06%, due 1/15/2004(e) 872,781
2,745,421 Bank of Nova Scotia, 1.08%, due 3/03/2004(e) 2,745,421
1,220,187 BNP Paribas, 0.97%, due 1/07/2004(e) 1,220,187
610,094 BNP Paribas, 1.00%, due 1/21/2004(e) 610,094
610,094 Den Danske Bank, 1.08%, due 1/20/2004(e) 610,094
3,355,515 Fleet National Bank, 1.00%, due 1/21/2004(e) 3,355,515
244,037 Harris Trust & Savings Bank, 1.05%, due
1/29/2004(e) 244,037
71,380 Merrill Lynch Premier Institutional Fund(e) 71,380
3,904,598 Merrimac Cash Fund, Premium Class(e) 3,904,598
305,047 Prefco, 1.091%, due 1/16/2004(e) 305,047
1,830,281 Royal Bank of Scotland, 1.08%, due 1/15/2004(e) 1,830,281
610,094 Sheffiled Receivables Corp., 1.081%, due
1/28/2004(e) 610,094
305,047 Sheffiled Receivables Corp., 1.091%, due
1/06/2004(e) 305,047
1,220,187 Southtrust Bank, 1.08%, due 1/16/2004(e) 1,220,187
1,220,187 The Bank of the West, 1.075%, due 1/14/2004(e) 1,220,187
Total Short Term Investments (Identified Cost ------------
$46,572,253) 46,572,253
------------
Total Investments -- 105.8%
(Identified Cost $292,388,879)(b) 346,490,430
Other assets less liabilities (19,088,797)
------------
Total Net Assets -- 100% $327,401,633
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2003, the net unrealized appreciation on
investments based on cost of $292,457,278 for federal income
tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 56,431,350
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost over
value (2,398,198)
------------
Net unrealized appreciation $ 54,033,152
============
At December 31, 2003, the Fund had a capital loss carryover of
approximately $21,372,149 of which $1,480,080 expires on December 31, 2009,
$6,713,084 expires on December 31, 2010 and $13,178,985 expires on December
31, 2011. These amounts may be available to offset future realized capital
gains, if any, to the extent provided by regulations.
At December 31, 2003, there was no undistributed ordinary income or
long-term capital gains except for unrealized appreciation/depreciation
disclosed on a tax basis.
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31,
2003.
(e) Represents investments of securities lending collateral.
See accompanying notes to financial statements.
11
- --------------------------------------------------------------------------------
Harris Associates Growth and Income Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2003
Shares Description Value (a)
- --------------------------------------------------------------------------------
Common Stocks -- 95.9% of Total Net Assets
Advertising -- 2.7%
612,300 Interpublic Group of Cos. (The), Inc.(c)(d) $ 9,551,880
------------
Aerospace & Defense -- 3.4%
358,700 Honeywell International, Inc. 11,991,341
------------
Apparel Retailers -- 3.3%
497,500 Gap (The), Inc.(d) 11,546,975
------------
Automotive -- 0.4%
32,400 Harley-Davidson, Inc. 1,539,972
------------
Banking -- 5.9%
236,400 U.S. Bancorp 7,039,992
334,300 Washington Mutual, Inc. 13,412,116
------------
20,452,108
------------
Beverages, Food & Tobacco -- 12.9%
85,300 Anheuser-Busch Cos., Inc. 4,493,604
208,100 Diageo PLC (ADR)(d) 11,000,166
102,300 General Mills, Inc. 4,634,190
241,600 H.J. Heinz Co. 8,801,488
290,700 Kraft Foods, Inc., Class A 9,366,354
105,000 Nestle SA (ADR) 6,552,945
------------
44,848,747
------------
Building Materials -- 6.8%
388,600 Home Depot, Inc. 13,791,414
364,500 Masco Corp. 9,990,945
------------
23,782,359
------------
Commercial Services -- 1.2%
182,800 Cendant Corp.(c)(d) 4,070,956
------------
Entertainment & Leisure -- 3.8%
176,000 Carnival Corp.(d) 6,992,480
265,500 Walt Disney Co. (The) 6,194,115
------------
13,186,595
------------
Environmental Control -- 3.3%
389,300 Waste Management, Inc. 11,523,280
------------
Financial Services -- 3.3%
151,500 Fannie Mae 11,371,590
------------
Food Retailers -- 3.8%
538,400 Kroger Co. (The)(c)(d) 9,965,784
148,500 Safeway, Inc.(c) 3,253,635
------------
13,219,419
------------
Household Products -- 4.0%
126,600 Fortune Brands, Inc. 9,050,634
91,900 Johnson & Johnson 4,747,554
------------
13,798,188
------------
Industrial - Diversified -- 1.1%
47,900 Illinois Tool Works, Inc. 4,019,289
------------
Insurance -- 2.0%
43,200 Aflac, Inc. 1,562,976
96,000 MGIC Investment Corp.(d) 5,466,240
------------
7,029,216
------------
Media - Broadcasting & Publishing -- 13.0%
249,500 Comcast Corp., Special Class A(c) 7,804,360
34,800 Gannett Co., Inc. 3,102,768
383,618 Hughes Electronics Corp.(c) 6,348,878
1,221,100 Liberty Media Corp., Class A(c) 14,518,879
750,600 Time Warner, Inc.(c) 13,503,294
------------
45,278,179
------------
Medical Supplies-- 2.1%
124,500 Guidant Corp. $ 7,494,900
------------
Office & Business Equipment -- 3.5%
875,000 Xerox Corp.(c)(d) 12,075,000
------------
Oil & Gas -- 2.8%
115,100 Burlington Resources, Inc. 6,374,238
51,846 ConocoPhillips 3,399,542
------------
9,773,780
------------
Pharmaceuticals -- 6.7%
151,500 Abbott Laboratories 7,059,900
242,500 Bristol-Myers Squibb Co. 6,935,500
53,500 Cardinal Health, Inc. 3,272,060
129,400 Merck & Co., Inc. 5,978,280
------------
23,245,740
------------
Restaurants -- 3.6%
511,800 McDonald's Corp. 12,707,994
------------
Retailers -- 1.9%
96,100 Costco Wholesale Corp.(c) 3,572,998
68,900 Kohl's Corp.(c) 3,096,366
------------
6,669,364
------------
Software -- 4.4%
90,500 Automatic Data Processing, Inc. 3,584,705
282,200 First Data Corp. 11,595,598
------------
15,180,303
------------
Total Common Stocks (Identified Cost $279,657,381) 334,357,175
------------
Preferred Stocks -- 0.4%
Media - Broadcasting & Publishing-- 0.4%
42,906 News Corp. (The), Ltd. (ADR) 1,297,907
------------
Total Preferred Stocks (Identified Cost $1,239,983) 1,297,907
------------
Principal
Amount
- -----------
Short Term Investments -- 17.1%
$11,860,966 Repurchase Agreement with Investors Bank &
Trust Co. dated 12/31/2003 at 0.75% to be
repurchased at $11,861,461 on 1/02/2004,
collateralized by $12,221,715 Federal National
Mortgage Association Bond, 4.233%, due 12/01/2033
valued at $12,454,015 11,860,966
2,176,565 Bank of Montreal, 1.06%, due 1/15/2004(e) 2,176,565
6,846,610 Bank of Nova Scotia, 1.08%, due 3/03/2004(e) 6,846,610
3,042,938 BNP Paribas, 0.97%, due 1/07/2004(e) 3,042,938
1,521,469 BNP Paribas, 1.00%, due 1/21/2004(e) 1,521,469
1,521,469 Den Danske Bank, 1.08%, due 1/20/2004(e) 1,521,469
8,368,079 Fleet National Bank, 1.00%, due 1/21/2004(e) 8,368,079
608,588 Harris Trust & Savings Bank, 1.05%, due
1/29/2004(e) 608,588
178,011 Merrill Lynch Premier Institutional Fund(e) 178,011
9,737,401 Merrimac Cash Fund, Premium Class(e) 9,737,401
760,734 Prefco, 1.091%, due 1/16/2004(e) 760,734
4,564,407 Royal Bank of Scotland, 1.08%, due 1/15/2004(e) 4,564,407
1,521,469 Sheffiled Receivables Corp., 1.081%, due
1/28/2004(e) 1,521,469
760,734 Sheffiled Receivables Corp., 1.091%, due
1/06/2004(e) 760,734
3,042,938 Southtrust Bank, 1.08%, due 1/16/2004(e) 3,042,938
3,042,938 The Bank of the West, 1.075%, due 1/14/2004(e) 3,042,938
------------
Total Short Term Investments (Identified Cost
$59,555,316) 59,555,316
------------
See accompanying notes to financial statements.
12
- --------------------------------------------------------------------------------
Harris Associates Growth and Income Fund
Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of December 31, 2003
- --------------------------------------------------------------------------------
Total Investments -- 113.4%
(Identified Cost $340,452,680) (b) $395,210,398
Other assets less liabilities (46,769,135)
------------
Total Net Assets -- 100% $348,441,263
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2003, the net unrealized appreciation on
investments based on cost of $342,363,024 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 55,021,253
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (2,173,879)
------------
Net unrealized appreciation $ 52,847,374
============
At December 31, 2003, the Fund had a capital loss carryover of
approximately $119,915,736 of which $19,895,206 expires on December 31,
2008, $69,951,207 expires on December 31, 2009, $20,103,857 expires on
December 31, 2010 and $9,965,466 expires on December 31, 2011. These
amounts may be available to offset future realized capital gains, if any,
to the extent provided by regulations.
At December 31, 2003, there was no undistributed ordinary income or
long-term capital gains except for unrealized appreciation/depreciation
disclosed on a tax basis.
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31,
2003.
(e) Represents investments of securities lending collateral.
ADR An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank
representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States.
See accompanying notes to financial statements.
