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
IXIS Advisor Funds Trust III
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(Exact name of Registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Coleen Downs Dinneen, Esq.
IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2810
Date of fiscal year end: December 31
Date of reporting period: December 31, 2005
Item 1. Reports to Stockholders.
The Registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
[LOGO]
IXIS
ADVISOR FUNDS
Equity Funds
Annual Report
December 31, 2005
CGM Advisor Targeted Equity Fund
Hansberger International Fund
Harris Associates Focused Value Fund
Harris Associates Large Cap Value Fund
IXIS U.S. Diversified Portfolio
Harris Associates
Loomis, Sayles & Company
Mercury Advisors
IXIS Value Fund
Harris Associates
Loomis, Sayles & Company
Vaughan Nelson Investment Management
Westpeak Global Advisors
Vaughan Nelson Small Cap Value Fund
Westpeak Capital Growth Fund
TABLE OF CONTENTS
Management Discussion and Performance.......Page 1
Portfolio of Investments...................Page 25
Financial Statements.......................Page 43
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
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Strategy:
Generally invests in a focused portfolio of common stocks of large-cap companies
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Inception Date:
November 27, 1968
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Manager:
G. Kenneth Heebner
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Symbols:
Class A NEFGX
Class B NEBGX
Class C NEGCX
Class Y NEGYX
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What 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
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Solid stock selection helped CGM Advisor Targeted Equity Fund deliver strongly
positive results for the year ended December 31, 2005. Class A shares of the
fund provided a total return of 13.19% at net asset value, including $0.02 in
dividends reinvested during the period. The fund's results were significantly
ahead of the 4.91% return on the Standard & Poor's 500 Index, and the 5.76%
average return on the funds in Morningstar's Large Blend category.
FUND EMPHASIZED ENERGY AND PHARMACEUTICALS
We maintained a fully invested position throughout the year in anticipation of
moderate economic growth, rising corporate profits, and modest interest rates.
Energy stocks dominated market performance, as soaring demand and fears about
supply sent oil prices to record highs.
We entered 2005 with roughly a quarter of the portfolio invested in
energy-related issues. This weighting moved higher throughout the year,
reflecting a combination of capital appreciation and additional new purchases.
We sold some stocks on strength during the second half of the year and ended
the period with more than 29% of the fund's total net assets invested in
energy-related industries.
The fund began 2005 with significant concentrations in hotel and mining
companies, but we sold these positions and used the proceeds to invest in
healthcare-related companies, which accounted for about 15% of the fund's total
net assets by the end of the year.
ENERGY STOCKS LEAD FUND PERFORMANCE
Among the top contributors to performance were ConocoPhillips, a leading
integrated oil company, and Halliburton, a major U.S. provider of oil services.
ConocoPhillips saw its stock price climb as a result of rising oil and gas
prices and increasing refinery margins. In addition, ConocoPhillips made a
substantial investment in LUKOIL, Russia's largest oil company, which added to
its oil reserves.
Halliburton benefited from a major increase in exploration and production
spending by energy companies seeking to increase production from existing
fields, and to discover new fields both domestically and abroad. The rapid
increase in the demand for exploration and production services has strained the
capacity of the oil-service industry, resulting in high oil prices and
contributing to large increases in the profitability of oil-service providers.
SELECT NON-ENERGY STOCKS ALSO CONTRIBUTED TO RESULTS
Several non-energy-related stocks, including Google, America Movil, and
Genentech, also benefited the fund. Global internet search engine Google was
the fund's top performer. Although the valuation of Google has been high all
year, it has enjoyed recent rapid earnings growth. Google is directly
benefiting from consumers' increasing use of the internet as well as from its
unique technology, which allows advertisers to pay only when customers access
their ads. America Movil, a major Latin American cellular telephone company,
profited from a favorable market environment as well as strong operating
performance from the country's rapidly growing cellular phone market.
Biotechnology company Genentech was also a standout, reflecting progress in the
company's medications for cancer and rheumatoid arthritis.
SEVERAL ISSUES DETRACTED FROM RESULTS
Online auction giant eBay was a negative, reflecting a sharp slowdown in the
company's growth rate, which disappointed investors early in the year. We sold
the stock. YUM! Brands, the global franchiser of Pizza Hut, Taco Bell, and
Kentucky Fried Chicken (KFC), also proved disappointing. Although YUM! Brands
continues to do well domestically, it has experienced weakness in China, where
sales at their KFC operation were impacted by concern over the avian flu. We
eliminated the position.
OUTLOOK IS FOR CONTINUED GLOBAL ECONOMIC EXPANSION
Although the world has been faced with significant increases in oil and gas
prices, this does not appear to have constrained economic activity. We believe
the global economy will continue to expand in the coming year, with moderate
inflation, providing a positive backdrop for stocks.
1
CGM ADVISOR TARGETED EQUITY FUND
Investment Results through December 31, 2005
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PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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, 1995 through December 31, 2005
Maximum
Net Asset Value/1/ Sales Charge/2/ S&P 500 Index/4/
---------------- ---------------- ----------------
12/31/1995 10,000 9,425 10,000
1/31/1996 10,351 9,756 10,340
2/29/1996 10,683 10,069 10,436
3/31/1996 10,683 10,069 10,537
4/30/1996 10,485 9,882 10,692
5/31/1996 10,646 10,034 10,968
6/30/1996 10,532 9,927 11,010
7/31/1996 9,916 9,346 10,523
8/31/1996 10,011 9,436 10,745
9/30/1996 10,698 10,083 11,350
10/31/1996 11,327 10,676 11,663
11/30/1996 12,209 11,507 12,545
12/31/1996 12,090 11,395 12,296
1/31/1997 13,181 12,423 13,064
2/28/1997 12,963 12,217 13,167
3/31/1997 12,412 11,698 12,626
4/30/1997 13,119 12,365 13,379
5/31/1997 13,763 12,972 14,194
6/30/1997 14,377 13,550 14,830
7/31/1997 15,770 14,863 16,010
8/31/1997 14,960 14,100 15,113
9/30/1997 15,726 14,821 15,941
10/31/1997 15,109 14,240 15,408
11/30/1997 14,937 14,078 16,122
12/31/1997 14,937 14,078 16,398
1/31/1998 15,180 14,308 16,580
2/28/1998 16,515 15,565 17,776
3/31/1998 17,577 16,566 18,686
4/30/1998 18,252 17,202 18,874
5/31/1998 17,965 16,932 18,549
6/30/1998 18,926 17,838 19,303
7/31/1998 19,026 17,932 19,097
8/31/1998 15,396 14,511 16,336
9/30/1998 15,506 14,614 17,383
10/31/1998 17,067 16,086 18,797
11/30/1998 18,487 17,424 19,936
12/31/1998 19,925 18,780 21,085
1/31/1999 21,276 20,053 21,967
2/28/1999 19,751 18,615 21,284
3/31/1999 20,225 19,062 22,135
4/30/1999 20,154 18,995 22,993
5/31/1999 19,505 18,383 22,450
6/30/1999 20,942 19,738 23,696
7/31/1999 20,450 19,274 22,956
8/31/1999 20,416 19,242 22,842
9/30/1999 19,205 18,101 22,216
10/31/1999 19,942 18,796 23,622
11/30/1999 20,696 19,506 24,102
12/31/1999 22,950 21,630 25,521
1/31/2000 21,155 19,939 24,239
2/29/2000 23,034 21,709 23,780
3/31/2000 23,285 21,946 26,107
4/30/2000 22,409 21,121 25,321
5/31/2000 21,513 20,276 24,802
6/30/2000 21,597 20,355 25,413
7/31/2000 20,908 19,706 25,016
8/31/2000 21,899 20,640 26,570
9/30/2000 21,106 19,893 25,167
10/31/2000 21,151 19,934 25,061
11/30/2000 20,952 19,747 23,085
12/31/2000 21,907 20,648 23,198
1/31/2001 19,964 18,816 24,021
2/28/2001 19,331 18,220 21,831
3/31/2001 18,840 17,757 20,448
4/30/2001 19,660 18,529 22,037
5/31/2001 19,263 18,155 22,184
6/30/2001 19,394 18,278 21,644
7/31/2001 18,829 17,747 21,431
8/31/2001 17,278 16,284 20,090
9/30/2001 15,609 14,711 18,467
10/31/2001 15,702 14,799 18,819
11/30/2001 17,371 16,373 20,263
12/31/2001 18,358 17,303 20,441
1/31/2002 18,922 17,834 20,142
2/28/2002 18,051 17,013 19,754
3/31/2002 18,356 17,301 20,497
4/30/2002 18,404 17,346 19,254
5/31/2002 18,216 17,169 19,112
6/30/2002 17,628 16,614 17,751
7/31/2002 15,677 14,775 16,367
8/31/2002 15,677 14,775 16,475
9/30/2002 14,713 13,867 14,684
10/31/2002 14,359 13,534 15,977
11/30/2002 14,006 13,201 16,917
12/31/2002 13,066 12,315 15,923
1/31/2003 13,066 12,315 15,506
2/28/2003 12,972 12,226 15,273
3/31/2003 13,277 12,514 15,422
4/30/2003 14,123 13,311 16,692
5/31/2003 15,345 14,462 17,571
6/30/2003 15,602 14,705 17,796
7/31/2003 15,297 14,417 18,109
8/31/2003 15,696 14,793 18,462
9/30/2003 15,884 14,971 18,266
10/31/2003 17,858 16,832 19,300
11/30/2003 18,564 17,496 19,470
12/31/2003 18,659 17,586 20,491
1/31/2004 18,235 17,187 20,867
2/29/2004 19,340 18,228 21,157
3/31/2004 20,234 19,070 20,838
4/30/2004 18,635 17,564 20,510
5/31/2004 19,082 17,985 20,792
6/30/2004 19,246 18,140 21,196
7/31/2004 18,330 17,276 20,495
8/31/2004 18,541 17,475 20,578
9/30/2004 19,693 18,560 20,800
10/31/2004 19,927 18,781 21,118
11/30/2004 20,820 19,622 21,973
12/31/2004 21,265 20,042 22,720
1/31/2005 21,078 19,866 22,167
2/28/2005 22,488 21,195 22,633
3/31/2005 21,501 20,265 22,232
4/30/2005 20,914 19,711 21,811
5/31/2005 21,502 20,265 22,505
6/30/2005 21,977 20,713 22,537
7/31/2005 23,106 21,778 23,375
8/31/2005 23,342 22,000 23,161
9/30/2005 24,213 22,821 23,349
10/31/2005 23,649 22,289 22,960
11/30/2005 24,025 22,643 23,828
12/31/2005 24,073 22,696 23,836
Average Annual Total Returns -- December 31, 2005
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
Class A (Inception 11/27/68)
Net Asset Value/1/ 13.19% 1.91% 9.18% --
With Maximum Sales Charge/2/ 6.71 0.71 8.54 --
Class B (Inception 2/28/97)
Net Asset Value/1/ 12.35 1.12 -- 6.44%
With CDSC/3/ 7.35 0.73 -- 6.44
Class C (Inception 9/1/98)
Net Asset Value/1/ 12.35 1.12 -- 4.70
With CDSC/3/ 11.35 1.12 -- 4.70
Class Y (Inception 6/30/99)
Net Asset Value/1/ 13.41 2.33 -- 2.56
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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/ 4.91% 0.54% 9.07% 6.95% 4.45% 0.09%
Morningstar Large Blend Fund Avg./5/ 5.76 0.50 8.12 6.45 4.97 0.89
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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.ixisadvisorfunds.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 12/31/05 12/31/04
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Common Stocks 99.0 99.4
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Commercial Paper 0.8 --
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Short-Term Investments and Other 0.2 0.6
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% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
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Total SA 6.2 5.6
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American International Group, Inc. 5.8 4.4
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Altria Group, Inc. 5.6 --
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Genentech, Inc. 5.4 --
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Procter & Gamble Co. 5.3 4.9
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BP PLC 5.3 4.7
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Toyota Motor Corp. 5.3 --
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Aflac, Inc. 5.3 --
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PepsiCo, Inc. 5.2 --
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General Electric Co. 5.1 --
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% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
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Oil & Gas 19.3 23.7
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Insurance 11.1 4.4
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Oil & Gas Services 9.9 --
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Miscellaneous --Manufacturing 7.1 --
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Biotechnology 6.5 --
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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 comparative performance figures shown for each Class of
fund shares are calculated as follows: Class B from 2/28/97; Class C from
9/30/98; and Class Y from 6/30/99.
2
HANSBERGER INTERNATIONAL FUND
PORTFOLIO PROFILE
Objective:
Seeks long-term growth of capital
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Strategy:
Invests in common stocks of small-, mid- and large-cap companies located
outside the United States. Assets are diversified across developed and emerging
markets
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Inception Date:
December 29, 1995
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Managers:
Growth:
Trevor Graham
Barry A. Lockhart
Patrick H. Tan
Thomas R.H. Tibbles
Value:
Ronald Holt
Robert Mazuelos
Lauretta Reeves
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Symbols:
Class A NEFDX
Class B NEDBX
Class C NEDCX
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What 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
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Two teams of international equity specialists manage Hansberger International
Fund - one focuses on value stocks and the other seeks growth potential. For
the year ended December 31, 2005, the fund's total return was 16.12%, 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, returned 14.02% and 17.11%,
respectively. The average performance of Morningstar's Foreign Large Blend
category was 14.54%. Neither the fund or its benchmarks includes U.S. stocks.
Its Morningstar category has only limited exposure to domestic equities.
ENERGY AND EMERGING-MARKET COUNTRIES POWERED THE VALUE SEGMENT
Companies in emerging economies were the value segment's best performing stocks
and energy was the strongest sector. Petrobras, a Brazilian oil company, was
one of the segment's best-performing individual holdings. Energy-related
investments around the world did well, including the natural gas utilities
stocks we selected. Our industrial stocks also did well in 2005. Japan's
Kawasaki Heavy Industries was a top performer. Kawasaki manufactures heavy
equipment for industrial customers, including airplane parts and engines for
rail, marine, and aerospace use, and has exposure to the consumer market
through its motorcycle and personal watercraft businesses. We sold the stock at
a profit late in December after it surpassed our expectations.
Although we find Japanese equities increasingly attractive, we have had some
disappointments, including Pioneer Corp., which manufactures electronic
products, such as DVD players and flat-screen televisions. This is a highly
competitive market, and Pioneer was unable to overcome pricing pressure, so we
sold the stock at a loss. We also eliminated Compass Group, a British food
services company whose stock declined as the company experienced pricing
pressure and lost some of its long-term contracts.
In spite of price gains in 2005, we continue to hold a substantial portion of
assets in energy. We also see opportunities in some of Europe's stronger
companies, where merger activity may accelerate, as well as in Japan. Emerging
markets will remain a focus for this segment, but more in Asia than in Latin
America, where several countries will hold national elections in 2006.
ASIAN COMPANIES BENEFITED THE GROWTH PORTFOLIO
Financial companies were among the best performers for the growth portfolio in
2005. Our strongest individual holding was South Korea's Kookmin Bank. Korea's
currency gained strength during the year, and its domestic economy improved
along with the credit cycle. Kookmin's management has been successful at
diversifying and cutting costs and they are active in mergers and acquisitions.
Another beneficiary of Korea's strong economy and currency was Samsung
Electronics, also among our top performers. Samsung manufactures silicon chips,
memory, and LCD screens as well as cell phones. An integrated company, Samsung
makes its own components, and has a strong management team, competitive
products, and a willingness to invest to stimulate future growth.
Disappointments this year included British Sky Broadcasting (BSB), which
supplies digital television programming in the U.K. BSB has been adding content
(movies, sports, etc.) and we believe BSB's audience will expand with the
growth in popularity of Personal Video Recorders (PVRs), which allow viewers to
record programs to view later. We believe the flexibility PVRs provide may
encourage more people to sign up for premium programming, adding to BSB's
already dominant market share. However, investors generally passed on the stock
in 2005; we have been capitalizing on periods of price weakness to add to the
fund's position.
Another stock that disappointed us was France's STMicroelectronics. The
semiconductor business is highly competitive and the company has been
experiencing cyclical weakness. We sold the stock to free up capital to pursue
other opportunities.
We look for stable growth globally in 2006 and beyond. Japan seems to be
overcoming past difficulties, and the supply/demand ratio for commodities
appears tight worldwide. In general, we look for stable growth in 2006, with
perhaps the greatest opportunities in those countries that are farther behind
in the economic cycle than the United States.
3
HANSBERGER INTERNATIONAL FUND
Investment Results through December 31, 2005
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PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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/7/
[CHART]
December 31, 1995 through December 30, 2005
Maximum MSCI MSCI ACWI
Net Asset Sales EAFE ex USA
Value/1/ Charge/2/ Index/4/ Index/5/
---------- ---------- ---------- -----------
12/31/1995 10,000 9,425 10,000 10,000
1/31/1996 10,088 9,508 10,043 10,137
2/29/1996 10,264 9,673 10,080 10,137
3/31/1996 10,527 9,922 10,297 10,327
4/30/1996 10,872 10,246 10,598 10,640
5/31/1996 11,136 10,495 10,406 10,480
6/30/1996 11,176 10,533 10,467 10,533
7/31/1996 10,664 10,051 10,164 10,183
8/31/1996 10,952 10,322 10,189 10,243
9/30/1996 11,136 10,496 10,462 10,497
10/31/1996 11,048 10,413 10,357 10,392
11/30/1996 11,495 10,834 10,772 10,793
12/31/1996 11,665 10,995 10,636 10,668
1/31/1997 12,136 11,438 10,266 10,472
2/28/1997 12,387 11,675 10,437 10,664
3/31/1997 12,265 11,560 10,477 10,641
4/30/1997 12,387 11,675 10,535 10,731
5/31/1997 13,027 12,278 11,223 11,394
6/30/1997 13,626 12,843 11,845 12,023
7/31/1997 14,144 13,331 12,039 12,266
8/31/1997 13,351 12,583 11,142 11,301
9/30/1997 14,081 13,271 11,769 11,912
10/31/1997 13,060 12,309 10,867 10,898
11/30/1997 12,907 12,165 10,759 10,762
12/31/1997 13,145 12,389 10,855 10,886
1/31/1998 13,103 12,349 11,354 11,211
2/28/1998 13,995 13,190 12,085 11,959
3/31/1998 14,565 13,727 12,460 12,373
4/30/1998 14,649 13,807 12,561 12,461
5/31/1998 14,352 13,527 12,503 12,235
6/30/1998 14,055 13,247 12,601 12,189
7/31/1998 14,013 13,207 12,731 12,305
8/31/1998 11,793 11,115 11,157 10,570
9/30/1998 11,682 11,010 10,818 10,346
10/31/1998 12,533 11,812 11,948 11,430
11/30/1998 13,204 12,445 12,563 12,044
12/31/1998 13,672 12,886 13,062 12,459
1/31/1999 14,148 13,334 13,027 12,446
2/28/1999 13,969 13,166 12,719 12,167
3/31/1999 14,539 13,703 13,253 12,755
4/30/1999 15,321 14,440 13,793 13,393
5/31/1999 14,938 14,079 13,086 12,764
6/30/1999 15,814 14,905 13,599 13,350
7/31/1999 15,635 14,736 14,006 13,663
8/31/1999 15,524 14,631 14,061 13,711
9/30/1999 15,167 14,295 14,205 13,804
10/31/1999 15,702 14,800 14,740 14,318
11/30/1999 16,875 15,905 15,256 14,890
12/31/1999 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 14103.7
4/30/2004 17,397 16,397 13,514 13665.38
5/31/2004 17,455 16,451 13,555 13696.23
6/30/2004 17,745 16,724 13,875 14005.75
7/31/2004 16,944 15,970 13,427 13597.59
8/31/2004 17,095 16,112 13,489 13706.47
9/30/2004 17,536 16,528 13,844 14147.16
10/31/2004 18,046 17,009 14,317 14639.2
11/30/2004 19,100 18,002 15,299 15655.3
12/31/2004 19,841 18,701 15,971 16327.48
1/31/2005 19,413 18,297 15,679 16046.28
2/28/2005 20,479 19,301 16,360 16837.76
3/31/2005 19,911 18,766 15,955 16381.02
4/30/2005 19,447 18,329 15,598 15977.04
5/31/2005 19,517 18,395 15,622 16077.13
6/30/2005 19,726 18,592 15,835 16379.73
7/31/2005 20,480 19,302 16,322 16984.07
8/31/2005 21,117 19,903 16,739 17418.74
9/30/2005 21,685 20,438 17,488 18317.24
10/31/2005 21,082 19,870 16,978 17650.4
11/30/2005 21,719 20,470 17,398 18243.83
12/31/2005 23,046 21,726 18,209 19121.61
Average Annual Total Returns -- December 31, 2005
1 YEAR 5 YEARS/7/ 10 YEARS/7/
CLASS A (Inception 12/29/95)
Net Asset Value/1/ 16.12% 6.89% 8.71%
With Maximum Sales Charge/2/ 9.47 5.63 8.07
CLASS B (Inception 12/29/95)
Net Asset Value/1/ 15.27 6.09 7.92
With CDSC/3/ 10.27 5.77 7.92
CLASS C (Inception 12/29/95)
Net Asset Value/1/ 15.26 6.09 7.92
With CDSC/3/ 14.26 6.09 7.92
- --------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
MSCI ACWI ex-U.S. Index/5/ 17.11% 6.66% 6.70%
MSCI EAFE Index/4/ 14.02 4.94 6.18
Morningstar Foreign Large Blend Fund Avg./6/ 14.54 2.92 6.47
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.ixisadvisorfunds.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 12/31/05 12/31/04
- -----------------------------------------------------------
Common Stocks 98.3 97.4
- -----------------------------------------------------------
Preferred Stocks 0.5 --
- -----------------------------------------------------------
Short-Term Investments and Other 1.2 2.6
- -----------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
- -----------------------------------------------------------
UniCredito Italiano SpA 1.7 1.1
- -----------------------------------------------------------
HBOS PLC 1.7 1.6
- -----------------------------------------------------------
Novartis AG 1.5 1.6
- -----------------------------------------------------------
British Sky Broadcasting PLC 1.4 1.2
- -----------------------------------------------------------
Royal Bank of Scotland Group PLC 1.4 1.8
- -----------------------------------------------------------
Schneider Electric SA 1.3 0.7
- -----------------------------------------------------------
Canon, Inc. 1.3 1.7
- -----------------------------------------------------------
Sumitomo Mitsui Financial Group, Inc. 1.3 0.8
- -----------------------------------------------------------
Denso Corp. 1.3 0.8
- -----------------------------------------------------------
Nestle SA 1.2 0.9
- -----------------------------------------------------------
% of Net Assets as of
FIVE LARGEST COUNTRIES 12/31/05 12/31/04
- -----------------------------------------------------------
United Kingdom 19.8 19.0
- -----------------------------------------------------------
Japan 18.9 18.7
- -----------------------------------------------------------
France 10.2 13.9
- -----------------------------------------------------------
Switzerland 8.3 5.6
- -----------------------------------------------------------
Germany 5.2 7.2
- -----------------------------------------------------------
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/Morgan Stanley Capital International Europe Australasia and Far East Index
(MSCI EAFE) is an unmanaged index designed to measure developed market
equity performance, excluding the United States and Canada.
/5/Morgan Stanley Capital International All Countries World Index ex-U.S. (MSCI
ACWI ex-U.S. Index) is an unmanaged index designed to measure equity market
performance in developed and emerging markets, 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/Fund performance has been increased by expense waivers, without which
performance would have been lower.
4
HARRIS ASSOCIATES FOCUSED VALUE FUND
PORTFOLIO PROFILE
Objective:
Seeks long-term capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Focuses on 25 to 30 stocks of mid- to large-cap U.S. companies
- --------------------------------------------------------------------------------
Inception Date:
March 15, 2001
- --------------------------------------------------------------------------------
Managers:
Floyd J. Bellman
Robert M. Levy
- --------------------------------------------------------------------------------
Symbols:
Class A NRSAX
Class B NRSBX
Class C NRSCX
- --------------------------------------------------------------------------------
What 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
- --------------------------------------------------------------------------------
Costly energy, rising interest rates, and natural disasters prevented the
equity markets from gaining traction, leaving most major indexes little changed
in 2005. However, strong economic data restored confidence to the markets late
in the year, aided by a retreat in energy prices.
Harris Associates Focused Value Fund's total return for the year ended December
31, 2005 was 5.74%, based on the net asset value of the fund's Class A shares
and $1.74 in capital gains reinvested during the period. The fund outperformed
its benchmark, the Standard & Poor's 500 Index, which returned 4.91% for the
period, but results were slightly below the average 5.87% return on
Morningstar's Large Value category.
ENERGY, HEALTHCARE AND FINANCIAL HOLDINGS AIDED RETURNS
Burlington Resources was the fund's number one performer in 2005. Burlington,
which has a heavy commitment to natural gas, benefited from stable gas prices
when oil prices slipped in the fall. Shares later rose as ConocoPhillips
announced plans to acquire the company.
We believe demographic trends and underlying fundamentals are favorable for the
healthcare industry. Our value-focused selection process steered us toward some
smaller, niche companies that contributed to results. Hospira, a maker of
specialty injectable pharmaceuticals and other drug-delivery systems, has moved
ahead steadily since it was spun off from Abbott Laboratories. Omnicare, which
provides pharmaceutical and pharmacist consulting services to nursing homes, is
expected to benefit further now that a federal reimbursement schedule has
replaced a patchwork of state plans.
Although the fund was underweight in financial stocks relative to the
benchmark, good selection within the sector led to positive performance.
Washington Mutual rebounded thanks to successful reconfiguring of the mortgage
division in the face of a housing slowdown. Efforts to balance revenues between
fee-based operations and traditional lending functions have also moved forward.
If the Federal Reserve Board ends its series of rate hikes in the near future,
as many market analysts expect, we believe financial stocks in general will
benefit.
RETAILERS WERE MIXED, MEDIA AND OTHER STOCKS LAGGED
Among consumer discretionary issues, retailers generally suffered from low
earnings projections, despite solid business results. Women's retailer Liz
Claiborne sagged under investor concerns about weak holiday sales. We continue
to view this company as one of the country's best-run apparel companies. More
positively, TJX, which operates T.J. Maxx, Marshall's, HomeGoods, and other
off-price retail chains, enjoyed better profit margins as many consumers
favored lower-priced goods.
Media companies are suffering from negative investor perception despite good
business conditions. Liberty Media languished as investors focused on the
competitive environment and overlooked strong fundamentals. Time Warner's
management faced challenges from outside investors concerning its allocation of
capital and low stock valuation. However, revenues have been growing and we
believe the company's fundamental outlook is strong.
Famed motorcycle company Harley-Davidson's stock fell early in the year over
inventory and production concerns. Management is trying to align production
levels with demand while keeping inventory lean to support firmer pricing. This
strategy risks losing sales opportunities and adding volatility to earnings,
but we like the company and are remaining patient.
ENVIRONMENT FOR EQUITIES SEEMS FAVORABLE
Our focus is always on selecting individual stocks we think are attractively
valued, rather than on sector allocation. We believe valuations of the stocks
in the portfolio currently are reasonable relative to the market in general and
that the management teams at the companies we hold are also using capital
wisely. All in all, we believe the environment for equities looks favorable:
modest economic growth, moderate inflation, and flattening energy prices. Some
slowing of consumer spending would not surprise us, but capital investment by
companies seems to be accelerating. Therefore, we expect the pattern of
sluggish job creation to continue, as companies focus on modernizing facilities
and improving worker efficiency.
5
HARRIS ASSOCIATES FOCUSED VALUE FUND
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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/7/
[CHART]
March 15, 2001 (inception) through December 31, 2005
Net Maximum
Asset Sales S&P 500
Value/1/ Charge/2/ Index/4/
---------- ---------- ----------
3/15/2001 10,000 9,425 10,000
3/31/2001 10,090 9,510 10,000
4/30/2001 10,420 9,821 10,777
5/31/2001 10,690 10,075 10,849
6/30/2001 10,990 10,358 10,585
7/31/2001 11,310 10,660 10,481
8/31/2001 10,870 10,245 9,825
9/30/2001 10,240 9,651 9,032
10/31/2001 10,000 9,425 9,204
11/30/2001 10,680 10,066 9,910
12/31/2001 10,960 10,330 9,997
1/31/2002 10,890 10,264 9,851
2/28/2002 10,600 9,990 9,661
3/31/2002 10,910 10,282 10,024
4/30/2002 10,859 10,235 9,416
5/31/2002 10,929 10,300 9,347
6/30/2002 10,079 9,499 8,681
7/31/2002 9,619 9,066 8,005
8/31/2002 9,959 9,386 8,057
9/30/2002 8,568 8,076 7,181
10/31/2002 8,968 8,453 7,813
11/30/2002 9,468 8,924 8,273
12/31/2002 9,238 8,707 7,787
1/31/2003 9,008 8,490 7,583
2/28/2003 8,888 8,377 7,469
3/31/2003 8,988 8,471 7,542
4/30/2003 9,507 8,960 8,163
5/31/2003 10,117 9,535 8,593
6/30/2003 10,336 9,742 8,703
7/31/2003 10,256 9,667 8,856
8/31/2003 10,676 10,062 9,029
9/30/2003 10,556 9,949 8,933
10/31/2003 11,196 10,552 9,439
11/30/2003 11,687 11,015 9,522
12/31/2003 11,787 11,109 10,021
1/31/2004 12,097 11,401 10,205
2/29/2004 12,177 11,477 10,347
3/31/2004 11,937 11,251 10,191
4/30/2004 11,777 11,100 10,031
5/31/2004 12,037 11,345 10,168
6/30/2004 11,907 11,223 10,366
7/31/2004 11,677 11,006 10,023
8/31/2004 11,627 10,959 10,064
9/30/2004 11,938 11,251 10,173
10/31/2004 12,148 11,449 10,328
11/30/2004 12,648 11,921 10,746
12/31/2004 13,058 12,307 11,111
1/31/2005 12,608 11,883 10,841
2/28/2005 12,987 12,240 11,069
3/31/2005 12,817 12,080 10,873
4/30/2005 12,597 11,872 10,667
5/31/2005 13,046 12,296 11,006
6/30/2005 13,415 12,644 11,022
7/31/2005 13,876 13,078 11,431
8/31/2005 13,856 13,059 11,327
9/30/2005 13,607 12,824 11,419
10/31/2005 13,156 12,400 11,229
11/30/2005 13,626 12,843 11,653
12/31/2005 13,810 13,016 11,657
Average Annual Total Returns -- December 31, 2005
SINCE
1 YEAR INCEPTION/7/
CLASS A (Inception 3/15/01)
Net Asset Value/1/ 5.74% 6.96%
With Maximum Sales Charge/2/ -0.36 5.65
CLASS B (Inception 3/15/01)
Net Asset Value/1/ 4.96 6.16
With CDSC/3/ 0.39 5.82
CLASS C (Inception 3/15/01)
Net Asset Value/1/ 4.96 6.16
With CDSC/3/ 4.05 6.16
- --------------------------------------------------------
SINCE
COMPARATIVE PERFORMANCE 1 YEAR INCEPTION/6/
S&P 500 Index/4/ 4.91% 3.28%
Morningstar Large Value Fund Avg./5/ 5.87 5.23
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.ixisadvisorfunds.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 12/31/05 12/31/04
- ------------------------------------------------------
Common Stocks 93.9 90.6
- ------------------------------------------------------
Short-Term Investments and Other 6.1 9.4
- ------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
- ------------------------------------------------------
Washington Mutual, Inc. 5.5 15.3
- ------------------------------------------------------
Raytheon Co. 5.0 4.0
- ------------------------------------------------------
R R Donnelley & Sons Co. 4.7 4.9
- ------------------------------------------------------
EW Scripps Co. 4.4 --
- ------------------------------------------------------
Yum! Brands, Inc. 4.4 6.7
- ------------------------------------------------------
H&R Block, Inc. 4.3 6.6
- ------------------------------------------------------
TJX Cos., Inc. 3.9 4.2
- ------------------------------------------------------
Knight-Ridder, Inc. 3.8 3.3
- ------------------------------------------------------
McDonald's Corp. 3.8 --
- ------------------------------------------------------
Conseco, Inc. 3.7 --
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
- ------------------------------------------------------
Media 17.8 11.5
- ------------------------------------------------------
Commercial Services 9.0 14.5
- ------------------------------------------------------
Savings & Loans 8.3 15.3
- ------------------------------------------------------
Restaurants 8.2 --
- ------------------------------------------------------
Retail 7.3 13.5
- ------------------------------------------------------
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 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 comparative performance figures shown are calculated
from 3/31/01.
/7/Fund performance has been increased by expense waivers, without which
performance would have been lower.
6
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:
Edward S. Loeb
Michael J. Mangan
Diane Mustain
- --------------------------------------------------------------------------------
Symbols:
Class A NEFOX
Class B NEGBX
Class C NECOX
Class Y NEOYX
- --------------------------------------------------------------------------------
What You Should Know:
Value stocks may fall out of favor with investors and underperform the overall
market during any given period.
Management Discussion
- --------------------------------------------------------------------------------
Record high oil prices, rising interest rates, and natural disasters held major
stock market indexes to relatively modest gains in 2005, although many
large-cap stocks were strong. Harris Associates Large Cap Value Fund's
disappointing return for the period reflects the fund's limited exposure to
energy stocks and investors' lack of recognition of many highly profitable
companies.
For the year ended December 31, 2005, the fund's Class A shares provided a
total return of -0.19% at net asset value, with $0.01 in dividends reinvested
during the period. These results trailed the fund's benchmark, the Russell 1000
Value Index, which returned 7.05% for the period. The average return on the
funds in Morningstar's Large Blend category was 5.76%.
TECHNOLOGY STOCKS, McDONALD'S, AND UNION PACIFIC AIDED RESULTS
After years when stock prices declined while fundamentals improved, many
technology issues have become attractive to value-oriented investors. As a
result, we increased the fund's technology exposure significantly over this
period. A new CEO at Hewlett-Packard has refocused the company, instituting
cost cuts and allocating capital more effectively, which was reflected in the
stock price. We bought shares of Texas Instruments during a temporary price
drop and they later sprang back. Texas Instruments' chips are used in high-tech
consumer products, a business segment where margins look attractive and
earnings seem less dependent on economic cycles. Management is also pursuing
such shareholder-friendly initiatives as share repurchases and dividend
increases. Dell and Intel are among the fund's other high-tech holdings.
McDonald's, one of the fund's largest holdings at year-end, continues to make
good on its revised business strategy. Management now pursues increased
profitability within each outlet through better service and menu quality. Union
Pacific, which has been working to improve efficiency, benefited from
increasing demand for oil- and coal-hauling capacity. Improved conditions in
the investment banking business benefited Morgan Stanley, which the fund
purchased relatively recently; shares rebounded following management changes.
LACK OF ENERGY EXPOSURE PENALIZED RETURNS
Key to the fund's underperformance was our lack of exposure to energy stocks,
this year's strongest sector. We preferred not to pursue energy companies or
others whose earnings are tied to volatile commodity prices. Instead, we looked
for opportunities among out-of-favor stocks whose longer-term prospects
appeared more attractive. The decision to avoid energy hurt performance as
prices for oil and gas reached record levels.
FANNIE MAE, MEDIA, AND RETAIL HOLDINGS DISAPPOINTED
Disappointments included mortgage giant Fannie Mae, which we sold on mounting
concerns about delays in the company's release of financial statements and the
competitive environment for home mortgages. Investors generally continued to be
negative about media stocks in light of industry challenges that included
shifting business models in cable and declining newspaper profits. As a result,
performance of the fund's media holdings was poor despite strengthening
earnings prospects for the companies we selected. For example, earnings are
meeting our expectations at Time Warner, parent company of America Online
(AOL), where we believe Google's recent partnership with AOL implies greater
value than is seen currently in the market. Time Warner has also stepped up its
program of buying back its stock. Shares of Liberty Media and Comcast also
disappointed, while Viacom split itself in two in hopes of realizing greater
shareholder value. The Gap, Inc., operators of Gap, Banana Republic and Old
Navy stores, stumbled over incorrect fashion choices and merchandise selection.
