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
(Exact name of registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
Coleen Downs Dinneen, Esq.
IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2810
Date of fiscal year end: December 31, 2004
Date of reporting period: December 31, 2004
Item 1. Reports to Stockholders.
[LOGO] CDC NVEST FUNDS/SM/
Equity Funds
Annual Report
December 31, 2004
CDC Nvest Star Advisers Fund
Harris Associates
Loomis, Sayles & Company
Mercury Advisors
CDC Nvest Star Value Fund
Harris Associates
Loomis, Sayles & Company
Vaughan Nelson Investment Management
Westpeak Global Advisors
CGM Advisor Targeted Equity Fund
Hansberger International Fund
(formerly CDC Nvest Star International Fund)
Harris Associates Focused Value Fund
Harris Associates Large Cap Value Fund
(formerly Harris Associates Growth and Income Fund)
Vaughan Nelson Small Cap Value Fund
(formerly CDC Nvest Star Small Cap Fund)
Westpeak Capital Growth Fund
TABLE OF CONTENTS
Management Discussion
and Performance.........Page 1
Schedule of InvestmentsPage 23
Financial Statements...Page 43
CDC NVEST STAR ADVISERS FUND
Management Discussion
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Thanks to strong performance in the fourth quarter, 2004 was a good year for
U.S. equities. All classes of stocks were positive, but value stocks
outperformed growth, and small-cap value stocks outpaced mid- and large-cap
stocks. For the year ended December 31, 2004, CDC Nvest Star Advisers Fund
returned 12.88%, based on the net asset value of Class A shares. The fund
outperformed the 10.88% return of the Standard & Poor's 500 Index, but fell
short of the 18.57% return of the Wilshire 4500 Index. The fund's results were
close to the 12.93% average return on the funds in Morningstar's Mid-Cap Growth
category.
Growth and value stocks of all sizes and in a variety of industries were
represented in the fund's four segments. Harris Associates' segment favored
undervalued mid- to large-cap companies. Loomis, Sayles & Company manages two
segments. In the mid-cap growth segment, Loomis focused on companies with a
combination of earnings growth, attractive relative value and strong price
trends. In the small-cap value segment, Loomis favored companies whose
appreciation potential had not been recognized by the market, in the managers'
opinion. Mercury Advisors sought large-cap growth stocks offering the potential
for above-average earnings growth and return on equity.
HARRIS ASSOCIATES PURSUED A HIGH RATE OF RETURN, ONE STOCK AT A TIME
This segment maintained its pursuit of high-quality, undervalued stocks
selected on a case-by-case basis. The strongest performers included McDonald's,
which closed unprofitable restaurants and enhanced its menu options -
strategies that were well received by the market. Masco enjoyed strong earnings
growth and gained market share; the company also raised its dividend and bought
back some of its stock. New management helped Home Depot profit from strength
in the housing market. Xerox reported improved cash flow, reduced its debt and
unveiled several new products that were welcomed by the market. Stocks that
detracted from results included Interpublic, which was sold in the third
quarter of 2004 when management's turnaround efforts proved disappointing.
Cardinal Health was also eliminated when shares of this pharmaceutical company
rebounded after it was cleared of accounting charges. Although Merck declined
significantly when its arthritis drug Vioxx was withdrawn from the market, the
stock remains in the segment because Harris Associates believes the decline was
an overreaction.
LOOMIS MID-CAP GROWTH FOCUSED ON EARNINGS AND REVENUES
This segment focused on companies expected to experience superior growth in
earnings and revenues, either because of company-specific events, such as a new
product introduction or because of good operating leverage. Stock selection in
the information technology and consumer discretionary sectors had the greatest
positive impact. Strong contributors included Research In Motion, whose
Blackberry wireless e-mail device was in demand; Apple Computer, which enjoyed
brisk sales of its iPod devices; and Symantec, whose Norton anti-virus products
and other security software sold well. Poor performers included Cypress
Semiconductor, whose earnings reflected softness in the entire semiconductor
industry; Univision, a leading Hispanic broadcaster, which faced disappointing
advertising revenues along with the industry as a whole; and internet retailer
Amazon.com, which failed to meet second-quarter estimates. The segment's
healthcare stocks were reduced and financial stocks were expanded. Currently,
the segment emphasizes companies Loomis believes may be able to sustain
earnings momentum even if economic growth slows in 2005.
LOOMIS SMALL-CAP LOOKED FOR INTRINSIC VALUE IN SELECTED STOCKS
This segment focused on companies that were generating strong cash flow and
whose intrinsic value seemed likely to improve. The strongest relative
performance came from the consumer discretionary sector, led by Kmart Holding,
which rose when investors recognized the value of its real estate holdings. The
segment also emphasized utilities; contributors included NRG Energy, which
benefited from the rapid increase in the price of natural gas. Diversified
transportation company Laidlaw International benefited from the proposed,
profitable divestiture of its healthcare business. After strong performance in
2003, both Fairchild Semiconductor and American Power Conversion weakened.
American Power was sold, but Fairchild remains in the segment and the stock
recovered modestly in the fourth quarter. Weaker-than-expected advertising
revenues hurt Westwood One, a radio network, but it, too, recovered toward the
end of the year.
MERCURY ADVISORS POSITIONED TO GROW WITH THE U.S. ECONOMY
The Mercury segment was positioned to benefit from improving real growth in the
U.S. economy. With this focus, positive investment returns came from stock
selection in the healthcare and industrials sectors and an emphasis on energy
and consumer discretionary companies. Stock selection in the information
technology sector detracted significantly from the segment's relative returns.
At the end of the year, the segment maintained its bias toward companies that
Mercury believed were likely to profit in a continued improvement in the
economy in 2005. As a result, there was a significant emphasis on industrials,
materials, and energy companies. However, Mercury is concerned about a possible
slowdown in the rate of real growth, led by an overall reduction in real
consumer spending in the year ahead.
Subadvisors:
Harris Associates L.P.
Loomis, Sayles & Company, L.P.
Mercury Advisors
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks can be more sensitive to market movements because their values
are based on future expectations. Value stocks may fall out of favor with
investors and underperform the overall market during any given period. Foreign
investments involve risks not associated with domestic securities, such as
currency fluctuations, differing political and economic conditions and
different accounting standards.
1
CDC NVEST STAR ADVISERS FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
December 31, 1994 through December 31, 2004
Cumulative Maximum S&P 500 S&P 400 Wilshire
Value/1/ Sales Charge/2/ Index/5/ Midcap Index/4/ 4500 Index/6/
---------- --------------- -------- --------------- -------------
12/31/1994 10,000 9,425 10,000 10,000 10,000
1/31/1995 9,985 9,411 10,259 10,105 10,097
2/28/1995 10,302 9,709 10,659 10,634 10,526
3/31/1995 10,565 9,958 10,974 10,819 10,758
4/30/1995 10,739 10,121 11,297 11,036 10,896
5/31/1995 10,988 10,356 11,748 11,302 11,139
6/30/1995 11,516 10,854 12,021 11,762 11,676
7/31/1995 12,353 11,643 12,420 12,376 12,363
8/31/1995 12,610 11,885 12,451 12,605 12,651
9/30/1995 13,003 12,255 12,977 12,910 12,994
10/31/1995 12,694 11,964 12,930 12,578 12,646
11/30/1995 13,248 12,486 13,498 13,128 13,183
12/31/1995 13,435 12,662 13,758 13,095 13,349
1/31/1996 13,586 12,805 14,226 13,285 13,487
2/29/1996 14,115 13,303 14,358 13,736 13,925
3/31/1996 14,355 13,529 14,496 13,901 14,138
4/30/1996 15,123 14,253 14,710 14,326 14,795
5/31/1996 15,595 14,698 15,089 14,519 15,262
6/30/1996 15,130 14,260 15,147 14,301 14,782
7/31/1996 13,970 13,166 14,478 13,334 13,672
8/31/1996 14,650 13,807 14,783 14,103 14,410
9/30/1996 15,464 14,575 15,615 14,718 15,098
10/31/1996 15,334 14,453 16,046 14,761 14,874
11/30/1996 16,092 15,167 17,259 15,592 15,502
12/31/1996 15,981 15,062 16,917 15,609 15,642
1/31/1997 16,694 15,734 17,973 16,195 16,147
2/28/1997 16,139 15,211 18,114 16,062 15,806
3/31/1997 15,463 14,574 17,370 15,377 14,981
4/30/1997 15,762 14,855 18,407 15,776 15,018
5/31/1997 16,949 15,974 19,528 17,155 16,513
6/30/1997 17,643 16,629 20,403 17,637 17,296
7/31/1997 19,058 17,963 22,026 19,384 18,485
8/31/1997 18,513 17,449 20,792 19,360 18,654
9/30/1997 19,409 18,293 21,931 20,473 19,946
10/31/1997 18,782 17,702 21,198 19,582 19,186
11/30/1997 18,927 17,839 22,180 19,872 19,192
12/31/1997 19,205 18,101 22,561 20,644 19,662
1/31/1998 19,290 18,181 22,810 20,251 19,381
2/28/1998 20,706 19,515 24,455 21,928 20,864
3/31/1998 21,571 20,331 25,708 22,917 21,943
4/30/1998 21,815 20,561 25,966 23,336 22,221
5/31/1998 21,213 19,993 25,520 22,286 21,183
6/30/1998 21,890 20,631 26,557 22,426 21,514
7/31/1998 21,235 20,014 26,274 21,557 20,296
8/31/1998 17,714 16,696 22,475 17,544 16,363
9/30/1998 19,002 17,909 23,915 19,182 17,544
10/31/1998 20,169 19,009 25,860 20,896 18,541
11/30/1998 21,175 19,958 27,428 21,939 19,694
12/31/1998 22,903 21,586 29,008 24,589 21,360
1/31/1999 23,980 22,601 30,221 23,632 21,704
2/28/1999 23,270 21,932 29,282 22,395 20,523
3/31/1999 24,666 23,248 30,453 23,020 21,324
4/30/1999 25,650 24,175 31,633 24,836 23,025
5/31/1999 24,940 23,506 30,886 24,944 22,825
6/30/1999 26,508 24,984 32,600 26,279 23,784
7/31/1999 25,628 24,155 31,582 25,721 23,063
8/31/1999 25,526 24,058 31,426 24,839 22,489
9/30/1999 25,618 24,145 30,564 24,072 22,313
10/31/1999 26,537 25,011 32,498 25,299 23,454
11/30/1999 28,796 27,140 33,159 26,627 25,433
12/31/1999 33,544 31,615 35,112 28,209 28,938
1/31/2000 33,131 31,226 33,348 27,415 28,590
2/29/2000 37,197 35,058 32,716 29,334 33,036
3/31/2000 36,814 34,697 35,917 31,789 31,814
4/30/2000 33,979 32,025 34,836 30,679 27,987
5/31/2000 31,186 29,393 34,122 30,296 25,921
6/30/2000 31,788 29,960 34,963 30,741 29,034
7/31/2000 30,968 29,187 34,416 31,226 28,210
8/31/2000 33,396 31,475 36,554 34,713 31,358
9/30/2000 32,414 30,550 34,624 34,475 30,082
10/31/2000 30,877 29,102 34,478 33,306 27,624
11/30/2000 27,144 25,583 31,760 30,792 22,920
12/31/2000 27,847 26,246 31,915 33,148 24,371
1/31/2001 28,641 26,994 33,047 33,886 25,696
2/28/2001 25,768 24,287 30,034 31,952 22,574
3/31/2001 24,024 22,642 28,131 29,577 20,502
4/30/2001 26,133 24,630 30,317 32,839 22,671
5/31/2001 26,386 24,869 30,521 33,604 23,208
6/30/2001 26,239 24,730 29,778 33,468 23,396
7/31/2001 25,780 24,297 29,485 32,970 22,308
8/31/2001 24,684 23,265 27,639 31,891 21,244
9/30/2001 22,065 20,796 25,407 27,925 18,512
10/31/2001 22,621 21,320 25,891 29,160 19,482
11/30/2001 24,478 23,071 27,877 31,329 20,996
12/31/2001 25,239 23,788 28,122 32,947 22,121
1/31/2002 25,017 23,579 27,711 32,776 21,690
2/28/2002 24,542 23,131 27,177 32,817 21,076
3/31/2002 25,749 24,269 28,199 35,162 22,505
4/30/2002 25,067 23,626 26,489 34,998 22,285
5/31/2002 24,734 23,312 26,294 34,408 21,792
6/30/2002 22,733 21,426 24,421 31,889 20,302
7/31/2002 20,732 19,540 22,518 28,798 18,326
8/31/2002 20,892 19,691 22,665 28,945 18,433
9/30/2002 18,796 17,716 20,202 26,613 17,190
10/31/2002 19,669 18,538 21,980 27,767 17,754
11/30/2002 20,827 19,630 23,274 29,373 18,972
12/31/2002 19,732 18,597 21,907 28,166 18,173
1/31/2003 19,224 18,119 21,333 27,343 17,781
2/28/2003 19,019 17,925 21,013 26,692 17,329
3/31/2003 19,161 18,060 21,217 26,917 17,586
4/30/2003 20,654 19,466 22,964 28,871 19,050
5/31/2003 22,178 20,903 24,174 31,264 20,860
6/30/2003 22,480 21,187 24,483 31,662 21,357
7/31/2003 23,051 21,726 24,914 32,785 22,354
8/31/2003 24,178 22,788 25,400 34,273 23,291
9/30/2003 23,576 22,221 25,130 33,748 23,002
10/31/2003 25,290 23,836 26,552 36,300 24,755
11/30/2003 25,925 24,434 26,786 37,564 25,609
12/31/2003 26,368 24,852 28,190 38,198 26,141
1/31/2004 26,988 25,436 28,708 39,026 27,077
2/29/2004 27,225 25,660 29,107 39,963 27,551
3/31/2004 27,288 25,719 28,668 40,133 27,667
4/30/2004 26,731 25,194 28,218 38,816 26,555
5/31/2004 27,143 25,582 28,605 39,621 26,958
6/30/2004 28,056 26,448 29,161 40,523 27,662
7/31/2004 26,457 24,936 28,196 38,632 26,121
8/31/2004 26,137 24,634 28,310 38,530 26,131
9/30/2004 26,968 25,417 28,617 39,672 27,198
10/31/2004 27,464 25,885 29,054 40,306 27,810
11/30/2004 28,824 27,166 30,230 42,707 29,701
12/31/2004 29,772 28,057 31,258 44,495 30,996
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
Class A (Inception 7/7/94)
Net Asset Value/1/ 12.88% -2.36% 11.53%
With Maximum Sales Charge/2/ 6.41 -3.51 10.87
Class B (Inception 7/7/94)
Net Asset Value/1/ 12.02 -3.10 10.70
With CDSC/3/ 7.02 -3.44 10.70
Class C (Inception 7/7/94)
Net Asset Value/1/ 12.00 -3.10 10.70
With CDSC/3/ 11.00 -3.10 10.70
Class Y (Inception 11/15/94)
Net Asset Value/1/ 13.52 -1.81 12.02
- --------------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years
S&P 400 Midcap Index/4/ 16.48% 9.54% 16.10%
S&P 500 Index/5/ 10.88 -2.30 12.07
Wilshire 4500 Index/6/ 18.57 1.36 11.96
Morningstar Mid-Cap Growth Fund Avg./7/ 12.93 -3.42 10.25
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Class Y shares are available to certain institutional investors only.
Portfolio Facts
================================================================================
% of Net Assets
as of
Fund Composition 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 98.3 97.1
- ---------------------------------------
Short Term Investments
and Other 1.7 2.9
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- ----------------------------------------------
General Electric Co. 1.3
- ----------------------------------------------
Liberty Media Corp., Class A 1.1
- ----------------------------------------------
Washington Mutual, Inc. 1.1
- ----------------------------------------------
Microsoft Corp. 1.0
- ----------------------------------------------
Time Warner, Inc. 1.0
- ----------------------------------------------
McDonald's Corp. 1.0
- ----------------------------------------------
3M Co. 1.0
- ----------------------------------------------
Home Depot, Inc. 1.0
- ----------------------------------------------
Laidlaw International, Inc. 0.9
- ----------------------------------------------
Intel Corp. 0.9
% of Net Assets
as of
Five Largest Industries 12/31/04
- ----------------------------------------------
Retail 7.8
- ----------------------------------------------
Media 6.4
- ----------------------------------------------
Health Care - Products 5.4
- ----------------------------------------------
Software 5.2
- ----------------------------------------------
Diversified Financial Services 4.1
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase.
/4/S&P 400 Midcap Index is an unmanaged index of U.S. mid-sized companies.
/5/S&P 500 Index is an unmanaged index of U.S. common stocks.
/6/Wilshire 4500 Index is an unmanaged index of 4,500 mid- and smallsized
companies.
/7/Morningstar Mid-Cap Growth Fund Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
2
CDC NVEST STAR VALUE FUND
Management Discussion
- --------------------------------------------------------------------------------
2004 ended on a high note. Most equity indexes were up for the year, but value
stocks led the market. Small- and mid-cap stocks outperformed large-caps. For
the 12 months ended December 31, 2004, the total return on CDC Nvest Star Value
Fund was 11.37% based on the net asset value of Class A shares and $0.165 in
capital gains reinvested during the period. The fund lagged its benchmark, the
Russell 1000 Value Index, which returned 16.49%, although it beat the 9.96%
average return on the funds in Morningstar's Large Blend category.
The fund's four segments include a broad range of stocks in a variety of
industries. Harris Associates invests in companies that they believe are
trading at a substantial discount to their true business value, with positive
cash flow, competitive returns, and favorable growth potential. Loomis, Sayles
& Company focuses on companies they believe have below-average valuations and
above-average earnings prospects. Vaughan Nelson Investment Management
emphasizes established but undervalued companies that the managers believe will
rebound. Westpeak Global Advisors employs proprietary research to select stocks
based on value and growth potential, while seeking to manage unnecessary risk.
HARRIS ASSOCIATES' FUNDAMENTAL SELECTION PROCESS RESULTED IN A HIGH-QUALITY
PORTFOLIO
Harris Associates believes in selecting stocks based on individual merit rather
than broad economic trends. Top performers included Costco, the dominant
discounter in the retail market; and Yum! Brands, whose well-known fast-food
chains include Kentucky Fried Chicken, Pizza Hut, and Taco Bell. Yum! Brands
has gained investor appreciation for its international as well as its domestic
business. Another top performer, Carnival Corp., continued to beat analysts'
earnings expectations, benefiting from a merger with Princess Cruise Lines, an
increase in passengers, and higher fares. Detractors included The Gap, a
clothing retailer whose lower-end retail operations have not done as well as
high-end retail of late, although the company's strong 2003 earnings made
comparisons difficult. Tiffany declined on lower-than-expected sales in Japan,
even though its U.S. sales were ahead of plan. The Gap and Tiffany remain in
the segment. However, Harris Associates sold Interpublic Group in the third
quarter on weak advertising spending industry-wide and management's
disappointing turnaround efforts.
LOOMIS SAYLES FOCUSED ON STOCKS SELLING AT A DISCOUNT TO THEIR INTRINSIC VALUE
Strong performers included financial companies, which benefited from a
favorable interest-rate environment and good corporate earnings. Energy
companies - especially energy services and coal companies - profited from
rising energy prices. Individual stocks with the biggest positive impact on
performance included Apple Computer, which rose on strong sales of its iPod
music player; JC Penney, which benefited from cost-cutting and capital
restructuring; and Exxon Mobil, whose business fundamentals seem excellent.
Investments in healthcare were significant detractors, including McKesson (a
healthcare products company) and Universal Health Services (which owns and
operates hospitals and medical service centers). Both stocks declined on
lower-than-expected earnings.
VAUGHAN NELSON PURSUED COMPANIES WITH COMPETITIVE ADVANTAGES
The segment's allocation to the consumer discretionary, materials, and
financial sectors contributed to performance. Individual companies that were
leaders included Ultra Petroleum, an independent oil and gas company; Allegheny
Technologies, a producer of specialty materials; and Consol Energy, a coal and
gas producer. Investments in information technology, consumer staples, and
industrials detracted from the segment's performance. The worst performers
included two established technology companies: Cisco Systems, a leader in
networking and communications; and Intel, a premier semiconductor company.
Vaughan Nelson believes both stocks are currently undervalued in light of their
potential for recovery and renewed growth, and they remain in the segment.
WESTPEAK EMPHASIZED VALUATION, STRONG FUNDAMENTALS AND MOMENTUM
This segment benefited from its energy-related investments, including Houston
Exploration, an independent natural gas and oil company. Chemical stocks were
another source of strength. The segment's relatively small position in media
companies was a positive since the sector was weak, but it would have benefited
from a larger position in real estate investment trusts (REITs), which were
strong during the year. Individual companies that boosted returns included
CompuCredit, which provides services to a specialized segment of the consumer
credit market; and Energizer Holdings, a manufacturer of batteries, flashlights
and shaving products. Although Intel detracted from results, Westpeak continues
to believe it is one of the more attractive stocks in the semiconductor
industry. They trimmed the segment's position in pharmaceutical giant Pfizer
when the company had to withdraw its popular arthritis drug, Celebrex; a
reduced position remains in the segment.
Subadvisors:
Harris Associates L.P.
Loomis, Sayles & Company, L.P.
Vaughan Nelson Investment Management, L.P.
Westpeak Global Advisors, L.P.
- --------------------------------------------------------------------------------
What You Should Know:
Value stocks may fall out of favor with investors and underperform the overall
market during any given period. Foreign investments involve risks not
associated with domestic securities, such as currency fluctuations, differing
political and economic conditions and different accounting standards.
3
CDC NVEST STAR VALUE FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
December 31, 1994 through December 31, 2004
Net Asset Maximum Russell 1000
Value/1/ Sales Charge/2/ Value Index/4/
---------- --------------- --------------
12/31/1994 $10,000 $ 9,425 $10,000
1/31/1995 10,028 9,451 10,308
2/28/1995 10,413 9,814 10,716
3/31/1995 10,798 10,177 10,952
4/30/1995 11,197 10,553 11,298
5/31/1995 11,665 10,994 11,772
6/30/1995 11,899 11,215 11,932
7/31/1995 12,285 11,578 12,347
8/31/1995 12,285 11,578 12,522
9/30/1995 12,660 11,932 12,975
10/31/1995 12,351 11,640 12,846
11/30/1995 13,027 12,278 13,496
12/31/1995 13,233 12,472 13,836
1/31/1996 13,686 12,899 14,267
2/29/1996 13,867 13,069 14,375
3/31/1996 13,912 13,112 14,619
4/30/1996 14,078 13,268 14,675
5/31/1996 14,319 13,495 14,859
6/30/1996 14,319 13,495 14,871
7/31/1996 13,852 13,055 14,309
8/31/1996 14,259 13,439 14,718
9/30/1996 15,068 14,201 15,303
10/31/1996 15,535 14,641 15,895
11/30/1996 16,751 15,788 17,047
12/31/1996 16,716 15,755 16,830
1/31/1997 17,134 16,148 17,646
2/28/1997 17,326 16,329 17,905
3/31/1997 16,664 15,706 17,261
4/30/1997 16,977 16,001 17,986
5/31/1997 17,935 16,903 18,991
6/30/1997 18,874 17,789 19,806
7/31/1997 20,301 19,134 21,296
8/31/1997 19,518 18,395 20,537
9/30/1997 20,343 19,173 21,778
10/31/1997 19,466 18,347 21,170
11/30/1997 19,924 18,778 22,106
12/31/1997 20,217 19,054 22,751
1/31/1998 20,176 19,016 22,429
2/28/1998 21,532 20,294 23,939
3/31/1998 22,389 21,102 25,404
4/30/1998 22,369 21,083 25,573
5/31/1998 21,731 20,482 25,194
6/30/1998 21,712 20,463 25,517
7/31/1998 20,974 19,768 25,067
8/31/1998 17,425 16,423 21,336
9/30/1998 18,418 17,359 22,561
10/31/1998 19,963 18,816 24,309
11/30/1998 21,002 19,794 25,441
12/31/1998 21,644 20,400 26,307
1/31/1999 21,086 19,873 26,517
2/28/1999 20,706 19,516 26,143
3/31/1999 20,795 19,600 26,684
4/30/1999 22,405 21,117 29,176
5/31/1999 22,203 20,926 28,855
6/30/1999 22,785 21,475 29,693
7/31/1999 21,757 20,506 28,824
8/31/1999 20,817 19,620 27,754
9/30/1999 19,616 18,488 26,784
10/31/1999 20,575 19,392 28,326
11/30/1999 20,279 19,113 28,104
12/31/1999 20,147 18,989 28,240
1/31/2000 19,525 18,402 27,319
2/29/2000 17,848 16,821 25,289
3/31/2000 19,686 18,554 28,375
4/30/2000 19,633 18,504 28,045
5/31/2000 19,525 18,402 28,340
6/30/2000 19,066 17,970 27,045
7/31/2000 19,119 18,020 27,384
8/31/2000 20,286 19,119 28,907
9/30/2000 19,935 18,788 29,172
10/31/2000 20,475 19,298 29,889
11/30/2000 19,826 18,686 28,779
12/31/2000 20,555 19,373 30,221
1/31/2001 21,205 19,986 30,337
2/28/2001 20,637 19,450 29,494
3/31/2001 19,933 18,787 28,451
4/30/2001 21,177 19,959 29,847
5/31/2001 21,744 20,494 30,517
6/30/2001 21,366 20,137 29,840
7/31/2001 21,176 19,958 29,777
8/31/2001 20,257 19,092 28,584
9/30/2001 18,553 17,486 26,572
10/31/2001 19,121 18,021 26,344
11/30/2001 20,392 19,220 27,875
12/31/2001 20,825 19,627 28,532
1/31/2002 20,527 19,347 28,312
2/28/2002 20,311 19,144 28,357
3/31/2002 21,203 19,984 29,699
4/30/2002 20,554 19,372 28,680
5/31/2002 20,554 19,372 28,824
6/30/2002 18,959 17,869 27,169
7/31/2002 17,310 16,315 24,644
8/31/2002 17,580 16,569 24,830
9/30/2002 15,444 14,556 22,069
10/31/2002 16,445 15,499 23,704
11/30/2002 17,770 16,748 25,197
12/31/2002 16,770 15,805 24,103
1/31/2003 16,364 15,423 23,519
2/28/2003 15,986 15,067 22,892
3/31/2003 16,013 15,092 22,930
4/30/2003 17,501 16,494 24,949
5/31/2003 18,771 17,692 26,559
6/30/2003 19,122 18,023 26,891
7/31/2003 19,338 18,226 27,292
8/31/2003 19,826 18,686 27,717
9/30/2003 19,393 18,278 27,446
10/31/2003 20,666 19,477 29,126
11/30/2003 21,180 19,962 29,521
12/31/2003 22,072 20,803 31,341
1/31/2004 22,315 21,032 31,892
2/29/2004 22,801 21,490 32,576
3/31/2004 22,667 21,363 32,290
4/30/2004 22,315 21,032 31,501
5/31/2004 22,585 21,287 31,823
6/30/2004 23,019 21,695 32,574
7/31/2004 22,342 21,057 32,116
8/31/2004 22,289 21,007 32,572
9/30/2004 22,558 21,261 33,077
10/31/2004 22,856 21,542 33,627
11/30/2004 23,912 22,537 35,327
12/31/2004 24,577 23,174 36,510
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
Class A (Inception 6/5/70)
Net Asset Value/1/ 11.37% 4.06% 9.41%
With Maximum Sales Charge/2/ 4.94 2.84 8.77
Class B (Inception 9/13/93)
Net Asset Value/1/ 10.67 3.28 8.59
With CDSC/3/ 5.67 2.93 8.59
Class C (Inception 12/30/94)
Net Asset Value/1/ 10.67 3.25 8.58
With CDSC/3/ 9.67 3.25 8.58
- ----------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years
Russell 1000 Value Index/4/ 16.49% 5.27% 13.83%
Morningstar Large Blend Fund Avg./5/ 9.96 -1.77 10.42
All results represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 96.9 95.9
- ---------------------------------------
Short Term Investments
and Other 3.1 4.1
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- ----------------------------------------------
McDonald's Corp. 2.5
- ----------------------------------------------
Time Warner, Inc. 2.5
- ----------------------------------------------
JPMorgan Chase & Co. 2.5
- ----------------------------------------------
Exxon Mobil Corp. 2.4
- ----------------------------------------------
Waste Management, Inc. 2.0
- ----------------------------------------------
Baxter International, Inc. 1.9
- ----------------------------------------------
Yum! Brands, Inc. 1.9
- ----------------------------------------------
Cendant Corp. 1.9
- ----------------------------------------------
Sovereign Bancorp, Inc. 1.8
- ----------------------------------------------
Citigroup, Inc. 1.8
% of Net Assets
as of
Five Largest Industries 12/31/04
- ----------------------------------------------
Retail 11.3
- ----------------------------------------------
Diversified Financial Services 9.1
- ----------------------------------------------
Media 7.6
- ----------------------------------------------
Oil & Gas 6.5
- ----------------------------------------------
Banks 6.2
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes 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 1,000 largest U.S.
companies within the Russell 3000 Index with lower price-to-book ratios and
lower forecasted growth values.
/5/Morningstar Large Blend Fund Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
4
CGM ADVISOR TARGETED EQUITY FUND
Portfolio Profile
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Strategy:
Generally invests in a focused portfolio of common stocks of large-cap companies
- --------------------------------------------------------------------------------
Inception Date:
November 27, 1968
- --------------------------------------------------------------------------------
Manager:
G. Kenneth Heebner
- --------------------------------------------------------------------------------
Symbols:
Class A NEFGX
Class B NEBGX
Class C NEGCX
Class Y NEGYX
- --------------------------------------------------------------------------------
You Should Know:
The fund invests in a small number of securities, which may result in greater
volatility than more diversified funds. Growth stocks can be more sensitive to
market movements because their prices are based in part on future expectations.
The fund may invest in foreign securities that involve risks not associated
with domestic securities.
Management Discussion
- --------------------------------------------------------------------------------
Several key issues delivered strong performance for CGM Advisor Targeted Equity
Fund in 2004, and positioned the fund in the top quarter of its peer group for
the year. The fund's total return was 13.98% based on the net asset value of
Class A shares. The fund outperformed both its benchmark, the Standard & Poor's
500 Index, which returned 10.88% for the year, and Morningstar's Large Blend
category, which averaged 9.96%.
SECTOR FOCUS UNDERWENT MAJOR SHIFT DURING THE YEAR
We began the year fully invested in anticipation of moderate economic growth,
rising corporate profits, and modest interest rates. Homebuilding stocks
accounted for about one-quarter of the portfolio, making it the fund's largest
sector. The fund also had substantial positions in the drug and technology
sectors. However, we eliminated these three industry concentrations during the
period and shifted the proceeds to energy, foreign cellular phone companies,
and domestic restaurants and hotels.
KEY ISSUES LED THE FUND'S ADVANCE
We focused the portfolio on several key issues that led its advance during the
year. These included Mobile TeleSystems, America Movil, and Companhia Vale do
Rio Doce.
Mobile TeleSystems is Russia's largest cell phone operator. With an unsaturated
market, Russia provides a tremendous growth opportunity for cell phone
companies, and Mobile TeleSystems is leading the way as firms penetrate the
market in the Russian Federation and adjacent former Soviet republics. America
Movil, Latin America's dominant cellular company, is benefiting from the same
trend. Based in Mexico, America Movil has made important acquisitions in the
relatively unsaturated markets of Brazil, Colombia, and Argentina. Strong
demand for cellular service in these countries offers extensive growth
opportunities in these expanding economies.
Companhia Vale do Rio Doce, a Brazilian mining company, is benefiting from
strong demand for iron ore that is in very short supply in the rapidly growing
economies of China and other Asian countries. The company's copper mining
operations are also profiting from higher copper prices.
ELECTRONICS AND TECHNOLOGY STOCKS UNDERPERFORMED
Disappointments for the year included AU Optronics, Taiwan's largest
manufacturer of flat panel screens for use in televisions and computer
monitors. Although the company operates in a rapidly expanding global market,
the stock price declined on fears of excess capacity in the sector. We
eliminated the position in the latter half of the year.
Micron Technology designs and manufactures semiconductor products, including
Dynamic Random Access Memory (DRAM) chips that store and retrieve data. We sold
the issue because the industry's supply and demand dynamic did not develop as
favorably as we anticipated, leading to pricing pressure and disappointing
earnings.
FUND EXPANDED EMPHASIS ON ENERGY AND MULTINATIONALS LIKELY TO BENEFIT FROM A
WEAK DOLLAR
Our interest in energy stocks mounted during the year, so that it was the
fund's largest industry position by year end. While much attention has been
focused on potential supply disruptions in the Middle East, upward pressure on
oil prices also reflects strong demand from Asia, particularly China. We
continue to believe that China's growing appetite for energy, as well as
constraints on production, will keep oil prices high.
As the year progressed, we also began to focus on multinationals we believe are
likely to benefit from the weaker dollar. These included worldwide restaurant
operators/franchisers Yum! Brands, which owns Kentucky Fried Chicken, Taco
Bell, and Pizza Hut, among others; and McDonald's, a global giant in the
fast-food market. We also invested in Marriott International, which has hotel
and lodging operations around the world.
FORECAST FOR GRADUALLY RISING INTEREST RATES
We expect the Federal Reserve Board to increase short-term interest rates
gradually during 2005. However, we do not anticipate aggressive tightening,
which could jeopardize economic recovery. We remain committed to seeking
long-term capital growth by investing in a small number of well-established
companies that we believe offer superior growth potential.
5
CGM ADVISOR TARGETED EQUITY FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
December 31, 1994 through December 31, 2004
Net Asset Maximum
Value/1/ Sales Charge/2/ S&P 500 Index/4/
---------- --------------- -------------
12/31/1994 $10,000 $ 9,425 $10,000
1/31/1995 9,763 9,202 10,259
2/28/1995 10,237 9,648 10,659
3/31/1995 10,552 9,945 10,974
4/30/1995 11,206 10,562 11,297
5/31/1995 11,883 11,200 11,748
6/30/1995 12,754 12,021 12,021
7/31/1995 13,329 12,563 12,420
8/31/1995 13,397 12,627 12,451
9/30/1995 13,641 12,857 12,977
10/31/1995 13,360 12,592 12,930
11/30/1995 13,997 13,192 13,498
12/31/1995 13,808 13,014 13,758
1/31/1996 14,293 13,471 14,226
2/29/1996 14,752 13,903 14,358
3/31/1996 14,752 13,903 14,496
4/30/1996 14,477 13,645 14,710
5/31/1996 14,700 13,855 15,089
6/30/1996 14,543 13,707 15,147
7/31/1996 13,692 12,905 14,478
8/31/1996 13,824 13,029 14,783
9/30/1996 14,772 13,923 15,615
10/31/1996 15,640 14,741 16,046
11/30/1996 16,859 15,889 17,259
12/31/1996 16,694 15,734 16,917
1/31/1997 18,201 17,155 17,973
2/28/1997 17,899 16,870 18,114
3/31/1997 17,138 16,153 17,370
4/30/1997 18,115 17,074 18,407
5/31/1997 19,005 17,912 19,528
6/30/1997 19,852 18,711 20,403
7/31/1997 21,776 20,524 22,026
8/31/1997 20,657 19,469 20,792
9/30/1997 21,714 20,466 21,931
10/31/1997 20,863 19,663 21,198
11/30/1997 20,625 19,439 22,180
12/31/1997 20,625 19,439 22,561
1/31/1998 20,961 19,756 22,810
2/28/1998 22,804 21,493 24,455
3/31/1998 24,270 22,875 25,708
4/30/1998 25,202 23,753 25,966
5/31/1998 24,806 23,380 25,520
6/30/1998 26,134 24,631 26,557
7/31/1998 26,272 24,761 26,274
8/31/1998 21,259 20,037 22,475
9/30/1998 21,410 20,179 23,915
10/31/1998 23,566 22,211 25,860
11/30/1998 25,527 24,059 27,428
12/31/1998 27,513 25,931 29,008
1/31/1999 29,378 27,689 30,221
2/28/1999 27,272 25,704 29,282
3/31/1999 27,927 26,321 30,453
4/30/1999 27,829 26,229 31,633
5/31/1999 26,933 25,384 30,886
6/30/1999 28,918 27,255 32,600
7/31/1999 28,238 26,614 31,582
8/31/1999 28,190 26,569 31,426
9/30/1999 26,518 24,994 30,564
10/31/1999 27,537 25,953 32,498
11/30/1999 28,578 26,934 33,159
12/31/1999 31,690 29,868 35,112
1/31/2000 29,212 27,532 33,348
2/29/2000 31,806 29,977 32,716
3/31/2000 32,152 30,303 35,917
4/30/2000 30,943 29,164 34,836
5/31/2000 29,706 27,998 34,122
6/30/2000 29,821 28,107 34,963
7/31/2000 28,870 27,210 34,416
8/31/2000 30,239 28,500 36,554
9/30/2000 29,144 27,468 34,624
10/31/2000 29,205 27,526 34,478
11/30/2000 28,931 27,267 31,760
12/31/2000 30,250 28,510 31,915
1/31/2001 27,567 25,982 33,047
2/28/2001 26,693 25,158 30,034
3/31/2001 26,015 24,519 28,131
4/30/2001 27,146 25,586 30,317
5/31/2001 26,598 25,069 30,521
6/30/2001 26,779 25,239 29,778
7/31/2001 26,000 24,505 29,485
8/31/2001 23,857 22,486 27,639
9/30/2001 21,553 20,313 25,407
10/31/2001 21,682 20,435 25,891
11/30/2001 23,987 22,608 27,877
12/31/2001 25,349 23,892 28,122
1/31/2002 26,128 24,625 27,711
2/28/2002 24,926 23,492 27,177
3/31/2002 25,347 23,889 28,199
4/30/2002 25,413 23,952 26,489
5/31/2002 25,154 23,707 26,294
6/30/2002 24,341 22,942 24,421
7/31/2002 21,647 20,402 22,518
8/31/2002 21,647 20,402 22,665
9/30/2002 20,315 19,147 20,202
10/31/2002 19,828 18,688 21,980
11/30/2002 19,340 18,228 23,274
12/31/2002 18,042 17,005 21,907
1/31/2003 18,042 17,005 21,333
2/28/2003 17,912 16,882 21,013
3/31/2003 18,333 17,279 21,217
4/30/2003 19,501 18,380 22,964
5/31/2003 21,188 19,970 24,174
6/30/2003 21,544 20,305 24,483
7/31/2003 21,122 19,907 24,914
8/31/2003 21,673 20,427 25,400
9/30/2003 21,933 20,672 25,130
10/31/2003 24,659 23,241 26,552
11/30/2003 25,633 24,159 26,786
12/31/2003 25,764 24,283 28,190
1/31/2004 25,179 23,731 28,708
2/29/2004 26,705 25,170 29,107
3/31/2004 27,939 26,332 28,668
4/30/2004 25,732 24,252 28,218
5/31/2004 26,349 24,834 28,605
6/30/2004 26,576 25,048 29,161
7/31/2004 25,311 23,855 28,196
8/31/2004 25,602 24,130 28,310
9/30/2004 27,192 25,628 28,617
10/31/2004 27,515 25,933 29,054
11/30/2004 28,748 27,095 30,230
12/31/2004 29,370 27,685 31,258
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
Since
1 Year 5 Years 10 Years Inception
Class A (Inception 11/27/68)
Net Asset Value/1/ 13.98% -1.51% 11.38% --
With Maximum Sales Charge/2/ 7.48 -2.67 10.72 --
Class B (Inception 2/28/97)
Net Asset Value/1/ 13.12 -2.26 -- 5.71%
With CDSC/3/ 8.12 -2.61 -- 5.71
Class C (Inception 9/1/98)
Net Asset Value/1/ 13.12 -2.26 -- 3.54
With CDSC/3/ 12.12 -2.26 -- 3.54
Class Y (Inception 6/30/99)
Net Asset Value/1/ 14.37 -1.07 -- 0.70
- --------------------------------------------------------------------------------
Since Since Since
Class B Class C Class Y
Comparative Performance 1 Year 5 Years 10 Years Inception/6/ Inception/6/ Inception/6/
S&P 500 Index/4/ 10.88% -2.30% 12.07% 7.21% 4.38% -0.76%
Morningstar Large Blend Fund
Avg./5/ 9.96 -1.77 10.42 6.25 4.52 -0.31
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com. 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 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 99.4 99.4
- ---------------------------------------
Short Term Investments
and Other 0.6 0.6
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- ----------------------------------------------------
Mobile TeleSystems, Sponsored ADR 7.1
- ----------------------------------------------------
America Movil SA de CV, Class L, ADR 6.4
- ----------------------------------------------------
ConocoPhillips 5.7
- ----------------------------------------------------
Total SA, Sponsored ADR 5.6
- ----------------------------------------------------
Nike, Inc., Class B 5.5
- ----------------------------------------------------
McDonald's Corp. 5.3
- ----------------------------------------------------
General Dynamics Corp. 5.0
- ----------------------------------------------------
FedEx Corp. 4.9
- ----------------------------------------------------
United Technologies Corp. 4.9
- ----------------------------------------------------
Procter & Gamble Co. 4.9
% of Net Assets
as of
Five Largest Industries 12/31/04
- ----------------------------------------------------
Oil & Gas 23.7
- ----------------------------------------------------
Telecommunications 13.5
- ----------------------------------------------------
Aerospace & Defense 9.9
- ----------------------------------------------------
Mining 9.2
- ----------------------------------------------------
Apparel 5.5
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes 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 stocks.
/5/Morningstar Large Blend Fund Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
/6/The since-inception performance comparisons 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.
6
HANSBERGER INTERNATIONAL FUND
Portfolio Profile
- --------------------------------------------------------------------------------
Objective:
Seeks long-term growth of capital
- --------------------------------------------------------------------------------
Strategy:
Invests in common stocks of small-, mid- and large capitalization companies
located outside the U.S. Assets are diversified across developed and emerging
markets
- --------------------------------------------------------------------------------
Inception Date:
December 29, 1995
- --------------------------------------------------------------------------------
Managers:
Growth:
Barry A. Lockhart
Patrick H. Tan
Thomas R.H. Tibbles
Value:
Ronald Holt
Robert Mazuelos
Lauretta Reeves
- --------------------------------------------------------------------------------
Symbols:
Class A NEFDX
Class B NEDBX
Class C NEDCX
- --------------------------------------------------------------------------------
You Should Know:
Foreign securities involve risks not associated with domestic securities, such
as currency fluctuations, differing political, economic conditions and
accounting standards. Growth stocks can be more sensitive to market movements
because their prices are based in part on future expectations. Value stocks may
fall out of favor and underperform the overall market during any given period.
Management Discussion
- --------------------------------------------------------------------------------
Although Hansberger did not become the fund's sole manager until March 1, 2004,
for the 12 months ended December 31, 2004 Hansberger International Fund
provided a total return of 13.60% based on the net asset value of Class A
shares. The fund's benchmarks, the MSCI EAFE Index and the MSCI ACWI ex-U.S.