13
- --------------------------------------------------------------------------------
Westpeak Capital Growth Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2003
Shares Description Value (a)
- --------------------------------------------------------------------------------
Common Stocks -- 99.1% of Total Net Assets
Aerospace & Defense -- 0.8%
22,500 Rockwell Collins, Inc. $ 675,675
----------
Apparel Retailers -- 2.1%
74,800 Gap (The), Inc. 1,736,108
----------
Automotive -- 1.5%
116,000 Delphi Corp. 1,184,360
----------
Banking -- 2.7%
16,800 Fifth Third Bancorp 992,880
14,400 First Tennessee National Corp. 635,040
9,300 Wells Fargo & Co. 547,677
----------
2,175,597
----------
Beverages, Food & Tobacco -- 5.8%
7,100 Altria Group, Inc. 386,382
4,200 Anheuser-Busch Cos., Inc. 221,256
9,800 Brown-Forman Corp., Class B 915,810
46,700 H.J. Heinz Co. 1,701,281
7,500 Hershey Foods Corp. 577,425
38,600 Pepsi Bottling Group, Inc. 933,348
----------
4,735,502
----------
Biotechnology -- 2.2%
28,800 Amgen, Inc.(c) 1,779,840
----------
Building Materials -- 3.6%
36,550 Home Depot, Inc. 1,297,159
59,100 Masco Corp. 1,619,931
----------
2,917,090
----------
Commercial Services -- 1.8%
40,600 Cendant Corp.(c) 904,162
23,000 Viad Corp. 575,000
----------
1,479,162
----------
Communications -- 5.1%
159,400 Cisco Systems, Inc.(c) 3,871,826
7,400 EchoStar Communications Corp., Class A(c) 251,600
----------
4,123,426
----------
Computers -- 3.9%
33,800 Dell, Inc.(c) 1,147,848
61,200 EMC Corp.(c) 790,704
43,100 SunGard Data Systems, Inc.(c) 1,194,301
----------
3,132,853
----------
Cosmetics & Personal Care -- 1.2%
20,400 Estee Lauder Cos. (The), Inc., Class A 800,904
1,900 Procter & Gamble Co. 189,772
----------
990,676
----------
Electronics -- 0.9%
25,800 Jabil Circuit, Inc.(c) 730,140
----------
Financial Services -- 7.2%
33,300 AG Edwards, Inc. 1,206,459
22,200 CompuCredit Corp.(c) 472,416
30,500 Fannie Mae 2,289,330
47,200 New Century Financial Corp.(d) 1,872,424
----------
5,840,629
----------
Health Care Providers -- 4.2%
14,700 Health Net, Inc.(c) 480,690
37,900 UnitedHealth Group, Inc. 2,205,022
7,100 WellPoint Health Networks, Inc.(c) 688,629
----------
3,374,341
----------
Healthcare-Services -- 3.3%
23,100 Laboratory Corp. of America Holdings(c) $ 853,545
55,900 McKesson Corp. 1,797,744
----------
2,651,289
----------
Heavy Machinery -- 0.7%
9,800 SPX Corp.(c)(d) 576,338
----------
Household Products -- 2.3%
36,500 Johnson & Johnson 1,885,590
----------
Industrial - Diversified -- 3.7%
96,700 General Electric Co. 2,995,766
----------
Insurance -- 1.1%
14,000 American International Group, Inc. 927,920
----------
Medical Supplies -- 5.3%
35,300 Apogent Technologies, Inc.(c)(d) 813,312
41,500 Becton, Dickinson & Co. 1,707,310
5,800 Boston Scientific Corp.(c) 213,208
15,300 Guidant Corp. 921,060
10,600 St. Jude Medical, Inc.(c) 650,310
----------
4,305,200
----------
Mining -- 0.4%
6,900 Freeport-McMoran Copper & Gold, Inc., Class B(d) 290,697
----------
Pharmaceuticals -- 10.8%
37,600 Abbott Laboratories 1,752,160
2,700 Gilead Sciences, Inc.(c) 156,978
27,700 MedImmune, Inc.(c) 703,580
14,700 Merck & Co., Inc. 679,140
60,500 Mylan Labratories, Inc. 1,528,230
111,550 Pfizer, Inc. 3,941,062
----------
8,761,150
----------
Restaurants -- 0.2%
3,400 CEC Entertainment, Inc.(c) 161,126
----------
Retailers -- 8.1%
29,000 Barnes & Noble, Inc.(c) 952,650
18,600 Bed Bath & Beyond, Inc.(c) 806,310
39,100 Family Dollar Stores 1,402,908
38,300 RadioShack Corp. 1,175,044
14,000 Staples, Inc.(c)(d) 382,200
30,300 Target Corp. 1,163,520
13,300 Wal-Mart Stores, Inc. 705,565
----------
6,588,197
----------
Semiconductors -- 9.1%
28,000 Altera Corp.(c)(d) 635,600
145,700 Intel Corp. 4,691,540
10,000 QLogic Corp.(c) 516,000
39,100 Xilinx, Inc.(c) 1,514,734
----------
7,357,874
----------
Software -- 9.0%
11,400 Citrix Systems, Inc.(c) 241,794
6,200 Electronic Arts, Inc.(c) 296,236
20,300 First Data Corp. 834,127
9,700 IMS Health, Inc. 241,142
169,100 Microsoft Corp. 4,657,014
74,800 Oracle Corp.(c) 987,360
----------
7,257,673
----------
Textiles, Clothing & Fabrics -- 0.3%
7,600 Jones Apparel Group, Inc. 267,748
----------
See accompanying notes to financial statements.
14
- --------------------------------------------------------------------------------
Westpeak Capital Growth Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of December 31, 2003
Shares Description Value (a)
- --------------------------------------------------------------------------------
Toys, Games & Hobbies -- 1.8%
74,600 Mattel, Inc. $ 1,437,542
-----------
Total Common Stocks (Identified Cost $80,477,764) 80,339,509
-----------
Principal
Amount
- ---------
Short Term Investments -- 5.6%
$878,356 Repurchase Agreement with Investors Bank & Trust Co.
dated 12/31/2003 at 0.75% to be repurchased at
$878,393 on 1/02/2004, collateralized by $898,076
Federal National Mortgage Association Bond, 5.221%,
due 6/01/2027 valued at $922,473 878,356
167,090 Bank of Montreal, 1.06%, due 1/15/2004(e) 167,090
525,599 Bank of Nova Scotia, 1.08%, due 3/03/2004(e) 525,599
233,600 BNP Paribas, 0.97%, due 1/07/2004(e) 233,600
116,800 BNP Paribas, 1.00%, due 1/21/2004(e) 116,800
116,800 Den Danske Bank, 1.08%, due 1/20/2004(e) 116,800
642,399 Fleet National Bank, 1.00%, due 1/21/2004(e) 642,399
46,720 Harris Trust & Savings Bank, 1.05%, due 1/29/2004(e) 46,720
13,665 Merrill Lynch Premier Institutional Fund(e) 13,665
747,520 Merrimac Cash Fund, Premium Class(e) 747,520
58,400 Prefco, 1.091%, due 1/16/2004(e) 58,400
350,399 Royal Bank of Scotland, 1.08%, due 1/15/2004(e) 350,399
116,800 Sheffiled Receivables Corp., 1.081%, due 1/28/2004(e) 116,800
58,400 Sheffiled Receivables Corp., 1.091%, due 1/06/2004(e) 58,400
233,600 Southtrust Bank, 1.08%, due 1/16/2004(e) 233,600
233,600 The Bank of the West, 1.075%, due 1/14/2004(e) 233,600
-----------
Total Short Term Investments (Identified Cost
$4,539,748) 4,539,748
-----------
Total Investments -- 104.7%
(Identified Cost $85,017,512) (b) 84,879,257
Other assets less liabilities (3,840,268)
-----------
Total Net Assets -- 100% $81,038,989
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2003, the net unrealized depreciation
on investments based on cost of $85,173,545 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $ 7,546,539
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (7,840,827)
-----------
Net unrealized depreciation $ (294,288)
===========
At December 31, 2003, the Fund had a capital loss carryover of
approximately $57,629,674 of which $26,648,714 expires on December 31,
2009, $26,883,047 expires on December 31, 2010 and $4,097,913 expires on
December 31, 2011. These amounts may be available to offset future realized
capital gains, if any, to the extent provided by regulations.
At December 31, 2003, there was no undistributed ordinary income or
long-term capital gains except for unrealized appreciation/depreciation
disclosed on a tax basis.
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31,
2003.
(e) Represents investments of securities lending collateral.
See accompanying notes to financial statements.