SEEKING VALUE IN NEGLECTED COMPANIES
Although stock prices may not have reflected it, our portfolio companies are
largely tracking close to our earnings estimates. Meanwhile, investors have
been looking overseas following a couple of disappointing years in the U.S.
markets. Investors also seem less interested in quality, pushing up more
speculative issues while companies with better business models linger at
average or sub-par valuations. These tendencies to overlook value and quality
among U.S. stocks suit our value-focused, stock-specific selection process,
allowing us to upgrade the portfolio under what we believe are opportune
conditions.
7
HARRIS ASSOCIATES LARGE CAP VALUE FUND
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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/7/
[CHART]
December 31, 1995 through December 31, 2005
Net Asset Maximum Sales Russell 1000
Value/1/ Charge/2/ Value Index/4/
---------- --------------- -------------------
12/31/1995 10,000 9,425 10,000
1/31/1996 10,313 9,720 10,311
2/29/1996 10,369 9,772 10,608
3/31/1996 10,421 9,821 10,257
4/30/1996 10,455 9,854 10,400
5/31/1996 10,615 10,005 9,980
6/30/1996 10,388 9,790 10,096
7/31/1996 9,871 9,304 10,407
8/31/1996 10,108 9,527 10,819
9/30/1996 10,626 10,015 11,057
10/31/1996 10,953 10,323 11,407
11/30/1996 11,927 11,241 11,886
12/31/1996 11,721 11,047 12,047
1/31/1997 12,303 11,596 12,466
2/28/1997 12,456 11,739 12,642
3/31/1997 11,914 11,229 13,099
4/30/1997 12,541 11,819 12,969
5/31/1997 13,344 12,577 13,626
6/30/1997 13,998 13,193 13,969
7/31/1997 14,880 14,025 14,404
8/31/1997 14,456 13,625 14,513
9/30/1997 15,348 14,465 14,760
10/31/1997 14,676 13,832 14,816
11/30/1997 15,308 14,428 15,002
12/31/1997 15,639 14,740 15,014
1/31/1998 15,731 14,827 14,446
2/28/1998 16,994 16,017 14,860
3/31/1998 17,953 16,921 15,450
4/30/1998 18,044 17,007 16,048
5/31/1998 17,799 16,776 17,211
6/30/1998 18,543 17,477 16,992
7/31/1998 18,257 17,208 17,815
8/31/1998 15,497 14,606 18,077
9/30/1998 16,269 15,333 17,427
10/31/1998 17,443 16,440 18,159
11/30/1998 18,235 17,187 19,174
12/31/1998 19,380 18,266 19,996
1/31/1999 19,942 18,796 21,501
2/28/1999 19,464 18,345 20,735
3/31/1999 19,732 18,598 21,988
4/30/1999 20,903 19,701 21,374
5/31/1999 20,808 19,612 22,319
6/30/1999 21,458 20,224 22,970
7/31/1999 20,825 19,627 22,645
8/31/1999 20,544 19,362 24,170
9/30/1999 19,712 18,578 25,648
10/31/1999 20,502 19,323 25,819
11/30/1999 20,561 19,379 25,437
12/31/1999 21,215 19,995 25,763
1/31/2000 20,108 18,952 25,308
2/29/2000 19,430 18,313 21,542
3/31/2000 21,008 19,800 22,778
4/30/2000 20,661 19,473 24,542
5/31/2000 20,025 18,874 25,686
6/30/2000 20,287 19,121 26,560
7/31/2000 20,164 19,004 26,772
8/31/2000 21,517 20,279 26,394
9/30/2000 20,533 19,353 26,941
10/31/2000 20,591 19,407 29,457
11/30/2000 19,363 18,250 29,133
12/31/2000 19,664 18,533 29,979
1/31/2001 19,677 18,546 29,101
2/28/2001 18,509 17,444 28,021
3/31/2001 17,468 16,464 27,042
4/30/2001 18,894 17,807 28,598
5/31/2001 18,922 17,834 28,375
6/30/2001 18,266 17,215 28,512
7/31/2001 17,639 16,625 27,582
8/31/2001 16,556 15,604 25,532
9/30/2001 15,174 14,301 28,648
10/31/2001 15,715 14,812 28,314
11/30/2001 16,828 15,860 28,613
12/31/2001 16,799 15,833 27,305
1/31/2002 16,714 15,753 27,647
2/28/2002 16,271 15,335 29,185
3/31/2002 16,713 15,752 29,453
4/30/2002 16,242 15,308 30,176
5/31/2002 16,170 15,241 29,056
6/30/2002 15,200 14,326 30,512
7/31/2002 14,230 13,412 30,629
8/31/2002 14,586 13,748 29,777
9/30/2002 12,619 11,893 28,725
10/31/2002 13,089 12,337 30,134
11/30/2002 13,973 13,169 30,811
12/31/2002 13,431 12,658 30,127
1/31/2003 13,103 12,349 30,063
2/28/2003 12,689 11,959 28,859
3/31/2003 12,846 12,108 26,828
4/30/2003 14,058 13,249 26,597
5/31/2003 15,113 14,244 28,143
6/30/2003 15,441 14,553 28,806
7/31/2003 15,299 14,420 28,584
8/31/2003 15,813 14,904 28,630
9/30/2003 15,472 14,582 29,985
10/31/2003 16,199 15,267 28,956
11/30/2003 16,769 15,805 29,101
12/31/2003 17,468 16,464 27,431
1/31/2004 17,598 16,586 24,881
2/29/2004 18,011 16,976 25,069
3/31/2004 17,741 16,721 22,281
4/30/2004 17,741 16,721 23,932
5/31/2004 17,755 16,734 25,440
6/30/2004 18,013 16,977 24,335
7/31/2004 17,357 16,359 23,745
8/31/2004 17,442 16,439 23,112
9/30/2004 17,442 16,439 23,151
10/31/2004 17,814 16,789 25,189
11/30/2004 18,298 17,246 26,815
12/31/2004 19,068 17,972 27,150
1/31/2005 18,697 17,622 27,554
2/28/2005 18,626 17,555 27,983
3/31/2005 18,398 17,340 27,710
4/30/2005 18,027 16,990 29,406
5/31/2005 18,468 17,406 29,805
6/30/2005 18,332 17,278 31,642
7/31/2005 18,916 17,829 32,199
8/31/2005 18,618 17,547 32,889
9/30/2005 18,560 17,493 32,601
10/31/2005 18,317 17,263 31,804
11/30/2005 19,073 17,976 32,129
12/31/2005 19,026 17,929 32,888
Average Annual Total Returns -- December 31, 2005
SINCE
1 YEAR/7/ 5 YEARS/7/ 10 YEARS/7/ INCEPTION/7/
CLASS A (Inception 5/6/31)
Net Asset Value/1/ -0.19% -0.65% 6.64% --
With Maximum Sales Charge/2/ -5.96 -1.82 6.01 --
CLASS B (Inception 9/13/93)
Net Asset Value/1/ -0.99 -1.39 5.85 --
With CDSC/3/ -5.94 -1.79 5.85 --
CLASS C (Inception 5/1/95)
Net Asset Value/1/ -0.99 -1.39 5.84 --
With CDSC/3/ -1.98 -1.39 5.84 --
CLASS Y (Inception 11/18/98)
Net Asset Value/1/ -0.04 -0.20 -- 1.25%
- -----------------------------------------------------------------------------------
SINCE CLASS Y
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS INCEPTION/6/
Russell 1000 Value Index/4/ 7.05% 5.28% 10.94% 6.25%
Morningstar Large Blend Fund Avg./5/ 5.76 0.50 8.12 3.20
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.ixisadvisorfunds.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 12/31/05 12/31/04
- ------------------------------------------------------
Common Stocks 99.0 97.3
- ------------------------------------------------------
Short-Term Investments and Other 1.0 2.7
- ------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
- ------------------------------------------------------
Hewlett-Packard Co. 4.7 --
- ------------------------------------------------------
McDonald's Corp. 4.6 3.6
- ------------------------------------------------------
JPMorgan Chase & Co. 4.4 3.0
- ------------------------------------------------------
Tyco International, Ltd. 4.3 --
- ------------------------------------------------------
Time Warner, Inc. 4.3 3.6
- ------------------------------------------------------
Morgan Stanley 4.2 --
- ------------------------------------------------------
Intel Corp. 4.0 --
- ------------------------------------------------------
Carnival Corp. 3.8 1.1
- ------------------------------------------------------
Washington Mutual, Inc. 3.7 4.0
- ------------------------------------------------------
Wal-Mart Stores, Inc. 3.5 1.3
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
- ------------------------------------------------------
Diversified Financial Services 15.0 8.2
- ------------------------------------------------------
Media 14.9 17.8
- ------------------------------------------------------
Retail 11.9 15.5
- ------------------------------------------------------
Computers 8.6 --
- ------------------------------------------------------
Semiconductors 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 1,000 largest 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 without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
/6/The since-inception comparative performance figures shown for Class Y are
calculated from 11/30/98.
/7/Fund performance has been increased by expense waivers, without which
performance would have been lower.
8
IXIS U.S. DIVERSIFIED PORTFOLIO
PORTFOLIO PROFILE
Objective:
Seeks long-term growth of capital
- --------------------------------------------------------------------------------
Strategy:
Features growth and value investments through a diversified portfolio of
complementary equity investment disciplines provided by specialized money
managers
- --------------------------------------------------------------------------------
Inception Date:
July 7, 1994
- --------------------------------------------------------------------------------
Subadvisors:
Harris Associates, L.P.
Loomis, Sayles & Company, L.P.
Mercury Advisors
- --------------------------------------------------------------------------------
Symbols:
Class A NEFSX
Class B NESBX
Class C NECCX
- --------------------------------------------------------------------------------
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. Small-cap stocks carry special
risks, including narrower markets, limited financial and management resources,
less liquidity and greater volatility.
Management Discussion
- --------------------------------------------------------------------------------
Despite devastating hurricanes, rising interest rates, and higher oil prices,
U.S. equities produced relatively strong performance in 2005, with mid-cap
stocks leading the way. In the large and small-cap areas, value stocks
continued to outpace growth. For the year ended December 31, 2005, IXIS U.S.
Diversified Portfolio returned 7.57% based on the net asset value of Class A
shares. This return was better than the 4.91% return of the S&P 500 Index, but
the portfolio lagged the Dow Jones Wilshire 4500 Index, which returned 10.27%.
It also trailed the 9.70% average return of the funds in Morningstar's Mid-Cap
Growth category.
Each of the fund's four segments is managed using a different investment
discipline, providing investors with exposure to growth and value stocks across
the capitalization spectrum. The Harris Associates segment favors stocks of
large- and mid-cap companies that the manager believes are trading at
substantial discounts to their true business value. Loomis Sayles manages two
segments. One focuses on mid-cap growth stocks; the other emphasizes small-cap
value stocks. Mercury Advisor's segment invests in stocks with market
capitalizations of any size, emphasizing companies with a capitalization
greater than $2 billion.
HARRIS ASSOCIATES FOCUSED ON HIGH-QUALITY BUSINESSES
Because lower-quality stocks outperformed their higher-quality counterparts,
this segment's emphasis on quality detracted from results. This segment's
relatively small position in energy stocks, which generated strong returns in
2005, also detracted from its results. Hewlett-Packard Co. was one of the
segment's top stocks, as investors grew more confident that the company's new
CEO would engineer a turnaround. The solid demand for semiconductors helped
Texas Instruments produce a superior return. Burlington Resources, an
independent oil and gas company, benefited from lower exploration expenses and
rising oil and natural gas prices. It was sold when the managers concluded it
had reached full valuation. Fannie Mae, Liberty Media Corp., and Masco Corp.
proved disappointing. Harris Associates sold Fannie Mae in the third quarter on
growing concerns about delays in the company's release of financial statements
and the competitive environment for home mortgages. Liberty Media slipped along
with the media sector as a whole, but management is streamlining the company,
and Harris Associates continues to believe in the company's earnings prospects
and valuation. Skepticism about the potential for continuing strength in the
housing industry hurt Masco, a manufacturer of home-improvement products, but
Harris Associates continues to like the stock. The segment remains focused on
high-quality stocks, which they believe have the potential to generate superior
returns over time.
LOOMIS SAYLES MID-CAP GROWTH SEGMENT BALANCED CYCLICAL AND NON-CYCLICAL STOCKS
This segment reduced exposure to the more cyclical areas of the economy,
including the consumer-related and building products sectors, and emphasized
areas that are not as influenced by macroeconomic factors, including
healthcare, consumer staples, and service companies. The segment also favored
"high-confidence themes" - stocks likely to benefit from macroeconomic tail
winds and/or company-specific events. The managers added to the segment's
financial services holdings during the year, focusing on companies active in
the capital markets, including public exchanges, asset managers, and brokerage
firms. Stock selection in the energy and consumer positions was positive, but
the segment's healthcare selections proved disappointing. Stocks that had the
greatest positive impact included Southwestern Energy, Express Scripts, and
Google. Southwestern Energy was the strongest performer, in part because it
owns a large amount of land with shale rock that may contain large quantities
of natural gas. Express Scripts, a leading provider of pharmacy benefit
management services, was a positive contributor; and Google, the leader in
internet paid-search advertising, continued to exhibit strong growth. XM
Satellite Radio, Harman International, and Starbucks detracted from results.
The price of XM stock was impacted by a slowdown in the installation rate of
9
IXIS U.S. DIVERSIFIED PORTFOLIO
Management Discussion
- --------------------------------------------------------------------------------
XM receivers and the resulting decline in new subscribers, but the stock
remains in the segment. Harman, a manufacturer of audio systems, declined
because of increased competition in the "infotainment" systems market and the
stock was sold. Starbucks was eliminated from this segment because investors
concluded that the company's superior growth in same-store sales was likely to
decline.
LOOMIS SAYLES SMALL CAP SEGMENT FOCUSED ON INDIVIDUAL STOCKS
Materials and processing and technology were among the best-performing sectors
for this segment in 2005, although individual stock selection was more
significant than sector allocation. Individual stocks with the greatest
positive contribution to performance included Assurant, a diversified niche
insurance company; the stock rose sharply when the company's earnings exceeded
estimates. Trammell Crow was another positive contributor. Strong earnings
gains drove up the stock price of this commercial real estate services company
whose clients are businesses around the world. Omnicare, Inc., which provides
pharmaceuticals and related pharmacy services to long-term care institutions,
also rose in value when a successful acquisition and the new Medicare drug
benefit increased its earnings prospects. The segment's weakest performers
included Commercial Capital Bancorp. Rising interest rates contributed to
weaker-than-expected earnings for Commercial Capital, which provides lending
and banking services to businesses. The stock was sold. Thinning profit margins
for Lowrance Electronics' lines of auto and marine navigational systems caused
its stock price to lose ground, and the stock was sold. Declining earnings also
hurt BlueLinx, a building products distributor, but Loomis continues to favor
the stock. Looking ahead, Loomis Sayles believes the market may respond
positively if the Federal Reserve Board ends its cycle of rate increases.
However, in their view, the most attractive investment opportunities are often
created by company-specific situations.
MERCURY MADE STRATEGIC CHANGES TO REFLECT ECONOMIC CONDITIONS
This segment had relatively large positions in materials, healthcare,
financials, industrials, consumer discretionary, and energy. It had relatively
small positions in information technology and consumer staples, and no exposure
to telecommunications services or utilities. Strong stock performance in
healthcare, energy, and information technology benefited the segment, but
returns in financials, consumer staples and industrials were negative. The
segment's best individual performers included Alcon, Inc., a manufacturer of
eye-care products; Transocean, Inc., an oil and gas exploration company; and
internet search giant Google. The segment's weakest holdings included oil and
gas giant Exxon Mobil Corp., mortgage banker Doral Financial Corp. and Altria
Group, parent company of cigarette maker Phillip Morris. Exxon Mobil and Altria
remain in the portfolio, but Doral was sold. As 2005 drew to a close, the
segment was strategically positioned in response to changing economic
conditions. Globalization is a broad investment theme across the segment,
ranging from the outsourcing of software development to India, the movement of
chemical production facilities to the Middle East, and the selection of
industrial companies meeting the needs of emerging China. However, Mercury was
cautious about several sectors. Changes in technology holdings were highly
selective, often featuring companies on the fringes of technology, including
internet retailing, internet content/search engines, or outsourcing services
for software development.
10
IXIS U.S. DIVERSIFIED PORTFOLIO
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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, 1995 through December 31, 2005
Maximum S&P Midcap
Net Asset Sales 400 S&P 500 Wilshire 4500
Value/1/ Charge/2/ Index/4/ Index/5/ Index/6/
---------- ------------ ---------- --------- -------------
12/31/1995 $10,000 9,425 10,000 10,000 10,000
1/31/1996 10,113 9,532 10,145 10,340 10,103
2/29/1996 10,506 9,902 10,490 10,436 10,431
3/31/1996 10,685 10,071 10,616 10,537 10,591
4/30/1996 11,257 10,609 10,940 10,692 11,083
5/31/1996 11,608 10,940 11,088 10,968 11,439
6/30/1996 11,262 10,614 10,921 11,010 11,080
7/31/1996 10,398 9,800 10,183 10,523 10,248
8/31/1996 10,905 10,278 10,770 10,745 10,801
9/30/1996 11,511 10,849 11,239 11,350 11,317
10/31/1996 11,414 10,758 11,272 11,663 11,149
11/30/1996 11,978 11,289 11,907 12,545 11,620
12/31/1996 11,895 11,211 11,920 12,296 11,724
1/31/1997 12,426 11,711 12,368 13,064 12,103
2/28/1997 12,013 11,323 12,266 13,167 11,847
3/31/1997 11,510 10,848 11,743 12,626 11,229
4/30/1997 11,732 11,058 12,048 13,379 11,257
5/31/1997 12,616 11,890 13,101 14,194 12,377
6/30/1997 13,133 12,378 13,469 14,830 12,964
7/31/1997 14,186 13,370 14,803 16,010 13,856
8/31/1997 13,780 12,988 14,785 15,113 13,982
9/30/1997 14,447 13,617 15,634 15,941 14,951
10/31/1997 13,981 13,177 14,954 15,408 14,381
11/30/1997 14,088 13,278 15,176 16,122 14,385
12/31/1997 14,295 13,473 15,765 16,398 14,738
1/31/1998 14,358 13,533 15,465 16,580 14,527
2/28/1998 15,412 14,526 16,746 17,776 15,638
3/31/1998 16,056 15,133 17,501 18,686 16,447
4/30/1998 16,238 15,304 17,821 18,874 16,656
5/31/1998 15,790 14,882 17,019 18,549 15,878
6/30/1998 16,293 15,357 17,126 19,303 16,126
7/31/1998 15,806 14,897 16,462 19,097 15,213
8/31/1998 13,186 12,427 13,398 16,336 12,265
9/30/1998 14,144 13,331 14,648 17,383 13,150
10/31/1998 15,013 14,149 15,957 18,797 13,897
11/30/1998 15,762 14,855 16,754 19,936 14,762
12/31/1998 17,048 16,068 18,778 21,085 16,010
1/31/1999 17,849 16,823 18,047 21,967 16,268
2/28/1999 17,321 16,325 17,102 21,284 15,383
3/31/1999 18,360 17,304 17,580 22,135 15,983
4/30/1999 19,093 17,995 18,966 22,993 17,259
5/31/1999 18,564 17,496 19,049 22,450 17,108
6/30/1999 19,731 18,597 20,068 23,696 17,827
7/31/1999 19,076 17,979 19,642 22,956 17,287
8/31/1999 19,000 17,908 18,969 22,842 16,856
9/30/1999 19,068 17,972 18,383 22,216 16,727
10/31/1999 19,753 18,617 19,320 23,622 17,581
11/30/1999 21,434 20,201 20,334 24,102 19,065
12/31/1999 24,968 23,533 21,542 25,521 21,692
1/31/2000 24,661 23,243 20,936 24,239 21,432
2/29/2000 27,687 26,095 22,401 23,780 24,765
3/31/2000 27,402 25,826 24,276 26,107 23,848
4/30/2000 25,292 23,838 23,428 25,321 20,979
5/31/2000 23,213 21,878 23,136 24,802 19,431
6/30/2000 23,661 22,301 23,475 25,413 21,765
7/31/2000 23,051 21,725 23,846 25,016 21,147
8/31/2000 24,858 23,428 26,509 26,570 23,507
9/30/2000 24,127 22,740 26,327 25,167 22,550
10/31/2000 22,983 21,662 25,434 25,061 20,708
11/30/2000 20,205 19,043 23,515 23,085 17,183
12/31/2000 20,728 19,536 25,314 23,198 18,271
1/31/2001 21,319 20,093 25,877 24,021 19,265
2/28/2001 19,180 18,078 24,401 21,831 16,924
3/31/2001 17,882 16,854 22,586 20,448 15,372
4/30/2001 19,452 18,333 25,078 22,037 16,999
5/31/2001 19,641 18,511 25,662 22,184 17,401
6/30/2001 19,531 18,408 25,558 21,644 17,542
7/31/2001 19,189 18,086 25,178 21,431 16,727
8/31/2001 18,373 17,317 24,354 20,090 15,914
9/30/2001 16,424 15,480 21,325 18,467 13,867
10/31/2001 16,838 15,870 22,268 18,819 14,594
11/30/2001 18,220 17,173 23,925 20,263 15,728
12/31/2001 18,787 17,707 25,161 20,441 16,571
1/31/2002 18,622 17,551 25,030 20,142 16,248
2/28/2002 18,268 17,217 25,061 19,754 15,788
3/31/2002 19,167 18,064 26,852 20,497 16,858
4/30/2002 18,659 17,586 26,727 19,254 16,693
5/31/2002 18,410 17,352 26,276 19,112 16,324
6/30/2002 16,921 15,948 24,353 17,751 15,206
7/31/2002 15,432 14,545 21,992 16,367 13,726
8/31/2002 15,551 14,657 22,104 16,475 13,806
9/30/2002 13,991 13,187 20,324 14,684 12,876
10/31/2002 14,640 13,798 21,204 15,977 13,299
11/30/2002 15,503 14,611 22,431 16,917 14,218
12/31/2002 14,687 13,843 21,509 15,923 13,620
1/31/2003 14,310 13,487 20,881 15,506 13,325
2/28/2003 14,157 13,343 20,383 15,273 12,986
3/31/2003 14,263 13,443 20,555 15,422 13,178
4/30/2003 15,374 14,490 22,048 16,692 14,275
5/31/2003 16,508 15,559 23,875 17,571 15,632
6/30/2003 16,733 15,771 24,179 17,796 16,004
7/31/2003 17,158 16,171 25,037 18,109 16,751
8/31/2003 17,997 16,962 26,173 18,462 17,453
9/30/2003 17,549 16,540 25,772 18,266 17,236
10/31/2003 18,825 17,742 27,721 19,300 18,541
11/30/2003 19,297 18,188 28,686 19,470 19,175
12/31/2003 19,627 18,499 29,171 20,491 19,574
1/31/2004 20,088 18,933 29,803 20,867 20,275
2/29/2004 20,265 19,100 30,518 21,157 20,630
3/31/2004 20,312 19,144 30,648 20,838 20,716
4/30/2004 19,897 18,753 29,642 20,510 19,884
5/31/2004 20,204 19,042 30,257 20,792 20,186
6/30/2004 20,723 19,531 30,945 21,196 20,713
7/31/2004 19,542 18,418 29,501 20,495 19,559
8/31/2004 19,305 18,195 29,424 20,578 19,567
9/30/2004 19,919 18,774 30,296 20,800 20,365
10/31/2004 20,286 19,119 30,780 21,118 20,823
11/30/2004 21,290 20,066 32,613 21,973 22,239
12/31/2004 22,152 20,878 33,979 22,720 23,209
1/31/2005 21,539 20,300 33,112 22,167 22,448
2/28/2005 21,976 20,712 34,222 22,633 22,854
3/31/2005 21,574 20,333 33,844 22,232 22,450
4/30/2005 20,888 19,687 32,528 21,811 21,691
5/31/2005 21,763 20,511 34,487 22,505 22,977
6/30/2005 22,070 20,801 35,287 22,537 23,717
7/31/2005 23,109 21,780 37,140 23,375 25,021
8/31/2005 22,968 21,647 36,726 23,161 24,726
9/30/2005 23,251 21,914 37,009 23,349 24,879
10/31/2005 22,755 21,447 36,213 22,960 24,344
11/30/2005 23,784 22,416 37,983 23,828 25,484
12/31/2005 23,836 22,471 38,245 23,836 25,593
Average Annual Total Returns -- December 31, 2005
1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 7/7/94)
Net Asset Value/1/ 7.57% 2.83% 9.07%
With Maximum Sales Charge/2/ 1.41 1.62 8.43
CLASS B (Inception 7/7/94)
Net Asset Value/1/ 6.76 2.04 8.26
With CDSC/3/ 1.76 1.67 8.26
CLASS C (Inception 7/7/94)
Net Asset Value/1/ 6.75 2.05 8.25
With CDSC/3/ 5.75 2.05 8.25
CLASS Y (Inception 11/15/94)
Net Asset Value/1/ 8.02 3.39 9.57
- ---------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
S&P Midcap 400 Index/4/ 12.55% 8.59% 14.35%
S&P 500 Index/5/ 4.91 0.54 9.07
Dow Jones Wilshire 4500 Index/6/ 10.27 6.97 9.85
Morningstar Mid-Cap Growth Fund Avg./7/ 9.70 0.01 8.48
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.ixisadvisorfunds.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 12/31/05 12/31/04
- ----------------------------------------------------
Common Stocks 98.1 98.3
- ----------------------------------------------------
Short-Term Investments
and Other 1.9 1.7
- ----------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
- ----------------------------------------------------
Hewlett-Packard Co. 1.3 0.4
- ----------------------------------------------------
McDonald's Corp. 1.3 1.0
- ----------------------------------------------------
JPMorgan Chase & Co. 1.2 0.8
- ----------------------------------------------------
Morgan Stanley 1.2 --
- ----------------------------------------------------
Time Warner, Inc. 1.2 1.0
- ----------------------------------------------------
Walt Disney Co. (The) 1.1 0.6
- ----------------------------------------------------
Tyco International, Ltd. 1.1 --
- ----------------------------------------------------
Intel Corp. 1.1 0.9
- ----------------------------------------------------
Citigroup, Inc. 1.1 0.7
- ----------------------------------------------------
Exxon Mobil Corp. 1.1 --
- ----------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
- ----------------------------------------------------
Diversified Financial Services 8.3 4.1
- ----------------------------------------------------
Retail 6.4 7.8
- ----------------------------------------------------
Media 5.1 6.4
- ----------------------------------------------------
Oil & Gas Services 4.0 1.4
- ----------------------------------------------------
Commercial Services 3.9 3.5
- ----------------------------------------------------
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 Midcap 400 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/Dow Jones Wilshire 4500 Index is an unmanaged index of 4,500 mid- and
small-sized 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.
11
IXIS VALUE FUND
PORTFOLIO PROFILE
Objective:
Seeks a reasonable, long-term investment return from a combination of market
appreciation and dividend income from equity securities
- --------------------------------------------------------------------------------
Strategy:
Features value investments through a diversified portfolio of complementary
equity investment disciplines provided by specialized money managers
- --------------------------------------------------------------------------------
Inception Date:
June 5, 1970
- --------------------------------------------------------------------------------
Subadvisors:
Harris Associates, L.P.
Loomis, Sayles & Company, L.P.
Vaughan Nelson Investment Management, L.P.
Westpeak Global Advisors, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A NEFVX
Class B NEVBX
Class C NECVX
- --------------------------------------------------------------------------------
What You Should Know:
Value stocks may fall out of favor with investors and underperform the overall
market. Small cap stocks carry special risks, including narrower markets,
limited financial and management resources, less liquidity and greater
volatility.
Management Discussion
- --------------------------------------------------------------------------------
Value stocks continued to outperform growth stocks in 2005, but mid-cap stocks
took the lead that small-caps had held previously. For the year ended December
31, 2005, the total return on the IXIS Value Fund was 6.21% based on the net
asset value of Class A shares and $1.16 in capital gains reinvested during the
period. The fund underperformed its benchmark, the Russell 1000 Value Index,
which returned 7.05%, although its results were above the 5.76% average return
of funds in Morningstar's Large Blend category.
Each of IXIS Value Fund's four segments is managed by a different investment
manager, providing four distinct approaches to value investing. The segment
managed by Harris Associates invests primarily in mid- and large-cap companies
that the manager believes are trading at substantial discounts to their true
business value. The Loomis Sayles segment features larger companies with market
capitalizations in excess of $2 billion. Vaughan Nelson's segment emphasizes
established companies that appear to be undervalued because they are
misunderstood or out of favor. Westpeak Global Advisors invests across the
capitalization spectrum and employs proprietary research to select stocks based
on their value and growth potential, while seeking to manage risk.
HARRIS ASSOCIATES FOCUSED ON HIGH-QUALITY BUSINESSES
Because lower-quality stocks outperformed higher-quality issues, the segment's
emphasis on quality detracted from results. The relatively small position in
energy, which was the strongest sector in 2005, also detracted from returns,
and media stocks were generally weak, despite strong fundamentals.
Hewlett-Packard Company was one of this segment's top stocks, as investors grew
more confident that the company's new CEO would engineer a turnaround. Improved
revenues and earnings in its Japanese business helped Tiffany & Company produce
superior results for this segment. Baxter International, a medical instrument
and supply company, benefited from a new management team and solid earnings
during the year. Liberty Media Corporation, Time Warner, and Cendant
Corporation had the most negative impact on the segment. Liberty Media slipped
along with the media sector in general, but the stock remains in the segment.
Management is restructuring the company and Harris Associates believes the
stock is undervalued relative to the company's prospects. While the
underpinnings of Time Warner, parent company of America Online (AOL), seemed
solid, the stock has languished following Google's investment in AOL. Harris
Associates believes Time Warner's stock is significantly undervalued and it
remains in the portfolio. Cendant Corporation declined on poor earnings and a
less-than-positive outlook for its online travel business; the stock was sold.
This segment will continue to focus on high-quality stocks because Harris
Associates believes they have the potential to generate superior returns over
time.
GOOD STOCK SELECTION GAVE THE LOOMIS SAYLES SEGMENT AN EDGE
While the segment's sector allocations did not change significantly over the
year, several modifications were made in individual security positions. Higher
commodity prices and an upturn in capital investment contributed to the strong
performance of energy stocks. Oil and gas producers Halliburton and
GlobalSantaFe rose on robust earnings and the prospects for additional capital
investment by their customers over the next several years. Peabody Energy, a
diversified coal company, was also helpful as the company benefited from rising
natural gas prices. Because it appears that the Federal Reserve Board may be
close to ending its rate-raising cycle, the segment increased exposure to
financial companies. In financials, the segment favored companies with
attractive valuations whose earnings prospects appeared to be ahead of the
market's consensus. One example is Ameriprise Financial, an asset-management
company spun off by American Express (also in the segment). Weak earnings
experienced by the segment's telecommunications holdings were a negative,
although the impact on this segment was minor. Individual companies that
detracted from results included Tyco International, which lowered earnings
guidance several times; News Corp., which made several expensive acquisitions
and instituted a share repurchase program; and Fannie Mae, which slumped
following an accounting scandal. Tyco and News Corp. remain in the segment.
Fannie Mae was eliminated.
12
IXIS VALUE FUND
Management Discussion
- --------------------------------------------------------------------------------
VAUGHAN NELSON SOUGHT COMPANIES WITH COMPETITIVE ADVANTAGES AND ATTRACTIVE
VALUATIONS
While this segment had relatively few stocks in the consumer discretionary,
energy, and materials sectors, all of these areas did well in 2005. The
segment's energy holdings included Kerr-McGee and Pioneer Natural Resources,
which were among the top contributors to results. MEMC Electronic Materials, a
semiconductor manufacturer, was also one of the segment's top performers. All
three of these top performers were sold at a profit. The segment had relatively
large positions in consumer staples, healthcare, financials, industrials,
information technology, and utilities. Healthcare, industrials, and the
segment's cash position had a negative impact on return. Boston Scientific,
Pfizer, and IBM detracted from performance. A leading developer of drug-eluting
cardiac stents, Boston Scientific was competing with Johnson & Johnson to
acquire Guidant, another medical technology company. The competition hurt
Boston Scientific's stock price, but Vaughan Nelson continues to favor the
stock and it remains in the segment. Pfizer, a pharmaceutical company, was sold
because trends continued to weaken for the company's three largest prescription
drugs. In addition, it did not appear likely that the sale of drugs in the
company's product pipeline would be able to replace revenues from expiring
patents. IBM was eliminated from the segment based on its valuation.
WESTPEAK FOCUSED ON "MOMENTUM" STOCKS
Stocks with strong momentum (recent upward price movements) benefited the
segment, as did the fact that Westpeak avoided higher-yielding stocks, which
did not do as well during the year. Energy was one of the segment's largest and
best performing sectors. The rally in energy prices boosted the performance of
Tesoro, an oil and gas refiner, and the stock was sold on strength. Having a
relatively small commitment to media stocks was helpful, as media companies
generally underperformed. Investments in grocery stores enhanced results. The
segment's position in construction and real property was strong during the
first half of the year, but faded in the second half. USG Corp., a materials
company, and AmerisourceBergen, a pharmaceutical company, were among the top
contributors to return. USG's shares rose following favorable legislation
regarding asbestos liability, and Amerisource Bergen gained steadily during the
closing months of the year. Westpeak's preference for stocks with low
price/earnings ratios detracted from results. Poor timing in the mining and
metals industry and in the financials sector also held back returns. Steel
maker Steel Dynamics declined on a profit warning and concerns about the
potential for weakness in demand. The stock was sold. Homebuilder WCI
Communities fell when stocks in the housing industry lost favor with investors
after rallying strongly for two years. WCI is no longer in the portfolio. Poor
earnings reports hurt NL Industries, a specialty chemical company, and the
position was eliminated before a major decline.