Index (neither of which include the United States) returned 20.70% and 21.36%,
respectively, in 2004, while the average performance of Morningstar's Foreign
Large Blend fund category was 17.59%.
VALUE SEGMENT EMPHASIZES EUROPE, EX U.K., AND EMERGING MARKETS
Although it is underweight in the U.K. relative to its benchmark, the fund's
value segment continues to emphasize the major economies in Europe and
emerging-market economies, including Brazil, Korea, and China. Even though the
value segment had a relatively small position in energy - one of the
best-performing market sectors in 2004 - the stocks we selected performed well,
including Italian oil and gas companies ENI and Saipem, and France's Total.
Petrobras, a Brazilian energy company, also benefited this segment. Solid
performers in other sectors included Rolls-Royce, the British manufacturer of
airplane engines, whose servicing division profited from an overall increase in
air travel during the year; E.ON, a leading German electric utility that also
produces gas; and ING, a European-based financial company active on a global
basis, whose ING Direct subsidiary surpassed its own goals.
Stocks that underperformed included Denway Motors, whose business in China
suffered when that country's government decided the auto industry was
overheating and clamped down on auto loans. We like Denway's long-term
prospects and continue to hold the stock. We also continue to hold shares of
NEC Corporation, which was one of the first companies in Japan to restructure.
Stories in the local news media about slowing sales of computers, DVDs, and
cell phones, which NEC makes, hurt the price of its shares, but we believe the
combined effects of its restructuring and a turnaround in the Japanese market
will benefit this company. However, we sold shares of Britain's largest money
manager, Amvescap PLC.
GROWTH SEGMENT FOCUSED ON HIGH-QUALITY, LARGE-CAP STOCKS
For most of 2004, large-cap stocks of the quality, growth-oriented companies
that this segment favors lagged value stocks, which tend to perform well during
periods of economic growth and low interest rates. The effects of rate hikes in
the U.K., the United States, and other countries have yet to trigger a
resurgence in quality growth stocks. Geographic regions that benefited this
segment included North America and the Pacific rim ex-Japan. From a sector
standpoint, although healthcare was relatively weak in 2004, the segment's
selections in this area did well, including Nobel Biocare, a manufacturer of
dental implants based in Switzerland. Energy stocks did well, including the
segment's holdings in Suncor, a Canadian oil company. Financial stocks were
also strong, including the segment's holdings in Hungary's OTP Bank, India's
HDFC Bank, and Canadian insurer Manulife. One of the segment's best-performing
stocks this year was Esprit, a Hong Kong apparel manufacturer.
Disappointments included British Sky Broadcasting, which offers programming as
well as satellite services to British television viewers. The stock fell when
the company issued a near-term profit warning, but we have confidence in the
company's long-term prospects so we still hold the stock. However, we sold
Ryanair, a low-cost airline headquartered in Ireland, because the dynamics of
this highly competitive industry are not what they once were.
OUTLOOK FOR A GRADUAL RISE IN INTEREST RATES
We expect interest rates to rise gradually in 2005, primarily in the United
States, although there is also some pressure on rates in other parts of the
world. While this might support the dollar, domestic budgetary problems and the
trade deficit may keep the dollar weak. In general, we look for continued
economic growth on a worldwide basis, but at a more moderate rate than in 2004.
7
HANSBERGER INTERNATIONAL FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
December 29, 1995 (inception) through December 31, 2004
Net Asset Maximum Sales MSCI EAFE MSCI ACWI ex-U.S.
Value/1/ Charge/2/ Index/4/ Index/5/
--------- ------------- --------- ----------------
12/29/95 10,000 9,425 10,000 10,000
12/31/95 10,000 9,425 10,000 10,000
1/31/96 10,088 9,508 10,043 10,137
2/29/96 10,264 9,673 10,080 10,137
3/31/96 10,527 9,922 10,297 10,327
4/30/96 10,872 10,246 10,598 10,640
5/31/96 11,136 10,495 10,406 10,480
6/30/96 11,176 10,533 10,467 10,533
7/31/96 10,664 10,051 10,164 10,183
8/31/96 10,952 10,322 10,189 10,243
9/30/96 11,136 10,496 10,462 10,497
10/31/96 11,048 10,413 10,357 10,392
11/30/96 11,495 10,834 10,772 10,793
12/31/96 11,665 10,995 10,636 10,668
1/31/97 12,136 11,438 10,266 10,472
2/28/97 12,387 11,675 10,437 10,664
3/31/97 12,265 11,560 10,477 10,641
4/30/97 12,387 11,675 10,535 10,731
5/31/97 13,027 12,278 11,223 11,394
6/30/97 13,626 12,843 11,845 12,023
7/31/97 14,144 13,331 12,039 12,266
8/31/97 13,351 12,583 11,142 11,301
9/30/97 14,081 13,271 11,769 11,912
10/31/97 13,060 12,309 10,867 10,898
11/30/97 12,907 12,165 10,759 10,762
12/31/97 13,145 12,389 10,855 10,886
1/31/98 13,103 12,349 11,354 11,211
2/28/98 13,995 13,190 12,085 11,959
3/31/98 14,565 13,727 12,460 12,373
4/30/98 14,649 13,807 12,561 12,461
5/31/98 14,352 13,527 12,503 12,235
6/30/98 14,055 13,247 12,601 12,189
7/31/98 14,013 13,207 12,731 12,305
8/31/98 11,793 11,115 11,157 10,570
9/30/98 11,682 11,010 10,818 10,346
10/31/98 12,533 11,812 11,948 11,430
11/30/98 13,204 12,445 12,563 12,044
12/31/98 13,672 12,886 13,062 12,459
1/31/99 14,148 13,334 13,027 12,446
2/28/99 13,969 13,166 12,719 12,167
3/31/99 14,539 13,703 13,253 12,755
4/30/99 15,321 14,440 13,793 13,393
5/31/99 14,938 14,079 13,086 12,764
6/30/99 15,814 14,905 13,599 13,350
7/31/99 15,635 14,736 14,006 13,663
8/31/99 15,524 14,631 14,061 13,711
9/30/99 15,167 14,295 14,205 13,804
10/31/99 15,702 14,800 14,740 14,318
11/30/99 16,875 15,905 15,256 14,890
12/31/99 18,814 17,733 16,628 16,310
1/31/2000 18,115 17,073 15,574 15,425
2/29/2000 19,248 18,142 15,996 15,842
3/31/2000 19,304 18,194 16,620 16,438
4/30/2000 17,905 16,875 15,748 15,520
5/31/2000 17,092 16,109 15,367 15,123
6/30/2000 17,593 16,581 15,971 15,767
7/31/2000 17,119 16,135 15,305 15,145
8/31/2000 17,631 16,617 15,441 15,332
9/30/2000 16,968 15,993 14,692 14,482
10/31/2000 16,325 15,387 14,348 14,021
11/30/2000 15,582 14,686 13,813 13,392
12/31/2000 16,516 15,566 14,307 13,850
1/31/2001 16,836 15,868 14,300 14,057
2/28/2001 15,760 14,854 13,229 12,945
3/31/2001 14,730 13,883 12,353 12,030
4/30/2001 15,680 14,778 13,220 12,848
5/31/2001 15,863 14,951 12,764 12,493
6/30/2001 15,732 14,827 12,246 12,014
7/31/2001 15,444 14,556 12,025 11,746
8/31/2001 15,110 14,241 11,722 11,455
9/30/2001 13,533 12,754 10,538 10,239
10/31/2001 13,798 13,004 10,807 10,526
11/30/2001 14,582 13,743 11,206 11,008
12/31/2001 15,034 14,169 11,273 11,150
1/31/2002 14,676 13,832 10,675 10,672
2/28/2002 14,711 13,865 10,750 10,749
3/31/2002 15,589 14,693 11,390 11,378
4/30/2002 15,485 14,594 11,419 11,407
5/31/2002 15,578 14,682 11,574 11,531
6/30/2002 14,631 13,789 11,118 11,033
7/31/2002 13,227 12,467 10,021 9,958
8/31/2002 13,250 12,488 10,001 9,958
9/30/2002 11,615 10,947 8,929 8,903
10/31/2002 12,253 11,548 9,410 9,381
11/30/2002 13,134 12,378 9,838 9,832
12/31/2002 12,565 11,842 9,508 9,514
1/31/2003 12,124 11,427 9,112 9,180
2/28/2003 11,788 11,110 8,904 8,994
3/31/2003 11,637 10,968 8,735 8,820
4/30/2003 12,854 12,115 9,601 9,669
5/31/2003 13,770 12,978 10,192 10,285
6/30/2003 14,082 13,272 10,444 10,570
7/31/2003 14,372 13,546 10,699 10,852
8/31/2003 14,824 13,971 10,959 11,175
9/30/2003 15,021 14,157 11,299 11,488
10/31/2003 16,087 15,162 12,004 12,233
11/30/2003 16,365 15,424 12,273 12,500
12/31/2003 17,467 16,463 13,232 13,454
1/31/2004 17,862 16,835 13,420 13,670
2/29/2004 18,081 17,042 13,732 14,017
3/31/2004 17,908 16,878 13,815 14104
4/30/2004 17,397 16,397 13,514 13665
5/31/2004 17,455 16,451 13,555 13696
6/30/2004 17,745 16,724 13,875 14006
7/31/2004 16,944 15,970 13,427 13598
8/31/2004 17,095 16,112 13,489 13706
9/30/2004 17,536 16,528 13,844 14147
10/31/2004 18,046 17,009 14,317 14639
11/30/2004 19,100 18,002 15,299 15655
12/31/2004 19,847 18,709 15,971 16327
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
Since
1 Year/8/ 5 Years/8/ Inception/8/
Class A (Inception 12/29/95)
Net Asset Value/1/ 13.60% 1.07% 7.91%
With Maximum Sales Charge/2/ 7.07 -0.12 7.20
Class B (Inception 12/29/95)
Net Asset Value/1/ 12.73 0.32 7.12
With CDSC/3/ 7.73 0.00 7.12
Class C (Inception 12/29/95)
Net Asset Value/1/ 12.80 0.32 7.13
With CDSC/3/ 11.80 0.32 7.13
- ----------------------------------------------------------------------------------------------------
Since
Comparative Performance 1 Year 5 Years Inception/7/
MSCI ACWI ex-U.S. Index/5/ 21.36% 0.02% 5.60%
MSCI EAFE Index/4/ 20.70 -0.80 5.34
Morningstar Foreign Large Blend Fund Avg./6/ 17.59 -2.93 5.78
All results represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 97.4 98.2
- ---------------------------------------
Short Term Investments
and Other 2.6 1.8
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- --------------------------------------------------
Royal Bank of Scotland Group PLC 1.8
- --------------------------------------------------
Societe Generale, Class A 1.8
- --------------------------------------------------
Canon, Inc. 1.7
- --------------------------------------------------
Novartis AG 1.6
- --------------------------------------------------
HBOS PLC 1.6
- --------------------------------------------------
Johnson Electric Holdings, Ltd. 1.4
- --------------------------------------------------
Total SA 1.3
- --------------------------------------------------
Hutchison Whampoa, Ltd. 1.3
- --------------------------------------------------
Samsung Electronics Co., Ltd. 1.2
- --------------------------------------------------
Eni-Ente Nazionale Idrocarburi SpA 1.2
% of Net Assets
as of
Five Largest Countries 12/31/04
- --------------------------------------------------
United Kingdom 19.0
- --------------------------------------------------
Japan 18.7
- --------------------------------------------------
France 13.9
- --------------------------------------------------
Germany 7.2
- --------------------------------------------------
Hong Kong 5.8
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase.
/4/Morgan Stanley Capital International Europe Australasia and Far East Index
(MSCI EAFE) is an unmanaged index of common stocks traded outside the
United States.
/5/Morgan Stanley Capital International All Countries World Index ex-U.S.
(MSCI ACWI ex-U.S. Index) is an unmanaged index of stock markets throughout
the world excluding the United States.
/6/Morningstar Foreign Large Blend Fund Average is the average performance
without sales charges of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/7/The since-inception performance comparisons are calculated from 12/31/95.
/8/Fund performance has been increased by expense waivers, without which
performance would have been lower.
Note: Effective 3/1/04, the fund changed from a multiple subadvisor format to
its present format, with one subadvisor.
8
HARRIS ASSOCIATES FOCUSED VALUE FUND
Portfolio Profile
- --------------------------------------------------------------------------------
Objective:
Seeks long-term capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Focuses on 15 to 20 stocks of mid- to largecap U.S. companies
- --------------------------------------------------------------------------------
Inception Date:
March 15, 2001
- --------------------------------------------------------------------------------
Managers:
William C. Nygren
Floyd J. Bellman
- --------------------------------------------------------------------------------
Symbols:
Class A NRSAX
Class B NRSBX
Class C NRSCX
- --------------------------------------------------------------------------------
You Should Know:
The fund invests in a small number of securities, which may result in greater
volatility than more diversified funds. Value stocks may fall out of favor with
investors and underperform the overall market during any given period.
Management Discussion
- --------------------------------------------------------------------------------
Election uncertainty plus possible economic damage from high energy prices left
stock prices trendless for most of 2004. However, optimism returned in the
fourth quarter as oil prices retreated and the election outcome proved
decisive. A strong rally followed, moving the market solidly into the black,
although at a slower pace than in 2003.
After trailing its benchmark earlier in the year, Harris Associates Focused
Value Fund gained significant ground during the fourth-quarter rally. Total
return for the year ended December 31, 2004 was 10.77%, based on the net asset
value of the fund's Class A shares. Performance was in line with the fund's
benchmark, the Standard & Poor's 500 Index, which returned 10.88% for the
period, but below the 12.91% average return on Morningstar's Large Value
category.
CONSUMER DISCRETIONARY ISSUES BOOSTED RETURNS
We took advantage of attractive valuations in economically sensitive consumer
stocks, a strategy that was rewarded as consumer confidence rebounded. A shift
in its product mix contributed to profits for TJX, as the company expanded its
offerings of accessories at its T.J. Maxx and Marshall's stores. Yum! Brands
stabilized domestic operations at its Pizza Hut division, a unit that is seeing
rapid growth in China. AutoNation, the country's largest retailer of new and
used cars, continued to execute its strategy of growth by acquiring additional
dealerships. AutoNation enjoys strong cash flow, conservative financial
management, and large insider ownership -- all characteristics that fit our
investment style. Black & Decker continued to execute its sound business
strategy and was the portfolio's best performing stock for the year.
FINANCIAL, HEALTHCARE, AND MEDIA COMPANIES ALSO ADVANCED
Washington Mutual, a banking and mortgage company, recovered after shaking off
a mid-year earnings shortfall. In healthcare, we took advantage of low prices
to increase our position in Omnicare, which provides pharmaceutical care for
seniors in nursing homes and other facilities; shares recovered after a stretch
of sluggish performance. Hospira, a leader in the growing market for injectable
and other drug delivery systems, rose as investors sought alternatives to the
beleaguered pharmaceutical industry.
Media and cable companies rebounded as investors recognized the sector's
improving prospects; performance had sagged following the collapse of Adelphia
(not in the portfolio). Fund holdings in Time Warner and Liberty Media
performed well. We increased exposure to Time Warner opportunistically during
the year. Cablevision, a new addition, also rose. We were attracted to
Cablevision because of its valuation, cash flow, and talented management team.
COMPANY-SPECIFIC PROBLEMS AND LOW ENERGY WEIGHTING HURT RESULTS
First Data Corporation, a leading processor of credit and debit card
transactions, was disappointing. Issues remain in its efforts to work through
the acquisition of Concord EFS. There was also some customer defection as
contracts came up for renewal. We retained our position based on our assessment
of the company's intrinsic value.
H&R Block suffered a moderate decline. The mortgage division, which prospered
while home sales boomed and rates were low, recently saw some erosion.
Competition in the tax preparation market and migration of customers to
electronic tax filing were other factors.
Although oil and gas exploration company Burlington Resources rose, the fund's
lack of significant exposure to such strong sectors as energy, materials, and
utilities hurt its 2004 performance comparisons.
PORTFOLIO SHIFTS CREATED OPPORTUNITY, POSITIONED FOR CONTINUED PROGRESS
During the year we eliminated Sprint and SunGard. We also increased the fund's
holdings in Omnicare and Time Warner, and added Cablevision, as mentioned above.
We see potential for satisfactory returns continuing into 2005. During the
market's sideways trend, we built a high-quality portfolio that we believe is
positioned to reward shareholders as the economy moves forward. In the
meantime, we are finding more stocks we feel are undervalued among large-cap
issues than in the mid-sized companies that we sometimes emphasize.
9
HARRIS ASSOCIATES FOCUSED VALUE FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
LOGO
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
Since
1 Year Inception/7/
Class A (Inception 3/15/01)
Net Asset Value/1/ 10.77% 7.28%
With Maximum Sales Charge/2/ 4.40 5.62
Class B (Inception 3/15/01)
Net Asset Value/1/ 9.87 6.47
With CDSC/3/ 4.87 5.81
Class C (Inception 3/15/01)
Net Asset Value/1/ 9.87 6.47
With CDSC/3/ 8.87 6.47
- --------------------------------------------------------------------------------
Since
Comparative Performance 1 Year Inception/6/
S&P 500 Index/4/ 10.88% 2.85%
Morningstar Large Value Fund Avg./5/ 12.91 4.65
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 90.6 92.5
- ---------------------------------------
Short Term Investments
and Other 9.4 7.5
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- ------------------------------------------
Washington Mutual, Inc. 15.3
- ------------------------------------------
Yum! Brands, Inc. 6.7
- ------------------------------------------
H&R Block, Inc. 6.6
- ------------------------------------------
Time Warner, Inc. 5.0
- ------------------------------------------
RR Donnelley & Sons Co. 4.9
- ------------------------------------------
First Data Corp. 4.6
- ------------------------------------------
Black & Decker Corp. 4.4
- ------------------------------------------
Omnicare, Inc. 4.3
- ------------------------------------------
Burlington Resources, Inc. 4.3
- ------------------------------------------
TJX Cos., Inc. 4.2
% of Net Assets
as of
Five Largest Industries 12/31/04
- ------------------------------------------
Savings & Loans 15.3
- ------------------------------------------
Commercial Services 14.5
- ------------------------------------------
Retail 13.5
- ------------------------------------------
Media 11.5
- ------------------------------------------
Pharmaceuticals 11.3
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes 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 stocks.
/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/The since-inception performance comparisons are calculated from 3/31/01.
/7/Fund performance has been increased by expense waivers, without which
performance would have been lower.
10
HARRIS ASSOCIATES LARGE CAP VALUE 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
- --------------------------------------------------------------------------------
Symbols:
Class A NEFOX
Class B NEGBX
Class C NECOX
Class Y NEOYX
- --------------------------------------------------------------------------------
You Should Know:
Value stocks may fall out of favor with investors and underperform the overall
market during any given period.
Management Discussion
- --------------------------------------------------------------------------------
After lacking direction for much of 2004, U.S stock markets moved into the
black in the fourth quarter. A decisive outcome to the presidential election, a
decline in oil prices, and strong corporate earnings prospects all helped
improve investor confidence. However, the market's gains for the year fell
short of 2003's results.
For the 12 months ended December 31, 2004, Harris Associates Large Cap Value
Fund provided a total return of 9.14% based on the net asset value of Class A
shares. The fund's results trailed its benchmark, the Russell 1000 Value Index,
which returned 16.49%, but it was within a percentage point of the 9.96%
average return on the funds in Morningstar's Large Blend category.
CONSUMER STOCKS REFLECTED THE ECONOMIC UPTURN
McDonald's continued its energetic turnaround. We purchased shares at a time
when sales were weak and market share was eroding. Since then, upheaval in the
executive suite has not disrupted the successful change in strategy that
emphasizes service and quality over growth via expansion. McDonald's has also
returned excess capital to its shareholders, including higher dividends and a
share repurchase program.
We purchased home products conglomerate Masco when its valuation seemed too low
given the wide acceptance of the company's products. Expanding earnings have
driven shares higher, as Masco's high market share brands, including Delta and
Peerless faucets, continue to prosper. Strength in housing also boosted results
at Home Depot, as new management has created a more efficient organization
through centralized buying, better communications, and other measures.
Cruise-ship operator Carnival had a large gain, as the travel industry
continued to prosper. Although The Gap was down moderately, we are looking past
short-term disappointments and are pleased with the company's overall progress.
Separately, Xerox advanced further, as it continues to pay down debt and
introduce new products.
MOST MEDIA AND FINANCIAL HOLDINGS WERE POSITIVE
Liberty Media, whose cable properties include QVC and Discovery, rose late in
the year after splitting into domestic and international units; both performed
well. Investors upped their assessment of Time Warner and welcomed a move at
the AOL division toward developing more advertising revenue and away from
subscriber growth. Washington Mutual's shares rose after shaking off a mid-year
earnings disappointment. Global ad agency Interpublic was an exception to the
positive trend among media stocks. New management has failed to revitalize the
firm, despite improving conditions in the advertising business.
LOW EXPOSURE TO ENERGY, UTILITIES, AND OTHER INDUSTRIES HURT PERFORMANCE
COMPARISONS
Results trailed the benchmark chiefly because we were underweight in energy and
utilities, as well as in the industrial, materials, and commodity sectors. Our
style is to invest in companies when we believe the products or services they
offer are out of favor or undervalued, and these industry groups performed well
in 2004. They also had a strong, positive influence on the fund's benchmark.
The fund benefited from its position in Burlington Resources, an energy
exploration company, but our position was relatively small, which diluted its
effect on the fund.
HEALTHCARE COMPANIES BROUGHT MIXED RESULTS
Among major drug makers, Merck's withdrawal of its Vioxx arthritis treatment
drove shares down sharply. Bristol-Myers Squibb's shares also declined. We
eliminated Cardinal Health, a distributor of pharmaceutical products, when
shares rebounded after the company was cleared of accounting charges. Abbott
Laboratories and Johnson & Johnson both showed gains, despite weakness in the
sector. We believe the current negative tone may not reflect the underlying
strength of many healthcare companies.
OUTLOOK IS FOR MODEST GAINS IN 2005
We believe corporate profits may expand further next year, but the muted market
gains of 2004 could foreshadow a slowing rate of economic expansion.
Nonetheless, the potential for satisfactory returns remains. We think the
economy will succeed in absorbing moderate interest rate increases in 2005. We
also feel that the anxiety over the dollar's weakness is overdone.
11
HARRIS ASSOCIATES LARGE CAP VALUE FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
December 31, 1994 through December 31, 2004
Net Asset Maximum Sales Russell 1000
Value/1/ Charge/2/ Value Index/4/
----------- ------------- --------------
12/31/1994 $10,000 $ 9,425 $10,000
1/31/1995 10,250 9,661 10,308
2/28/1995 10,588 9,979 10,716
3/31/1995 10,883 10,257 10,952
4/30/1995 11,215 10,570 11,298
5/31/1995 11,579 10,913 11,772
6/30/1995 11,850 11,169 11,932
7/31/1995 12,265 11,559 12,347
8/31/1995 12,379 11,667 12,522
9/30/1995 12,922 12,179 12,975
10/31/1995 12,794 12,059 12,846
11/30/1995 13,222 12,461 13,496
12/31/1995 13,512 12,735 13,836
1/31/1996 13,935 13,134 14,267
2/29/1996 14,011 13,205 14,375
3/31/1996 14,081 13,271 14,619
4/30/1996 14,127 13,315 14,675
5/31/1996 14,343 13,519 14,859
6/30/1996 14,036 13,229 14,871
7/31/1996 13,339 12,572 14,309
8/31/1996 13,659 12,873 14,718
9/30/1996 14,358 13,533 15,303
10/31/1996 14,800 13,949 15,895
11/30/1996 16,116 15,190 17,047
12/31/1996 15,837 14,927 16,830
1/31/1997 16,625 15,669 17,646
2/28/1997 16,831 15,863 17,905
3/31/1997 16,099 15,173 17,261
4/30/1997 16,945 15,971 17,986
5/31/1997 18,032 16,995 18,991
6/30/1997 18,915 17,827 19,806
7/31/1997 20,107 18,951 21,296
8/31/1997 19,534 18,410 20,537
9/30/1997 20,739 19,546 21,778
10/31/1997 19,831 18,690 21,170
11/30/1997 20,685 19,496 22,106
12/31/1997 21,132 19,917 22,751
1/31/1998 21,257 20,034 22,429
2/28/1998 22,964 21,643 23,939
3/31/1998 24,259 22,864 25,404
4/30/1998 24,382 22,980 25,573
5/31/1998 24,051 22,668 25,194
6/30/1998 25,056 23,615 25,517
7/31/1998 24,670 23,252 25,067
8/31/1998 20,940 19,736 21,336
9/30/1998 21,983 20,719 22,561
10/31/1998 23,570 22,215 24,309
11/30/1998 24,640 23,223 25,441
12/31/1998 26,188 24,682 26,307
1/31/1999 26,947 25,398 26,517
2/28/1999 26,300 24,788 26,143
3/31/1999 26,663 25,130 26,684
4/30/1999 28,244 26,620 29,176
5/31/1999 28,117 26,501 28,855
6/30/1999 28,995 27,327 29,693
7/31/1999 28,139 26,521 28,824
8/31/1999 27,759 26,163 27,754
9/30/1999 26,635 25,104 26,784
10/31/1999 27,703 26,110 28,326
11/30/1999 27,784 26,186 28,104
12/31/1999 28,667 27,019 28,240
1/31/2000 27,171 25,608 27,319
2/29/2000 26,255 24,745 25,289
3/31/2000 28,387 26,755 28,375
4/30/2000 27,919 26,313 28,045
5/31/2000 27,059 25,503 28,340
6/30/2000 27,413 25,837 27,045
7/31/2000 27,246 25,679 27,384
8/31/2000 29,074 27,402 28,907
9/30/2000 27,745 26,150 29,172
10/31/2000 27,823 26,223 29,889
11/30/2000 26,165 24,660 28,779
12/31/2000 26,570 25,043 30,221
1/31/2001 26,589 25,060 30,337
2/28/2001 25,010 23,572 29,494
3/31/2001 23,604 22,247 28,451
4/30/2001 25,530 24,062 29,847
5/31/2001 25,568 24,098 30,517
6/30/2001 24,681 23,262 29,840
7/31/2001 23,835 22,464 29,777
8/31/2001 22,371 21,085 28,584
9/30/2001 20,503 19,324 26,572
10/31/2001 21,235 20,014 26,344
11/30/2001 22,739 21,431 27,875
12/31/2001 22,700 21,395 28,532
1/31/2002 22,584 21,286 28,312
2/28/2002 21,986 20,722 28,357
3/31/2002 22,584 21,285 29,699
4/30/2002 21,947 20,685 28,680
5/31/2002 21,850 20,594 28,824
6/30/2002 20,539 19,358 27,169
7/31/2002 19,229 18,123 24,644
8/31/2002 19,710 18,576 24,830
9/30/2002 17,051 16,070 22,069
10/31/2002 17,687 16,670 23,704
11/30/2002 18,881 17,795 25,197
12/31/2002 18,148 17,105 24,103
1/31/2003 17,705 16,687 23,519
2/28/2003 17,146 16,160 22,892
3/31/2003 17,358 16,360 22,930
4/30/2003 18,995 17,903 24,949
5/31/2003 20,422 19,248 26,559
6/30/2003 20,865 19,665 26,891
7/31/2003 20,673 19,484 27,292
8/31/2003 21,368 20,139 27,717
9/30/2003 20,906 19,704 27,446
10/31/2003 21,889 20,630 29,126
11/30/2003 22,659 21,356 29,521
12/31/2003 23,604 22,247 31,341
1/31/2004 23,779 22,411 31,892
2/29/2004 24,337 22,938 32,576
3/31/2004 23,972 22,594 32,290
4/30/2004 23,972 22,594 31,501
5/31/2004 23,992 22,612 31,823
6/30/2004 24,339 22,940 32,574
7/31/2004 23,454 22,105 32,116
8/31/2004 23,568 22,213 32,572
9/30/2004 23,568 22,213 33,077
10/31/2004 24,070 22,686 33,627
11/30/2004 24,725 23,303 35,327
12/31/2004 25,756 24,269 36,510
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
Since
1 Year/7/ 5 Years/7/ 10 Years/7/ Inception/7/
Class A (Inception 5/6/31)
Net Asset Value/1/ 9.14% -2.12% 9.92% --
With Maximum Sales Charge/2/ 2.85 -3.27 9.27 --
Class B (Inception 9/13/93)
Net Asset Value/1/ 8.42 -2.84 9.13 --
With CDSC/3/ 3.42 -3.22 9.13 --
Class C (Inception 5/1/95)
Net Asset Value/1/ 8.34 -2.84 -- 8.20%
With CDSC/3/ 7.34 -2.84 -- 8.20
Class Y (Inception 11/18/98)
Net Asset Value/1/ 9.57 -1.62 -- 1.47
- --------------------------------------------------------------------------------
Since Since
Class C Class Y
Comparative Performance 1 Year 5 Years 10 Years Inception/6/ Inception/6/
Russell 1000 Value Index/4/ 16.49% 5.27% 13.83% 12.54% 6.12%
Morningstar Large Blend Fund Avg./5/ 9.96 -1.77 10.42 9.24 2.46
All returns represents past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com. 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 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 97.3 94.1
- ---------------------------------------
Short Term Investments
and Other 2.7 5.9
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- ----------------------------------------------
Liberty Media Corp., Class A 4.0
- ----------------------------------------------
Washington Mutual, Inc. 4.0
- ----------------------------------------------
Time Warner, Inc. 3.6
- ----------------------------------------------
McDonald's Corp. 3.6
- ----------------------------------------------
Home Depot, Inc. 3.5
- ----------------------------------------------
Comcast Corp., Special Class A 3.3
- ----------------------------------------------
Masco Corp. 3.2
- ----------------------------------------------
Xerox Corp. 3.2
- ----------------------------------------------
JPMorgan Chase & Co. 3.0
- ----------------------------------------------
Diageo PLC, Sponsored ADR 3.0
% of Net Assets
as of
Five Largest Industries 12/31/04
- ----------------------------------------------
Media 17.8
- ----------------------------------------------
Retail 15.5
- ----------------------------------------------
Diversified Financial Services 8.2
- ----------------------------------------------
Food 7.3
- ----------------------------------------------
Beverages 6.7
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes 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 with lower price-to-book ratios and lower
forecasted growth values.
/5/Morningstar Large Blend Fund Average is the average performance of funds
with similar investment objectives without sales charges, as calculated by
Morningstar, Inc.
/6/The since-inception performance comparisons for each Class of shares are
calculated as follows: Class C from 5/31/95 and Class Y from 11/30/98.
/7/Fund performance has been increased by expense waivers, without which
performance would have been lower.
12
VAUGHAN NELSON SMALL CAP VALUE FUND
Portfolio Profile
- --------------------------------------------------------------------------------
Objective:
Seeks capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Invests in small capitalization companies with a focus on absolute return using
a bottom up value oriented investment process
- --------------------------------------------------------------------------------
Inception Date:
December 31, 1996
- --------------------------------------------------------------------------------
Managers:
Mark J. Roach
Chris D. Wallis
Scott J. Weber
- --------------------------------------------------------------------------------
Symbols:
Class A NEFJX
Class B NEJBX
Class C NEJCX
- --------------------------------------------------------------------------------
You Should Know:
Investing in small cap stocks carries special risk, including narrower markets,
limited financial and management resources, less liquidity and greater
volatility than large company stocks. Value stocks may fall out of favor with
investors and underperform the overall market during any given period.
Management Discussion
- --------------------------------------------------------------------------------
Vaughan Nelson Small Cap Value Fund provided a total return of 15.28% in 2004,
based on the net asset value of Class A shares. The fund lagged both its
benchmark, the Russell 2000 Value Index, which returned 22.25% for the year,
and the 20.58% average return on the funds in Morningstar's Small Value
category.
Small-cap value stocks led the market's rise in 2004, as they had in 2003,
presenting us with challenges as we searched for attractively priced prospects
to help reshape the portfolio when we began managing it in March. Declining
markets provide better opportunities for value-oriented investors than periods
when prices are rising, and we strive to provide investors with above-average
results through full market cycles - the ups and the downs.
STOCK SELECTION HELPED MORE THAN SECTOR ALLOCATION
Rising oil prices caused energy stocks to do well, and one of the fund's best
performers in 2004 was Southwestern Energy. However, the strong performance of
this oil and gas explorer/producer had more to do with the fact that the
company had assets for which it had not been properly credited. Once this
oversight came to light, the stock price rose strongly. Some coal assets owned
by Walter Industries, a diversified company that is actively expanding its coal
production business, were significantly repriced during the year, causing the
stock price to climb.
Another strong performer for the fund was MTS Systems, a unique company with a
dominant share of a niche market and virtually no debt. The Mechanical Testing
and Simulation (MTS) division makes systems that help manufacturers with design
and development work, as well as helping them trim manufacturing costs. This
division also provides customized systems for simulation and manufacturing of
such high-end products as aircraft and suspension systems.
UNDERWEIGHT IN FINANCIAL SECTOR AND SOME INDIVIDUAL STOCKS HURT
Financial stocks did well during 2004. Although the portfolio included some
banks and other financial companies that appreciated, the fund was underweight
in this sector relative to the benchmark, which hurt our performance
comparisons.
Stocks that performed poorly were from different industries. For example,
Graftech did well for the fund early in the year, but the stock price began to
slide in March when it became apparent that analysts had overestimated the
company's earnings prospects. We sold the stock even though Graftech has a
profitable business selling graphite to steel manufacturers. However, we are
following it with a view to possibly buying it again if the price weakens
further.
The share price of Navigant International declined when this corporate travel
agency trimmed its earnings forecast slightly. We believe this was a one-time
event and we continue to hold the stock. Hypercom provides point-of-sale
electronic payment solutions to customers internationally as well as
domestically. The business is doing well, cash flow is brisk and the company
has no debt, but the weakness of the U.S. dollar impacted its earnings
estimates. We are not currently planning to add to the position, and if the
dollar weakens further we will consider selling it.
VALUATIONS OF SMALL-CAP VERSUS LARGE-CAP STOCKS APPEAR TO BE NEAR PARITY
After a long run of strong performance by small-cap stocks, it is natural to
wonder whether the market may be ready to shift. In our opinion, valuations of
small-cap versus large-cap stocks are about equal right now; neither is
significantly over- or under-valued. We do not anticipate major gains in 2005,
but our long-term outlook is positive. We believe 2005 earnings may already be
reflected in current stock prices, and the first half is likely to see the
markets rise and fall in a range of about 5%. However, once analysts begin to
factor in 2006 earnings forecasts, we believe double-digit returns may become
possible again.
13
VAUGHAN NELSON SMALL CAP VALUE FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
December 31, 1996 (inception) through December 31, 2004
Net Asset Maximum Sales Russell 2000 Russell 2000
Value/1/ Charge/2/ Index/4/ Value Index/5/
----------- ------------- -------------- ---------------
12/31/1996 $10,000 $ 9,425 $10,000 $10,000
1/31/1997 10,192 9,606 10,200 10,154
2/28/1997 9,920 9,349 9,953 10,250
3/31/1997 9,351 8,814 9,483 9,975
4/30/1997 9,264 8,731 9,509 10,122
5/31/1997 10,447 9,847 10,567 10,928
6/30/1997 11,040 10,405 11,020 11,481
7/31/1997 11,784 11,106 11,533 11,963
8/31/1997 12,104 11,408 11,797 12,153
9/30/1997 13,160 12,403 12,660 12,961
10/31/1997 12,672 11,943 12,104 12,608
11/30/1997 12,375 11,664 12,026 12,746
12/31/1997 12,696 11,966 12,236 13,178
1/31/1998 12,340 11,631 12,043 12,940
2/28/1998 13,348 12,581 12,934 13,722
3/31/1998 14,125 13,313 13,467 14,279
4/30/1998 13,994 13,189 13,542 14,349
5/31/1998 13,135 12,379 12,812 13,841
6/30/1998 13,341 12,574 12,839 13,763
7/31/1998 12,300 11,593 11,800 12,685
8/31/1998 9,624 9,070 9,509 10,699
9/30/1998 10,294 9,702 10,253 11,303
10/31/1998 10,749 10,131 10,671 11,638
11/30/1998 11,758 11,082 11,230 11,953
12/31/1998 12,957 12,212 11,925 12,328
1/31/1999 13,231 12,470 12,083 12,048
2/28/1999 12,122 11,425 11,105 11,226
3/31/1999 12,957 12,212 11,278 11,133
4/30/1999 13,934 13,133 12,289 12,150
5/31/1999 13,818 13,024 12,468 12,523
6/30/1999 14,968 14,107 13,032 12,976
7/31/1999 14,785 13,935 12,674 12,668
8/31/1999 14,654 13,811 12,205 12,205
9/30/1999 15,061 14,195 12,208 11,961
10/31/1999 16,203 15,271 12,257 11,722
11/30/1999 18,066 17,027 12,989 11,783
12/31/1999 21,430 20,198 14,460 12,145
1/31/2000 21,402 20,172 14,227 11,827
2/29/2000 26,682 25,148 16,577 12,550
3/31/2000 25,666 24,190 15,484 12,609
4/30/2000 22,655 21,352 14,552 12,684
5/31/2000 20,815 19,619 13,704 12,490
6/30/2000 22,508 21,213 14,899 12,855
7/31/2000 20,925 19,722 14,419 13,283
8/31/2000 23,526 22,174 15,520 13,877
9/30/2000 22,776 21,466 15,063 13,799
10/31/2000 20,858 19,659 14,391 13,750
11/30/2000 17,223 16,232 12,914 13,470
12/31/2000 18,811 17,729 14,023 14,917
1/31/2001 19,631 18,502 14,753 15,329
2/28/2001 17,102 16,119 13,785 15,307
3/31/2001 15,472 14,583 13,111 15,062
4/30/2001 17,023 16,044 14,136 15,759
5/31/2001 17,375 16,376 14,484 16,164
6/30/2001 17,968 16,934 14,984 16,815
7/31/2001 16,737 15,774 14,173 16,438
8/31/2001 15,711 14,807 13,715 16,381
9/30/2001 13,216 12,456 11,869 14,572
10/31/2001 14,116 13,304 12,563 14,953
11/30/2001 15,358 14,475 13,536 16,028
12/31/2001 16,544 15,593 14,371 17,009
1/31/2002 16,157 15,228 14,222 17,235
2/28/2002 14,869 14,014 13,832 17,340
3/31/2002 16,191 15,260 14,944 18,638
4/30/2002 15,815 14,906 15,080 19,294
5/31/2002 15,051 14,186 14,411 18,656
6/30/2002 14,049 13,241 13,696 18,243
7/31/2002 11,929 11,243 11,627 15,533
8/31/2002 11,917 11,232 11,598 15,463
9/30/2002 10,823 10,201 10,765 14,359
10/31/2002 11,382 10,727 11,110 14,575
11/30/2002 12,259 11,554 12,101 15,738
12/31/2002 11,450 10,792 11,428 15,066
1/31/2003 10,812 10,190 11,111 14,641
2/28/2003 10,436 9,836 10,776 14,149
3/31/2003 10,459 9,857 10,914 14,300
4/30/2003 11,462 10,803 11,949 15,659
5/31/2003 12,636 11,909 13,232 17,257
6/30/2003 13,114 12,360 13,471 17,550
7/31/2003 13,970 13,166 14,314 18,425
8/31/2003 14,688 13,843 14,970 19,125
9/30/2003 14,254 13,435 14,694 18,906
10/31/2003 15,279 14,401 15,928 20,447
11/30/2003 15,724 14,820 16,493 21,232
12/31/2003 15,883 14,969 16,828 22,000
1/31/2004 16,497 15,549 17,559 22,761
2/29/2004 16,407 15,463 17,716 23,201
3/31/2004 16,441 15,496 17,881 23,522
4/30/2004 15,734 14,829 16,970 22,306
5/31/2004 15,791 14,883 17,240 22,575
6/30/2004 16,610 15,655 17,966 23,721
7/31/2004 15,893 14,979 16,756 22,631
8/31/2004 15,734 14,829 16,670 22,853
9/30/2004 16,292 15,355 17,452 23,757
10/31/2004 16,520 15,570 17,796 24,126
11/30/2004 17,774 16,752 19,340 26,267
12/31/2004 18,309 17,260 19,912 26,894
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
Since
1 Year 5 Years Inception
Class A (Inception 12/31/96)
Net Asset Value/1/ 15.28% -3.10% 7.85%
With Maximum Sales Charge/2/ 8.65 -4.24 7.06
Class B (Inception 12/31/96)
Net Asset Value/1/ 14.45 -3.84 7.04
With CDSC/3/ 9.45 -4.15 7.04
Class C (Inception 12/31/96)
Net Asset Value/1/ 14.44 -3.83 7.05
With CDSC/3/ 13.44 -3.83 7.05
- --------------------------------------------------------------------------------
Since
Comparative Performance 1 Year 5 Years Inception
Russell 2000 Index/4/ 18.33% 6.61% 8.99%
Russell 2000 Value Index/5/ 22.25 17.23 13.16
Morningstar Small Value Fund Avg./6/ 20.58 15.81 12.36
All results represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 98.6 94.6
- ---------------------------------------
Short Term Investments
and Other 1.4 5.4
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- -----------------------------------------------------
iShares Russell 2000 Value Index Fund 3.7
- -----------------------------------------------------
Regis Corp. 2.6
- -----------------------------------------------------
Healthcare Services Group, Inc. 2.4
- -----------------------------------------------------
DRS Technologies, Inc. 2.2
- -----------------------------------------------------
Raymond James Financial, Inc. 2.0
- -----------------------------------------------------
Consolidated Graphics, Inc. 1.9
- -----------------------------------------------------
Ashford Hospitality Trust, Inc. 1.9
- -----------------------------------------------------
Infinity Property & Casualty Corp. 1.9
- -----------------------------------------------------
Triad Hospitals, Inc. 1.8
- -----------------------------------------------------
MB Financial, Inc. 1.8
% of Net Assets
as of
Five Largest Industries 12/31/04
- -----------------------------------------------------
Banks 8.2
- -----------------------------------------------------
Commercial Services 7.9
- -----------------------------------------------------
Retail 7.5
- -----------------------------------------------------
Transportation 5.9
- -----------------------------------------------------
Aerospace & Defense 5.7
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase.
/4/Russell 2000 Index is an unmanaged index measuring the stock price
performance of the 2,000 smallest companies within the Russell 3000 Index.
/5/The Russell 2000 Value Index is an unmanaged index that measures the
performance of those Russell 2000 companies with lower price-to-book ratios
and lower forecasted growth values.
/6/Morningstar Small Value Fund Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
Note: The fund changed its benchmark from the Russell 2000 to the Russell 2000
Value Index because the advisor believes the latter is more representative of
the types of stocks in which the fund can invest. Also, effective 3/1/04, the
fund changed from a multiple subadvisor format to its present format, with one
subadvisor.