15
FINANCIAL STATEMENTS
16
- --------------------------------------------------------------------------------
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
December 31, 2003
CGM Advisor Harris Associates Harris Associates Westpeak
Targeted Equity Focused Value Growth and Capital Growth
Fund Fund Income Fund Fund
--------------- ----------------- ----------------- --------------
ASSETS
Investments at cost $ 622,235,351 $292,388,879 $ 340,452,680 $ 85,017,512
Net unrealized appreciation (depreciation) 191,386,279 54,101,551 54,757,718 (138,255)
------------- ------------ ------------- ------------
Investments at value 813,621,630 346,490,430 395,210,398 84,879,257
Receivable for Fund shares sold 214,722 918,551 266,543 84,333
Receivable for securities sold 16,780,321 1,761,117 1,760,801 --
Dividends and interest receivable 948,453 298,293 422,548 95,787
Receivable from investment adviser -- 67,874 35,927 --
Securities lending income receivable 1,646 1,836 4,379 326
------------- ------------ ------------- ------------
TOTAL ASSETS 831,566,772 349,538,101 397,700,596 85,059,703
------------- ------------ ------------- ------------
LIABILITIES
Collateral on securities loaned, at value 24,675,500 19,124,950 47,694,350 3,661,392
Payable for securities purchased 13,003,210 1,632,126 -- --
Payable for Fund shares redeemed 1,044,762 347,905 958,397 136,351
Management fees payable 463,717 776,572 196,226 50,908
Deferred Trustees' fees 439,473 19,853 172,515 60,327
Transfer agent fees payable 253,630 111,857 124,298 45,983
Accounting and administrative fees payable 43,382 17,287 18,508 4,436
Other accounts payable and accrued expenses 127,843 105,918 95,039 61,317
------------- ------------ ------------- ------------
TOTAL LIABILITIES 40,051,517 22,136,468 49,259,333 4,020,714
------------- ------------ ------------- ------------
NET ASSETS $ 791,515,255 $327,401,633 $ 348,441,263 $ 81,038,989
============= ============ ============= ============
NET ASSETS CONSIST OF:
Paid in capital $ 928,933,208 $294,760,483 $ 415,604,289 $139,023,277
Undistributed (overdistributed) net investment
income (loss) (350,987) (19,853) (94,664) (60,326)
Accumulated net realized gain (loss) on investments (328,453,245) (21,440,548) (121,826,080) (57,785,707)
Net unrealized appreciation (depreciation)
of investments 191,386,279 54,101,551 54,757,718 (138,255)
------------- ------------ ------------- ------------
NET ASSETS $ 791,515,255 $327,401,633 $ 348,441,263 $ 81,038,989
============= ============ ============= ============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 724,214,470 $ 95,956,914 $ 215,259,159 $ 63,379,592
============= ============ ============= ============
Shares of beneficial interest 91,222,788 8,136,177 17,574,914 5,832,352
============= ============ ============= ============
Net asset value and redemption price per share $ 7.94 $ 11.79 $ 12.25 $ 10.87
============= ============ ============= ============
Offering price per share $ 8.42 $ 12.51 $ 13.00 $ 11.53
============= ============ ============= ============
Class B shares: (redemption price is equal to net
asset value less any applicable
contingent deferred sales charges)
Net assets $ 56,880,440 $107,017,255 $ 91,084,616 $ 16,485,059
============= ============ ============= ============
Shares of beneficial interest 7,611,494 9,266,614 7,824,870 1,732,157
============= ============ ============= ============
Net asset value and offering price per share $ 7.47 $ 11.55 $ 11.64 $ 9.52
============= ============ ============= ============
Class C shares: (redemption price is equal to net
asset value less any applicable
contingent deferred sales charges)
Net assets $ 2,647,231 $124,427,464 $ 15,552,537 $ 1,174,338
============= ============ ============= ============
Shares of beneficial interest 354,377 10,772,020 1,337,684 123,625
============= ============ ============= ============
Net asset value per share $ 7.47 $ 11.55 $ 11.63 $ 9.50
============= ============ ============= ============
Offering price per share $ 7.55 $ 11.67 $ 11.75 $ 9.60
============= ============ ============= ============
Class Y shares:
Net assets $ 7,773,114 $ -- $ 26,544,951 $ --
============= ============ ============= ============
Shares of beneficial interest 962,801 -- 2,116,229 --
============= ============ ============= ============
Net asset value, offering and redemption price
per share $ 8.07 $ -- $ 12.54 $ --
============= ============ ============= ============
See accompanying notes to financial statements.
17
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
For the Year Ended Ended December 31, 2003
CGM Advisor Harris Associates Harris Associates Westpeak
Targeted Equity Focused Value Growth and Capital Growth
Fund Fund Income Fund Fund
--------------- ----------------- ----------------- --------------
INVESTMENT INCOME
Dividends $ 7,547,744 $ 3,732,774 $ 4,017,730 $ 799,357
Interest 11,106 70,346 49,714 1,465
Securities lending income 34,519 16,238 23,158 3,748
Less net foreign taxes withheld (22,582) -- (10,329) --
------------ ----------- ----------- -----------
7,570,787 3,819,358 4,080,273 804,570
------------ ----------- ----------- -----------
Expenses
Management fees 4,896,799 2,704,949 1,872,859 577,451
Service fees - Class A 1,604,248 193,897 414,415 149,936
Service and distribution fees - Class B 491,820 934,937 788,312 160,891
Service and distribution fees - Class C 23,108 994,426 93,302 9,298
Trustees' fees and expenses 167,756 34,192 58,786 30,363
Accounting and administrative 535,402 205,807 202,313 59,187
Custodian 119,238 47,055 53,971 46,196
Transfer agent fees - Class A, Class B, Class C 3,094,096 1,062,171 1,239,679 450,411
Transfer agent fees - Class Y 9,619 -- 20,211 --
Audit and tax services 36,138 32,030 33,293 33,086
Legal 67,539 28,240 23,936 9,426
Shareholder reporting 162,037 93,683 92,332 31,344
Registration 56,665 60,453 64,840 37,156
Miscellaneous 85,118 45,470 51,662 18,030
------------ ----------- ----------- -----------
Total expenses before reductions 11,349,583 6,437,310 5,009,911 1,612,775
------------ ----------- ----------- -----------
Less reimbursement/waiver -- (390,033) (471,915) --
Less reductions (656,166) (26,617) (56,865) (27,349)
------------ ----------- ----------- -----------
Net expenses 10,693,417 6,020,660 4,481,131 1,585,426
------------ ----------- ----------- -----------
Net investment income (loss) (3,122,630) (2,201,302) (400,858) (780,856)
------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on:
Realized gain (loss) on investments - net 106,028,525 (5,444,642) (6,367,843) (1,825,695)
Change in unrealized appreciation (depreciation) of:
Investments - net 147,570,284 74,168,695 78,036,056 20,729,574
------------ ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 253,598,809 68,724,053 71,668,213 18,903,879
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $250,476,179 $66,522,751 $71,267,355 $18,123,023
============ =========== =========== ===========
See accompanying notes to financial statements.
18
Statements of Changes in Net Assets
CGM Advisor Harris Associates
Targeted Equity Fund Focused Value Fund
------------------------------ ---------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
------------- -------------- ------------ ------------
FROM OPERATIONS:
Net investment income (loss) $ (3,122,630) $ (8,332,759) $ (2,201,302) $ (1,930,970)
Net realized gain (loss) on investments 106,028,525 (243,684,297) (5,444,642) (14,515,826)
Net change in unrealized appreciation
(depreciation) of investments. 147,570,284 (31,792,914) 74,168,695 (26,008,735)
------------- -------------- ------------ ------------
Increase (decrease) in net assets
resulting from operations 250,476,179 (283,809,970) 66,522,751 (42,455,531)
------------- -------------- ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
-- -- -- --
------------- -------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS (115,291,688) (163,710,155) 20,155,440 140,115,357
------------- -------------- ------------ ------------
Total increase (decrease) in net assets 135,184,491 (447,520,125) 86,678,191 97,659,826
NET ASSETS
Beginning of period 656,330,764 1,103,850,889 240,723,442 143,063,616
------------- -------------- ------------ ------------
End of period $ 791,515,255 $ 656,330,764 $327,401,633 $240,723,442
============= ============== ============ ============
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ (350,987) $ (238,514) $ (19,853) $ (8,974)
============= ============== ============ ============
See accompanying notes to financial statements.
19
Harris Associates Westpeak Capital
Growth and Income Fund Growth Fund
- ---------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
- ------------ ------------- ------------- ------------
$ (400,858) $ (503,999) $ (780,856) $ (1,058,415)
(6,367,843) (23,052,758) (1,825,695) (24,033,239)
78,036,056 (40,836,656) 20,729,574 (9,195,048)
- ------------ ------------- ------------ ------------
71,267,355 (64,393,413) 18,123,023 (34,286,702)
- ------------ ------------- ------------ ------------
-- -- -- --
- ------------ ------------- ------------ ------------
57,978,163 (70,380,717) (12,927,717) (25,435,438)
- ------------ ------------- ------------ ------------
129,245,518 (134,774,130) 5,195,306 (59,722,140)
219,195,745 353,969,875 75,843,683 135,565,823
- ------------ ------------- ------------ ------------
$348,441,263 $ 219,195,745 $ 81,038,989 $ 75,843,683
============ ============= ============ ============
$ (94,664) $ (54,661) $ (60,326) $ (42,027)
============ ============= ============ ============
20
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period.
Income (loss) from investment operations:
Net asset -----------------------------------------
value, Net Net realized
beginning investment and unrealized Total from
of income gain (loss) on investment
the period (loss) investments operations
---------- ---------- -------------- ----------
CGM Advisor Targeted Equity Fund
Class A
12/31/2003 $ 5.56 $(0.03)(c) $ 2.41 $ 2.38
12/31/2002 7.81 (0.06)(c) (2.19) (2.25)
12/31/2001 9.36 (0.03)(c) (1.49) (1.52)
12/31/2000 11.00 0.09(c) (0.60) (0.51)
12/31/1999 11.36 0.02 1.57 1.59
Class B
12/31/2003 5.28 (0.07)(c) 2.26 2.19
12/31/2002 7.47 (0.11)(c) (2.08) (2.19)
12/31/2001 9.02 (0.09)(c) (1.43) (1.52)
12/31/2000 10.67 0.01(c) (0.58) (0.57)
12/31/1999 11.15 (0.05) 1.52 1.47
Class C
12/31/2003 5.27 (0.07)(c) 2.27 2.20
12/31/2002 7.47 (0.11)(c) (2.09) (2.20)
12/31/2001 9.02 (0.09)(c) (1.43) (1.52)
12/31/2000 10.67 0.01(c) (0.58) (0.57)
12/31/1999 11.15 (0.05) 1.52 1.47
Class Y
12/31/2003 5.63 0.01(c) 2.43 2.44
12/31/2002 7.85 (0.02)(c) (2.20) (2.22)
12/31/2001 9.37 0.01(c) (1.50) (1.49)
12/31/2000 11.01 0.12(c) (0.60) (0.48)
12/31/1999(d) 11.94 0.03 0.99 1.02
Harris Associates Focused Value Fund
Class A
12/31/2003 $ 9.24 $(0.03)(c) $ 2.58 $ 2.55
12/31/2002 10.96 (0.03)(c) (1.69) (1.72)
12/31/2001(e) 10.00 (0.01)(c) 0.97 0.96
Class B
12/31/2003 9.12 (0.10)(c) 2.53 2.43
12/31/2002 10.90 (0.11)(c) (1.67) (1.78)
12/31/2001(e) 10.00 (0.07)(c) 0.97 0.90
Class C
12/31/2003 9.12 (0.10)(c) 2.53 2.43
12/31/2002 10.90 (0.11)(c) (1.67) (1.78)
12/31/2001(e) 10.00 (0.07)(c) 0.97 0.90
Less distributions:
----------------------------------------------------------
Dividends Distributions
from from net
net investment realized Return of Total
income capital gains capital distributions
-------------- ------------- --------- -------------
CGM Advisor Targeted Equity Fund
Class A
12/31/2003 $ -- $ -- $-- $ --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- -- (0.03)
12/31/2000 (0.06) (1.07) -- (1.13)
12/31/1999 -- (1.95) -- (1.95)
Class B
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- -- (0.03)
12/31/2000 (0.01) (1.07) -- (1.08)
12/31/1999 -- (1.95) -- (1.95)
Class C
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- -- (0.03)
12/31/2000 (0.01) (1.07) -- (1.08)
12/31/1999 -- (1.95) -- (1.95)
Class Y
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- -- (0.03)
12/31/2000 (0.09) (1.07) -- (1.16)
12/31/1999(d) -- (1.95) -- (1.95)
Harris Associates Focused Value Fund
Class A
12/31/2003 $ -- $ -- $-- $ --
12/31/2002 -- -- -- --
12/31/2001(e) -- -- -- --
Class B
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001(e) -- -- -- --
Class C
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001(e) -- -- -- --
(a) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year are not annualized.