13
IXIS VALUE FUND
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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/6/
[CHART]
December 31, 1995 through December 31, 2005
Maximum Russell 1000
Net Asset Sales Value
Value/1/ Charge/2/ Index/4/
---------- ---------- ------------
12/31/1995 10,000 9,425 10,000
1/31/1996 10,342 9,747 10,312
2/29/1996 10,479 9,876 10,390
3/31/1996 10,513 9,909 10,566
4/30/1996 10,638 10,027 10,607
5/31/1996 10,820 10,198 10,739
6/30/1996 10,820 10,198 10,748
7/31/1996 10,467 9,866 10,342
8/31/1996 10,775 10,156 10,638
9/30/1996 11,386 10,731 11,061
10/31/1996 11,739 11,064 11,488
11/30/1996 12,658 11,930 12,321
12/31/1996 12,632 11,905 12,164
1/31/1997 12,947 12,203 12,754
2/28/1997 13,092 12,340 12,941
3/31/1997 12,592 11,868 12,476
4/30/1997 12,829 12,091 13,000
5/31/1997 13,553 12,773 13,726
6/30/1997 14,263 13,443 14,315
7/31/1997 15,341 14,459 15,392
8/31/1997 14,749 13,901 14,844
9/30/1997 15,373 14,489 15,741
10/31/1997 14,710 13,864 15,301
11/30/1997 15,056 14,190 15,978
12/31/1997 15,277 14,399 16,444
1/31/1998 15,247 14,370 16,211
2/28/1998 16,271 15,336 17,303
3/31/1998 16,919 15,946 18,361
4/30/1998 16,904 15,932 18,484
5/31/1998 16,422 15,478 18,210
6/30/1998 16,407 15,464 18,443
7/31/1998 15,849 14,938 18,118
8/31/1998 13,167 12,410 15,421
9/30/1998 13,918 13,118 16,307
10/31/1998 15,086 14,218 17,570
11/30/1998 15,870 14,958 18,388
12/31/1998 16,356 15,415 19,014
1/31/1999 15,934 15,018 19,166
2/28/1999 15,647 14,747 18,895
3/31/1999 15,714 14,811 19,286
4/30/1999 16,931 15,957 21,088
5/31/1999 16,778 15,814 20,856
6/30/1999 17,218 16,228 21,461
7/31/1999 16,441 15,496 20,833
8/31/1999 15,731 14,827 20,060
9/30/1999 14,823 13,971 19,359
10/31/1999 15,548 14,654 20,473
11/30/1999 15,324 14,443 20,313
12/31/1999 15,225 14,349 20,411
1/31/2000 14,754 13,906 19,745
2/29/2000 13,487 12,711 18,278
3/31/2000 14,876 14,021 20,508
4/30/2000 14,836 13,983 20,270
5/31/2000 14,754 13,906 20,484
6/30/2000 14,408 13,579 19,547
7/31/2000 14,448 13,617 19,792
8/31/2000 15,329 14,448 20,893
9/30/2000 15,064 14,198 21,085
10/31/2000 15,472 14,583 21,603
11/30/2000 14,982 14,120 20,801
12/31/2000 15,533 14,640 21,843
1/31/2001 16,024 15,103 21,927
2/28/2001 15,595 14,698 21,317
3/31/2001 15,063 14,197 20,564
4/30/2001 16,003 15,083 21,572
5/31/2001 16,432 15,487 22,057
6/30/2001 16,146 15,217 21,568
7/31/2001 16,002 15,082 21,522
8/31/2001 15,307 14,427 20,660
9/30/2001 14,020 13,214 19,206
10/31/2001 14,449 13,618 19,041
11/30/2001 15,410 14,524 20,147
12/31/2001 15,737 14,832 20,622
1/31/2002 15,512 14,620 20,463
2/28/2002 15,349 14,466 20,496
3/31/2002 16,023 15,101 21,466
4/30/2002 15,532 14,639 20,729
5/31/2002 15,532 14,639 20,833
6/30/2002 14,327 13,503 19,637
7/31/2002 13,081 12,328 17,812
8/31/2002 13,285 12,521 17,946
9/30/2002 11,671 10,999 15,951
10/31/2002 12,427 11,712 17,133
11/30/2002 13,428 12,656 18,212
12/31/2002 12,672 11,944 17,421
1/31/2003 12,366 11,655 16,999
2/28/2003 12,080 11,385 16,546
3/31/2003 12,101 11,405 16,573
4/30/2003 13,225 12,464 18,032
5/31/2003 14,185 13,369 19,196
6/30/2003 14,450 13,619 19,436
7/31/2003 14,613 13,773 19,726
8/31/2003 14,982 14,120 20,033
9/30/2003 14,655 13,812 19,838
10/31/2003 15,616 14,718 21,052
11/30/2003 16,005 15,085 21,337
12/31/2003 16,679 15,720 22,652
1/31/2004 16,863 15,893 23,051
2/29/2004 17,230 16,239 23,545
3/31/2004 17,128 16,144 23,339
4/30/2004 16,863 15,893 22,768
5/31/2004 17,067 16,086 23,000
6/30/2004 17,395 16,395 23,544
7/31/2004 16,883 15,913 23,212
8/31/2004 16,843 15,874 23,542
9/30/2004 17,047 16,066 23,907
10/31/2004 17,272 16,278 24,305
11/30/2004 18,070 17,031 25,534
12/31/2004 18,575 17,507 26,389
1/31/2005 18,304 17,252 25,920
2/28/2005 18,762 17,683 26,779
3/31/2005 18,512 17,448 26,412
4/30/2005 18,096 17,055 25,939
5/31/2005 18,637 17,565 26,563
6/30/2005 18,857 17,773 26,854
7/31/2005 19,541 18,418 27,631
8/31/2005 19,434 18,316 27,511
9/30/2005 19,626 18,498 27,897
10/31/2005 19,155 18,054 27,188
11/30/2005 19,776 18,639 28,082
12/31/2005 19,728 18,585 28,250
Average Annual Total Returns -- December 31, 2005
1 YEAR/6/ 5 YEARS/6/ 10 YEARS/6/
CLASS A (Inception 6/5/70)
Net Asset Value/1/ 6.21% 4.90% 7.03%
With Maximum Sales Charge/2/ 0.15 3.67 6.39
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 5.54 4.14 6.24
With CDSC/3/ 0.96 3.79 6.24
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 5.39 4.11 6.22
With CDSC/3/ 4.48 4.11 6.22
- ---------------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Russell 1000 Value Index/4/ 7.05% 5.28% 10.94%
Morningstar Large Blend Fund Avg./5/ 5.76 0.50 8.12
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.ixisadvisorfunds.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 12/31/05 12/31/04
- ------------------------------------------------------
Common Stocks 98.0 96.9
- ------------------------------------------------------
Short Term Investments and Other 2.0 3.1
- ------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
- ------------------------------------------------------
Exxon Mobil Corp. 3.3 2.4
- ------------------------------------------------------
JPMorgan Chase & Co. 2.6 2.5
- ------------------------------------------------------
Time Warner, Inc. 2.4 2.5
- ------------------------------------------------------
McDonald's Corp. 2.4 2.5
- ------------------------------------------------------
Hewlett-Packard Co. 2.2 0.2
- ------------------------------------------------------
Citigroup, Inc. 2.2 1.8
- ------------------------------------------------------
Morgan Stanley 1.9 --
- ------------------------------------------------------
Baxter International, Inc. 1.8 1.9
- ------------------------------------------------------
U.S. Bancorp 1.8 1.2
- ------------------------------------------------------
Washington Mutual, Inc. 1.6 1.6
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
- ------------------------------------------------------
Diversified Financial Services 13.3 9.1
- ------------------------------------------------------
Retail 8.0 11.3
- ------------------------------------------------------
Oil & Gas 7.7 6.5
- ------------------------------------------------------
Media 6.7 7.6
- ------------------------------------------------------
Banks 6.3 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.
/6/Fund performance has been increased by expense waivers, without which
performance would have been lower.
14
VAUGHAN NELSON SMALL CAP VALUE FUND
PORTFOLIO PROFILE
Objective:
Seeks capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Invests in small-cap 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
- --------------------------------------------------------------------------------
What 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 10.08% for the
year ended December 31, 2005, based on the net asset value of Class A shares.
The fund outperformed both its benchmark, the Russell 2000 Value Index, which
returned 4.71%, and the 6.13% average return on the funds in Morningstar's
Small Value category.
Mid-cap value stocks outperformed small-cap issues in 2005. Value stocks had an
advantage over growth stocks for most of the year, with the exception of the
fourth quarter, when growth gained some ground.
ENERGY STOCKS RULED THE MARKET IN 2005
As oil prices reached record highs during the year, energy stocks led the
market across the board, and energy companies accounted for a substantial
portion of fund assets during the year. One of our best individual performers
was Southwestern Energy Co., which is active in exploration, production, and
distribution of natural gas. The fund also benefited from its holdings in GMX
Resources, which is active in the exploration and development of crude oil and
natural gas, and Oil States International, which provides specialty products
and services to oil and gas drilling and production companies.
STOCK PICKS IN OTHER INDUSTRIES ALSO PERFORMED WELL
The fund also benefited from its position in AMERCO, whose principal operation,
U-Haul International, rents trucks and other equipment, and leases storage
space to commercial and retail customers in the United States and Canada. CB
Richard Ellis Group, a commercial real estate broker with a global reach,
performed well, as did two companies in the heating, air conditioning, and
refrigeration equipment business: Watsco and York International. In December of
2005, York was acquired by Johnson Controls, which provides innovative products
for interior use in buildings and automobiles.
SOME SELECTIONS PROVED DISAPPOINTING
As its results suggest, the fund's positives were stronger than its negatives
during the period. Even though sporting goods retailer K2 Inc is anticipating
increased earnings in 2005, the stock has yet to recover from a collapse in its
paintball sales and investors' concern in the wake of K2's aggressive series of
acquisitions. Since we believe the company's longer-term outlook is strong, we
have used price weakness to add to the fund's holdings. Invacare Corp., which
manufactures home healthcare products, slid as it experienced pricing pressures
that were not offset by lower manufacturing costs. The company is moving its
operations overseas and we look for improvement in the stock price in the year
ahead. Commercial banker MB Financial is experiencing slow growth in its
market, combined with a flattening yield curve as short-term interest rates
rose more than long rates during the year. We believe the yield curve will
revert to a more normal configuration during the coming year, contributing to
better performance for financial stocks in general and MB Financial in
particular.
UPSIDE POTENTIAL IN 2006 MAY BE LIMITED TO FEWER STOCKS
Despite strong appreciation in 2005, we believe the energy sector will continue
to do well in 2006, although we may encounter a mid-cycle slowdown. We think
the market may continue to rally if investors believe the Federal Reserve Board
is nearing the end of its cycle of raising interest rates. This suggests that
the first half of 2006 may be stronger than the second half. We also think
positive performance may be limited to a smaller number of stocks than was true
in 2005.
In general, we are anticipating more headwinds than tailwinds in the months
ahead, but periods of uncertainty historically have created opportunities for
watchful investors.
15
VAUGHAN NELSON SMALL CAP VALUE FUND
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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 June 30, 2005
Maximum Russell 2000
Net Asset Sales Value
Value/1/ Charge/2/ Index/4/
---------- ---------- ------------
12/31/1996 $10,000 $ 9,425 $10,000
1/31/1997 10,192 9,606 10,154
2/28/1997 9,920 9,349 10,250
3/31/1997 9,351 8,814 9,975
4/30/1997 9,264 8,731 10,122
5/31/1997 10,447 9,847 10,928
6/30/1997 11,040 10,405 11,481
7/31/1997 11,784 11,106 11,963
8/31/1997 12,104 11,408 12,153
9/30/1997 13,160 12,403 12,961
10/31/1997 12,672 11,943 12,608
11/30/1997 12,375 11,664 12,746
12/31/1997 12,696 11,966 13,178
1/31/1998 12,340 11,631 12,940
2/28/1998 13,348 12,581 13,722
3/31/1998 14,125 13,313 14,279
4/30/1998 13,994 13,189 14,349
5/31/1998 13,135 12,379 13,841
6/30/1998 13,341 12,574 13,763
7/31/1998 12,300 11,593 12,685
8/31/1998 9,624 9,070 10,699
9/30/1998 10,294 9,702 11,303
10/31/1998 10,749 10,131 11,638
11/30/1998 11,758 11,082 11,953
12/31/1998 12,957 12,212 12,328
1/31/1999 13,231 12,470 12,048
2/28/1999 12,122 11,425 11,226
3/31/1999 12,957 12,212 11,133
4/30/1999 13,934 13,133 12,150
5/31/1999 13,818 13,024 12,523
6/30/1999 14,968 14,107 12,976
7/31/1999 14,785 13,935 12,668
8/31/1999 14,654 13,811 12,205
9/30/1999 15,061 14,195 11,961
10/31/1999 16,203 15,271 11,722
11/30/1999 18,066 17,027 11,783
12/31/1999 21,430 20,198 12,145
1/31/2000 21,402 20,172 11,827
2/29/2000 26,682 25,148 12,550
3/31/2000 25,666 24,190 12,609
4/30/2000 22,655 21,352 12,684
5/31/2000 20,815 19,619 12,490
6/30/2000 22,508 21,213 12,855
7/31/2000 20,925 19,722 13,283
8/31/2000 23,526 22,174 13,877
9/30/2000 22,776 21,466 13,799
10/31/2000 20,858 19,659 13,750
11/30/2000 17,223 16,232 13,470
12/31/2000 18,811 17,729 14,917
1/31/2001 19,631 18,502 15,329
2/28/2001 17,102 16,119 15,307
3/31/2001 15,472 14,583 15,062
4/30/2001 17,023 16,044 15,759
5/31/2001 17,375 16,376 16,164
6/30/2001 17,968 16,934 16,815
7/31/2001 16,737 15,774 16,438
8/31/2001 15,711 14,807 16,381
9/30/2001 13,216 12,456 14,572
10/31/2001 14,116 13,304 14,953
11/30/2001 15,358 14,475 16,028
12/31/2001 16,544 15,593 17,009
1/31/2002 16,157 15,228 17,235
2/28/2002 14,869 14,014 17,340
3/31/2002 16,191 15,260 18,638
4/30/2002 15,815 14,906 19,294
5/31/2002 15,051 14,186 18,656
6/30/2002 14,049 13,241 18,243
7/31/2002 11,929 11,243 15,533
8/31/2002 11,917 11,232 15,463
9/30/2002 10,823 10,201 14,359
10/31/2002 11,382 10,727 14,575
11/30/2002 12,259 11,554 15,738
12/31/2002 11,450 10,792 15,066
1/31/2003 10,812 10,190 14,641
2/28/2003 10,436 9,836 14,149
3/31/2003 10,459 9,857 14,300
4/30/2003 11,462 10,803 15,659
5/31/2003 12,636 11,909 17,257
6/30/2003 13,114 12,360 17,550
7/31/2003 13,970 13,166 18,425
8/31/2003 14,688 13,843 19,125
9/30/2003 14,254 13,435 18,906
10/31/2003 15,279 14,401 20,447
11/30/2003 15,724 14,820 21,232
12/31/2003 15,883 14,969 22,000
1/31/2004 16,497 15,549 22,761
2/29/2004 16,407 15,463 23,201
3/31/2004 16,441 15,496 23,522
4/30/2004 15,734 14,829 22,306
5/31/2004 15,791 14,883 22,575
6/30/2004 16,610 15,655 23,721
7/31/2004 15,893 14,979 22,631
8/31/2004 15,734 14,829 22,853
9/30/2004 16,292 15,355 23,757
10/31/2004 16,520 15,570 24,126
11/30/2004 17,774 16,752 26,267
12/31/2004 18,309 17,256 26,894
1/31/2005 17,762 16,740 25,853
2/28/2005 18,343 17,288 26,367
3/31/2005 18,080 17,041 25,824
4/30/2005 17,214 16,224 24,492
5/31/2005 18,125 17,083 25,986
6/30/2005 18,853 17,769 27,135
7/31/2005 19,857 18,715 28,679
8/31/2005 19,708 18,574 28,020
9/30/2005 19,901 18,756 27,974
10/31/2005 19,308 18,197 27,271
11/30/2005 20,140 18,982 28,378
12/31/2005 20,155 19,000 28,160
Average Annual Total Returns -- December 31, 2005
SINCE
1 YEAR 5 YEARS INCEPTION
CLASS A (Inception 12/31/96)
Net Asset Value/1/ 10.08% 1.39% 8.10%
With Maximum Sales Charge/2/ 3.75 0.19 7.39
CLASS B (Inception 12/31/96)
Net Asset Value/1/ 9.28 0.62 7.29
With CDSC/3/ 4.28 0.23 7.29
CLASS C (Inception 12/31/96)
Net Asset Value/1/ 9.28 0.64 7.30
With CDSC/3/ 8.28 0.64 7.30
- -------------------------------------------------------------
SINCE
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS INCEPTION
Russell 2000 Value Index/4/ 4.71% 13.55% 12.19%
Morningstar Small Value Fund Avg./5/ 6.13 13.50 11.50
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.ixisadvisorfunds.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 12/31/05 12/31/04
- -----------------------------------------------------------
Common Stocks 95.1 98.6
- -----------------------------------------------------------
Short-Term Investments and Other 4.9 1.4
- -----------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
- -----------------------------------------------------------
iShares Russell 2000 Value Index Fund 4.6 3.7
- -----------------------------------------------------------
Raymond James Financial, Inc. 3.1 2.0
- -----------------------------------------------------------
Universal Compression Holdings, Inc. 2.9 --
- -----------------------------------------------------------
Genesee & Wyoming, Inc. 2.8 1.6
- -----------------------------------------------------------
Pediatrix Medical Group, Inc. 2.5 1.3
- -----------------------------------------------------------
Briggs & Stratton Corp. 2.1 1.5
- -----------------------------------------------------------
Alliant Techsystems, Inc. 2.1 1.7
- -----------------------------------------------------------
AMERCO, Inc. 2.0 1.1
- -----------------------------------------------------------
Hilb, Rogal & Hobbs Co. 2.0 --
- -----------------------------------------------------------
Nordson Corp. 2.0 1.4
- -----------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
- -----------------------------------------------------------
Commercial Services 9.0 7.9
- -----------------------------------------------------------
Aerospace & Defense 7.4 5.7
- -----------------------------------------------------------
Health Care -- Services 5.8 5.5
- -----------------------------------------------------------
Transportation 5.7 5.9
- -----------------------------------------------------------
Oil & Gas 5.5 3.2
- -----------------------------------------------------------
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/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.
/5/Morningstar Small Value Fund Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
16
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
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks can be more sensitive to market movements because their prices
are based in part on future expectations.
Management Discussion
- --------------------------------------------------------------------------------
Westpeak Capital Growth Fund held a modest lead over its benchmark, the Russell
1000 Growth Index, for most of 2005, but the fund lost ground in the fourth
quarter. For the year ended December 31, 2005, the fund's total return was
3.32% based on the net asset value of Class A shares. For the same period, the
fund's benchmark returned 5.26%, and the average return on the funds in
Morningstar's Large Growth category was 6.46%.
Mid-cap stocks edged out small-cap issues in 2005. Value stocks had a slight
advantage over growth stocks for most of the year, with the exception of the
fourth quarter, when growth gained some ground. "Momentum" stocks with strong
recent price performance did well, but those with low price/earnings ratios -
which we also favor - detracted from results.
ENERGY STOCKS DOMINATED 2005
Energy has been a primary focus of the fund since 2004, including all three
industries that make up that category: refining, reserves, and services. We
favored companies with substantial energy reserves and added to oil services
during the year, although we trimmed the entire sector late in the period. Our
best performer in 2005 was Southwestern Energy Company, which is active in
exploration, production, and distribution of natural gas. We began buying the
stock in 2004 and continued adding to the position through May of 2005. We sold
Southwestern on strength late in the year because we felt its price had risen
too high.
TECHNOLOGY AND OTHER INDUSTRIES WERE MIXED
Although larger technology companies did not do well, smaller ones had a good
year. International Business Machines (IBM) has been in the portfolio since
about mid-2004. It was hit hard by disappointing earnings in April of 2005, but
the fund still has a sizeable position in "Big Blue." NII Holdings, a small
wireless communications company serving customers in Latin America, had an
excellent year, and we took profits in the stock late in the year.
Home-building stocks did well for the fund early in the year, but slumped near
the end and we trimmed holdings. We have also been trimming some of our better
performers in other industries, selling on strength during the year when we
felt they were reaching full valuation. Examples included Best Buy, a leading
electronics retailer, and AmerisourceBergen Corporation, a wholesale
distributor of pharmaceuticals.
The transportation sector also did well, although the fund's results were
mixed. Some businesses that transport freight were able to pass on higher costs
to their customers. The fund owned transportation giant FedEx for much of the
year but sold it at a slight loss. Although UPS did not have a good year, we
purchased a small position in the stock late in the year and it was a modest
positive for the fund.
STOCKS OF TWO MEDICAL GIANTS HURT PERFORMANCE
In addition to IBM, discussed above, Johnson & Johnson (J&J) and Boston
Scientific held the fund back as they competed in a bidding war to acquire
Guidant Corporation. Although each company has a unique business mix, all three
have been active in the development and production of cardiac stents. Even
though the competition has taken its toll, we retain positions in both J&J and
Boston Scientific.
OUTLOOK FOR 2006 IS POSITIVE
We believe the price momentum in energy stocks will carry through into 2006,
even if oil prices recede from their recent highs. We also have significant
positions in insurance companies and other interest-sensitive issues. Computer
software companies, information services, and the freight industry also still
seem attractive. As always, our focus is on stocks that appear to be
attractively priced, with positive momentum.
17
WESTPEAK CAPITAL GROWTH FUND
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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, 1995 through December 31, 2005
Maximum
Net Asset Sales Russell 1000
Value/1/ Charge/2/ Growth Index/4/
---------- ---------- ---------------
12/31/1995 $10,000 $ 9,425 $10,000
1/31/1996 10,185 9,599 10,335
2/29/1996 10,451 9,850 10,524
3/31/1996 10,353 9,757 10,537
4/30/1996 10,868 10,243 10,814
5/31/1996 11,194 10,551 11,192
6/30/1996 11,042 10,407 11,207
7/31/1996 10,281 9,690 10,551
8/31/1996 10,672 10,058 10,823
9/30/1996 11,558 10,893 11,611
10/31/1996 11,552 10,888 11,681
11/30/1996 12,127 11,430 12,558
12/31/1996 11,703 11,030 12,312
1/31/1997 12,365 11,654 13,176
2/28/1997 12,025 11,334 13,087
3/31/1997 11,127 10,487 12,378
4/30/1997 11,606 10,939 13,200
5/31/1997 12,626 11,900 14,153
6/30/1997 12,979 12,232 14,719
7/31/1997 13,890 13,091 16,021
8/31/1997 13,252 12,490 15,083
9/30/1997 13,653 12,868 15,826
10/31/1997 13,101 12,348 15,241
11/30/1997 13,444 12,671 15,888
12/31/1997 13,720 12,931 16,066
1/31/1998 13,830 13,034 16,547
2/28/1998 14,778 13,929 17,791
3/31/1998 15,439 14,551 18,500
4/30/1998 15,714 14,810 18,756
5/31/1998 15,335 14,453 18,224
6/30/1998 16,132 15,205 19,340
7/31/1998 15,981 15,062 19,212
8/31/1998 13,443 12,670 16,329
9/30/1998 14,250 13,430 17,583
10/31/1998 15,291 14,412 18,997
11/30/1998 16,209 15,277 20,442
12/31/1998 17,706 16,688 22,285
1/31/1999 18,597 17,528 23,593
2/28/1999 17,552 16,543 22,516
3/31/1999 17,938 16,907 23,701
4/30/1999 18,290 17,238 23,732
5/31/1999 17,955 16,923 23,002
6/30/1999 18,907 17,819 24,613
7/31/1999 18,487 17,424 23,831
8/31/1999 18,650 17,577 24,221
9/30/1999 18,377 17,321 23,712
10/31/1999 19,658 18,528 25,502
11/30/1999 20,242 19,078 26,878
12/31/1999 22,088 20,818 29,674
1/31/2000 20,842 19,644 28,283
2/29/2000 21,711 20,463 29,665
3/31/2000 23,450 22,102 31,789
4/30/2000 22,754 21,446 30,276
5/31/2000 21,691 20,444 28,751
6/30/2000 23,121 21,791 30,930
7/31/2000 22,522 21,227 29,641
8/31/2000 24,283 22,887 32,325
9/30/2000 22,039 20,772 29,267
10/31/2000 21,275 20,051 27,882
11/30/2000 18,405 17,346 23,772
12/31/2000 17,773 16,751 23,020
1/31/2001 18,625 17,554 24,610
2/28/2001 16,096 15,170 20,432
3/31/2001 14,594 13,755 18,209
4/30/2001 16,567 15,614 20,512
5/31/2001 16,378 15,436 20,210
6/30/2001 16,123 15,196 19,742
7/31/2001 15,271 14,393 19,248
8/31/2001 14,042 13,235 17,674
9/30/2001 12,600 11,875 15,910
10/31/2001 13,179 12,422 16,744
11/30/2001 14,326 13,502 18,353
12/31/2001 14,137 13,324 18,318
1/31/2002 14,078 13,268 17,995
2/28/2002 13,568 12,788 17,248
3/31/2002 14,031 13,224 17,845
4/30/2002 13,249 12,487 16,388
5/31/2002 12,964 12,219 15,992
6/30/2002 11,897 11,213 14,512
7/31/2002 10,973 10,342 13,715
8/31/2002 10,985 10,353 13,756
9/30/2002 9,824 9,259 12,329
10/31/2002 10,535 9,929 13,460
11/30/2002 10,879 10,253 14,191
12/31/2002 10,167 9,582 13,211
1/31/2003 9,907 9,337 12,890
2/28/2003 9,954 9,382 12,831
3/31/2003 10,155 9,571 13,070
4/30/2003 10,747 10,130 14,036
5/31/2003 11,340 10,688 14,737
6/30/2003 11,446 10,788 14,939
7/31/2003 11,601 10,934 15,311
8/31/2003 11,743 11,068 15,692
9/30/2003 11,790 11,113 15,524
10/31/2003 12,359 11,648 16,396
11/30/2003 12,501 11,782 16,568
12/31/2003 12,880 12,139 17,141
1/31/2004 13,069 12,318 17,491
2/29/2004 13,069 12,318 17,602
3/31/2004 12,832 12,095 17,275
4/30/2004 12,548 11,826 17,074
5/31/2004 12,772 12,038 17,393
6/30/2004 12,938 12,194 17,610
7/31/2004 12,346 11,636 16,614
8/31/2004 12,333 11,624 16,532
9/30/2004 12,405 11,692 16,690
10/31/2004 12,689 11,959 16,950
11/30/2004 13,163 12,407 17,533
12/31/2004 13,543 12,764 18,220
1/31/2005 13,151 12,395 17,613
2/28/2005 13,258 12,495 17,800
3/31/2005 12,902 12,161 17,476
4/30/2005 12,619 11,893 17,143
5/31/2005 13,306 12,541 17,973
6/30/2005 13,473 12,698 17,906
7/31/2005 14,160 13,346 18,781
8/31/2005 13,899 13,100 18,540
9/30/2005 13,946 13,144 18,625
10/31/2005 13,580 12,799 18,444
11/30/2005 14,196 13,380 19,240
12/31/2005 14,000 13,197 19,179
Average Annual Total Returns -- December 31, 2005
1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 8/3/92)
Net Asset Value/1/ 3.32% -4.67% 3.42%
With Maximum Sales Charge/2/ -2.64 -5.79 2.81
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 2.52 -5.37 2.61
With CDSC/3/ -2.48 -5.75 2.61
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 2.52 -5.41 2.60
With CDSC/3/ 1.52 -5.41 2.60
- -------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Russell 1000 Growth Index/4/ 5.26% -3.58% 6.73%
Morningstar Large Growth Fund Avg./5/ 6.46 -3.37 6.95
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.ixisadvisorfunds.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 12/31/05 12/30/04
- -----------------------------------------------------------
Common Stocks 99.1 98.4
- -----------------------------------------------------------
Short-Term Investments and Other 0.9 1.6
- -----------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 12/31/04
- -----------------------------------------------------------
Microsoft Corp. 5.7 5.3
- -----------------------------------------------------------
Johnson & Johnson 4.1 2.4
- -----------------------------------------------------------
Intel Corp. 3.9 4.7
- -----------------------------------------------------------
Amgen, Inc. 3.1 1.6
- -----------------------------------------------------------
International Business Machines Corp. 3.0 4.0
- -----------------------------------------------------------
Boeing Co. (The) 2.9 2.5
- -----------------------------------------------------------
General Electric Co. 2.9 --
- -----------------------------------------------------------
American Express Co. 2.9 2.1
- -----------------------------------------------------------
Texas Instruments, Inc. 2.8 --
- -----------------------------------------------------------
Cisco Systems, Inc. 2.7 4.3
- -----------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
- -----------------------------------------------------------
Software 10.3 9.3
- -----------------------------------------------------------
Health Care -- Products 8.0 5.4
- -----------------------------------------------------------
Diversified Financial Services 6.7 7.6
- -----------------------------------------------------------
Semiconductors 6.7 5.2
- -----------------------------------------------------------
Health Care -- Services 6.0 2.4
- -----------------------------------------------------------
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 of the 1,000 largest U.S.
companies within the Russell 3000 Index with higher price-to-book ratios and
higher forecasted growth values.
/5/Morningstar Large Growth Fund Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
18
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 IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor 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 IXIS Advisor Funds at 1-800-225-5478;
on the funds' website at www.ixisadvisorfunds.com; and on the Securities and
Exchange Commission's (SEC) website at www.sec.gov. Information regarding how
the funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2005 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
19
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, 2005 through December 31, 2005. 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 VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
CGM ADVISOR TARGETED EQUITY FUND 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,095.30 $6.65
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.85 $6.41
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,089.70 $10.59
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.80 $10.21
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,090.90 $10.70
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.95 $10.31
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,094.70 $5.54
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.90 $5.35
*Expenses are equal to the fund's annualized expense ratio: 1.26%, 2.01%,
2.03%, and 1.05% 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 365 (to reflect the half-year period).
20
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
BEGINNING ACCOUNT VALUE --ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
HANSBERGER INTERNATIONAL FUND 7/1/05 12/31/05 7/1/05 - 12/31/05
- --------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,168.00 $9.95
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.02 $9.26
- --------------------------------------------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,163.70 $13.91
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.34 $12.93
- --------------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,164.30 $14.02
- --------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.23 $13.03
*Expenses are equal to the fund's annualized expense ratio: 1.82%, 2.55% and
2.57% 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
HARRIS ASSOCIATES FOCUSED VALUE FUND 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,029.10 $8.69
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.64 $8.64
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,024.60 $12.50
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.84 $12.43
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,024.60 $12.50
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.84 $12.43
*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 365 (to reflect the half-year period).
21
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
HARRIS ASSOCIATES LARGE CAP VALUE FUND 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,038.20 $6.68
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.65 $6.61
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,034.00 $10.51
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.87 $10.41
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,033.20 $10.51
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.87 $10.41
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,038.60 $5.40
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.83 $5.35
*Expenses are equal to the fund's annualized expense ratio (after reimbursement
of expenses): 1.30%, 2.05%, 2.05% and 1.05% 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
IXIS U.S. DIVERSIFIED PORTFOLIO 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,079.80 $8.65
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.88 $8.39
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,075.20 $12.50
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.14 $12.13
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,075.80 $12.50
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.14 $12.13
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,081.90 $6.61
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.88 $6.41
*Expenses are equal to the fund's annualized expense ratio: 1.65%, 2.39%, 2.39%
and 1.26% 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 365 (to reflect the half-year period).
22
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
IXIS VALUE FUND 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,046.20 $8.30
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.08 $8.19
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,043.20 $12.15
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.32 $11.98
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,041.80 $12.15
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.32 $11.98
*Expenses are equal to the fund's annualized expense ratio (after advisory fee
waiver): 1.61%, 2.36% and 2.36% 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 365 (to reflect
the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
VAUGHAN NELSON SMALL CAP VALUE FUND 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,068.90 $9.75
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.76 $9.50
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,065.10 $13.48
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.14 $13.14
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,065.10 $13.59
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.04 $13.24
*Expenses are equal to the fund's annualized expense ratio: 1.87%, 2.59% and
2.61% 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 365 (to reflect the half-year period).
23
UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
WESTPEAK CAPITAL GROWTH FUND 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,038.70 $9.56
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.84 $9.45
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,035.60 $13.34
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.09 $13.19
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,035.60 $13.39
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,012.04 $13.24
*Expenses are equal to the fund's annualized expense ratio: 1.86%, 2.60% and
2.61% 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 365 (to reflect the half-year period).
24
CGM ADVISOR TARGETED EQUITY FUND -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- -------------------------------------------------------------------------------
Common Stocks -- 99.0% of Net Assets
Aerospace & Defense -- 3.2%
435,000 United Technologies Corp. $ 24,320,850
---------------
Auto Manufacturers -- 5.3%
385,000 Toyota Motor Corp.(d) 40,278,700
---------------
Beverages -- 5.2%
670,000 PepsiCo, Inc. 39,583,600
---------------
Biotechnology -- 6.5%
100,000 Amgen, Inc.(c) 7,886,000
449,000 Genentech, Inc.(c) 41,532,500
---------------
49,418,500
---------------
Cosmetics & Personal Care -- 5.3%
700,000 Procter & Gamble Co. 40,516,000
---------------
Diversified Financial Services -- 1.8%
115,000 Legg Mason, Inc. 13,764,350
---------------
Health Care -- Products -- 4.9%
625,000 Johnson & Johnson 37,562,500
---------------
Insurance -- 11.1%
865,000 Aflac, Inc. 40,153,300
650,000 American International Group, Inc. 44,349,500
---------------
84,502,800
---------------
Internet -- 2.7%
49,000 Google, Inc., Class A(c) 20,328,140
---------------
Miscellaneous -- Manufacturing -- 7.1%
200,000 3M Co. 15,500,000
1,110,000 General Electric Co. 38,905,500
---------------
54,405,500
---------------
Oil & Gas -- 19.3%
630,000 BP PLC, Sponsored ADR 40,458,600
640,000 ConocoPhillips 37,235,200
400,000 Exxon Mobil Corp. 22,468,000
374,000 Total SA, Sponsored ADR(d) 47,273,600
---------------
147,435,400
---------------
Oil & Gas Services -- 9.9%
595,000 Halliburton Co. 36,866,200
400,000 Schlumberger, Ltd.(d) 38,860,000
---------------
75,726,200
---------------
Pharmaceuticals -- 4.6%
770,000 Wyeth Corp. 35,473,900
---------------
Retail -- 1.4%
410,000 CVS Corp. 10,832,200
---------------
Semiconductors -- 1.6%
490,000 Intel Corp. 12,230,400
---------------
Telecommunications -- 3.5%
920,000 America Movil SA de CV, Series L, ADR 26,919,200
---------------
Tobacco -- 5.6%
568,000 Altria Group, Inc. 42,440,960
---------------
Total Common Stocks (Identified Cost $653,104,376) 755,739,200
---------------
Shares/
Principal
Amount Description Value (a)
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 7.3%
$ 6,205,000 American Express Credit Corp, 4.18%, due 1/03/2006 $ 6,205,000
49,555,261 State Street Navigator Securities Lending Prime Portfolio(e) 49,555,261
---------------
Total Short-Term Investments (Identified Cost $55,760,261) 55,760,261
---------------
Total Investments -- 106.3%
(Identified Cost $708,864,637)(b) 811,499,461
Other assets less liabilities -- (6.3)% (48,060,352)
---------------
Net Assets -- 100% $ 763,439,109
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $710,721,449 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 $ 105,505,324
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (4,727,312)
---------------
Net unrealized appreciation $ 100,778,012
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment 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, 2005 as a Percentage of Net Assets (unaudited)
Oil & Gas 19.3%
Insurance 11.1
Oil & Gas Services 9.9
Miscellaneous -- Manufacturing 7.1
Biotechnology 6.5
Tobacco 5.6
Cosmetics & Personal Care 5.3
Auto Manufacturers 5.3
Beverages 5.2
Healthcare -- Products 4.9
Pharmaceuticals 4.6
Telecommunications 3.5
Aerospace & Defense 3.2
Internet 2.7
Others, less than 2% each 4.8
See accompanying notes to financial statements.