14
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
- --------------------------------------------------------------------------------
You Should Know:
Growth stocks can be more sensitive to market movements because their prices
are based in part on future expectations.
Management Discussion
- --------------------------------------------------------------------------------
Value stocks continued to outperform growth stocks in 2004, most notably during
the latter part of the year, when the Federal Reserve Board's actions seemed to
energize the markets, triggering a wave of speculation among depressed stocks.
Prices of higher quality, profitable companies -- which this fund seeks to
emphasize -- tended to lag lower-quality, more speculative issues.
For 2004, the total return on Westpeak Capital Growth Fund was 5.15% based on
the net asset value of Class A shares. The fund trailed both its benchmark, the
broad-based Russell 1000 Growth Index, which returned 6.30%, and the 7.64%
average return on the funds in Morningstar's Large Growth category.
ENERGY AND INDUSTRIAL PARTS WERE STRONG, TECHNOLOGY STRUGGLED
As oil prices rose throughout most of 2004, the fund's energy stocks did well,
especially companies with large energy reserves, like Southwestern Energy
Company, and Baker Hughes, which provides products and services to energy
exploration companies. In addition, the fund benefited from its position in
Energizer Holdings, hotels (including Harrah's Entertainment), and medical
products. However, the technology sector continued to lag, as it has for the
past few years. Some of the country's most prestigious technology companies are
among the fund's largest holdings.
FUND'S BEST PERFORMERS INCLUDED HEALTHCARE COMPANIES AND AN INTERNET STOCK
We had built up the fund's holdings in UnitedHealth Group before the beginning
of the year, and our emphasis in the stock of this healthcare services company
was a positive. The fund's long-term position in Becton Dickinson, a profitable
manufacturer of medical supplies, was another positive. Although we sold the
fund's holdings in Internet services provider Infospace when the company's
earnings outlook dimmed, the stock did well for the fund while it was in the
portfolio.
LEADING TECHNOLOGY COMPANIES AND A PHARMACEUTICAL GIANT WERE BIGGEST DETRACTORS
Intel Corp, a renowned semiconductor manufacturer, has been in the portfolio
for several years and is among the fund's largest holdings. Although the stock
underperformed the benchmark in 2004, it did better than most semiconductor
stocks and we believe it is still highly attractive. Another major holding,
Cisco Systems, has also been in the portfolio for some time and it, too,
underperformed, especially during the third quarter. However, Cisco remains a
profitable company and we believe it is attractively valued relative to its
future prospects, so we continue to hold the stock.
We trimmed the fund's position in Pfizer, which had been the fund's largest
holding, when negative headlines about one of its drugs, Celebrex, drove down
the share price of this premier pharmaceutical company. Celebrex is just one
drug in a broad array of prescription medicines Pfizer offers for human and
animal healthcare. We believe the price decline might turn out to have been an
overreaction, so we continue to hold a reduced position in Pfizer.
FUND IS POSITIONED IN ANTICIPATION OF SECTOR ROTATION IN 2005
As we enter 2005, the fund's largest sectors include technology, with
particular emphasis on the computer software and hardware industries. We also
favor the aerospace and defense industries. In addition, we are emphasizing
interest-sensitive companies in financial services, asset management and the
construction business. If the Federal Reserve Board's more restrictive monetary
policies slow the economy, growth stocks in general, and technology stocks in
particular, may enjoy a period of renewed investor interest. Bargain hunting
may give way to a search for companies whose earnings are relatively
independent of the economic cycle. Stocks of quality companies, like those
featured in the fund's portfolio, may come back into their own.
15
WESTPEAK CAPITAL GROWTH FUND
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
December 31, 1994 through December 31, 2004
Net Asset Maximum Sales Russell 1000
Value/1/ Charge/2/ Growth Index/4/
----------- ------------- ---------------
12/31/1994 $10,000 $ 9,425 $10,000
1/31/1995 10,080 9,500 10,214
2/28/1995 10,479 9,877 10,642
3/31/1995 10,825 10,203 10,952
4/30/1995 10,992 10,360 11,192
5/31/1995 11,298 10,649 11,581
6/30/1995 12,051 11,358 12,028
7/31/1995 12,591 11,867 12,528
8/31/1995 12,817 12,080 12,542
9/30/1995 13,251 12,489 13,120
10/31/1995 13,040 12,290 13,129
11/30/1995 13,357 12,589 13,639
12/31/1995 13,078 12,326 13,718
1/31/1996 13,320 12,554 14,176
2/29/1996 13,667 12,881 14,436
3/31/1996 13,539 12,760 14,454
4/30/1996 14,213 13,396 14,834
5/31/1996 14,639 13,798 15,353
6/30/1996 14,440 13,610 15,374
7/31/1996 13,445 12,672 14,473
8/31/1996 13,956 13,154 14,847
9/30/1996 15,115 14,245 15,928
10/31/1996 15,107 14,238 16,024
11/30/1996 15,859 14,947 17,227
12/31/1996 15,304 14,424 16,889
1/31/1997 16,170 15,241 18,074
2/28/1997 15,726 14,822 17,952
3/31/1997 14,551 13,714 16,980
4/30/1997 15,178 14,305 18,108
5/31/1997 16,512 15,563 19,414
6/30/1997 16,973 15,997 20,191
7/31/1997 18,165 17,120 21,977
8/31/1997 17,331 16,334 20,691
9/30/1997 17,854 16,828 21,709
10/31/1997 17,133 16,148 20,907
11/30/1997 17,582 16,571 21,795
12/31/1997 17,942 16,911 22,039
1/31/1998 18,086 17,046 22,698
2/28/1998 19,326 18,215 24,405
3/31/1998 20,190 19,029 25,378
4/30/1998 20,550 19,368 25,729
5/31/1998 20,054 18,901 24,999
6/30/1998 21,097 19,884 26,530
7/31/1998 20,899 19,697 26,355
8/31/1998 17,580 16,569 22,399
9/30/1998 18,635 17,564 24,120
10/31/1998 19,997 18,847 26,059
11/30/1998 21,197 19,978 28,041
12/31/1998 23,156 21,824 30,569
1/31/1999 24,320 22,922 32,364
2/28/1999 22,954 21,634 30,886
3/31/1999 23,459 22,110 32,512
4/30/1999 23,918 22,543 32,554
5/31/1999 23,481 22,131 31,553
6/30/1999 24,725 23,304 33,764
7/31/1999 24,176 22,786 32,691
8/31/1999 24,389 22,987 33,225
9/30/1999 24,033 22,651 32,527
10/31/1999 25,708 24,230 34,983
11/30/1999 26,472 24,949 36,871
12/31/1999 28,886 27,225 40,705
1/31/2000 27,257 25,689 38,797
2/29/2000 28,393 26,761 40,693
3/31/2000 30,668 28,904 43,606
4/30/2000 29,757 28,046 41,531
5/31/2000 28,367 26,736 39,440
6/30/2000 30,236 28,498 42,429
7/31/2000 29,453 27,760 40,660
8/31/2000 31,757 29,931 44,342
9/30/2000 28,822 27,165 40,147
10/31/2000 27,822 26,222 38,247
11/30/2000 24,069 22,685 32,609
12/31/2000 23,243 21,907 31,578
1/31/2001 24,357 22,956 33,759
2/28/2001 21,049 19,839 28,028
3/31/2001 19,085 17,988 24,978
4/30/2001 21,666 20,420 28,137
5/31/2001 21,419 20,187 27,723
6/30/2001 21,084 19,872 27,081
7/31/2001 19,971 18,823 26,404
8/31/2001 18,363 17,308 24,245
9/30/2001 16,478 15,530 21,824
10/31/2001 17,236 16,244 22,969
11/30/2001 18,735 17,658 25,176
12/31/2001 18,488 17,425 25,128
1/31/2002 18,410 17,351 24,685
2/28/2002 17,744 16,723 23,660
3/31/2002 18,349 17,294 24,478
4/30/2002 17,327 16,330 22,481
5/31/2002 16,954 15,979 21,937
6/30/2002 15,559 14,664 19,908
7/31/2002 14,350 13,525 18,813
8/31/2002 14,366 13,540 18,869
9/30/2002 12,847 12,109 16,912
10/31/2002 13,777 12,985 18,463
11/30/2002 14,227 13,408 19,466
12/31/2002 13,296 12,532 18,122
1/31/2003 12,956 12,211 17,682
2/28/2003 13,018 12,269 17,601
3/31/2003 13,281 12,517 17,928
4/30/2003 14,055 13,247 19,254
5/31/2003 14,830 13,977 20,215
6/30/2003 14,969 14,108 20,493
7/31/2003 15,171 14,299 21,003
8/31/2003 15,358 14,475 21,526
9/30/2003 15,419 14,532 21,295
10/31/2003 16,162 15,233 22,491
11/30/2003 16,348 15,408 22,727
12/31/2003 16,843 15,875 23,513
1/31/2004 17,091 16,108 23,993
2/29/2004 17,091 16,108 24,145
3/31/2004 16,782 15,817 23,697
4/30/2004 16,409 15,466 23,422
5/31/2004 16,703 15,743 23,858
6/30/2004 16,920 15,947 24,157
7/31/2004 16,145 15,217 22,791
8/31/2004 16,129 15,202 22,678
9/30/2004 16,223 15,290 22,894
10/31/2004 16,594 15,640 23,251
11/30/2004 17,215 16,225 24,051
12/31/2004 17,717 16,694 24,994
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
Class A (Inception 8/3/92)
Net Asset Value/1/ 5.15% -9.32% 5.89%
With Maximum Sales Charge/2/ -0.87 -10.38 5.26
Class B (Inception 9/13/93)
Net Asset Value/1/ 4.41 -9.97 5.05
With CDSC/3/ -0.59 -10.26 5.05
Class C (Inception 12/30/94)
Net Asset Value/1/ 4.42 -10.01 5.03
With CDSC/3/ 3.42 -10.01 5.03
- --------------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years
Russell 1000 Growth Index/4/ 6.30% -9.29% 9.59%
Morningstar Large Growth Fund Avg./5/ 7.64 -7.64 9.00
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 12/31/04 6/30/04
- ---------------------------------------
Common Stocks 98.4 98.6
- ---------------------------------------
Short Term Investments
and Other 1.6 1.4
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- -----------------------------------------------------
Microsoft Corp. 5.3
- -----------------------------------------------------
Intel Corp. 4.7
- -----------------------------------------------------
Cisco Systems, Inc. 4.3
- -----------------------------------------------------
International Business Machines Corp. 4.0
- -----------------------------------------------------
Pfizer, Inc. 3.6
- -----------------------------------------------------
Home Depot, Inc. 3.6
- -----------------------------------------------------
Dell, Inc. 3.0
- -----------------------------------------------------
Cardinal Health, Inc. 2.6
- -----------------------------------------------------
Boeing Co. (The) 2.5
- -----------------------------------------------------
Johnson & Johnson 2.4
% of Net Assets
as of
Five Largest Industries 12/31/04
- -----------------------------------------------------
Software 9.3
- -----------------------------------------------------
Retail 8.0
- -----------------------------------------------------
Diversified Financial Services 7.6
- -----------------------------------------------------
Computers 6.9
- -----------------------------------------------------
Pharmaceuticals 6.8
Portfolio holdings and asset allocations will vary.
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, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes 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.
16
ADDITIONAL INFORMATION
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 the funds are actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
For more complete information on any CDC Nvest Fund, contact your financial
professional or call CDC Nvest Funds and ask for a free prospectus, which
contains more complete information, including charges and other ongoing
expenses. Investors should consider a fund's objective, risks and expenses
carefully before investing. This and other fund information can be found in the
prospectus. Please read the prospectus carefully before investing.
Proxy Voting Information
A description of the funds' proxy voting policies and procedures is available
without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; on
the funds' website at www.cdcnvestfunds.com; and on the Securities and Exchange
Commission's website at www.sec.gov. Information regarding how the funds voted
proxies relating to portfolio securities during the 12-month period ended June
30, 2004 is available from the funds' website and the SEC's website.
Quarterly Portfolio Schedules
The funds file a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q
are available on the SEC's website at www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
17
UNDERSTANDING YOUR FUNDS' EXPENSES
As a mutual fund shareholder, you incur different costs: transaction costs,
including sales charges (loads) on purchases, redemption fees and certain
exchange fees and ongoing costs, including management fees, distribution fees
(12b-1 fees), and other fund expenses. In addition, each fund assesses a
minimum balance fee of $20 on an annual basis for accounts that fall below the
required minimum to establish an account. Certain exemptions may apply. These
costs are described in more detail in the funds' prospectus. The examples below
are intended to help you understand the ongoing costs of investing in the funds
and help you compare these with the ongoing costs of investing in other mutual
funds.
The first line in the table of each Class of fund shares shows the actual
account values and actual fund expenses you would have paid on a $1,000
investment in the fund from July 1, 2004 through December 31, 2004. It also
shows how much a $1,000 investment would be worth at the close of the period,
assuming actual fund returns and expenses. To estimate the expenses you paid
over the period, simply divide your account value by $1,000 (for example $8,600
account value divided by $1,000 = $8.60) and multiply the result by the number
in the Expenses Paid During Period column as shown below for your Class.
The second line in the table of each Class of fund shares provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratios and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid on your investment for the period. You may use
this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs, such as sales charges, redemption fees or
exchange fees. Therefore, the second line in the table of each fund is useful
in comparing ongoing costs only, and will not help you determine the relative
costs of owning different funds. If transaction costs were included, total
costs would be higher.
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/1/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
CDC Nvest Star Advisers Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,069.00 $9.82
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.64 $9.57
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,064.30 $13.70
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.86 $13.36
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,064.90 $13.70
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.87 $13.35
- ----------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,071.90 $7.00
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.38 $6.82
*Expenses are equal to the fund's annualized expense ratio: 1.89%, 2.64%, 2.64%
and 1.34% for Class A, B, C and Y, respectively, multiplied by the average
account value over the period, multiplied by the number of days in the most
recent fiscal half-year divided by 366 (to reflect the half-year period).
18
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/1/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
CDC Nvest Star Value Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,067.90 $8.73
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.70 $8.51
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,064.50 $12.61
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,012.92 $12.29
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,064.50 $12.58
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,012.95 $12.26
*Expenses are equal to the fund's annualized expense ratio: 1.68%, 2.43%, and
2.42% for Class A, B, and C, respectively, multiplied by the average account
value over the period, multiplied by the number of days in the most recent
fiscal half-year divided by 366 (to reflect the half-year period).
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/31/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
CGM Advisor Targeted Equity Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,105.00 $7.52
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.99 $7.21
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,100.30 $11.46
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.22 $10.99
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,100.30 $11.46
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.23 $10.99
- ----------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,106.70 $5.74
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.69 $5.50
*Expenses are equal to the fund's annualized expense ratio: 1.42%, 2.17%, 2.17%
and 1.08% for Class A, B, C and Y, respectively, multiplied by the average
account value over the period, multiplied by the number of days in the most
recent fiscal half-year divided by 366 (to reflect the half-year period).
19
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/1/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
Hansberger International Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,118.20 $10.07
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.63 $ 9.58
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,113.80 $14.00
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.89 $13.32
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,114.50 $14.04
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.86 $13.36
*Expenses are equal to the fund's annualized expense ratio: 1.89%, 2.63%, and
2.64% for Class A, B, and C, respectively, multiplied by the average account
value over the period, multiplied by the number of days in the most recent
fiscal half-year divided by 366 (to reflect the half-year period).
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/1/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
Harris Associates Focused Value Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $ 1,096.60 $8.96
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $ 1,016.59 $8.61
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $ 1,092.10 $ 12.88
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $ 1,012.82 $ 12.40
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,092.10 $12.88
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,012.82 $12.39
*Expenses are equal to the fund's annualized expense ratio: 1.70%, 2.45%, and
2.45% for Class A, B, and C, respectively, multiplied by the average account
value over the period, multiplied by the number of days in the most recent
fiscal half-year divided by 366 (to reflect the half-year period).
20
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/1/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
Harris Associates Large Cap Value Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,058.60 $6.73
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.60 $6.59
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,055.20 $10.59
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.83 $10.38
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,055.30 $10.59
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.83 $10.38
- ----------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,061.00 $5.20
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.09 $5.10
*Expenses are equal to the fund's annualized expense ratio: 1.30%, 2.05%, 2.05%
and 1.00% for Class A, B, C and Y, respectively, multiplied by the average
account value over the period, multiplied by the number of days in the most
recent fiscal half-year divided by 366 (to reflect the half-year period).
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/1/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
Vaughan Nelson Small Cap Value Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,102.20 $10.49
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.16 $10.05
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,097.50 $14.42
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.39 $13.83
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,097.40 $14.43
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.38 $13.83
*Expenses are equal to the fund's annualized expense ratio: 1.98%, 2.73%, and
2.74% for Class A, B, and C, respectively, multiplied by the average account
value over the period, multiplied by the number of days in the most recent
fiscal half-year divided by 366 (to reflect the half-year period).
21
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/1/04 12/31/04 7/1/04 - 12/31/04
- ----------------------------------------------------------------------------------------------
Westpeak Capital Growth Fund
- ----------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,046.70 $9.94
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.42 $9.79
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,043.00 $13.79
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.64 $13.58
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
Actual $1,000 $1,043.10 $13.78
- ----------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,011.64 $13.57
*Expenses are equal to the fund's annualized expense ratio: 1.93%, 2.69%, and
2.68% for Class A, B, and C, respectively, multiplied by the average account
value over the period, multiplied by the number of days in the most recent
fiscal half-year divided by 366 (to reflect the half-year period).
22
STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- ----------------------------------------------------------
Common Stocks -- 98.3% of Total Net Assets
Advertising -- 1.2%
84,900 Lamar Advertising Co.(c) $ 3,632,022
81,425 R.H. Donnelley Corp.(c)(d) 4,808,146
-------------
8,440,168
-------------
Aerospace & Defense -- 1.4%
41,550 Armor Holdings, Inc.(d) 1,953,681
36,275 L-3 Communications Holdings, Inc.(c) 2,656,781
130,400 Raytheon Co. 5,063,432
-------------
9,673,894
-------------
Apparel -- 0.8%
98,475 Coach, Inc.(c) 5,553,990
-------------
Auto Manufacturers -- 0.4%
35,300 Paccar, Inc.(d) 2,840,944
-------------
Auto Parts & Equipment -- 0.4%
303,300 Visteon Corp.(d) 2,963,241
-------------
Banks -- 2.7%
46,725 City National Corp. 3,301,121
80,482 Dearborn Bancorp, Inc.(c) 2,346,855
48,675 East-West Bancorp, Inc. 2,042,403
63,475 Investors Financial Services Corp. 3,172,480
130,650 South Financial Group (The), Inc.(d) 4,250,044
124,700 U.S. Bancorp 3,905,604
-------------
19,018,507
-------------
Beverages -- 1.9%
80,600 Anheuser-Busch Cos., Inc. 4,088,838
24,000 Coca-Cola Co. (The) 999,120
99,200 Coca-Cola Enterprises, Inc. 2,068,320
101,200 Diageo PLC, Sponsored ADR 5,857,456
-------------
13,013,734
-------------
Biotechnology -- 0.7%
23,575 Genzyme Corp.(c) 1,369,000
86,300 Gilead Sciences, Inc.(c)(d) 3,019,637
63,600 Incyte Corp.(d) 635,364
-------------
5,024,001
-------------
Building Materials -- 1.4%
477,400 Comfort Systems USA, Inc.(c) 3,666,432
170,900 Masco Corp. 6,242,977
-------------
9,909,409
-------------
Chemicals -- 1.9%
33,700 Air Products & Chemicals, Inc. 1,953,589
129,925 Airgas, Inc. 3,444,312
61,000 Dow Chemical Co. (The) 3,020,110
7,100 Du Pont (E.I.) de Nemours & Co. 348,255
84,850 Lyondell Chemical Co. 2,453,862
45,200 Praxair, Inc. 1,995,580
7,200 Sigma-Aldrich Corp. 435,312
-------------
13,651,020
-------------
Commercial Services -- 3.5%
57,800 Accenture, Ltd., Class A(c) 1,560,600
150,575 Adesa, Inc.(c) 3,195,201
94,325 Aramark Corp., Class B(d) 2,500,556
40,825 Corporate Executive Board Co.(d) 2,732,825
86,475 Exponent, Inc.(c) 2,377,198
20,100 Hewitt Associates, Inc., Class A(c) 643,401
62,500 Manpower, Inc. 3,018,750
Shares Description Value (a)
- -----------------------------------------------------------------
Commercial Services -- continued
38,750 Moody's Corp. $ 3,365,437
55,300 Paychex, Inc. 1,884,624
25,700 Robert Half International, Inc.(d) 756,351
83,943 Viad Corp. 2,391,536
-------------
24,426,479
-------------
Computers -- 2.5%
39,700 Apple Computer, Inc.(c) 2,556,680
19,625 CACI International, Inc., Class A(c) 1,337,051
22,675 Diebold, Inc. 1,263,678
125,200 Hewlett-Packard Co. 2,625,444
85,250 Network Appliance, Inc.(c)(d) 2,832,005
58,300 SanDisk Corp.(c)(d) 1,455,751
31,100 SRA International, Inc., Class A(c) 1,996,620
104,025 Storage Technology Corp.(c)(d) 3,288,230
-------------
17,355,459
-------------
Distribution & Wholesale -- 0.8%
275,750 BlueLinx Holdings, Inc.(d) 3,990,102
84,000 Wolseley PLC 1,566,312
-------------
5,556,414
-------------
Diversified Financial Services -- 4.1%
44,100 American Express Co. 2,485,917
35,700 Blackrock, Inc., Class A 2,758,182
13,200 Chicago Mercantile Exchange (The) 3,018,840
96,200 Citigroup, Inc. 4,634,916
73,700 Fannie Mae 5,248,177
21,100 Franklin Resources, Inc. 1,469,615
150,200 JPMorgan Chase & Co. 5,859,302
56,550 T. Rowe Price Group, Inc. 3,517,410
-------------
28,992,359
-------------
Electric -- 1.6%
44,041 Allete, Inc. 1,618,507
124,225 MDU Resources Group, Inc. 3,314,323
173,475 NRG Energy, Inc.(c) 6,253,774
-------------
11,186,604
-------------
Electrical Components & Equipment -- 0.8%
98,575 Ametek, Inc. 3,516,170
26,700 Emerson Electric Co. 1,871,670
-------------
5,387,840
-------------
Electronics -- 2.0%
107,175 Amphenol Corp., Class A(c) 3,937,609
39,450 Cogent, Inc. 1,301,850
13,400 Fisher Scientific International, Inc.(c)(d) 835,892
94,770 Lowrance Electronics, Inc. 2,985,160
147,225 Thermo Electron Corp.(c) 4,444,723
15,400 Waters Corp.(c) 720,566
-------------
14,225,800
-------------
Engineering & Construction -- 0.7%
122,075 Washington Group International, Inc.(c) 5,035,594
-------------
Environmental Control -- 1.1%
89,050 Nalco Holding Co. 1,738,256
188,100 Waste Management, Inc. 5,631,714
-------------
7,369,970
-------------
Food -- 3.0%
72,150 Dean Foods Co.(c) 2,377,342
61,200 General Mills, Inc.(d) 3,042,252
See accompanying notes to financial statements.
23
STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Shares Description Value (a)
- -------------------------------------------------------------
Food -- continued
71,300 HJ Heinz Co. $ 2,779,987
115,800 Kraft Foods, Inc., Class A(d) 4,123,638
43,000 McCormick & Co., Inc. 1,659,800
51,400 Nestle SA, Sponsored ADR 3,354,282
28,925 Supervalu, Inc. 998,491
28,800 Whole Foods Market, Inc.(d) 2,746,080
-------------
21,081,872
-------------
Gas -- 1.0%
124,325 Oneok, Inc.(d) 3,533,316
87,225 UGI Corp. 3,568,375
-------------
7,101,691
-------------
Health Care-Products -- 5.4%
56,200 Alcon, Inc.(d) 4,529,720
48,450 American Medical Systems Holdings, Inc. 2,025,694
120,100 Baxter International, Inc. 4,148,254
29,375 Biomet, Inc. 1,274,581
79,200 Boston Scientific Corp.(c) 2,815,560
38,800 Guidant Corp. 2,797,480
70,000 Johnson & Johnson 4,439,400
28,100 Kinetic Concepts, Inc.(c) 2,144,030
80,500 Medtronic, Inc. 3,998,435
106,425 St. Jude Medical, Inc.(c)(d) 4,462,400
39,500 Varian Medical Systems, Inc.(c) 1,707,980
32,850 Ventana Medical Systems 2,102,071
18,000 Zimmer Holdings, Inc.(c) 1,442,160
-------------
37,887,765
-------------
Health Care-Services -- 2.1%
50,100 Covance, Inc.(c) 1,941,375
64,950 Omnicare, Inc.(d) 2,248,569
36,700 Sierra Health Services, Inc.(c) 2,022,537
123,250 Triad Hospitals, Inc.(c) 4,586,132
18,500 UnitedHealth Group, Inc. 1,628,555
17,150 WellPoint, Inc. 1,972,250
-------------
14,399,418
-------------
Home Builders -- 0.7%
24,575 Standard-Pacific Corp. 1,576,240
49,650 Toll Brothers, Inc.(c)(d) 3,406,486
-------------
4,982,726
-------------
Home Furnishings -- 0.4%
21,800 Harman International Industries, Inc. 2,768,600
-------------
Household Products & Wares -- 1.0%
61,850 Church & Dwight Co., Inc. 2,079,397
62,700 Fortune Brands, Inc. 4,839,186
-------------
6,918,583
-------------
Insurance -- 2.9%
45,100 Aflac, Inc. 1,796,784
173,175 Assurant, Inc. 5,290,496
25,300 MGIC Investment Corp.(d) 1,743,423
142,650 Old Republic International Corp. 3,609,045
106,725 Platinum Underwriters Holdings, Ltd. 3,319,148
99,250 Protective Life Corp. 4,236,983
-------------
19,995,879
-------------
Internet -- 1.9%
63,975 Avocent Corp.(c) 2,592,267
7,550 Google, Inc., Class A(c)(d) 1,457,905
73,450 McAfee, Inc. 2,124,909
Shares Description Value (a)
- ----------------------------------------------------------------------
Internet -- continued
61,700 Monster Worldwide, Inc.(c) $ 2,075,588
25,350 Shanda Interactive Entertainment, Ltd., ADR(d) 1,077,375
100,500 Yahoo!, Inc.(c) 3,786,840
-------------
13,114,884
-------------
Iron & Steel -- 0.4%
131,375 Roanoke Electric Steel Corp. 2,715,653
-------------
Leisure Time -- 0.8%
63,900 Carnival Corp.(d) 3,682,557
33,500 Harley-Davidson, Inc. 2,035,125
-------------
5,717,682
-------------
Lodging -- 3.2%
49,275 Choice Hotels International, Inc. 2,857,950
490,575 La Quinta Corp.(c) 4,459,327
25,850 Las Vegas Sands Corp. 1,240,800
51,000 Marriott International, Inc., Class A 3,211,980
101,400 Starwood Hotels & Resorts Worldwide, Inc. 5,921,760
59,050 Station Casinos, Inc. 3,228,854
23,400 Wynn Resorts, Ltd.(c)(d) 1,565,928
-------------
22,486,599
-------------
Machinery - Diversified -- 2.0%
109,975 Albany International Corp., Class A 3,866,721
30,100 Cummins, Inc. 2,522,079
19,800 Deere & Co. 1,473,120
33,200 Rockwell Automation, Inc. 1,645,060
221,825 Wabtec Corp. 4,729,309
-------------
14,236,289
-------------
Media -- 6.4%
191,100 Comcast Corp., Special Class A(c) 6,275,724
191,700 DIRECTV Group (The), Inc.(c) 3,209,058
86,825 Journal Communications, Inc., Class A 1,568,928
715,000 Liberty Media Corp., Class A(c) 7,850,700
94,225 Scholastic Corp.(c) 3,482,556
78,325 Sirius Satellite Radio, Inc.(d) 599,186
359,000 Time Warner, Inc.(c) 6,978,960
133,500 Viacom, Inc., Class B 4,858,065
152,900 Walt Disney Co. 4,250,620
85,175 Westwood One, Inc.(c) 2,293,763
92,900 XM Satellite Radio Holdings, Inc., Class A(c)(d) 3,494,898
-------------
44,862,458
-------------
Metals -- 0.2%
52,250 Commercial Metals Co. 1,320,880
-------------
Mining -- 0.4%
77,525 Freeport-McMoran Copper & Gold, Inc., Class B(d) 2,963,781
-------------
Miscellaneous - Manufacturing -- 2.9%
83,100 3M Co. 6,820,017
26,200 Eaton Corp.(d) 1,895,832
245,500 General Electric Co. 8,960,750
73,300 Honeywell International, Inc. 2,595,553
-------------
20,272,152
-------------
Office & Business Equipment -- 1.1%
29,000 Canon, Inc. 1,562,299
359,000 Xerox Corp.(c) 6,106,590
-------------
7,668,889
-------------
Office Furnishings -- 0.3%
200,539 Interface, Inc., Class A(c) 1,999,374
-------------
See accompanying notes to financial statements.
24
STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Shares Description Value (a)
- --------------------------------------------------------------
Oil & Gas -- 3.7%
61,400 Baker Hughes, Inc. $ 2,619,938
79,600 Burlington Resources, Inc. 3,462,600
12,300 ConocoPhillips 1,068,009
80,200 Devon Energy Corp. 3,121,384
112,900 Energy Partners, Ltd.(d) 2,288,483
44,250 EOG Resources, Inc. 3,157,680
53,725 Noble Corp.(c) 2,672,282
32,700 Occidental Petroleum Corp. 1,908,372
42,700 Pioneer Natural Resources Co. 1,498,770
42,600 Transocean, Inc.(c) 1,805,814
41,675 Ultra Petroleum Corp.(c) 2,005,818
-------------
25,609,150
-------------
Oil & Gas Services -- 1.4%
162,475 FMC Technologies, Inc.(c) 5,231,695
18,500 Grant Prideco, Inc.(c) 370,925
61,600 Schlumberger, Ltd. 4,124,120
-------------
9,726,740
-------------
Packaging & Containers -- 0.4%
119,525 Pactiv Corp.(c) 3,022,787
-------------
Pharmaceuticals -- 2.8%
95,900 Abbott Laboratories 4,473,735
24,225 Allergan, Inc. 1,963,921
116,500 Bristol-Myers Squibb Co. 2,984,730
33,400 Forest Laboratories, Inc.(c)(d) 1,498,324
135,325 Hospira, Inc.(c) 4,533,388
104,200 Merck & Co., Inc. 3,348,988
37,150 Valeant Pharmaceuticals International(d) 978,903
-------------
19,781,989
-------------
Pipelines -- 0.3%
37,775 Questar Corp. 1,925,014
-------------
Real Estate -- 1.2%
45,050 St. Joe Co. (The) 2,892,210
287,850 Trammell Crow Co.(c) 5,212,964
-------------
8,105,174
-------------
REITS - Diversified -- 0.6%
99,100 iStar Financial, Inc. 4,485,266
-------------
REITS - Mortgage -- 0.8%
225,500 Luminent Mortgage Capital, Inc.(d) 2,683,450
48,525 New Century Financial Corp.(d) 3,101,233
-------------
5,784,683
-------------
REITS - Shopping Centers -- 0.5%
73,825 Developers Diversified Realty Corp. 3,275,615
-------------
Restaurants -- 0.3%
75,050 Applebee's International, Inc. 1,985,073
-------------
Retail -- 7.8%
60,225 BJ's Wholesale Club, Inc.(c) 1,754,354
95,325 CBRL Group, Inc.(d) 3,989,351
56,375 Chico's FAS, Inc.(c)(d) 2,566,754
51,100 Costco Wholesale Corp. 2,473,751
241,900 Gap (The), Inc.(d) 5,108,928
156,300 Home Depot, Inc. 6,680,262
14,725 Kmart Holding Corp.(c)(d) 1,457,039
107,800 Kohl's Corp.(c) 5,300,526
89,600 Limited Brands, Inc. 2,062,592
217,300 McDonald's Corp. 6,966,638
75,500 Staples, Inc. 2,545,105
Shares Description Value (a)
- ---------------------------------------------------------------------------------------
Retail -- continued
91,550 Starbucks Corp.(c) $ 5,709,058
92,475 Talbots, Inc. 2,518,094
47,100 Wal-Mart Stores, Inc. 2,487,822
68,125 Yum! Brands, Inc. 3,214,138
-------------
54,834,412
-------------
Savings & Loans -- 1.7%
176,324 Commercial Capital Bancorp, Inc.(d) 4,087,190
180,000 Washington Mutual, Inc. 7,610,400
-------------
11,697,590
-------------
Semiconductors -- 2.0%
285,750 Entegris, Inc.(c) 2,843,213
161,650 Fairchild Semiconductor International, Inc.(c) 2,628,429
272,800 Intel Corp.(d) 6,380,792
61,375 Marvell Technology Group, Ltd.(c)(d) 2,176,971
-------------
14,029,405
-------------
Software -- 5.2%
59,650 Autodesk, Inc. 2,263,718
119,400 Certegy, Inc.(d) 4,242,282
92,800 Cognizant Technology Solutions Corp.(c) 3,928,224
43,225 Dun & Bradstreet Corp.(c) 2,578,371
24,100 Electronic Arts, Inc.(c) 1,486,488
139,900 First Data Corp. 5,951,346
268,200 Microsoft Corp. 7,163,622
86,600 MoneyGram International, Inc. 1,830,724
24,450 NAVTEQ Corp. 1,133,502
231,400 Oracle Corp.(c) 3,174,808
125,550 Sybase, Inc.(c) 2,504,723
-------------
36,257,808
-------------
Telecommunications -- 2.0%
95,200 Adtran, Inc. 1,822,128
144,625 Comverse Technology, Inc.(c) 3,536,081
142,700 Corning, Inc.(c) 1,679,579
50,875 Harris Corp. 3,143,566
90,800 Juniper Networks, Inc.(c) 2,468,852
46,000 Telefonaktiebolaget LM Ericsson, Sponsored ADR(d) 1,448,540
-------------
14,098,746
-------------
Transportation -- 1.6%
53,025 CNF, Inc. 2,656,553
307,375 Laidlaw International, Inc.(c) 6,577,825
31,625 UTI Worldwide, Inc. 2,151,133
-------------
11,385,511
-------------
Total Common Stocks (Identified Cost $548,651,629) 688,125,565
-------------
Principal
Amount
- ---------------------------------------------------------------------------------------
Short Term Investments -- 14.5%
$13,360,337 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be repurchased at $13,362,285 on
1/03/2005, collateralized by $10,540,000 Federal Home Loan
Mortgage Bond, 2.902%, due 1/15/2033 valued at $10,501,516
and $3,276,117 Small Business Administration Bond 5.125%, due
5/25/2027 valued at $3,528,354 13,360,337
173,639 Bank of America, 2.26%, due 2/15/2005(e) 173,639
4,340,988 Bank of America, 2.27%, due 1/18/2005(e) 4,340,988
4,340,988 Bank of Montreal, 2.125%, due 2/02/2005(e) 4,340,988
9,865,652 Bank of Montreal, 2.26%, due 1/28/2005(e) 9,865,652
4,340,988 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 4,340,988
1,736,395 BGI Institutional Money Market Fund(e) 1,736,395
See accompanying notes to financial statements.
25
STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------------------------
Short Term Investments -- continued
$ 3,472,790 BNP Paribas, 2.295%, due 2/23/2005(e) $ 3,472,790
1,736,395 Calyon, 2.27%, due 1/20/2005(e) 1,736,395
12,154,765 Calyon, 2.34%, due 2/02/2005(e) 12,154,765
820,446 Calyon, 2.435%, due 3/16/2005(e) 820,446
2,604,592 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 2,604,592
4,236,804 Fortis Bank, 2.14%, due 1/12/2005(e) 4,236,804
4,340,988 Fortis Bank, 2.20%, due 2/11/2005(e) 4,340,988
7,588,046 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 7,588,046
1,736,395 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 1,736,395
1,736,395 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 1,736,395
1,082,585 Merrill Lynch Premier Institutional Fund(e) 1,082,585
5,209,185 Merrimac Cash Fund-Premium Class(e) 5,209,185
868,197 Ranger Funding, 2.271%, due 1/14/2005(e) 868,197
6,945,580 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 6,945,580
4,340,988 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 4,340,988
1,736,395 Wells Fargo, 2.27%, due 1/25/2005(e) 1,736,395
2,604,592 Wells Fargo, 2.32%, due 1/14/2005(e) 2,604,592
-------------
Total Short Term Investments (Identified Cost $101,374,125) 101,374,125
-------------
Total Investments -- 112.8%
(Identified Cost $650,025,754)(b) 789,499,690
Other assets less liabilities (89,481,735)
-------------
Total Net Assets -- 100% $ 700,017,955
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on
investments based on cost of $653,017,584 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 $ 141,410,290
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (4,928,184)
-------------
Net unrealized appreciation $ 136,482,106
=============
At December 31, 2004, the Fund had a capital loss carryover of
approximately $224,285,919 of which $161,817,021 expires on
December 31, 2009 and $62,468,898 expires on December 31,
2010. These amounts may be available to offset future realized
capital gains, if any, to the extent provided by regulations.
For the year ended December 31, 2004, the Fund has elected to defer
$2,008 of foreign currency losses attributable to Post-October losses.
At December 31, 2004, 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, 2004.
(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.
REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Retail 7.8%
Media 6.4
Health Care-Products 5.4
Software 5.2
Diversified Financial Services 4.1
Oil & Gas 3.7
Commercial Services 3.5
Lodging 3.2
Food 3.0
Miscellaneous - Manufacturing 2.9
Insurance 2.9
Pharmaceuticals 2.8
Banks 2.7
Computers 2.5
Health Care-Services 2.1
Machinery - Diversified 2.0
Electronics 2.0
Semiconductors 2.0
Telecommunications 2.0
Other, less than 2% each 32.1
See accompanying notes to financial statements.
26
STAR VALUE FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- -----------------------------------------------------------
Common Stocks -- 96.9% of Total Net Assets
Aerospace & Defense -- 1.7%
10,400 Boeing Co. (The) $ 538,408
8,400 General Dynamics Corp. 878,640
17,000 Northrop Grumman Corp. 924,120
-------------
2,341,168
-------------
Agriculture -- 0.8%
18,500 Altria Group, Inc. 1,130,350
-------------
Auto Parts & Equipment -- 0.4%
2,400 Autoliv, Inc. 115,920
7,100 Johnson Controls, Inc. 450,424
-------------
566,344
-------------
Banks -- 6.2%
30,875 Bank of America Corp. 1,450,816
6,550 Comerica, Inc.(c) 399,681
8,125 PNC Financial Services Group, Inc. 466,700
14,000 Sky Financial Group, Inc. 401,380
5,850 SunTrust Banks, Inc. 432,198
51,800 U.S. Bancorp 1,622,376
43,076 Wachovia Corp. 2,265,798
23,200 Wells Fargo & Co. 1,441,880
-------------
8,480,829
-------------
Beverages -- 2.9%
15,150 Anheuser-Busch Cos., Inc. 768,559
16,000 Coca-Cola Co. (The) 666,080
70,000 Pepsi Bottling Group, Inc.(c) 1,892,800
11,900 PepsiCo, Inc. 621,180
-------------
3,948,619
-------------
Biotechnology -- 0.2%
3,900 Amgen, Inc.(d) 250,185
-------------
Building Materials -- 1.4%
6,100 Genlyte Group, Inc.(d) 522,648
38,475 Masco Corp.(c) 1,405,492
-------------
1,928,140
-------------
Chemicals -- 1.4%
12,400 Georgia Gulf Corp. 617,520
113 Kronos Worldwide, Inc. 4,605
22,200 NL Industries 490,620
18,650 Praxair, Inc. 823,397
-------------
1,936,142
-------------
Coal -- 0.9%
15,800 CONSOL Energy, Inc.(c) 648,590
7,350 Peabody Energy Corp. 594,688
-------------
1,243,278
-------------
Commercial Services -- 2.7%
23,050 Accenture, Ltd., Class A(d) 622,350
108,600 Cendant Corp. 2,539,068
18,100 Equifax, Inc.(c) 508,610
-------------
3,670,028
-------------
Computers -- 2.1%
4,500 Apple Computer, Inc.(d) 289,800
6,350 DST Systems, Inc.(d) 330,962
15,000 Hewlett-Packard Co. 314,550
14,900 International Business Machines Corp. 1,468,842
16,400 SunGard Data Systems, Inc.(d) 464,612
-------------
2,868,766
-------------
Shares Description Value (a)
- --------------------------------------------------------------
Cosmetics & Personal Care -- 0.3%
7,200 Procter & Gamble Co. $ 396,576
-------------
Distribution & Wholesale -- 0.5%
14,200 Genuine Parts Co. 625,652
-------------
Diversified Financial Services -- 9.1%
21,800 American Express Co. 1,228,866
16,200 AmeriCredit Corp.(c)(d) 396,090
1,800 Capital One Financial Corp.(c) 151,578
5,475 CIT Group, Inc. 250,864
50,433 Citigroup, Inc. 2,429,862
19,000 CompuCredit Corp.(d) 519,460
15,800 Countrywide Financial Corp.(c) 584,758
5,725 Fannie Mae 407,677
13,200 Federated Investors, Inc., Class B 401,280
85,672 JPMorgan Chase & Co. 3,342,065
8,900 Lehman Brothers Holdings, Inc. 778,572
9,200 MBNA Corp. 259,348
22,100 Merrill Lynch & Co., Inc. 1,320,917
10,300 Raymond James Financial, Inc. 319,094
-------------
12,390,431
-------------
Electric -- 3.5%
12,700 Constellation Energy Group, Inc. 555,117
7,000 Dominion Resources, Inc. 474,180
23,400 Exelon Corp.(c) 1,031,238
4,800 FirstEnergy Corp. 189,648
53,125 PG&E Corp.(d) 1,768,000
21,000 Wisconsin Energy Corp. 707,910
-------------
4,726,093
-------------
Electrical Components & Equipment -- 0.7%
10,100 Energizer Holdings, Inc.(c)(d) 501,869
9,100 Hubbell, Inc., Class B 475,930
-------------
977,799
-------------
Electronics -- 0.2%
11,200 Applera Corp. - Applied Biosystems Group 234,192
-------------
Environmental Control -- 2.0%
90,000 Waste Management, Inc. 2,694,600
-------------
Food -- 0.4%
31,500 Tyson Foods, Inc., Class A 579,600
-------------
Forest Products & Paper -- 0.4%
7,500 Louisiana-Pacific Corp. 200,550
7,700 Plum Creek Timber Co., Inc. 295,988
-------------
496,538
-------------
Gas -- 0.1%
3,700 KeySpan Corp. 145,965
-------------
Health Care-Products -- 4.2%
76,000 Baxter International, Inc. 2,625,040
4,400 Becton Dickinson & Co. 249,920
8,900 Boston Scientific Corp.(d) 316,395
4,600 Dade Behring Holdings, Inc.(c)(d) 257,600
25,000 Guidant Corp. 1,802,500
6,500 Johnson & Johnson 412,230
-------------
5,663,685
-------------
Health Care-Services -- 2.4%
22,400 Laboratory Corp. of America Holdings(d) 1,115,968
5,200 Pediatrix Medical Group, Inc.(d) 333,060
5,250 Quest Diagnostics 501,637
See accompanying notes to financial statements.