(b) Certain Funds have entered into agreements with certain brokers to rebate a
portion of brokerage commissions. The rebated commissions are used to
reduce operating expenses of the Fund.
(c) Per share net investment income (loss) has been calculated using the
average shares outstanding during the period.
(d) For the period June 30, 1999 (inception) through December 31, 1999.
(e) For the period March 15, 2001, (inception) through December 13, 2001.
(f) Had certain expenses not been reduced during the period total return would
have been lower.
(g) The investment adviser agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement, expenses would have been
higher.
(h) Computed on an annualized basis for periods less than one year.
See accompanying notes to financial statements.
21
Ratios to average net assets:
-----------------------------------------
Net asset Net assets, Expenses
value, Total end of after expense Net investment Portfolio
end of return the period Expenses reductions income (loss) turnover
the period (%)(a) (000) (%)(h) (%)(b)(h) (%)(h) rate(%)
- ---------- -------- ----------- -------- ------------- -------------- ---------
$ 7.94 42.8 $ 724,214 1.57 1.48 (0.40) 261
5.56 (28.8) 602,989 1.47 1.39 (0.86) 223
7.81 (16.2) 1,012,161 1.38 1.35 (0.39) 243
9.36 (4.6) 1,413,685 1.18 1.16 0.83 266
11.00 15.2 1,871,138 1.12 1.12 0.23 206
7.47 41.5 56,880 2.32 2.23 (1.14) 261
5.28 (29.3) 45,633 2.23 2.15 (1.62) 223
7.47 (16.8) 78,744 2.13 2.10 (1.14) 243
9.02 (5.2) 107,594 1.93 1.91 0.08 266
10.67 14.4 135,786 1.87 1.87 (0.52) 206
7.47 41.8 2,647 2.32 2.23 (1.14) 261
5.27 (29.5) 2,187 2.23 2.15 (1.62) 223
7.47 (16.8) 4,162 2.13 2.10 (1.14) 243
9.02 (5.2) 5,830 1.93 1.91 0.08 266
10.67 14.4 8,754 1.87 1.87 (0.52) 206
8.07 43.3 7,773 1.03 0.94 0.16 261
5.63 (28.3) 5,522 0.92 0.84 (0.31) 223
7.85 (15.9) 8,785 0.87 0.83 0.13 243
9.37 (4.2) 12,260 0.85 0.83 1.16 266
11.01 9.7 15,418 0.87 0.87 0.48 206
$11.79 27.6 (f) $ 95,957 1.70(g) 1.69(g) (0.28) 30
9.24 (15.7)(f) 68,660 1.70(g) 1.69(g) (0.35) 12
10.96 9.6 (f) 45,987 1.70(g) 1.63(g) (0.08) 10
11.55 26.6 (f) 107,017 2.45(g) 2.44(g) (1.03) 30
9.12 (16.3)(f) 85,794 2.45(g) 2.44(g) (1.10) 12
10.90 9.0 (f) 62,671 2.45(g) 2.39(g) (0.83) 10
11.55 26.6 (f) 124,427 2.45(g) 2.44(g) (1.03) 30
9.12 (16.3)(f) 86,269 2.45(g) 2.44(g) (1.10) 12
10.90 9.0 (f) 34,406 2.45(g) 2.39(g) (0.86) 10
22
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period.
Income (loss) from investment operations:
-----------------------------------------
Net asset
value, Net Net realized
beginning investment and unrealized Total from
of income gain (loss) on investment
the period (loss) investments operations
---------- ---------- -------------- ----------
Harris Associates Growth and Income Fund
Class A
12/31/2003 $ 9.42 $ 0.01(c) $ 2.82 $ 2.83
12/30/2002 11.78 0.01(c) (2.37) (2.36)
12/31/2001 13.79 (0.01)(c) (2.00) (2.01)
12/31/2000 15.33 0.01(c) (1.09) (1.08)
12/31/1999 16.57 0.08 1.40 1.48
Class B
12/31/2003 9.02 (0.07)(c) 2.69 2.62
12/31/2002 11.37 (0.07)(c) (2.28) (2.35)
12/31/2001 13.40 (0.10)(c) (1.93) (2.03)
12/31/2000 15.03 (0.10)(c) (1.07) (1.17)
12/31/1999 16.37 (0.04) 1.36 1.32
Class C
12/31/2003 9.01 (0.07)(c) 2.69 2.62
12/31/2002 11.36 (0.07)(c) (2.28) (2.35)
12/31/2001 13.38 (0.10)(c) (1.92) (2.02)
12/31/2000 15.01 (0.10)(c) (1.07) (1.17)
12/31/1999 16.35 (0.04) 1.36 1.32
Class Y
12/31/2003 9.59 0.06(c) 2.89 2.95
12/31/2002 11.93 0.07(c) (2.41) (2.34)
12/31/2001 13.87 0.06(c) (2.00) (1.94)
12/31/2000 15.36 0.07(c) (1.10) (1.03)
12/31/1999 16.57 0.02 1.51 1.53
Westpeak Capital Growth Fund
Class A
12/31/2003 $ 8.58 $(0.08)(c) $ 2.37 $ 2.29
12/31/2002 11.93 (0.09)(c) (3.26) (3.35)
12/31/2001 15.04 (0.13)(c) (2.95) (3.08)
12/31/2000 22.86 (0.18)(c) (4.14) (4.32)
12/31/1999 20.67 (0.13)(c) 5.05 4.92
Class B
12/31/2003 7.56 (0.13)(c) 2.09 1.96
12/31/2002 10.61 (0.15)(c) (2.90) (3.05)
12/31/2001 13.47 (0.20)(c) (2.63) (2.83)
12/31/2000 21.06 (0.32)(c) (3.77) (4.09)
12/31/1999 19.37 (0.27)(c) 4.69 4.42
Class C
12/31/2003 7.56 (0.13)(c) 2.07 1.94
12/31/2002 10.60 (0.14)(c) (2.90) (3.04)
12/31/2001 13.47 (0.20)(c) (2.64) (2.84)
12/31/2000 21.06 (0.32)(c) (3.77) (4.09)
12/31/1999 19.37 (0.27)(c) 4.69 4.42
Less distributions:
----------------------------------------------------------
Dividends Distributions
from from net
net investment realized Return of Total
income capital gains capital distributions
-------------- ------------- --------- -------------
Harris Associates Growth and Income Fund
Class A
12/31/2003 $ -- $ -- $-- $ --
12/30/2002 -- -- -- --
12/31/2001 -- -- -- --
12/31/2000 -- (0.46) -- (0.46)
12/31/1999 (0.06) (2.66) -- (2.72)
Class B
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 -- -- -- --
12/31/2000 -- (0.46) -- (0.46)
12/31/1999 -- (2.66) -- (2.66)
Class C
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 -- -- -- --
12/31/2000 -- (0.46) -- (0.46)
12/31/1999 -- (2.66) -- (2.66)
Class Y
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 -- -- -- --
12/31/2000 -- (0.46) -- (0.46)
12/31/1999 (0.08) (2.66) -- (2.74)
Westpeak Capital Growth Fund
Class A
12/31/2003 $ -- $ -- $-- $ --
12/31/2002 -- -- -- --
12/31/2001 -- (0.03) -- (0.03)
12/31/2000 -- (3.50) -- (3.50)
12/31/1999 -- (2.73) -- (2.73)
Class B
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 -- (0.03) -- (0.03)
12/31/2000 -- (3.50) -- (3.50)
12/31/1999 -- (2.73) -- (2.73)
Class C
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 -- (0.03) -- (0.03)
12/31/2000 -- (3.50) -- (3.50)
12/31/1999 -- (2.73) -- (2.73)
(a) A sales chare for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year are not annualized.
(b) Certain Funds have entered into agreements with certain brokers to rebate a
portion of brokerage commissions. The rebated commissions are used to
reduce operating expenses of the Fund.
(c) Per share net investment income (loss) has been calculated using the
average shares outstanding during the period.
(d) The investment adviser agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement, expense ratios would have
been higher.
(e) Had certain expenses not been reduced during the period, total return would
have been lower.
See accompanying notes to financial statements.