25
HANSBERGER INTERNATIONAL FUND -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- -----------------------------------------------------------------------------
Common Stocks -- 98.3% of Net Assets
Australia -- 1.7%
64,173 Westpac Banking Corp. $ 1,068,278
44,997 Woodside Petroleum, Ltd.(c) 1,286,550
---------------
2,354,828
---------------
Brazil -- 2.0%
20,400 Aracruz Celulose SA(d) 816,204
20,400 Cia Energetica de Minas Gerais, Sponsored ADR(d) 751,944
18,760 Petroleo Brasileiro SA, ADR 1,337,025
---------------
2,905,173
---------------
Canada -- 3.1%
30,700 Alcan, Inc. 1,257,165
47,616 Celestica, Inc.(c) 502,825
27,000 Manulife Financial Corp. 1,587,600
17,155 Suncor Energy, Inc. 1,082,995
---------------
4,430,585
---------------
China -- 1.5%
2,204,410 Denway Motors, Ltd. 730,051
404,451 Ping An Insurance Group Co. of China, Ltd. 743,011
1,050,000 Yanzhou Coal Mining Co., Ltd. 670,335
---------------
2,143,397
---------------
Denmark -- 0.9%
75,700 Vestas Wind Systems A/S(c)(d) 1,238,034
---------------
Finland -- 1.1%
44,480 Nokia OYJ 815,727
20,000 Tietoenator OYJ 730,944
---------------
1,546,671
---------------
France -- 10.2%
29,920 Axa 966,259
10,300 BNP Paribas 832,061
27,800 Bouygues SA(d) 1,358,641
21,780 Carrefour SA(d) 1,019,360
9,700 Cie Generale d'Optique Essilor International SA 782,596
32,000 France Telecom SA(d) 795,053
8,800 Sanofi-Aventis 770,420
21,330 Schneider Electric SA 1,902,084
19,340 Suez SA(d) 601,904
15,400 Technip SA 930,886
4,640 Total SA 1,170,092
11,600 Total SA, Sponsored ADR(d) 1,466,240
23,400 Veolia Environnement(d) 1,058,364
27,000 Vivendi Universal 845,706
---------------
14,499,666
---------------
Germany -- 5.2%
3,550 Adidas-Salomon AG 671,382
9,635 Allianz AG 1,457,427
8,920 Deutsche Bank AG 862,377
11,010 E.ON AG 1,137,632
8,910 Linde AG 693,963
15,700 SAP AG, Sponsored ADR 707,599
13,980 Schering AG 936,098
11,200 Siemens AG 958,677
---------------
7,425,155
---------------
Greece -- 0.3%
15,300 Folli-Follie SA 407,241
---------------
Shares Description Value (a)
- -----------------------------------------------------------------------------------
Hong Kong -- 2.5%
184,400 Esprit Holdings, Ltd. $ 1,307,993
64,950 Hutchison Whampoa, Ltd. 617,393
705,730 Johnson Electric Holdings, Ltd. 667,502
590,217 Shangri-La Asia, Ltd. 986,288
---------------
3,579,176
---------------
India -- 1.7%
21,900 HDFC Bank, Ltd., ADR(d) 1,114,710
15,600 Infosys Technologies, Ltd., Sponsored ADR(d) 1,261,416
---------------
2,376,126
---------------
Indonesia -- 0.5%
1,142,300 PT Indosat Tbk 649,142
---------------
Israel -- 0.7%
24,100 Teva Pharmaceutical Industries, Ltd., Sponsored ADR(d) 1,036,541
---------------
Italy -- 3.1%
42,420 ENI-Ente Nazionale Idrocarburi SpA 1,185,321
47,840 Saipem SpA 785,420
358,700 UniCredito Italiano SpA 2,472,830
---------------
4,443,571
---------------
Japan -- 18.9%
62,000 Asahi Glass Co., Ltd.(d) 798,771
106,000 Bank of Yokohama, Ltd. (The) 867,638
31,900 Canon, Inc.(d) 1,872,533
53,000 Chugoku Bank 759,811
51,600 Denso Corp. 1,786,426
40,400 JS Group Corp. 807,128
161 KDDI Corp. 932,054
3,200 Keyence Corp. 910,031
148,000 Marubeni Corp. 792,604
17,800 Nidec Corp.(d) 1,514,323
7,400 Nintendo Co, Ltd. 896,040
76,400 Nissan Motor Co., Ltd.(d) 779,336
15,400 Nitto Denko Corp. 1,199,851
49,000 Nomura Holdings, Inc. 943,237
6,500 ORIX Corp. 1,654,442
97,000 Sharp Corp. 1,475,893
65,000 Shionogi & Co., Ltd.(c) 913,827
11,200 SMC Corp. 1,600,557
61,000 Sumitomo Corp. 789,441
170 Sumitomo Mitsui Financial Group, Inc. 1,795,939
137,000 Sumitomo Trust & Banking Co., Ltd. (The) 1,396,910
16,100 Takeda Pharmaceutical Co., Ltd. 872,360
28,700 Toyota Motor Corp. 1,499,406
---------------
26,858,558
---------------
Luxembourg -- 0.6%
46,137 SES Global SA 808,326
---------------
Mexico -- 0.6%
15,100 Wal-Mart de Mexico SA de CV(d) 828,990
---------------
Netherlands -- 3.3%
33,461 ABN AMRO Holding NV 873,571
67,100 ASML Holding NV, ADR(c)(d) 1,347,368
28,328 ING Groep NV 982,701
27,390 Koninklijke Philips Electronics NV 850,675
38,600 STMicroelectronics NV(d) 694,065
---------------
4,748,380
---------------
See accompanying notes to financial statements.
26
HANSBERGER INTERNATIONAL FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- -------------------------------------------------------------------------
Republic of Korea -- 4.1%
8,720 Kookmin Bank $ 657,197
15,300 Kookmin Bank, Sponsored ADR (c)(d) 1,143,063
14,000 LG Chem, Ltd.(c) 782,035
2,212 Samsung Electronics Co., Ltd. 1,423,109
3,300 Samsung Electronics Co., Ltd., GDR, 144A 1,087,350
1,840 Shinsegae Co., Ltd. 801,895
---------------
5,894,649
---------------
Russia -- 0.8%
20,500 LUKOIL, Sponsored ADR 1,209,500
---------------
Singapore -- 1.6%
171,140 DBS Group Holdings, Ltd.(d) 1,695,589
87,470 Singapore Airlines, Ltd. 650,493
---------------
2,346,082
---------------
South Africa -- 0.9%
281,020 Old Mutual PLC 796,196
24,000 Telkom SA, Ltd.(c) 511,210
---------------
1,307,406
---------------
Spain -- 3.8%
88,400 Banco Bilbao Vizcaya Argentaria SA 1,578,281
126,400 Banco Santander Central Hispano SA 1,666,752
86,200 Telefonica Moviles SA(d) 904,576
87,389 Telefonica SA 1,313,586
---------------
5,463,195
---------------
Sweden -- 0.5%
31,000 Svenska Handelsbanken(d) 768,315
---------------
Switzerland -- 8.3%
124,320 ABB, Ltd.(c) 1,209,138
9,700 Ciba Specialty Chemicals AG 627,773
22,037 Credit Suisse Group 1,122,541
14,580 Lonza Group AG 891,809
5,748 Nestle SA 1,716,574
3,600 Nobel Biocare Holding AG 792,471
41,810 Novartis AG 2,192,934
6,580 Roche Holding AG 986,606
980 Serono SA, Class B 778,222
15,210 UBS AG 1,445,722
---------------
11,763,790
---------------
Taiwan -- 0.6%
418,053 Taiwan Semiconductor Manufacturing Co., Ltd. 796,539
---------------
United Kingdom -- 19.8%
379,762 ARM Holdings PLC 788,154
18,000 AstraZeneca PLC 874,896
93,418 Barclays PLC 980,023
53,511 BHP Billiton PLC 875,765
57,939 BP PLC 620,375
20,100 BP PLC, Sponsored ADR 1,290,822
238,200 British Sky Broadcasting PLC 2,028,042
70,090 Cattles PLC 396,638
35,858 GlaxoSmithKline PLC 905,220
256,629 Group 4 Securicor PLC 710,838
344,277 Hays PLC 742,628
140,453 HBOS PLC 2,396,297
56,800 HSBC Holdings PLC 911,157
69,044 ICAP PLC 480,967
35,600 Johnson Matthey PLC 864,890
194,477 Kingfisher PLC 793,084
Shares Description Value (a)
- ---------------------------------------------------------------------------------------------------
United Kingdom -- continued
23,500 Man Group PLC $ 772,268
22,715 Reckitt Benckiser PLC 749,099
32,623 Reuters Group PLC 241,674
113,100 Rolls-Royce Group PLC 832,400
64,754 Royal Bank of Scotland Group PLC 1,954,106
384,270 Signet Group PLC 710,052
117,800 Smith & Nephew PLC 1,083,643
58,400 Smiths Group PLC 1,051,291
30,780 Standard Chartered PLC 684,910
251,472 Tesco PLC 1,433,389
66,110 Unilever PLC 657,148
560,346 Vodafone Group PLC 1,205,835
52,000 Vodafone Group PLC, Sponsored ADR 1,116,440
---------------
28,152,051
---------------
Total Common Stocks (Identified Cost $112,208,977) 139,981,087
---------------
Preferred Stocks -- 0.6%
Brazil -- 0.6%
20,439 Companhia de Bebidas das Americas, ADR
(Identified Cost $493,877) 777,704
---------------
Shares/
Principal
Amount
- ---------------------------------------------------------------------------------------------------
Short-Term Investments -- 15.3%
19,777,153 State Street Navigator Securities Lending Prime Portfolio(e) 19,777,153
$ 2,059,798 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$2,060,267 on 1/03/2006, collateralized by $1,740,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $2,104,845 2,059,798
---------------
Total Short-Term Investments (Identified Cost $21,836,951) 21,836,951
---------------
Total Investments -- 114.2%
(Identified Cost $134,539,805)(b) 162,595,742
Other assets less liabilities -- (14.2)% (20,156,580)
---------------
Net Assets -- 100% $ 142,439,162
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $135,999,745 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 $ 28,261,802
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (1,665,805)
---------------
Net unrealized appreciation $ 26,595,997
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment 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 registration, normally to
qualified institutional buyers. At December 31, 2005, the value of these securities
amounted to $1,087,350 or 0.8% of net assets.
See accompanying notes to financial statements.
27
HANSBERGER INTERNATIONAL FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Holdings at December 31, 2005 as a Percentage of Net Assets (unaudited)
Banking 20.4%
Oil & Gas 7.5
Pharmaceuticals 7.2
Telecommunications 6.4
Insurance 4.6
Semiconductors 4.3
Electrical Components & Equipment 3.7
Food 3.4
Chemicals 3.1
Diversified Financial Services 3.0
Retail 2.5
Engineering & Construction 2.3
Media 2.2
Hand & Machine Tools 2.2
Auto Manufacturers 2.1
Distribution & Wholesale 2.0
Others, less than 2% each 22.0
See accompanying notes to financial statements.
28
HARRIS ASSOCIATES FOCUSED VALUE FUND -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- ----------------------------------------------------------------------------------
Common Stocks -- 93.9% of Net Assets
Aerospace & Defense -- 5.0%
378,600 Raytheon Co. $ 15,200,790
---------------
Apparel -- 3.6%
304,900 Liz Claiborne, Inc. 10,921,518
---------------
Apparel Retailers -- 3.4%
318,800 Timberland Co.(c)(d) 10,376,940
---------------
Beverages -- 3.5%
548,500 Coca-Cola Enterprises, Inc. 10,514,745
---------------
Commercial Services -- 9.0%
533,000 H&R Block, Inc. 13,085,150
413,400 R R Donnelley & Sons Co.(d) 14,142,414
---------------
27,227,564
---------------
Cosmetics & Personal Care -- 3.0%
272,500 Estee Lauder Co., Inc. (The)(d) 9,123,300
---------------
Distribution & Wholesale -- 3.1%
162,900 CDW Corp. 9,378,153
---------------
Diversified Financial Services -- 1.6%
85,900 Morgan Stanley 4,873,966
---------------
Insurance -- 3.7%
478,100 Conseco, Inc.(c) 11,077,577
---------------
Leisure Time -- 3.6%
208,300 Harley-Davidson, Inc. 10,725,367
---------------
Media -- 17.8%
398,900 Cablevision Systems Corp., Class A(c)(d) 9,362,183
359,920 Discovery Holding Co.(c)(d) 5,452,788
277,000 EW Scripps Co. 13,301,540
181,400 Knight-Ridder, Inc.(d) 11,482,620
851,200 Liberty Media Corp., Class A(c) 6,698,944
433,300 Time Warner, Inc. 7,556,752
---------------
53,854,827
---------------
Oil & Gas -- 2.5%
88,700 Burlington Resources, Inc. 7,645,940
---------------
Pharmaceuticals -- 5.5%
140,700 Hospira, Inc.(c) 6,019,146
186,900 Omnicare, Inc. 10,694,418
---------------
16,713,564
---------------
Restaurants -- 8.2%
338,900 McDonald's Corp. 11,427,708
282,500 Yum! Brands, Inc. 13,243,600
---------------
24,671,308
---------------
Retail -- 7.3%
480,900 AutoNation, Inc.(c)(d) 10,449,957
504,600 TJX Cos., Inc. 11,721,858
---------------
22,171,815
---------------
Savings & Loans -- 8.3%
380,300 Sovereign Bancorp, Inc. 8,222,086
383,600 Washington Mutual, Inc. 16,686,600
---------------
24,908,686
---------------
Semiconductors -- 4.8%
308,400 Intel Corp. 7,697,664
262,900 National Semiconductor Corp. 6,830,142
---------------
14,527,806
---------------
Total Common Stocks (Identified Cost $245,393,262) 283,913,866
---------------
Shares/
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------------------------
Short-Term Investments -- 14.3%
19,573,534 State Street Navigator Securities Lending Prime Portfolio(e) $ 19,573,534
$ 23,749,785 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$23,755,194 on 1/03/2006, collateralized by $20,030,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $24,229,910 23,749,785
---------------
Total Short-Term Investments (Identified Cost $43,323,319) 43,323,319
---------------
Total Investments -- 108.2%
(Identified Cost $288,716,581)(b) 327,237,185
Other assets less liabilities -- (8.2)% (24,938,082)
---------------
Net Assets -- 100% $ 302,299,103
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $288,716,580 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 $ 41,410,305
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (2,889,700)
---------------
Net unrealized appreciation $ 38,520,605
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment of securities lending collateral.
Holdings at December 31, 2005 as a Percentage of Net Assets (unaudited)
Media 17.8%
Commercial Services 9.0
Saving & Loans 8.3
Restaurants 8.2
Retail 7.3
Pharmaceuticals 5.5
Aerospace & Defense 5.0
Semiconductors 4.8
Insurance 3.7
Apparel 3.6
Leisure Time 3.6
Beverages 3.5
Apparel Retailers 3.4
Distribution & Wholesale 3.1
Cosmetic & Personal Care 3.0
Oil & Gas 2.5
Others, less than 2% each 1.6
See accompanying notes to financial statements.
29
HARRIS ASSOCIATES LARGE CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- --------------------------------------------------------------------
--------------------------------------- ---------------
Common Stocks -- 99.0% of Net Assets
Aerospace & Defense -- 4.1%
106,500 Honeywell International, Inc. $ 3,967,125
190,400 Raytheon Co. 7,644,560
---------------
11,611,685
---------------
Banks -- 0.9%
87,800 U.S. Bancorp 2,624,342
---------------
Beverages -- 2.9%
35,800 Coca-Cola Co. (The) 1,443,098
116,400 Diageo PLC, Sponsored ADR(d) 6,786,120
---------------
8,229,218
---------------
Building Materials -- 2.7%
249,500 Masco Corp.(d) 7,532,405
---------------
Computers -- 8.6%
214,000 Dell, Inc.(c) 6,417,860
460,400 Hewlett-Packard Co. 13,181,252
1,080,400 Sun Microsystems, Inc.(c) 4,526,876
---------------
24,125,988
---------------
Diversified Financial Services -- 15.0%
158,600 American Express Co. 8,161,556
32,720 Ameriprise Financial, Inc. 1,341,520
174,100 Citigroup, Inc. 8,449,073
313,700 JPMorgan Chase & Co. 12,450,753
210,600 Morgan Stanley 11,949,444
---------------
42,352,346
---------------
Health Care -- Products -- 3.4%
185,500 Baxter International, Inc. 6,984,075
45,100 Johnson & Johnson 2,710,510
---------------
9,694,585
---------------
Household Products & Wares -- 2.1%
77,100 Fortune Brands, Inc. 6,015,342
---------------
Insurance -- 1.9%
66,100 Aflac, Inc. 3,068,362
36,800 MGIC Investment Corp. 2,422,176
---------------
5,490,538
---------------
Leisure Time -- 6.4%
199,100 Carnival Corp. 10,645,877
143,900 Harley-Davidson, Inc.(d) 7,409,411
---------------
18,055,288
---------------
Media -- 14.9%
91,400 Comcast Corp., Special Class A(c) 2,348,066
192,800 DIRECTV Group (The), Inc.(c) 2,722,336
1,054,500 Liberty Media Corp., Class A(c) 8,298,915
691,900 Time Warner, Inc. 12,066,736
227,400 Viacom, Inc., Class B 7,413,240
389,000 Walt Disney Co. (The) 9,324,330
---------------
42,173,623
---------------
Miscellaneous -- Manufacturing -- 4.3%
418,400 Tyco International, Ltd. 12,075,024
---------------
Office & Business Equipment -- 1.6%
298,800 Xerox Corp.(c) 4,377,420
---------------
Pharmaceuticals -- 0.8%
57,700 Abbott Laboratories 2,275,111
---------------
Shares Description Value (a)
- ------------------------------------------------------------------------------------------------------
---------------------------------------------------------------- ---------------
Restaurants -- 4.6%
388,000 McDonald's Corp. $ 13,083,360
---------------
Retail -- 11.9%
74,200 Costco Wholesale Corp. 3,670,674
237,400 Gap (The), Inc. 4,187,736
230,400 Home Depot, Inc. 9,326,592
102,300 Kohl's Corp.(c) 4,971,780
71,800 Limited Brands, Inc. 1,604,730
208,900 Wal-Mart Stores, Inc. 9,776,520
---------------
33,538,032
---------------
Savings & Loans -- 3.7%
239,300 Washington Mutual, Inc. 10,409,550
---------------
Semiconductors -- 6.7%
455,800 Intel Corp. 11,376,768
236,400 Texas Instruments, Inc. 7,581,348
---------------
18,958,116
---------------
Transportation -- 2.5%
86,300 Union Pacific Corp. 6,948,013
---------------
Total Common Stocks (Identified Cost $239,759,128) 279,569,986
---------------
Shares/
Principal
Amount
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 4.7%
9,914,734 State Street Navigator Securities Lending Prime Portfolio(e) 9,914,734
$ 3,256,403 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$3,257,145 on 1/03/2006, collateralized by $2,750,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $3,326,623 3,256,403
---------------
Total Short-Term Investments (Identified Cost $13,171,137) 13,171,137
---------------
Total Investments -- 103.7%
(Identified Cost $252,930,265)(b) 292,741,123
Other assets less liabilities -- (3.7)% (10,409,515)
---------------
Net Assets -- 100% $ 282,331,608
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $253,316,890 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 $ 41,918,853
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (2,494,620)
---------------
Net unrealized appreciation $ 39,424,233
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment 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
HARRIS ASSOCIATES LARGE CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Holdings at December 31, 2005 as a Percentage of Net Assets (unaudited)
Diversified Financial Services 15.0%
Media 14.9
Retail 11.9
Computers 8.6
Semiconductors 6.7
Leisure Time 6.4
Restaurants 4.6
Miscellaneous--Manufacturing 4.3
Aerospace & Defense 4.1
Savings & Loans 3.7
Health Care--Products 3.4
Beverages 2.9
Building Materials 2.7
Transportation 2.5
Household Products & Wares 2.1
Others, less than 2% each 5.2
See accompanying notes to financial statements.
31
IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- -----------------------------------------------------------------
Common Stocks -- 98.1% of Net Assets
Advertising -- 1.2%
39,775 Getty Images, Inc.(c)(d) $ 3,550,714
69,700 R.H. Donnelley Corp.(c) 4,294,914
---------------
7,845,628
---------------
Aerospace & Defense -- 2.1%
36,300 Boeing Co. (The) 2,549,712
66,900 Honeywell International, Inc. 2,492,025
31,900 Lockheed Martin Corp. 2,029,797
119,000 Raytheon Co. 4,777,850
26,900 United Technologies Corp. 1,503,979
---------------
13,353,363
---------------
Apparel -- 0.8%
32,875 Carter's, Inc.(c)(d) 1,934,694
54,200 Coach, Inc.(c) 1,807,028
18,000 Nike, Inc., Class B 1,562,220
---------------
5,303,942
---------------
Auto Parts & Equipment -- 0.2%
36,725 Lear Corp.(d) 1,045,194
---------------
Banks -- 3.9%
85,975 Banc Corp. (The)(c)(d) 980,975
44,800 Bank of America Corp. 2,067,520
80,900 BOK Financial Corp. 3,675,287
45,350 City National Corp. 3,285,154
129,150 Colonial BancGroup, Inc. 3,076,353
76,410 Dearborn Bancorp, Inc. 1,891,149
74,225 East West Bancorp, Inc. 2,708,470
51,525 Northern Trust Corp. 2,670,025
31,650 South Financial Group (The), Inc.(d) 871,641
109,300 U.S. Bancorp 3,266,977
---------------
24,493,551
---------------
Beverages -- 1.1%
21,400 Coca-Cola Co. (The) 862,634
72,600 Diageo PLC, Sponsored ADR(d) 4,232,580
27,350 PepsiCo, Inc. 1,615,838
---------------
6,711,052
---------------
Biotechnology -- 2.0%
47,700 Amgen, Inc.(c) 3,761,622
32,550 Celgene Corp.(c) 2,109,240
35,300 Genzyme Corp.(c) 2,498,534
44,725 Medimmune, Inc.(c) 1,566,269
44,450 Protein Design Labs, Inc.(c) 1,263,269
54,450 Vertex Pharmaceuticals, Inc.(c) 1,506,632
---------------
12,705,566
---------------
Building Materials -- 1.5%
275,550 Comfort Systems USA, Inc. 2,535,060
155,900 Masco Corp. 4,706,621
47,350 Texas Industries, Inc.(d) 2,359,924
---------------
9,601,605
---------------
Chemicals -- 2.7%
40,000 Air Products & Chemicals, Inc. 2,367,600
97,900 Airgas, Inc. 3,220,910
43,525 Cytec Industries, Inc. 2,073,096
78,100 Dow Chemical Co. (The) 3,422,342
46,100 Du Pont (E.I.) de Nemours & Co. 1,959,250
58,350 Huntsman Corp.(c) 1,004,787
53,900 Praxair, Inc. 2,854,544
---------------
16,902,529
---------------
Shares Description Value (a)
- --------------------------------------------------------------------------
Commercial Services -- 4.3%
66,900 Adesa, Inc.(d) $ 1,633,698
99,550 Aramark Corp., Class B 2,765,499
58,350 Arbitron, Inc. 2,216,133
168,575 CCE Spinco, Inc.(c) 2,208,333
39,275 Corporate Executive Board Co. 3,522,967
74,950 Exponent, Inc.(c) 2,127,081
73,025 FTI Consulting, Inc.(c)(d) 2,003,806
23,900 Hewitt Associates, Inc., Class A(c)(d) 669,439
51,650 Monster Worldwide, Inc.(c) 2,108,353
66,700 Moody's Corp. 4,096,714
191,025 Rent-A-Center, Inc.(c) 3,602,731
---------------
26,954,754
---------------
Computers -- 3.5%
33,525 Apple Computer, Inc.(c) 2,410,112
80,200 Cognizant Technology Solutions Corp.(c) 4,038,070
163,000 Dell, Inc.(c) 4,888,370
283,800 Hewlett-Packard Co. 8,125,194
680,600 Sun Microsystems, Inc.(c)(d) 2,851,714
---------------
22,313,460
---------------
Cosmetics & Personal Care -- 0.9%
94,200 Procter & Gamble Co. 5,452,296
---------------
Distribution & Wholesale -- 0.6%
205,400 BlueLinx Holdings, Inc. 2,310,750
74,875 Ingram Micro, Inc.(c) 1,492,259
---------------
3,803,009
---------------
Diversified Financial Services -- 8.3%
40,725 Affiliated Managers Group(c)(d) 3,268,181
99,600 American Express Co. 5,125,416
19,560 Ameriprise Financial, Inc. 801,960
9,025 Chicago Mercantile Exchange Holdings, Inc. 3,316,597
146,900 Citigroup, Inc. 7,129,057
23,300 Franklin Resources, Inc. 2,190,433
36,675 GFI Group, Inc.(c)(d) 1,739,495
38,900 Greenhill & Co., Inc.(d) 2,184,624
38,300 Intercontinental Exchange, Inc.(c)(d) 1,392,205
50,875 Investment Technology Group, Inc.(c) 1,803,010
197,900 JPMorgan Chase & Co. 7,854,651
132,900 Morgan Stanley 7,540,746
55,325 Nasdaq Stock Market, Inc. (The)(c)(d) 1,946,334
96,150 Nuveen Investments, Class A(d) 4,097,913
72,075 OptionsXpress Holdings, Inc.(d) 1,769,441
---------------
52,160,063
---------------
Electric -- 1.4%
31,566 Allete, Inc.(d) 1,388,904
110,500 MDU Resources Group, Inc. 3,617,770
83,150 NRG Energy, Inc.(c) 3,918,028
---------------
8,924,702
---------------
Electrical Components & Equipment -- 0.6%
91,150 Ametek, Inc. 3,877,521
---------------
Electronics -- 1.4%
60,975 Amphenol Corp., Class A 2,698,753
80,250 Avnet, Inc.(c) 1,921,185
42,050 Mettler Toledo International, Inc.(c) 2,321,160
74,700 PerkinElmer, Inc. 1,759,932
---------------
8,701,030
---------------
See accompanying notes to financial statements.
32
IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- -----------------------------------------------------------------
Engineering & Construction -- 0.5%
5,600 Fluor Corp. $ 432,656
47,575 Washington Group International, Inc. 2,520,048
---------------
2,952,704
---------------
Entertainment -- 0.5%
163,700 Warner Music Group Corp.(d) 3,154,499
---------------
Environmental Control -- 0.6%
51,500 Nalco Holding Co.(c) 912,065
43,600 Stericycle, Inc.(c) 2,567,168
---------------
3,479,233
---------------
Food -- 0.5%
116,875 Spartan Stores, Inc.(c) 1,217,837
27,500 Whole Foods Market, Inc.(d) 2,128,225
---------------
3,346,062
---------------
Forest Products & Paper -- 0.4%
45,425 Potlatch Corp.(d) 2,315,767
---------------
Gas -- 0.9%
81,225 Oneok, Inc. 2,163,022
158,300 UGI Corp. 3,260,980
---------------
5,424,002
---------------
Health Care -- Products -- 3.2%
46,300 Alcon, Inc. 6,000,480
112,200 Baxter International, Inc. 4,224,330
25,075 Beckman Coulter, Inc. 1,426,768
16,675 Intuitive Surgical, Inc.(c) 1,955,477
28,200 Johnson & Johnson 1,694,820
55,600 Medtronic, Inc. 3,200,892
45,800 Sybron Dental Specialties, Inc.(c) 1,823,298
---------------
20,326,065
---------------
Health Care -- Services -- 3.2%
7,200 Covance, Inc.(c)(d) 349,560
55,725 Coventry Health Care, Inc.(c) 3,174,096
55,000 Health Net, Inc.(c) 2,835,250
41,200 Humana, Inc.(c) 2,238,396
10,900 Sierra Health Services, Inc.(c)(d) 871,564
72,125 Triad Hospitals, Inc.(c) 2,829,464
58,800 UnitedHealth Group, Inc. 3,653,832
51,500 WellPoint, Inc.(c) 4,109,185
---------------
20,061,347
---------------
Home Builders -- 0.3%
17,825 Standard-Pacific Corp.(d) 655,960
44,900 Winnebago Industries(d) 1,494,272
---------------
2,150,232
---------------
Household Products & Wares -- 0.9%
53,175 Church & Dwight Co., Inc.(d) 1,756,370
47,400 Fortune Brands, Inc. 3,698,148
---------------
5,454,518
---------------
Insurance -- 1.9%
41,200 Aflac, Inc. 1,912,504
92,525 Assurant, Inc. 4,023,912
22,300 MGIC Investment Corp. 1,467,786
25,175 Navigators Group, Inc.(c) 1,097,882
74,075 Protective Life Corp. 3,242,263
---------------
11,744,347
---------------
Shares Description Value (a)
- -----------------------------------------------------------------------------
Internet -- 2.1%
130,850 Akamai Technologies, Inc.(c)(d) $ 2,607,840
58,900 eBay, Inc.(c) 2,547,425
39,750 F5 Networks, Inc.(c) 2,273,303
6,000 Google, Inc., Class A(c) 2,489,160
80,100 Yahoo!, Inc.(c) 3,138,318
---------------
13,056,046
---------------
Iron & Steel -- 0.3%
66,625 Chaparral Steel Co.(c)(d) 2,015,406
---------------
Leisure Time -- 1.8%
124,400 Carnival Corp. 6,651,668
88,700 Harley-Davidson, Inc.(d) 4,567,163
---------------
11,218,831
---------------
Lodging -- 0.8%
43,400 Starwood Hotels & Resorts Worldwide, Inc. 2,771,524
6,400 Station Casinos, Inc. 433,920
27,900 Wynn Resorts, Ltd.(c)(d) 1,530,315
---------------
4,735,759
---------------
Machinery -- Construction & Mining -- 0.8%
33,800 Caterpillar, Inc. 1,952,626
74,038 Joy Global, Inc. 2,961,500
---------------
4,914,126
---------------
Machinery -- Diversified -- 1.1%
53,075 Alamo Group, Inc. 1,088,038
81,000 Albany International Corp., Class A 2,928,960
118,075 Wabtec Corp. 3,176,217
---------------
7,193,215
---------------
Manufacturing -- 0.7%
81,250 Actuant Corp.(d) 4,533,750
---------------
Media -- 5.1%
134,325 Citadel Broadcasting Corp.(d) 1,805,328
56,900 Comcast Corp., Special Class A(c) 1,461,761
121,700 DIRECTV Group (The), Inc.(c) 1,718,404
644,300 Liberty Media Corp., Class A(c) 5,070,641
44,225 Scholastic Corp.(c)(d) 1,260,855
419,800 Time Warner, Inc. 7,321,312
150,200 Viacom, Inc., Class B 4,896,520
301,600 Walt Disney Co. (The) 7,229,352
53,150 XM Satellite Radio Holdings, Inc., Class A(c)(d) 1,449,932
---------------
32,214,105
---------------
Metal Fabricate & Hardware -- 0.5%
54,875 Precision Castparts Corp. 2,843,074
---------------
Miscellaneous -- Manufacturing -- 3.2%
53,900 3M Co. 4,177,250
158,400 General Electric Co. 5,551,920
15,800 ITT Industries, Inc. 1,624,556
51,600 Pall Corp.(d) 1,385,976
248,500 Tyco International, Ltd. 7,171,710
---------------
19,911,412
---------------
Office & Business Equipment -- 0.4%
187,100 Xerox Corp.(c)(d) 2,741,015
---------------
Office Furnishings -- 0.3%
261,289 Interface, Inc., Class A(c) 2,147,796
---------------
See accompanying notes to financial statements.
33
IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------------
Oil & Gas -- 3.4%
23,200 ConocoPhillips $ 1,349,776
120,100 Exxon Mobil Corp. 6,746,017
91,625 Southwestern Energy Co. 3,293,002
23,600 Sunoco, Inc. 1,849,768
48,625 Todco, Class A 1,850,668
50,600 Transocean, Inc.(c) 3,526,314
51,550 Ultra Petroleum Corp.(c)(d) 2,876,490
---------------
21,492,035
---------------
Oil & Gas Services -- 4.0%
39,600 Baker Hughes, Inc. 2,406,888
54,550 BJ Services Co. 2,000,348
114,600 FMC Technologies, Inc.(c) 4,918,632
100,325 Grant Prideco, Inc.(c)(d) 4,426,339
52,900 Halliburton Co. 3,277,684
31,200 National Oilwell Varco, Inc.(c) 1,956,240
36,700 Schlumberger, Ltd. 3,565,405
60,900 Universal Compression Holdings, Inc.(c) 2,504,208
---------------
25,055,744
---------------
Pharmaceuticals -- 1.6%
35,100 Abbott Laboratories 1,383,993
37,600 Caremark Rx, Inc.(c) 1,947,304
19,200 MGI Pharma, Inc.(c)(d) 329,472
16,450 Neurocrine Biosciences, Inc.(c)(d) 1,031,909
66,750 Omnicare, Inc. 3,819,435
103,150 Perrigo Co. 1,537,966
---------------
10,050,079
---------------
Pipelines -- 0.3%
21,275 Questar Corp. 1,610,518
---------------
Processing/Business Services -- 0.6%
46,000 Express Scripts, Inc.(c) 3,854,800
---------------
Real Estate -- 1.3%
63,025 CB Richard Ellis Group, Inc., Class A(c) 3,709,021
172,400 Trammell Crow Co.(c)(d) 4,422,060
---------------
8,131,081
---------------
REITs -- Financial Services -- 0.3%
46,975 CBL & Associates Properties, Inc. 1,855,982
---------------
REITs -- Shopping Centers -- 0.5%
66,425 Developers Diversified Realty Corp. 3,123,304
---------------
Restaurants -- 1.5%
237,800 McDonald's Corp. 8,018,616
32,900 Yum! Brands, Inc. 1,542,352
---------------
9,560,968
---------------
Retail -- 6.4%
109,975 Applebee's International, Inc.(d) 2,484,335
62,850 Chico's FAS, Inc.(c) 2,761,000
83,275 Coldwater Creek, Inc.(c)(d) 2,542,386
45,300 Costco Wholesale Corp. 2,240,991
61,200 Dollar Tree Stores, Inc.(c) 1,465,128
151,500 Gap (The), Inc. 2,672,460
141,900 Home Depot, Inc. 5,744,112
60,500 Kohl's Corp.(c) 2,940,300
80,900 Limited Brands, Inc.(d) 1,808,115
11,800 MSC Industrial Direct Co., Inc.(d) 474,596
27,000 Outback Steakhouse, Inc. 1,123,470
32,800 Petsmart, Inc. 841,648
40,825 Regis Corp. 1,574,620
Shares Description Value (a)
- -------------------------------------------------------------------------------------------
Retail -- continued
118,450 Staples, Inc. $ 2,690,000
83,600 Starbucks Corp.(c) 2,508,836
138,600 Wal-Mart Stores, Inc. 6,486,480
---------------
40,358,477
---------------
Savings & Loans -- 1.0%
147,700 Washington Mutual, Inc. 6,424,950
---------------
Semiconductors -- 3.6%
43,600 Broadcom Corp., Class A(c) 2,055,740
286,300 Intel Corp. 7,146,048
67,875 Marvell Technology Group, Ltd.(c) 3,807,109
87,600 Microsemi Corp.(c)(d) 2,423,016
444,325 ON Semiconductor Corp.(c)(d) 2,457,117
143,900 Texas Instruments, Inc. 4,614,873
---------------
22,503,903
---------------
Software -- 2.5%
107,900 Certegy, Inc. 4,376,424
259,825 Compuware Corp.(c) 2,330,630
17,900 Infosys Technologies, Ltd., Sponsored ADR(d) 1,447,394
40,125 NAVTEQ Corp.(c) 1,760,284
70,025 Salesforce.Com, Inc.(c)(d) 2,244,301
38,500 Satyam Computer Services, Ltd.(d) 1,408,715
93,800 Sybase, Inc.(c)(d) 2,050,468
---------------
15,618,216
---------------
Telecommunications -- 2.5%
74,250 ADTRAN, Inc. 2,208,195
98,650 American Tower Corp.(c) 2,673,415
52,450 Harris Corp. 2,255,874
61,975 Nextel Partners, Inc., Class A(c) 1,731,582
97,300 NII Holdings, Inc., Class B(c) 4,250,064
57,600 Telefonaktiebolaget LM Ericsson, Sponsored ADR(d) 1,981,440
63,050 Valor Communications Group, Inc.(d) 718,770
---------------
15,819,340
---------------
Tobacco -- 0.4%
33,200 Altria Group, Inc. 2,480,704
---------------
Transportation -- 1.8%
159,775 Laidlaw International, Inc. 3,711,573
54,500 Union Pacific Corp. 4,387,795
37,100 UTI Worldwide, Inc.(d) 3,444,364
---------------
11,543,732
---------------
Total Common Stocks (Identified Cost $514,820,045) 617,566,409
---------------
Shares/
Principal
Amount
- -------------------------------------------------------------------------------------------
Short-Term Investments -- 11.5%
61,379,500 State Street Navigator Securities Lending Prime Portfolio(e) 61,379,500
$ 10,985,482 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$10,987,984 on 1/03/2006, collateralized by $9,265,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $11,207,694 10,985,482
---------------
Total Short-Term Investments (Identified Cost $72,364,982) 72,364,982
---------------
Total Investments -- 109.6%
(Identified Cost $587,185,027)(b) 689,931,391
Other assets less liabilities -- (9.6)% (60,395,755)
---------------
Net Assets -- 100% $ 629,535,636
===============
See accompanying notes to financial statements.