27
STAR VALUE FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Shares Description Value (a)
- -------------------------------------------------------------------
Health Care-Services -- continued
15,100 Triad Hospitals, Inc.(d) $ 561,871
16,525 Universal Health Services, Inc., Class B 735,362
-------------
3,247,898
-------------
Home Builders -- 0.1%
7,400 Technical Olympic USA, Inc. 187,812
-------------
Insurance -- 3.8%
21,000 ACE, Ltd. 897,750
11,100 Allmerica Financial Corp. 364,413
19,000 Allstate Corp. (The) 982,680
8,500 AMBAC Financial Group, Inc. 698,105
9,960 American International Group, Inc. 654,073
290 Berkshire Hathaway, Inc., Class B(d) 851,440
1,900 Erie Indemnity Co., Class A 99,883
13,100 Old Republic International Corp. 331,430
8,300 Principal Financial Group 339,802
-------------
5,219,576
-------------
Internet -- 0.4%
14,800 Yahoo!, Inc.(d) 557,664
-------------
Iron & Steel -- 0.3%
17,000 Allegheny Technologies, Inc. 368,390
-------------
Leisure Time -- 0.8%
20,000 Carnival Corp. 1,152,600
-------------
Lodging -- 0.1%
3,200 Marriott International, Inc., Class A 201,536
-------------
Media -- 7.6%
70,000 Cablevision Systems Corp., Class A(d) 1,743,000
30,000 DIRECTV Group (The), Inc.(d) 502,200
200,000 Liberty Media Corp., Class A(d) 2,196,000
12,000 Liberty Media International, Inc., Class A(d) 554,760
6,575 McGraw-Hill Cos. (The), Inc. 601,876
39,100 News Corp., Inc., Class A(c)(d) 729,606
172,425 Time Warner, Inc.(d) 3,351,942
12,925 Tribune Co. 544,660
2,800 Viacom, Inc., Class B 101,892
-------------
10,325,936
-------------
Mining -- 0.6%
11,100 Inco, Ltd.(c)(d) 408,258
4,200 Phelps Dodge Corp. 415,464
-------------
823,722
-------------
Miscellaneous - Manufacturing -- 2.6%
36,200 General Electric Co. 1,321,300
23,500 Honeywell International, Inc. 832,135
3,800 Illinois Tool Works, Inc.(c) 352,184
29,450 Tyco International, Ltd. 1,052,543
-------------
3,558,162
-------------
Oil & Gas -- 6.5%
18,650 BP PLC, Sponsored ADR 1,089,160
9,600 ChevronTexaco Corp. 504,096
5,925 ConocoPhillips 514,468
64,350 Exxon Mobil Corp. 3,298,581
23,700 GlobalSantaFe Corp. 784,707
8,200 Houston Exploration Co.(d) 461,742
14,000 Kerr-McGee Corp. 809,060
32,800 Pioneer Natural Resources Co.(c) 1,151,280
2,200 Sunoco, Inc. 179,762
-------------
8,792,856
-------------
Shares Description Value (a)
- -------------------------------------------------------------
Oil & Gas Services -- 0.7%
19,750 Halliburton Co.(c) $ 774,990
8,600 Oil States International, Inc.(d) 165,894
-------------
940,884
-------------
Pharmaceuticals -- 2.3%
18,400 Abbott Laboratories 858,360
17,200 Merck & Co., Inc. 552,808
62,017 Pfizer, Inc. 1,667,637
-------------
3,078,805
-------------
Pipelines -- 0.4%
9,700 Equitable Resources, Inc. 588,402
-------------
REITS - Mortgage -- 0.9%
15,200 American Home Mortgage Investment Corp. 520,600
12,400 New Century Financial Corp.(c) 792,484
-------------
1,313,084
-------------
REITS - Regional Malls -- 0.5%
10,500 Simon Property Group, Inc.(c) 679,035
-------------
Retail -- 11.3%
40,000 Costco Wholesale Corp. 1,936,400
18,100 CVS Corp. 815,767
5,100 Federated Department Stores 294,729
92,300 Gap (The), Inc.(c) 1,949,376
7,800 Home Depot, Inc. 333,372
24,250 J.C. Penney Co., Inc.(c) 1,003,950
3,800 Kohl's Corp.(d) 186,846
105,300 McDonald's Corp. 3,375,918
16,300 Regis Corp. 752,245
52,000 Tiffany & Co. 1,662,440
16,200 United Auto Group, Inc. 479,358
55,000 Yum! Brands, Inc. 2,594,900
-------------
15,385,301
-------------
Savings & Loans -- 3.9%
16,700 People's Bank 649,463
107,825 Sovereign Bancorp, Inc.(c) 2,431,454
53,000 Washington Mutual, Inc. 2,240,840
-------------
5,321,757
-------------
Semiconductors -- 1.8%
20,765 Freescale Semiconductor, Inc., Class B 381,245
64,100 Intel Corp.(c) 1,499,299
18,700 Lam Research Corp.(d) 540,617
-------------
2,421,161
-------------
Software -- 2.0%
40,225 First Data Corp. 1,711,172
6,400 IMS Health, Inc. 148,544
13,300 Microsoft Corp. 355,243
39,500 Oracle Corp.(d) 541,940
-------------
2,756,899
-------------
Telecommunications -- 4.2%
9,000 Alltel Corp. 528,840
29,625 BellSouth Corp. 823,279
10,025 CenturyTel, Inc. 355,587
58,500 Cisco Systems, Inc.(d) 1,129,050
34,825 Citizens Communications Co. 480,237
32,975 Motorola, Inc. 567,170
26,500 Nokia OYJ, Sponsored ADR 415,255
26,325 SBC Communications, Inc. 678,395
17,000 Verizon Communications, Inc. 688,670
-------------
5,666,483
-------------
See accompanying notes to financial statements.
28
STAR VALUE FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Shares Description Value (a)
- -----------------------------------------------------------------------------------------
Toys, Games & Hobbies -- 0.4%
26,150 Hasbro, Inc. $ 506,787
-------------
Transportation -- 1.2%
9,525 Burlington Northern Santa Fe Corp. 450,628
3,300 Norfolk Southern Corp. 119,427
6,300 Overseas Shipholding Group 347,760
28,600 Werner Enterprises, Inc. 647,504
-------------
1,565,319
-------------
Total Common Stocks (Identified Cost $102,963,335) 131,955,049
-------------
Units
- -----------------------------------------------------------------------------------------
Warrants -- 0.0%
Telecommunications -- 0.0%
564 Lucent Technologies, Inc., Expires 12/10/2007(d) 891
-------------
Total Warrants (Identified Cost $0) 891
-------------
Principal
Amount
- -----------------------------------------------------------------------------------------
Short Term Investments -- 12.2%
$4,890,878 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be repurchased at $4,891,591 on
1/03/2005, collateralized by $4,759,742 Small Business
Administration Bond, 5.625%, due 9/25/2016 valued at $5,135,422 4,890,878
23,171 Bank of America, 2.26%, due 2/15/2005(e) 23,171
579,262 Bank of America, 2.27%, due 1/18/2005(e) 579,262
579,262 Bank of Montreal, 2.125%, due 2/02/2005(e) 579,262
1,316,475 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,316,475
579,262 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 579,262
231,705 BGI Institutional Money Market Fund(e) 231,705
463,410 BNP Paribas, 2.295%, due 2/23/2005(e) 463,410
231,705 Calyon, 2.27%, due 1/20/2005(e) 231,705
1,621,934 Calyon, 2.34%, due 2/02/2005(e) 1,621,934
109,481 Calyon, 2.435%, due 3/16/2005(e) 109,481
347,557 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 347,557
565,360 Fortis Bank, 2.14%, due 1/12/2005(e) 565,360
579,262 Fortis Bank, 2.20%, due 2/11/2005(e) 579,262
1,012,550 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,012,550
231,705 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 231,705
231,705 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 231,705
144,460 Merrill Lynch Premier Institutional Fund(e) 144,460
695,115 Merrimac Cash Fund-Premium Class(e) 695,115
115,852 Ranger Funding, 2.271%, due 1/14/2005(e) 115,852
926,819 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 926,819
579,262 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 579,262
231,705 Wells Fargo, 2.27%, due 1/25/2005(e) 231,705
347,557 Wells Fargo, 2.32%, due 1/14/2005(e) 347,557
-------------
Total Short Term Investments (Identified Cost $16,635,454) 16,635,454
-------------
Total Investments -- 109.1%
(Identified Cost $119,598,789)(b) 148,591,394
Other assets less liabilities (12,349,125)
-------------
Total Net Assets -- 100% $ 136,242,269
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on investments based
on cost of $119,915,634 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 $29,502,367
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (826,607)
-----------
Net unrealized appreciation $28,675,760
===========
At December 31, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$3,420,348 in undistributed long-term gains.
(c) All or a portion of this security was on loan to brokers at December 31, 2004.
(d) Non-income producing security.
(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.
REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Retail 11.3%
Diversified Financial Services 9.1
Media 7.6
Oil & Gas 6.5
Banks 6.2
Telecommunications 4.2
Health Care-Products 4.2
Savings & Loans 3.9
Insurance 3.8
Electric 3.5
Beverages 2.9
Commercial Services 2.7
Miscellaneous - Manufacturing 2.6
Health Care-Services 2.4
Pharmaceuticals 2.3
Computers 2.1
Software 2.0
Environmental Control 2.0
Other, less than 2% each 17.6
See accompanying notes to financial statements.
29
CGM ADVISOR TARGETED EQUITY FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- -------------------------------------------------------------------------------------
Common Stocks -- 99.4% of Total Net Assets
Aerospace & Defense -- 9.9%
360,000 General Dynamics Corp. $ 37,656,000
362,000 United Technologies Corp. 37,412,700
-------------
75,068,700
-------------
Apparel -- 5.5%
460,000 Nike, Inc., Class B 41,717,400
-------------
Cosmetics & Personal Care -- 4.9%
679,000 Procter & Gamble Co. 37,399,320
-------------
Electronic Components -- 3.2%
190,000 Harman International Industries, Inc. 24,130,000
-------------
Health Care-Services -- 4.7%
408,000 UnitedHealth Group, Inc. 35,916,240
-------------
Insurance -- 4.4%
510,000 American International Group, Inc. 33,491,700
-------------
Internet -- 2.9%
190,000 eBay, Inc.(c) 22,093,200
-------------
Lodging -- 4.9%
586,000 Marriott International, Inc., Class A 36,906,280
-------------
Mining -- 9.2%
1,530,000 BHP Billiton, Ltd., Sponsored ADR(d) 36,750,600
1,155,000 Companhia Vale do Rio Doce, ADR(d) 33,506,550
-------------
70,257,150
-------------
Oil & Gas -- 23.7%
610,000 BP PLC, Sponsored ADR 35,624,000
700,000 ChevronTexaco Corp. 36,757,000
495,000 ConocoPhillips 42,980,850
260,000 Devon Energy Corp. 10,119,200
235,000 Exxon Mobil Corp. 12,046,100
384,000 Total SA, Sponsored ADR(d) 42,178,560
-------------
179,705,710
-------------
Restaurants -- 5.3%
1,265,000 McDonald's Corp. 40,555,900
-------------
Retail -- 2.4%
390,000 Yum! Brands, Inc. 18,400,200
-------------
Telecommunications -- 13.5%
930,000 America Movil SA de CV, Series L, ADR(d) 48,685,500
388,300 Mobile TeleSystems, Sponsored ADR(d) 53,783,433
-------------
102,468,933
-------------
Transportation -- 4.9%
380,000 FedEx Corp. 37,426,200
-------------
Total Common Stocks (Identified Cost $655,739,063) 755,536,933
-------------
Principal
Amount
- -------------------------------------------------------------------------------------
Short Term Investments -- 13.3%
$ 5,113,179 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be purchased at $5,113,925 on
1/03/2005, collateralized by $5,366,089 Federal Home Loan
Mortgage Bond, 2.953%, due 12/15/2031 valued at $5,371,113 5,113,179
189,258 Bank of America, 2.26%, due 2/15/2005(e) 189,258
4,731,462 Bank of America, 2.27%, due 1/18/2005(e) 4,731,462
4,731,462 Bank of Montreal, 2.125%, due 2/02/2005(e) 4,731,462
10,753,072 Bank of Montreal, 2.26%, due 1/28/2005(e) 10,753,072
4,731,462 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 4,731,462
Principal
Amount Description Value (a)
- ----------------------------------------------------------------------------------------------------
Short Term Investments -- continued
$ 1,892,585 BGI Institutional Money Market Fund(e) $ 1,892,585
3,785,169 BNP Paribas, 2.295%, due 2/23/2005(e) 3,785,169
1,892,585 Calyon, 2.27%, due 1/20/2005(e) 1,892,585
13,248,092 Calyon, 2.34%, due 2/02/2005(e) 13,248,092
894,246 Calyon, 2.435%, due 3/16/2005(e) 894,246
2,838,877 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 2,838,877
4,617,906 Fortis Bank, 2.14%, due 1/12/2005(e) 4,617,906
4,731,461 Fortis Bank, 2.20%, due 2/11/2005(e) 4,731,461
8,270,595 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 8,270,595
1,892,585 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 1,892,585
1,892,585 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 1,892,585
1,179,964 Merrill Lynch Premier Institutional Fund(e) 1,179,964
5,677,754 Merrimac Cash Fund-Premium Class(e) 5,677,754
946,292 Ranger Funding, 2.271%, due 1/14/2005(e) 946,292
7,570,338 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 7,570,338
4,731,462 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 4,731,462
1,892,585 Wells Fargo, 2.27%, due 1/25/2005(e) 1,892,585
2,838,877 Wells Fargo, 2.32%, due 1/14/2005(e) 2,838,877
-------------
Total Short Term Investments (Identified Cost $101,043,853) 101,043,853
-------------
Total Investments -- 112.7%
(Identified Cost $756,782,916)(b) 856,580,786
Other assets less liabilities (96,727,772)
-------------
Total Net Assets -- 100% $ 759,853,014
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on
investments based on cost of $756,992,153 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 $ 101,146,182
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (1,557,549)
-------------
Net unrealized appreciation $ 99,588,633
=============
At December 31, 2004, the Fund had a capital loss carryover of
approximately $141,323,294 which expires on December 31, 2010.
This amount may be available to offset future realized capital gains, if
any, to the extent provided by regulations.
At December 31, 2004, the components of distributable earnings,
excluding unrealized appreciation/depreciation, disclosed on a tax
basis consisted of $965,026 in undistributed ordinary income.
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at
December 31, 2004.
(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.
30
CGM ADVISOR TARGETED EQUITY FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Oil & Gas 23.7%
Telecommunications 13.5
Aerospace & Defense 9.9
Mining 9.2
Apparel 5.5
Restaurants 5.3
Transportation 4.9
Cosmetics & Personal Care 4.9
Lodging 4.9
Health Care-Services 4.7
Insurance 4.4
Electronic Components 3.2
Internet 2.9
Retail 2.4
See accompanying notes to financial statements.
31
HANSBERGER INTERNATIONAL FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- -----------------------------------------------------------------------
Common Stocks -- 97.4% of Total Net Assets
Brazil -- 1.2%
15,000 Banco Bradesco SA, Sponsored ADR $ 375,900
12,800 Cia Energetica de Minas Gerais, Sponsored ADR 314,112
22,860 Petroleo Brasileiro SA, ADR 909,371
-------------
1,599,383
-------------
Canada -- 1.5%
23,600 Manulife Financial Corp.(c) 1,090,320
28,200 Suncor Energy, Inc. 998,280
-------------
2,088,600
-------------
China -- 2.1%
190,460 China Mobile (Hong Kong), Ltd. 645,648
47,200 China Mobile (Hong Kong), Ltd., Sponsored ADR 809,952
1,649,410 Denway Motors, Ltd. 588,848
476,160 Ping An Insurance Group Co. of China, Ltd.(d) 820,860
-------------
2,865,308
-------------
Denmark -- 1.0%
110,400 Vestas Wind Systems AS(c)(d) 1,367,208
-------------
Finland -- 2.9%
65,780 Nokia OYJ 1,035,369
44,700 Nokia OYJ, Sponsored ADR 700,449
43,700 Stora Enso OYJ 667,115
32,000 Tietoenator OYJ 1,014,287
27,330 UPM-Kymmene OYJ 605,645
-------------
4,022,865
-------------
France -- 13.9%
44,520 Axa 1,096,337
45,600 Axa, Sponsored ADR 1,128,600
12,000 BNP Paribas 866,370
34,100 Bouygues SA(c) 1,570,465
12,380 Carrefour SA 587,597
13,200 Cie Generale D'Optique Essilor International SA 1,030,785
22,860 European Aeronautic Defense and Space Co.(c) 662,342
10,670 Groupe Danone 982,085
6,286 Lafarge SA 604,544
14,900 L'Oreal SA 1,127,209
6,971 Sanofi-Aventis 555,223
13,330 Schneider Electric SA 924,475
23,650 Societe Generale, Class A 2,385,014
37,800 STMicroelectronics NV (New York)(c) 730,296
21,240 Suez SA 564,480
43,500 Thomson 1,146,051
8,040 Total SA 1,750,117
10,400 Total SA, Sponsored ADR(c) 1,142,336
-------------
18,854,326
-------------
Germany -- 6.5%
5,050 Adidas-Salomon AG 815,111
5,800 Allianz AG 763,248
7,620 Deutsche Bank AG 674,005
23,400 Deutsche Boerse AG(c) 1,402,569
11,710 E.ON AG 1,065,594
8,090 Fresenius Medical Care AG 648,184
13,710 Linde AG 852,589
1,350 SAP AG 239,918
16,400 SAP AG, Sponsored ADR 725,044
12,380 Schering AG 921,978
8,100 Siemens AG 684,205
-------------
8,792,445
-------------
Shares Description Value (a)
- -----------------------------------------------------------------------------
Hong Kong -- 5.8%
239,400 Esprit Holdings, Ltd. $ 1,447,549
81,140 HSBC Holdings PLC (Hong Kong) 1,388,347
182,950 Hutchison Whampoa, Ltd. 1,712,288
1,891,730 Johnson Electric Holdings, Ltd. 1,837,458
418,000 Li & Fung, Ltd. 704,464
560,217 Shangri-La Asia, Ltd. 821,623
------------
7,911,729
------------
Hungary -- 0.6%
12,600 OTP Bank Rt, Sponsored ADR, 144A(c) 768,600
------------
India -- 1.1%
17,700 HDFC Bank, Ltd., ADR 802,872
9,600 Infosys Technologies, Ltd., Sponsored ADR(c) 665,376
------------
1,468,248
------------
Israel -- 0.7%
30,700 Teva Pharmaceutical Industries, Ltd., Sponsored ADR(c) 916,702
------------
Italy -- 3.5%
65,420 Eni-Ente Nazionale Idrocarburi SpA 1,632,282
31,620 Luxottica Group SpA, Sponsored ADR 644,732
77,040 Saipem SpA 923,538
264,900 UniCredito Italiano SpA 1,517,810
------------
4,718,362
------------
Japan -- 18.7%
100,000 Asahi Glass Co., Ltd. 1,100,828
42,100 Canon, Inc. 2,268,027
42,100 Denso Corp. 1,125,811
38,400 Fujisawa Pharmaceutical Co., Ltd. 1,049,313
5,600 Funai Electric Co., Ltd. 693,931
13,900 Honda Motor Co., Ltd. 719,036
48,600 JS Group Corp. 881,097
24,000 Kao Corp. 612,567
409,000 Kawasaki Heavy Industries, Ltd.(c) 669,381
2,800 Keyence Corp. 626,283
242,000 Mazda Motor Corp.(c) 759,123
131,000 NEC Corp. 812,927
11,600 Nidec Corp. 1,411,437
29,700 Nitto Denko Corp. 1,626,050
488 NTT DoCoMo, Inc. 898,509
5,600 ORIX Corp. 759,396
45,000 Pioneer Corp. 876,766
5,900 Rohm Co., Ltd. 609,255
22,000 Seven-Eleven Japan Co., Ltd. 692,255
81,000 Sharp Corp. 1,320,146
10,100 SMC Corp. 1,154,145
26,600 Sony Corp. 1,026,167
156 Sumitomo Mitsui Financial Group, Inc. 1,132,197
194,000 Sumitomo Trust & Banking Co., Ltd. (The) 1,400,429
16,200 Takeda Pharmaceutical Co., Ltd. 814,340
11,000 World Co., Ltd. 385,777
------------
25,425,193
------------
Mexico -- 0.6%
22,280 Cemex SA de CV, Sponsored ADR 811,439
------------
Netherlands -- 3.0%
28,987 ABN AMRO Holding NV 765,262
18,280 Akzo Nobel NV 777,006
41,028 ING Groep NV 1,229,307
22,190 Koninklijke Philips Electronics NV 584,317
26,100 Koninklijke Philips Electronics NV 691,650
------------
4,047,542
------------
See accompanying notes to financial statements.
32
HANSBERGER INTERNATIONAL FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Shares Description Value (a)
- ----------------------------------------------------------------------------------
Republic of Korea -- 4.1%
17,660 Kookmin Bank(d) $ 690,910
19,500 Kookmin Bank, Sponsored ADR(c)(d) 762,060
16,430 LG Chem, Ltd. 654,692
3,900 Samsung Electronics Co., Ltd. 1,697,208
2,100 Samsung Electronics Co., Ltd., GDR, 144A(c) 456,941
2,760 Shinsegae Co., Ltd. 758,520
28,470 SK Telecom Co., Ltd., ADR(c) 633,458
------------
5,653,789
------------
Singapore -- 1.3%
113,140 DBS Group Holdings, Ltd. 1,115,260
102,470 Singapore Airlines, Ltd. 715,213
------------
1,830,473
------------
South Africa -- 0.6%
333,020 Old Mutual PLC 844,019
------------
Spain -- 2.7%
64,600 Banco Bilbao Vizcaya Argentaria SA 1,141,926
92,400 Telefonica Moviles SA 1,158,985
75,613 Telefonica SA 1,419,563
------------
3,720,474
------------
Switzerland -- 5.6%
104,750 ABB, Ltd.(d) 583,629
19,880 Lonza Group AG 1,116,364
4,480 Nestle SA 1,169,431
5,300 Nobel Biocare Holding AG 957,971
43,710 Novartis AG 2,197,581
18,600 UBS AG 1,556,120
------------
7,581,096
------------
Taiwan -- 1.0%
387,148 Taiwan Semiconductor Manufacturing Co., Ltd. 615,004
87,620 Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR 743,894
------------
1,358,898
------------
United Kingdom -- 19.0%
19,400 AstraZeneca PLC, Sponsored ADR(c) 705,966
100,418 Barclays PLC 1,124,818
57,711 BHP Billiton PLC 673,538
17,800 BP PLC, Sponsored ADR 1,039,520
150,900 British Sky Broadcasting PLC 1,623,772
234,090 Compass Group PLC 1,099,095
47,100 Exel PLC 652,597
63,095 GlaxoSmithKline PLC 1,477,584
299,300 Group 4 Securicor PLC(d) 795,840
130,264 HBOS PLC 2,113,185
133,710 Kingfisher PLC 791,787
110,401 Lloyds TSB Group PLC 999,680
38,172 Reckitt Benckiser PLC 1,151,425
143,320 Rolls-Royce Group PLC(d) 677,720
4,785,900 Rolls-Royce Group PLC, Class B 9,172
72,094 Royal Bank of Scotland Group PLC 2,417,816
330,070 Signet Group PLC 697,382
82,700 Smith & Nephew PLC 843,939
65,900 Smiths Group PLC 1,038,110
74,831 Standard Chartered PLC 1,388,171
233,488 Tesco PLC 1,436,335
75,610 Unilever PLC 741,521
524,146 Vodafone Group PLC 1,413,796
34,300 Vodafone Group PLC, Sponsored ADR 939,134
------------
25,851,903
------------
Total Common Stocks (Identified Cost $112,795,179) 132,498,602
------------
Shares Description Value (a)
- --------------------------------------------------------------------------------------------------
Preferred Stocks -- 0.7%
Germany -- 0.7%
945 Porsche AG $ 597,399
9,640 Volkswagen AG 319,918
------------
917,317
------------
Total Preferred Stocks (Identified Cost $884,110) 917,317
------------
Principal
Amount
- --------------------------------------------------------------------------------------------------
Short Term Investments -- 10.9%
$2,644,318 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be repurchased at $2,644,704 on
1/03/2005, collateralized by $2,767,732 Federal Home Loan
Mortgage Bond, 2.8525%, due 11/15/2031 valued at $2,776,942 2,644,318
24,015 Bank of America, 2.26%, due 2/15/2005(e) 24,015
600,381 Bank of America, 2.27%, due 1/18/2005(e) 600,381
600,381 Bank of Montreal, 2.125%, due 2/02/2005(e) 600,381
1,364,470 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,364,470
600,380 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 600,380
240,152 BGI Institutional Money Market Fund(e) 240,152
480,304 BNP Paribas, 2.295%, due 2/23/2005(e) 480,304
240,152 Calyon, 2.27%, due 1/20/2005(e) 240,152
1,681,066 Calyon, 2.34%, due 2/02/2005(e) 1,681,066
113,472 Calyon, 2.435%, due 3/16/2005(e) 113,472
360,228 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 360,228
585,972 Fortis Bank, 2.14%, due 1/12/2005(e) 585,972
600,380 Fortis Bank, 2.20%, due 2/11/2005(e) 600,380
1,049,466 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,049,466
240,152 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 240,152
240,152 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 240,152
149,727 Merrill Lynch Premier Institutional Fund(e) 149,727
720,457 Merrimac Cash Fund-Premium Class(e) 720,457
120,076 Ranger Funding, 2.271%, due 1/14/2005(e) 120,076
960,609 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 960,609
600,380 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 600,380
240,152 Wells Fargo, 2.27%, due 1/25/2005(e) 240,152
360,228 Wells Fargo, 2.32%, due 1/14/2005(e) 360,228
------------
Total Short Term Investments (Identified Cost $14,817,070) 14,817,070
------------
Total Investments -- 109.0%
(Identified Cost $128,496,359)(b) 148,232,989
Other assets less liabilities (12,267,150)
------------
Total Net Assets -- 100% $135,965,839
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on investments
based on cost of $129,348,120 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 $ 21,146,883
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (2,262,014)
------------
Net unrealized appreciation $ 18,884,869
============
At December 31, 2004, the Fund had a capital loss carryover of
approximately $8,938,160 of which $1,066,443 expires on December
31, 2009 and $7,871,717 expires on December 31, 2010. These
amounts may be available to offset future realized capital gains, if any,
to the extent provided by regulations.
See accompanying notes to financial statements.
33
HANSBERGER INTERNATIONAL FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
For the year ended December 31, 2004, the Fund has elected to defer
$9,235 of foreign currency losses attributable to Post-October losses.
At December 31, 2004, there was no undistributed ordinary income or
long-term capital gains except for unrealized appreciation/depreciation
disclosed on a tax basis.
(c) All or a portion of this security was on loan to brokers at December 31, 2004.
(d) Non-income producing security.
(e) Represents investments of securities lending collateral.
ADR/GDR An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a U.S. Bank representing the right to
receive securities of the foreign issuer described. The values of ADRs and
GDRs are significantly influenced by trading on exchanges not located in
the United States.
144A Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registrations, normally to qualified institutional buyers. At the period
end, the value of these amounted to $1,225,541 or 0.9% of net assets.
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Banks 18.7%
Telecommunications 7.2
Pharmaceuticals 6.4
Oil & Gas 5.5
Electrical Components & Equipment 5.3
Insurance 5.1
Food 3.6
Chemicals 3.1
Health Care-Products 3.1
Hand & Machine Tools 2.5
Building Materials 2.5
Home Furnishings 2.3
Engineering & Construction 2.2
Auto Manufacturers 2.2
Retail 2.1
Electronics 2.0
Other, less than 2% each 24.3
See accompanying notes to financial statements.
34
HARRIS ASSOCIATES FOCUSED VALUE FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- -------------------------------------------------------------------------------------------
Common Stocks -- 90.6% of Total Net Assets
Aerospace & Defense -- 4.0%
378,600 Raytheon Co. $ 14,701,038
-------------
Apparel -- 2.4%
203,800 Liz Claiborne, Inc. 8,602,398
-------------
Beverages -- 3.2%
548,500 Coca-Cola Enterprises, Inc. 11,436,225
-------------
Commercial Services -- 14.5%
485,900 H&R Block, Inc.(c) 23,809,100
127,800 Moody's Corp. 11,099,430
503,000 RR Donnelley & Sons Co. 17,750,870
-------------
52,659,400
-------------
Hand & Machine Tools -- 4.4%
178,900 Black & Decker Corp.(c) 15,802,237
-------------
Health Care-Products -- 1.6%
170,300 Baxter International, Inc. 5,882,162
-------------
Media -- 11.5%
84,500 Cablevision Systems Corp., Class A(d) 2,104,050
181,400 Knight-Ridder, Inc.(c) 12,142,916
851,200 Liberty Media Corp., Class A(d) 9,346,176
932,700 Time Warner, Inc.(d) 18,131,688
-------------
41,724,830
-------------
Oil & Gas -- 4.3%
357,800 Burlington Resources, Inc. 15,564,300
-------------
Pharmaceuticals -- 11.3%
480,100 Bristol-Myers Squibb Co. 12,300,162
388,400 Hospira, Inc.(d) 13,011,400
452,800 Omnicare, Inc. 15,675,936
-------------
40,987,498
-------------
Retail -- 13.5%
497,800 AutoNation, Inc.(d) 9,562,738
611,900 TJX Cos., Inc.(c) 15,377,047
513,900 Yum! Brands, Inc. 24,245,802
-------------
49,185,587
-------------
Savings & Loans -- 15.3%
1,314,000 Washington Mutual, Inc. 55,555,920
-------------
Software -- 4.6%
393,600 First Data Corp. 16,743,744
-------------
Total Common Stocks (Identified Cost $250,117,258) 328,845,339
-------------
Principal
Amount
- -------------------------------------------------------------------------------------------
Short Term Investments -- 16.1%
$ 34,625,799 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be repurchased at $34,630,848 on
1/03/2005, collateralized by $10,472,407 Federal Home Loan
Mortgage Bond, 2.803%, due 6/15/2034 valued at $10,502,808
and $21,080,000 Federal Home Loan Mortgage Bond, 2.902%, due
1/15/2033 valued at $21,003,033 and $4,544,305 Small Business
Administration Bond, 4.625%, due 11/25/2022 valued at
$4,857,089 34,625,799
47,324 Bank of America, 2.26%, due 2/15/2005(e) 47,324
1,183,096 Bank of America, 2.27%, due 1/18/2005(e) 1,183,096
1,183,096 Bank of Montreal, 2.125%, due 2/02/2005(e) 1,183,096
2,688,792 Bank of Montreal, 2.26%, due 1/28/2005(e) 2,688,792
1,183,096 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 1,183,096
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------------------------
Short Term Investments -- (continued)
$ 473,238 BGI Institutional Money Market Fund(e) $ 473,238
946,477 BNP Paribas, 2.295%, due 2/23/2005(e) 946,477
473,238 Calyon, 2.27%, due 1/20/2005(e) 473,238
3,312,669 Calyon, 2.34%, due 2/02/2005(e) 3,312,669
223,605 Calyon, 2.435%, due 3/16/2005(e) 223,605
709,858 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 709,858
1,154,702 Fortis Bank, 2.14%, due 1/12/2005(e) 1,154,702
1,183,096 Fortis Bank, 2.20%, due 2/11/2005(e) 1,183,096
2,068,052 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 2,068,052
473,238 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 473,238
473,238 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 473,238
295,049 Merrill Lynch Premier Institutional Fund(e) 295,049
1,419,715 Merrimac Cash Fund-Premium Class(e) 1,419,715
236,619 Ranger Funding, 2.271%, due 1/14/2005(e) 236,619
1,892,954 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 1,892,954
1,183,096 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 1,183,096
473,238 Wells Fargo, 2.27%, due 1/25/2005(e) 473,238
709,858 Wells Fargo, 2.32%, due 1/14/2005(e) 709,858
-------------
Total Short Term Investments (Identified Cost $58,613,143) 58,613,143
-------------
Total Investments -- 106.7%
(Identified Cost $308,730,401)(b) 387,458,482
Other assets less liabilities (24,361,324)
-------------
Total Net Assets -- 100% $ 363,097,158
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on
investments based on cost of $308,730,401 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 $ 78,728,081
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value --
-------------
Net unrealized appreciation $ 78,728,081
=============
At December 31, 2004, the Fund had a capital loss carryover of approximately
$10,136,380 which expires on December 31, 2011. This amount may be available to
offset future realized capital gains, if any, to the extent provided by regulations.
At December 31, 2004, there was no undistributed ordinary income or long-term capital
gains except for unrealized appreciation/depreciation disclosed on a tax basis.
(c) All or a portion of this security was on loan to brokers at December 31, 2004.
(d) Non-income producing security.
(e) Represents investments of securities lending collateral.
See accompanying notes to financial statements.
35
HARRIS ASSOCIATES FOCUSED VALUE FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Savings & Loans 15.3%
Commercial Services 14.5
Retail 13.5
Media 11.5
Pharmaceuticals 11.3
Software 4.6
Hand & Machine Tools 4.4
Oil & Gas 4.3
Aerospace & Defense 4.0
Beverages 3.2
Apparel 2.4
Other, less than 2% each 1.6
See accompanying notes to financial statements.
36
HARRIS ASSOCIATES LARGE CAP VALUE FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- ---------------------------------------------------------------
Common Stocks -- 97.3% of Total Net Assets
Aerospace & Defense -- 2.6%
234,900 Raytheon Co. $ 9,121,167
-------------
Banks -- 2.0%
224,800 U.S. Bancorp 7,040,736
-------------
Beverages -- 6.7%
145,300 Anheuser-Busch Cos., Inc. 7,371,069
43,000 Coca-Cola Co. (The) 1,790,090
171,900 Coca-Cola Enterprises, Inc. 3,584,115
182,300 Diageo PLC, Sponsored ADR(c) 10,551,524
-------------
23,296,798
-------------
Building Materials -- 3.2%
303,500 Masco Corp. 11,086,855
-------------
Diversified Financial Services -- 8.2%
173,400 Citigroup, Inc. 8,354,412
132,700 Fannie Mae 9,449,567
268,300 JPMorgan Chase & Co. 10,466,383
-------------
28,270,362
-------------
Environmental Control -- 2.9%
337,900 Waste Management, Inc. 10,116,726
-------------
Food -- 7.3%
136,900 General Mills, Inc.(c) 6,805,299
128,500 H.J. Heinz Co. 5,010,215
206,800 Kraft Foods, Inc., Class A(c) 7,364,148
92,700 Nestle SA, Sponsored ADR 6,049,454
-------------
25,229,116
-------------
Health Care-Products -- 5.9%
213,300 Baxter International, Inc. 7,367,382
69,900 Guidant Corp. 5,039,790
126,100 Johnson & Johnson 7,997,262
-------------
20,404,434
-------------
Household Products & Wares -- 2.5%
113,000 Fortune Brands, Inc. 8,721,340
-------------
Insurance -- 1.8%
81,300 Aflac, Inc. 3,238,992
44,600 MGIC Investment Corp. 3,073,386
-------------
6,312,378
-------------
Leisure Time -- 2.1%
64,500 Carnival Corp. 3,717,135
60,200 Harley-Davidson, Inc. 3,657,150
-------------
7,374,285
-------------
Media -- 17.8%
344,300 Comcast Corp., Special Class A(d) 11,306,812
345,400 DIRECTV Group (The), Inc.(d) 5,781,996
1,254,700 Liberty Media Corp., Class A(d) 13,776,606
644,900 Time Warner, Inc.(d) 12,536,856
235,600 Viacom, Inc., Class B 8,573,484
354,600 Walt Disney Co. (The) 9,857,880
-------------
61,833,634
-------------
Miscellaneous - Manufacturing -- 1.4%
132,100 Honeywell International, Inc. 4,677,661
-------------
Office & Business Equipment -- 3.2%
644,900 Xerox Corp.(d) 10,969,749
-------------
Shares Description Value (a)
- ---------------------------------------------------------------------------------------------
Oil & Gas -- 2.3%
141,800 Burlington Resources, Inc. $ 6,168,300
22,200 ConocoPhillips 1,927,626
-------------
8,095,926
-------------
Pharmaceuticals -- 5.6%
172,800 Abbott Laboratories 8,061,120
209,800 Bristol-Myers Squibb Co. 5,375,076
187,700 Merck & Co., Inc. 6,032,678
-------------
19,468,874
-------------
Retail -- 15.5%
92,100 Costco Wholesale Corp. 4,458,561
435,800 Gap (The), Inc.(c) 9,204,096
282,100 Home Depot, Inc. 12,056,954
192,200 Kohl's Corp.(d) 9,450,474
71,800 Limited Brands, Inc. 1,652,836
390,400 McDonald's Corp. 12,516,224
84,900 Wal-Mart Stores, Inc. 4,484,418
-------------
53,823,563
-------------
Savings & Loans -- 4.0%
324,300 Washington Mutual, Inc. 13,711,404
-------------
Software -- 2.3%
189,500 First Data Corp. 8,061,330
-------------
Total Common Stocks (Identified Cost $268,523,000) 337,616,338
-------------
Principal
Amount
- ---------------------------------------------------------------------------------------------
Short Term Investments -- 7.1%
$ 9,247,571 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be repurchased at $9,248,920 on
1/03/2005, collateralized by $931,368 Small Business Administration
Bond, 5.375%, due 1/25/2017 valued at $976,088 and $8,079,543
Small Business Administration Bond, 5.375%, due 1/25/2017 valued
at $8,733,862 9,247,571
30,039 Bank of America, 2.26%, due 2/15/2005(e) 30,039
750,995 Bank of America, 2.27%, due 1/18/2005(e) 750,995
750,995 Bank of Montreal, 2.125%, due 2/02/2005(e) 750,995
1,706,767 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,706,767
750,995 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 750,995
300,398 BGI Institutional Money Market Fund(e) 300,398
600,796 BNP Paribas, 2.295%, due 2/23/2005(e) 600,796
300,397 Calyon, 2.27%, due 1/20/2005(e) 300,397
2,102,785 Calyon, 2.34%, due 2/02/2005(e) 2,102,785
141,938 Calyon, 2.435%, due 3/16/2005(e) 141,938
450,597 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 450,597
732,971 Fortis Bank, 2.14%, due 1/12/2005(e) 732,971
750,995 Fortis Bank, 2.20%, due 2/11/2005(e) 750,995
1,312,739 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,312,739
300,398 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 300,398
300,398 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 300,398
187,288 Merrill Lynch Premier Institutional Fund(e) 187,288
901,194 Merrimac Cash Fund-Premium Class(e) 901,194
150,199 Ranger Funding, 2.271%, due 1/14/2005(e) 150,199
1,201,592 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 1,201,592
750,995 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 750,995
300,398 Wells Fargo, 2.27%, due 1/25/2005(e) 300,398
450,596 Wells Fargo, 2.32%, due 1/14/2005(e) 450,596
-------------
Total Short Term Investments (Identified Cost $24,474,036) 24,474,036
-------------
See accompanying notes to financial statements.
37
HARRIS ASSOCIATES LARGE CAP VALUE FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Total Investments -- 104.4%
(Identified Cost $292,997,036)(b) $362,090,374
Other assets less liabilities (15,288,229)
------------
Total Net Assets -- 100% $346,802,145
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on investments
based on cost of $294,643,614 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 $ 70,283,743
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (2,836,983)
------------
Net unrealized appreciation $ 67,446,760
============
At December 31, 2004, the Fund had a capital loss carryover of approximately
$134,352,059 of which $16,433,943 expires on December 31, 2008, $83,318,807
expires on December 31, 2009, $24,633,843 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.
For the year ended December 31, 2004, the Fund has elected to defer $159,806 of capital
losses attributable to Post-October losses.
At December 31, 2004, the components of distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax basis consisted of $357,277 in undistributed
ordinary income.
(c) All or a portion of this security was on loan to brokers at December 31, 2004.
(d) Non-income producing security.
(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.
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Media 17.8%
Retail 15.5
Diversified Financial Services 8.2
Food 7.3
Beverages 6.7
Health Care-Products 5.9
Pharmaceuticals 5.6
Savings & Loans 4.0
Building Materials 3.2
Office & Business Equipment 3.2
Environmental Control 2.9
Aerospace & Defense 2.6
Household Products & Wares 2.5
Oil & Gas 2.3
Software 2.3
Leisure Time 2.1
Banks 2.0
Other, less than 2% each 3.2
See accompanying notes to financial statements.