23
Ratios to average net assets:
-----------------------------------------
Net asset Net assets, Expenses
value, Total end of after expense Net investment Portfolio
end of return the period Expenses reductions income (loss) turnover
the period (%)(a) (000) (%) (%)(b) (%) rate (%)
- ---------- ------ ----------- -------- ------------- -------------- ---------
$12.25 30.0(e) $215,259 1.45(d) 1.43(d) 0.07 30(f)
9.42 (20.0) 130,751 1.56 1.54 0.07 195
11.78 (14.6) 211,138 1.46 1.41 (0.05) 154
13.79 (7.3) 290,714 1.31 1.28 0.04 139
15.33 9.5 375,676 1.21 1.21 0.48 133
11.64 29.1(e) 91,085 2.20(d) 2.18(d) (0.69) 30(f)
9.02 (20.7) 71,436 2.31 2.29 (0.68) 195
11.37 (15.1) 120,361 2.21 2.16 (0.80) 154
13.40 (8.1) 165,767 2.06 2.03 (0.71) 139
15.03 8.6 216,457 1.96 1.96 (0.27) 133
11.63 29.1(e) 15,553 2.20(d) 2.18(d) (0.69) 30(f)
9.01 (20.7) 6,440 2.31 2.29 (0.68) 195
11.36 (15.1) 10,553 2.21 2.16 (0.80) 154
13.38 (8.1) 19,373 2.06 2.03 (0.71) 139
15.01 8.6 26,983 1.96 1.96 (0.27) 133
12.54 30.8 26,545 1.01 0.99 0.51 30(f)
9.59 (19.6) 10,569 0.96 0.94 0.66 195
11.93 (14.0) 11,918 0.91 0.87 0.52 154
13.87 (7.0) 10,131 0.87 0.84 0.48 139
15.36 9.8 14,377 0.96 0.96 (0.73) 133
$10.87 26.7 $ 63,380 1.93 1.89 (0.85) 107
8.58 (28.1) 58,729 1.75 1.71 (0.84) 103
11.93 (20.5) 98,412 1.62 1.58 (0.99) 90
15.04 (19.5) 143,425 1.40 1.37 (0.80) 118
22.86 24.7 200,821 1.39 1.39 (0.61) 124
9.52 25.9 16,485 2.68 2.64 (1.60) 107
7.56 (28.8) 16,267 2.50 2.46 (1.59) 103
10.61 (21.0) 35,409 2.37 2.33 (1.74) 90
13.47 (20.1) 56,884 2.15 2.12 (1.55) 118
21.06 23.8 74,774 2.14 2.14 (1.36) 124
9.50 25.7 1,174 2.68 2.64 (1.60) 107
7.56 (28.7) 847 2.50 2.46 (1.59) 103
10.60 (21.1) 1,745 2.37 2.33 (1.74) 90
13.47 (20.1) 2,487 2.15 2.12 (1.55) 118
21.06 23.8 3,110 2.14 2.14 (1.36) 124
(f) Portfolio turnover excludes the impact of assets as a result of a merger
with another Fund.
24
NOTES TO
FINANCIAL STATEMENTS
25
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
1. Organization. CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and CDC Nvest
Funds Trust III (the "Trusts" and each a "Trust") are organized as Massachusetts
business trusts. Each Trust is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. Each Declaration
of Trust permits the Trustees to issue an unlimited number of shares of the
Trust in multiple series (individually, a "Fund" and, collectively, the
"Funds"). Information presented in these financial statements pertains to the
equity funds of the Trusts, the financial statements of the other Funds of the
Trusts are presented in separate reports. The following table provides a list of
the Funds included in this report.
CDC Nvest Funds Trust I:
Westpeak Capital Growth Fund (the "Capital Growth Fund"), formerly CDC Nvest
Capital Growth Fund
CGM Advisor Targeted Equity Fund (the "Targeted Equity Fund"), formerly CDC
Nvest Targeted Equity Fund.
CDC Nvest Funds Trust II:
Harris Associates Growth and Income Fund (the "Growth and Income Fund"),
formerly CDC Nvest Growth and Income Fund
CDC Nvest Funds Trust III:
Harris Associates Focused Value Fund (the "Focused Value Fund"), formerly CDC
Nvest Select Fund
Each Fund offers Class A, Class B, and Class C shares. Targeted Equity Fund and
Growth and Income Fund also offer Class Y shares. Class A shares are sold with a
maximum front end sales charge of 5.75%. Class B shares do not pay a front end
sales charge, but pay a higher ongoing distribution fee than Class A shares for
eight years (at which point they automatically convert to Class A shares), and
are subject to a contingent deferred sales charge ("CDSC") if those shares are
redeemed within six years of purchase. Class C shares are sold with a maximum
front end sales charge of 1.00%, do not convert to any other class of shares and
pay a higher ongoing distribution fee than Class A shares and may be subject to
a CDSC of 1.00% if those shares are redeemed within one year. (Beginning
February 1, 2004, the 1% front-end sales charge will no longer be imposed on
Class C shares). Class Y shares do not pay a front end sales charge, a CDSC or
distribution fees. They are intended for institutional investors with a minimum
initial investment of $1,000,000.
Expenses of a Fund are borne pro rata by the holders of each class of shares,
except that each class bears expenses unique to that class (including the Rule
12b-1 service and distribution fees and transfer agent fees applicable to such
class), and votes as a class only with respect to its own Rule 12b-1 Plan.
Shares of each class would receive their pro rata share of the net assets of a
Fund, if the Fund were liquidated. The Trustees approve separate dividends from
net investment income on each class of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by each Fund in the preparation of its
financial statements. The Funds' financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
which require the use of management estimates that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
a. Security Valuation. Equity securities for which market quotations are readily
available are valued at market price on the basis of valuations furnished to the
Fund by a pricing service which has been authorized by the Board of Trustees.
The pricing service provides the last reported sale price for securities listed
on an applicable securities exchange or on the NASDAQ national market system,
or, if no sale was reported and in the case of over-the-counter securities not
so listed, the last reported bid price. Effective April 14, 2003, securities
traded on the NASDAQ National Market are valued at the NASDAQ Official Closing
Price ("NOCP"), or if lacking an NOCP, at the most recent bid quotation on the
NASDAQ National Market. Debt securities for which market quotations are readily
available (other than short-term obligations with a remaining maturity of less
than sixty days) are generally valued at market price on the basis of valuations
furnished by a pricing service authorized by the Board of Trustees, which
service determines valuations for normal, institutional-size trading units of
such securities using market information, transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders. Short-term obligations with a remaining maturity of less
than sixty days are stated at amortized cost, which approximates market value.
All other securities and assets are valued at their fair value as determined in
good faith by the Fund's investment adviser and subadviser, under the
supervision of the Fund's Trustees.
The Fund may hold securities traded in foreign markets. Foreign securities are
valued at the market price in the foreign market. However, if events occurring
after the close of the foreign market (but before the close of regular trading
on the New York Stock Exchange) are believed to materially affect the value of
those securities, such securities are fair valued pursuant to procedures
approved by the Board of Trustees. When fair valuing its securities, the Fund
may, among other things, use modeling tools or other processes that may take
into account factors such as securities market activity and/or significant
events that occur after the close of the foreign market and before the Fund
calculates its net asset value.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified, and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
recovery of such taxes is uncertain. In determining net gain or loss on
securities sold, the cost of securities has been determined on an identified
cost basis.
26
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
c. Foreign Currency Translation. The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Such changes are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities at the end of the fiscal periods, resulting from changes
in exchange rates.
d. Federal and Foreign Income Taxes. The Trusts treat each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
e. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gains distributions are determined in accordance with federal tax
regulations which may differ from accounting principles generally accepted in
the United States of America. These differences are primarily due to differing
treatments for book and tax purposes of items such as distributions from real
estate investment trusts, net operating losses, non-deductible expenses, foreign
currency transactions and gains realized from passive foreign investment
companies. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to capital accounts.
Distributions from net investment income and short-term capital gains are
considered to be ordinary income for tax purposes.
f. Repurchase Agreements. Each Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. Each Fund's subadviser (adviser for
the Targeted Equity Fund) is responsible for determining that the value of the
collateral is at all times at least equal to 102% of the repurchase price,
including interest. Repurchase agreements could involve certain risks in the
event of default or insolvency of the counterparty including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities.
3. Purchases and Sales of Securities. For the year ended December 31, 2003,
purchases and sales of securities (excluding short-term investments) were as
follows:
Fund Purchases Sales
- ---------------------- -------------- ---------------
Targeted Equity Fund $1,821,424,316 $1,941,244,514
Focused Value Fund 82,616,919 75,168,663
Growth and Income Fund 78,250,594 103,326,448
Capital Growth Fund 81,235,659 95,295,451
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS
Advisers") is the investment adviser to each of the Funds except the Targeted
Equity Fund. Capital Growth Management Limited Partnership ("CGM") is the
investment adviser to the Targeted Equity Fund. Under the terms of the
management agreements, each Fund pays a management fee at the following annual
rates, calculated daily and payable monthly (quarterly for Focused Value Fund),
based on each Fund's average daily net assets:
Percentage of Average Daily Net Assets
--------------------------------------------------------------------
First Next Next Next Over
Fund $200 million $300 million $500 million $1 billion $2 billion
- ---------------------- ------------ ------------ ------------ ---------- ----------
Targeted Equity Fund 0.750% 0.700% 0.650% 0.650% 0.600%
Focused Value Fund 1.000% 1.000% 1.000% 0.950% 0.950%
Growth and Income Fund 0.700% 0.650% 0.600% 0.600% 0.600%
Capital Growth Fund 0.750% 0.700% 0.650% 0.650% 0.650%
27
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
For the year ended December 31, 2003, the management fees for each Fund were as
follows:
Gross
Management Percentage of Average
Fund Fee Daily Net Assets*
- ---------------------- ---------- ---------------------
Targeted Equity Fund $4,896,799 0.700%
Focused Value Fund 2,704,949 1.000%
Growth and Income Fund 1,872,859 0.687%
Capital Growth Fund 577,451 0.750%
CDC IXIS Advisers has entered into subadvisory agreements for each Fund listed
below. Payments to CDC IXIS Advisers are reduced by payments to the subadvisers.
Focused Value Fund Harris Associates L.P.
Growth and Income Fund Harris Associates L.P.
Capital Growth Fund Westpeak Global Advisors, L.P.
CDC IXIS Advisers and each of the subadvisers are wholly-owned subsidiaries of
CDC IXIS Asset Management North America, L.P. ("CDC IXIS North America"), CGM is
a 50% owned subsidiary of CDC IXIS North America. Certain officers and directors
of CDC IXIS Advisers are also officers or Trustees of the Funds.
Broker commissions paid to affiliated broker/dealers by the Funds were as
follows:
Fund Commission
- ---------------------- ----------
Focused Value Fund $7,266
Growth and Income Fund 585
b. Accounting and Administrative Expense. CDC IXIS Asset Management Services,
Inc. ("CIS"), a wholly owned subsidiary of CDC IXIS North America, performs
certain accounting and administrative services for the Funds and has
subcontracted with Investors Bank & Trust Company ("IBT"), to serve as
subadministrator. Pursuant to an agreement among the Trusts, CDC Nvest Cash
Management Trust, CDC Nvest Companies Trust I (the "CDC Nvest Funds Trusts");
Loomis Sayles Funds I, Loomis Sayles Funds II (the "Loomis Sayles Funds Trusts")
and CIS each Fund pays CIS its pro rata portion of a group fee for these
services representing the higher amount based on the following calculations:
(1) Percentage of Eligible Average Daily Net Assets
First Next Over
$5 billion $5 billion $10 billion
---------- ---------- -----------
0.0675% 0.0625% 0.0500%
or
(2) Each Fund's pro rata portion, allocated based on the combined
assets of the CDC Nvest Funds Trusts and the Loomis Sayles Funds
Trusts, of the annual minimum aggregate fee of $5 million.