34
IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on investments based
on cost of $589,188,796 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. $107,131,315
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value. (6,388,720)
------------
Net unrealized appreciation $100,742,595
============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment of securities lending collateral.
REITs Real Estate Investment Trusts
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, 2005 as a Percentage of Net Assets (unaudited)
Diversified Financial Services 8.3%
Retail 6.4
Media 5.1
Commercial Services 4.3
Oil & Gas Services 4.0
Banks 3.9
Semiconductors 3.6
Computers 3.5
Oil & Gas 3.4
Health Care --Products 3.2
Health Care -- Services 3.2
Miscellaneous -- Manufacturing 3.2
Chemicals 2.7
Telecommunications 2.5
Software 2.5
Aerospace & Defense 2.1
Internet 2.1
Biotechnology 2.0
Others, less than 2% each 32.1
See accompanying notes to financial statements.
35
IXIS VALUE FUND -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------
------------------------------------- ---------------
Common Stocks -- 98.1% of Net Assets
Aerospace & Defense -- 3.0%
3,800 Boeing Co. (The) $ 266,912
5,475 General Dynamics Corp. 624,424
21,000 Honeywell International, Inc. 782,250
14,375 Northrop Grumman Corp. 864,081
9,925 Raytheon Co. 398,489
14,825 United Technologies Corp. 828,866
---------------
3,765,022
---------------
Agriculture -- 0.1%
6,000 Archer-Daniels-Midland Co. 147,960
---------------
Banks -- 6.3%
33,450 Bank of America Corp. 1,543,718
800 First Citizens BancShares, Inc. 139,536
6,600 Mellon Financial Corp. 226,050
24,425 North Fork Bancorporation, Inc. 668,268
6,200 State Street Corp. 343,728
5,850 SunTrust Banks, Inc. 425,646
72,950 U.S. Bancorp 2,180,475
15,000 Wachovia Corp. 792,900
23,375 Wells Fargo & Co. 1,468,651
---------------
7,788,972
---------------
Beverages -- 3.7%
4,700 Anheuser-Busch Cos., Inc. 201,912
30,000 Coca-Cola Co. (The) 1,209,300
8,800 Molson Coors Brewing Co. 589,512
65,000 Pepsi Bottling Group, Inc. 1,859,650
13,000 PepsiCo, Inc. 768,040
---------------
4,628,414
---------------
Biotechnology -- 0.9%
13,525 Amgen, Inc.(c) 1,066,582
1,000 Millipore Corp.(c) 66,040
---------------
1,132,622
---------------
Building Materials -- 0.3%
5,900 USG Corp.(c)(d) 383,500
---------------
Chemicals -- 0.7%
15,425 Praxair, Inc. 816,908
---------------
Coal -- 0.4%
6,375 Peabody Energy Corp. 525,428
---------------
Commercial Services -- 0.9%
17,150 Aramark Corp., Class B 476,427
17,700 H&R Block, Inc. 434,535
17,500 MPS Group, Inc.(c) 239,225
---------------
1,150,187
---------------
Computers -- 2.9%
5,000 Dell, Inc.(c) 149,950
95,350 Hewlett-Packard Co. 2,729,870
6,200 Intergraph Corp.(c) 308,822
4,700 International Business Machines Corp. 386,340
---------------
3,574,982
---------------
Distribution & Wholesale -- 0.2%
8,100 Brightpoint, Inc.(c) 224,613
1,500 WESCO International, Inc.(c) 64,095
---------------
288,708
---------------
Shares Description Value (a)
- --------------------------------------------------------------------
--------------------------------------- ---------------
Diversified Financial Services -- 13.3%
36,425 American Express Co. $ 1,874,430
12,240 Ameriprise Financial, Inc. 501,840
8,375 Capital One Financial Corp. 723,600
19,125 CIT Group, Inc. 990,293
55,158 Citigroup, Inc. 2,676,818
2,100 CompuCredit Corp.(c)(d) 80,808
4,800 Franklin Resources, Inc. 451,248
3,025 Goldman Sachs Group, Inc. 386,323
19,000 Janus Capital Group, Inc. 353,970
80,125 JPMorgan Chase & Co. 3,180,161
7,500 Lehman Brothers Holdings, Inc. 961,275
25,350 Merrill Lynch & Co., Inc. 1,716,955
42,100 Morgan Stanley 2,388,754
2,100 SLM Corp. 115,689
---------------
16,402,164
---------------
Electric -- 3.8%
14,600 Dominion Resources, Inc. 1,127,120
18,325 Entergy Corp. 1,258,011
12,700 Exelon Corp. 674,878
10,625 NRG Energy, Inc.(c) 500,650
10,775 TXU Corp. 540,797
14,300 Wisconsin Energy Corp. 558,558
---------------
4,660,014
---------------
Electronics -- 0.8%
13,025 Amphenol Corp., Class A 576,487
43,075 Flextronics International, Ltd.(c) 449,703
---------------
1,026,190
---------------
Engineering & Construction -- 0.7%
87,975 ABB, Ltd., Sponsored ADR(c) 855,117
---------------
Food -- 0.5%
23,400 Kroger Co. (The)(c) 441,792
4,400 Supervalue, Inc. 142,912
---------------
584,704
---------------
Health Care -- Products -- 3.4%
59,500 Baxter International, Inc. 2,240,175
7,525 Beckman Coulter, Inc. 428,173
7,700 Becton Dickinson & Co. 462,616
26,900 Boston Scientific Corp.(c) 658,781
7,425 Johnson & Johnson 446,242
---------------
4,235,987
---------------
Health Care -- Services -- 1.1%
2,400 Aetna, Inc. 226,344
2,400 Coventry Health Care, Inc.(c) 136,704
10,500 Quest Diagnostics 540,540
8,000 UnitedHealth Group, Inc. 497,120
---------------
1,400,708
---------------
Insurance -- 4.0%
21,725 Allstate Corp. (The) 1,174,671
14,075 American International Group, Inc. 960,337
140 Berkshire Hathaway, Inc., Class B(c) 410,970
12,800 Genworth Financial, Inc., Class A 442,624
3,800 LandAmerica Financial Group, Inc.(d) 237,120
1,900 Metlife, Inc. 93,100
3,600 MGIC Investment Corp. 236,952
3,000 Old Republic International Corp. 78,780
See accompanying notes to financial statements.
36
IXIS VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- -------------------------------------------------------------------
Insurance -- continued
4,600 Principal Financial Group $ 218,178
14,300 Prudential Financial, Inc. 1,046,617
---------------
4,899,349
---------------
Internet -- 0.4%
300 Google, Inc., Class A(c) 124,458
9,500 Internet Security Systems(c) 199,025
6,200 VeriSign, Inc.(c) 135,904
---------------
459,387
---------------
Leisure Time -- 0.9%
20,000 Carnival Corp. 1,069,400
---------------
Lodging -- 0.1%
2,000 Marriott International, Inc., Class A 133,940
---------------
Lodging & Gaming -- 0.7%
30,025 Hilton Hotels Corp. 723,903
2,300 Las Vegas Sands Corp.(c)(d) 90,781
---------------
814,684
---------------
Machinery -- Diversified -- 0.1%
3,700 Cascade Corp. 173,567
---------------
Media -- 6.7%
50,000 Cablevision Systems Corp., Class A(c) 1,173,500
46,100 DIRECTV Group (The), Inc.(c) 650,932
12,000 Liberty Global, Inc., Class A 270,000
12,000 Liberty Global, Inc., Class C(c) 254,400
200,000 Liberty Media Corp., Class A(c) 1,574,000
12,600 McGraw-Hill Cos. (The), Inc. 650,538
44,350 News Corp., Inc., Class A 689,642
171,500 Time Warner, Inc. 2,990,960
---------------
8,253,972
---------------
Metal Fabricate & Hardware -- 0.4%
12,300 Commercial Metals Co. 461,742
---------------
Mining -- 0.0%
1,500 Royal Gold, Inc.(d) 52,095
---------------
Miscellaneous -- Manufacturing -- 2.5%
37,175 General Electric Co. 1,302,984
62,925 Tyco International, Ltd. 1,816,015
---------------
3,118,999
---------------
Oil & Gas - 7.7%
1,200 Anadarko Petroleum Corp. 113,700
11,800 Chevron Corp. 669,886
16,325 ConocoPhillips 949,788
2,800 Devon Energy Corp. 175,112
7,750 Diamond Offshore Drilling, Inc. 539,090
13,300 EnCana Corp. 600,628
72,975 Exxon Mobil Corp. 4,099,006
15,750 GlobalSantaFe Corp. 758,362
2,300 Helmerich and Payne, Inc. 142,393
7,225 Occidental Petroleum Corp. 577,133
15,825 Southwestern Energy Co. 568,751
7,600 Valero Energy Corp. 392,160
---------------
9,586,009
---------------
Oil & Gas Services -- 1.4%
24,300 Halliburton Co. 1,505,628
5,500 Oil States International, Inc.(c) 174,240
---------------
1,679,868
---------------
Shares Description Value (a)
- ------------------------------------------------------------
Pharmaceuticals -- 2.4%
25,375 Abbott Laboratories $ 1,000,536
8,200 AmerisourceBergen Corp. 339,480
6,700 Cardinal Health, Inc. 460,625
16,200 Merck & Co., Inc. 515,322
27,775 Pfizer, Inc. 647,713
---------------
2,963,676
---------------
REITs -- Hotels -- 0.3%
42,300 MeriStar Hospitality Corp.(c) 397,620
---------------
REITs -- Mortgage -- 0.1%
4,500 Arbor Realty Trust, Inc. 116,640
---------------
REITs -- Regional Malls -- 0.4%
6,750 Simon Property Group, Inc. 517,253
---------------
Restaurants -- 3.9%
86,400 McDonald's Corp. 2,913,408
40,000 Yum! Brands, Inc. 1,875,200
---------------
4,788,608
---------------
Retail -- 8.0%
35,000 Costco Wholesale Corp. 1,731,450
25,550 CVS Corp. 675,031
12,825 Federated Department Stores 850,682
70,000 Gap (The), Inc. 1,234,800
1,900 Home Depot, Inc. 76,912
8,350 JC Penney Co., Inc. 464,260
11,500 Kohl's Corp.(c) 558,900
10,400 Lowe's Cos, Inc. 693,264
22,500 Office Depot, Inc.(c) 706,500
45,000 Tiffany & Co. 1,723,050
28,575 TJX Cos., Inc. 663,797
11,575 Wal-Mart Stores, Inc. 541,710
---------------
9,920,356
---------------
Savings & Loans -- 3.1%
3,900 Firstfed Financial Corp.(c)(d) 212,628
80,000 Sovereign Bancorp, Inc. 1,729,600
45,000 Washington Mutual, Inc. 1,957,500
---------------
3,899,728
---------------
Semiconductors -- 1.9%
59,500 Intel Corp. 1,485,120
28,000 National Semiconductor Corp. 727,440
5,800 Texas Instruments, Inc. 186,006
---------------
2,398,566
---------------
Software -- 2.9%
12,225 First Data Corp. 525,797
6,200 Fiserv, Inc.(c) 268,274
6,500 Intuit, Inc.(c) 346,450
73,675 Microsoft Corp. 1,926,602
41,200 Oracle Corp.(c) 503,052
---------------
3,570,175
---------------
Telecommunications -- 4.3%
34,500 AT&T, Inc. 844,905
49,850 Avaya, Inc.(c) 531,899
36,150 BellSouth Corp. 979,665
12,050 CenturyTel, Inc. 399,578
53,775 Cisco Systems, Inc.(c) 920,628
35,400 Motorola, Inc. 799,686
See accompanying notes to financial statements.
37
IXIS VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------------------------------------------
Telecommunications -- continued
40,350 Nokia OYJ, Sponsored ADR $ 738,405
1,700 United States Cellular Corp.(c) 83,980
---------------
5,298,746
---------------
Tobacco -- 0.8%
13,875 Altria Group, Inc. 1,036,740
---------------
Transportation -- 1.9%
21,100 Burlington Northern Santa Fe Corp. 1,494,302
13,000 JB Hunt Transport Services, Inc. 294,320
12,850 Norfolk Southern Corp. 576,066
---------------
2,364,688
---------------
Total Common Stocks (Identified Cost $99,516,354) 121,343,395
---------------
Shares/
Principal
Amount
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 3.1%
1,005,339 State Street Navigator Securities Lending Prime Portfolio(e) 1,005,339
$ 2,876,721 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$2,877,376 on 1/03/2006, collateralized by $2,435,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $2,945,573 2,876,721
---------------
Total Short-Term Investments (Identified Cost $3,882,060) 3,882,060
---------------
Total Investments -- 101.2%
(Identified Cost $103,398,414)(b) 125,225,455
Other assets less liabilities -- (1.2)% (1,498,102)
---------------
Net Assets -- 100% $ 123,727,353
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $103,919,608 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. $ 22,696,811
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value. (1,390,964)
---------------
Net unrealized appreciation $ 21,305,847
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment 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, 2005 as a Percentage of Net Assets (unaudited)
Diversified Financial Services 13.3%
Retail 8.0
Oil & Gas 7.7
Media 6.7
Banks 6.3
Telecommunications 4.3
Insurance 4.0
Restaurants 3.9
Electric 3.8
Beverages 3.7
Health Care -- Products 3.4
Savings & Loans 3.1
Aerospace & Defense 3.0
Computers 2.9
Software 2.9
Miscellaneous -- Manufacturing 2.5
Pharmaceuticals 2.4
Others, less than 2% each 16.2
See accompanying notes to financial statements.
38
VAUGHAN NELSON SMALL CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------------
Common Stocks -- 95.1% of Net Assets
Aerospace & Defense -- 7.4%
30,225 Alliant Techsystems, Inc.(c)(d) $ 2,302,238
32,525 DRS Technologies, Inc.(d) 1,672,436
57,000 EDO Corp.(d) 1,542,420
45,550 Esterline Technologies Corp.(c)(d) 1,694,004
36,937 Moog, Inc., Class A(c) 1,048,272
---------------
8,259,370
---------------
Banks -- 5.3%
18,775 City Holding Co.(d) 674,961
45,926 MB Financial, Inc.(d) 1,625,780
4,525 PrivateBancorp, Inc.(d) 160,954
152,064 Republic Bancorp, Inc.(d) 1,809,562
94,075 UCBH Holdings, Inc.(d) 1,682,061
---------------
5,953,318
---------------
Biotechnology -- 1.1%
63,725 Serologicals Corp.(c)(d) 1,257,932
---------------
Building Materials -- 0.6%
66,800 U.S. Concrete, Inc.(c) 633,264
---------------
Commercial Services -- 9.0%
49,750 ACE Cash Express, Inc.(c)(d) 1,161,663
21,050 Consolidated Graphics, Inc.(c)(d) 996,507
59,100 Dollar Thrifty Automotive Group, Inc.(c)(d) 2,131,737
64,050 McGrath Rentcorp(d) 1,780,590
40,150 Monro Muffler, Inc.(d) 1,217,348
15,475 Strayer Education, Inc.(d) 1,450,007
62,150 Team, Inc.(c)(d) 1,311,986
---------------
10,049,838
---------------
Computer Services -- 0.7%
82,375 Tyler Technologies, Inc.(c)(d) 723,253
---------------
Computers & Peripherals -- 0.6%
27,750 Synaptics, Inc.(c) 685,980
---------------
Distribution & Wholesale -- 1.6%
29,450 Watsco, Inc. 1,761,404
---------------
Diversified Financial Services -- 4.6%
13,500 BKF Capital Group, Inc.(d) 255,825
30,850 Financial Federal Corp.(d) 1,371,283
92,750 Raymond James Financial, Inc.(d) 3,493,892
---------------
5,121,000
---------------
Electric -- 2.2%
85,725 Pike Electric Corp.(c) 1,390,459
50,500 Westar Energy, Inc. 1,085,750
---------------
2,476,209
---------------
Engineering & Construction -- 0.7%
36,225 Dycom Industries, Inc.(c)(d) 796,950
---------------
Environmental Control -- 1.9%
60,100 Waste Connections, Inc.(c)(d) 2,071,046
---------------
Food -- 1.7%
77,625 Corn Products International, Inc.(d) 1,854,461
---------------
Health Care -- Products -- 1.4%
49,775 Invacare Corp.(d) 1,567,415
---------------
Health Care -- Services -- 5.8%
69,262 Healthcare Services Group, Inc.(d) 1,434,416
148,550 Healthsouth Corp.(c)(d) 727,895
31,150 Pediatrix Medical Group, Inc.(c)(d) 2,758,956
39,400 Triad Hospitals, Inc.(c) 1,545,662
---------------
6,466,929
---------------
Shares Description Value (a)
- -----------------------------------------------------------------------
Insurance -- 4.0%
72,812 HCC Insurance Holdings, Inc.(d) $ 2,161,060
59,125 Hilb, Rogal & Hobbs Co.(d) 2,276,904
---------------
4,437,964
---------------
Internet -- 1.2%
9,775 F5 Networks, Inc.(c)(d) 559,032
45,025 Vignette Corp.(c)(d) 734,358
---------------
1,293,390
---------------
Investment Companies -- 4.6%
78,000 iShares Russell 2000 Value Index Fund(d) 5,142,540
---------------
Iron & Steel -- 1.5%
72,012 Gibraltar Industries, Inc.(d) 1,651,955
---------------
Leisure Time -- 1.0%
113,200 K2, Inc.(c)(d) 1,144,452
---------------
Machinery -- Diversified -- 4.1%
61,225 Briggs & Stratton Corp.(d) 2,374,918
54,775 Nordson Corp.(d) 2,218,935
---------------
4,593,853
---------------
Mining -- 0.8%
32,600 Century Aluminum Co.(c)(d) 854,446
---------------
Miscellaneous -- Manufacturing -- 2.0%
259,600 Jacuzzi Brands, Inc.(c)(d) 2,180,640
---------------
Oil & Gas -- 5.5%
47,200 Energy Partners, Ltd.(c)(d) 1,028,488
25,400 GMX Resources, Inc.(c)(d) 914,400
60,525 Petrohawk Energy Corp.(c)(d) 800,141
46,275 Southwestern Energy Co. 1,663,123
43,625 Whiting Petroleum Corp.(c)(d) 1,745,000
---------------
6,151,152
---------------
Oil & Gas Services -- 3.6%
24,850 Oil States International, Inc.(c)(d) 787,248
78,200 Universal Compression Holdings, Inc.(c)(d) 3,215,584
---------------
4,002,832
---------------
Real Estate -- 1.2%
23,325 CB Richard Ellis Group, Inc., Class A(c) 1,372,676
---------------
REITs -- Health Care -- 1.5%
48,850 Healthcare Realty Trust, Inc. 1,625,240
---------------
REITs -- Hotels -- 2.5%
147,425 Ashford Hospitality Trust, Inc.(d) 1,546,488
111,525 Highland Hospitality Corp.(d) 1,232,351
---------------
2,778,839
---------------
REITs -- Mortgage -- 1.6%
130,600 MFA Mortgage Investments, Inc. 744,420
24,525 Redwood Trust, Inc. 1,011,902
---------------
1,756,322
---------------
Retail -- 4.6%
49,175 Regis Corp.(d) 1,896,680
119,450 Triarc Cos., Inc., Class B(d) 1,773,832
37,000 United Auto Group, Inc.(d) 1,413,400
---------------
5,083,912
---------------
Semiconductors -- 0.9%
34,125 ATMI, Inc.(c)(d) 954,476
---------------
Software -- 1.4%
56,750 Reynolds & Reynolds Co. (The), Class A(d) 1,592,973
---------------
See accompanying notes to financial statements.
39
VAUGHAN NELSON SMALL CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- --------------------------------------------------------------------------------------------------
Telecommunications -- 0.8%
22,250 Netgear, Inc.(c)(d) $ 428,312
81,425 Sonus Networks, Inc.(c)(d) 302,901
14,125 Tekelec(c) 196,338
---------------
927,551
---------------
Transportation -- 5.7%
89,250 Arlington Tankers, Ltd.(d) 1,941,188
81,650 Genesee & Wyoming, Inc., Class A(c) 3,065,957
32,400 Landstar System, Inc. 1,352,376
---------------
6,359,521
---------------
Trucking & Leasing -- 2.0%
31,635 AMERCO, Inc. 2,279,303
---------------
Total Common Stocks (Identified Cost $93,371,970) 105,862,406
---------------
Shares/
Principal
Amount
- --------------------------------------------------------------------------------------------------
Short-Term Investments -- 30.8%
28,701,451 State Street Navigator Securities Lending Prime Portfolio(e) $ 28,701,451
$ 5,633,694 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$5,634,978 on 1/03/2006, collateralized by $4,755,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $5,752,033 5,633,694
---------------
Total Short-Term Investments (Identified Cost $34,335,145) 34,335,145
---------------
Total Investments -- 125.9%
(Identified Cost $127,707,115)(b) 140,197,551
Other assets less liabilities -- (25.9)% (28,835,998)
---------------
Net Assets -- 100% $ 111,361,553
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $127,742,085 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 $ 15,798,081
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (3,342,615)
---------------
Net unrealized appreciation $ 12,455,466
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment of securities lending collateral.
REITs Real Estate Investment Trusts
Holdings at December 31, 2005 as a Percentage of Net Assets (unaudited)
Commercial Services 9.0%
Aerospace & Defense 7.4
Health Care -- Services 5.8
Transportation 5.7
Oil & Gas 5.5
Banks 5.3
Investment Companies 4.6
Diversified Financial Services 4.6
Retail 4.6
Machinery -- Diversified 4.1
Insurance 4.0
Oil & Gas Services 3.6
REITs -- Hotels 2.5
Electric 2.2
Trucking & Leasing 2.0
Miscellaneous -- Manufacturing 2.0
Other, less than 2% each 22.2
See accompanying notes to financial statements.
40
WESTPEAK CAPITAL GROWTH FUND -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- -----------------------------------------------------------------------
Common Stocks -- 99.1% of Net Assets
Aerospace & Defense -- 4.2%
25,300 Boeing Co. (The) $ 1,777,072
6,900 Raytheon Co. 277,035
16,300 Teledyne Technologies, Inc.(c) 474,330
---------------
2,528,437
---------------
Agriculture -- 1.3%
10,100 Monsanto Co. 783,053
---------------
Banking -- 0.7%
7,800 State Street Corp. 432,432
---------------
Beverages -- 1.0%
22,000 Constellation Brands, Inc.(c) 577,060
---------------
Biotechnology -- 3.7%
24,000 Amgen, Inc.(c) 1,892,640
5,000 Millipore Corp.(c) 330,200
---------------
2,222,840
---------------
Building Materials -- 1.6%
20,000 Florida Rock Industries, Inc. 981,200
---------------
Commercial Services -- 1.2%
8,400 H&R Block, Inc. 206,220
40,000 MPS Group, Inc.(c) 546,800
---------------
753,020
---------------
Computers -- 5.5%
36,200 Dell, Inc.(c) 1,085,638
6,900 DST Systems, Inc.(c) 413,379
22,200 International Business Machines Corp. 1,824,840
---------------
3,323,857
---------------
Cosmetics & Personal Care -- 2.5%
15,300 Kimberly Clark Corp. 912,645
10,300 Procter & Gamble Co. 596,164
---------------
1,508,809
---------------
Distribution & Wholesale -- 0.5%
6,400 WESCO International, Inc.(c) 273,472
---------------
Diversified Financial Services -- 6.7%
33,800 American Express Co. 1,739,348
3,500 Chicago Mercantile Exchange Holdings, Inc. 1,286,215
15,300 Countrywide Financial Corp. 523,107
5,500 Franklin Resources, Inc. 517,055
---------------
4,065,725
---------------
Food -- 1.0%
400 Seaboard Corp.(d) 604,400
---------------
Health Care -- Products -- 8.0%
23,300 Becton Dickinson & Co. 1,399,864
38,700 Boston Scientific Corp.(c) 947,763
1,500 Johnson & Johnson 2,494,150
---------------
4,841,777
---------------
Health Care -- Services -- 6.0%
15,200 Aetna, Inc. 1,433,512
20,450 Coventry Health Care, Inc.(c) 1,164,832
16,600 UnitedHealth Group, Inc. 1,031,524
---------------
3,629,868
---------------
Insurance -- 4.7%
9,500 Aflac, Inc. 440,990
16,900 American International Group, Inc. 1,153,087
12,200 Genworth Financial, Inc., Class A 421,876
Shares Description Value (a)
- -----------------------------------------------------------------------
Insurance -- continued
6,900 MBIA, Inc. $ 415,104
3,700 Progressive Corp. (The) 432,086
---------------
2,863,143
---------------
Internet -- 3.3%
14,100 Amazon.Com, Inc.(c) 664,815
1,600 Google, Inc., Class A(c) 663,776
15,700 j2 Global Communications, Inc.(c)(d) 671,018
---------------
1,999,609
---------------
Iron & Steel -- 1.1%
10,900 Reliance Steel & Aluminum Co. 666,208
---------------
Lodging & Gaming -- 1.3%
20,000 Las Vegas Sands Corp.(c)(d) 789,400
---------------
Machinery -- Construction & Mining -- 0.9%
11,200 JLG Industries, Inc.(d) 511,392
---------------
Miscellaneous -- Manufacturing -- 2.9%
49,700 General Electric Co. 1,741,985
---------------
Oil & Gas -- 4.6%
6,400 Giant Industries, Inc.(c)(d) 332,544
23,700 KCS Energy, Inc.(c)(d) 574,014
17,700 Oil States International, Inc.(c) 560,736
17,000 Sunoco, Inc. 1,332,460
---------------
2,799,754
---------------
Pharmaceuticals -- 5.1%
17,800 AmerisourceBergen Corp. 736,920
20,000 Cardinal Health, Inc. 1,375,000
30,100 Merck & Co., Inc. 957,481
---------------
3,069,401
---------------
Pipelines -- 1.1%
8,800 Questar Corp. 666,160
---------------
REITs -- Regional Malls -- 0.9%
15,900 Taubman Centers, Inc. 552,525
---------------
Retail -- 4.1%
29,200 Best Buy Co., Inc. 1,269,616
14,500 JC Penney Co., Inc. 806,200
8,900 Wal-Mart Stores, Inc. 416,520
---------------
2,492,336
---------------
Semiconductors -- 6.7%
93,800 Intel Corp. 2,341,248
52,700 Texas Instruments, Inc. 1,690,089
---------------
4,031,337
---------------
Software -- 10.3%
29,700 BEA Systems, Inc.(c) 279,180
18,700 First Data Corp. 804,287
11,800 Fiserv, Inc.(c) 510,586
132,300 Microsoft Corp. 3,459,645
97,000 Oracle Corp.(c) 1,184,370
---------------
6,238,068
---------------
Telecommunications -- 3.6%
95,400 Cisco Systems, Inc.(c) 1,633,248
12,300 Scientific-Atlanta, Inc. 529,761
---------------
2,163,009
---------------
Tobacco -- 1.0%
8,400 Altria Group, Inc. 627,648
---------------
See accompanying notes to financial statements.
41
WESTPEAK CAPITAL GROWTH FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- ---------------------------------------------------------------------------------------------------
Transportation -- 3.6%
27,300 CH Robinson Worldwide, Inc. $ 1,010,919
34,100 JB Hunt Transport Services, Inc. 772,024
5,600 United Parcel Service, Inc. 420,840
---------------
2,203,783
---------------
Total Common Stocks (Identified Cost $58,900,660) 59,941,708
---------------
Shares/
Principal
Amount
- ---------------------------------------------------------------------------------------------------
Short-Term Investments -- 7.2%
3,596,076 State Street Navigator Securities Lending Prime Portfolio(e) 3,596,076
$ 729,363 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$729,530 on 1/03/2006, collateralized by $615,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $743,954 729,363
---------------
Total Short-Term Investments (Identified Cost $4,325,439) 4,325,439
---------------
Total Investments -- 106.3%
(Identified Cost $63,226,099)(b) 64,267,147
Other assets less liabilities -- (6.3)% (3,787,214)
---------------
Net Assets -- 100% $ 60,479,933
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on investments based on cost of
$63,716,483 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 $ 4,546,562
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (3,995,898)
---------------
Net unrealized appreciation $ 550,664
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment of securities lending collateral.
REITs Real Estate Investment Trusts
Holdings at December 31, 2005 as a Percentage of Net Assets (unaudited)
Software 10.3%
Health Care -- Products 8.0
Diversified Financial Services 6.7
Semiconductors 6.7
Health Care -- Services 6.0
Computers 5.5
Pharmaceuticals 5.1
Insurance 4.7
Oil & Gas 4.6
Aerospace & Defense 4.2
Retail 4.1
Biotechnology 3.7
Transportation 3.6
Telecommunications 3.6
Internet 3.3
Miscellaneous -- Manufacturing 2.9
Cosmetics & Personal Care 2.5
Others, less than 2% each 13.6
See accompanying notes to financial statements.
42
STATEMENTS OF ASSETS & LIABILITIES
December 31, 2005
CGM Advisor Hansberger Harris Associates
Targeted Equity International Focused Value
Fund Fund Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
ASSETS
Investments at cost $ 708,864,637 $ 134,539,805 $ 288,716,581
Net unrealized appreciation 102,634,824 28,055,937 38,520,604
--------------------- --------------------- ---------------------
Investments at value (a) 811,499,461 162,595,742 327,237,185
Cash 2,401 -- --
Foreign cash at value (identified cost
$0, $392,185, $0, $0, $0, $0, $0 and
$0) -- 389,826 --
Receivable for Fund shares sold 214,960 235,776 280,751
Receivable for securities sold 1,810,375 -- 3,738,238
Receivable from advisor -- -- --
Dividends and interest receivable 1,567,413 222,302 196,676
Tax reclaims receivable 9,439 45,147 --
Securities lending income receivable 4,533 1,873 2,266
Other assets -- -- --
--------------------- --------------------- ---------------------
TOTAL ASSETS 815,108,582 163,490,666 331,455,116
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value 49,555,261 19,777,153 19,573,534
Payable for securities purchased -- 601,091 8,284,023
Payable for Fund shares redeemed 627,949 293,040 746,570
Payable to custodian bank -- 28 --
Management fees payable 456,520 95,646 260,978
Deferred Trustees' fees 633,410 87,195 58,725
Administrative fees payable 39,600 6,923 16,677
Other accounts payable and accrued
expenses 356,733 190,428 215,506
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 51,669,473 21,051,504 29,156,013
--------------------- --------------------- ---------------------
NET ASSETS $ 763,439,109 $ 142,439,162 $ 302,299,103
===================== ===================== =====================
NET ASSETS CONSIST OF:
Paid-in capital $ 713,784,979 $ 112,845,186 $ 255,674,801
Undistributed (overdistributed) net
investment income (loss) 4,156,656 (159,969) (58,725)
Accumulated net realized gain (loss) (57,137,350) 1,700,806 8,162,423
Net unrealized appreciation on
investments and foreign currency
translations 102,634,824 28,053,139 38,520,604
--------------------- --------------------- ---------------------
NET ASSETS $ 763,439,109 $ 142,439,162 $ 302,299,103
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE:
Class A shares:
Net assets $ 694,120,716 $ 89,663,247 $ 82,298,020
===================== ===================== =====================
Shares of beneficial interest 67,928,940 4,510,069 6,814,350
===================== ===================== =====================
Net asset value and redemption price
per share $ 10.22 $ 19.88 $ 12.08
===================== ===================== =====================
Offering price per share
(100/[100-maximum sales charge] of
net assets value) $ 10.84 $ 21.09 $ 12.82
===================== ===================== =====================
Class B shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charge)
Net assets $ 53,004,791 $ 33,387,562 $ 97,255,740
===================== ===================== =====================
Shares of beneficial interest 5,588,643 1,827,166 8,391,228
===================== ===================== =====================
Net asset value and offering price
per share $ 9.48 $ 18.27 $ 11.59
===================== ===================== =====================
Class C shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charge)
Net assets $ 5,132,613 $ 19,388,353 $ 122,745,343
===================== ===================== =====================
Shares of beneficial interest 541,342 1,060,769 10,588,907
===================== ===================== =====================
Net asset value and offering price
per share $ 9.48 $ 18.28 $ 11.59
===================== ===================== =====================
Class Y shares:
Net assets $ 11,180,989 $ -- $ --
===================== ===================== =====================
Shares of beneficial interest 1,072,524 -- --
===================== ===================== =====================
Net asset value, offering and
redemption price per share $ 10.42 $ -- $ --
===================== ===================== =====================
(a) Including securities on loan with
market values of $ 48,623,038 $ 18,932,539 $ 19,007,977
===================== ===================== =====================
See accompanying notes to financial statements.