38
VAUGHAN NELSON SMALL CAP VALUE FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- ------------------------------------------------------------------------
Common Stocks -- 98.6% of Total Net Assets
Aerospace & Defense -- 5.7%
30,125 Alliant Techsystems, Inc.(c)(d) $ 1,969,572
57,450 DRS Technologies, Inc.(c) 2,453,689
23,800 Esterline Technologies Corp.(c) 777,070
27,100 Moog, Inc., Class A(c) 1,228,985
-------------
6,429,316
-------------
Automobiles -- 0.7%
40,650 Monaco Coach Corp. 836,170
-------------
Banks -- 8.2%
48,951 MB Financial, Inc. 2,063,285
54,800 Provident Bankshares Corp. 1,993,076
114,015 Republic Bancorp, Inc. 1,742,149
46,075 United Bankshares, Inc. 1,757,761
54,900 WesBanco, Inc. 1,755,153
-------------
9,311,424
-------------
Building Materials -- 1.1%
167,650 U.S. Concrete, Inc.(c) 1,285,875
-------------
Chemicals -- 1.0%
21,800 Georgia Gulf Corp. 1,085,640
-------------
Commercial Services -- 7.9%
47,900 Consolidated Graphics, Inc.(c) 2,198,610
101,425 Cornell Cos., Inc.(c) 1,539,631
62,500 Dollar Thrifty Automotive Group, Inc.(c) 1,887,500
27,275 McGrath Rentcorp 1,189,463
100,600 Navigant International, Inc.(c) 1,224,302
55,700 Team, Inc.(c) 866,135
-------------
8,905,641
-------------
Distribution & Wholesale -- 1.3%
41,050 Watsco, Inc. 1,445,781
-------------
Diversified Financial Services -- 3.0%
57,650 Friedman, Billings, Ramsey Group, Inc., Class A 1,117,833
74,450 Raymond James Financial, Inc. 2,306,461
-------------
3,424,294
-------------
Electrical Components & Equipment -- 2.1%
30,100 AZZ, Inc.(c) 489,125
57,300 MTS Systems Corp. 1,937,313
-------------
2,426,438
-------------
Food -- 0.6%
52,500 Gold Kist, Inc.(c) 715,050
-------------
Health Care-Services -- 5.5%
128,850 Healthcare Services Group, Inc. 2,685,234
23,375 Pediatrix Medical Group, Inc.(c) 1,497,169
56,075 Triad Hospitals, Inc.(c) 2,086,551
-------------
6,268,954
-------------
Holding Companies - Diversified -- 1.4%
48,600 Walter Industries, Inc.(d) 1,639,278
-------------
Household Products & Wares -- 1.3%
45,175 Yankee Candle Co. (The), Inc.(c)(d) 1,498,906
-------------
Insurance -- 4.8%
40,875 Allmerica Financial Corp.(c) 1,341,926
61,250 HCC Insurance Holdings, Inc. 2,028,600
59,925 Infinity Property & Casualty Corp. 2,109,360
-------------
5,479,886
-------------
Shares Description Value (a)
- -----------------------------------------------------------------
Investment Companies -- 4.7%
21,450 iShares Russell 2000 Value Index Fund(d) $ 4,138,992
66,675 MCG Capital Corp. 1,142,143
-------------
5,281,135
-------------
Iron & Steel -- 4.3%
57,375 Allegheny Technologies, Inc. 1,243,316
55,287 Gibraltar Industries, Inc. 1,305,879
47,975 Olympic Steel, Inc.(d) 1,271,817
26,800 Steel Dynamics, Inc. 1,015,184
-------------
4,836,196
-------------
Leisure Time -- 1.6%
111,500 K2, Inc.(c)(d) 1,770,620
-------------
Lodging -- 1.6%
194,575 La Quinta Corp.(c) 1,768,687
-------------
Machinery - Diversified -- 2.9%
41,300 Briggs & Stratton Corp.(c)(d) 1,717,254
40,550 Nordson Corp. 1,624,838
-------------
3,342,092
-------------
Media -- 1.3%
75,925 Journal Register Co.(c) 1,467,630
-------------
Mining -- 0.7%
29,025 Century Aluminum Co. 762,196
-------------
Miscellaneous - Manufacturing -- 1.4%
177,200 Jacuzzi Brands, Inc. 1,541,640
-------------
Oil & Gas -- 3.2%
86,475 Comstock Resources, Inc.(c) 1,906,774
22,175 Southwestern Energy Co.(c) 1,124,051
11,375 Ultra Petroleum Corp.(c) 547,479
-------------
3,578,304
-------------
Oil & Gas Services -- 3.0%
76,200 Oil States International, Inc.(c) 1,469,898
85,925 Willbros Group, Inc.(c)(d) 1,980,571
-------------
3,450,469
-------------
Pipelines -- 1.3%
24,550 Equitable Resources, Inc.(d) 1,489,203
-------------
Real Estate -- 1.7%
57,650 CB Richard Ellis Group, Inc., Class A(c) 1,934,158
-------------
REITS - Hotel -- 3.4%
198,600 Ashford Hospitality Trust, Inc. 2,158,782
153,300 Highland Hospitality Corp. 1,723,092
-------------
3,881,874
-------------
REITS - Mortgage -- 1.6%
51,800 American Home Mortgage Investment Corp. 1,774,150
-------------
REITS - Office Buildings -- 1.7%
118,875 American Financial Realty Trust 1,923,398
-------------
Retail - 7.5%
64,525 Regis Corp. 2,977,829
120,825 Triarc Cos., Inc., Class B 1,481,315
68,925 United Auto Group, Inc. 2,039,491
65,275 Zale Corp.(c)(d) 1,949,764
-------------
8,448,399
-------------
Semiconductors -- 1.7%
147,000 Asyst Technologies, Inc.(c) 748,230
See accompanying notes to financial statements.
39
VAUGHAN NELSON SMALL CAP VALUE FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Shares Description Value (a)
- -------------------------------------------------------------------------------------
Semiconductors -- continued
16,675 ATMI, Inc.(c)(d) $ 375,688
43,825 Brooks Automation, Inc.(c) 754,667
-------------
1,878,585
-------------
Software -- 2.6%
52,250 Inter-Tel, Inc. 1,430,605
56,750 Reynolds & Reynolds Co. (The), Class A 1,504,443
-------------
2,935,048
-------------
Telecommunications -- 0.8%
160,225 Hypercom Corp.(c) 948,532
-------------
Transportation -- 5.9%
6,900 Arlington Tankers, Ltd. 158,355
63,775 Genesee & Wyoming, Inc., Class A(c) 1,793,991
22,350 Landstar System, Inc.(c) 1,645,854
122,250 RailAmerica, Inc.(c) 1,595,363
67,000 Werner Enterprises, Inc. 1,516,880
-------------
6,710,443
-------------
Trucking & Leasing -- 1.1%
27,510 Amerco, Inc.(c)(d) 1,264,910
-------------
Total Common Stocks (Identified Cost $97,108,617) 111,740,322
-------------
Principal
Amount
- -------------------------------------------------------------------------------------
Short Term Investments -- 16.4%
$ 1,891,143 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be repurchased at $1,891,419 on
1/03/2005, collateralized by $1,970,075 Federal Home Loan
Mortgage Bond, 2.902%, due 3/15/2032 valued at $1,986,949 1,891,143
32,852 Bank of America, 2.26%, due 2/15/2005(e) 32,852
821,308 Bank of America, 2.27%, due 1/18/2005(e) 821,308
821,308 Bank of Montreal, 2.125%, due 2/02/2005(e) 821,308
1,866,566 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,866,566
821,308 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 821,308
328,523 BGI Institutional Money Market Fund(e) 328,523
657,046 BNP Paribas, 2.295%, due 2/23/2005(e) 657,046
328,523 Calyon, 2.27%, due 1/20/2005(e) 328,523
2,299,663 Calyon, 2.34%, due 2/02/2005(e) 2,299,663
155,227 Calyon, 2.435%, due 3/16/2005(e) 155,227
492,785 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 492,785
801,597 Fortis Bank, 2.14%, due 1/12/2005(e) 801,597
821,308 Fortis Bank, 2.20%, due 2/11/2005(e) 821,308
1,435,647 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,435,647
328,523 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 328,523
328,523 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 328,523
204,823 Merrill Lynch Premier Institutional Fund(e) 204,823
985,570 Merrimac Cash Fund-Premium Class(e) 985,570
164,262 Ranger Funding, 2.271%, due 1/14/2005(e) 164,262
1,314,093 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 1,314,093
821,308 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 821,308
328,523 Wells Fargo, 2.27%, due 1/25/2005(e) 328,523
492,785 Wells Fargo, 2.32%, due 1/14/2005(e) 492,785
-------------
Total Short Term Investments (Identified Cost $18,543,214) 18,543,214
-------------
Total Investments -- 115.0%
(Identified Cost $115,651,831)(b) 130,283,536
Other assets less liabilities (16,945,681)
-------------
Total Net Assets -- 100% $ 113,337,855
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on investments based
on cost of $115,609,992 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 $16,077,384
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (1,403,840)
-----------
Net unrealized appreciation $14,673,544
===========
At December 31, 2004, the Fund had a capital loss carryover of approximately $42,306,805 of
which $15,016,855 expires on December 31, 2009 and $27,289,950 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, 2004, 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, 2004.
(e) Represents investments of securities lending collateral.
REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Banks 8.2%
Commercial Services 7.9
Retail 7.5
Transportation 5.9
Aerospace & Defense 5.7
Health Care-Services 5.5
Insurance 4.8
Investment Companies 4.7
Iron & Steel 4.3
REITS - Hotel 3.4
Oil & Gas 3.2
Diversified Financial Services 3.0
Oil & Gas Services 3.0
Machinery - Diversified 2.9
Software 2.6
Electrical Components & Equipment 2.1
Other, less than 2% each 23.9
See accompanying notes to financial statements.
40
WESTPEAK CAPITAL GROWTH FUND -- SCHEDULE OF INVESTMENTS
Investments as of December 31, 2004
Shares Description Value (a)
- -----------------------------------------------------------------
Common Stocks -- 98.4% of Total Net Assets
Aerospace & Defense -- 4.5%
35,000 Boeing Co. (The) $ 1,811,950
13,500 General Dynamics Corp. 1,412,100
------------
3,224,050
------------
Banks -- 2.2%
49,100 U.S. Bancorp 1,537,812
------------
Beverages -- 3.3%
2,200 Anheuser-Busch Cos., Inc. 111,606
11,900 Coca-Cola Co. (The) 495,397
33,600 Pepsi Bottling Group, Inc.(c) 908,544
15,600 PepsiCo, Inc. 814,320
------------
2,329,867
------------
Biotechnology -- 2.4%
17,800 Amgen, Inc.(d) 1,141,870
10,100 Genentech, Inc.(d) 549,844
------------
1,691,714
------------
Chemicals -- 2.2%
24,900 Sherwin-Williams Co. (The) 1,111,287
7,100 Sigma-Aldrich Corp. 429,266
------------
1,540,553
------------
Commercial Services -- 2.7%
55,000 Cendant Corp. 1,285,900
23,700 Equifax, Inc. 665,970
------------
1,951,870
------------
Computers -- 6.9%
50,000 Dell, Inc.(d) 2,107,000
28,800 International Business Machines Corp. 2,839,104
------------
4,946,104
------------
Cosmetics & Personal Care -- 2.4%
23,400 Kimberly-Clark Corp. 1,539,954
3,800 Procter & Gamble Co. 209,304
------------
1,749,258
------------
Distribution & Wholesale -- 1.2%
2,700 Ingram Micro, Inc., Class A(d) 56,160
11,800 W.W. Grainger, Inc. 786,116
------------
842,276
------------
Diversified Financial Services -- 7.6%
26,700 American Express Co. 1,505,079
17,500 Ameritrade Holding Corp.(d) 248,850
19,900 Capital One Financial Corp.(c) 1,675,779
72,800 Charles Schwab Corp. (The)(c) 870,688
12,000 Fannie Mae 854,520
10,500 MBNA Corp. 295,995
------------
5,450,911
------------
Electrical Components & Equipment -- 1.8%
26,500 Energizer Holdings, Inc.(c)(d) 1,316,785
------------
Electronics -- 2.9%
38,800 Applera Corp. - Applied Biosystems Group 811,308
23,400 Taser International, Inc.(c)(d) 739,206
11,200 Waters Corp.(d) 524,048
------------
2,074,562
------------
Forest Products & Paper -- 0.0%
739 Neenah Paper, Inc.(c) 24,091
------------
Shares Description Value (a)
- ---------------------------------------------------------------
Health Care-Products -- 5.4%
28,500 Becton Dickinson & Co. $ 1,618,800
10,300 Dade Behring Holdings, Inc.(c)(d) 576,800
26,600 Johnson & Johnson 1,686,972
------------
3,882,572
------------
Health Care-Services -- 2.4%
15,700 Laboratory Corp. of America Holdings(d) 782,174
10,500 UnitedHealth Group, Inc. 924,315
------------
1,706,489
------------
Home Builders -- 2.3%
2,100 NVR, Inc.(d) 1,615,740
------------
Insurance -- 0.9%
4,300 Aflac, Inc. 171,312
1,600 American International Group, Inc. 105,072
7,600 W.R. Berkley Corp. 358,492
------------
634,876
------------
Internet -- 1.5%
8,400 Travelzoo, Inc.(c)(d) 801,612
6,600 Yahoo!, Inc.(d) 248,688
------------
1,050,300
------------
Leisure Time -- 0.4%
4,900 Harley-Davidson, Inc. 297,675
------------
Lodging -- 0.9%
11,500 Choice Hotels International, Inc. 667,000
------------
Media -- 0.3%
8,800 Westwood One, Inc.(d) 236,984
------------
Mining -- 0.2%
3,400 Newmont Mining Corp. 150,994
------------
Miscellaneous - Manufacturing -- 2.0%
15,300 Illinois Tool Works, Inc. 1,418,004
------------
Office & Business Equipment -- 0.7%
10,400 Pitney Bowes, Inc. 481,312
------------
Oil & Gas -- 0.5%
6,400 Southwestern Energy Co.(d) 324,416
------------
Oil & Gas Services -- 1.0%
13,600 Baker Hughes, Inc. 580,312
2,500 BJ Services Co. 116,350
------------
696,662
------------
Pharmaceuticals -- 6.8%
31,900 Cardinal Health, Inc.(c) 1,854,985
12,700 Merck & Co., Inc. 408,178
96,250 Pfizer, Inc. 2,588,163
------------
4,851,326
------------
Pipelines -- 1.4%
13,600 Kinder Morgan, Inc. 994,568
------------
REITS - Mortgage -- 0.0%
700 American Home Mortgage Investment Corp. 23,975
------------
REITS - Regional Malls -- 0.2%
4,000 General Growth Properties, Inc. 144,640
------------
Retail -- 8.0%
17,200 Costco Wholesale Corp. 832,652
31,800 Family Dollar Stores(c) 993,114
49,800 Gap (The), Inc.(c) 1,051,776
59,350 Home Depot, Inc. 2,536,619
See accompanying notes to financial statements.
41
WESTPEAK CAPITAL GROWTH FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of December 31, 2004
Shares Description Value (a)
- -------------------------------------------------------------------------------------------
Retail -- continued
5,200 Wal-Mart Stores, Inc. $ 274,664
------------
5,688,825
------------
Semiconductors -- 5.2%
16,600 Altera Corp.(d) 343,620
143,300 Intel Corp. 3,351,787
------------
3,695,407
------------
Software -- 9.3%
29,200 Automatic Data Processing, Inc. 1,295,020
36,600 IMS Health, Inc. 849,486
4,800 Intuit, Inc.(d) 211,248
142,200 Microsoft Corp. 3,798,162
35,500 Oracle Corp.(d) 487,060
------------
6,640,976
------------
Telecommunications -- 6.8%
158,500 Cisco Systems, Inc.(d) 3,059,050
20,900 NII Holdings, Inc., Class B(c)(d) 991,705
18,200 QUALCOMM, Inc. 771,680
------------
4,822,435
------------
Transportation -- 2.1%
14,900 FedEx Corp. 1,467,501
------------
Total Common Stocks (Identified Cost $70,597,744) 70,172,530
------------
Principal
Amount
- -------------------------------------------------------------------------------------------
Short Term Investments -- 17.5%
$ 1,446,143 Repurchase Agreement with Investors Bank & Trust Co. dated
12/31/2004 at 1.75% to be repurchased at $1,446,354 on
1/03/2005, collateralized by $1,406,351 Small Business
Administration Bond, 5.505%, due 8/25/2016 valued at $1,518,450 1,446,143
21,832 Bank of America, 2.26%, due 2/15/2005(e) 21,832
545,794 Bank of America, 2.27%, due 1/18/2005(e) 545,794
545,794 Bank of Montreal, 2.125%, due 2/02/2005(e) 545,794
1,240,413 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,240,413
545,794 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 545,794
218,318 BGI Institutional Money Market Fund(e) 218,318
436,635 BNP Paribas, 2.295%, due 2/23/2005(e) 436,635
218,318 Calyon, 2.27%, due 1/20/2005(e) 218,318
1,528,224 Calyon, 2.34%, due 2/02/2005(e) 1,528,224
103,155 Calyon, 2.435%, due 3/16/2005(e) 103,155
327,477 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 327,477
532,695 Fortis Bank, 2.14%, due 1/12/2005(e) 532,695
545,794 Fortis Bank, 2.20%, due 2/11/2005(e) 545,794
954,049 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 954,049
218,318 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 218,318
218,318 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 218,318
136,114 Merrill Lynch Premier Institutional Fund(e) 136,114
654,953 Merrimac Cash Fund-Premium Class(e) 654,953
109,159 Ranger Funding, 2.271%, due 1/14/2005(e) 109,159
873,271 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 873,271
545,794 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 545,794
218,318 Wells Fargo, 2.27%, due 1/25/2005(e) 218,318
327,477 Wells Fargo, 2.32%, due 1/14/2005(e) 327,477
------------
Total Short Term Investments (Identified Cost $12,512,157) 12,512,157
------------
Total Investments -- 115.9%
(Identified Cost $83,109,901)(b) 82,684,687
Other assets less liabilities (11,336,934)
------------
Total Net Assets -- 100% $ 71,347,753
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized depreciation on investments based on
cost of $83,558,398 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 $ 6,668,477
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (7,542,188)
-----------
Net unrealized depreciation $ (873,711)
===========
At December 31, 2004, the Fund had a capital loss carryover of approximately $53,439,207 of
which $22,458,247 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, 2004, there was no undistributed ordinary income or long-term capital gains
except for unrealized appreciation/depreciation disclosed on a tax basis.
(c) All or a portion of this security was on loan to brokers at December 31, 2004.
(d) Non-income producing security.
(e) Represents investments of securities lending collateral.
REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
Software 9.3%
Retail 8.0
Diversified Financial Services 7.6
Computers 6.9
Pharmaceuticals 6.8
Telecommunications 6.8
Health Care-Products 5.4
Semiconductors 5.2
Aerospace & Defense 4.5
Beverages 3.3
Electronics 2.9
Commercial Services 2.7
Cosmetics & Personal Care 2.4
Health Care-Services 2.4
Biotechnology 2.4
Home Builders 2.3
Chemicals 2.2
Banks 2.2
Transportation 2.1
Miscellaneous - Manufacturing 2.0
Other, less than 2% each 11.0
See accompanying notes to financial statements.
42
STATEMENTS OF ASSETS & LIABILITIES
December 31, 2004
CDC Nvest CDC Nvest CGM Advisor
Star Advisers Star Value Targeted Equity
Fund Fund Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
ASSETS
Investments at cost $ 650,025,754 $ 119,598,789 $ 756,782,916
Net unrealized appreciation
(depreciation) 139,473,936 28,992,605 99,797,870
--------------------- --------------------- ---------------------
Investments at value 789,499,690 148,591,394 856,580,786
Receivable for Fund shares sold 134,305 27,303 216,742
Receivable for securities sold 1,658,041 524,972 5,807,859
Dividends and interest receivable 936,755 162,038 1,001,078
Tax reclaims receivable 7,019 -- 9,439
Securities lending income receivable 12,308 844 29,947
Prepaid insurance expense 3,760 712 3,823
--------------------- --------------------- ---------------------
TOTAL ASSETS 792,251,878 149,307,263 863,649,674
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value 88,013,788 11,744,576 95,930,674
Payable for securities purchased 2,074,842 846,708 5,534,905
Payable for Fund shares redeemed 696,716 127,853 917,951
Management fees payable 615,603 85,990 444,297
Deferred Trustees' fees 287,793 150,906 540,306
Transfer agent fees payable 325,241 46,180 234,749
Accounting and administrative fees
payable 39,057 7,529 39,107
Other accounts payable and accrued
expenses 180,883 55,252 154,671
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 92,233,923 13,064,994 103,796,660
--------------------- --------------------- ---------------------
NET ASSETS $ 700,017,955 $ 136,242,269 $ 759,853,014
===================== ===================== =====================
NET ASSETS CONSIST OF:
Paid in capital $ 788,110,108 $ 104,297,067 $ 801,162,956
Undistributed (overdistributed) net
investment income (loss) (135,059) (143,263) 424,719
Accumulated net realized gain (loss) (227,432,491) 3,095,860 (141,532,531)
Net unrealized appreciation
(depreciation) of investments and
foreign currency translations 139,475,397 28,992,605 99,797,870
--------------------- --------------------- ---------------------
NET ASSETS $ 700,017,955 $ 136,242,269 $ 759,853,014
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE:
Class A shares:
Net assets $ 392,725,546 $ 105,358,955 $ 689,966,737
===================== ===================== =====================
Shares of beneficial interest 20,942,558 11,813,348 76,247,213
===================== ===================== =====================
Net asset value and redemption price
per share $ 18.75 $ 8.92 $ 9.05
===================== ===================== =====================
Offering price per share
(100/[100-maximum sales charge] of
net asset value) $ 19.89 $ 9.46 $ 9.60
===================== ===================== =====================
Class B shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charges)
Net assets $ 223,348,773 $ 27,803,912 $ 57,527,490
===================== ===================== =====================
Shares of beneficial interest 13,239,416 3,387,504 6,804,442
===================== ===================== =====================
Net asset value and offering price
per share $ 16.87 $ 8.21 $ 8.45
===================== ===================== =====================
Class C shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charges)
Net assets $ 58,883,360 $ 3,079,402 $ 3,213,562
===================== ===================== =====================
Shares of beneficial interest 3,486,535 375,190 380,199
===================== ===================== =====================
Net asset value and offering price
per share $ 16.89 $ 8.21 $ 8.45
===================== ===================== =====================
Class Y shares:
Net assets $ 25,060,276 $ -- $ 9,145,225
===================== ===================== =====================
Shares of beneficial interest 1,264,598 -- 990,459
===================== ===================== =====================
Net asset value, offering and
redemption price per share $ 19.82 $ -- $ 9.23
===================== ===================== =====================
See accompanying notes to financial statements.
43
Hansberger Harris Associates Harris Associates Vaughan Nelson Westpeak
International Focused Value Large Cap Value Small Cap Value Capital Growth
Fund Fund Fund Fund Fund
- --------------------- --------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- --------------------- ---------------------
$ 128,496,359 $ 308,730,401 $ 292,997,036 $ 115,651,831 $ 83,109,901
19,736,630 78,728,081 69,093,338 14,631,705 (425,214)
- --------------------- --------------------- --------------------- --------------------- ---------------------
148,232,989 387,458,482 362,090,374 130,283,536 82,684,687
137,641 456,143 162,900 73,058 20,657
39,684 -- -- -- --
141,697 360,775 607,358 218,372 59,250
58,793 -- -- -- --
4,949 107 2,930 4,285 10,179
671 1,768 1,833 573 385
- --------------------- --------------------- --------------------- --------------------- ---------------------
148,616,424 388,277,275 362,865,395 130,579,824 82,775,158
- --------------------- --------------------- --------------------- --------------------- ---------------------
12,172,752 23,987,344 15,226,465 16,652,071 11,066,014
56,088 -- -- -- --
127,719 596,074 271,718 283,514 137,769
90,342 303,029 112,934 85,361 45,347
67,920 36,853 216,157 73,021 77,062
73,230 134,719 133,652 72,161 45,464
6,844 18,420 20,041 5,841 3,997
55,690 103,678 82,283 70,000 51,752
- --------------------- --------------------- --------------------- --------------------- ---------------------
12,650,585 25,180,117 16,063,250 17,241,969 11,427,405
- --------------------- --------------------- --------------------- --------------------- ---------------------
$ 135,965,839 $ 363,097,158 $ 346,802,145 $ 113,337,855 $ 71,347,753
===================== ===================== ===================== ===================== =====================
$ 126,090,029 $ 294,542,310 $ 413,730,549 $ 141,044,137 $ 125,737,733
(526,717) (36,853) 136,701 51,736 (74,878)
(9,340,359) (10,136,380) (136,158,443) (42,389,723) (53,889,888)
19,742,886 78,728,081 69,093,338 14,631,705 (425,214)
- --------------------- --------------------- --------------------- --------------------- ---------------------
$ 135,965,839 $ 363,097,158 $ 346,802,145 $ 113,337,855 $ 71,347,753
===================== ===================== ===================== ===================== =====================
$ 73,706,846 $ 108,041,636 $ 222,434,404 $ 45,137,695 $ 57,419,664
===================== ===================== ===================== ===================== =====================
4,304,852 8,273,575 16,630,845 2,809,079 5,021,668
===================== ===================== ===================== ===================== =====================
$ 17.12 $ 13.06 $ 13.37 $ 16.07 $ 11.43
===================== ===================== ===================== ===================== =====================
$ 18.16 $ 13.86 $ 14.19 $ 17.05 $ 12.13
===================== ===================== ===================== ===================== =====================
$ 45,212,594 $ 110,275,439 $ 79,948,614 $ 54,651,556 $ 12,915,579
===================== ===================== ===================== ===================== =====================
2,851,809 8,687,993 6,336,330 3,649,893 1,299,534
===================== ===================== ===================== ===================== =====================
$ 15.85 $ 12.69 $ 12.62 $ 14.97 $ 9.94
===================== ===================== ===================== ===================== =====================
$ 17,046,399 $ 144,780,083 $ 26,392,123 $ 13,548,604 $ 1,012,510
===================== ===================== ===================== ===================== =====================
1,074,894 11,404,640 2,094,573 904,338 102,060
===================== ===================== ===================== ===================== =====================
$ 15.86 $ 12.69 $ 12.60 $ 14.98 $ 9.92
===================== ===================== ===================== ===================== =====================
$ -- $ -- $ 18,027,004 $ -- $ --
===================== ===================== ===================== ===================== =====================
-- -- 1,312,207 -- --
===================== ===================== ===================== ===================== =====================
$ -- $ -- $ 13.74 $ -- $ --
===================== ===================== ===================== ===================== =====================
44
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2004
CDC Nvest CDC Nvest CGM Advisor
Star Advisers Star Value Targeted Equity
Fund Fund Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ 7,862,633 $ 2,278,279 $ 12,031,859
Interest 107,675 23,364 24,059
Securities lending income 107,625 15,181 416,679
Less net foreign taxes withheld (24,032) (3,582) (643,007)
--------------------- --------------------- ---------------------
8,053,901 2,313,242 11,829,590
--------------------- --------------------- ---------------------
Expenses
Management fees 7,430,406 1,026,814 5,233,103
Service fees - Class A 907,809 264,465 1,712,687
Service and distribution fees -
Class B 2,426,636 285,614 552,535
Service and distribution fees -
Class C 590,286 25,611 28,229
Trustees' fees and expenses 85,475 37,845 124,891
Accounting and administrative 460,770 89,143 486,061
Custodian 161,300 79,372 125,694
Transfer agent fees - Class A, Class
B, Class C 2,770,001 555,495 2,429,666
Transfer agent fees - Class Y 52,556 -- 19,464
Audit and tax services 36,642 29,072 27,010
Legal 49,570 9,595 51,924
Shareholder reporting 180,421 37,622 120,467
Registration 71,642 38,906 71,091
Miscellaneous 61,249 21,610 71,062
--------------------- --------------------- ---------------------
Total expenses 15,284,763 2,501,164 11,053,884
Less reimbursement/waiver -- -- --
--------------------- --------------------- ---------------------
Net expenses 15,284,763 2,501,164 11,053,884
--------------------- --------------------- ---------------------
Net investment income (loss) (7,230,862) (187,922) 775,706
--------------------- --------------------- ---------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSLATIONS
Realized gain (loss) on:
Investments - net 92,347,670 14,932,687 186,920,714
Foreign currency transactions - net (5,706) -- --
Change in unrealized appreciation
(depreciation) of:
Investments - net (4,149,423) (382,788) (91,588,409)
Foreign currency transactions - net 362 -- --
--------------------- --------------------- ---------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 88,192,903 14,549,899 95,332,305
--------------------- --------------------- ---------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 80,962,041 $ 14,361,977 $ 96,108,011
===================== ===================== =====================
Hansberger
International
Fund
---------------------
---------------------
INVESTMENT INCOME
Dividends $ 2,831,079
Interest 32,433
Securities lending income 89,804
Less net foreign taxes withheld (285,227)
---------------------
2,668,089
---------------------
Expenses
Management fees 1,097,894
Service fees - Class A 162,480
Service and distribution fees -
Class B 509,319
Service and distribution fees -
Class C 143,216
Trustees' fees and expenses 25,369
Accounting and administrative 82,666
Custodian 181,399
Transfer agent fees - Class A, Class
B, Class C 632,659
Transfer agent fees - Class Y --
Audit and tax services 36,513
Legal 8,997
Shareholder reporting 49,099
Registration 40,922
Miscellaneous 15,860
---------------------
Total expenses 2,986,393
Less reimbursement/waiver (11,186)
---------------------
Net expenses 2,975,207
---------------------
Net investment income (loss) (307,118)
---------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSLATIONS
Realized gain (loss) on:
Investments - net 26,046,228
Foreign currency transactions - net (410,005)
Change in unrealized appreciation
(depreciation) of:
Investments - net (9,264,434)
Foreign currency transactions - net (1,309)
---------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 16,370,480
---------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 16,063,362
=====================
See accompanying notes to financial statements.
45
Harris Associates Harris Associates Vaughan Nelson Westpeak
Focused Value Large Cap Value Small Cap Value Capital Growth
Fund Fund Fund Fund
---- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
$ 5,129,095 $ 5,449,650 $ 1,151,109 $ 1,221,369
165,627 82,324 36,654 4,832
19,302 31,577 39,989 35,261
-- (27,498) -- --
- --------------------- --------------------- --------------------- ---------------------
5,314,024 5,536,053 1,227,752 1,261,462
- --------------------- --------------------- --------------------- ---------------------
3,426,387 2,354,906 1,019,012 557,319
255,192 541,436 110,829 147,891
1,064,555 834,735 535,320 140,871
1,341,064 218,832 121,533 10,655
31,050 57,746 25,337 24,265
221,730 226,999 71,162 48,358
58,490 66,828 75,723 48,688
1,013,878 1,280,682 577,700 417,004
-- 37,045 -- --
22,906 23,467 35,818 23,258
21,123 22,154 7,379 4,688
90,769 76,210 50,183 36,056
45,551 58,356 52,205 40,912
36,336 36,614 21,661 16,660
- --------------------- --------------------- --------------------- ---------------------
7,629,031 5,836,010 2,703,862 1,516,625
-- (613,592) -- --
- --------------------- --------------------- --------------------- ---------------------
7,629,031 5,222,418 2,703,862 1,516,625
- --------------------- --------------------- --------------------- ---------------------
(2,315,007) 313,635 (1,476,110) (255,163)
- --------------------- --------------------- --------------------- ---------------------
11,304,168 14,432,239 19,642,510 3,895,820
-- -- (273) --
24,626,530 14,335,620 (3,213,186) (286,959)
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
35,930,698 28,767,859 16,429,051 3,608,861
- --------------------- --------------------- --------------------- ---------------------
$ 33,615,691 $ 29,081,494 $ 14,952,941 $ 3,353,698
===================== ===================== ===================== =====================
46
STATEMENTS OF CHANGES IN NET ASSETS
CDC Nvest
Star Advisers Fund
--------------------------------------------
Year Ended December 31,
2004 2003
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (7,230,862) $ (8,401,745)
Net realized gain (loss) on investments and foreign currency transactions 92,341,964 17,243,427
Net change in unrealized appreciation (depreciation) on investments (4,149,061) 182,793,440
--------------------- ---------------------
Increase in net assets resulting from operations 80,962,041 191,635,122
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Long-Term capital gain
Class A -- --
Class B -- --
Class C -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (116,500,139) (99,821,845)
--------------------- ---------------------
Redemption Fees
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
Total increase (decrease) in net assets (35,538,098) 91,813,277
--------------------- ---------------------
NET ASSETS
Beginning of period 735,556,053 643,742,776
--------------------- ---------------------
End of period $ 700,017,955 $ 735,556,053
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (135,059) $ 1,210
===================== =====================
CDC Nvest
Star Value Fund
--------------------------------------------
Year Ended December 31,
2004 2003
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (187,922) $ (418,478)
Net realized gain (loss) on investments and foreign currency transactions 14,932,687 4,594,089
Net change in unrealized appreciation (depreciation) on investments (382,788) 31,376,271
--------------------- ---------------------
Increase in net assets resulting from operations 14,361,977 35,551,882
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Long-Term capital gain
Class A (1,926,692) --
Class B (548,440) --
Class C (60,195) --
--------------------- ---------------------
(2,535,327) --
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (17,975,676) (22,910,231)
--------------------- ---------------------
Redemption Fees
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
Total increase (decrease) in net assets (6,149,026) 12,641,651
--------------------- ---------------------
NET ASSETS
Beginning of period 142,391,295 129,749,644
--------------------- ---------------------
End of period $ 136,242,269 $ 142,391,295
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (143,263) $ (120,827)
===================== =====================
See accompanying notes to financial statements.
47
CGM Advisor Hansberger
Targeted Equity Fund International Fund
- -------------------------------------------- --------------------------------------------
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
$ 775,706 $ (3,122,630) $ (307,118) $ (860,042)
186,920,714 106,028,525 25,636,223 4,108,518
(91,588,409) 147,570,284 (9,265,743) 34,846,636
- --------------------- --------------------- --------------------- ---------------------
96,108,011 250,476,179 16,063,362 38,095,112
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
(127,772,868) (115,291,688) (12,713,186) (19,850,820)
- --------------------- --------------------- --------------------- ---------------------
2,396 -- 170 --
181 -- 118 --
12 -- 38 --
27 -- -- --
- --------------------- --------------------- --------------------- ---------------------
2,616 -- 326 --
- --------------------- --------------------- --------------------- ---------------------
(31,662,241) 135,184,491 3,350,502 18,244,292
- --------------------- --------------------- --------------------- ---------------------
791,515,255 656,330,764 132,615,337 114,371,045
- --------------------- --------------------- --------------------- ---------------------
$ 759,853,014 $ 791,515,255 $ 135,965,839 $ 132,615,337
===================== ===================== ===================== =====================
$ 424,719 $ (350,987) $ (526,717) $ (280,247)
===================== ===================== ===================== =====================
Harris Associates Harris Associates
Focused Value Fund Large Cap Value Fund
- -------------------------------------------- --------------------------------------------
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
$ (2,315,007) $ (2,201,302) $ 313,635 $ (400,858)
11,304,168 (5,444,642) 14,432,239 (6,367,843)
24,626,530 74,168,695 14,335,620 78,036,056
- --------------------- --------------------- --------------------- ---------------------
33,615,691 66,522,751 29,081,494 71,267,355
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
2,079,342 20,155,440 (30,720,612) 57,978,163
- --------------------- --------------------- --------------------- ---------------------
149 -- -- --
149 -- -- --
194 -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
492 -- -- --
- --------------------- --------------------- --------------------- ---------------------
35,695,525 86,678,191 (1,639,118) 129,245,518
- --------------------- --------------------- --------------------- ---------------------
327,401,633 240,723,442 348,441,263 219,195,745
- --------------------- --------------------- --------------------- ---------------------
$ 363,097,158 $ 327,401,633 $ 346,802,145 $ 348,441,263
===================== ===================== ===================== =====================
$ (36,853) $ (19,853) $ 136,701 $ (94,664)
===================== ===================== ===================== =====================
48
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Vaughan Nelson
Small Cap Value Fund
--------------------------------------------
Year Ended December 31,
2004 2003
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (1,476,110) $ (2,106,900)
Net realized gain (loss) on investments and foreign currency transactions 19,642,237 11,598,714
Net change in unrealized appreciation (depreciation) of investments (3,213,186) 22,419,975
--------------------- ---------------------
Increase in net assets resulting from operations 14,952,941 31,911,789
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Long-Term capital gain
Class A -- --
Class B -- --
Class C -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (14,761,490) (14,351,582)
--------------------- ---------------------
Redemption Fees
Class A 188 --
Class B 225 --
Class C 52 --
Class Y -- --
--------------------- ---------------------
465 --
--------------------- ---------------------
Total increase (decrease) in net assets 191,916 17,560,207
--------------------- ---------------------
NET ASSETS
Beginning of period 113,145,939 95,585,732
--------------------- ---------------------
End of period $ 113,337,855 $ 113,145,939
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 51,736 $ (40,406)
===================== =====================
Westpeak
Capital Growth Fund
--------------------------------------------
Year Ended December 31,
2004 2003
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (255,163) $ (780,856)
Net realized gain (loss) on investments and foreign currency transactions 3,895,820 (1,825,695)
Net change in unrealized appreciation (depreciation) of investments (286,959) 20,729,574
--------------------- ---------------------
Increase in net assets resulting from operations 3,353,698 18,123,023
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Long-Term capital gain
Class A -- --
Class B -- --
Class C -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (13,044,934) (12,927,717)
--------------------- ---------------------
Redemption Fees
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
Total increase (decrease) in net assets (9,691,236) 5,195,306
--------------------- ---------------------
NET ASSETS
Beginning of period 81,038,989 75,843,683
--------------------- ---------------------
End of period $ 71,347,753 $ 81,038,989
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (74,878) $ (60,326)
===================== =====================
See accompanying notes to financial statements.
49
This Page Intentionally Left Blank
50
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
------------------------------------------ ------------------------------------------
Net asset
value, Net Net realized Dividends Distributions
beginning investment and unrealized Total from from from net
of income gain (loss) on investment net investment realized Total
period (loss) investments operations income capital gains distributions
---------- ---------- -------------- ---------- -------------- ------------- -------------
STAR ADVISERS FUND
Class A
12/31/2004 $ 16.61 $ (0.12)(b) $ 2.26 $ 2.14 $ -- $ -- $ --
12/31/2003 12.43 (0.13)(b) 4.31 4.18 -- -- --
12/31/2002 15.90 (0.11)(b) (3.36) (3.47) -- -- --
12/31/2001 17.55 (0.05)(b) (1.59) (1.64) -- (0.01) (0.01)
12/31/2000 24.50 (0.06)(b) (3.87) (3.93) -- (3.02) (3.02)
Class B
12/31/2004 15.06 (0.23)(b) 2.04 1.81 -- -- --
12/31/2003 11.35 (0.22)(b) 3.93 3.71 -- -- --
12/31/2002 14.64 (0.20)(b) (3.09) (3.29) -- -- --
12/31/2001 16.29 (0.16)(b) (1.48) (1.64) -- (0.01) (0.01)
12/31/2000 23.14 (0.22)(b) (3.61) (3.83) -- (3.02) (3.02)
Class C
12/31/2004 15.08 (0.23)(b) 2.04 1.81 -- -- --
12/31/2003 11.37 (0.22)(b) 3.93 3.71 -- -- --
12/31/2002 14.66 (0.20)(b) (3.09) (3.29) -- -- --
12/31/2001 16.30 (0.16)(b) (1.47) (1.63) -- (0.01) (0.01)
12/31/2000 23.16 (0.22)(b) (3.62) (3.84) -- (3.02) (3.02)
Class Y
12/31/2004 17.46 (0.05)(b) 2.41 2.36 -- -- --
12/31/2003 12.98 (0.04)(b) 4.52 4.48 -- -- --
12/31/2002 16.50 (0.02)(b) (3.50) (3.52) -- -- --
12/31/2001 18.13 0.04(b) (1.66) (1.62) -- (0.01) (0.01)
12/31/2000 25.08 0.03(b) (3.96) (3.93) -- (3.02) (3.02)
STAR VALUE FUND
Class A
12/31/2004 $ 8.16 $ 0.00(b)(c) $ 0.93 $ 0.93 $ -- $ (0.17) $ (0.17)
12/31/2003 6.20 (0.01)(b) 1.97 1.96 -- -- --
12/31/2002 7.70 (0.01)(b) (1.49) (1.50) -- -- --
12/31/2001 7.60 (0.02)(b) 0.12 0.10 -- -- --
12/31/2000 7.45 0.01 0.14 0.15 0.00(c) -- --
Class B
12/31/2004 7.57 (0.06)(b) 0.87 0.81 -- (0.17) (0.17)
12/31/2003 5.80 (0.06)(b) 1.83 1.77 -- -- --
12/31/2002 7.26 (0.06)(b) (1.40) (1.46) -- -- --
12/31/2001 7.22 (0.07)(b) 0.11 0.04 -- -- --
12/31/2000 7.13 (0.04) 0.13 0.09 0.00(c) -- --
Class C
12/31/2004 7.57 (0.05)(b) 0.86 0.81 -- (0.17) (0.17)
12/31/2003 5.80 (0.06)(b) 1.83 1.77 -- -- --
12/31/2002 7.26 (0.06)(b) (1.40) (1.46) -- -- --
12/31/2001 7.22 (0.07)(b) 0.11 0.04 -- -- --
12/31/2000 7.14 (0.05) 0.13 0.08 0.00(c) -- --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004)
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)Per share net investment income (loss) has been calculated using the average
shares outstanding during the period.
(c)Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
51
Ratios to average net assets:
----------------------------
Net asset Net assets,
value, Total end of Net investment Portfolio
end of return the period Expenses income turnover
the period (%) (a) (000's) (%) (loss) (%) rate (%)
---------- --------- ----------- --------- -------------- ---------
$ 18.75 12.9 $ 392,726 1.87 (0.71) 104
16.61 33.6 354,755 1.99 (0.94) 102
12.43 (21.8) 269,180 1.89 (0.75) 95
15.90 (9.4) 389,405 1.83 (0.31) 183
17.55 (17.0) 525,479 1.62 (0.25) 524
16.87 12.0 223,349 2.62 (1.50) 104
15.06 32.7 272,533 2.74 (1.69) 102
11.35 (22.5) 282,361 2.64 (1.50) 95
14.64 (10.1) 491,614 2.58 (1.06) 183
16.29 (17.6) 649,107 2.37 (1.00) 524
16.89 12.0 58,883 2.62 (1.48) 104
15.08 32.6 60,783 2.74 (1.69) 102
11.37 (22.4) 54,291 2.64 (1.50) 95
14.66 (10.0) 87,245 2.58 (1.06) 183
16.30 (17.6) 118,921 2.37 (1.00) 524
19.82 13.5 25,060 1.33 (0.27) 104
17.46 34.5 47,485 1.34 (0.30) 102
12.98 (21.3) 37,911 1.29 (0.15) 95
16.50 (9.0) 55,970 1.29 0.23 183
18.13 (16.6) 73,310 1.25 0.12 524
$ 8.92 11.4 $ 105,359 1.66 0.03 56
8.16 31.6 110,228 1.81 (0.15) 75
6.20 (19.5) 99,894 1.68 (0.21) 67
7.70 1.3 137,855 1.64 (0.28) 77
7.60 2.0 154,179 1.62 0.10 129
8.21 10.7 27,804 2.41 (0.72) 56
7.57 30.5 30,029 2.56 (0.90) 75
5.80 (20.1) 27,808 2.43 (0.96) 67
7.26 0.6 44,325 2.39 (1.03) 77
7.22 1.3 45,364 2.37 (0.65) 129
8.21 10.7 3,079 2.41 (0.70) 56
7.57 30.5 2,134 2.56 (0.90) 75
5.80 (20.1) 2,047 2.43 (0.96) 67
7.26 0.6 2,833 2.39 (1.03) 77
7.22 1.1 2,496 2.40 (0.68) 129
52
FINANCIAL HIGHLIGHTS (continued)
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
period (loss) (b) investments operations
---------- ---------- -------------- ----------
CGM ADVISOR TARGETED EQUITY FUND
Class A
12/31/2004 $ 7.94 $ 0.01 $ 1.10 $ 1.11
12/31/2003 5.56 (0.03) 2.41 2.38
12/31/2002 7.81 (0.06) (2.19) (2.25)
12/31/2001 9.36 (0.03) (1.49) (1.52)
12/31/2000 11.00 0.09 (0.60) (0.51)
Class B
12/31/2004 7.47 (0.04) 1.02 0.98
12/31/2003 5.28 (0.07) 2.26 2.19
12/31/2002 7.47 (0.11) (2.08) (2.19)
12/31/2001 9.02 (0.09) (1.43) (1.52)
12/31/2000 10.67 0.01 (0.58) (0.57)
Class C
12/31/2004 7.47 (0.04) 1.02 0.98
12/31/2003 5.27 (0.07) 2.27 2.20
12/31/2002 7.47 (0.11) (2.09) (2.20)
12/31/2001 9.02 (0.09) (1.43) (1.52)
12/31/2000 10.67 0.01 (0.58) (0.57)
Class Y
12/31/2004 8.07 0.04 1.12 1.16
12/31/2003 5.63 0.01 2.43 2.44
12/31/2002 7.85 (0.02) (2.20) (2.22)
12/31/2001 9.37 0.01 (1.50) (1.49)
12/31/2000 11.01 0.12 (0.60) (0.48)
HANSBERGER INTERNATIONAL FUND
Class A
12/31/2004 $ 15.07 $ 0.02 $ 2.03 $ 2.05
12/31/2003 10.84 (0.04) 4.27 4.23
12/31/2002 13.02 (0.05) (2.08) (2.13)
12/31/2001 14.42 0.13 (1.42) (1.29)
12/31/2000 19.90 (0.02) (2.43) (2.45)
Class B
12/31/2004 14.06 (0.09) 1.88 1.79
12/31/2003 10.19 (0.12) 3.99 3.87
12/31/2002 12.32 (0.14) (1.94) (2.08)
12/31/2001 13.74 0.03 (1.36) (1.33)
12/31/2000 19.26 (0.16) (2.33) (2.49)
Less distributions:
-----------------------------------------
Dividends Distributions
from from net
net investment realized Total Redemption
income capital gains distributions fee
-------------- ------------- ------------- ----------
CGM ADVISOR TARGETED EQUITY FUND
Class A
12/31/2004 $ -- $ -- $ -- $ 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
12/31/2000 (0.06) (1.07) (1.13) --
Class B
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
12/31/2000 (0.01) (1.07) (1.08) --
Class C
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
12/31/2000 (0.01) (1.07) (1.08) --
Class Y
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
12/31/2000 (0.09) (1.07) (1.16) --
HANSBERGER INTERNATIONAL FUND
Class A
12/31/2004 $ -- $ -- $ -- $ 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 (0.05) -- (0.05) --
12/31/2001 (0.03) (0.08) (0.11) --
12/31/2000 -- (3.03) (3.03) --
Class B
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 (0.05) -- (0.05) --
12/31/2001 (0.01) (0.08) (0.09) --
12/31/2000 -- (3.03) (3.03) --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004)
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)Per share net investment income (loss) has been calculated using the average
shares outstanding during the period.