For the year ended December 31, 2003, fees paid to CIS for accounting and
administrative expense were as follows:
Accounting
And
Fund Administrative
- ---------------------- --------------
Targeted Equity Fund $535,402
Focused Value Fund 205,807
Growth and Income Fund 202,313
Capital Growth Fund 59,187
Prior to October 1, 2003, the annual rate as a percentage of average daily net
assets was 0.0600% on the first $5 billion in average daily net assets, 0.0500%
on the next $5 billion in average daily net assets and 0.0450% on average daily
net assets over $10 billion. The annual minimum aggregate fee was $3.4 million.
This fee rate applied only to the CDC Nvest Funds Trusts.
28
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
c. Transfer Agent Fees. CIS is the transfer and shareholder servicing agent for
each Fund and has subcontracted with Boston Financial Data Services ("BFDS") to
serve as sub-transfer agent. Each Fund pays CIS service fees for servicing
shareholder accounts. Classes A, B and C pay service fees monthly representing
the higher amount based on the following calculations:
(1) An annual aggregate fee determined by applying an annual fee rate
(see schedule below) to the eligible average daily net assets.
Eligible assets are the average daily net assets of all accounts
in load* equity funds.
First Next Over
$5.7 billion $5 billion $10.7 billion
------------ ---------- -------------
0.184% 0.180% 0.175%
Each Class of shares is subject to a monthly class minimum of
$1,500.
or
(2) An allocated portion, based on eligible assets, of an annual
minimum aggregate fee of $8.4 million beginning September 15,
2003.
* Consisting of all equity funds within the CDC Nvest Funds Trusts, Loomis
Sayles Growth Fund, Loomis Sayles International Equity Fund and Loomis Sayles
Sales Research Fund.
For the period July 1, 2003 through September 14, 2003, the annual minimum
aggregate fee was $8.1 million. Prior to July 1, 2003, the annual minimum
aggregate fee was $9.8 million.
Effective September 15, 2003 through December 31, 2003, Class Y pays service
fees monthly representing the higher amount based on the following calculations:
(1) An annual aggregate fee determined by applying an annual rate of 0.026%
to the eligible average daily net assets. Eligible assets are the average
daily net assets of all accounts in no-load Retail* funds and load** funds
- Class Y.
Class Y shares of each fund are subject to a monthly minimum of $1,250.
or
(2) An allocated portion, based on eligible assets for the period September
15, 2003 through December 31, 2003, of an annual minimum aggregate fee of
$644,000 beginning September 15, 2003. Effective January 1, 2004 the annual
minimum aggregate fee changed to $650,000.
* No-load retail funds consist of Loomis Sayles Aggressive Growth Fund,
Loomis Sayles Bond Fund, Loomis Sayles Global Bond Fund, Loomis Sayles
Small Cap Growth Fund, Loomis Sayles Small Cap Value Fund, Loomis Sayles
Tax-Managed Equity Fund, Loomis Sayles Value Fund and Loomis Sayles
Worldwide Fund.
** Load funds Class Y consist of all funds with Class Y in the CDC Nvest
Funds Trusts, Loomis Sayles Growth Fund, Loomis Sayles International Equity
Fund, Loomis Sayles Research Fund and Loomis Sayles Investment Grade Bond
Fund.
Prior to September 15, 2003, Class Y shareholders paid service fees monthly at
an annual rate of 0.10% of their average daily net assets.
In addition, pursuant to other servicing agreements, the Funds pay service fees
to other firms that provide similar services for their own shareholder accounts.
CIS and BFDS and other firms are also reimbursed by the Funds for out-of-pocket
expenses. For the year ended December 31, 2003, amounts paid to CIS as
compensation for its services as transfer agent were as follows:
Transfer Agent
Fund Fee
- ---------------------- --------------
Targeted Equity Fund $2,644,683
Focused Value Fund 679,867
Growth and Income Fund 930,414
Capital Growth Fund 311,376
29
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act, the
Trusts have adopted a Service Plan relating to each Fund's Class A shares (the
"Class A Plan") and Service and Distribution Plans relating to each Fund's Class
B and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, each Fund pays CDC IXIS Asset Management Distributors,
L.P. ("CDC IXIS Distributors"), the Fund's distributor (a wholly owned
subsidiary of CDC IXIS North America), a monthly service fee at the annual rate
of 0.25% of the average daily net assets attributable to the Fund's Class A
shares, as reimbursement for expenses incurred by CDC IXIS Distributors in
providing personal services to investors in Class A shares and/or the
maintenance of shareholder accounts.
Under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a
monthly service fee at the annual rate of 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses incurred by CDC IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
Also under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a
monthly distribution fee at the annual rate of 0.75% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses incurred by CDC IXIS Distributors in
connection with the marketing or sale of Class B and Class C shares.
For the year ended December 31, 2003, the Funds paid the following service and
distribution fees:
Service Fee Distribution Fee
-------------------------------- -------------------
Fund Class A Class B Class C Class B Class C
- ---------------------- ---------- -------- -------- -------- --------
Targeted Equity Fund $1,604,248 $122,955 $ 5,777 $368,865 $ 17,331
Focused Value Fund 193,897 233,734 248,607 701,203 745,819
Growth and Income Fund 414,415 197,078 23,326 591,234 69,976
Capital Growth Fund 149,936 40,223 2,325 120,668 6,973
Commissions (including CDSC) on Fund shares paid to CDC IXIS Distributors by
investors in shares of the Funds during the year ended December 31, 2003 were as
follows:
Fund
- ----------------------
Targeted Equity Fund $456,826
Focused Value Fund 707,783
Growth and Income Fund 451,330
Capital Growth Fund 117,603
e. Trustees Fees and Expenses.
The CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts do not pay any
compensation directly to their officers or Trustees who are directors, officers
or employees of CDC IXIS Advisers, CDC IXIS Distributors, CDC IXIS North
America, CIS or their affiliates. Each other Trustee receives a retainer fee at
the annual rate of $45,000 and meeting attendance fees of $4,500 for each
meeting of the Board of Trustees attended. Each committee member receives an
additional retainer fee at the annual rate of $7,000 while each committee
chairman receives a retainer fee (beyond the $7,000 fee) at the annual rate of
$5,000. The retainer fees assume four Board or Committee meetings per year;
Trustees are compensated for each additional Board or Committee meeting in
excess of four per year, at the rate of $4,500 and $1,750, respectively. These
fees are allocated to the various series of the CDC Nvest Funds Trusts and
Loomis Sayles Funds Trusts based on a formula that takes into account, among
other factors, the relative net assets of each Fund. Trustees are reimbursed for
travel expenses in connection with attendance at meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in a
designated Fund or certain other series of the CDC Nvest Funds Trusts or Loomis
Sayles Funds Trusts on the normal payment date. Deferred amounts remain in the
Funds until distributed in accordance with the Plan.
f. Publishing Services. CIS performs certain desktop publishing services for the
Funds. Fees for these services are presented in the statements of operations as
shareholder reporting. For the year ended December 31, 2003, amounts paid to CIS
as compensation for these services were as follows:
Publishing
Fund Services Fee
- ---------------------- ------------
Targeted Equity Fund $ 782
Focused Value Fund 677
Growth and Income Fund 1,340
Capital Growth Fund 782
30
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
5. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
CGM Advisor Targeted Equity Fund
---------------------------------------------------------
Year Ended Year Ended
December 31, 2003 December 31, 2002
--------------------------- ---------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Class A:
Shares sold 3,272,602 $ 21,476,490 2,888,014 $ 20,668,849
Shares issued - merger -- -- -- --
----------- ------------- ----------- -------------
3,272,602 21,476,490 2,888,014 20,668,849
Shares repurchased (20,406,401) (130,309,788) (24,057,649) (169,752,395)
----------- ------------- ----------- -------------
Net increase (decrease) (17,133,799) $(108,833,298) (21,169,635) $(149,083,546)
----------- ------------- ----------- -------------
Class B:
Shares sold 703,119 $ 4,292,342 808,645 $ 5,457,636
Shares issued - merger -- -- -- --
----------- ------------- ----------- -------------
703,119 4,292,342 808,645 5,457,636
Shares repurchased (1,738,618) (10,346,801) (2,703,038) (18,188,643)
----------- ------------- ----------- -------------
Net increase (decrease) (1,035,499) $ (6,054,459) (1,894,393) $ (12,731,007)
----------- ------------- ----------- -------------
Class C:
Shares sold 38,555 $ 239,637 42,117 $ 286,122
Shares issued - merger -- -- -- --
----------- ------------- ----------- -------------
38,555 239,637 42,117 286,122
Shares repurchased (98,860) (579,017) (184,345) (1,163,741)
----------- ------------- ----------- -------------
Net increase (decrease) (60,305) $ (339,380) (142,228) $ (877,619)
----------- ------------- ----------- -------------
Class Y:
Shares sold 98,496 $ 670,426 72,523 $ 518,150
Shares issued - merger -- -- -- --
----------- ------------- ----------- -------------
98,496 670,426 72,523 518,150
Shares repurchased (117,263) (734,977) (209,324) (1,536,133)
----------- ------------- ----------- -------------
Net increase (decrease) (18,767) $ (64,551) (136,801) $ (1,017,983)
----------- ------------- ----------- -------------
Increase (decrease) derived from
capital shares transactions (18,248,370) $(115,291,688) (23,343,057) $(163,710,155)