43
Harris Associates Vaughan Nelson Westpeak
Large Cap Value IXIS U.S. Diversified IXIS Value Small Cap Capital Growth
Fund Portfolio Fund Value Fund Fund
- --------------------- --------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- --------------------- ---------------------
$ 252,930,265 $ 587,185,027 $ 103,398,414 $ 127,707,115 $ 63,226,099
39,810,858 102,746,364 21,827,041 12,490,436 1,041,048
- --------------------- --------------------- --------------------- --------------------- ---------------------
292,741,123 689,931,391 125,225,455 140,197,551 64,267,147
-- -- -- -- --
-- -- -- -- --
51,099 96,172 14,305 168,608 4,015
-- 5,828,222 -- 245,668 --
10,173 -- 706 -- --
449,331 700,603 152,622 169,472 76,045
-- 6,375 -- -- --
693 12,728 126 2,923 241
-- -- 4,554 15,597 2,899
- --------------------- --------------------- --------------------- --------------------- ---------------------
293,252,419 696,575,491 125,397,768 140,799,819 64,350,347
- --------------------- --------------------- --------------------- --------------------- ---------------------
9,914,734 61,379,500 1,005,339 28,701,451 3,596,076
-- 3,448,223 -- 201,417 --
311,778 838,204 264,409 202,675 32,392
-- 9 4,933 -- --
167,439 489,692 80,219 86,228 39,538
257,819 348,230 179,535 92,028 95,208
15,127 32,757 6,578 5,490 3,272
253,914 503,240 129,402 148,977 103,928
- --------------------- --------------------- --------------------- --------------------- ---------------------
10,920,811 67,039,855 1,670,415 29,438,266 3,870,414
- --------------------- --------------------- --------------------- --------------------- ---------------------
$ 282,331,608 $ 629,535,636 $ 123,727,353 $ 111,361,553 $ 60,479,933
===================== ===================== ===================== ===================== =====================
$ 352,522,076 $ 668,618,513 $ 100,326,511 $ 128,272,215 $ 112,436,786
378,522 (348,230) (129,408) (92,028) (95,208)
(110,379,848) (141,481,011) 1,703,209 (29,309,070) (52,902,693)
39,810,858 102,746,364 21,827,041 12,490,436 1,041,048
- --------------------- --------------------- --------------------- --------------------- ---------------------
$ 282,331,608 $ 629,535,636 $ 123,727,353 $ 111,361,553 $ 60,479,933
===================== ===================== ===================== ===================== =====================
$ 188,763,302 $ 386,084,099 $ 98,353,437 $ 58,962,693 $ 49,679,962
===================== ===================== ===================== ===================== =====================
14,163,820 19,138,377 11,815,498 3,333,765 4,206,054
===================== ===================== ===================== ===================== =====================
$ 13.33 $ 20.17 $ 8.32 $ 17.69 $ 11.81
===================== ===================== ===================== ===================== =====================
$ 14.14 $ 21.40 $ 8.83 $ 18.77 $ 12.53
===================== ===================== ===================== ===================== =====================
$ 59,034,515 $ 174,745,212 $ 22,457,577 $ 38,732,230 $ 9,863,712
===================== ===================== ===================== ===================== =====================
4,731,211 9,700,569 2,992,265 2,367,170 968,119
===================== ===================== ===================== ===================== =====================
$ 12.48 $ 18.01 $ 7.51 $ 16.36 $ 10.19
===================== ===================== ===================== ===================== =====================
$ 20,307,933 $ 48,261,569 $ 2,916,339 $ 13,666,630 $ 936,259
===================== ===================== ===================== ===================== =====================
1,629,858 2,676,280 388,617 834,920 92,068
===================== ===================== ===================== ===================== =====================
$ 12.46 $ 18.03 $ 7.50 $ 16.37 $ 10.17
===================== ===================== ===================== ===================== =====================
$ 14,225,858 $ 20,444,756 $ -- $ -- $ --
===================== ===================== ===================== ===================== =====================
1,036,579 954,996 -- -- --
===================== ===================== ===================== ===================== =====================
$ 13.72 $ 21.41 $ -- $ -- $ --
===================== ===================== ===================== ===================== =====================
$ 9,623,937 $ 59,572,629 $ 979,701 $ 27,814,879 $ 3,447,940
===================== ===================== ===================== ===================== =====================
44
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2005
CGM Advisor Hansberger Harris Associates
Targeted Equity International Focused Value
Fund Fund Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ 15,845,057 $ 3,496,147 $ 4,975,251
Interest 174,425 19,522 396,039
Securities lending income 181,084 93,734 28,194
Less net foreign taxes withheld (680,182) (320,400) --
--------------------- --------------------- ---------------------
15,520,384 3,289,003 5,399,484
--------------------- --------------------- ---------------------
Expenses
Management fees 5,250,690 1,068,281 3,299,323
Service fees - Class A 1,713,347 196,709 235,627
Service and distribution fees -
Class B 549,452 374,044 1,034,086
Service and distribution fees -
Class C 35,915 174,470 1,322,731
Trustees' fees and expenses 111,395 31,568 33,005
Administrative fees 499,625 76,262 220,382
Custodian fees 100,117 158,160 50,282
Transfer agent fees and expenses -
Class A, Class B, Class C 1,387,297 546,120 799,350
Transfer agent fees and expenses -
Class Y 22,572 -- --
Audit fees 29,340 44,697 22,465
Legal fees 32,911 5,753 20,784
Shareholder reporting 246,644 96,335 192,801
Registration 56,994 43,694 56,657
Miscellaneous 28,522 12,858 18,095
--------------------- --------------------- ---------------------
Total expenses 10,064,821 2,828,951 7,305,588
Less reimbursement/waiver -- -- --
--------------------- --------------------- ---------------------
Net expenses 10,064,821 2,828,951 7,305,588
--------------------- --------------------- ---------------------
Net investment income (loss) 5,455,563 460,052 (1,906,104)
--------------------- --------------------- ---------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain (loss) on:
Investments - net 84,395,181 11,261,087 57,991,221
Foreign currency transactions - net -- (313,229) --
Change in unrealized appreciation
(depreciation) on:
Investments - net 2,836,954 8,319,307 (40,207,477)
Foreign currency translations - net -- (9,054) --
--------------------- --------------------- ---------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 87,232,135 19,258,111 17,783,744
--------------------- --------------------- ---------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 92,687,698 $ 19,718,163 $ 15,877,640
===================== ===================== =====================
Harris Associates
Large Cap Value
Fund
---------------------
---------------------
INVESTMENT INCOME
Dividends $ 5,156,152
Interest 97,776
Securities lending income 33,466
Less net foreign taxes withheld (33,944)
---------------------
5,253,450
---------------------
Expenses
Management fees 2,108,419
Service fees - Class A 506,728
Service and distribution fees -
Class B 678,039
Service and distribution fees -
Class C 229,100
Trustees' fees and expenses 52,620
Administrative fees 202,085
Custodian fees 56,523
Transfer agent fees and expenses -
Class A, Class B, Class C 966,952
Transfer agent fees and expenses -
Class Y 31,753
Audit fees 25,238
Legal fees 28,753
Shareholder reporting 177,430
Registration 58,997
Miscellaneous 15,349
---------------------
Total expenses 5,137,986
Less reimbursement/waiver (479,821)
---------------------
Net expenses 4,658,165
---------------------
Net investment income (loss) 595,285
---------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain (loss) on:
Investments - net 25,778,595
Foreign currency transactions - net --
Change in unrealized appreciation
(depreciation) on:
Investments - net (29,282,480)
Foreign currency translations - net --
---------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (3,503,885)
---------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (2,908,600)
=====================
See accompanying notes to financial statements.
45
Vaughan Nelson Westpeak
IXIS U.S. Diversified IXIS Value Small Cap Value Capital Growth
Portfolio Fund Fund Fund
- --------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
$ 7,241,918 $ 2,234,107 $ 1,435,864 $ 650,129
151,243 69,633 68,886 8,738
132,967 9,181 38,881 17,144
(23,086) (3,249) -- --
- --------------------- --------------------- --------------------- ---------------------
7,503,042 2,309,672 1,543,631 676,011
- --------------------- --------------------- --------------------- ---------------------
6,299,035 969,085 966,582 485,338
953,408 253,517 123,612 131,974
1,913,770 247,423 446,807 109,769
515,322 30,469 132,723 9,451
76,941 36,661 26,679 24,959
420,015 81,005 67,870 39,477
121,992 59,178 36,403 35,609
2,078,478 424,600 531,502 347,008
35,934 -- -- --
42,013 31,460 22,532 25,655
35,014 7,075 5,162 2,851
360,006 77,599 90,207 55,830
55,666 45,184 36,205 33,743
22,143 11,132 8,277 6,803
- --------------------- --------------------- --------------------- ---------------------
12,929,737 2,274,388 2,494,561 1,308,467
-- (1,232) -- --
- --------------------- --------------------- --------------------- ---------------------
12,929,737 2,273,156 2,494,561 1,308,467
- --------------------- --------------------- --------------------- ---------------------
(5,426,695) 36,516 (950,930) (632,456)
- --------------------- --------------------- --------------------- ---------------------
85,734,237 14,669,814 12,955,895 984,436
(15,561) -- -- --
(36,727,572) (7,165,564) (2,141,269) 1,466,262
(1,461) -- -- --
- --------------------- --------------------- --------------------- ---------------------
48,989,643 7,504,250 10,814,626 2,450,698
- --------------------- --------------------- --------------------- ---------------------
$ 43,562,948 $ 7,540,766 $ 9,863,696 $ 1,818,242
===================== ===================== ===================== =====================
46
STATEMENTS OF CHANGES IN NET ASSETS
CGM Advisor Targeted Equity Fund
--------------------------------------------
Year Ended Year Ended
December 31, December 31,
2005 2004
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 5,455,563 $ 775,706
Net realized gain on investments and
foreign currency transactions 84,395,181 186,920,714
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations 2,836,954 (91,588,409)
--------------------- ---------------------
Increase (decrease) in net assets resulting
from operations 92,687,698 96,108,011
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (1,593,713) --
Class B (75,336) --
Class C (4,738) --
Class Y (49,839) --
Net realized capital gains
Class A -- --
Class B -- --
Class C -- --
--------------------- ---------------------
(1,723,626) --
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9) (87,386,245) (127,772,868)
--------------------- ---------------------
Redemption fees
Class A 7,519 2,396
Class B 600 181
Class C 39 12
Class Y 110 27
--------------------- ---------------------
8,268 2,616
--------------------- ---------------------
Total increase (decrease) in net assets 3,586,095 (31,662,241)
--------------------- ---------------------
NET ASSETS
Beginning of the year 759,853,014 791,515,255
--------------------- ---------------------
End of the year $ 763,439,109 $ 759,853,014
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME (LOSS) $ 4,156,656 $ 424,719
===================== =====================
Hansberger International Fund
--------------------------------------------
Year Ended Year Ended
December 31, December 31,
2005 2004
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 460,052 $ (307,118)
Net realized gain on investments and
foreign currency transactions 10,947,858 25,636,223
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations 8,310,253 (9,265,743)
--------------------- ---------------------
Increase (decrease) in net assets resulting
from operations 19,718,163 16,063,362
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
Net realized capital gains
Class A -- --
Class B -- --
Class C -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9) (13,245,555) (12,713,186)
--------------------- ---------------------
Redemption fees
Class A 411 170
Class B 216 118
Class C 88 38
Class Y -- --
--------------------- ---------------------
715 326
--------------------- ---------------------
Total increase (decrease) in net assets 6,473,323 3,350,502
--------------------- ---------------------
NET ASSETS
Beginning of the year 135,965,839 132,615,337
--------------------- ---------------------
End of the year $ 142,439,162 $ 135,965,839
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME (LOSS) $ (159,969) $ (526,717)
===================== =====================
See accompanying notes to financial statements.
47
Harris Associates Focused Value Fund Harris Associates Large Cap Value Fund
- -------------------------------------------- --------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
- --------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
$ (1,906,104) $ (2,315,007) $ 595,285 $ 313,635
57,991,221 11,304,168 25,778,595 14,432,239
(40,207,477) 24,626,530 (29,282,480) 14,335,620
- --------------------- --------------------- --------------------- ---------------------
15,877,640 33,615,691 (2,908,600) 29,081,494
- --------------------- --------------------- --------------------- ---------------------
-- -- (231,035) --
-- -- (81,761) --
-- -- (28,415) --
-- -- (16,672) --
(10,494,877) -- -- --
(12,897,474) -- -- --
(16,300,067) -- -- --
- --------------------- --------------------- --------------------- ---------------------
(39,692,418) -- (357,883) --
- --------------------- --------------------- --------------------- ---------------------
(37,006,144) 2,079,342 (61,204,054) (30,720,612)
- --------------------- --------------------- --------------------- ---------------------
6,748 149 -- --
7,032 149 -- --
9,087 194 -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
22,867 492 -- --
- --------------------- --------------------- --------------------- ---------------------
(60,798,055) 35,695,525 (64,470,537) (1,639,118)
- --------------------- --------------------- --------------------- ---------------------
363,097,158 327,401,633 346,802,145 348,441,263
- --------------------- --------------------- --------------------- ---------------------
$ 302,299,103 $ 363,097,158 $ 282,331,608 $ 346,802,145
===================== ===================== ===================== =====================
$ (58,725) $ (36,853) $ 378,522 $ 136,701
===================== ===================== ===================== =====================
IXIS U.S. Diversified Portfolio IXIS Value Fund
- -------------------------------------------- --------------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
$ (5,426,695) $ (7,230,862) $ 36,516 $ (187,922)
85,718,676 92,341,964 14,669,814 14,932,687
(36,729,033) (4,149,061) (7,165,564) (382,788)
- --------------------- --------------------- --------------------- ---------------------
43,562,948 80,962,041 7,540,766 14,361,977
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- (12,510,896) (1,926,692)
-- -- (3,162,413) (548,440)
-- -- (411,818) (60,195)
- --------------------- --------------------- --------------------- ---------------------
-- -- (16,085,127) (2,535,327)
- --------------------- --------------------- --------------------- ---------------------
(114,045,267) (116,500,139) (3,970,555) (17,975,676)
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
(70,482,319) (35,538,098) (12,514,916) (6,149,026)
- --------------------- --------------------- --------------------- ---------------------
700,017,955 735,556,053 136,242,269 142,391,295
- --------------------- --------------------- --------------------- ---------------------
$ 629,535,636 $ 700,017,955 $ 123,727,353 $ 136,242,269
===================== ===================== ===================== =====================
$ (348,230) $ (135,059) $ (129,408) $ (143,263)
===================== ===================== ===================== =====================
48
STATEMENTS OF CHANGES IN NET ASSETS (continued)
Vaughan Nelson Small Cap Value Fund
--------------------------------------------
Year Ended Year Ended
December 31, December 31,
2005 2004
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (950,930) $ (1,476,110)
Net realized gain on investments and
foreign currency transactions 12,955,895 19,642,237
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations (2,141,269) (3,213,186)
--------------------- ---------------------
Increase (decrease) in net assets resulting
from operations 9,863,696 14,952,941
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9) (11,845,326) (14,761,490)
--------------------- ---------------------
Redemption fees
Class A 2,646 188
Class B 2,033 225
Class C 649 52
Class Y -- --
--------------------- ---------------------
5,328 465
--------------------- ---------------------
Total increase (decrease) in net assets (1,976,302) 191,916
--------------------- ---------------------
NET ASSETS
Beginning of the year 113,337,855 113,145,939
--------------------- ---------------------
End of the year $ 111,361,553 $ 113,337,855
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME (LOSS) $ (92,028) $ 51,736
===================== =====================
Westpeak Capital Growth Fund
--------------------------------------------
Year Ended Year Ended
December 31, December 31,
2005 2004
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (632,456) $ (255,163)
Net realized gain on investments and
foreign currency transactions 984,436 3,895,820
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations 1,466,262 (286,959)
--------------------- ---------------------
Increase (decrease) in net assets resulting
from operations 1,818,242 3,353,698
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9) (12,686,062) (13,044,934)
--------------------- ---------------------
Redemption fees
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
Total increase (decrease) in net assets (10,867,820) (9,691,236)
--------------------- ---------------------
NET ASSETS
Beginning of the year 71,347,753 81,038,989
--------------------- ---------------------
End of the year $ 60,479,933 $ 71,347,753
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME (LOSS) $ (95,208) $ (74,878)
===================== =====================
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:
---------------------------------------
Net asset
value, Net
beginning investment Net realized Total from
of income and unrealized investment
period (loss) (b) gain (loss) operations
---------- ---------- -------------- ----------
CGM ADVISOR TARGETED EQUITY FUND
Class A
12/31/2005 $ 9.05 $ 0.07 $ 1.12 $ 1.19
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)
Class B
12/31/2005 8.45 0.00(e) 1.04 1.04
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)
Class C
12/31/2005 8.45 0.00(e) 1.04 1.04
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)
Class Y
12/31/2005 9.23 0.10 1.14 1.24
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)
HANSBERGER INTERNATIONAL FUND
Class A
12/31/2005 $ 17.12 $ 0.11 $ 2.65 $ 2.76
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)
Class B
12/31/2005 15.85 0.00(e) 2.42 2.42
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)
Less distributions:
-----------------------------------------
Dividends Distributions
from from net
net investment realized Total Redemption
income capital gains distributions fees
-------------- ------------- ------------- ----------
CGM ADVISOR TARGETED EQUITY FUND
Class A
12/31/2005 $ (0.02) $ -- $ (0.02) $ 0.00(e)
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
Class B
12/31/2005 (0.01) -- (0.01) 0.00(e)
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
Class C
12/31/2005 (0.01) -- (0.01) 0.00(e)
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
Class Y
12/31/2005 (0.05) -- (0.05) 0.00(e)
12/31/2004 -- -- -- 0.00(e)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 (0.03) -- (0.03) --
HANSBERGER INTERNATIONAL FUND
Class A
12/31/2005 $ -- $ -- $ -- $ 0.00(e)
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) --
Class B
12/31/2005 -- -- -- 0.00(e)
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) --
(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.
See accompanying notes to financial statements.
51
Ratios to average net assets:
------------------------------------
Net asset Net assets,
value, Total end of Gross Net Net investment Portfolio
end of return period expenses expenses income (loss) turnover
period (%) (a) (000's) (%) (f) (%) (%) rate (%)
- ---------- --------- ----------- --------- --------- -------------- ---------
$ 10.22 13.2 $ 694,121 1.28 N/A 0.78 196
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
9.48 12.4 53,005 2.03 N/A 0.03 196
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
9.48 12.4 5,133 2.04 N/A 0.03 196
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
10.42 13.4 11,181 1.07 N/A 0.99 196
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
$ 19.88 16.1 $ 89,663 1.81 N/A 0.62 45
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
18.27 15.3 33,388 2.55 N/A (0.02) 45
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
(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 $0.01 per share.
(f)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses.
52
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations:
---------------------------------------
Net asset
value, Net
beginning investment Net realized Total from
of income and unrealized investment
period (loss) (b) gain (loss) operations
---------- ---------- -------------- ----------
HANSBERGER INTERNATIONAL FUND (continued)
Class C
12/31/2005 $ 15.86 $ (0.02) $ 2.44 $ 2.42
12/31/2004 14.06 (0.09) 1.89 1.80
12/31/2003 10.19 (0.12) 3.99 3.87
12/31/2002 12.33 (0.14) (1.95) (2.09)
12/31/2001 13.75 0.03 (1.36) (1.33)
HARRIS ASSOCIATES FOCUSED VALUE FUND
Class A
12/31/2005 $ 13.06 $ 0.00(h) $ 0.76 $ 0.76
12/31/2004 11.79 (0.02) 1.29 1.27
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
12/31/2005 12.69 (0.10) 0.74 0.64
12/31/2004 11.55 (0.11) 1.25 1.14
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
12/31/2005 12.69 (0.10) 0.74 0.64
12/31/2004 11.55 (0.11) 1.25 1.14
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
12/31/2005 $ 13.37 $ 0.05 $ (0.08) $ (0.03)
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)
Class B
12/31/2005 12.62 (0.04) (0.09) (0.13)
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)
Less distributions:
-----------------------------------------
Dividends Distributions
from from net
net investment realized Total Redemption
income capital gains distributions fees
-------------- ------------- ------------- ----------
HANSBERGER INTERNATIONAL FUND (continued)
Class C
12/31/2005 $ -- $ -- $ -- $ 0.00(h)
12/31/2004 -- -- -- 0.00(h)
12/31/2003 -- -- -- --
12/31/2002 (0.05) -- (0.05) --
12/31/2001 (0.01) (0.08) (0.09) --
HARRIS ASSOCIATES FOCUSED VALUE FUND
Class A
12/31/2005 $ -- $ (1.74) $ (1.74) $ 0.00(h)
12/31/2004 -- -- -- 0.00(h)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001(f) -- -- -- --
Class B
12/31/2005 -- (1.74) (1.74) 0.00(h)
12/31/2004 -- -- -- 0.00(h)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001(f) -- -- -- --
Class C
12/31/2005 -- (1.74) (1.74) 0.00(h)
12/31/2004 -- -- -- 0.00(h)
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001(f) -- -- -- --
HARRIS ASSOCIATES LARGE CAP VALUE FUND
Class A
12/31/2005 $ (0.01) $ -- $ (0.01) $ --
12/31/2004 -- -- -- --
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 -- -- -- --
Class B
12/31/2005 (0.01) -- (0.01) --
12/31/2004 -- -- -- --
12/31/2003 -- -- -- --
12/31/2002 -- -- -- --
12/31/2001 -- -- -- --
(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 agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this waiver,
expenses would have been higher. See Note 4.
(d)Had certain expenses not been reduced during the period, total return would
have been lower.
See accompanying notes to financial statements.
53
Ratios to average net assets:
--------------------------------------
Net asset Net assets,
value, Total end of Gross Net Net investment Portfolio
end of return period expenses expenses income (loss) turnover
period (%) (a) (000's) (%) (g) (i) (%) (g) (%) (g) rate (%)
- ---------- --------- ----------- ----------- --------- -------------- ---------
$ 18.28 15.3 $ 19,388 2.56 N/A (0.11) 45
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
$ 12.08 5.7 $ 82,298 1.68 N/A (0.04) 39
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
11.59 5.0 97,256 2.43 N/A (0.80) 39
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
11.59 5.0 122,745 2.43 N/A (0.79) 39
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
$ 13.33 (0.2)(d) $ 188,763 1.46 1.30(c) 0.40 39
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
12.48 (1.0)(d) 59,035 2.21 2.05(c) (0.35) 39
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
(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.
54
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations:
----------------------------------------
Net asset
value, Net
beginning investment Net realized Total from
of income and unrealized investment
period (loss) (b) gain (loss) operations
---------- ---------- -------------- ----------
HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued)
Class C
12/31/2005 $ 12.60 $ (0.04) $ (0.09) $ (0.13)
12/31/2004 11.63 (0.05) 1.02 0.97
12/31/2003 9.01 (0.07) 2.69 2.62
12/31/2002 11.36 (0.07) (2.28) (2.35)
12/31/2001 13.38 (0.10) (1.92) (2.02)
Class Y
12/31/2005 13.74 0.09 (0.10) (0.01)
12/31/2004 12.54 0.07 1.13 1.20
12/31/2003 9.59 0.06 2.89 2.95
12/31/2002 11.93 0.07 (2.41) (2.34)
12/31/2001 13.87 0.06 (2.00) (1.94)
IXIS U.S. DIVERSIFIED PORTFOLIO
Class A
12/31/2005 $ 18.75 $ (0.11) $ 1.53 $ 1.42
12/31/2004 16.61 (0.12) 2.26 2.14
12/31/2003 12.43 (0.13) 4.31 4.18
12/31/2002 15.90 (0.11) (3.36) (3.47)
12/31/2001 17.55 (0.05) (1.59) (1.64)
Class B
12/31/2005 16.87 (0.22) 1.36 1.14
12/31/2004 15.06 (0.23) 2.04 1.81
12/31/2003 11.35 (0.22) 3.93 3.71
12/31/2002 14.64 (0.20) (3.09) (3.29)
12/31/2001 16.29 (0.16) (1.48) (1.64)
Class C
12/31/2005 16.89 (0.22) 1.36 1.14
12/31/2004 15.08 (0.23) 2.04 1.81
12/31/2003 11.37 (0.22) 3.93 3.71
12/31/2002 14.66 (0.20) (3.09) (3.29)
12/31/2001 16.30 (0.16) (1.47) (1.63)
Class Y
12/31/2005 19.82 (0.03) 1.62 1.59
12/31/2004 17.46 (0.05) 2.41 2.36
12/31/2003 12.98 (0.04) 4.52 4.48
12/31/2002 16.50 (0.02) (3.50) (3.52)
12/31/2001 18.13 0.04 (1.66) (1.62)
Less distributions:
-----------------------------------------
Dividends Distributions
from from net
net investment realized Total
income capital gains distributions
-------------- ------------- -------------
HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued)
Class C
12/31/2005 $ (0.01) $ -- $ (0.01)
12/31/2004 -- -- --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- -- --
Class Y
12/31/2005 (0.01) -- (0.01)
12/31/2004 -- -- --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- -- --
IXIS U.S. DIVERSIFIED PORTFOLIO
Class A
12/31/2005 $ -- $ -- $ --
12/31/2004 -- -- --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- (0.01) (0.01)
Class B
12/31/2005 -- -- --
12/31/2004 -- -- --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- (0.01) (0.01)
Class C
12/31/2005 -- -- --
12/31/2004 -- -- --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- (0.01) (0.01)
Class Y
12/31/2005 -- -- --
12/31/2004 -- -- --
12/31/2003 -- -- --
12/31/2002 -- -- --
12/31/2001 -- (0.01) (0.01)
(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 agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this waiver,
expenses would have been higher. See Note 4.
See accompanying notes to financial statements.
55
Ratios to average net assets:
---------------------------------------
Net asset Net assets,
value, Total end of Gross Net Net investment Portfolio
end of return period expenses expenses income (loss) turnover
period (%) (a) (000's) (%) (%) (%) rate (%)
- ---------- --------- ----------- --------- --------- -------------- ---------
$ 12.46 (1.0)(d) $ 20,308 2.21(f) 2.05(c) (0.35) 39
12.60 8.3(d) 26,392 2.24(f) 2.05(c) (0.42) 27
11.63 29.1(d) 15,553 2.37(f) 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
13.72 (0.0)(d) $ 14,226 1.09(f) 1.05(c) 0.65 39
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
$ 20.17 7.6 $ 386,084 1.73 N/A (0.57) 97
18.75 12.9 392,726 1.87 N/A (0.71) 104
16.61 33.6 354,755 1.99 N/A (0.94) 102
12.43 (21.8) 269,180 1.89 N/A (0.75) 95
15.90 (9.4) 389,405 1.83 N/A (0.31) 183
18.01 6.8 174,745 2.48 N/A (1.32) 97
16.87 12.0 223,349 2.62 N/A (1.50) 104
15.06 32.7 272,533 2.74 N/A (1.69) 102
11.35 (22.5) 282,361 2.64 N/A (1.50) 95
14.64 (10.1) 491,614 2.58 N/A (1.06) 183
18.03 6.8 48,262 2.48 N/A (1.32) 97
16.89 12.0 58,883 2.62 N/A (1.48) 104
15.08 32.6 60,783 2.74 N/A (1.69) 102
11.37 (22.4) 54,291 2.64 N/A (1.50) 95
14.66 (10.0) 87,245 2.58 N/A (1.06) 183
21.41 8.0 20,445 1.32 N/A (0.16) 97
19.82 13.5 25,060 1.33 N/A (0.27) 104
17.46 34.5 47,485 1.34 N/A (0.30) 102
12.98 (21.3) 37,911 1.29 N/A (0.15) 95
16.50 (9.0) 55,970 1.29 N/A 0.23 183
(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)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses.
56
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
--------------------------------------- --------------------------
Net asset
value, Net Distributions
beginning investment Net realized Total from from net
of income and unrealized investment realized Total
period (loss) (b) gain (loss) operations capital gains distributions
---------- ---------- -------------- ---------- ------------- -------------
IXIS VALUE FUND
Class A
12/31/2005 $ 8.92 $ 0.02 $ 0.54 $ 0.56 $ (1.16) $ (1.16)
12/31/2004 8.16 0.00(c) 0.93 0.93 (0.17) (0.17)
12/31/2003 6.20 (0.01) 1.97 1.96 -- --
12/31/2002 7.70 (0.01) (1.49) (1.50) -- --
12/31/2001 7.60 (0.02) 0.12 0.10 -- --
Class B
12/31/2005 8.21 (0.05) 0.51 0.46 (1.16) (1.16)
12/31/2004 7.57 (0.06) 0.87 0.81 (0.17) (0.17)
12/31/2003 5.80 (0.06) 1.83 1.77 -- --
12/31/2002 7.26 (0.06) (1.40) (1.46) -- --
12/31/2001 7.22 (0.07) 0.11 0.04 -- --
Class C
12/31/2005 8.21 (0.05) 0.50 0.45 (1.16) (1.16)
12/31/2004 7.57 (0.05) 0.86 0.81 (0.17) (0.17)
12/31/2003 5.80 (0.06) 1.83 1.77 -- --
12/31/2002 7.26 (0.06) (1.40) (1.46) -- --
12/31/2001 7.22 (0.07) 0.11 0.04 -- --
VAUGHAN NELSON SMALL CAP VALUE FUND
Class A
12/31/2005 $ 16.07 $ (0.08) $ 1.70 $ 1.62 $ -- $ --
12/31/2004 13.94 (0.13) 2.26 2.13 -- --
12/31/2003 10.05 (0.19) 4.08 3.89 -- --
12/31/2002 14.52 (0.21) (4.26) (4.47) -- --
12/31/2001 16.51 (0.21) (1.78) (1.99) -- --
Class B
12/31/2005 14.97 (0.19) 1.58 1.39 -- --
12/31/2004 13.08 (0.22) 2.11 1.89 -- --
12/31/2003 9.51 (0.26) 3.83 3.57 -- --
12/31/2002 13.84 (0.28) (4.05) (4.33) -- --
12/31/2001 15.86 (0.30) (1.72) (2.02) -- --
Class C
12/31/2005 14.98 (0.19) 1.58 1.39 -- --
12/31/2004 13.09 (0.22) 2.11 1.89 -- --
12/31/2003 9.51 (0.26) 3.84 3.58 -- --
12/31/2002 13.84 (0.28) (4.05) (4.33) -- --
12/31/2001 15.86 (0.30) (1.72) (2.02) -- --
Redemption
fees
----------
IXIS VALUE FUND
Class A
12/31/2005 $ --
12/31/2004 --
12/31/2003 --
12/31/2002 --
12/31/2001 --
Class B
12/31/2005 --
12/31/2004 --
12/31/2003 --
12/31/2002 --
12/31/2001 --
Class C
12/31/2005 --
12/31/2004 --
12/31/2003 --
12/31/2002 --
12/31/2001 --
VAUGHAN NELSON SMALL CAP VALUE FUND
Class A
12/31/2005 $ 0.00(c)
12/31/2004 0.00(c)
12/31/2003 --
12/31/2002 --
12/31/2001 --
Class B
12/31/2005 0.00(c)
12/31/2004 0.00(c)
12/31/2003 --
12/31/2002 --
12/31/2001 --
Class C
12/31/2005 0.00(c)
12/31/2004 0.00(c)
12/31/2003 --
12/31/2002 --
12/31/2001 --
(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.
See accompanying notes to financial statements.
57
Ratios to average net assets:
----------------------------
Net asset Net assets,
value, Total end of Net investment Portfolio
end of return period Expenses income (loss) turnover
period (%) (a) (000's) (%) (%) rate (%)
---------- --------- ----------- --------- -------------- ---------
$ 8.32 6.2 $ 98,353 1.60(d) 0.19 62
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
7.51 5.5 22,458 2.35(d) (0.56) 62
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
7.50 5.4 2,916 2.35(d) (0.56) 62
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
$ 17.69 10.1 $ 58,963 1.92 (0.47) 80
16.07 15.3 45,138 2.01 (0.89) 172
13.94 38.7 45,442 2.33 (1.69) 156
10.05 (30.8) 38,441 2.13 (1.72) 160
14.52 (12.1) 69,873 2.08 (1.43) 174
16.36 9.3 38,732 2.66 (1.24) 80
14.97 14.5 54,652 2.76 (1.65) 172
13.08 37.5 55,662 3.08 (2.44) 156
9.51 (31.3) 46,215 2.88 (2.47) 160
13.84 (12.7) 82,060 2.83 (2.18) 174
16.37 9.3 13,667 2.67 (1.23) 80
14.98 14.4 13,549 2.76 (1.63) 172
13.09 37.6 12,042 3.08 (2.44) 156
9.51 (31.3) 10,930 2.88 (2.47) 160
13.84 (12.7) 22,047 2.83 (2.18) 174
(c)Amount rounds to less than $0.01 per share.
(d)Effect of voluntary waiver of expenses by advisor was less than 0.005%. See
Note 4.
58
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
---------------------------------------- --------------------------
Net asset
value, Net Distributions
beginning investment Net realized Total from from net
of income and unrealized investment realized Total
period (loss) (b) gain (loss) operations capital gains distributions
---------- ---------- -------------- ---------- ------------- -------------
WESTPEAK CAPITAL GROWTH FUND
Class A
12/31/2005 $ 11.43 $ (0.10) $ 0.48 $ 0.38 $ -- $ --
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)
Class B
12/31/2005 9.94 (0.16) 0.41 0.25 -- --
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)
Class C
12/31/2005 9.92 (0.16) 0.41 0.25 -- --
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)
(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.
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 period Expenses income (loss) turnover
period (%) (a) (000's) (%) (%) rate (%)
---------- --------- ----------- --------- -------------- ---------
$ 11.81 3.3 $ 49,680 1.88 (0.84) 132
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
10.19 2.5 9,864 2.63 (1.59) 132
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
10.17 2.5 936 2.63 (1.59) 132
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
(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.
60
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
1. Organization. IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II and
IXIS Advisor Funds Trust III (the "Trusts" and each a "Trust") are each
organized as a Massachusetts business trust. 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
certain 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:
IXIS Advisor Funds Trust I:
CGM Advisor Targeted Equity Fund (the "Targeted Equity Fund")
Hansberger International Fund (the "International Fund")
IXIS U.S. Diversified Portfolio (the "U.S. Diversified Portfolio")
IXIS Value Fund (the "Value Fund")
Vaughan Nelson Small Cap Value Fund (the "Small Cap Value Fund")
Westpeak Capital Growth Fund (the "Capital Growth Fund")
IXIS Advisor Funds Trust II:
Harris Associates Large Cap Value Fund (the "Large Cap Value Fund")
IXIS Advisor Funds Trust III:
Harris Associates Focused Value Fund (the "Focused Value Fund")
Each Fund offers Class A, Class B, and Class C shares. Targeted Equity Fund,
Large Cap Value Fund and U.S. Diversified Portfolio 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.
Class Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1 fees.
They are generally 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, for those Funds that offer Class Y shares, 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 Funds 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 to the Funds 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.
Securities traded on foreign exchanges are valued at the market price on the
non-U.S. exchange, unless a Fund believes that an occurrence after the closing
of that exchange will materially affect a security's value. In that case, the
security may be fair valued at the time the Fund determines its net asset value
by or pursuant to procedures approved by the Board of Trustees. When fair
valuing their securities, the Funds may, among other things, use modeling tools
or other processes that may take into account factors such as securities market
activity and/or significant events that occur after the close of the local
market and before the time a Fund's net asset value is calculated. All other
securities and assets are valued at their fair value as determined in good
faith by the Funds' investment advisers and subadvisers, pursuant to the
procedures approved by the Board of Trustees. As of December 31, 2005,
approximately 73% of the market value of the investments for the Hansberger
International Fund were fair valued 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 thereafter as the
Fund is notified, and interest income is recorded on an accrual basis. Interest
income is increased by the accretion
61
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
of discount and decreased by the amortization of premium. Investment income is
recorded net of foreign taxes withheld when applicable. 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.
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 and 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.
The Funds use foreign currency exchange contracts to facilitate transactions in
foreign-denominated investments. Losses may arise from changes in the value of
the foreign currency or if the counterparties do not perform under the
contracts' terms.
Each Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the price of such securities may be more volatile that those
of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. The International Fund, the U.S.
Diversified Portfolio and the Value Fund may use forward foreign currency
contracts. 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 a Fund has committed to
buy or sell represents 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. At December 31, 2005, there were no open forward currency
contracts.
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 gain distributions are determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. Permanent differences are primarily due to
differing treatments for book and tax purposes of items such as net operating
losses and foreign currency transactions. Permanent book and tax basis
differences relating to shareholder distributions, net investment income, and
net realized gains will result in reclassifications to the capital accounts.
Temporary differences between book and tax distributable earnings are primarily
due to deferred Trustees' fees, capital loss carryforwards, wash sales,
distributions from real estate investment trusts and gains realized from
passive foreign investment companies. Distributions from net investment income
and short-term capital gains are considered to be ordinary income for tax
purposes.
62
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
The tax character of distributions paid to shareholders during the years ended
December 31, 2005 and 2004 was as follows:
2005 Distributions Paid From: 2004 Distributions Paid From:
- - ------------------------------------- -------------------------------------
Ordinary Long-Term Ordinary Long-Term
Fund Income Capital Gains Total Income Capital Gains Total
- ---- ----------- ------------- ----------- ----------- ------------- -----------
Targeted Equity Fund $ 1,723,626 $ -- $ 1,723,626 $ -- $ -- $ --
International Fund -- -- -- -- -- --
Focused Value Fund -- 39,692,418 39,692,418 -- -- --
Large Cap Value Fund 357,883 -- 357,883 -- -- --
U.S. Diversified Portfolio -- -- -- -- -- --
Value Fund 2,535,529 13,549,598 16,085,127 -- 2,535,327 2,535,327
Small Cap Value Fund -- -- -- -- -- --
Capital Growth Fund -- -- -- -- -- --
As of December 31, 2005, the components of distributable earnings on a tax
basis were as follows:
U.S.