(c)Had certain expenses not been reduced during the period total return would
have been lower.
(d)The investment adviser waived a portion of its advisory fee during the
period. Without this waiver, expenses would have been higher.
(e)Amount rounds to less than a $0.01 per share.
(f)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses. Prior to 2004, expenses in this table
were presented net of such waivers and/or reimbursements.
See accompanying notes to financial statements.
53
Ratios to average net assets:
--------------------------------------
Net asset Net assets, Expenses after
value, Total end of reimbursement/ Net investment Portfolio
end of return the period Expenses waiver income turnover
the period (%) (a) (000's) (%) (f) (%) (loss) (%) rate (%)
- ---------- --------- ----------- --------- -------------- -------------- ---------
$ 9.05 14.0 $ 689,967 1.42 N/A 0.16 265
7.94 42.8 724,214 1.57 N/A (0.40) 261
5.56 (28.8) 602,989 1.47 N/A (0.86) 223
7.81 (16.2) 1,012,161 1.38 N/A (0.39) 243
9.36 (4.6) 1,413,685 1.18 N/A 0.83 266
8.45 13.1 57,527 2.17 N/A (0.58) 265
7.47 41.5 56,880 2.32 N/A (1.14) 261
5.28 (29.3) 45,633 2.23 N/A (1.62) 223
7.47 (16.8) 78,744 2.13 N/A (1.14) 243
9.02 (5.2) 107,594 1.93 N/A 0.08 266
8.45 13.1 3,214 2.17 N/A (0.58) 265
7.47 41.8 2,647 2.32 N/A (1.14) 261
5.27 (29.5) 2,187 2.23 N/A (1.62) 223
7.47 (16.8) 4,162 2.13 N/A (1.14) 243
9.02 (5.2) 5,830 1.93 N/A 0.08 266
9.23 14.4 9,145 1.08 N/A 0.51 265
8.07 43.3 7,773 1.03 N/A 0.16 261
5.63 (28.3) 5,522 0.92 N/A (0.31) 223
7.85 (15.9) 8,785 0.87 N/A 0.13 243
9.37 (4.2) 12,260 0.85 N/A 1.16 266
$ 17.12 13.6(c) $ 73,707 1.92 1.91(d) 0.14 81
15.07 39.0(c) 59,762 2.32 2.30(d) (0.34) 92
10.84 (16.4) 50,053 2.19 N/A (0.45) 91
13.02 (9.0) 71,536 2.12 N/A 0.98 110
14.42 (12.2) 102,507 2.01 N/A (0.13) 175
15.85 12.7(c) 45,213 2.67 2.66(d) (0.60) 81
14.06 38.0(c) 60,296 3.07 3.05(d) (1.09) 92
10.19 (17.0) 53,306 2.94 N/A (1.20) 91
12.32 (9.7) 82,861 2.87 N/A 0.23 110
13.74 (12.8) 114,450 2.76 N/A (0.88) 175
54
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
---------------------------------------- -----------------------------------------------------
Net asset
value, Net Net realized Dividends Distributions
beginning investment and unrealized Total from from from net
of income gain (loss) on investment net investment realized Total Redemption
period (loss) (b) investments operations income capital gains distributions fee
---------- ---------- -------------- ---------- -------------- ------------- ------------- ----------
HANSBERGER INTERNATIONAL FUND (continued)
Class C
12/31/2004 $ 14.06 $ (0.09) $ 1.89 $ 1.80 $ -- $ -- $ -- $ 0.00(h)
12/31/2003 10.19 (0.12) 3.99 3.87 -- -- -- --
12/31/2002 12.33 (0.14) (1.95) (2.09) (0.05) -- (0.05) --
12/31/2001 13.75 0.03 (1.36) (1.33) (0.01) (0.08) (0.09) --
12/31/2000 19.27 (0.16) (2.33) (2.49) -- (3.03) (3.03) --
HARRIS ASSOCIATES FOCUSED VALUE FUND
Class A
12/31/2004 $ 11.79 $ (0.02) $ 1.29 $ 1.27 $ -- $ -- $ -- $ 0.00(h)
12/31/2003 9.24 (0.03) 2.58 2.55 -- -- -- --
12/31/2002 10.96 (0.03) (1.69) (1.72) -- -- -- --
12/31/2001(f) 10.00 (0.01) 0.97 0.96 -- -- -- --
Class B
12/31/2004 11.55 (0.11) 1.25 1.14 -- -- -- 0.00(h)
12/31/2003 9.12 (0.10) 2.53 2.43 -- -- -- --
12/31/2002 10.90 (0.11) (1.67) (1.78) -- -- -- --
12/31/2001(f) 10.00 (0.07) 0.97 0.90 -- -- -- --
Class C
12/31/2004 11.55 (0.11) 1.25 1.14 -- -- -- 0.00(h)
12/31/2003 9.12 (0.10) 2.53 2.43 -- -- -- --
12/31/2002 10.90 (0.11) (1.67) (1.78) -- -- -- --
12/31/2001(f) 10.00 (0.07) 0.97 0.90 -- -- -- --
HARRIS ASSOCIATES LARGE CAP VALUE FUND
Class A
12/31/2004 $ 12.25 $ 0.04 $ 1.08 $ 1.12 $ -- $ -- $ -- $ --
12/31/2003 9.42 0.01 2.82 2.83 -- -- -- --
12/31/2002 11.78 0.01 (2.37) (2.36) -- -- -- --
12/31/2001 13.79 (0.01) (2.00) (2.01) -- -- -- --
12/31/2000 15.33 0.01 (1.09) (1.08) -- (0.46) (0.46) --
Class B
12/31/2004 11.64 (0.05) 1.03 0.98 -- -- -- --
12/31/2003 9.02 (0.07) 2.69 2.62 -- -- -- --
12/31/2002 11.37 (0.07) (2.28) (2.35) -- -- -- --
12/31/2001 13.40 (0.10) (1.93) (2.03) -- -- -- --
12/31/2000 15.03 (0.10) (1.07) (1.17) -- (0.46) (0.46) --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004)
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)Per share net investment income (loss) has been calculated using the average
shares outstanding during the period.
(c)The investment adviser waived a portion of its advisory fee and/or
reimbursed a portion of the Fund's expenses during the period. Without this
waiver/reimbursement, expense ratios would have been higher.
(d)Had certain expenses not been reduced during the period, total return would
have been lower.
(e)Portfolio turnover excludes the impact of assets as a result of a merger
with another Fund.
(f)For the period March 15, 2001, (inception) through December 31, 2001.
(g)Computed on an annualized basis for periods less than one year.
(h)Amount rounds to less than $0.01 per share.
(i)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses. Prior to 2004, expenses in this table
were presented net of such waivers and/or reimbursements.
See accompanying notes to financial statements.
55
Ratios to average net assets:
---------------------------------------
Net asset Net assets, Expenses after
value, Total end of reimbursement/ Net investment Portfolio
end of return the period Expenses waiver income turnover
the period (%) (a) (000's) (%) (g)(i) (%) (g) (loss) (%) (g) rate (%)
- ---------- --------- ----------- ---------- -------------- -------------- ---------
$ 15.86 12.8(d) $ 17,046 2.67 2.66(c) (0.63) 81
14.06 38.0(d) 12,557 3.07 3.05(c) (1.09) 92
10.19 (17.0) 11,013 2.94 N/A (1.20) 91
12.33 (9.7) 16,493 2.87 N/A 0.23 110
13.75 (12.8) 23,949 2.76 N/A (0.88) 175
$ 13.06 10.8 $ 108,042 1.70 N/A (0.15) 26
11.79 27.6(d) 95,957 1.84 1.70(c) (0.28) 30
9.24 (15.7)(d) 68,660 1.79 1.70(c) (0.35) 12
10.96 9.6(d) 45,987 2.08 1.70(c) (0.08) 10
12.69 9.9 110,275 2.45 N/A (0.90) 26
11.55 26.6(d) 107,017 2.59 2.45(c) (1.03) 30
9.12 (16.3)(d) 85,794 2.54 2.45(c) (1.10) 12
10.90 9.0(d) 62,671 2.83 2.45(c) (0.83) 10
12.69 9.9 144,780 2.45 N/A (0.90) 26
11.55 26.6(d) 124,427 2.59 2.45(c) (1.03) 30
9.12 (16.3)(d) 86,269 2.54 2.45(c) (1.10) 12
10.90 9.0(d) 34,406 2.83 2.45(c) (0.86) 10
$ 13.37 9.1(d) $ 222,434 1.49 1.30(c) 0.30 27
12.25 30.0(d) 215,259 1.62 1.45(c) 0.07 30(e)
9.42 (20.0) 130,751 1.56 N/A 0.07 195
11.78 (14.6) 211,138 1.46 N/A (0.05) 154
13.79 (7.3) 290,714 1.31 N/A 0.04 139
12.62 8.4(d) 79,949 2.24 2.05(c) (0.46) 27
11.64 29.1(d) 91,085 2.37 2.20(c) (0.69) 30(e)
9.02 (20.7) 71,436 2.31 N/A (0.68) 195
11.37 (15.1) 120,361 2.21 N/A (0.80) 154
13.40 (8.1) 165,767 2.06 N/A (0.71) 139
56
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations:
-----------------------------------------
Net asset
value, Net realized
beginning Net and unrealized Total from
of investment gain (loss) on investment
period income (loss) investments operations
---------- ------------- -------------- ----------
HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued)
Class C
12/31/2004 $ 11.63 $ (0.05)(b) $ 1.02 $ 0.97
12/31/2003 9.01 (0.07)(b) 2.69 2.62
12/31/2002 11.36 (0.07)(b) (2.28) (2.35)
12/31/2001 13.38 (0.10)(b) (1.92) (2.02)
12/31/2000 15.01 (0.10)(b) (1.07) (1.17)
Class Y
12/31/2004 12.54 0.07(b) 1.13 1.20
12/31/2003 9.59 0.06(b) 2.89 2.95
12/31/2002 11.93 0.07(b) (2.41) (2.34)
12/31/2001 13.87 0.06(b) (2.00) (1.94)
12/31/2000 15.36 0.07(b) (1.10) (1.03)
VAUGHAN NELSON SMALL CAP VALUE FUND
Class A
12/31/2004 $ 13.94 $ (0.13)(b) $ 2.26 $ 2.13
12/31/2003 10.05 (0.19)(b) 4.08 3.89
12/31/2002 14.52 (0.21)(b) (4.26) (4.47)
12/31/2001 16.51 (0.21)(b) (1.78) (1.99)
12/31/2000 23.42 (0.28) (2.30) (2.58)
Class B
12/31/2004 13.08 (0.22)(b) 2.11 1.89
12/31/2003 9.51 (0.26)(b) 3.83 3.57
12/31/2002 13.84 (0.28)(b) (4.05) (4.33)
12/31/2001 15.86 (0.30)(b) (1.72) (2.02)
12/31/2000 22.85 (0.44) (2.22) (2.66)
Class C
12/31/2004 13.09 (0.22)(b) 2.11 1.89
12/31/2003 9.51 (0.26)(b) 3.84 3.58
12/31/2002 13.84 (0.28)(b) (4.05) (4.33)
12/31/2001 15.86 (0.30)(b) (1.72) (2.02)
12/31/2000 22.85 (0.44) (2.22) (2.66)
Less distributions:
--------------------------------------
Distributions
from net
realized Total Redemption
capital gains distributions fee
------------- ------------- ----------
HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued)
Class C
12/31/2004 $ -- $ -- $ --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- -- --
12/31/2000 (0.46) (0.46) --
Class Y
12/31/2004 -- -- --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- -- --
12/31/2000 (0.46) (0.46) --
VAUGHAN NELSON SMALL CAP VALUE FUND
Class A
12/31/2004 $ -- $ -- $ 0.00(f)
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- -- --
12/31/2000 (4.33) (4.33) --
Class B
12/31/2004 -- -- 0.00(f)
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- -- --
12/31/2000 (4.33) (4.33) --
Class C
12/31/2004 -- -- 0.00(f)
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- -- --
12/31/2000 (4.33) (4.33) --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004)
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)Per share net investment income (loss) has been calculated using the average
shares outstanding during the period.
(c)The investment adviser waived a portion of its advisory fee and/or
reimbursed a portion of the Fund's expenses during the period. Without this
waiver/reimbursement, expense ratios would have been higher.
(d)Had certain expenses not been reduced during the period, total return would
have been lower.
(e)Portfolio turnover excludes the impact of assets as a result of a merger
with another Fund.
(f)Amount rounds to less than $0.01 per share.
(g)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses. Prior to 2004, expenses in this table
were presented net of such waivers and/or reimbursements.
See accompanying notes to financial statements.
57
Ratios to average net assets:
--------------------------------------
Net asset Net assets, Expenses after
value, Total end of reimbursement/ Net investment Portfolio
end of return the period Expenses waiver income turnover
the period (%) (a) (000's) (%) (g) (%) (loss) (%) rate (%)
- ---------- --------- ----------- --------- -------------- -------------- ---------
$ 12.60 8.3(d) $ 26,392 2.24 2.05(c) (0.42) 27
11.63 29.1(d) 15,553 2.37 2.20(c) (0.69) 30(e)
9.01 (20.7) 6,440 2.31 N/A (0.68) 195
11.36 (15.1) 10,553 2.21 N/A (0.80) 154
13.38 (8.1) 19,373 2.06 N/A (0.71) 139
13.74 9.6 18,027 0.99 N/A 0.58 27
12.54 30.8 26,545 1.01 N/A 0.51 30(e)
9.59 (19.6) 10,569 0.96 N/A 0.66 195
11.93 (14.0) 11,918 0.91 N/A 0.52 154
13.87 (7.0) 10,131 0.87 N/A 0.48 139
$ 16.07 15.3 $ 45,138 2.01 N/A (0.89) 172
13.94 38.7 45,442 2.33 N/A (1.69) 156
10.05 (30.8) 38,441 2.13 N/A (1.72) 160
14.52 (12.1) 69,873 2.08 N/A (1.43) 174
16.51 (12.2) 89,714 1.88 N/A (1.19) 216
14.97 14.5 54,652 2.76 N/A (1.65) 172
13.08 37.5 55,662 3.08 N/A (2.44) 156
9.51 (31.3) 46,215 2.88 N/A (2.47) 160
13.84 (12.7) 82,060 2.83 N/A (2.18) 174
15.86 (12.9) 107,083 2.63 N/A (1.94) 216
14.98 14.4 13,549 2.76 N/A (1.63) 172
13.09 37.6 12,042 3.08 N/A (2.44) 156
9.51 (31.3) 10,930 2.88 N/A (2.47) 160
13.84 (12.7) 22,047 2.83 N/A (2.18) 174
15.86 (12.9) 28,090 2.63 N/A (1.94) 216
58
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
---------------------------------------- --------------------------
Net asset
value, Net Net realized Distributions
beginning investment and unrealized Total from from net
of income gain (loss) on investment realized Total
period loss (b) investments operations capital gains distributions
---------- ---------- -------------- ---------- ------------- -------------
WESTPEAK CAPITAL GROWTH FUND
Class A
12/31/2004 $ 10.87 $ (0.02)(c) $ 0.58 $ 0.56 $ -- $ --
12/31/2003 8.58 (0.08) 2.37 2.29 -- --
12/31/2002 11.93 (0.09) (3.26) (3.35) -- --
12/31/2001 15.04 (0.13) (2.95) (3.08) (0.03) (0.03)
12/31/2000 22.86 (0.18) (4.14) (4.32) (3.50) (3.50)
Class B
12/31/2004 9.52 (0.09)(c) 0.51 0.42 -- --
12/31/2003 7.56 (0.13) 2.09 1.96 -- --
12/31/2002 10.61 (0.15) (2.90) (3.05) -- --
12/31/2001 13.47 (0.20) (2.63) (2.83) (0.03) (0.03)
12/31/2000 21.06 (0.32) (3.77) (4.09) (3.50) (3.50)
Class C
12/31/2004 9.50 (0.09)(c) 0.51 0.42 -- --
12/31/2003 7.56 (0.13) 2.07 1.94 -- --
12/31/2002 10.60 (0.14) (2.90) (3.04) -- --
12/31/2001 13.47 (0.20) (2.64) (2.84) (0.03) (0.03)
12/31/2000 21.06 (0.32) (3.77) (4.09) (3.50) (3.50)
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004)
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)Per share net investment income (loss) has been calculated using the average
shares outstanding during the period.
(c)Includes special one-time distribution from Microsoft Corp. Without this
distribution, net investment loss per share would have been $(0.08), $(0.14)
and $(0.14) for Class A, Class B and Class C shares, respectively, and the
ratio of net investment loss to average net assets would have been (0.76)%,
(1.52)% and (1.51)% for Class A, Class B and Class C shares, respectively.
See accompanying notes to financial statements.
59
Ratios to average net assets:
------------------------
Net asset Net assets,
value, Total end of Net investment Portfolio
end of return the period Expenses income turnover
the period (%) (a) (000's) (%) (loss) (%) rate (%)
---------- --------- ----------- --------- -------------- ---------
$ 11.43 5.2 $ 57,420 1.89 (0.18)(c) 121
10.87 26.7 63,380 1.93 (0.85) 107
8.58 (28.1) 58,729 1.75 (0.84) 103
11.93 (20.5) 98,412 1.62 (0.99) 90
15.04 (19.5) 143,425 1.40 (0.80) 118
9.94 4.4 12,916 2.64 (0.97)(c) 121
9.52 25.9 16,485 2.68 (1.60) 107
7.56 (28.8) 16,267 2.50 (1.59) 103
10.61 (21.0) 35,409 2.37 (1.74) 90
13.47 (20.1) 56,884 2.15 (1.55) 118
9.92 4.4 1,013 2.64 (0.94)(c) 121
9.50 25.7 1,174 2.68 (1.60) 107
7.56 (28.7) 847 2.50 (1.59) 103
10.60 (21.1) 1,745 2.37 (1.74) 90
13.47 (20.1) 2,487 2.15 (1.55) 118
60
NOTES TO FINANCIAL STATEMENTS
61
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2004
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 ("1940 Act"), as an open-end management
investment company. Each Declaration of Trust permits the Board of Trustees to
authorize the issuance of 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 Funds are included in this
report:
CDC Nvest Funds Trust I:
CDC Nvest Star Advisers Fund (the "Star Advisers Fund")
CDC Nvest Star Value Fund (the "Star Value Fund")
CGM Advisor Targeted Equity Fund (the "Targeted Equity Fund")
Hansberger International Fund (the "International Fund"), formerly CDC Nvest
Star International Fund
Vaughan Nelson Small Cap Value Fund (the "Small Cap Value Fund"), formerly CDC
Nvest Star Small Cap Fund
Westpeak Capital Growth Fund (the "Capital Growth Fund")
CDC Nvest Funds Trust II:
Harris Associates Large Cap Value Fund (the "Large Cap Value Fund"), formerly
Harris Associates Growth and Income Fund
CDC Nvest Funds Trust III:
Harris Associates Focused Value Fund (the "Focused Value Fund")
Each Fund offers Class A, Class B, and Class C shares. Star Advisers Fund,
Targeted Equity Fund and Large Cap Value 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 higher ongoing Rule 12b-1
fees 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 do not pay a front end sales charge, do not convert to any other
class of shares and pay higher ongoing Rule 12b-1 fees, than Class A shares and
may be subject to a CDSC of 1.00% if those shares are redeemed within one year.
Prior to February 1, 2004, a 1.00% front end sales charge was imposed on Class
C shares. Class Y shares do not pay a front end sales charge, a CDSC or Rule
12b-1 fees. They are intended for institutional investors with a minimum
initial investment of $1,000,000, though some categories of investors are
excepted from the minimum investment amount.
Most expenses of the Trusts can be directly attributed to a Fund. Expenses
which cannot be directly attributed are generally apportioned based on the
relative net assets of each of the Funds in the Trusts. 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, if no sale was
reported and in the case of over-the-counter securities not so listed, the last
reported bid price. 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 Funds' investment adviser and subadviser, pursuant to the
procedures approved by the Board of Trustees.
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 thereafter 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. Investment income and realized and unrealized gains and
losses are allocated on a pro rata basis to each Class based on the relative
net assets of each Class to the total net assets of the Fund.
62
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
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 Funds' 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 period, resulting from changes
in exchange rates.
d. Forward Foreign Currency Contracts. The Star Advisers Fund, the Star Value
Fund and the International Fund may use foreign currency contracts to
facilitate transactions in foreign securities and to manage their currency
exposure. Contracts to buy generally are used to acquire exposure to foreign
currencies, while contracts to sell are used to hedge the Funds' investments
against currency fluctuation. Also, a contract to buy or sell can offset a
previous contract. These contracts involve market risk in excess of the
unrealized gain or loss reflected in the Funds' Statement of Assets and
Liabilities. The U.S. dollar value of the currencies the Fund has committed to
buy or sell, if any, is shown in the portfolio composition under the caption
"Forward Currency Contracts Outstanding." These amounts represent the aggregate
exposure to each currency the Fund has acquired or hedged through currency
contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
e. 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.
f. 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.
g. Repurchase Agreements. Each Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is each
Funds' policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. Each Funds' 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 Funds' ability to dispose of the underlying securities.
3. Purchases and Sales of Securities. For the year ended December 31, 2004,
purchases and sales of securities (excluding short-term investments) were as
follows:
Fund Purchases Sales
---- --------- -----
Star Advisers Fund $ 716,519,780 $ 832,001,558
Star Value Fund 74,743,252 94,746,061
Targeted Equity Fund 1,990,392,107 2,111,742,035
International Fund 104,342,844 119,367,331
Focused Value Fund 82,778,902 89,750,124
Large Cap Value Fund 90,210,688 116,996,430
Small Cap Value Fund 176,285,987 190,840,484
Capital Growth Fund 89,493,359 103,242,716
63
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. IXIS Asset Management Advisors, L.P. ("IXIS Advisors"),
formerly CDC IXIS Asset Management Advisers, L.P., 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, 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
- ---- ------------ ------------ ------------ ---------- ----------
Star Value Fund 0.750% 0.700% 0.650% 0.650% 0.650%
Targeted Equity Fund 0.750% 0.700% 0.650% 0.650% 0.600%
International Fund 0.800% 0.750% 0.750% 0.750% 0.750%
Focused Value Fund 1.000% 1.000% 1.000% 0.950% 0.950%
Large Cap Value Fund 0.700% 0.650% 0.600% 0.600% 0.600%
Small Cap Value Fund 0.900% 0.900% 0.900% 0.900% 0.900%
Capital Growth Fund 0.750% 0.700% 0.650% 0.650% 0.650%
Star Advisers Fund pays management fees at the annual rate of 1.05% of the
first $750 million of the Fund's average daily net assets and 0.95% of such
assets in excess of $750 million. Prior to May 1, 2004, the Fund paid
management fees at the annual rate of 1.05% of the first $1 billion of the
Fund's average daily net assets, 1.00% of the next $1 billion and 0.95% of such
assets in excess of $2 billion.
Prior to March 1, 2004, the International Fund and Small Cap Value Fund each
paid management fees at the annual rate of 1.05% of each Fund's average daily
net assets. The adviser also contractually agreed to waive a portion of its
advisory fee for International Fund so that the effective management fee was
1.00%.
For the year ended December 31, 2004, the management fees and waivers for each
Fund were as follows:
Percentage of
Average
Gross Waiver of Net Daily Net Assets
Management Management Management ----------------
Fund Fee Fee Fee Gross Net
---- ---------- ---------- ---------- ------ ------
Star Advisers Fund $7,430,406 $ -- $7,430,406 1.050% 1.050%
Star Value Fund 1,026,814 -- 1,026,814 0.750% 0.750%
Targeted Equity Fund 5,233,103 -- 5,233,103 0.700% 0.700%
International Fund 1,097,894 11,186 1,086,708 0.840% 0.830%
Focused Value Fund 3,426,387 -- 3,426,387 1.000% 1.000%
Large Cap Value Fund 2,354,906 -- 2,354,906 0.680% 0.680%
Small Cap Value Fund 1,019,012 -- 1,019,012 0.930% 0.930%
Capital Growth Fund 557,319 -- 557,319 0.750% 0.750%
IXIS Advisors has entered into subadvisory agreements for each Fund listed
below. Payments to IXIS Advisors are reduced in the amount of payments to the
subadvisers.
Star Advisers Fund Harris Associates L.P. ("Harris")
Loomis, Sayles & Company, L.P. ("Loomis Sayles")
Mercury Advisors
Star Value Fund Harris
Loomis Sayles
Vaughan Nelson Investment Management, L.P.
("Vaughan Nelson")
Westpeak Global Advisors, L.P. ("Westpeak")
International Fund Hansberger Global Investors, Inc. ("Hansberger")
Focused Value Fund Harris
Large Cap Value Fund Harris
Small Cap Value Fund Vaughan Nelson
Capital Growth Fund Westpeak
64
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
IXIS Advisors, CGM, Harris, Loomis Sayles, Vaughan Nelson and Westpeak are
subsidiaries of IXIS Asset Management North America, L.P. ("IXIS North
America"). Hansberger is an affiliated money manager of IXIS North America.
Certain officers and directors of IXIS Advisors and its affiliates are also
officers or Trustees of the Funds.
Broker commissions paid to affiliated broker/dealers by the Funds were as
follows:
Fund Commission
---- ----------
Star Advisers Fund $188,230
Star Value Fund 10,080
Focused Value Fund 14,434
Large Cap Value Fund 14,878
Small Cap Value Fund 4,371
b. Accounting and Administrative Expense. During the period, IXIS Asset
Management Services Company ("IXIS Services"), formerly CDC IXIS Asset
Management Services, Inc., a wholly-owned subsidiary of IXIS North America,
performed certain accounting and administrative services for the Funds and
subcontracted with Investors Bank & Trust Company ("IBT") to serve as
subadministrator. Pursuant to an agreement among CDC Nvest Funds Trust I, CDC
Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC Nvest Cash Management
Trust and CDC Nvest Companies Trust I ("CDC Nvest Funds Trusts") and Loomis
Sayles Funds I and Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and
IXIS Services, each Fund paid IXIS Services 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 Funds' pro rata portion, allocated based on the combined
assets of the CDC Nvest Funds Trusts and Loomis Sayles Funds
Trusts, of the annual aggregate minimum fee of $5 million.
For the year ended December 31, 2004, amounts paid to IXIS Services for
accounting and administrative expense were as follows:
Accounting
And
Fund Administrative
---- --------------
Star Advisers Fund $460,770
Star Value Fund 89,143
Targeted Equity Fund 486,061
International Fund 82,666
Focused Value Fund 221,730
Large Cap Value Fund 226,999
Small Cap Value Fund 71,162
Capital Growth Fund 48,358
Effective January 1, 2005, IXIS Advisors assumed responsibility for providing
accounting and administrative services to the Funds.
c. Transfer Agent Fees. IXIS Services 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. During the period, Classes A, B and C
paid service fees monthly representing the higher amount based on the following
calculations:
(1)Each Fund's pro rata portion of 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 Class A, Class B and Class C
accounts in Load Equity Funds. Load Equity Funds consist of all
equity funds within the CDC Nvest Funds Trusts, Loomis Sayles
Growth Fund, CDC IXIS International Equity Fund, which was
renamed the Hansberger Foreign Growth Fund on February 1, 2005,
and Loomis Sayles Research Fund.
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 allocated based on the combined assets of Class A, Class
B and Class C
or
(2)An allocated portion, based on eligible assets, of an annual
aggregate minimum fee of $8.4 million.
65
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
Class Y paid service fees monthly representing the higher amount based on the
following calculations:
(1)Each Fund's pro rata portion of 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 are subject to a monthly class minimum of $1,250.
or
(2)An allocated portion, based on eligible assets, of an annual
aggregate minimum fee of $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 offered within the
CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts.
Effective January 1, 2005, each Load Equity Fund, for its Class A, B, and C
shares, will pay fees to IXIS Services representing a pro rata portion of the
greater of:
(1)An aggregate annual minimum fee of approximately $6.8 million
for all Load Equity Funds;
or
(2)An annual account based fee of $25.44 for each open account and
$2.00 for each closed account, aggregated for all Load Equity
Funds.
Each Load Equity Fund, for its Class Y shares, will pay fees to IXIS Services
representing a pro rata portion of the greater of:
(1)An aggregate annual minimum fee of approximately $1 million for
all No Load Retail Funds and Load Funds Class Y;
or
(2)An annual account based fee of $25.44 for each open account in
an Equity Fund, $25.25 for each open account in a Fixed Income
Fund and $2.00 for each closed account, aggregated for all No
Load Retail Funds and Load Funds Class Y.
Each class of shares is subject to a monthly class minimum of $1,500.
In addition, pursuant to other servicing agreements, each class pays service
fees to other firms that provide similar services for their own shareholder
accounts.
IXIS Services and BFDS and other firms are also reimbursed by the Funds for
out-of-pocket expenses. For the year ended December 31, 2004, amounts paid to
IXIS Services as compensation for its services as transfer agent were as
follows:
Transfer Agent
Fund Fee
---- --------------
Star Advisers Fund $2,214,033
Star Value Fund 450,254
Targeted Equity Fund 2,025,928
International Fund 489,524
Focused Value Fund 680,834
Large Cap Value Fund 1,015,753
Small Cap Value Fund 425,161
Capital Growth Fund 329,353
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 IXIS Asset Management Distributors, L.P.
("IXIS Distributors") formerly CDC IXIS Asset Management Distributors, L.P.,
the Fund's distributor (a wholly-owned subsidiary of 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 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 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 IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
66
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
Also under the Class B and Class C Plans, each Fund pays 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 IXIS Distributors in connection
with the marketing or sale of Class B and Class C shares.
For the year ended December 31, 2004, the Funds paid the following service and
distribution fees:
Service Fee Distribution Fee
- ---------------------------- ---------------------
Fund Class A Class B Class C Class B Class C
---- ------- ------- ------- ------- -------
Star Advisers Fund $ 907,809 $606,659 $147,572 $1,819,977 $ 442,714
Star Value Fund 264,465 71,404 6,403 214,210 19,208
Targeted Equity Fund 1,712,687 138,134 7,057 414,401 21,172
International Fund 162,480 127,330 35,804 381,989 107,412
Focused Value Fund 255,192 266,139 335,266 798,416 1,005,798
Large Cap Value Fund 541,436 208,684 54,708 626,051 164,124
Small Cap Value Fund 110,829 133,830 30,383 401,490 91,150
Capital Growth Fund 147,891 35,218 2,664 105,653 7,991
Commissions (including CDSC) on Fund shares paid to IXIS Distributors by
investors in shares of the Funds during the year ended December 31, 2004 were
as follows:
Fund
---- -
Star Advisers Fund $736,098
Star Value Fund 110,716
Targeted Equity Fund 333,241
International Fund 124,644
Focused Value Fund 492,975
Large Cap Value Fund 326,330
Small Cap Value Fund 139,904
Capital Growth Fund 73,219
e. Trustees Fees and Expenses. The CDC Nvest Funds Trusts and the Loomis Sayles
Funds Trusts do not pay any compensation directly to their officers or Trustees
who are directors, officers or employees of IXIS Advisors, IXIS Distributors,
IXIS North America, IXIS Services or their affiliates. Each Trustee who is an
independent Trustee of the CDC Nvest Funds Trusts and the Loomis Sayles Funds
Trusts receives, in the aggregate, a retainer fee at the annual rate of $50,000
and meeting attendance fees of $5,000 for each meeting of the Board of Trustees
attended. Each committee chairman receives an additional retainer fee at the
annual rate of $7,000. Each committee member receives a meeting attendance fee
of $3,750 per committee meeting attended. The co-chairmen of the Board each
receive an additional annual retainer of $25,000. These fees are allocated to
the various series of the CDC Nvest Funds Trusts and the 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.
Prior to July 1, 2004, the Trust paid each independent Trustee a $45,000 annual
retainer and a $4,500 fee per meeting attended. In addition, each committee
member received a retainer fee at the annual rate of $7,000 while each
committee chairman received a $5,000 annual retainer (beyond the $7,000). Each
committee member received a $1,750 fee per meeting attended. The retainer fees
assumed four Board or committee meetings per year.
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 funds of the CDC Nvest Funds Trusts and the
Loomis Sayles Funds Trusts on the normal payment date. Deferred amounts remain
in the Funds until distributed in accordance with the Plan.
f. Redemption fees. Effective May 1, 2004, shareholders of Class A shares of
Targeted Equity Fund, Focused Value Fund, Small Cap Value Fund and
International Fund were charged a 2% redemption fee if they redeemed, including
redeeming by exchange, Class A shares of these Funds within 60 days of their
acquisition (including acquisition by exchange). The redemption fee is intended
to offset the costs to the Funds of short-term trading, such as portfolio
transaction and market impact costs associated with redemption activity and
administrative costs associated with processing redemptions. The redemption fee
is deducted from the shareholder's redemption or exchange proceeds and is paid
to the Fund. The "first-in, first-out" (FIFO) method is used to determine the
holding period of redeemed or exchange shares, which means that if you acquired
shares on different days, the shares acquired first will be redeemed or
exchanged first for purposes of determining whether the redemption fee applies.
A new holding period begins with each purchase or exchange. These fees are
broken out on the Statements of Changes in Net Assets.
67
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
g. Publishing Services. IXIS Services performs certain desktop publishing
services for the Funds. Fees for these services are presented in the Statements
of Operations as a part of shareholder reporting. For the year ended December
31, 2004, amounts paid to IXIS Services as compensation for these services were
as follows:
Publishing Services
Fund Fees
---- -------------------
Star Advisers Fund $1,108
Star Value Fund 928
Targeted Equity Fund 858
International Fund 1,126
Focused Value Fund 873
Large Cap Value Fund 461
Small Cap Value Fund 1,193
Capital Growth Fund 830
5. Line of Credit. Each Fund, along with certain other portfolios, participates
in a $50,000,000 committed line of credit provided by IBT under a credit
agreement (the "Agreement") dated April 30, 2002. Advances under the Agreement
are taken primarily for temporary or emergency purposes. Interest is charged to
each participating Fund based on its borrowing at a rate per annum equal to the
Federal Funds rate plus 0.45%. 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
during the year ended December 31, 2004.
6. Security Lending. Each Fund has entered into an agreement with IBT, as an
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, 2004, were as follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
---- ------------------ -------------------
Star Advisers Fund $85,386,028 $88,013,788
Star Value Fund 11,274,472 11,744,576
Targeted Equity Fund 93,408,963 95,930,674
International Fund 11,604,148 12,172,752
Focused Value Fund 23,368,942 23,987,344
Large Cap Value Fund 14,745,778 15,226,465
Small Cap Value Fund 16,170,885 16,652,071
Capital Growth Fund 10,676,677 11,066,014
7. Brokerage Commission Recapture. Each Fund has entered into agreements with
certain brokers whereby the brokers will rebate a portion of brokerage
commissions. All amounts rebated by the brokers are returned to the Funds under
such agreements and are presented as realized gains in the Statements of
Operations. For the year ended December 31, 2004, amounts rebated under these
agreements were as follows:
Fund Rebates
---- -------
Star Advisers Fund $ 85,945
Star Value Fund 45,937
Targeted Equity Fund 694,343
International Fund 26,035
Focused Value Fund 32,314
Large Cap Value Fund 20,832
Small Cap Value Fund 66,797
Capital Growth Fund 26,491
Previously, such rebates were presented as a reduction of expenses in the
Statements of Operations. This reclassification has no impact on total net
assets of the Funds.
8. Contingent Expense Obligations. IXIS Advisors 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 under "Expiration of Waiver" below
and will be reevaluated on an annual basis. For the year ended December 31,
2004, certain class level expenses have been reimbursed as follows: Large Cap
Value Fund $613,592.
68
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
IXIS Advisors shall be permitted to recover expenses it has borne (whether
through reduction of its management fee or otherwise) in later periods to the
extent the Funds' expenses fall below the expense limits, provided, however,
that the Funds are not obligated to pay such deferred fees more than one year
after the end of the fiscal year in which the fee was deferred.
At December 31, 2004, 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 Expenses Subject
Daily Net Assets to Possible
- - --------------------------------------- Expiration of Reimbursement
Fund Class A Class B Class C Class Y Waiver through 2005
- ---- ------- ------- ------- ------- -------------- ----------------
Focused Value Fund 1.70% 2.45% 2.45% -- April 30, 2005 --
Large Cap Value Fund 1.30% 2.05% 2.05% 1.05% April 30, 2005 $613,592
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.
International Fund had the following geographic concentrations in excess of 10%
of its total net assets at December 31, 2004: France 13.9%, Japan 18.7%, and
the United Kingdom 19.0%. The Fund pursues its objectives by investing in
foreign securities. There are certain risks involved in investing in foreign
securities that are in addition to the usual risks inherent in domestic
investments. These risks include those resulting from future adverse political
or economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions.
10. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
Year Ended
December 31, 2004
-----------------------------------
CDC Nvest Star Advisers Fund Shares Amount
- ---------------------------- ---------------- -----------------
Class A
Shares sold 3,621,946 $ 61,819,311
Shares repurchased (4,042,630) (69,134,083)
---------------- -----------------
Net increase (decrease) (420,684) $ (7,314,772)
---------------- -----------------
Class B
Shares sold 1,023,105 $ 15,892,084
Shares repurchased (5,878,024) (90,809,102)
---------------- -----------------
Net increase (decrease) (4,854,919) $ (74,917,018)
---------------- -----------------
Class C
Shares sold 189,049 $ 2,929,359
Shares repurchased (734,192) (11,393,435)
---------------- -----------------
Net increase (decrease) (545,143) $ (8,464,076)
---------------- -----------------
Class Y
Shares sold 218,190 $ 3,966,766
Shares repurchased (1,673,188) (29,771,039)
---------------- -----------------
Net increase (decrease) (1,454,998) $ (25,804,273)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (7,275,744) $ (116,500,139)
================ =================
Year Ended
December 31, 2003
-----------------------------------
CDC Nvest Star Advisers Fund Shares Amount
- ---------------------------- ---------------- -----------------
Class A
Shares sold 4,698,412 $ 65,219,946
Shares repurchased (4,998,858) (68,998,837)
---------------- -----------------
Net increase (decrease) (300,446) $ (3,778,891)
---------------- -----------------
Class B
Shares sold 1,455,180 $ 18,516,959
Shares repurchased (8,227,621) (102,616,431)
---------------- -----------------
Net increase (decrease) (6,772,441) $ (84,099,472)
---------------- -----------------
Class C
Shares sold 194,012 $ 2,480,648
Shares repurchased (938,013) (11,591,919)
---------------- -----------------
Net increase (decrease) (744,001) $ (9,111,271)
---------------- -----------------
Class Y
Shares sold 262,069 $ 3,940,480
Shares repurchased (462,570) (6,772,691)
---------------- -----------------
Net increase (decrease) (200,501) $ (2,832,211)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (8,017,389) $ (99,821,845)
================ =================
69
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
Year Ended
December 31, 2004
-----------------------------------
CDC Nvest Star Value Fund Shares Amount
- ------------------------- ---------------- -----------------
Class A
Shares sold 963,269 $ 8,089,262
Shares issued in connection with the reinvestment of:
Distributions from net realized gain 214,596 1,883,282
---------------- -----------------
1,177,865 9,972,544
Shares repurchased (2,880,533) (24,188,526)
---------------- -----------------
Net increase (decrease) (1,702,668) $ (14,215,982)
---------------- -----------------
Class B
Shares sold 406,698 $ 3,154,676
Shares issued in connection with the reinvestment of:
Distributions from net realized gain 65,280 527,181
---------------- -----------------
471,978 3,681,857
Shares repurchased (1,049,412) (8,162,688)
---------------- -----------------
Net increase (decrease) (577,434) $ (4,480,831)
---------------- -----------------
Class C
Shares sold 139,514 $ 1,078,896
Shares issued in connection with the reinvestment of:
Distributions from net realized gain 5,506 44,489
---------------- -----------------
145,020 1,123,385
Shares repurchased (51,629) (402,248)
---------------- -----------------
Net increase (decrease) 93,391 $ 721,137
---------------- -----------------
Increase (decrease) derived from capital shares transactions (2,186,711) $ (17,975,676)
================ =================
Year Ended
December 31, 2004
-----------------------------------
CGM Advisor Targeted Equity Fund Shares Amount
- -------------------------------- ---------------- -----------------
Class A
Shares sold 2,521,858 $ 20,870,954
Shares repurchased (17,497,433) (142,925,716)
---------------- -----------------
Net increase (decrease) (14,975,575) $ (122,054,762)
---------------- -----------------
Class B
Shares sold 584,350 $ 4,509,878
Shares repurchased (1,391,402) (10,654,125)
---------------- -----------------
Net increase (decrease) (807,052) $ (6,144,247)
---------------- -----------------
Class C
Shares sold 105,596 $ 786,319
Shares repurchased (79,774) (611,842)
---------------- -----------------
Net increase (decrease) 25,822 $ 174,477
---------------- -----------------
Class Y
Shares sold 129,331 $ 1,094,935
Shares repurchased (101,673) (843,271)
---------------- -----------------
Net increase (decrease) 27,658 $ 251,664
---------------- -----------------
Increase (decrease) derived from capital shares transactions (15,729,147) $ (127,772,868)
================ =================
Year Ended
December 31, 2003
-----------------------------------
CDC Nvest Star Value Fund Shares Amount
- ------------------------- ---------------- -----------------
Class A
Shares sold 1,104,961 $ 7,639,153
Shares issued in connection with the reinvestment of:
Distributions from net realized gain -- --
---------------- -----------------
1,104,961 7,639,153
Shares repurchased (3,694,156) (25,006,261)
---------------- -----------------
Net increase (decrease) (2,589,195) $ (17,367,108)
---------------- -----------------
Class B
Shares sold 595,770 $ 3,795,458
Shares issued in connection with the reinvestment of:
Distributions from net realized gain -- --
---------------- -----------------
595,770 3,795,458
Shares repurchased (1,421,634) (8,919,193)
---------------- -----------------
Net increase (decrease) (825,864) $ (5,123,735)
---------------- -----------------
Class C
Shares sold 62,780 $ 394,765
Shares issued in connection with the reinvestment of:
Distributions from net realized gain -- --
---------------- -----------------
62,780 394,765
Shares repurchased (133,770) (814,153)
---------------- -----------------
Net increase (decrease) (70,990) $ (419,388)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (3,486,049) $ (22,910,231)
================ =================
Year Ended
December 31, 2003
-----------------------------------
CGM Advisor Targeted Equity Fund Shares Amount
- -------------------------------- ---------------- -----------------
Class A
Shares sold 3,272,602 $ 21,476,490
Shares repurchased (20,406,401) (130,309,788)
---------------- -----------------
Net increase (decrease) (17,133,799) $ (108,833,298)
---------------- -----------------
Class B
Shares sold 703,119 $ 4,292,342
Shares repurchased (1,738,618) (10,346,801)
---------------- -----------------
Net increase (decrease) (1,035,499) $ (6,054,459)
---------------- -----------------
Class C
Shares sold 38,555 $ 239,637
Shares repurchased (98,860) (579,017)
---------------- -----------------
Net increase (decrease) (60,305) $ (339,380)
---------------- -----------------
Class Y
Shares sold 98,496 $ 670,426
Shares repurchased (117,263) (734,977)
---------------- -----------------
Net increase (decrease) (18,767) $ (64,551)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (18,248,370) $ (115,291,688)
================ =================
70
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
Year Ended
December 31, 2004
-----------------------------------
Hansberger International Fund Shares Amount
- ----------------------------- ---------------- -----------------
Class A
Shares sold 1,378,026 $ 21,181,534
Shares repurchased (1,039,791) (15,979,778)
---------------- -----------------
Net increase (decrease) 338,235 $ 5,201,756
---------------- -----------------
Class B
Shares sold 234,404 $ 3,365,251
Shares repurchased (1,672,509) (23,865,174)
---------------- -----------------
Net increase (decrease) (1,438,105) $ (20,499,923)
---------------- -----------------
Class C
Shares sold 324,631 $ 4,638,364
Shares repurchased (142,798) (2,053,383)
---------------- -----------------
Net increase (decrease) 181,833 $ 2,584,981
---------------- -----------------
Increase (decrease) derived from capital shares transactions (918,037) $ (12,713,186)
================ =================
Year Ended
December 31, 2004
-----------------------------------
Harris Associates Focused Value Fund Shares Amount
- ------------------------------------ ---------------- -----------------
Class A
Shares sold 2,211,604 $ 26,494,287
Shares repurchased (2,074,206) (24,982,274)
---------------- -----------------
Net increase (decrease) 137,398 $ 1,512,013
---------------- -----------------
Class B
Shares sold 773,815 $ 9,061,361
Shares repurchased (1,352,436) (15,825,604)
---------------- -----------------
Net increase (decrease) (578,621) $ (6,764,243)
---------------- -----------------
Class C
Shares sold 2,570,290 $ 30,041,268
Shares repurchased (1,937,670) (22,709,696)
---------------- -----------------
Net increase (decrease) 632,620 $ 7,331,572
---------------- -----------------
Increase (decrease) derived from capital shares transactions 191,397 $ 2,079,342
================ =================
Year Ended
December 31, 2003
-----------------------------------
Hansberger International Fund Shares Amount
- ----------------------------- ---------------- -----------------
Class A
Shares sold 5,487,733 $ 61,630,766
Shares repurchased (6,139,050) (69,259,645)
---------------- -----------------
Net increase (decrease) (651,317) $ (7,628,879)
---------------- -----------------
Class B
Shares sold 290,640 $ 3,415,741
Shares repurchased (1,233,804) (13,640,399)
---------------- -----------------
Net increase (decrease) (943,164) $ (10,224,658)
---------------- -----------------
Class C
Shares sold 125,234 $ 1,506,714
Shares repurchased (312,978) (3,503,997)
---------------- -----------------
Net increase (decrease) (187,744) $ (1,997,283)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (1,782,225) $ (19,850,820)
================ =================
Year Ended
December 31, 2003
-----------------------------------
Harris Associates Focused Value Fund Shares Amount
- ------------------------------------ ---------------- -----------------
Class A
Shares sold 2,875,956 $ 29,849,185
Shares repurchased (2,168,603) (22,052,029)
---------------- -----------------
Net increase (decrease) 707,353 $ 7,797,156
---------------- -----------------
Class B
Shares sold 1,701,970 $ 16,766,807
Shares repurchased (1,844,300) (18,116,704)
---------------- -----------------
Net increase (decrease) (142,330) $ (1,349,897)
---------------- -----------------
Class C
Shares sold 3,353,028 $ 33,891,515
Shares repurchased (2,040,296) (20,183,334)
---------------- -----------------
Net increase (decrease) 1,312,732 $ 13,708,181
---------------- -----------------
Increase (decrease) derived from capital shares transactions 1,877,755 $ 20,155,440
================ =================
71
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
Year Ended
December 31, 2004
-----------------------------------
Harris Associates Large Cap Value Fund Shares Amount
- -------------------------------------- ---------------- -----------------
Class A
Shares sold 2,114,459 $ 26,293,904
Shares issued - merger -- --
---------------- -----------------
2,114,459 26,293,904
Shares repurchased (3,058,528) (38,152,674)
---------------- -----------------
Net increase (decrease) (944,069) $ (11,858,770)
---------------- -----------------
Class B
Shares sold 539,873 $ 6,373,696
Shares issued - merger -- --
---------------- -----------------
539,873 6,373,696
Shares repurchased (2,028,413) (23,942,400)
---------------- -----------------
Net increase (decrease) (1,488,540) $ (17,568,704)
---------------- -----------------
Class C
Shares sold 1,068,463 $ 12,555,826
Shares issued - merger -- --
---------------- -----------------
1,068,463 12,555,826
Shares repurchased (311,574) (3,687,561)
---------------- -----------------
Net increase (decrease) 756,889 $ 8,868,265
---------------- -----------------
Class Y
Shares sold 278,070 $ 3,599,061
Shares issued - merger -- --
---------------- -----------------
278,070 3,599,061
Shares repurchased (1,082,092) (13,760,464)
---------------- -----------------
Net increase (decrease) (804,022) $ (10,161,403)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (2,479,742) $ (30,720,612)
================ =================
Year Ended
December 31, 2003
-----------------------------------
Harris Associates Large Cap Value Fund Shares Amount
- -------------------------------------- ---------------- -----------------
Class A
Shares sold 2,100,861 $ 22,762,821
Shares issued - merger 5,074,724 54,776,568
---------------- -----------------
7,175,585 77,539,389
Shares repurchased (3,485,439) (36,836,357)
---------------- -----------------
Net increase (decrease) 3,690,146 $ 40,703,032
---------------- -----------------
Class B
Shares sold 856,774 $ 9,891,819
Shares issued - merger 1,413,315 14,555,728
---------------- -----------------
2,270,089 24,447,547
Shares repurchased (2,366,418) (24,751,845)
---------------- -----------------
Net increase (decrease) (96,329) $ (304,298)
---------------- -----------------
Class C
Shares sold 706,519 $ 7,419,708
Shares issued - merger 101,458 1,043,494
---------------- -----------------
807,977 8,463,202
Shares repurchased (185,271) (1,965,684)
---------------- -----------------
Net increase (decrease) 622,706 $ 6,497,518
---------------- -----------------
Class Y
Shares sold 60,321 $ 637,760
Shares issued - merger 1,419,922 15,668,839
---------------- -----------------
1,480,243 16,306,599
Shares repurchased (465,803) (5,224,688)
---------------- -----------------
Net increase (decrease) 1,014,440 $ 11,081,911
---------------- -----------------
Increase (decrease) derived from capital shares transactions 5,230,963 $ 57,978,163
================ =================
72
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended December 31, 2004
Year Ended
December 31, 2004
-----------------------------------
Vaughan Nelson Small Cap Value Fund Shares Amount
- ----------------------------------- ---------------- -----------------
Class A
Shares sold 397,634 $ 5,765,216
Shares repurchased (849,371) (12,182,549)
---------------- -----------------
Net increase (decrease) (451,737) $ (6,417,333)
---------------- -----------------
Class B
Shares sold 291,248 $ 3,924,012
Shares repurchased (895,799) (12,076,096)
---------------- -----------------
Net increase (decrease) (604,551) $ (8,152,084)
---------------- -----------------
Class C
Shares sold 171,240 $ 2,309,106
Shares repurchased (186,838) (2,501,179)
---------------- -----------------
Net increase (decrease) (15,598) $ (192,073)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (1,071,886) $ (14,761,490)
================ =================
Year Ended
December 31, 2004
-----------------------------------
Westpeak Capital Growth Fund Shares Amount
- ---------------------------- ---------------- -----------------
Class A
Shares sold 313,633 $ 3,392,393
Shares repurchased (1,124,317) (12,133,801)
---------------- -----------------
Net increase (decrease) (810,684) $ (8,741,408)
---------------- -----------------
Class B
Shares sold 142,812 $ 1,353,045
Shares repurchased (575,435) (5,454,484)
---------------- -----------------
Net increase (decrease) (432,623) $ (4,101,439)
---------------- -----------------
Class C
Shares sold 14,061 $ 133,009
Shares repurchased (35,626) (335,096)
---------------- -----------------
Net increase (decrease) (21,565) $ (202,087)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (1,264,872) $ (13,044,934)
================ =================
Year Ended
December 31, 2003
-----------------------------------
Vaughan Nelson Small Cap Value Fund Shares Amount
- ----------------------------------- ---------------- -----------------
Class A
Shares sold 735,059 $ 8,197,295
Shares repurchased (1,297,834) (14,135,491)
---------------- -----------------
Net increase (decrease) (562,775) $ (5,938,196)
---------------- -----------------
Class B
Shares sold 495,700 $ 5,413,902
Shares repurchased (1,100,218) (11,475,987)
---------------- -----------------
Net increase (decrease) (604,518) $ (6,062,085)
---------------- -----------------
Class C
Shares sold 92,836 $ 1,009,312
Shares repurchased (321,688) (3,360,613)
---------------- -----------------
Net increase (decrease) (228,852) $ (2,351,301)
---------------- -----------------
Increase (decrease) derived from capital shares transactions (1,396,145) $ (14,351,582)
================ =================
Year Ended
December 31, 2003
-----------------------------------
Westpeak Capital Growth Fund Shares Amount
- ---------------------------- ---------------- -----------------
Class A
Shares sold 459,334 $ 4,434,198
Shares repurchased (1,474,769) (14,012,775)
---------------- -----------------
Net increase (decrease) (1,015,435) $ (9,578,577)
---------------- -----------------
Class B
Shares sold 241,744 $ 2,031,512
Shares repurchased (660,282) (5,491,199)
---------------- -----------------
Net increase (decrease) (418,538) $ (3,459,687)
---------------- -----------------
Class C
Shares sold 43,266 $ 374,020
Shares repurchased (31,761) (263,473)
---------------- -----------------
Net increase (decrease) 11,505 $ 110,547
---------------- -----------------
Increase (decrease) derived from capital shares transactions (1,422,468) $ (12,927,717)
================ =================
73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and shareholders of CDC Nvest Funds Trust I, CDC Nvest
Funds Trust II and CDC Nvest Funds Trust III (collectively, the "Trusts")
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 the CDC Nvest Star
Advisers Fund, CDC Nvest Star Value Fund, CGM Advisor Targeted Equity Fund,
Hansberger International Fund (formerly CDC Nvest Star International Fund),
Harris Associates Focused Value Fund, Harris Associates Large Cap Value Fund
(formerly Harris Associates Growth and Income Fund), Vaughan Nelson Small Cap
Value Fund (formerly CDC Nvest Star Small Cap Fund) and Westpeak Capital Growth
Fund, each a series within the Trusts (collectively, the "Funds"), at December
31, 2004, and 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
therein, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2005
74
ADDITIONAL INFORMATION
Shareholder Meetings (unaudited)
At a special shareholder meeting held on November 17, 2004, shareholders of the
CGM Advisor Targeted Equity Fund voted for the following proposal:
1. Approval of a new advisory agreement between CDC Nvest Funds Trust I, on
behalf of the CGM Advisor Targeted Equity Fund and Capital Growth Management
Limited Partnership.
Voted For Voted Against Abstained Votes Total Votes
--------- ------------- --------------- -----------
52,499,751.821 1,853,357.475 2,286,063.471 56,639,172.767
At a special shareholder meeting held on February 18, 2004, shareholders of the
Vaughan Nelson Small Cap Value Fund voted for the following proposal:
1. Approval of a new subadvisory agreement for the Vaughan Nelson Small Cap
Value Fund among CDC Nvest Funds Trust I, IXIS Asset Management Advisors, L.P.
and Vaughan Nelson Investment Management, L.P.
Voted For Voted Against Abstained Votes Total Votes
--------- ------------- --------------- -----------
5,995,736.288 177,986.322 189,268.957 6,362,991.567
75
TRUSTEE AND OFFICER INFORMATION
The table below provides certain information regarding the Trustees and
Officers of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and CDC Nvest
Funds Trust III (the "Trusts"). Unless otherwise indicated, the address of all
persons below is 399 Boylston Street, Boston, MA 02116. The statement of
additional information includes additional information about the Trustees of
the Trusts and is available by calling CDC Nvest Funds at 800-225-5478.
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee, Contract Review Douglas Dillon Professor and 41;
(3/23/40) and Governance Committee Director for the Belfer Center Director, Taubman Centers,
Member, since 1984 for of Science and International Inc. (real estate investment
CDC Nvest Funds Trust I, Affairs, John F. Kennedy trust); Advisory Board
1993 for CDC Nvest Funds School of Government, Member, USEC Inc. (energy
Trust II and 1995 for CDC Harvard University supplier)
Nvest Funds Trust III
Edward A. Benjamin Trustee, Audit Committee Retired 41;
(5/30/38) Member, since 2003 Director, Coal, Energy
Investments & Management,
LLC; Director, Precision
Optics Corporation (optics
manufacturer)
Daniel M. Cain Trustee, Chairman of the President and Chief Executive 41;
(2/24/45) Audit Committee, since Officer, Cain Brothers & Trustee, Universal Health
1996; Co-Chairman of the Company, Incorporated Realty Income Trust;
Board, since 2004 (investment banking) Director, Sheridan
Healthcorp (physician
practice management)
Paul G. Chenault Trustee, Contract Review Retired; Trustee, First Variable 41;
(9/12/33) and Governance Committee Life (variable life insurance) Director, Mailco Office
Member, since 2003 Products, Inc. (mailing
equipment)
Kenneth J. Cowan Trustee, Chairman of the Retired 41; None
(4/5/32) Contract Review and
Governance Committee,
since 1993 for CDC Nvest
Funds Trust I, 1975 for
CDC Nvest Funds Trust II
and 1995 for CDC Nvest
Funds Trust III; Co-
Chairman of the Board,
since 2004
Richard Darman Trustee, Contract Review Partner, The Carlyle Group 41;
(5/10/43) and Governance Committee (investments); formerly, Director and Chairman of
Member, since 1996 Professor, John F. Kennedy the Board of Directors, AES
School of Government, Corporation (independent
Harvard University power company)
76
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
continued
Sandra O. Moose Trustee, Audit Committee President, Strategic Advisory 41;
(2/17/42) Member, since 1982 for Services (management Director, Verizon
CDC Nvest Funds Trust I, consulting); formerly, Senior Communications; Director,
1993 for CDC Nvest Funds Vice President and Director, Rohm and Haas Company
Trust II, 1995 for CDC The Boston Consulting Group, (specialty chemicals);
Nvest Funds Trust III Inc. (management consulting) Director, AES Corporation
John A. Shane Trustee, Contract Review President and Director, Palmer 41;
(2/22/33) and Governance Committee Service Corporation (venture Director, Gensym
Member, since 1993 for capital organization) Corporation (software and
CDC Nvest Funds Trust I, technology services
1982 for CDC Nvest Funds provider); Director, Abt
Trust II, 1995 for CDC Associates Inc. (research and
Nvest Funds Trust III consulting firm)
INTERESTED TRUSTEES
Robert J. Blanding/1/ Trustee, since 2003 President, Chairman, Director 41;
(4/17/47) and Chief Executive Officer, None
555 California Street Loomis, Sayles & Company,
San Francisco, CA 94104 L.P.; President and Chief
Executive Officer -- Loomis
Sayles Funds I; Chief Executive
Officer -- Loomis Sayles
Funds II
John T. Hailer/2/ President, Chief Executive President and Chief Executive 41;
(11/23/60) Officer and Trustee, since Officer, IXIS Asset None
2000 Management Distributors, L.P.;
Executive Vice President --
Loomis Sayles Funds I;
President -- Loomis Sayles
Funds II
OFFICERS
Coleen Downs Dinneen Secretary, Clerk and Chief Senior Vice President, General Not Applicable
(12/16/60) Legal Officer, since 2004 Counsel, Secretary and Clerk
(formerly, Deputy General
Counsel, Assistant Secretary
and Assistant Clerk), IXIS
Asset Management
Distribution Corporation, IXIS
Asset Management
Distributors, L.P., IXIS Asset
Management Advisors, L.P.
and IXIS Asset Management
Services Company; Chief
Compliance Officer, IXIS Asset
Management Advisors, L.P.
77
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ---------------------- -------------------------- --------------------- ----------------------------
OFFICERS
(continued)
Michael C. Kardok Treasurer, Principal Senior Vice President, IXIS Not Applicable
(7/17/59) Financial and Accounting Asset Management Advisors,
Officer, since 2004 L.P. and IXIS Asset
Management Distributors,
L.P.; formerly, Senior Vice
President, IXIS Asset
Management Services
Company; formerly, Senior
Director, PFPC Inc; formerly,
Vice President -- Division
Manager, First Data Investor
Services, Inc.
Frank LoPiccolo Anti-Money Laundering President, Chief Executive Not Applicable
(4/1/53) Officer, since 2003 Officer and Director (formerly,
Executive Vice President), IXIS
Asset Management Services
Company
John E. Pelletier Chief Operating Officer, Executive Vice President and Not Applicable
(6/24/64) since 2004 Chief Operating Officer
(formerly, General Counsel,
Secretary and Clerk), IXIS
Asset Management
Distributors, L.P. and IXIS
Asset Management Advisors,
L.P.; Executive Vice President
(formerly, Senior Vice
President, General Counsel,
Secretary and Clerk), IXIS
Asset Management
Distribution Corporation;
Director (formerly, President,
Chief Executive Officer,
General Counsel, Secretary
and Clerk), IXIS Asset
Management Services
Company
78
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ---------------------- -------------------------- --------------------- ----------------------------
OFFICERS
(continued)
Kristin Vigneaux Chief Compliance Officer, Chief Compliance Officer for Not Applicable
(9/25/69) since 2004 Mutual Funds, IXIS Asset
Management Distributors,
L.P., IXIS Asset Management
Advisors, L.P. and IXIS Asset
Management Services
Company; formerly, Vice
President, IXIS Asset
Management Services
Company
* All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. At a meeting held on November 19, 2004,
the Trustees voted to suspend the retirement policy until 2006.
** Previous positions during the past five years with IXIS Asset Management
Distributors, L.P. (the "Distributor"), IXIS Asset Management Advisors, L.P.
or Loomis, Sayles & Company, L.P. are omitted if not materially different
from a trustee's or officer's current position with such entity. As
indicated, each Trustee is also a trustee of certain other investment
companies for which the Distributor acts as principal underwriter.
***The Trustees of the Trusts serve as Trustees of a fund complex that includes
all series of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest
Funds Trust III, CDC Nvest Cash Management Trust, CDC Nvest Companies Trust
I, AEW Real Estate Income Fund, Loomis Sayles Funds I and Loomis Sayles
Funds II.
/1/ 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.
/2/ 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 IXIS Asset Management Distribution
Corporation, President and Chief Executive Officer of IXIS Asset
Management Advisors, L.P.
79
[LOGO] CDCNvestFunds(SM)
- --------------------------------------------------------------------------------
Annual Report
December 31, 2004
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio
Loomis Sayles Core Fixed Income Discipline
Loomis Sayles Large Cap Growth Discipline
Harris Associates Large Cap Value Discipline
Reich & Tang Mid Cap Value Discipline
Hansberger International Developed Markets
Discipline
TABLE OF CONTENTS
Management Discussion
and Performance..............Page 1
Schedule of Investments......Page 6
Financial Statements.........Page 7
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio
- --------------------------------------------------------------------------------
Portfolio Profile
- --------------------------------------------------------------------------------
Subadvisors:
Hansberger Global Investors
Harris Associates
Loomis, Sayles & Company
Reich & Tang Asset Management
- --------------------------------------------------------------------------------
You Should Know:
Growth investments focus on future expectations of a security. The fund may be
exposed to greater volatility if these expectations are not met. Value stocks
can fall out of favor and under-perform growth stocks during certain market
conditions. Foreign securities involve unique risks such as currency
fluctuations, differing political and economic conditions, and different
accounting standards. Lower-rated securities are considered riskier than
investment-grade securities because there is a greater rate of default among the
issuers of such securities. Mutual funds that invest in bonds can lose their
value as interest rates rise and an investor can lose principal.
Management Discussion
- --------------------------------------------------------------------------------
Equity investors were rewarded in 2004, as both domestic and international
stocks posted positive returns. In the United States, stocks of every stripe -
growth and value, small-, mid-, and large-caps - all finished the year with
solid gains, although value outpaced growth and small- and mid-cap stocks
outperformed large-caps. In U.S. dollar terms, most overseas stock indexes did
better than the U.S. indexes, and virtually every developed market registered a
solid gain. While the returns on U.S. bonds lagged the stock market, most bond
categories rose, with high-yield, mortgage-backed, and asset-backed securities
outperforming Treasury securities.
Since its inception on July 15, 2004, through December 31, 2004, CDC IXIS
Moderate Diversified Portfolio's total return was 7.21% based on the net asset
value of Class A shares. The fund's equity benchmark, the Standard & Poor's 500
Index, returned 10.86%, and its fixed-income benchmark, the Lehman Aggregate
Bond Index, returned 3.16%. The average return on the funds in Morningstar's
Moderate Allocation category was 8.91% for the period.
The fund offers investors access to five complementary investment disciplines -
including both equity and fixed-income - managed by four investment advisors.
The Loomis Sayles Core Fixed Income discipline focuses on U.S. investment-grade,
fixed-income securities, while the Loomis Sayles Large Cap Growth discipline
seeks growth from investments in equity securities of large U.S. companies. The
Harris Associates Large Cap Value discipline emphasizes equity securities of
large companies that appear to be undervalued. The Reich & Tang Mid Cap Value
discipline seeks stocks of companies with small- to midsized market
capitalizations. Securities in international developed markets make up the
Hansberger International Developed Markets discipline.
Loomis Sayles Core Fixed Income discipline diversified its investments
A variety of fixed-income investments - from high-yielding U.S. corporate bonds
to mortgage-backed and Treasury securities - produced positive results. While
corporate bonds faced challenges, including drug recalls and insurance fraud
allegations, they moved higher and ended the year ahead of Treasuries. Treasury
Inflation-Protected Securities (TIPS) were added but later sold when they
appeared to be overvalued. Despite the Federal Reserve Board's interest-rate
hikes, longer-term Treasuries performed relatively well and aided results.
Duration was relatively short, and will remain so, in anticipation of a rising
interest-rate environment. Fixed-income securities with a shorter duration can
add a measure of price stability when rising interest rates cause bond prices to
decline. While yields may continue up in 2005, Loomis believes they will still
be low, by historic standards. As a result, current income will be critical to
performance and Loomis believes better investment performance may come from
lower-quality bonds that pay higher rates.
Loomis Sayles Large Cap Growth discipline emphasized earnings growth
Stock selection worked well for this discipline. In the consumer discretionary
category, specialty retailer Coach benefited from a strong product line and
increased demand for luxury goods during the holiday season. Apple Computer,
AutoDesk, and VeriSign were the best performers among information technology
companies. Apple prospered from strong demand for its iPod music player.
AutoDesk rose after reporting brisk sales of its two- and three-dimensional
products, which have many design and visualization applications. VeriSign's
strong results were partly due to its recently acquired Jamba unit, which
provides wireless content for cell phones. Detractors included Coventry Health
Care, which declined when the company acquired First Health Group; Countrywide
Financial, which slid when the growth in mortgage refinancing slowed in the
third quarter; and Cisco Systems, which forecasted slower sales growth. Loomis
Sayles expects good performance for equities in 2005, but selection will become
even more critical as the overall rate of economic growth subsides.
1
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio
- --------------------------------------------------------------------------------
Management Discussion
- --------------------------------------------------------------------------------
Harris Associates Large Cap Value discipline emphasized quality
Harris Associates believes in selecting stocks based on the merits of individual
companies rather than economic or sector forecasts. Top performers included
Liberty Media, which is building its position within the broadcasting and film
industry by increasing its investment in News Corp.; Home Depot, which benefited
from the strong housing market, corporate restructuring, and a new initiative to
attract women shoppers; and Xerox Corporation, which was buoyed by strong
quarterly earnings, improved cash flow, progress on debt reduction, and new
products that were well received. Detractors during the period included
pharmaceutical products distributor Cardinal Health, which was sold when it
rebounded after the company was cleared of accounting charges. Merck declined
when it had to withdraw its arthritis drug, Vioxx. Harris Associates believed
the market's initial reaction to the Vioxx problem may have been overdone. Sales
at the Gap's lower-end clothing stores slumped when higher gas prices made
cost-conscious shoppers less willing than more affluent shoppers to drive to
stores. Harris Associates believes that stock valuations, though not cheap, are
reasonable in light of the outlook for low interest rates and inflation and low
taxes.
Reich & Tang Mid Cap Value discipline focused on relatively few stocks
Reich & Tang focused on relatively few companies that seemed to have the
potential for strong growth over the next three to four years. One positive
contributor was Copart, which provides salvage vehicle auction services to
vehicle suppliers, primarily insurance companies. Another good performer, Harman
International Industries, manufactures high-fidelity audio and electronic
systems for consumer and professional use. Ball Corporation also did well. The
company manufactures metal and plastic packaging, primarily for beverages and
foods, and supplies technical services to government and commercial customers.
Detractors from performance were few, but they included DeVry, a private,
degree-granting, higher education provider. The stock went down when the number
of technology students declined. NBTY also fell, but Reich & Tang thinks the
market reaction to the slide in sales of NBTY's value-priced nutritional
supplements may have been overdone. They believe earnings are likely to be
relatively strong over the next few years. Reich & Tang sold its small position
in Blyth Inc., a designer and marketer of home decorating accessories, when the
shares appeared to fully reflect the company's growth prospects. With economic
growth continuing to expand and the prospect of inflation reemerging, Reich &
Tang expects stock prices to rise in 2005, but at a slower pace than last year.
Hansberger International Developed Markets discipline sought opportunities
outside the United States
Investments focused on Europe, the United Kingdom, Japan and other parts of the
Pacific region. Positive contributors included Hong Kong's Hutchison Whampoa,
whose diversified mix of businesses, such as ports, property and retail
operations, did well. Netherlands-based ING, a global financial services firm,
was also a positive contributor. Hansberger began accumulating shares of
Finland's Nokia, a leader in the telecommunications industry when the share
price declined after the company reported lower-than-expected revenues and
market share. The sell-off appeared to be undeserved and the stock subsequently
rebounded, benefiting the portfolio. Stocks that detracted included Japan's NEC
Corporation, which declined on reports of falling personal computer and mobile
telephone sales. Hansberger believes the stock may benefit from a corporate
restructuring program. Nestle S.A. also fell when it reported
lower-than-expected earnings, and Brazilian regulators are blocking Nestle's
attempt to acquire a privately owned candy and chocolate manufacturer. However,
Hansberger believes Nestle is attractively valued and has strong growth
prospects. Britain's Amvescap, a global asset management company, was sold
because its assets under management were declining. Hansberger believes that
equity markets will be challenged by slowing economic growth and rising interest
rates in 2005.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio
- --------------------------------------------------------------------------------
Investment Results through December 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The table comparing the fund's performance to an index provides you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, an index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Average Annual Total Returns -- December 31, 2004
- --------------------------------------------------------------------------------
Since
Inception/8/
------------
Class A (Inception 7/15/2004)
Net Asset Value/1/ 7.21%
With Maximum Sales Charge/2/ 1.05
Class C (Inception 7/15/2004)
Net Asset Value/1/ 6.81
With CDSC/3/ 5.81
- --------------------------------------------------------------------------------
Since
Comparative Performance Inception/7/
------------
S&P 500 Index/4/ 10.86%
Lehman Aggregate Bond Index/5/ 3.16
Morningstar Moderate Allocation Funds Avg./6/ 8.91
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
The table does 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 12/31/04
- --------------------------------------------------------------------------------
Common Stocks 63.1
- --------------------------------------------------------------------------------
Bonds and Notes 30.7
- --------------------------------------------------------------------------------
Short Term Investments and Other 6.2
- --------------------------------------------------------------------------------
% of Net Assets
as of
Ten Largest Holdings 12/31/04
- --------------------------------------------------------------------------------
FNMA (TBA), 4.500%, 1/01/2035 2.3
- --------------------------------------------------------------------------------
FNMA, 5.500%, with various maturities to 2034 2.2
- --------------------------------------------------------------------------------
FNMA, 6.500%, with various maturities to 2034 2.0
- --------------------------------------------------------------------------------
Johnson & Johnson 1.3
- --------------------------------------------------------------------------------
FHLMC, 4.500%, with various maturities to 2034 1.3
- --------------------------------------------------------------------------------
Home Depot, Inc. 1.3
- --------------------------------------------------------------------------------
U.S. Treasury Bond, 5.250%, 2/15/2029 1.2
- --------------------------------------------------------------------------------
U.S. Treasury Note, 2.375%, 8/15/2006 1.2
- --------------------------------------------------------------------------------
U.S. Treasury Note, 5.000%, 8/15/2011 1.1
- --------------------------------------------------------------------------------
U.S. Treasury Note, 4.250%, 8/15/2014 1.0
- --------------------------------------------------------------------------------
% of Net Assets
as of
Five Largest Industries 12/31/04
- --------------------------------------------------------------------------------
Diversified Financial Services 10.7
- --------------------------------------------------------------------------------
U.S. Government & Agency 9.5
- --------------------------------------------------------------------------------
Retail 7.9
- --------------------------------------------------------------------------------
Treasuries 6.1
- --------------------------------------------------------------------------------
Media 4.9
- --------------------------------------------------------------------------------
Portfolio holdings and asset allocations will vary.
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 5.75%.
/3/ Class C share performance assumes a 1.00% contingent deferred sales charge
("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/ Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds
with one-to ten-year maturities issued by the U.S. government, its agencies
and U.S. corporations.
/6/ Morningstar Moderate Allocation Funds Average is the average performance
without sales charges of funds with similiar current investment objectives
as calculated by Morningstar, Inc.
/7/ The since-inception performance comparisons for Class A and C shares were
calculated from 7/31/04.
/8/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
3
- --------------------------------------------------------------------------------
Additional Information
- --------------------------------------------------------------------------------
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 the fund is actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
For more complete information on any CDC Nvest Fund, contact your financial
professional or call CDC Nvest Funds and ask for a free prospectus, which
contains more complete information including charges and other ongoing expenses.
Investors should consider a fund's objective, risks and expenses carefully
before investing. This and other fund information can be found in the
prospectus. Please read the prospectus carefully before investing.
Proxy Voting Information
A description of the fund's proxy voting policies and procedures is available
without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; on the
fund's website at www.cdcnvestfunds.com; and on the Securities and Exchange
Commission's website at www.sec.gov.
Quarterly Portfolio Schedules
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q
are available on the SEC's website at www.sec.gov and may be reviewed and copied
at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
4
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
- --------------------------------------------------------------------------------
As a mutual fund shareholder, you incur different costs: transaction costs,
including sales charges (loads) on purchases, and certain exchange fees, and
ongoing costs, including management fees, sales and distribution fees (12b-1
fees), and other fund expenses. In addition, the fund assesses a minimum balance
fee of $20 on an annual basis for accounts that fall below the required minimum
to establish an account (Certain exceptions may apply). These costs are
described in more detail in the fund's prospectus. The examples below are
intended to help you understand the ongoing costs of investing in the fund and
help you compare these with the ongoing costs of investing in other mutual
funds.
The first line in the table shows the actual account values and actual fund
expenses you would have paid on a $1,000 investment in the fund from July 15,
2004 (commencement of operations) through December 31, 2004. It also shows how
much a $1,000 investment would be worth at the close of the period, assuming
actual fund returns and expenses. To estimate the expenses you paid over the
period, simply divide your account value by $1,000 (for example $8,600 account
value divided by $1,000 = 8.6) and multiply the result by the number in the
Expenses Paid During the Period row as shown below for your class.
The second line in the table provides information about hypothetical account
values and hypothetical expenses based on the fund's actual expense ratios and
an assumed rate of return of 5% per year before expenses, which is not the
fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid on your
investment for the period. You may use this information to compare the ongoing
costs of investing in the fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs. Therefore, the second line in the table is useful
in comparing ongoing costs only, and will not help you determine the relative
costs of owning different funds. If transaction costs were included, total costs
would be higher.
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
7/15/04 12/31/04 7/15/04 - 12/31/04
- ----------------------------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,072.10 $ 7.94
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.56 $ 7.73
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,068.10 $11.53
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.07 $11.22
- ----------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio of 1.65% and 2.40%
for Class A and C, respectively, multiplied by the average account value over
the period, multiplied by the number of days in the most recent fiscal year,
divided by 366 (to reflect the half-year period).
5
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Common Stocks -- 63.1% of Total Net Assets
Aerospace & Defense -- 0.7%
11,500 Raytheon Co. $ 446,545
3,440 Rolls-Royce Group PLC, Sponsored ADR 82,388
----------
528,933
----------
Airlines -- 0.1%
1,440 British Airways PLC, Sponsored ADR(e) 64,987
----------
Apparel -- 1.4%
9,450 Coach, Inc.(e) 532,980
4,800 Jones Apparel Group, Inc. 175,536
3,825 Nike, Inc., Class B 346,889
----------
1,055,405
----------
Audio/Video Products -- 0.4%
2,575 Harman International Industries, Inc. 327,025
----------
Auto Manufacturers -- 0.4%
5,230 Honda Motor Co., Ltd., Sponsored ADR 136,294
16,375 Volkswagen AG, Sponsored ADR 148,194
----------
284,488
----------
Banks -- 2.2%
6,435 ABN AMRO Holding NV, Sponsored ADR 171,171
3,140 BNP Paribas, ADR 114,924
6,535 DBS Group Holdings, Ltd., Sponsored ADR 256,172
2,180 Deutsche Bank AG 194,042
2,805 HSBC Holdings PLC, Sponsored ADR(d) 238,818
3,740 Lloyds TSB Group PLC, Sponsored ADR 137,595
19,680 Sumitomo Trust & Banking Co., Ltd. (The), Sponsored ADR 137,760
11,000 US Bancorp 344,520
----------
1,595,002
----------
Beverages -- 1.5%
7,000 Anheuser-Busch Cos., Inc. 355,110
2,000 Coca-Cola Co. (The) 83,260
7,500 Coca-Cola Enterprises, Inc. 156,375
8,900 Diageo Plc, Sponsored ADR 515,132
----------
1,109,877
----------
Biotechnology -- 0.8%
3,025 Biogen Idec, Inc.(e) 201,495
2,800 Cambrex Corp.(d) 75,880
5,950 Genentech, Inc.(e) 323,918
----------
601,293
----------
Building Materials -- 1.2%
4,895 Lafarge SA, Sponsored ADR 118,214
4,100 Martin Marietta Materials, Inc. 220,006
14,900 Masco Corp. 544,297
----------
882,517
----------
Chemicals -- 1.1%
3,090 Akzo Nobel NV, Sponsored ADR 131,293
5,600 Engelhard Corp. 171,752
2,900 FMC Corp.(e) 140,070
12,100 Hercules, Inc.(e) 179,685
2,500 Minerals Technologies, Inc. 166,750
----------
789,550
----------
Commercial Services -- 1.9%
8,900 Copart, Inc.(e) 234,248
8,500 DeVry, Inc.(e) 147,560
7,800 First Health Group Corp.(e) 145,938
14,000 Gartner Group, Inc., Class A(e) 174,440
3,700 ITT Educational Services, Inc.(d) (e) 175,935
4,200 Keane, Inc.(e) 61,740
3,200 MoneyGram International, Inc. 67,648
3,225 Moody's Corp. $ 280,091
6,000 MPS Group, Inc.(e) 73,560
2,000 ProQuest Co.(e) 59,400
----------
1,420,560
----------
Computers -- 1.9%
7,050 Apple Computer, Inc.(e) 454,020
12,575 Dell, Inc.(e) 529,910
12,450 Network Appliance, Inc.(d) (e) 413,589
----------
1,397,519
----------
Cosmetics & Personal Care -- 0.2%
555 Kao Corp., Sponsored ADR 141,525
----------
Distribution & Wholesale -- 0.6%
3,325 Fastenal Co.(d) 204,687
5,000 United Stationers, Inc.(e) 231,000
----------
435,687
----------
Diversified Financial Services -- 5.6%
7,000 American Express Co. 394,590
3,675 Capital One Financial Corp.(d) 309,472
1,150 Chicago Mercantile Exchange(d) 263,005
8,400 Citigroup, Inc. 404,712
6,400 Fannie Mae 455,744
3,850 Goldman Sachs Group, Inc. 400,554
12,900 JPMorgan Chase & Co. 503,229
5,675 Legg Mason, Inc. 415,750
2,775 Lehman Brothers Holdings, Inc. 242,757
8,100 SLM Corp. 432,459
4,050 T. Rowe Price Group, Inc. 251,910
----------
4,074,182
----------
Electric -- 0.2%
1,490 E.ON AG, Sponsored ADR(d) 135,590
----------
Electrical Components & Equipment -- 0.5%
2,070 Hitachi, Ltd., Sponsored ADR 143,720
19,135 Johnson Electric Holdings, Ltd., Sponsored ADR 189,436
----------
333,156
----------
Electronics -- 0.9%
3,000 Applera Corp.-Applied Biosystems Group 62,730
6,395 Koninklijke Philips Electronics NV 169,467
20,835 NEC Corp., ADR 127,719
10,100 Thermo Electron Corp.(e) 304,919
----------
664,835
----------
Engineering & Construction -- 0.2%
31,505 ABB, Ltd., Sponsored ADR(e) 178,318
----------
Environmental Control -- 0.9%
15,000 Allied Waste Industries, Inc.(e) 139,200
16,400 Waste Management, Inc. 491,016
----------
630,216
----------
Food -- 2.7%
6,600 General Mills, Inc. 328,086
6,425 Groupe Danone, Sponsored ADR 118,477
6,200 HJ Heinz Co. 241,738
10,100 Kraft Foods, Inc., Class A(d) 359,661
7,320 Nestle SA, Sponsored ADR 477,691
2,415 Unilever PLC, Sponsored ADR 95,441
3,325 Whole Foods Market, Inc.(d) 317,039
----------
1,938,133
----------
Food Service -- 0.2%
30,690 Compass Group PLC, ADR(d) 150,381
----------
See accompanying notes to financial statements.