=========== ============= =========== =============
31
For the Year Ended December 31, 2003
5. Capital Shares. (continued).
Harris Associates Focused Value Fund Harris Associates Growth and Income Fund
- ----------------------------------------------------- -----------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, 2003 December 31, 2002 December 31, 2003 December 31, 2002
- ------------------------- ------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
2,875,956 $ 29,849,185 5,396,731 $ 55,604,458 2,100,861 $ 22,762,821 945,632 $ 10,205,721
-- -- -- -- 5,074,724 54,776,568 -- --
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
2,875,956 29,849,185 5,396,731 55,604,458 7,175,585 77,539,389 945,632 10,205,721
(2,168,603) (22,052,029) (2,164,581) (21,141,953) (3,485,439) (36,836,357) (4,978,487) (52,521,283)
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
707,353 $ 7,797,156 3,232,150 $ 34,462,505 3,690,146 $ 40,703,032 (4,032,855) $(42,315,562)
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
1,701,970 $ 16,766,807 5,734,108 $ 59,212,895 856,774 $ 9,891,819 601,736 $ 6,071,959
-- -- -- -- 1,413,315 14,555,728 -- --
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
1,701,970 16,766,807 5,734,108 59,212,895 2,270,089 24,447,547 601,736 6,071,959
(1,844,300) (18,116,704) (2,077,257) (19,685,531) (2,366,418) (24,751,845) (3,266,561) (33,165,088)
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
(142,330) $ (1,349,897) 3,656,851 $ 39,527,364 (96,329) $ (304,298) (2,664,825) $(27,093,129)
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
3,353,028 $ 33,891,515 7,600,954 $ 78,413,530 706,519 $ 7,419,708 96,568 $ 935,777
-- -- -- -- 101,458 1,043,494 -- --
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
3,353,028 33,891,515 7,600,954 78,413,530 807,977 8,463,202 96,568 935,777
(2,040,296) (20,183,334) (1,299,396) (12,288,042) (185,271) (1,965,684) (310,868) (3,192,896)
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
1,312,732 $ 13,708,181 6,301,558 $ 66,125,488 622,706 $ 6,497,518 (214,300) $ (2,257,119)
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
-- $ -- -- $ -- 60,321 $ 637,760 331,631 $ 3,818,587
-- -- -- -- 1,419,922 15,668,839 -- --
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
-- -- -- -- 1,480,243 16,306,599 331,631 3,818,587
-- -- -- -- (465,803) (5,224,688) (228,979) (2,533,494)
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
-- $ -- -- $ -- 1,014,440 $ 11,081,911 102,652 $ 1,285,093
- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
1,877,755 $ 20,155,440 13,190,559 $140,115,357 5,230,963 $ 57,978,163 (6,809,328) $(70,380,717)
========== ============ ========== ============ ========== ============ ========== ============
32
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
5. Capital Shares. (continued).
Westpeak Capital Growth Fund
-----------------------------------------------------
Year Ended Year Ended
December 31, 2003 December 31, 2002
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Class A
Shares sold 459,334 $ 4,434,198 761,322 $ 8,210,459
Shares repurchased (1,474,769) (14,012,775) (2,161,141) (22,158,435)
----------- ------------ ---------- ------------
Net increase (decrease) (1,015,435) $ (9,578,577) (1,399,819) $(13,947,976)
---------- ------------ ---------- ------------
Class B
Shares sold 241,744 $ 2,031,512 237,784 $ 2,165,602
Shares repurchased (660,282) (5,491,199) (1,425,706) (13,198,190)
---------- ------------ ---------- ------------
Net increase (decrease) (418,538) $ (3,459,687) (1,187,922) $(11,032,588)
---------- ------------ ---------- ------------
Class C
Shares sold 43,266 $ 374,020 19,550 $ 183,007
Shares repurchased (31,761) (263,473) (72,021) (637,881)
---------- ------------ ---------- ------------
Net increase (decrease) 11,505 $ 110,547 (52,471) $ (454,874)
---------- ------------ ---------- ------------
Increase (decrease) derived from capital shares transactions (1,422,468) $(12,927,717) (2,640,212) $(25,435,438)
========== ============ ========== ============
33
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended December 31, 2003
6. Line of Credit. The Funds that comprise the CDC Nvest Funds Trusts
participate in a $50,000,000 committed line of credit provided by IBT. Advances
under the Agreement are taken primarily for temporary or emergency purposes.
Borrowings under the Agreement bear interest at a rate tied to one of several
short-term rates that may be selected by the lender from time to time. In
addition, the Funds are charged a facility fee equal to 0.10% per annum on the
unused portion of the line of credit. The annual cost of maintaining the line of
credit and the facility fee is apportioned pro rata among the participating
Funds. There were no borrowings as of or during the year ended December 31,
2003.
7. Security Lending. Each Fund has entered into an agreement with IBT, as agent
of the Funds, to lend securities to certain designated borrowers. The loans are
collateralized at all times with cash or securities with a market value at least
equal to the market value of the securities on loan. The Funds receive fees for
lending their securities. The market value of securities on loan to borrowers
and the value of collateral held by the Funds with respect to such loans at
December 31, 2003, were as follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
- ---------------------- ------------------ -------------------
Targeted Equity Fund $23,972,453 $24,675,500
Focused Value Fund 18,455,792 19,124,950
Growth and Income Fund 46,321,901 47,694,350
Capital Growth Fund 3,547,272 3,661,392
8. Expense Reductions and Contingent Expense Obligations. Each Fund has entered
into agreements with certain brokers whereby the brokers will rebate a portion
of brokerage commissions. Amounts earned by the Funds under such agreements are
presented as a reduction of expenses in the statements of operations. For the
year ended December 31, 2003, expenses were reduced under these agreements as
follows:
Fund Reductions
- ---------------------- ----------
Targeted Equity Fund $656,166
Focused Value Fund 26,617
Growth and Income Fund 56,865
Capital Growth Fund 27,349
CDC IXIS Advisers has given binding undertakings to certain Funds to defer its
management fees and, if necessary, bear certain expenses associated with these
Funds to limit their operating expenses. These undertakings are in effect until
the dates indicated below and will be reevaluated on an annual basis. The
expense limitation for Growth and Income Fund began June 1, 2003. For the year
ended December 31, 2003, certain class level expenses have been reimbursed as
follows: Focused Value Fund $390,033; Growth and Income Fund $471,915.
If in the following fiscal year the actual operating expenses of a Fund that
previously received a deferral or reimbursement are less than the expense limit
for that Fund, the Fund is required to pay an amount of additional expense that
is the lower of the difference between the expense limit and the actual amount
of fees previously waived or expenses reimbursed.
At December 31, 2003, the expense limits as a percentage of average daily net
assets and amounts subject to possible reimbursement under the expense
limitation agreements were as follows:
Expense Limit as a Percentage
of Average Daily Net Assets Expenses Subject to
------------------------------------- Expiration Possible Reimbursement
Fund Class A Class B Class C Class Y of Waiver until December 31, 2004
- ---------------------- ------- ------- ------- ------- -------------- -----------------------
Focused Value Fund 1.70% 2.45% 2.45% --% April 30, 2004 $390,033
Growth and Income Fund 1.30% 2.05% 2.05% 1.05% April 30, 2004 471,915
9. Concentration of Risk. Focused Value Fund is a non-diversified Fund. Compared
with diversified mutual funds, the Fund may invest a greater percentage of its
assets in a particular company. Therefore, the Fund's returns could be
significantly affected by the performance of any one of the small number of
stocks in its portfolio.
10. Acquisition of Assets. After the close of business on June 27, 2003, Growth
and Income Fund acquired all the assets and liabilities of CDC Nvest Balanced
Fund ("Balanced Fund"), pursuant to a plan of reorganization approved by its
shareholders on June 17, 2003. The acquisition was accomplished by a tax-free
exchange of 5,074,724 Class A shares of the Fund for 6,130,305 shares of
Balanced Fund Class A, 1,413,315 Class B shares of the Fund for 1,624,326 shares
of Balanced Fund Class B, 101,458 Class C shares of the Fund for 116,986 shares
of Balanced Fund Class C and 1,419,922 Class Y shares of the Fund for 1,771,498
shares of Balanced Fund Class Y. Balanced Fund net assets at that date
$86,044,629, including $6,680,807 of net unrealized appreciation, were combined
with those of the Fund. The aggregate net assets of the Fund immediately before
the acquisition were $236,323,033. The combined net assets of the Fund
immediately following the acquisition were $322,367,662.
34
- --------------------------------------------------------------------------------
Report of independent auditors
- --------------------------------------------------------------------------------
To the Trustees of CDC Nvest Funds Trust I, CDC Nvest Trust II, and CDC Nvest
Trust III:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Westpeak Capital Growth Fund
(formerly CDC Nvest Capital Growth Fund), Harris Associates Focused Value Fund
(formerly CDC Nvest Select Fund), Harris Associates Growth and Income Fund
(formerly CDC Nvest Growth and Income Fund) and CGM Advisor Targeted Equity Fund
(formerly CDC Nvest Targeted Equity Fund at December 31, 2003, the results of
each of their operations, the changes in each of their net assets and the
financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2004
35
- --------------------------------------------------------------------------------
Trustees' Information
- --------------------------------------------------------------------------------
The Funds are governed by a Board of Trustees, which is responsible for
generally overseeing the conduct of Fund business and for protecting the
interests of shareholders. The trustees meet periodically throughout the year to
oversee the Funds' activities, review contractual arrangements with companies
that provide services to the Funds and review the Funds' performance.
Position(s) Held with Number of Portfolios in
Name, Age and Address Funds/1/, Length of Time Principal Occupation(s) Fund Complex Overseen and
INDEPENDENT TRUSTEES Served and Term of Office/2/ During Past 5 Years Other Directorships held
- --------------------------- ---------------------------- ------------------------------ ----------------------------
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor and 40;
399 Boylston Street 19 years for CDC Nvest Director for the Belfer Center Director, Taubman Centers,
Boston, MA 02116 Funds Trusts of Science and International Inc.; Board Member, USEC
Affairs, John F. Kennedy Inc.