Targeted International Focused Large Cap Diversified
Equity Fund Fund Value Fund Value Fund Portfolio Value Fund
- - ------------ ------------- ------------ ------------- ------------- ------------
Undistributed ordinary income $ 4,790,067 $ 1,203,155 $ -- $ 636,340 $ -- $ 677,866
Undistributed long-term capital gains -- 1,884,817 8,162,423 -- -- 1,596,664
------------ ------------ ------------ ------------- ------------- ------------
Total undistributed earnings 4,790,067 3,087,972 8,162,423 636,340 -- 2,274,530
Capital loss carryforward:
Expires December 31, 2009 -- -- -- (75,393,915) (77,008,343) --
Expires December 31, 2010 (55,280,538) -- -- (24,633,843) (62,468,898) --
Expires December 31, 2011 -- -- -- (9,965,466) -- --
------------ ------------ ------------ ------------- ------------- ------------
Total capital loss carryforward (55,280,538) -- -- (109,993,224) (139,477,241) --
Deferred net capital losses
(post October) -- -- -- -- -- --
Unrealized appreciation (depreciation) 100,778,012 26,593,199 38,520,605 39,424,233 100,742,595 21,305,847
------------ ------------ ------------ ------------- ------------- ------------
Total accumulated earnings (losses) $ 50,287,541 $ 29,681,171 $ 46,683,028 $ (69,932,651) $ (38,734,646) $ 23,580,377
------------ ------------ ------------ ------------- ------------- ------------
Capital loss carryforward utilized in the
current year $ 86,042,756 $ 8,938,160 $ 10,136,380 $ 24,358,835 $ 84,778,800 $ --
============ ============ ============ ============= ============= ============
Small Cap Capital
Value Fund Growth Fund
- - ------------ ------------
Undistributed ordinary income $ -- $ --
Undistributed long-term capital gains -- --
------------ ------------
Total undistributed earnings -- --
Capital loss carryforward:
Expires December 31, 2009 (1,984,150) (21,116,910)
Expires December 31, 2010 (27,289,950) (26,883,047)
Expires December 31, 2011 -- (4,097,913)
------------ ------------
Total capital loss carryforward (29,274,100) (52,097,870)
Deferred net capital losses
(post October) -- (314,439)
Unrealized appreciation (depreciation) 12,455,466 550,664
------------ ------------
Total accumulated earnings (losses) $(16,818,634) $(51,861,645)
------------ ------------
Capital loss carryforward utilized in the
current year $ 13,032,705 $ 1,341,337
============ ============
g. Repurchase Agreements. Each Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The repurchase agreements are
tri-party agreements whereby the collateral is held at the custodian bank in a
segregated account for the benefit of the Fund and the counterparty. Repurchase
agreements could involve certain risks in the event of default or insolvency of
the counterparty including possible delays or restrictions upon a Fund's
ability to dispose of the underlying securities.
h. Indemnifications. Under the Funds' organizational documents, their officers
and Trustees are indemnified against certain liability arising out of the
performance of their duties to the Funds. Additionally, in the normal course of
business, the Funds enter into contracts with service providers that contain
general indemnification clauses. The Funds' maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Funds that have not yet occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
63
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
3. Purchases and Sales of Securities. For the year ended December 31, 2005,
purchases and sales of securities (excluding short-term investments) were as
follows:
Fund Purchases Sales
---- --------------- ---------------
Targeted Equity Fund $ 1,464,043,103 $ 1,550,732,665
International Fund 59,450,965 71,853,166
Focused Value Fund 117,856,510 179,246,512
Large Cap Value Fund 116,703,463 170,302,572
U.S. Diversified Portfolio 615,835,359 733,707,251
Value Fund 77,968,440 95,362,014
Small Cap Value Fund 83,785,397 100,215,342
Capital Growth Fund 84,254,716 96,892,094
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. IXIS Asset Management Advisors, L.P. ("IXIS Advisors") 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 the Fund's average daily net assets:
Percentage of Average Daily Net Assets
- - ------------------------------------------------------------
First Next Next Next Over
Fund $200 million $300 million $500 million $1 billion $2 billion
- ---- ------------ ------------ ------------ ---------- ----------
Targeted Equity Fund 0.75% 0.70% 0.65% 0.65% 0.60%
International Fund 0.80% 0.75% 0.75% 0.75% 0.75%
Focused Value Fund 1.00% 1.00% 1.00% 0.95% 0.95%
Large Cap Value Fund 0.70% 0.65% 0.60% 0.60% 0.60%
U.S. Diversified Portfolio 0.90% 0.90% 0.90% 0.80% 0.80%
Value Fund 0.75% 0.70% 0.65% 0.65% 0.65%
Small Cap Value Fund 0.90% 0.90% 0.90% 0.90% 0.90%
Capital Growth Fund 0.75% 0.70% 0.65% 0.65% 0.65%
Prior to July 1, 2005, the effective date of the approval by the Trustees of a
reduction in rates per the agreement, U.S. Diversified Portfolio paid
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.
IXIS Advisors has entered into subadvisory agreements for each Fund as listed
below.
International Fund Hansberger Global Investors, Inc. ("Hansberger")
Focused Value Fund Harris Associates L.P. ("Harris")
Large Cap Value Fund Harris
U.S. Diversified Portfolio Harris
Loomis, Sayles & Company, L.P. ("Loomis Sayles")
Mercury Advisors
Value Fund Harris
Loomis Sayles
Vaughan Nelson Investment Management, L.P. ("Vaughan Nelson")
Westpeak Global Advisors, L.P. ("Westpeak")
Small Cap Value Fund Vaughan Nelson
Capital Growth Fund Westpeak
Payments to IXIS Advisors are reduced in the amount of payments to the
subadvisers. Effective July 1, 2005, IXIS Advisors voluntarily agreed to waive
a portion of the management fee it retains for the Value Fund after payment to
subadvisers.
64
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
IXIS Advisors has given binding undertakings to certain Funds to reduce its
management fees and/or reimburse certain expenses associated with these Funds
to limit their operating expenses. These undertakings are in effect until
April 30, 2006 and will be reevaluated on an annual basis. At December 31,
2005, the expense limits as a percentage of average daily net assets under the
expense limitation agreements were as follows:
Expense Limit as a Percentage of Average
Daily Net Assets
- ----------------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Focused Value Fund 1.70% 2.45% 2.45% --%
Large Cap Value Fund 1.30% 2.05% 2.05% 1.05%
For the year ended December 31, 2005, 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
---- ---------- ---------- ---------- ----- -----
Targeted Equity Fund $5,250,690 $ -- $5,250,690 0.70% 0.70%
International Fund 1,068,281 -- 1,068,281 0.80% 0.80%
Focused Value Fund 3,299,323 -- 3,299,323 1.00% 1.00%
Large Cap Value Fund 2,108,419 -- 2,108,419 0.68% 0.68%
U.S. Diversified Portfolio 6,299,035 -- 6,299,035 0.98% 0.98%
Value Fund 969,085 1,232 967,853 0.75% 0.75%
Small Cap Value Fund 966,582 -- 966,582 0.90% 0.90%
Capital Growth Fund 485,338 -- 485,338 0.75% 0.75%
For the year ended December 31, 2005, in addition to the waiver of management
fees, expenses have been reimbursed as follows: Large Cap Value Fund $479,821.
IXIS Advisors is permitted to recover expenses it has borne under the expense
limitation agreement (whether through reduction of its management fees 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, 2005, the amounts subject to possible reimbursement under the
expense limitation agreements were as follows:
Expenses Subject
to Possible
Reimbursement
Fund until December 31, 2006
---- -----------------------
Large Cap Value Fund $479,821
IXIS Advisors, CGM, Harris, Loomis Sayles, Vaughan Nelson and Westpeak are
subsidiaries of IXIS Asset Management North America, L.P. ("IXIS North
America"), which is part of IXIS Asset Management Group, an international asset
management group based in Paris, France. IXIS Asset Management Group is
ultimately owned principally, directly or indirectly by the following three
large affiliated French financial services entities: the Caisse des Depots et
Consignations ("CDC"), a public sector financial institution created by the
French government in 1816; the Caisse Nationale des Caisses d'Epargne, a
financial institution owned by CDC and by the French regional savings banks
known as Caisses d'Epargne; and CNP Assurances, a large French life insurance
company. 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.
b. Administrative Expense. IXIS Advisors provides certain administrative
services to the Funds and subcontracts with State Street Bank and Trust Company
("State Street Bank") to serve as subadministrator.
Pursuant to an agreement among IXIS Advisor Funds Trust I, IXIS Advisor Funds
Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS
Advisor Cash Management Trust ("IXIS Advisor Funds Trusts"), Loomis Sayles
Funds I, Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS
Advisors, each Fund pays IXIS Advisors monthly its pro rata portion of fees
equal to an annual rate of 0.0675% of the first $5 billion of the average daily
net assets of the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts,
0.0625% of the next $5 billion, and 0.0500% of such assets in excess of $10
billion, subject to an annual aggregate minimum fee for the IXIS Advisor Funds
Trusts and Loomis Sayles Funds Trusts of $5 million, which is reevaluated on an
annual basis.
65
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
Prior to September 1, 2005, Investors Bank & Trust Company ("IBT") served as
the subadministrator.
For the year ended December 31, 2005, amounts paid to IXIS Advisors for
administrative expense were as follows:
Administrative
Fund Fees
---- --------------
Targeted Equity Fund $499,625
International Fund 76,262
Focused Value Fund 220,382
Large Cap Value Fund 202,085
U.S. Diversified Portfolio 420,015
Value Fund 81,005
Small Cap Value Fund 67,870
Capital Growth Fund 39,477
c. Transfer Agent Fees. Prior to October 1, 2005, IXIS Asset Management
Services Company ("IXIS Services"), a wholly-owned subsidiary of IXIS North
America, was the transfer and shareholder servicing agent for each Fund and had
subcontracted with Boston Financial Data Services ("Boston Financial") to serve
as sub-transfer agent. During this period, each Fund, for its Class A, B and C
shares, paid fees monthly to IXIS Services equal to an annual rate of $25.44
for each open account and $2.00 for each closed account, subject to a monthly
minimum of $1,500 per class and an annual aggregate minimum fee for all Load
Equity Funds* of approximately $6.8 million. Each Fund, for its Class Y shares,
paid service fees monthly to IXIS Services equal to an annual rate of $25.44
for each open account and $2.00 for each closed account, subject to a monthly
minimum of $1,500 and an annual aggregate minimum fee for all No-Load Retail
Funds** and Load Funds - Class Y *** of approximately $1 million.
* Load Equity Funds consisted of Loomis Sayles Growth Fund, Loomis Sayles
Research Fund and all equity Funds in the IXIS Advisor Funds Trusts.
** No-Load Retail Funds consisted 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 consisted of all Funds with Class Y offered within the
IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts.
Effective October 1, 2005, Boston Financial became the transfer and shareholder
servicing agent for the Funds under a new agreement with the Trusts. Under this
new agreement, the Funds pay fees to Boston Financial pursuant to a different
schedule.
For the period January 1, 2005 through September 30, 2005, amounts paid to IXIS
Services as compensation for its services as transfer agent were as follows:
Transfer Agent
Fund Fee
---- --------------
Targeted Equity Fund $ 907,031
International Fund 347,171
Focused Value Fund 419,090
Large Cap Value Fund 615,817
U.S. Diversified Portfolio 1,374,347
Value Fund 270,037
Small Cap Value Fund 342,688
Capital Growth Fund 226,617
IXIS Services (prior to October 1, 2005), Boston Financial and other firms are
also reimbursed by the Funds for out-of-pocket expenses. In addition, pursuant
to other servicing agreements, each Fund pays service fees to other firms that
provide similar services for their own shareholder accounts.
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"), the Fund's distributor (a wholly-owned subsidiary of
IXIS North America), a monthly service fee at the annual rate not to exceed
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.
66
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
Under the Class B and Class C Plans, each Fund pays IXIS Distributors a monthly
service fee at the annual rate not to exceed 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.
Also under the Class B and Class C Plans, each Fund pays IXIS Distributors a
monthly distribution fee at the annual rate not to exceed 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, 2005, the Funds paid the following service and
distribution fees:
Service Fee Distribution Fee
- - ----------------------------------------- ---------------------------
Fund Class A Class B Class C Class B Class C
- ---- ------- ------- ------- ------- -------
Targeted Equity Fund $ 1,713,347 $ 137,363 $ 8,979 $ 412,089 $ 26,936
International Fund 196,709 93,511 43,618 280,533 130,852
Focused Value Fund 235,627 258,522 330,683 775,564 992,048
Large Cap Value Fund 506,728 169,510 57,275 508,529 171,825
U.S. Diversified Portfolio 953,408 478,443 128,831 1,435,327 386,491
Value Fund 253,517 61,856 7,617 185,567 22,852
Small Cap Value Fund 123,612 111,702 33,181 335,105 99,542
Capital Growth Fund 131,974 27,442 2,363 82,327 7,088
e. Commissions. The Funds have been informed that commissions (including CDSC)
on shares paid to IXIS Distributors by investors in shares of the Funds during
the year ended December 31, 2005 were as follows:
Fund Commission
---- ----------
Targeted Equity Fund $370,363
International Fund 102,668
Focused Value Fund 438,841
Large Cap Value Fund 204,402
U.S. Diversified Portfolio 661,226
Value Fund 89,703
Small Cap Value Fund 141,375
Capital Growth Fund 66,367
For the year ended December 31, 2005, brokerage commissions paid to affiliated
broker/dealers by the Funds were as follows:
Fund Commissions
---- -----------
Focused Value Fund $ 9,348
Large Cap Value Fund 4,752
U.S. Diversified Portfolio 17,775
f. Trustees Fees and Expenses. The 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 or their affiliates. The
Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any meeting attendance fees for
Board of Trustees meetings or committee meetings that she attends. Each
independent Trustee (other than the Chairperson) receives, in the aggregate, a
retainer fee at the annual rate of $55,000. Each independent Trustee also
receives a meeting attendance fee of $6,000 for each meeting of the Board of
Trustees that he or she attends in person and $3,000 for each meeting of the
Board of Trustees that he or she attends telephonically. In addition, each
committee chairman receives an additional retainer fee at the annual rate of
$10,000. Each committee member receives $4,000 for each committee meeting that
he or she attends in person and $2,000 for each committee meeting that he or
she attends telephonically. These fees are allocated among the Funds in the
IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts based on a formula
that takes into account, among other factors, the relative net assets of each
Fund. Trustees are reimbursed for travel expenses in connection with attendance
at meetings.
Prior to November 18, 2005, the Trusts had co-chairmen of the Board. Prior to
October 1, 2005, each independent Trustee received, 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 that he or she attended. The
co-chairmen of the Board each received an additional annual retainer of
$25,000. Each committee chairman received an additional retainer fee at the
annual rate of $7,000. Each committee member received $3,750 for each committee
meeting that he or she attended.
67
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
Effective January 1, 2006, each committee member will be compensated $5,000 for
each Audit Committee meeting that he or she attends in person and $2,500 for
such meeting he or she attends telephonically.
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 IXIS Advisor 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.
Additionally, the Board of Trustees has approved the use of Fund assets to pay
its portion of the annual salary for 2005 of an employee of IXIS Advisors who
supports the Funds' Chief Compliance Officer. For the year ended December 31,
2005, each Fund's portion of such expense was approximately $1,500.
g. Redemption Fees. Shareholders of Class A shares of Targeted Equity Fund,
International Fund, Focused Value Fund and Small Cap Value Fund are charged a
2% redemption fee if they redeem, including redeeming by exchange, Class A
shares 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 exchanged shares,
which means that if a shareholder 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 accounted for as an addition to paid-in
capital and are presented in the Statements of Changes in Net Assets.
5. Line of Credit. The Funds, together with certain other Funds of IXIS Advisor
Funds Trusts and Loomis Sayles Funds Trusts, participate in a $75,000,000
committed line of credit provided by State Street Bank. Advances under the line
are taken primarily for temporary or emergency purposes. Interest is charged to
a Fund based on its borrowing at a rate per annum equal to the Federal Funds
rate plus 0.50%. In addition, a Fund is charged its pro rata portion of a
facility fee equal to 0.09% per annum on the unused portion of the line of
credit. Prior to September 1, 2005, each Fund, together with certain other
Funds, participated in a $50,000,000 committed line of credit provided by IBT.
There were no borrowings by the Funds during year ended December 31, 2005.
6. Securities Lending. The Funds have entered into an agreement with State
Street Bank, as agent of the Funds, to lend securities to certain designated
borrowers. The loans are collateralized with cash or securities in an amount
equal to at least 105% or 102% of the market value of the loaned international
equity or domestic securities, respectively, when the loan is initiated.
Thereafter, the value of the collateral must remain at least 102% of the market
value of loaned securities for U.S. equities and U.S. corporate debt; at least
105% of the market value of loaned securities for non-U.S. equities; and at
least 100% of the market value of loaned securities for U.S. government and
agency securities, sovereign debt issued by non-U.S. governments and non-U.S.
corporate debt. The Funds invest cash collateral in short-term investments, a
portion of the income from which is remitted to the borrowers and the remainder
allocated between the Funds and State Street Bank as lending agent. As with
other extensions of credit, the Funds may bear the risk of loss with respect to
the investment of the collateral.
Prior to September 1, 2005, IBT served as the securities lending agent for the
Funds.
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, 2005 were as
follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
---- ------------------ -------------------
Targeted Equity Fund $48,623,038 $49,555,261
International Fund 18,932,539 19,777,153
Focused Value Fund 19,007,977 19,573,534
Large Cap Value Fund 9,623,937 9,914,734
U.S. Diversified Portfolio 59,572,629 61,379,500
Value Fund 979,701 1,005,339
Small Cap Value Fund 27,814,879 28,701,451
Capital Growth Fund 3,447,940 3,596,076
68
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
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 included in realized gains on investments in the
Statements of Operations. For the year ended December 31, 2005, amounts rebated
under these agreements were as follows:
Fund Reductions
---- ----------
Targeted Equity Fund $329,507
International Fund 21,547
Focused Value Fund 22,944
Large Cap Value Fund 31,258
U.S. Diversified Portfolio 143,569
Value Fund 32,333
Small Cap Value Fund 66,046
Capital Growth Fund 44,153
8. 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, 2005: France 10.2%, Japan 18.9%, and
the United Kingdom 19.8%. 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.
9. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
Year Ended
December 31, 2005
-----------------------------------
Targeted Equity Fund Shares Amount
- -------------------- ---------------- -----------------
Class A
Shares sold 2,114,436 $ 20,342,978
Shares issued in connection with the reinvestment of distributions 157,595 1,531,634
---------------- -----------------
2,272,031 21,874,612
Shares repurchased (10,590,304) (100,805,465)
---------------- -----------------
Net increase (decrease) (8,318,273) $ (78,930,853)
---------------- -----------------
Class B
Shares sold 479,091 $ 4,271,772
Shares issued in connection with the reinvestment of distributions 8,192 70,535
---------------- -----------------
487,283 4,342,307
Shares repurchased (1,703,082) (15,113,085)
---------------- -----------------
Net increase (decrease) (1,215,799) $ (10,770,778)
---------------- -----------------
Class C
Shares sold 247,891 $ 2,279,688
Shares issued in connection with the reinvestment of distributions 427 3,675
---------------- -----------------
248,318 2,283,363
Shares repurchased (87,175) (772,409)
---------------- -----------------
Net increase (decrease) 161,143 $ 1,510,954
---------------- -----------------
Class Y
Shares sold 154,883 $ 1,499,898
Shares issued in connection with the reinvestment of distributions 4,853 49,839
---------------- -----------------
159,736 1,549,737
Shares repurchased (77,671) (745,305)
---------------- -----------------
Net increase (decrease) 82,065 $ 804,432
---------------- -----------------
Increase (decrease) from capital share transactions (9,290,864) $ (87,386,245)
================ =================
Year Ended
December 31, 2004
-----------------------------------
Targeted Equity Fund Shares Amount
- -------------------- ---------------- -----------------
Class A
Shares sold 2,521,858 $ 20,870,954
Shares issued in connection with the reinvestment of distributions -- --
---------------- -----------------
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 issued in connection with the reinvestment of distributions -- --
---------------- -----------------
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 issued in connection with the reinvestment of distributions -- --
---------------- -----------------
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 issued in connection with the reinvestment of distributions -- --
---------------- -----------------
129,331 1,094,935
Shares repurchased (101,673) (843,271)
---------------- -----------------
Net increase (decrease) 27,658 $ 251,664
---------------- -----------------
Increase (decrease) from capital share transactions (15,729,147) $ (127,772,868)
================ =================
69
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
9. Capital Shares (continued).
Year Ended
December 31, 2005
-----------------------------------
International Fund Shares Amount
- ------------------ ---------------- -----------------
Class A
Shares sold 1,043,158 $ 18,504,622
Shares repurchased (837,941) (14,808,970)
---------------- -----------------
Net increase (decrease) 205,217 $ 3,695,652
---------------- -----------------
Class B
Shares sold 203,605 $ 3,346,613
Shares repurchased (1,228,248) (20,075,132)
---------------- -----------------
Net increase (decrease) (1,024,643) $ (16,728,519)
---------------- -----------------
Class C
Shares sold 171,446 $ 2,829,915
Shares repurchased (185,571) (3,042,603 )
---------------- -----------------
Net increase (decrease) (14,125) $ (212,688)
---------------- -----------------
Increase (decrease) from capital share transactions (833,551) $ (13,245,555)
================ =================
Year Ended
December 31, 2005
-----------------------------------
Focused Value Fund Shares Amount
- ------------------ ---------------- -----------------
Class A
Shares sold 1,278,667 $ 16,573,289
Shares issued in connection with the reinvestment of distributions 580,779 7,068,077
---------------- -----------------
1,859,446 23,641,366
Shares repurchased (3,318,671) (43,905,787)
---------------- -----------------
Net increase (decrease) (1,459,225) $ (20,264,421)
---------------- -----------------
Class B
Shares sold 576,120 $ 7,060,801
Shares issued in connection with the reinvestment of distributions 766,254 8,949,845
---------------- -----------------
1,342,374 16,010,646
Shares repurchased (1,639,139) (21,010,935)
---------------- -----------------
Net increase (decrease) (296,765 ) $ (5,000,289)
---------------- -----------------
Class C
Shares sold 1,319,958 $ 16,274,937
Shares issued in connection with the reinvestment of distributions 758,307 8,857,031
---------------- -----------------
2,078,265 25,131,968
Shares repurchased (2,893,997) (36,873,402)
---------------- -----------------
Net increase (decrease) (815,732) $ (11,741,434)
---------------- -----------------
Increase (decrease) from capital share transactions (2,571,722) $ (37,006,144)
================ =================
Year Ended
December 31, 2004
-----------------------------------
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) from capital share transactions (918,037 ) $ (12,713,186)
================ =================
Year Ended
December 31, 2004
-----------------------------------
Focused Value Fund Shares Amount
- ------------------ ---------------- -----------------
Class A
Shares sold 2,211,604 $ 26,494,287
Shares issued in connection with the reinvestment of distributions -- --
---------------- -----------------
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 issued in connection with the reinvestment of distributions -- --
---------------- -----------------
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 issued in connection with the reinvestment of distributions -- --
---------------- -----------------
2,570,290 30,041,268
Shares repurchased (1,937,670) (22,709,696)
---------------- -----------------
Net increase (decrease) 632,620 $ 7,331,572
---------------- -----------------
Increase (decrease) from capital share transactions 191,397 $ 2,079,342
================ =================
70
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
9. Capital Shares (continued).
Year Ended
December 31, 2005
-----------------------------------
Large Cap Value Fund Shares Amount
- -------------------- ---------------- -----------------
Class A
Shares sold 1,068,733 $ 13,952,739
Shares issued in connection with the reinvestment of distributions 14,688 191,232
---------------- -----------------
1,083,421 14,143,971
Shares repurchased (3,550,446) (46,275,347)
---------------- -----------------
Net increase (decrease) (2,467,025) $ (32,131,376)
---------------- -----------------
Class B
Shares sold 262,250 $ 3,214,063
Shares issued in connection with the reinvestment of distributions 6,033 73,844
---------------- -----------------
262,283 3,287,907
Shares repurchased (1,873,402) (22,992,338)
---------------- -----------------
Net increase (decrease) (1,605,119) $ (19,704,431)
---------------- -----------------
Class C
Shares sold 233,814 $ 2,864,911
Shares issued in connection with the reinvestment of distributions 976 11,942
---------------- -----------------
234,790 2,876,853
Shares repurchased (699,505) (8,571,119)
---------------- -----------------
Net increase (decrease) (464,715) $ (5,694,266)
---------------- -----------------
Class Y
Shares sold 68,963 $ 925,029
Shares issued in connection with the reinvestment of distributions 1,195 16,006
---------------- -----------------
70,158 941,035
Shares repurchased (345,786) (4,615,016)
---------------- -----------------
Net increase (decrease) (275,628) $ (3,673,981)
---------------- -----------------
Increase (decrease) from capital share transactions (4,812,487) $ (61,204,054)
================ =================
Year Ended
December 31, 2005
-----------------------------------
U.S. Diversified Portfolio Shares Amount
- -------------------------- ---------------- -----------------
Class A
Shares sold 2,385,720 $ 44,954,334
Shares repurchased (4,189,901) (79,262,654)
---------------- -----------------
Net increase (decrease) (1,804,181) $ (34,308,320)
---------------- -----------------
Class B
Shares sold 669,095 $ 11,320,578
Shares repurchased (4,207,942) (71,182,972)
---------------- -----------------
Net increase (decrease) (3,538,847) $ (59,862,394)
---------------- -----------------
Class C
Shares sold 102,734 $ 1,746,851
Shares repurchased (912,989) (15,415,642)
---------------- -----------------
Net increase (decrease) (810,255) $ (13,668,791)
---------------- -----------------
Class Y
Shares sold 142,301 $ 2,842,762
Shares repurchased (451,903) (9,048,524)
---------------- -----------------
Net increase (decrease) (309,602) $ (6,205,762)
---------------- -----------------
Increase (decrease) from capital share transactions (6,462,885) $ (114,045,267)
================ =================
Year Ended
December 31, 2004
-----------------------------------
Large Cap Value Fund Shares Amount
- -------------------- ---------------- -----------------
Class A
Shares sold 2,114,459 $ 26,293,904
Shares issued in connection with the reinvestment of distributions -- --
---------------- -----------------
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 in connection with the reinvestment of distributions -- --
---------------- -----------------
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 in connection with the reinvestment of distributions -- --
---------------- -----------------
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 in connection with the reinvestment of distributions -- --
---------------- -----------------
278,070 3,599,061
Shares repurchased (1,082,092) (13,760,464)
---------------- -----------------
Net increase (decrease) (804,022) $ (10,161,403)
---------------- -----------------
Increase (decrease) from capital share transactions (2,479,742) $ (30,720,612)
================ =================
Year Ended
December 31, 2004
-----------------------------------
U.S. Diversified Portfolio 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) from capital share transactions (7,275,744) $ (116,500,139)
================ =================
71
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
9. Capital Shares (continued).
Year Ended
December 31, 2005
-----------------------------------
Value Fund Shares Amount
- ---------- ---------------- -----------------
Class A
Shares sold 752,413 $ 6,758,994
Shares issued in connection with the reinvestment of distributions 1,432,023 12,200,602
---------------- -----------------
2,184,436 18,959,596
Shares repurchased (2,182,286) (19,556,017)
---------------- -----------------
Net increase (decrease) 2,150 $ (596,421)
---------------- -----------------
Class B
Shares sold 229,964 $ 1,881,852
Shares issued in connection with the reinvestment of distributions 393,062 3,030,283
---------------- -----------------
623,026 4,912,135
Shares repurchased (1,018,265) (8,370,264)
---------------- -----------------
Net increase (decrease) (395,239) $ (3,458,129)
---------------- -----------------
Class C
Shares sold 51,464 $ 417,159
Shares issued in connection with the reinvestment of distributions 39,420 303,708
---------------- -----------------
90,884 720,867
Shares repurchased (77,457) (636,872)
---------------- -----------------
Net increase (decrease) 13,427 $ 83,995
---------------- -----------------
Increase (decrease) from capital share transactions (379,662) $ (3,970,555)
================ =================
Year Ended
December 31, 2005
-----------------------------------
Small Cap Value Fund Shares Amount
- -------------------- ---------------- -----------------
Class A
Shares sold 1,322,502 $ 21,908,202
Shares repurchased (797,816) (13,154,538)
---------------- -----------------
Net increase (decrease) 524,686 $ 8,753,664
---------------- -----------------
Class B
Shares sold 172,453 $ 2,628,609
Shares repurchased (1,455,176) (22,158,268)
---------------- -----------------
Net increase (decrease) (1,282,723) $ (19,529,659)
---------------- -----------------
Class C
Shares sold 177,290 $ 2,719,736
Shares repurchased (246,708) (3,789,067)
---------------- -----------------
Net increase (decrease) (69,418) $ (1,069,331)
---------------- -----------------
Increase (decrease) from capital share transactions (827,455) $ (11,845,326)
================ =================
Year Ended
December 31, 2004
-----------------------------------
Value Fund Shares Amount
- ---------- ---------------- -----------------
Class A
Shares sold 963,269 $ 8,089,262
Shares issued in connection with the reinvestment of distributions 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 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 5,506 44,489
---------------- -----------------
145,020 1,123,385
Shares repurchased (51,629) (402,248)
---------------- -----------------
Net increase (decrease) 93,391 $ 721,137
---------------- -----------------
Increase (decrease) from capital share transactions (2,186,711) $ (17,975,676)
================ =================
Year Ended
December 31, 2004
-----------------------------------
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) from capital share transactions (1,071,886) $ (14,761,490)
================ =================
72
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
9. Capital Shares (continued).
Year Ended Year Ended
December 31, 2005 December 31, 2004
------------------------ ------------------------
Capital Growth Fund Shares Amount Shares Amount
- ------------------- ---------- ------------ ---------- ------------
Class A
Shares sold 241,489 $ 2,743,935 313,633 $ 3,392,393
Shares repurchased (1,057,103) (12,074,125) (1,124,317) (12,133,801)
---------- ------------ ---------- ------------
Net increase (decrease) (815,614) $ (9,330,190) (810,684) $ (8,741,408)
---------- ------------ ---------- ------------
Class B
Shares sold 93,730 $ 919,070 142,812 $ 1,353,045
Shares repurchased (425,145) (4,178,212) (575,435) (5,454,484)
---------- ------------ ---------- ------------
Net increase (decrease) (331,415) $ (3,259,142) (432,623) $ (4,101,439)
---------- ------------ ---------- ------------
Class C
Shares sold 5,876 $ 57,428 14,061 $ 133,009
Shares repurchased (15,868) (154,158) (35,626) (335,096)
---------- ------------ ---------- ------------
Net increase (decrease) (9,992) $ (96,730) (21,565) $ (202,087)
---------- ------------ ---------- ------------
Increase (decrease) from capital share transactions (1,157,021) $(12,686,062) (1,264,872) $(13,044,934)
========== ============ ========== ============
73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, and
IXIS Advisor Funds Trust III and Shareholders of CGM Advisor Targeted Equity
Fund, Hansberger International Fund, IXIS U.S. Diversified Portfolio, IXIS
Value Fund, Vaughan Nelson Small Cap Value Fund, Westpeak Capital Growth Fund,
Harris Associates Large Cap Value Fund and Harris Associates Focused Value Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios 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 CGM Advisor
Targeted Equity Fund, Hansberger International Fund, IXIS U.S. Diversified
Portfolio (formerly the CDC Nvest Star Advisers Fund), IXIS Value Fund
(formerly the CDC Star Value Fund), Vaughan Nelson Small Cap Value Fund and the
Westpeak Capital Growth Fund, each a series of IXIS Advisor Funds Trust I, the
Harris Associates Large Cap Value Fund, a series of IXIS Advisor Funds Trust
II, and the Harris Associates Focused Value Fund, a series of IXIS Advisor
Funds Trust III (collectively, the "Funds"), at December 31, 2005, 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, 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 audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2006
74
2005 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (unaudited)
Corporate Dividends Received Deduction. For the fiscal year ended December 31,
2005, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
Qualifying
Fund Percentage
---- ----------
Targeted Equity Fund 100.00%
Large Cap Value Fund 100.00%
Value Fund 82.22%
Capital Gains Distributions. Pursuant to Internal Revenue Section 852(b), the
following Funds paid distributions, which have been designated as capital gains
distributions for the fiscal year ended December 31, 2005.
Fund Amount
---- -----------
Focused Value Fund $39,692,418
Value Fund 13,549,598
Qualified Dividend Income. A percentage of dividends distributed by the Funds
during the fiscal year ended December 31, 2005 are considered qualified
dividend income, and are eligible for reduced tax rates. These lower rates
range from 5% to 15% depending on an individual's tax bracket. These
percentages are noted below:
Fund Percentage
---- ----------
Targeted Equity Fund 100.00%
Large Cap Value Fund 100.00%
Value Fund 80.14%
75
TRUSTEE AND OFFICER INFORMATION
The table below provides certain information regarding the Trustees and
Officers of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, and IXIS
Advisor 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 Trust and is available by calling IXIS Advisor 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 since 1984 for Douglas Dillon Professor and 38
(3/23/40) IXIS Advisor Funds Trust I; Director of the Belfer Center Director, Taubman Centers,
1995 for IXIS Advisor of Science for International Inc. (real estate investment
Funds Trust II and IXIS Affairs, John F. Kennedy trust)
Advisor Funds Trust III School of Government,
Harvard University
Contract Review and
Governance Committee
Member
Charles D. Baker Trustee since 2005 for President and Chief Executive 38
(11/13/56) IXIS Advisor Funds Trust I, Officer, Harvard Pilgrim None
IXIS Advisor Funds Trust II Health Care (health plan)
and IXIS Advisor Funds
Trust III
Contract Review and
Governance Committee
Member
Edward A. Benjamin Trustee since 2003 for Retired 38
(5/30/38) IXIS Advisor Funds Trust I, Director, Precision Optics
IXIS Advisor Funds Trust II Corporation (optics
and IXIS Advisor Funds manufacturer)
Trust III
Contract Review and
Governance Committee
Member
Daniel M. Cain Trustee since 1996 for President and Chief Executive 38
(2/24/45) IXIS Advisor Funds Trust I, Officer, Cain Brothers & Director, Sheridan
IXIS Advisor Funds Trust II Company, Incorporated Healthcare Inc. (physician
and IXIS Advisor Funds (investment banking) practice management)
Trust III
Chairman of the Audit
Committee
Paul G. Chenault Trustee since 2003 for Retired; Trustee, First Variable 38
(9/12/33) IXIS Advisor Funds Trust I, Life (variable life insurance) Director, Mailco Office
IXIS Advisor Funds Trust II Products, Inc. (mailing
and IXIS Advisor Funds equipment)
Trust III
Contract Review and
Governance Committee
Member
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
Kenneth J. Cowan Trustee since 1993 for IXIS Retired 38
(4/05/32) Advisor Funds Trust I; 1975 None
for IXIS Advisor Funds
Trust II; 1995 for IXIS
Advisor Funds Trust III
Chairman of the Contract
Review and Governance
Committee
Richard Darman Trustee since 1996 for IXIS Partner, The Carlyle Group 38
(5/10/43) Advisor Funds Trust I, IXIS (investments); formerly, Director and Chairman of
Advisor Funds Trust II and Professor, John F. Kennedy Board of Directors, AES
IXIS Advisor Funds Trust School of Government, Corporation (international
III Contract Review and Harvard University power company)
Governance Committee
Member
Sandra O. Moose Chairperson of the Board of President, Strategic Advisory 38
(2/17/42) Trustees since November Services (management Director, Verizon
2005 Trustee since 1984 for consulting); formerly, Senior Communications;
IXIS Advisor Funds Trust I; Vice President and Director, Director, Rohm and Haas
1995 for IXIS Advisor The Boston Consulting Group, Company (specialty
Funds Trust II and IXIS Inc. (management consulting) chemicals);
Advisor Funds Trust III Director, AES Corporation
Ex officio member of the
Audit Committee and
Contract Review and
Governance Committee
John A. Shane Trustee since 1982 for President, Palmer Service 38
(2/22/33) IXIS Advisor Funds Trust I; Corporation (venture capital Director, Gensym
1995 for IXIS Advisor organization) Corporation (software and
Funds Trust II and IXIS technology service provider);
Advisor Funds Trust III Director and Chairman of
the Board, Abt Associates
Audit Committee Member Inc. (research and consulting
firm)
Cynthia L. Walker Trustee since 2005 for Executive Dean for 38
(7/25/56) IXIS Advisor Funds Trust I, Administration (formerly, None
IXIS Advisor Funds Trust II Dean for Finance and CFO),
and IXIS Advisor Funds Harvard Medical School
Trust III
Audit Committee Member
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
- ---------------------- -------------------------- --------------------- ----------------------------
INTERESTED TRUSTEES
Robert J. Blanding/1/ Trustee since 2003 for President, Chairman, Director, 38
(4/14/47) IXIS Advisor Funds Trust I, and Chief Executive Officer, None
555 California Street IXIS Advisor Funds Trust II Loomis, Sayles & Company,
San Francisco, CA 94104 and IXIS Advisor Funds L.P.; President and Chief
Trust III Executive Officer -- Loomis
Sayles Funds I
Chief Executive Officer for
Loomis Sayles Trust II
John T. Hailer/2/ President, Chief Executive President and Chief Executive 38
(11/23/60) Officer and Trustee since Officer, IXIS Asset None
2000 for IXIS Advisor Management Advisors, L.P.