6
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Forest Products & Paper -- 0.2%
5,040 UPM-Kymmene Oyj, Sponsored ADR(d) $ 112,493
----------
Health Care-Products -- 3.3%
10,400 Baxter International, Inc. 359,216
3,400 Guidant Corp. 245,140
15,150 Johnson & Johnson 960,813
1,400 Kinetic Concepts, Inc.(e) 106,820
3,240 Luxottica Group SpA, Sponsored ADR 66,064
7,950 St. Jude Medical, Inc.(e) 333,343
3,100 Steris Corp.(e) 73,532
3,050 Zimmer Holdings, Inc.(e) 244,366
----------
2,389,294
----------
Health Care-Services -- 1.7%
3,755 Fresenius Medical Care AG, ADR 100,634
9,400 Health Management Associates, Inc., Class A(d) 213,568
2,200 Laboratory Corp. of America Holdings(e) 109,604
4,850 UnitedHealth Group, Inc. 426,945
3,375 WellPoint, Inc. 388,125
----------
1,238,876
----------
Holding Companies - Diversified -- 0.3%
4,840 Hutchison Whampoa, Ltd., ADR 224,576
----------
Home Furnishings -- 0.8%
8,000 Furniture Brands International, Inc.(d) 200,400
4,400 Maytag Corp.(d) 92,840
6,680 Pioneer Corp., ADR(d) 130,527
4,245 Sony Corp., Sponsored ADR 165,385
----------
589,152
----------
Household Products & Wares -- 0.8%
5,500 Fortune Brands, Inc. 424,490
7,700 Newell Rubbermaid, Inc. 186,263
----------
610,753
----------
Insurance -- 1.3%
3,900 Aflac, Inc. 155,376
5,830 AXA, Sponsored ADR 144,292
7,785 ING Groep NV, Sponsored ADR 235,496
2,200 MGIC Investment Corp.(d) 151,602
4,575 Prudential Financial, Inc. 251,442
----------
938,208
----------
Internet -- 2.4%
5,100 eBay, Inc.(d) (e) 593,028
1,675 Google, Inc., Class A(d) (e) 323,443
7,300 Symantec Corp.(e) 188,048
7,175 VeriSign, Inc.(e) 240,506
11,025 Yahoo!, Inc.(e) 415,422
----------
1,760,447
----------
Leisure Time -- 0.5%
3,000 Carnival Corp. 172,890
2,900 Harley-Davidson, Inc. 176,175
----------
349,065
----------
Lodging -- 0.3%
4,225 Starwood Hotels & Resorts Worldwide, Inc. 246,740
----------
Machinery - Diversified -- 0.3%
6,900 Flowserve Corp.(e) 190,026
----------
Media -- 4.3%
16,700 Comcast Corp., Class A(e) 548,428
16,700 DIRECTV Group (The), Inc.(e) 279,558
4,500 Entercom Communications Corp.(e) 161,505
61,600 Liberty Media Corp., Class A(e) 676,368
31,300 Time Warner, Inc.(e) 608,472
11,300 Viacom, Inc., Class B 411,207
17,200 Walt Disney Co. 478,160
----------
3,163,698
----------
Metal Fabricate & Hardware -- 0.3%
6,100 Mueller Industries, Inc.(d) $ 196,420
----------
Miscellaneous - Manufacturing -- 2.2%
2,200 Carlisle Cos., Inc. 142,824
4,800 Crane Co. 138,432
6,500 Danaher Corp. 373,165
5,800 Federal Signal Corp.(d) 102,428
12,100 General Electric Co. 441,650
6,400 Honeywell International, Inc. 226,624
14,250 Kawasaki Heavy Industries, Ltd., Sponsored ADR 90,488
2,000 Teleflex, Inc.(d) 103,880
----------
1,619,491
----------
Office & Business Equipment -- 1.0%
4,330 Canon, Inc., Sponsored ADR 234,946
31,200 Xerox Corp.(e) 530,712
----------
765,658
----------
Oil & Gas -- 1.3%
1,100 ConocoPhillips 95,513
1,545 ENI SpA, Sponsored ADR 194,423
3,725 EOG Resources, Inc. 265,816
1,630 Total SA, Sponsored ADR(d) 179,039
6,200 XTO Energy, Inc. 219,356
----------
954,147
----------
Oil & Gas Services -- 0.2%
2,400 Smith International, Inc.(e) 130,584
----------
Packaging & Containers -- 0.5%
1,800 Aptargroup, Inc. 95,004
2,800 Ball Corp. 123,144
4,100 Sonoco Products Co. 121,565
----------
339,713
----------
Pharmaceuticals -- 2.6%
8,300 Abbott Laboratories 387,195
10,100 Bristol-Myers Squibb Co. 258,762
1,900 Express Scripts, Inc.(e) 145,236
4,915 GlaxoSmithKline PLC, ADR 232,922
9,100 Merck & Co., Inc. 292,474
7,500 NBTY, Inc.(e) 180,075
2,730 Novartis AG, ADR 137,974
2,130 Sanofi-Aventis, ADR 85,307
2,085 Schering AG, ADR 154,811
----------
1,874,756
----------
Retail -- 7.3%
8,250 Chico's FAS, Inc.(d) (e) 375,623
4,400 Costco Wholesale Corp. 213,004
5,300 Dillard's, Inc., Class A(d) 142,411
7,800 Dollar Tree Stores, Inc.(e) 223,704
11,300 Foot Locker, Inc. 304,309
16,000 Gap (The), Inc.(d) 337,920
21,825 Home Depot, Inc. 932,801
11,660 Kingfisher PLC, Sponsored ADR 142,835
9,400 Kohl's Corp.(e) 462,198
3,800 Ltd. Brands 87,476
18,900 McDonald's Corp. 605,934
6,025 Petsmart, Inc.(d) 214,068
5,900 RadioShack Corp. 193,992
1,600 Regis Corp. 73,840
4,590 Signet Group PLC, Sponsored ADR 99,465
6,900 Starbucks Corp.(e) 430,284
5,200 Toys R US, Inc.(e) 106,444
3,400 Urban Outfitters, Inc.(e) 150,960
4,100 Wal-Mart Stores, Inc. 216,562
----------
5,313,830
----------
See accompanying notes to financial statements.
7
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Software -- 2.7%
2,600 Acxiom Corp. $ 68,380
4,125 Adobe Systems, Inc.(d) 258,803
9,700 Autodesk, Inc. 368,115
2,600 Fair Isaac Corp.(d) 95,368
9,200 First Data Corp. 391,368
9,125 Microsoft Corp. 243,729
18,500 Oracle Corp.(e) 253,820
9,800 Reynolds & Reynolds Co. (The), Class A 259,798
-----------
1,939,381
-----------
Telecommunications -- 2.7%
9,750 Cisco Systems, Inc.(e) 188,175
13,825 Juniper Networks, Inc.(e) 375,902
19,275 Motorola, Inc. 331,530
13,260 Nokia OYJ, Sponsored ADR 207,784
9,275 Qualcomm, Inc. 393,260
18,835 Telefonica Moviles SA, ADR(d) 239,393
8,295 Vodafone Group PLC, Sponsored ADR 227,117
-----------
1,963,161
-----------
Transportation -- 0.3%
3,750 Expeditors International Washington, Inc.(d) 209,550
-----------
Water -- 0.2%
4,310 Suez SA, ADR 115,293
-----------
Total Common Stocks (Identified Cost $42,691,838) 45,974,491
-----------
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 30.7%
Asset Backed Securities -- 0.3%
$ 100,000 Citibank Credit Card Issuance Trust,
Series 2003-A3, Class A3
3.100%, 3/10/2010 98,221
145,000 Citibank Credit Card Issuance Trust, Series 2003-A6,
Class A6 2.900%, 5/17/2010 141,173
-----------
239,394
-----------
Auto Manufacturers -- 0.3%
215,000 DaimlerChrysler North America Holding Corp., Note
6.400%, 5/15/2006 223,663
-----------
Banks -- 0.6%
395,000 Bank of America Corp., Subordinated Note
7.400%, 1/15/2011 457,559
-----------
Diversified Financial Services -- 5.1%
235,000 CIT Group, Inc., Senior Note
6.500%, 2/07/2006 243,260
445,000 Countrywide Home Loans, Inc., (MTN)
5.500%, 2/01/2007 461,294
235,000 Ford Motor Credit Co., Note
5.800%, 1/12/2009 240,203
425,000 General Electric Capital Corp., Note, (MTN)
6.000%, 6/15/2012 463,266
450,000 General Motors Acceptance Corp., Note
6.750%, 1/15/2006 461,646
450,000 Household Finance Corp., Note
4.625%, 1/15/2008 460,769
460,000 John Deere Capital Corp., Global Note
4.500%, 8/22/2007 470,596
438,000 Lehman Brothers Holdings, Inc., Global Note
6.250%, 5/15/2006 455,842
450,000 Morgan Stanley Dean Witter & Co., Global Note
6.100%, 4/15/2006 465,955
-----------
3,722,831
-----------
Electric -- 1.3%
440,000 Dominion Resources, Inc., Note
5.700%, 9/17/2012 465,874
$ 460,000 Duke Energy Corp., Senior Note
4.200%, 10/01/2008 $ 463,507
-----------
929,381
-----------
Food -- 1.3%
405,000 ConAgra Foods, Inc., Note
6.750%, 9/15/2011 $ 455,655
405,000 Kellogg Co., Note
6.600%, 4/01/2011 453,691
-----------
909,346
-----------
Government Agencies -- 9.5%
962,249 FHLMC
4.500%, with various maturities to 2034 (c) 953,632
345,000 FHLMC
4.875%, 3/15/2007 356,215
445,000 FHLMC
5.250%, 1/15/2006 454,532
361,010 FHLMC
5.500%, with various maturities to 2019 (c) 373,115
441,782 FHLMC
6.500%, with various maturities to 2033 (c) 463,672
120,129 FNMA
4.000%, 9/01/2019 117,344
689,834 FNMA
4.500%, with various maturities to 2019 (c) 688,071
1,538,49 FNMA
5.500%, with various maturities to 2034 (c) 1,589,735
1,417,96 FNMA
6.500%, with various maturities to 2034 (c) 1,488,879
450,000 FNMA (TBA)
4.500%, 1/01/2020 448,453
-----------
6,933,648
-----------
Media -- 0.6%
165,000 Comcast Cable Communications Corp., Note
6.750%, 1/30/2011 185,292
25,000 Comcast Corp., Note
5.500%, 3/15/2011 26,424
190,000 Time Warner, Inc., Note
7.625%, 4/15/2031 229,855
-----------
441,571
-----------
Mining -- 0.6%
460,000 Alcan, Inc., Senior Note
4.875%, 9/15/2012 467,182
-----------
Mortgage Related -- 2.4%
1,765,00 FNMA (TBA)
4.500%, 1/01/2035 1,705,431
-----------
Oil & Gas -- 0.7%
420,000 Transocean Sedco Forex, Inc., Note
6.625%, 4/15/2011 469,568
-----------
Pipelines -- 0.3%
220,000 Kinder Morgan, Inc., Senior Note
6.500%, 9/01/2012 241,818
-----------
Retail -- 0.6%
460,000 Target Corp., Note
3.375%, 3/01/2008 456,032
-----------
Telecommunications -- 1.0%
230,000 Sprint Capital Corp., Note
6.125%, 11/15/2008 246,657
95,000 Verizon Global Funding Corp., Global Note
7.375%, 9/01/2012 111,795
355,000 Verizon Global Funding Corp., Note
4.375%, 6/01/2013 345,920
-----------
704,372
-----------
See accompanying notes to financial statements.
8
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
CDC IXIS Moderate Diversified Portfolio -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of December 31, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Treasuries -- 6.1%
$825,000 U.S. Treasury Bond
5.250%, 2/15/2029 $ 865,412
430,000 U.S. Treasury Bond
5.375%, 2/15/2031 (d) 464,971
870,000 U.S. Treasury Note
2.375%, 8/15/2006 (d) 861,742
745,000 U.S. Treasury Note
4.250%, 8/15/2014 (d) 746,659
730,000 U.S. Treasury Note
5.000%, 8/15/2011 777,136
615,000 U.S. Treasury Note
6.250%, 2/15/2007 654,591
70,000 U.S. Treasury Note
6.500%, 5/15/2005 71,023
-----------
4,441,534
-----------
Total Bonds and Notes (Identified Cost $22,361,594) 22,343,330
-----------
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Short Term Investments -- 19.9%
$7,265,412 Repurchase Agreement with Investors Bank & Trust
Co. dated 12/31/2004 at 1.75% to be repurchased at
$7,266,472 on 1/03/2005, collateralized by $260,845
Federal National Mortgage Bond, 4.212%
due 4/01/2034 valued at $261,584 and $6,809,930
Small Business Administration Bond, 5.295%, due
8/25/2017 valued at $7,367,099 $ 7,265,412
11,787 Bank of America, 2.26%, due 2/15/2005(f) 11,787
294,677 Bank of America, 2.27%, due 1/18/2005(f) 294,677
294,676 Bank of Montreal, 2.125%, due 2/02/2005(f) 294,676
669,704 Bank of Montreal, 2.26%, due 1/28/2005(f) 669,704
294,676 Bank of Nova Scotia, 2.33%, due 1/13/2005(f) 294,676
117,871 BGI Institutional Money Market Fund(f) 117,871
235,741 BNP Paribas, 2.295%, due 2/23/2005(f) 235,741
117,870 Calyon, 2.27%, due 1/20/2005(f) 117,870
825,095 Calyon, 2.34%, due 2/02/2005(f) 825,095
55,694 Calyon, 2.435%, due 3/16/2005(f) 55,694
176,806 Federal Home Loan Bank, 2.184%, due 1/05/2005(f) 176,806
287,604 Fortis Bank, 2.14%, due 1/12/2005(f) 287,604
294,677 Fortis Bank, 2.20%, due 2/11/2005(f) 294,677
515,095 Goldman Sachs Group Inc., 2.353%, due 1/03/2005(f) 515,095
117,871 HBOS Halifax Bank of Scotland, 2.025%, due 117,871
1/21/2005(f)
117,871 Lloyds TSB Bank, 2.28%, due 2/02/2005(f) 117,871
73,488 Merrill Lynch Premier Institutional Fund(f) 73,488
353,612 Merrimac Cash Fund-Premium Class(f) 353,612
58,935 Ranger Funding, 2.271%, due 1/14/2005(f) 58,935
471,483 Royal Bank of Canada, 2.25%, due 1/19/2005(f) 471,483
294,677 Royal Bank of Scotland, 2.36%, due 2/17/2005(f) 294,677
1,275,000 U.S. Treasury Bill, 1.925%, due 1/13/2005 1,274,182
117,870 Wells Fargo, 2.27%, due 1/25/2005(f) 117,870
176,806 Wells Fargo, 2.32%, due 1/14/2005(f) 176,806
-----------
Total Short Term Investments (Identified Cost
$14,514,180) 14,514,180
-----------
Total Investments -- 113.7%
(Identified Cost $79,567,612) (b) 82,832,001
Other assets less liabilities (9,999,650)
-----------
Total Net Assets -- 100% $72,832,351
===========
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2004, the net unrealized appreciation on investments based
on cost of $79,619,784 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 $3,398,223
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (186,006)
----------
Net unrealized appreciation $3,212,217
==========
At December 31, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$3,261 in undistributed ordinary income and $154,621 in undistributed long
term capital gains.
(c) The Portfolio's investment in mortgage related securities of the Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association and
Government National Mortgage Association are interests in separate pools of
mortgages. All separate investments in securities of each issuer which have
the same coupon rate have been aggregated for the purpose of presentation
in the schedule of investments.
(d) All or a portion of this security was on loan to brokers at December 31,
2004.
(e) Non-income producing security.
(f) 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.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
TBA To Be Announced (see Note 2h of Notes to Financial Statements)
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited)
- --------------------------------------------------------------------------------
Diversified Financial Services 10.7%
Government Agencies 9.5
Retail 7.9
Treasuries 6.1
Media 4.9
Food 4.0
Telecommunications 3.7
Health Care-Products 3.3
Banks 2.8
Software 2.7
Pharmaceuticals 2.6
Internet 2.4
Mortgage Related 2.4
Miscellaneous - Manufacturing 2.2
Oil & Gas 2.0
Other, less than 2% each 26.6
See accompanying notes to financial statements.
9
- --------------------------------------------------------------------------------
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
December 31, 2004
ASSETS
Investments at cost $79,567,612
Net unrealized appreciation 3,264,389
-----------
Investments at value 82,832,001
Receivable for Fund shares sold 2,260,145
Dividends and interest receivable 304,619
Tax reclaims receivable 20
Receivable from investment adviser 36,752
Securities lending income receivable 832
-----------
TOTAL ASSETS 85,434,369
-----------
LIABILITIES
Collateral on securities loaned, at value 5,974,586
Payable for securities purchased 6,453,973
Deferred Trustees' Fees 2,946
Transfer agent fees payable 24,140
Accounting and administrative fees payable 5,754
Other accounts payable and accrued expenses 140,619
-----------
TOTAL LIABILITIES 12,602,018
-----------
NET ASSETS APPLICABLE TO COMMON SHARES $72,832,351
===========
NET ASSETS CONSIST OF:
Paid in capital 69,465,198
Undistributed (overdistributed) net
investment income (loss) (34,846)
Accumulated net realized gain (loss) on investments 137,610
Net unrealized appreciation (depreciation) of investments 3,264,389
-----------
NET ASSETS APPLICABLE TO COMMON SHARES $72,832,351
===========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $25,659,529
===========
Shares of beneficial interest 2,398,616
===========
Net asset value and redemption price per share $ 10.70
===========
Offering price per share (100/[100-maximum sales charge]
of net asset value) $ 11.35
===========
Class C shares:
(redemption price is equal to net asset value less any
applicable contingent deferred sales charges)
Net assets $47,172,822
===========
Shares of beneficial interest 4,421,293
===========
Net asset value and offering price per share $ 10.67
===========
See accompanying notes to financial 10 statements.
10
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
For the Period Ended December 31, 2004
INVESTMENT INCOME
Dividends $ 180,848
Interest 166,851
Securities lending income 2,183
Less net foreign taxes withheld (1,789)
----------
348,093
----------
Expenses
Management fees 120,418
Service fees - Class A 13,853
Service and distribution fees - Class C 86,262
Trustees' fees and expenses 6,312
Accounting and administrative 52,862
Custodian 112,219
Transfer agent fees 46,961
Audit and tax services 40,000
Legal 3,000
Shareholder reporting 26,000
Registration 45,000
Miscellaneous 9,000
----------
Total expenses before waivers 561,887
----------
Less reimbursement/waiver (263,368)
----------
Net expenses 298,519
----------
Net investment income 49,574
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain on:
Investments - net 141,889
Change in unrealized appreciation (depreciation) of:
Investments - net 3,264,389
----------
Net realized and unrealized gain on investments 3,406,278
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,455,852
==========
See accompanying notes to financial statements.
11
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
period
July 15, 2004
to
December 31, 2004
-----------------
FROM OPERATIONS
Net investment income $ 49,574
Net realized gain (loss) on investments 141,889
Net change in unrealized appreciation (depreciation) of
investments 3,264,389
-----------
Increase (decrease) in net assets resulting from operations 3,455,852
-----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (45,390)
Class C (43,309)
-----------
(88,699)
-----------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS: 69,465,198
-----------
Total increase (decrease) in net assets 72,832,351
NET ASSETS
Beginning of period --
-----------
End of period $72,832,351
===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (34,846)
===========
See accompanying notes to financial statements.
12
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period.
Income from investment operations:
-------------------------------------------
Net asset
value, Net realized
beginning Net and unrealized Total from
of investment gain (loss) on investment
the period income (b)(g) investments operations
---------- ------------- -------------- ----------
Class A
12/31/2004(e) $10.00 $0.03 $0.69 $0.72
Class C
12/31/2004(e) $10.00 $0.01 $0.67 $0.68
Less distributions:
----------------------------------------------
Dividends Distributions Net asset
from from net value, Total
net investment realized Total end of return
income capital gains distributions the period (%) (a)
-------------- ------------- ------------- ---------- -------
Class A
12/31/2004(e) $(0.02) $-- $(0.02) $10.70 7.21(d)
Class C
12/31/2004(e) $(0.01) $-- $(0.01) $10.67 6.81(d)
(a) A sales charge for Class A shares and a contingent deferred sales charge
for Class C shares are not reflected in total return calculations. Periods
less than one year are not annualized.
(b) Per share net investment income has been calculated using the average
shares outstanding during the period.
(c) The investment adviser agreed to reimburse a portion of the Portfolio's
expenses during the period. Without this reimbursement, expenses would have
been higher.
(d) Had certain expenses not been reduced during the period, total return would
have been lower.
(e) For the period July 15, 2004 (inception) through December 31, 2004.
(f) Computed on an annualized basis for periods less than one year.
(g) Includes special one-time distribution from Microsoft Corp. Without this
distribution, net investment income (loss) per share would have been $0.02
and $(0.01) for Class A and Class C shares, respectively, and the ratio of
net investment income (loss) to average net assets would have been 0.51%
and (0.14)% for Class A and Class C shares, respectively.
See accompanying notes to financial statements.
13
Ratios to average net assets:
-----------------------------
Net assets, Expenses after Net
end of reimbursement/ investment Portfolio
the period Expenses waiver income turnover
(000's) (%) (f) (%) (f) (%) (f)(g) rate (%)
- ---------- -------- -------------- ---------- ---------
$25,660 3.51(c) 1.65(c) 0.71 33
$47,173 4.26(c) 2.40(c) 0.12 33
14
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the Period Ended December 31, 2004
1. Organization. CDC Nvest Funds Trust III (the "Trust") is organized as a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as an open-end management
investment company. The 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 CDC IXIS Moderate Diversified Portfolio (the
"Portfolio"); the financial statements of the other Funds of the Trust are
presented in a separate report. The Portfolio commenced operations on July 15,
2004.
The Portfolio offers Class A and Class C shares. Class A shares are sold with a
maximum front end sales charge of 5.75%. Class C shares do not pay a front end
sales charge, pay higher ongoing Rule 12b-1 fees than Class A shares and may be
subject to a contingent deferred sales charge ("CDSC") of 1.00% if those shares
are redeemed within one year.
Expenses of the Portfolio 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 the Portfolio, if the Portfolio 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 the Portfolio in the preparation of
its financial statements. The Portfolio's 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
Portfolio 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, if no sale was
reported and in the case of over-the-counter securities not so listed, the last
reported bid price. 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
Portfolio's investment adviser and subadvisers, pursuant to procedures approved
by the Board of Trustees.
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 Portfolio 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. Investment income and realized and unrealized gains and losses are
allocated on a pro rata basis to each class based on the relative net assets of
each class to the total net assets of the Portfolio.
c. Foreign Currency Translation. The books and records of the Portfolio 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 Portfolio'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. Forward Foreign Currency Contracts. The Portfolio may use foreign currency
contracts to facilitate transactions in foreign securities and to manage the
Portfolio's currency exposure. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell are used to hedge the
Portfolio's investments against currency fluctuation. Also, a contract to buy or
sell can offset a previous contract. These contracts involve market risk in
excess of the unrealized gain or loss reflected in the Portfolio's Statement of
Assets and Liabilities. The U.S. dollar value of the currencies the Portfolio
has committed to buy or sell, if any, is shown in the portfolio composition
under the caption "Forward Currency Contracts Outstanding." These amounts
represent the aggregate exposure to each currency the Portfolio has acquired or
hedged through currency contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
15
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Period Ended December 31, 2004
e. Federal and Foreign Income Taxes. The Portfolio 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. The Portfolio
may be subject to foreign taxes on income and gains on investments that are
accrued based upon the Portfolio's understanding of the tax rules and
regulations that exist in the countries in which the Portfolio invests. Foreign
governments may also impose taxes or other payments on investments with respect
to foreign securities. Such taxes are accrued as applicable.
f. 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.
g. Repurchase Agreements. The Portfolio, through its custodian, receives
delivery of the underlying securities collateralizing repurchase agreements. It
is the Portfolio's policy that the market value of the collateral be at least
equal to 102% of the repurchase price, including interest. The Portfolio's
subadvisers are 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
the Portfolio's ability to dispose of the underlying securities.
h. Delayed Delivery Commitments. The Portfolio may purchase or sell securities
on a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated. Losses may arise
due to changes in the market value of the underlying securities or if the
counterparty does not perform under the contract. Collateral consisting of
liquid securities or cash and cash equivalents is maintained in an amount at
least equal to these commitments with the custodian.
3. Purchases and Sales of Securities. For the period ended December 31, 2004,
purchases and sales of securities (excluding short-term investments) were
$73,864,009 and $8,931,109, respectively.
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. IXIS Asset Management Advisors, L.P. ("IXIS Advisors"),
formerly CDC IXIS Asset Management Advisers, L.P., is the investment adviser to
the Portfolio. Under the terms of the management agreement for the reporting
period ended December 31, 2004, the Portfolio paid a management fee at an annual
rate of 0.85% of the first $1 billion of the Portfolio's average daily net
assets and 0.80% of the Portfolio's average daily net assets in excess of $1
billion, calculated daily and payable monthly.
For the period ended December 31, 2004, management fees for the Portfolio were
$120,418 (0.85% of average daily net assets).
Effective January 1, 2005, the management fee was reduced to an annual rate of
0.75% for the first $1 billion of average daily net assets and 0.70% of average
daily net assets in excess of $1 billion.
IXIS Advisors has entered into subadvisory agreements with Loomis, Sayles &
Company, L.P. ("Loomis Sayles"), Harris Associates, L.P. ("Harris Associates"),
Reich & Tang Asset Management, LLC ("Reich & Tang"), and Hansberger Global
Investors, Inc. ("Hansberger"). Payments to IXIS Advisors are reduced in the
amount of payments to the subadvisers.
IXIS Advisors, Loomis Sayles, Harris Associates and Reich & Tang are
subsidiaries of IXIS Asset Management North America, L.P. ( "IXIS North
America."). Hansberger is an affiliated money manager of IXIS North America.
Certain officers and directors of IXIS Advisors and its affiliates are also
officers or Trustees of the Portfolio.
For the period ended December 31, 2004, brokerage commissions paid to affiliated
broker/dealers by the Portfolio were $752.
b. Accounting and Administrative Expense. During the period, IXIS Asset
Management Services Company ("IXIS Services"), formerly CDC IXIS Asset
Management Services, Inc., a wholly owned subsidiary of IXIS North America,
performed certain accounting and administrative services for the Portfolio and
subcontracted with Investors Bank & Trust Co. ("IBT") to serve as
subadministrator. For the period ended December 31, 2004, the portfolio paid
IXIS Services a fee of $52,862, based on an annualized fee of $112,500.
Effective January 1, 2005, IXIS Advisors became administrator to the Portfolio
pursuant to an agreement among CDC Nvest Funds Trust I, CDC Nvest Funds Trust
II, CDC Nvest Funds Trust III, CDC Nvest Cash Management Trust, CDC Nvest
Companies Trust I ("CDC Nvest Funds Trusts"), Loomis Sayles Funds I, Loomis
Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS Advisors. Under the
agreement, the Portfolio will pay IXIS Advisors (and paid IXIS Services for the
period covered by this report) its pro rata portion of a group fee for these
services representing the higher amount based on the following calculations:
16
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Period Ended December 31, 2004
(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) The Portfolio'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 aggregate minimum fee of $5 million.
For the period ended December 31, 2004, the Portfolio paid $52,862 to IXIS
Services for accounting and administrative services.
c. Transfer Agent Fees. IXIS Services is the transfer and shareholder servicing
agent for the Portfolio and has subcontracted with Boston Financial Data
Services ("BFDS") to serve as sub-transfer agent. During the period, Class A and
Class C paid Transfer Agent fees monthly representing the higher amount based on
the following calculations:
(1) The Portfolio's pro rata portion of 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 Class A, Class B and Class C accounts in Load
Equity Funds. Load Equity Funds consist of all equity funds within the
CDC Nvest Funds Trusts, Loomis Sayles Growth Fund, CDC IXIS
International Equity Fund (renamed the Hansberger Foreign Growth Fund
on February 1, 2005) and Loomis Sayles Research Fund.
First Next Over
$5.7 million $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, allocated
based on the combined assets of Class A, Class B, and Class C.
or
(2) An allocated portion, based on eligible assets, of an annual
aggregate minimum fee of $8.4 million.
Effective January 1, 2005, each Load Equity Fund, for its Class A, B, and C
shares, pays fees to IXIS Services representing a pro rata portion of the
greater of:
(1) An aggregate annual minimum fee of approximately $6.8 million for
all Load Equity Funds; or
(2) An annual account based fee of $25.44 for each open account and
$2.00 for each closed account, aggregated for all Load Equity Funds.
Each class of shares is subject to a monthly class minimum of $1,500.
In addition, pursuant to other servicing agreements, the Portfolio pays service
fees to other firms that provide similar services for their own shareholder
accounts.
IXIS Services, BFDS and other firms are also reimbursed by the Portfolio for
out-of-pocket expenses. For the period ended December 31, 2004, the Portfolio
paid $31,040 to IXIS Services as compensation for its services as transfer
agent.
d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act, the
Trust has adopted a Service Plan relating to the Portfolio's Class A shares (the
"Class A Plan") and a Service and Distribution Plan relating to the Portfolio's
Class C shares (the "Class C Plan").
Under the Class A Plan, the Portfolio pays IXIS Asset Management Distributors,
L.P. ("IXIS Distributors") formerly CDC IXIS Asset Management Distributors,
L.P., the Portfolio's distributor (a wholly owned subsidiary of IXIS North
America), a monthly service fee at the annual rate of 0.25% of the average daily
net assets attributable to the Portfolio's Class A shares, as reimbursement for
expenses incurred by IXIS Distributors in providing personal services to
investors in Class A shares and/or the maintenance of shareholder accounts.
Under the Class C Plan, the Portfolio pays IXIS Distributors a monthly service
fee at the annual rate of 0.25% of the average daily net assets attributable to
the Portfolio's Class C shares, as compensation for services provided and
expenses incurred by IXIS Distributors in providing personal services to
investors in Class C shares and/or the maintenance of shareholder accounts.
Also under the Class C Plan, the Portfolio pays IXIS Distributors a monthly
distribution fee at the annual rate of 0.75% of the average daily net assets
attributable to the Portfolio's Class C shares, as compensation for services
provided and expenses incurred by IXIS Distributors in connection with the
marketing or sale of Class C shares.
17
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Period Ended December 31, 2004
For the period ended December 31, 2004, the Portfolio paid service fees of
$13,853 and $21,565 on Class A and Class C, respectively, and distribution fees
of $64,697 on Class C.
Commissions (including CDSC) on Portfolio shares paid to IXIS Distributors by
investors in shares of the Portfolio during the period ended December 31, 2004
were $358,965.
e. Trustees Fees and Expenses. The CDC Nvest Funds Trusts and the Loomis Sayles
Funds Trusts do not pay any compensation directly to their officers or Trustees
who are directors, officers or employees of IXIS Advisors, IXIS Distributors,
IXIS North America, IXIS Services or their affiliates. Each Trustee who is an
independent Trustee of the CDC Nvest Funds Trusts and the Loomis Sayles Funds
Trusts receives, in the aggregate, a retainer fee at the annual rate of $50,000
and meeting attendance fees of $5,000 for each meeting of the Board of Trustees
attended. Each committee chairman receives an additional retainer fee at the
annual rate of $7,000. Each committee member receives a meeting attendance fee
of $3,750 per committee meeting attended. The co-chairmen of the Board each
receive an additional annual retainer of $25,000. These fees are allocated to
the various series of the CDC Nvest Funds Trusts and the 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 funds of the CDC Nvest Funds Trusts and the
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. IXIS Services performs certain desktop publishing
services for the Portfolio. Fees for these services are presented in the
Statement of Operations as a part of shareholder reporting. For the period ended
December 31, 2004, the amount paid to IXIS Services as compensation for these
services was $132.
5. Security Lending. The Portfolio has entered into an agreement with IBT, as
agent of the Portfolio, 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
Portfolio receives fees for lending its securities. The market value of
securities on loan to borrowers and the value of collateral held by the
Portfolio with respect to such loans at December 31, 2004, were $5,809,231 and
$5,974,586, respectively.
6. Broker Commission Recapture. The Portfolio has entered into agreements with
certain brokers whereby the brokers will rebate a portion of brokerage
commissions. All amounts rebated by the brokers are returned to the Portfolio
under such agreements and are presented as realized gains in the Statement of
Operations. For the period ended December 31, 2004, the amounts rebated under
these agreements were $8,070.
7. Contingent Expense Obligations. IXIS Advisors has given a binding undertaking
to the Portfolio to defer its management fees and, if necessary, bear certain
expenses associated with the Portfolio to limit its operating expenses. This
undertaking is in effect until April 30, 2005 and will be reevaluated on an
annual basis. For the period ended December 31, 2004, $263,368 of class level
expenses were reimbursed.
IXIS Advisors shall be permitted to recover expenses it has borne (whether
through reduction of its management fee or otherwise) in later periods to the
extent the Portfolio's expenses fall below the expense limits, provided,
however, that the Portfolio is not obligated to pay such deferred fees more than
one year after the end of the fiscal year in which the fee was deferred.
At December 31, 2004, the expense limits as a percentage of average daily net
assets and amount subject to possible reimbursement under the expense limitation
agreements were as follows:
Cumulative Expenses
Expense Limit as a Percentage Expiration Waived or Reimbursed
of Average Daily Net Assets of Waiver Subject to Future Payment
- --------------------------------------------------------------------------
Class A Class C
------- -------
1.65% 2.40% April 30, 2005 $263,368
18
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
8. Capital Shares. The Portfolio may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
For the Period
July 15, 2004*
to December 31, 2004
------------------------
Shares Amount
--------- ------------
Class A
Shares sold 2,418,837 $24,714,691
Shares Issued in connection with the
reinvestment of:
Distributions from net investment income 849 8,967
--------- -----------
2,419,686 24,723,658
Shares repurchased (21,070) (222,356)
--------- -----------
Net increase 2,398,616 $24,501,302
--------- -----------
Shares Amount
--------- ------------
Class C
Shares sold 4,441,511 $45,170,380
Shares Issued in connection with the
reinvestment of:
Distributions from net investment income 252 2,656
--------- -----------
4,441,763 45,173,036
Shares repurchased (20,470) (209,140)
--------- -----------
Net increase 4,421,293 $44,963,896
--------- -----------
Increase derived from capital transactions 6,819,909 $69,465,198
========= ===========
*Commencement of operations.
19
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of CDC IXIS Moderate Diversified Portfolio -
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CDC IXIS Moderate Diversified
Portfolio (the "Portfolio") at December 31, 2004, and the results of its
operations, the changes in its net assets and the financial highlights for the
period 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 Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
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 audit, which included
confirmation of securities at December 31, 2004 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2005
20
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Trustee and Officer Information
- --------------------------------------------------------------------------------
The table below provides certain information regarding the Trustees and Officers
of CDC Nvest Funds Trust III (the "Trust"). Unless otherwise indicated, the
address of all persons below is 399 Boylston Street, Boston, MA 02116. The
statement of additional information includes additional information about the
Trustees of the Trust and is available by calling CDC Nvest Funds at
800-225-5478.
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ----------------------- -------------------------- ------------------------------ -----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee, Contract Review Douglas Dillon Professor and 41; Director, Taubman
(3/23/40) and Governance Committee Director for the Belfer Center Centers, Inc. (real estate
Member, since 1995 of Science and International investment trust); Advisory
Affairs, John F. Kennedy Board Member, USEC Inc.
School of Government, (energy supplier)
Harvard University
Edward A. Benjamin Trustee, Audit Committee Retired 41; Director, Coal, Energy
(5/30/38) Member, since 2003 Investments & Management,
LLC; Director, Precision
Optics Corporation (optics
manufacturer)
Daniel M. Cain Trustee, Chairman of the President and Chief Executive 41; Trustee, Universal
(2/24/45) Audit Committee, since Officer, Cain Brothers & Health Realty Income Trust;
1996; Co-Chairman of the Company, Incorporated Director, Sheridan Healthcorp
Board, since 2004 (investment banking) (physician practice
management)
Paul G. Chenault Trustee, Contract Review Retired; Trustee, First 41; Director, Mailco Office
(9/12/33) and Governance Committee Variable Life (variable life Products, Inc. (mailing
Member, since 2003 insurance) equipment)
Kenneth J. Cowan Trustee, Chairman of the Retired 41; None
(4/5/32) Contract Review and
Governance Committee,
since 1995; Co-Chairman of
the Board, since 2004
Richard Darman Trustee, Contract Review Partner, The Carlyle Group 41; Director and Chairman of
(5/10/43) and Governance Committee (investments); formerly, the Board of Directors, AES
Member, since 1996 Professor, John F. Kennedy Corporation (independent
School of Government, power company)
Harvard University
21
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Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ----------------------- -------------------------- ------------------------------ ----------------------------
INDEPENDENT TRUSTEES
continued
Sandra O. Moose Trustee, Audit Committee President, Strategic Advisory 41; Director, Verizon
(2/17/42) Member, since 1995 Services (management con- Communications; Director,
sulting); formerly, Senior Rohm and Haas Company
Vice President and Director, (specialty chemicals);
The Boston Consulting Director, AES Corporation
Group, Inc. (management
consulting)
John A. Shane Trustee, Contract Review President and Director, 41; Director, Gensym
(2/22/33) and Governance Committee Palmer Service Corporation Corporation (software and
Member, since 1995 (venture capital organization) technology services
provider); Director, Abt
Associates Inc. (research
and consulting)
INTERESTED TRUSTEES
Robert J. Blanding/1/ Trustee, since 2003 President, Chairman, 41; None
(4/17/47) Director and Chief Executive
555 California Street Officer, Loomis, Sayles &
San Francisco, CA 94104 Company, L.P.; President
and Chief Executive Officer -
Loomis Sayles Funds I; Chief
Executive Officer - Loomis
Sayles Funds II
John T. Hailer/2/ President, Chief Executive President and Chief 41; None
(11/23/60) Officer and Trustee, since Executive Officer, IXIS Asset
2000 Management Distributors,
L.P.; Executive Vice President
- Loomis Sayles Funds I;
President - Loomis Sayles
Funds II
OFFICERS
Coleen Downs Dinneen Secretary, Clerk and Chief Senior Vice President, Not Applicable
(12/16/60) Legal Officer, since 2004 General Counsel, Secretary
and Clerk (formerly, Deputy
General Counsel, Assistant
Secretary and Assistant
Clerk), IXIS Asset
Management Distribution
Corporation, IXIS Asset
Management Distributors,
L.P., IXIS Asset Management
Advisors, L.P. and IXIS Asset
Management Services
Company; Chief Compliance
Officer, IXIS Asset
Management Advisors, L.P.
22
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Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ----------------------- -------------------------- ------------------------------ ----------------------------
OFFICERS
(continued)
Michael C. Kardok Treasurer, Principal Senior Vice President, IXIS Not Applicable
(7/17/59) Financial and Accounting Asset Management Advisors,
Officer, since 2004 L.P. and IXIS Asset
Management Distributors,
L.P.; formerly, Senior Vice
President, IXIS Asset
Management Services
Company; formerly, Senior
Director, PFPC Inc; formerly,
Vice President - Division
Manager, First Data Investor
Services, Inc.
Frank LoPiccolo Anti-Money Laundering President, Chief Executive Not Applicable
(4/1/53) Officer, since 2003 Officer and Director (for-
merly, Executive Vice
President), IXIS Asset
Management Services
Company
John E. Pelletier Chief Operating Officer, Executive Vice President and Not Applicable
(6/24/64) since 2004 Chief Operating Officer
(formerly, General Counsel,
Secretary and Clerk), IXIS
Asset Management
Distributors, L.P. and IXIS
Asset Management
Advisors, L.P.; Executive
Vice President (formerly,
Senior Vice President,
General Counsel, Secretary
and Clerk), IXIS Asset
Management Distribution
Corporation; Director (for-
merly, President, Chief
Executive Officer, General
Counsel, Secretary and
Clerk), IXIS Asset
Management Services
Company
23
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Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held
- ----------------------- -------------------------- ------------------------------ ----------------------------
OFFICERS
(continued)
Kristin Vigneaux Chief Compliance Officer, Chief Compliance Officer for Not Applicable
(9/25/69) since 2004 Mutual Funds, IXIS Asset
Management Distributors, L.P.,
IXIS Asset Management
Advisors, L.P. and IXIS
Asset Management Services
Company; formerly, Vice
President, IXIS Asset
Management Services Company
* All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. At a meeting held on November 19, 2004,
the Trustees voted to suspend the retirement policy until 2006.
** Previous positions during the past five years with IXIS Asset Management
Distributors, L.P. (the "Distributor"), IXIS Asset Management Advisors,
L.P. or Loomis, Sayles & Company, L.P. are omitted if not materially
different from a trustee's or officer's current position with such entity.
As indicated, each Trustee is also a trustee of certain other investment
companies for which the Distributor acts as principal underwriter.
*** The Trustees of the Trusts serve as Trustees of a fund complex that
includes all series of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II,
CDC Nvest Funds Trust III, CDC Nvest Cash Management Trust, CDC Nvest
Companies Trust I, AEW Real Estate Income Fund, Loomis Sayles Funds I and
Loomis Sayles Funds II.
/1/ 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.
/2/ 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 IXIS Asset Management Distribution Corporation,
President and Chief Executive Officer of IXIS Asset Management Advisors,
L.P.
24
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 have 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 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 Funds. The table below sets forth fees
billed by the principal accountant, PricewaterhouseCoopers LLP, 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/1/ Tax fees/2/ All other fees
- -------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
- -------------------------------------------------------------------------------------------------
CDC Nvest Funds Trust III $20,000 $45,000 N/A N/A $4,365 $13,330 N/A N/A
- -------------------------------------------------------------------------------------------------
1. The tax fees consist of a review of the Trust's tax returns (2003 &
2004), tax compliance (2004), and year-end shareholder reporting
(2004).
Aggregate fees billed to the Trust for non-audit services for 2003 and 2004 were
$4,365 and $13,330, 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 IXIS Asset Management Advisors, L.P. and entities
controlling, controlled by or under common control with IXIS Asset Management
Advisors, 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
- --------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004
- --------------------------------------------------------------------------------
Control Affiliates $107,239 $115,650 N/A N/A N/A $12,000
- --------------------------------------------------------------------------------
1. The audit related fees consist of performing SAS 70 internal
examinations for two Trust affiliates, review of anti-money laundering
procedures for the investment adviser and review of 12b-1 expenditures
for the Trust's distributor.
Aggregate fees billed to Control Affiliates for non-audit services during 2003
and 2004 were $201,539 and $389,150, 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
engagements 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. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included as part of the Report to Shareholders filed as Item 1 herewith.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Securities Holders.
The following represents new procedures by which shareholders may recommend
nominees to the registrant's board of trustees:
Shareholders that wish to recommend a candidate to the Board must submit
any such recommendation in writing to the following address: Attention of the
Board of Trustees, c/o Secretary of the Funds, IXIS Asset Management Services
Advisor, L.P., 399 Boylston Street, Boston, MA 02116 (the "Shareholder
Recommendation"). Recommendations by email will not be accepted. The Shareholder
Recommendation must contain sufficient background information concerning the
candidate to enable a proper judgment to be made as to the candidate's
qualifications, which may include (i) the recommended candidate's knowledge of
the mutual fund industry; (ii) any experience possessed by the recommended
candidate's as a director or senior officer of other public companies; (iii) the
recommended candidate's educational background; (iv) the recommended candidate's
reputation for high ethical standards and personal and professional integrity;
(v) any specific financial, technical or other expertise possessed by the
recommended candidate, and the extent to which such expertise would complement
the Board's existing mix of skills and qualifications; (vi) the recommended
candidate's perceived ability to contribute to the ongoing functions of the
Board, including the recommended candidate's ability and commitment to attend
meetings regularly and work collaboratively with other members of the Board;
(vii) the recommended candidate's ability to qualify as an Independent Trustee
for purposes of applicable regulations; and (viii) such other factors as the
appropriate Board Committee may request in light of the existing composition of
the Board and any anticipated vacancies or other transitions. The Shareholder
Recommendation must be received in a timely manner (and in any event no later
than the date specified for receipt of shareholder proposals in any applicable
proxy statement with respect to a Fund). A Shareholder Recommendation shall be
kept on file and considered by the Board for six (6) months from the date of
receipt, after which the Shareholder Recommendation shall be considered stale
and discarded.
Item 11. 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 with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
Item 12. Exhibits.
(a) (1) Code of Ethics required by Item 2 hereof, filed herewith as
exhibit (a)(1)
(a) (2) Certifications of Principal Executive Officer and Principal
Financial Officer pursuant to 30a-2 under the Investment Company
Act of 1940 (17 CFR 270.30a-2), as herewith as exhibit (a)(2)(1)
and a(2)(2), respectively
(a) (3) Not applicable.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are
filed herewith as Exhibit (b)(1) and (b)(2), respectively.
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 18, 2005
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 18, 2005
By: /s/ Michael C. Kardok
----------------------------------------
Name: Michael C. Kardok
Title: Treasurer
Date: February 18, 2005