School of Government,
Harvard University
Edward A. Benjamin (65) Trustee (1) Retired; formerly, Partner, 40;
399 Boylston Street Less than 1 year Ropes & Gray (law firm) Director, Coal, Energy
Boston, MA 02116 for CDC Nvest Investments &
Funds Trust Management; Director,
Precision Optics Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain 40;
452 Fifth Avenue Committee Chairman (1); Brothers & Company, Trustee for Universal Health
New York, NY 10018 7 years for CDC Nvest Incorporated (investment Realty Income Trust;
Funds Trusts banking) Director, PASC; Director,
Sheridan Healthcorp
Paul G. Chenault (70) Trustee (2) Retired; formerly, Trustee, 40;
5852 Pebble Beach Way Less than 1 year for CDC First Variable Life (variable Director, Mailco Office
San Luis Obispo, CA 93401 Nvest Funds Trusts life insurance) Products, Inc.
Kenneth J. Cowan (71) Trustee Retired 40;
399 Boylston Street Committee Chairman (2); None
Boston, MA 02116 28 years for CDC Nvest
Funds Trusts
Richard Darman (60) Trustee (2); Partner, The Carlyle Group 40;
399 Boylston Street 7 years for CDC Nvest (investments); Chairman of Director and Chairman, AES
Boston, MA 02116 Funds Trusts the Board of Directors of Corporation
AES Corporation (interna-
tional power company); for-
merly, Professor, John F.
Kennedy School of
Government, Harvard
University
Sandra O. Moose (61) Trustee (1); President, Strategic Advisory 40;
399 Boylston Street 21 years for CDC Nvest Services; formerly, Senior Director, Verizon
Boston, MA 02116 Funds Trusts Vice President and Director, Communications
The Boston Consulting Director, Rohm and Haas
Group, Inc. (management Company
consulting)
36
- --------------------------------------------------------------------------------
Trustees' Information (continued)
- --------------------------------------------------------------------------------
Name, Age and Address Position(s) Held with Number of Portfolios in
INDEPENDENT TRUSTEES Funds/1/, Length of Time Principal Occupation(s) Fund Complex Overseen
(continued) Served and Term of Office/2/ During Past 5 Years and Other Directorships held
- -------------------------- ---------------------------- ------------------------------ -----------------------------
John A. Shane (70) Trustee (2); President, Palmer Service 40;
200 Unicorn Park Drive 21 years for CDC Nvest Corporation (venture capital Director, Gensym
Woburn, MA 01801 Funds Trusts organization) Corporation; Director,
Overland Storage, Inc.
Director, Abt Associates Inc.
INTERESTED TRUSTEES
Robert J. Blanding/3/ (56) Trustee President, Chairman, 40;
555 California Street Less than 1 year for Director, and Chief Executive None
San Francisco, CA 94104 CDC Nvest Funds Trusts Officer, Loomis Sayles, Chief
Executive Officer - Loomis
Sayles Funds II; President
and CEO - Loomis Sayles
Funds I
John T. Hailer/4/ (43) President and Chief President and Chief 40;
399 Boylston Street Executive Officer - CDC Executive Officer, CDC IXIS None
Boston, MA 02116 Nvest Funds Trusts, Asset Management
Trustee; 3 years for CDC Distributors, L.P.; President,
Nvest Funds Trusts Loomis Sayles Funds II;
Executive Vice President -
Loomis Sayles Funds I, for-
merly, Senior Vice President,
Fidelity Investments
Peter S. Voss/5/ (57) Chairman of the Board, Director, President and Chief 40;
399 Boylston Street Trustee; 11 years for CDC Executive Officer, CDC IXIS Trustee of Harris Associates
Boston, MA 02116 Nvest Funds Trusts Asset Management North Investment Trust/6/
America, L.P.
37
- --------------------------------------------------------------------------------
Trustees' Information (continued)
- --------------------------------------------------------------------------------
Position(s) Held with Number of Portfolios in
Funds/1/, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name, Age and Address Served and Term of Office/2/ During Past 5 Years Other Directorships held
- -------------------------- ---------------------------- ------------------------------ -------------------------
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC Not Applicable;
399 Boylston Street Not Applicable IXIS Asset Management None
Boston, MA 02116 Services, Inc.; Senior Vice
President, CDC IXIS Asset
Management Advisers, L.P.;
formerly, Vice President,
Loomis, Sayles & Company,
L.P.
John E. Pelletier (39) Secretary; Senior Vice President, Not Applicable;
399 Boylston Street Not Applicable General Counsel, Secretary None
Boston, MA 02116 and Clerk, CDC IXIS
Distribution Corporation;
Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Distributors,
L.P.; Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Advisers, L.P.;
Executive Vice President,
General Counsel, Secretary,
Clerk, and Director, CDC
IXIS Asset Management
Services, Inc.
(1) Member of Audit Committee.
(2) Member of Contract Review and Governance Committee.
/1/ Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC
Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash Management
Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest Funds Trusts")
and Loomis Sayles Funds I and Loomis Sayles Funds II (the "Loomis Sayles Funds
Trusts" and together with the CDC Nvest Funds Trusts, the "Trusts").
/2/ All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72.
/3/ Mr. Blanding is deemed an "interested person" of the Trusts because he holds
the following positions with affiliated persons of the Trusts: President,
Chairman, Director and Chief Executive Officer of Loomis, Sayles & Company, L.P.
("Loomis Sayles").
/4/ Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution Corporation;
President and Chief Executive Officer of CDC IXIS Asset Management Distributors,
L.P. ("CDC IXIS Distributors").
/5/ Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW Capital
Management, Inc; Director of Harris Associates, Inc; Director of Loomis, Sayles
& Company, Inc.; Member of Reich & Tang Asset Management, LLC; Director of
Westpeak Global Advisors, Inc.; Director of Vaughan, Nelson, Scarborough &
McCullough, Inc.; Director, Hansberger Group, Inc.; Member, Board of Managers,
Harris Alternatives L.L.C.; and Director and Member of Executive Board of CDC
IXIS Asset Management.
/6/ As of December 31, 2003, Harris Associates Investment Trust has seven series
that were overseen by its Board of Trustees.
38
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Item 2. Code of Ethics.
The Trust has adopted a code of Ethics that applies to the Trust's principal
executive officer, principal financial officer and persons performing similar
functions.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Trust has established an audit committee. Ms.
Sandra O. Moose and Messrs. Edward A. Benjamin and Daniel M. Cain, all members
of the audit committee have been designated as financial experts. Each of these
individuals is also an Independent Trustee of the Trust.
Item 4. Principal Accountant Fees and Services.
Fees paid to Principal Accountant by the Trust. The table below sets forth fees
billed by the Trust's principal accountant for the past two fiscal years for
professional services rendered in connection with a) the audit of the Trust's
annual financial statements and services provided in connection with regulatory
filings; b) audit-related services (including services that are reasonably
related to the performance of the audit of the registrant's financial statements
and but not reported under "Audit Fees"); c) tax compliance, tax advice and tax
planning and d) all other fees billed for professional services rendered by the
principal accountant to the Trust, other than the services provided reported as
a part of (a) through (c) of this Item.
Audit-related
Audit fees fees Tax fees/1/ All other fees
- ------------------------------------------------------------------------------------------------------------
2002 2003 2002 2003 2002 2003 2002 2003
- ------------------------------------------------------------------------------------------------------------
CDC Nvest Funds Trust III $20,000 $20,000 n/a n/a $5,715 $4,365 n/a n/a
- ------------------------------------------------------------------------------------------------------------
1. The tax fees consist of a review of the Trust's tax returns.
Aggregate fees billed to the Trust for non-audit services for 2003 and 2002 were
$4,365 and $5,715, respectively.
Fees paid to Principal Accountant By Adviser and Control Affiliates. The
following table sets forth the non-audit services provided by the Trust's
principal accountant to CDC IXIS Asset Management Advisers, L.P. and entities
controlling, controlled by or under common control with CDC IXIS Asset
Management Advisers, L.P. that provide ongoing services to the Trust ("Control
Affiliates") for the last two fiscal years.
Audit-related fees/1/ Tax fees All other fees
- ----------------------------------------------------------------------------------------
2002 2003 2002 2003 2002 2003
- ----------------------------------------------------------------------------------------
Control Affiliates 96,000 $107,239 n/a n/a n/a n/a
- ----------------------------------------------------------------------------------------
1. The audit related fees consist of performing SAS 70 internal
examinations; review of anti-money laundering procedures and review of
certain 12b-1 expenditures.
Aggregate fees billed to Control Affiliates for non-audit services were during
2003 and 2002 were $201,539 and $187,300, respectively.
None of the services described above were approved pursuant to (c)(7)(i)(C) of
Regulation S-X.
Audit Committee Pre Approval Policies.
Annually, the Trust's Audit Committee reviews the audit, audit-related, tax
and other non-audit services together with the projected fees, for services
proposed to be rendered to the Trust and/or other entities for which
pre-approval is required during the upcoming year. Any subsequent revisions to
already pre-approved services or fees (including fee increases) and requests for
pre-approval of new services would be presented for consideration quarterly as
needed.
If, in the opinion of management, a proposed engagement by the Trust's
independent accountants needs to commence before the next regularly scheduled
Audit Committee meeting, any member of the Audit Committee who is an independent
Board member is authorized to pre-approve the engagement, but only for
engagement to provide audit, audit related and tax services. This approval is
subject to review of the full Audit committee at its next quarterly meeting. All
other engagements require the approval of all the members of the audit
committee.
Item 5. Reserved.
Item 6. Reserved.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Reserved.
Item 9. Controls and Procedures
The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions that occurred during the
Trust's last fiscal half-year with regard to significant deficiencies or
material weaknesses in the Trust's internal controls or in other factors that
have materially affected, or are reasonably likely to material affect the
Trust's internal controls subsequent to the date of their evaluation.
Item 10. Exhibits.
(a) Code of Ethics.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CDC Nvest Funds Trust III
By: /s/ JOHN T. HAILER
--------------------
Name: John T. Hailer
Title: President and Chief Executive Officer
Date: February 25, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ JOHN T. HAILER
--------------------
Name: John T. Hailer
Title: President and Chief Executive Officer
Date: February 25, 2004
By: /s/ NICHOLAS H. PALMERINO
--------------------------
Name: Nicholas H. Palmerino
Title: Treasurer
Date: February 25, 2004
EXHIBIT INDEX
(a) Code of Ethics of CDC Nvest Funds Trust III.
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940
(b)(2) Certifications of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.