Funds Trust I, IXIS Advisor and IXIS Asset Management
Funds Trust II and IXIS Distributors, L.P.; Executive
Advisor Funds Trust III Vice President, Loomis Sayles
Funds I; President and Chief
Executive Officer, AEW Real
Estate Income Fund, IXIS
Advisor Cash Management
Trust, IXIS Advisor Funds
Trust II, IXIS Advisor Funds
Trust III and IXIS Advisor
Funds Trust IV
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. and IXIS
Asset Management Advisors,
L.P.
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 Director,
PFPC Inc; formerly, Vice
President -- Division
Manager, First Data Investor
Services, Inc.
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
- ---------------------- -------------------------- --------------------- ----------------------------
Max J. Mahoney Anti-Money Laundering Senior Vice President, Deputy Not Applicable
(5/01/62) Officer and Assistant General Counsel, Assistant
Secretary, since 2005 Secretary and Assistant Clerk,
IXIS Asset Management
Distribution Corporation, IXIS
Asset Management
Distributors, L.P. and IXIS
Asset Management Advisors,
L.P.; Chief Compliance
Officer, IXIS Asset
Management Advisors, L.P.;
formerly, Senior Counsel,
MetLife, Inc.; formerly,
Associate Counsel, LPL
Financial Services, Inc.
John E. Pelletier Chief Operating Officer, Executive Vice President and Not Applicable
(6/24/64) since 2004 Chief Operating Officer
(formerly, Senior Vice
President, General Counsel,
Secretary and Clerk), IXIS
Asset Management
Distributors, L.P. and IXIS
Asset Management Advisors,
L.P.; Executive Vice President
and Chief Operating Officer
(formerly, Senior Vice
President, General Counsel,
Secretary and Clerk), IXIS
Asset Management
Distribution Corporation;
Executive Vice President, Chief
Operating Officer and
Director (formerly, President,
Chief Operating Officer and
Director), IXIS Asset
Management Services
Company.
Kristin Vigneaux Chief Compliance Officer, Chief Compliance Officer for Not Applicable
(9/25/69) since 2004 Mutual Funds, IXIS Asset
Management Distributors, L.P.
and IXIS Asset Management
Advisors, L.P.; formerly, Vice
President, IXIS Asset
Management Services
Company.
* The year provided is the earliest year during which a Trustee was elected or
appointed to the Trust. Each Trustee serves until retirement, resignation or
removal from the Board of Trustees. The current retirement age is 72, but
the retirement policy was suspended for the calendar year 2005. At a meeting
held on August 26, 2005, the trustees voted to lift the suspension of the
retirement policy and to designate 2006 as a transition period so that any
trustees who are currently
79
TRUSTEE AND OFFICER INFORMATION
age 72 or older or who reach age 72 during the remainder of 2005 or in 2006
will not be required to retire until the end of calendar year 2006. The
position of Chairperson of the Board is appointed for a two-year term.
** Each person listed above, except as noted, holds the same position(s) with
the Trusts. Previous positions during the past five years with IXIS Asset
Management Distributors, L.P. (the "Distributor"), IXIS Asset Management
Advisors, L.P. ("IXIS Advisors") or Loomis, Sayles & Company, L.P. are
omitted if not materially different from a trustee's or officer's current
position with such entity.
***The Trustees of the Trust serve as Trustees of a fund complex that includes
all series of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS
Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash
Management Trust, AEW Real Estate Income Fund, Loomis Sayles Funds I and
Loomis Sayles Funds II.
/1/ Mr. Blanding is deemed an "interested person" of the Trust because he
holds the following positions with affiliated persons of the Trust:
President, Chairman, Director and Chief Executive Officer of Loomis,
Sayles & Company, L.P.
/2/ Mr. Hailer is deemed an "interested person" of the Trust because he holds
the following positions with affiliated persons of the Trust: Director and
Executive Vice President of IXIS Asset Management Distribution
Corporation, President and Chief Executive Officer of IXIS Advisors.
80
This Page Intentionally Left Blank
[LOGO]
Annual Report
December 31, 2005
IXIS Equity Diversified Portfolio
Loomis Sayles Large Cap Growth Discipline
Harris Associates Large Cap Value Discipline
Reich & Tang Mid Cap Value Discipline
Hansberger International Developed Markets Discipline
IXIS Income Diversified Portfolio
AEW Diversified REIT Discipline
Active Dividend Equity Discipline
Loomis Sayles Inflation Protected Securities Discipline
Loomis Sayles Multi-Sector Bond Discipline
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
Portfolio of InvestmentsPage 13
Financial Statements....Page 24
IXIS EQUITY DIVERSIFIED PORTFOLIO
PORTFOLIO PROFILE
Objective:
Seeks long-term capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Features U.S. growth and value as well as international investments through a
diversified portfolio of complementary equity investment disciplines from
specialized money managers
- --------------------------------------------------------------------------------
Inception Date:
January 31, 2005
- --------------------------------------------------------------------------------
Subadvisors:
Hansberger Global Investors, Inc.
Harris Associates, L.P.
Loomis, Sayles & Company, L.P.
Reich & Tang Asset Management, LLC
- --------------------------------------------------------------------------------
Symbols:
Class A AEDPX
Class C CEDPX
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks focus on future expectations of a security. The portfolio may be
exposed to greater volatility if the expectations are not met. Value stocks can
fall out of favor and underperform growth stocks during certain market
conditions. Foreign investments involve unique risks, such as currency
fluctuations, differing political and economic conditions, and different
accounting standards.
Management Discussion
- --------------------------------------------------------------------------------
Both domestic and most overseas markets finished 2005 with gains, but foreign
stocks surpassed their U.S. counterparts. In the United States, value stocks
continued to out-perform growth stocks, although growth stocks gained ground in
the fourth quarter. Outside U.S. borders, several factors fell into line to
make equities attractive. Interest rates in most countries were low and there
was a wave of corporate restructuring in Europe and Japan. The emerging markets
experienced strong economic growth, and there was a surge in demand for natural
resources, which was particularly helpful to stocks in Latin America.
Since inception on January 31, 2005 through December 31, 2005, the total return
on Class A shares of IXIS Equity Diversified Portfolio was 8.30% at net asset
value. The portfolio's benchmark, the Standard & Poor's 500 Index, returned
7.53% for the same period, and the average return of the funds in Morningstar's
Large Blend category was 8.22%.
IXIS Equity Diversified Portfolio is invested in a broad range of growth and
value stocks in the United States and overseas, managed by four investment
advisors. The Loomis Sayles Large Cap Growth Discipline focuses on equity
securities of large-cap U.S. companies selected for their growth potential,
while the Harris Associates Large Cap Value Discipline emphasizes large-cap
companies the manager believes to be undervalued. The Reich & Tang Mid Cap
Value Discipline concentrates on equities with small to medium market
capitalizations. Developed markets in foreign countries are the focus of the
Hansberger International Developed Markets Discipline.
LOOMIS SAYLES SOUGHT INDUSTRY LEADERS WITH STRONG FUNDAMENTALS
Financial services, which was one of the largest sectors in this segment, made
the greatest contribution to its return in 2005. Top performers included
investment services specialist Legg Mason and Moody's Corp, a leading business
services company. Legg Mason benefited from strong earnings and revenue growth,
as well as its acquisition of Citigroup's asset management business. Moody's
was aided by substantial strength in its structured finance business as well as
solid growth overseas. The segment's top-performing individual stocks included
Google, a leader in internet paid-search advertising, which continues to exceed
expectations; Apple Computer, which rose on outstanding sales of its iPod
product line; and Chico's FAS, a specialty retailer of women's fashion. Oil and
gas utility Southwestern Energy Company was strong early in the year but
slipped in the fourth quarter along with energy prices. In autos and
transportation, Expeditors International of Washington fell as profit margins
shrank. Loomis sold the position in May, although the stock price later
recovered. Other individual stocks that proved disappointing included Dell
Computer, which declined as earnings fell short of the company's forecasts;
Biogen, a leading pharmaceutical company whose earnings also failed to live up
to expectations; and Zimmer Holdings, a manufacturer of orthopedic implants,
which saw a deteriorating pricing environment for its products in the United
States and Japan. Dell and Biogen were sold. Investments in healthcare
companies were increased, while exposure to energy was reduced when stock
prices rose to levels Loomis felt reflected full valuations. In consumer
durables, homebuilders were eliminated, as real estate sales leveled off. And
the segment's retail exposure was trimmed as sales trends for specific
companies fell below expectations.
HARRIS ASSOCIATES SOUGHT STRONG RETURNS FROM QUALITY BUSINESSES
Because lower-quality stocks outperformed higher-quality issues, this segment's
emphasis on quality detracted from results in 2005. Harris Associates'
technology selections were a positive during the year, but its relatively small
position in energy stocks held the segment back, as soaring oil prices during
most of the year made this a strong sector. This segment also had a relatively
small position in telecommunications, but since the sector was weak, this was a
positive. Burlington Resources, an independent oil and gas company, was one of
the segment's top performers. The company benefited from lower exploration
expenses and rising oil and
1
IXIS EQUITY DIVERSIFIED PORTFOLIO
Management Discussion
- --------------------------------------------------------------------------------
natural gas prices. The stock was sold at a profit in September.
Hewlett-Packard Company also did well, as investors grew more confident that
the company's new CEO would engineer a turnaround. Benefiting from solid demand
for semiconductors, Texas Instruments was a positive performer, but Masco
Corporation, Fannie Mae, and Walt Disney Company had a negative impact on
performance. Skepticism about the potential for continuing strength in the
housing industry hurt Masco, a manufacturer of home-improvement products, but
Harris Associates continues to like the stock. However, they sold Fannie Mae in
the third quarter on growing concerns about accounting issues and the intensely
competitive environment for home mortgages. While business fundamentals for
Disney appeared attractive, the stock was hurt by general weakness in the media
sector.
REICH & TANG FOCUSED ON OUT-OF-FAVOR COMPANIES
Reich & Tang uses a "contrarian" approach, seeking out-of-favor stocks that
appear to have growth potential over the next three to four years. In both the
energy and financial areas, such stocks were difficult to find, yet these were
some of the best-performing sectors in 2005. The managers' focus on individual
companies with strong business plans and management teams led them to Martin
Marietta Materials, which was one of the best performers in this segment.
Martin Marietta benefited from rising demand for construction products,
improved pricing, and increased government spending. Flowserve Company, a
manufacturer of industrial pumps and valves, was also a top stock. A new
management team instituted strict cost controls and productivity programs, and
the company experienced a significant turnaround. A large portion of the
segment's Flowserve position was sold on strength. Symbol Technologies, a
manufacturer of bar code labeling and identification systems, was aided by an
amicable legal settlement with a competitor. Symbol also reported
stronger-than-anticipated revenue growth. The segment's consumer-related
companies proved disappointing, on the whole. Specific companies that detracted
included Proquest Corporation, a provider of information services to private
customers and the U.S. government. One of the company's divisions was affected
by damage caused by Hurricane Katrina. Because Proquest's setbacks appeared to
be temporary, the managers added to the position. RadioShack's revenues
declined when cell-phone sales dropped more than expected, but Reich & Tang
still likes the company's prospects, so they used the price weakness to add to
the position. The share price of NBTY, a manufacturer of vitamins and natural
food supplements, slumped on declining same-store sales. Here again, the
manager used the price weakness to buy more shares.
HANSBERGER PURSUED INVESTMENT OPPORTUNITIES OUTSIDE THE UNITED STATES
Hansberger's segment had substantial positions in industrials, information
technology and healthcare, all of which added to performance. Although this
segment had relatively small positions in energy and consumer staples, the
stocks selected in these areas benefited return. Investments in Canada, Europe,
and Asia (including Japan) registered attractive absolute returns, although the
segment's U.K. investments proved disappointing. Three stocks that had the
greatest positive impact on performance were industrial companies. These were:
Kawasaki Heavy Industries and Marubeni Corporation, two major Japanese
industrial companies; and ABB Limited, a Swiss industrial electric equipment
manufacturer. All three benefited from restructuring programs and increased
demand for their products and services. The segment's weakest stocks were
Pioneer Corporation in Japan; and Vodafone Group and Compass Group in the UK.
Hansberger sold Pioneer, a consumer electronics company, when earnings proved
disappointing. Vodafone, a mobile telecommunications company, declined because
some of its key business performance indicators slipped, but Hansberger felt
that the market over-reacted to the news and the stock remains in the segment.
Compass Group, a global player in the outsourcing of food services, lost some
long-term contracts and the stock was sold.
2
IXIS EQUITY DIVERSIFIED PORTFOLIO
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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.
Growth of a $10,000 Investment in Class A Shares/6/
[CHART]
Net Asset Maximum Sales S&P 500
Value/1/ Charge/2/ Index/4/
--------- ------------- --------
01/31/2005 10,000 9,425 10,000
02/28/2005 10,080 9,500 10,210
03/31/2005 9,889 9,321 10,030
04/30/2005 9,610 9,057 9,839
05/31/2005 9,959 9,387 10,152
06/30/2005 10,080 9,500 10,167
07/31/2005 10,430 9,830 10,545
08/31/2005 10,310 9,717 10,449
09/30/2005 10,450 9,849 10,533
10/31/2005 10,310 9,717 10,358
11/30/2005 10,759 10,141 10,750
12/31/2005 10,830 10,207 10,753
Average Annual Total Returns -- December 31, 2005
SINCE
INCEPTION/6/
CLASS A (Inception 1/31/05)
Net Asset Value/1/ 8.30%
With Maximum Sales Charge/2/ 2.07
CLASS C (Inception 1/31/05)
Net Asset Value/1/ 7.70
With CDSC/3/ 6.70
- -------------------------------------------------
SINCE
COMPARATIVE PERFORMANCE INCEPTION
S&P 500 Index/4/ 7.53%
Morningstar Large Blend Fund Avg./5/ 8.22
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.ixisadvisorfunds.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 12/31/05 6/30/05
- ------------------------------------------------------
Common Stocks 98.2 93.4
- ------------------------------------------------------
Short-Term Investments and Other 1.8 6.6
- ------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 12/31/05 6/30/05
- ------------------------------------------------------
Hewlett-Packard Co. 2.5 1.1
- ------------------------------------------------------
Intel Corp. 1.8 1.8
- ------------------------------------------------------
McDonald's Corp. 1.6 1.3
- ------------------------------------------------------
Google, Inc. 1.6 1.4
- ------------------------------------------------------
JP Morgan Chase & Co. 1.6 1.2
- ------------------------------------------------------
Morgan Stanley 1.5 0.5
- ------------------------------------------------------
Apple Computer, Inc. 1.5 0.4
- ------------------------------------------------------
Time Warner, Inc. 1.5 1.1
- ------------------------------------------------------
Tyco International, Ltd. 1.4 0.5
- ------------------------------------------------------
United Health Group, Inc. 1.4 0.7
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 6/30/05
- ------------------------------------------------------
Diversified Financial Services 10.8 6.9
- ------------------------------------------------------
Retail 8.5 9.9
- ------------------------------------------------------
Computers 6.5 3.3
- ------------------------------------------------------
Media 6.2 6.3
- ------------------------------------------------------
Telecommunications 3.9 3.1
- ------------------------------------------------------
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/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/Morningstar Large Blend Fund Average is the average performance without
sales charges of funds with similar current investment objectives, as
calculated by Morningstar, Inc.
/6/Fund performance has been increased by expense waivers, without which
performance would have been lower.
3
IXIS INCOME DIVERSIFIED PORTFOLIO
PORTFOLIO PROFILE
Objective:
Seeks current income with a secondary objective of capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Focuses on income-producing fixed-income and equity securities through a
diversified portfolio of complementary income-producing investment disciplines
from specialized money managers
- --------------------------------------------------------------------------------
Inception Date:
November 17, 2005
- --------------------------------------------------------------------------------
Subadvisors:
Active Investment Advisors
AEW Management and Advisors, L.P.
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A IIDPX
Class C CIDPX
- --------------------------------------------------------------------------------
What You Should Know:
Value stocks can fall out of favor and underperform growth stocks during
certain market conditions. The fixed-income discipline may invest in U.S.
government and high-yield securities. The U.S. government guarantees the timely
payment of principal and interest on some of these securities; however, the
value of fund shares is not guaranteed and will fluctuate. Lower-rated
securities are considered riskier than investment-grade securities because
there is a greater risk of default. Mutual funds that invest in bonds can lose
their value as interest rates rise and an investor can lose principal. A
portion of the fund invests in real estate investment trusts (REITs). While the
fund offers the diversification benefits of real estate investments, it is also
subject to the risks unique to that market, including fluctuating property
values and interest rates, along with changing tax laws.
Management Discussion
- --------------------------------------------------------------------------------
From its inception on November 17, 2005 through December 31, 2005, IXIS Income
Diversified Portfolio provided a total return of 1.15% based on the net asset
value of Class A shares and $0.05 in reinvested dividends. These results
reflected the combined performance of its four income-oriented segments. For
the month of December 2005, the fund's primary benchmark, the Lehman Aggregate
Bond Index, returned 0.95%, and its secondary benchmark returned 0.54%. The
secondary benchmark is calculated based on 55% of the Lehman Aggregate Bond
Index (a broad index of U.S. corporate and government bonds) and 45% of the
Standard & Poor's 500 Index (an index of U.S. common stocks). For the month,
the average return on Morningstar's Conservative Allocation category was 0.70%.
This report covers a period during which the fund was in the process of
building its four segments; current results should not be regarded as an
indication of its long-range performance potential. The portfolio offers
investors access to four complementary, income-oriented investment disciplines
from three money managers through a single mutual fund. The AEW Diversified
REIT Discipline invests primarily in equity real estate investment trusts
(REITs). The Active Dividend Equity Discipline is designed to replicate the Dow
Jones Select Dividend Index, seeking to provide a return very similar to that
of its index. The Loomis Sayles Inflation-Protected Securities Discipline
focuses on investments in inflation-protected securities, with an emphasis on
Treasury Inflation-Protected Securities (TIPS) issued by the U.S. government.
The Loomis Sayles Multisector Bond Discipline invests primarily in
investment-grade fixed-income securities, although it may also invest a portion
of assets in lower-rated, fixed-income securities or preferred stocks.
HOTELS WERE THE BEST-PERFORMING REIT SECTOR FOR AEW
In the brief period since the fund's inception, AEW constructed a diversified
portfolio of REIT securities. The hotel group was the best performing sector,
while industrials also provided attractive returns during the period. Security
selection and sector allocation both had a positive effect on performance
during the period. Healthcare REITs were underweight relative to the segment's
REIT benchmark, the MSCI US REIT Index. The top three contributors to
performance for the period covered in this report were industrial REIT ProLogis
and hotel companies Host Marriott Corp. and Hilton Hotels Corp. The weakest
performers were Healthcare Realty Trust, Federal Realty Investment Trust (a
shopping center REIT), and Public Storage, Inc.
AEW's strategy is designed to provide investors with broad exposure to all
major property sectors in the U.S. real estate market. The manager's investment
process focuses on security selection within each property sector, with the
goal of identifying real estate equity securities that AEW thinks are
attractively priced, with the potential for appreciation as well as lower
downside risk. AEW believes that investor demand for commercial property is
strong and likely to remain so in 2006, reflecting broad economic trends and
low interest rates, and that this demand will benefit the REIT market. However,
after double-digit total returns for the past three years, AEW believes REIT
returns may begin to moderate in 2006, with continued high volatility.
ACTIVE DIVIDEND EQUITY DISCIPLINE REPLICATES THE DOW JONES SELECT DIVIDEND INDEX
Since this discipline attempts to replicate an index, the manager seeks to
provide a return as close to the segment's benchmark as possible. The Dow Jones
Select Dividend Index is composed of equity securities issued by companies that
have provided relatively high dividend yields on a consistent basis over time.
It includes 100 of the highest-yielding stocks (other than REITs) in the Dow
Jones U.S. Total Market Index - a broad-based index believed to be
representative of the total returns on U.S. equity securities as a whole. Any
decision to buy or sell a stock in the segment reflects changes made to its
benchmark, rather than an investment decision that might be made for an
actively managed portfolio.
4
IXIS INCOME DIVERSIFIED PORTFOLIO
Management Discussion
- --------------------------------------------------------------------------------
Every December the Dow Jones Select Dividend Index adjusts the stocks in its
index to ensure that it includes the 100 highest-paying stocks each year. This
December the changes were minor: DPL, Inc. was added and Occidental Petroleum
was removed. The manager adjusted the segment's holdings accordingly.
LOOMIS SAYLES INFLATION-PROTECTED SECURITIES DISCIPLINE'S DURATION IS NEUTRAL
This segment is building its position in U.S. Treasury Inflation Protected
Securities (TIPS), and holds a smaller position in U.S. Treasury Notes.
Maturities were "laddered," avoiding a focus on any one area along the yield
curve. Results for the brief period since the portfolio's inception reflect the
costs attendant on becoming fully invested and price fluctuations during the
period. In light of Loomis Sayles' outlook for higher interest rates, the
portfolio duration was relatively short - 6.2 years as of December 31, 2005 -
which is a neutral stance. Once the Federal Reserve Board signals that it has
completed its series of interest-rate hikes, Loomis expects to shift to a
longer maturity and duration strategy in order to lock in higher rates. They
also expect to seek opportunities in foreign currency TIPS to capture global
inflationary expectations.
LOOMIS SAYLES MULTISECTOR BOND DISCIPLINE FOCUSES ON INDIVIDUAL ISSUES
This segment has the flexibility to seek high current returns from a
combination of income and capital appreciation. Its investment guidelines
encompass a wide range of global fixed-income sectors. The managers use a
"bottom-up" investment process, so that selection starts with an evaluation of
individual securities, as opposed to a "top down" process, which begins with
sector allocation. The managers also base investment decisions on what they
believe will prove to be optimal yield curve and duration positioning based on
broad economic analysis.
In the brief period covered in this report, the Multisector discipline was in
the process of being constructed. As of December 31, 2005, the average credit
rating of the securities in the segment was Aa2, according to Moody's Investors
Service, with nearly 77% of total net assets invested in investment-grade
issues, not quite 20% in high-yield bonds, and less than 4% in cash and
short-term securities. Duration stood at approximately 4.5 years, which was
relatively short, reflecting ongoing changes in interest rates while the
portfolio is under construction.
5
IXIS INCOME DIVERSIFIED PORTFOLIO
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The table comparing the fund's performance to two indexes and a Morning-star
average provides 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, 2005
SINCE
INCEPTION/8/
CLASS A (Inception 11/17/05)
Net Asset Value/1/ 1.15%
With Maximum Sales Charge/2/ -3.39
CLASS C (Inception 11/17/05)
Net Asset Value/1/ 1.11
With CDSC/3/ 0.11
- -----------------------------------------------------------------
SINCE
COMPARATIVE PERFORMANCE INCEPTION/7/
Lehman Aggregate Bond Index/4/ 0.95%
55% Lehman Aggregate Bond Index/45% S&P 500 Index/5/ 0.54
Morningstar Conservative Allocation Fund Avg./6/ 0.70
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.ixisadvisorfunds.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 12/31/05
- ------------------------------------------------------
Bond and Notes 52.2
- ------------------------------------------------------
Common Stocks 44.5
- ------------------------------------------------------
Preferred Stocks 0.2
- ------------------------------------------------------
Short Term Investments and Other 3.1
- ------------------------------------------------------
% of Net Assets
as of
LARGEST HOLDINGS 12/31/05
- ------------------------------------------------------
Equities
- ------------------------------------------------------
Simon Property Group, Inc. 1.8
- ------------------------------------------------------
ProLogis Trust 1.5
- ------------------------------------------------------
Boston Properties, Inc. 1.3
- ------------------------------------------------------
Avalonbay Communities, Inc. 1.2
- ------------------------------------------------------
Equity Residential Properties Trust 1.1
- ------------------------------------------------------
Fixed-Income
- ------------------------------------------------------
FNMA, 3.250%, 08/15/2008 18.9
- ------------------------------------------------------
U.S. Treasury Bond, 3.375%, 04/15/2032 3.0
- ------------------------------------------------------
U.S. Treasury Note, 3.625%, 01/15/2008 2.4
- ------------------------------------------------------
U.S. Treasury Note, 3.000%, 07/15/2012 1.8
- ------------------------------------------------------
FHLMC, 4.375%, 11/16/2007 1.5
- ------------------------------------------------------
% of Net Assets
as of
FIVE LARGEST INDUSTRIES 12/31/05
- ------------------------------------------------------
Government Agencies 20.3
- ------------------------------------------------------
Treasuries 14.5
- ------------------------------------------------------
Banks 5.6
- ------------------------------------------------------
REITs--Apartments 4.6
- ------------------------------------------------------
REITs--Office 4.4
- ------------------------------------------------------
Portfolio holdings and asset allocations will vary.
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes the maximum sales charge of 4.50%.
/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/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.
/5/55% Lehman Aggregate Bond Index/45% S&P 500 Index is an unmanaged combined
index which measures the performance of domestic debt issued by the U.S.
government, its agencies, and U.S. corporations, as well as U.S. common
stock performance.
/6/Morningstar Conservative Allocation Fund Average is the average performance
without sales charges of funds with similar current investment objectives,
as calculated by Morningstar, Inc.
/7/The since-inception performance comparisons for Class A and C shares were
calculated from 11/30/05.
/8/Fund performance has been increased by expense waivers, without which
performance would have been lower.
6
IXIS MODERATE DIVERSIFIED PORTFOLIO
PORTFOLIO PROFILE
Objective:
Seeks long-term capital appreciation, with income as a secondary objective
- --------------------------------------------------------------------------------
Strategy:
Combines both equity and fixed-income investments through a diversified
portfolio of complementary investment disciplines from specialized money
managers. Equity disciplines feature U.S. growth and value as well as
international investments. The fixed-income discipline focuses on U.S.
investment-grade, fixed-income securities
- --------------------------------------------------------------------------------
Inception Date:
July 15, 2004
- --------------------------------------------------------------------------------
Subadvisors:
Hansberger Global Investors, Inc.
Harris Associates, L.P.
Loomis, Sayles & Company, L.P.
Reich & Tang Asset Management, LLC
- --------------------------------------------------------------------------------
Symbols:
Class A AMDPX
Class C CMDPX
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks focus on future expectations of a security. The fund may be
exposed to greater volatility if the expectations are not met. Value stocks can
fall out of favor and underperform growth stocks during certain market
conditions. Foreign investments involve unique risks, such as currency
fluctuations, differing political and economic conditions, and different
accounting standards. Fixed-income securities are subject to credit risk,
interest rate risk and liquidity risk. Lower-rated securities are considered
riskier than investment-grade securities because there is a greater risk of
default.
Management Discussion
- --------------------------------------------------------------------------------
Stocks in Europe, Japan, and emerging markets produced strong returns in 2005.
In the United States, small-cap value stocks outperformed small-cap growth, but
in the large-cap area, growth stocks outpaced value stocks. For the year, the
fixed-income markets struggled in a difficult environment. Nevertheless, most
fixed-income areas ended the year with positive performance.
For the year ended December 31, 2005, Class A shares of IXIS Moderate
Diversified Portfolio returned 3.52% at net asset value, with $0.08 in
dividends and $0.05 in capital gains reinvested during the period. The
portfolio underperformed the 4.91% return of its equity benchmark, the
Standard & Poor's 500 Index, but outperformed its fixed-income benchmark, the
Lehman Aggregate Bond Index, which returned 2.43%. It also fell short of the
5.29% average return on the funds in Morningstar's Moderate Allocation category.
IXIS Moderate Diversified Portfolio combines both equity and fixed-income
disciplines. Loomis Sayles manages two segments. The Loomis Sayles Core Fixed
Income Discipline focuses on U.S. investment-grade, fixed-income securities.
The Loomis Sayles Large Cap Growth Discipline favors stocks of U.S. large-cap
growth companies. Harris Associates Large Cap Value Discipline emphasizes
large- and mid-cap companies that are trading at a substantial discount to
their "true business value." In the Reich & Tang Mid Cap Value Discipline, the
focus is primarily on small- and mid-cap stocks, while the Hansberger
International Developed Markets Discipline favors stocks across the
capitalization spectrum in international developed markets.
LOOMIS SAYLES' FIXED-INCOME SEGMENT FAVORED A "BARBELL"
This segment balanced securities at both the short and long end of the maturity
spectrum, with a lesser position in intermediate-term issues - a so-called
"barbell" configuration. This structure benefited performance, as short-term
yields rose during the period, providing a rising stream of income, and
longer-term yields declined, providing some capital appreciation. Loomis Sayles
kept the segment's duration relatively short to reduce the negative price
impact of rising short-term interest rates. They also added to the segment's
position in mortgage-backed bonds during the period because these securities
offered higher yields than U.S. government issues. As an asset class,
higher-yielding corporate bonds underperformed during the period, although
specific bonds Loomis selected did well. For example, the segment's holdings in
Sprint, a leading telecommunications company, and insurance giant Marsh
McLennan were helpful. However, the segment's holdings in the auto sector
detracted from performance when bond ratings agencies downgraded Ford and
General Motors, and both positions were eliminated. Time Warner also
underperformed on concerns that a proposal calling for the restructuring of the
company could lead to a downgrade in credit quality. However, Time Warner bonds
remain in the portfolio because Loomis believes a downgrade below investment
grade is unlikely.
LOOMIS SAYLES' LARGE CAP GROWTH DISCIPLINE FOCUSED ON LEADING COMPANIES
Investments in healthcare were increased during the year, while the segment's
exposure to energy was reduced, as Loomis Sayles believed stocks in that sector
had reached full valuation. Financial services was one of this segment's
largest and best-performing sectors. The focus was on asset managers and
specialty finance companies, with investment services specialist Legg Mason and
Moody's Corp, a business services company, taking the lead. Legg Mason
benefited from strong earnings, as well as its acquisition of Citigroup's asset
management business. Moody's was aided by strength in its structured finance
business, as well as solid growth overseas. Healthcare stocks were also
positive, with service companies, such as United Health Group, WellPoint, and
Aetna, benefiting from increased membership and stabilizing operating costs.
Individual stocks that boosted results included Google, which exhibited strong
growth, and Apple Computer, which benefited from outstanding sales of its iPod
lineup. A strong performer early in the year, Southwestern Energy Company
slumped along
7
IXIS MODERATE DIVERSIFIED PORTFOLIO
Management Discussion
- --------------------------------------------------------------------------------
with energy prices late in the period. In autos and transportation, shares of
Expeditors International of Washington declined as profit margins shrank.
Loomis sold the stock at a loss in May, although it subsequently recovered.
Other disappointments included: eBay, Inc., Symantec Corporation, and AutoDesk,
Inc. EBay declined in the first half of the year after missing earnings
estimates. The position was sold but reinstated when earnings picked up.
Symantec, a maker of anti-virus software, fell after announcing the acquisition
of Veritas. Software manufacturer AutoDesk suffered after weaker-than-expected
earnings led to analysts' downgrades. Symantec and AutoDesk were sold.
HARRIS ASSOCIATES SOUGHT STRONG RETURNS FROM HIGH-QUALITY BUSINESSES
In 2005, lower-quality stocks outperformed higher-quality issues, so the
segment's emphasis on quality detracted from results. Energy was the
top-performing sector during most of the year, but this segment had a
relatively small position in energy, which held it back. Hewlett-Packard was
one of the segment's top stocks, as investors grew more confident that the
company's new CEO would engineer a turnaround. Benefiting from solid demand for
semiconductors, Texas Instruments also generated strong returns. Union Pacific
Corporation looked highly competitive, as rising gasoline prices affected
trucking companies more than freight railroad companies. Harris Associates
believes Union Pacific's CEO will help the company realize the profit potential
of its strong asset base. Fannie Mae, Liberty Media Corporation, and Masco
Corporation had a negative impact on performance. Harris Associates sold Fannie
Mae in the third quarter on growing concerns about accounting issues and the
intensely competitive environment for home mortgages. Liberty Media weakened
along with the media industry in general, but management is restructuring the
company and Harris Associates believes the stock is attractively valued. They
also continue to be comfortable with Masco, even though the market's apparent
doubts about the future strength of the housing industry hurt the stock in 2005.
REICH & TANG MID CAP VALUE DISCIPLINE FOCUSED ON OUT-OF-FAVOR COMPANIES
Reich & Tang uses a "contrarian" investment approach, seeking out of favor
stocks that appear to have growth potential over the next three to four years.
In both the energy and financial areas, such stocks were difficult to find, yet
these were some of the best-performing sectors in 2005. The managers' focus on
individual companies with strong business plans and managements led them to
Martin Marietta Materials, which was one of the best performers in the segment.
The company benefited from rising demand for construction products, improved
pricing, and increased government spending. Flowserve Company, a manufacturer
of industrial pumps and valves, was another strong holding, as a new management
team helped turn the company around. Express Scripts, which provides mail-order
pharmacy services, was a standout. When its price reached a premium level, the
managers began selling the position. Overexposure to consumer-related stocks
was a drawback for the segment. Shares of NBTY, which makes and sells vitamins
and natural food supplements, slumped as same-store sales declined, but Reich &
Tang used price weakness to add to the segment's holdings. Sales at Harman
International, an electronics company that supplies equipment to the auto
industry, weakened in response to a slump in the auto sector. The stock was
sold. RadioShack was impacted by a drop in cell-phone sales, but Reich & Tang
believed RadioShack's long-term prospects appeared favorable and they added to
the position.
HANSBERGER SOUGHT OPPORTUNITIES OUTSIDE THE UNITED STATES
Hansberger's segment had substantial positions in industrials, information
technology and healthcare, all of which were positive. It had smaller positions
in energy, consumer staples and utilities, but most of the stocks selected in
these sectors performed relatively well. Investments in Canada, Europe, and
Asia (including Japan) were positive, but the segment's U.K. investments
detracted from results. Three industrial stocks were among the segment's
strongest individual performers. These included two Japanese companies -
Kawasaki Heavy Industries and Marubeni Corporation - and ABB Limited, a Swiss
manufacturer of electrical equipment. All three benefited from restructuring
programs and strong sales. The segment's poorest performers were Pioneer
Corporation in Japan, Vodafone Group and Compass Group in the UK. Hansberger
sold Pioneer, a consumer electronics company, when the company's cost-cutting
program was not able to help it get ahead of fierce competition. Vodafone, a
telecommunications company, declined because some of its business performance
indicators slipped, but Hansberger felt that the market overreacted to the news
and the stock remains in the segment. Compass Group, a global player in the
outsourcing of food services, lost some long-term contracts and the stock was
sold.
8
IXIS MODERATE DIVERSIFIED PORTFOLIO
Investment Results through December 31, 2005
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide 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.
Growth of a $10,000 Investment in Class A Shares/8/
[CHART]
Net Asset Maximum Sales S&P 500 Lehman Aggregate
Value/1/ Charge/2/ Index/4/ Bond Index/5/
---------- ------------ -------- ----------------
7/15/2004 10,000 9,425
7/31/2004 9,850 9,284 10,000 10,000
8/31/2004 9,870 9,302 10,040 10,191
10/31/2004 10,150 9,566 10,304 10,304
12/31/2004 10,721 10,105 11,086 10,316
2/28/2005 10,531 9,925 11,043 10,319
4/30/2005 10,241 9,652 10,642 10,405
6/30/2005 10,585 9,977 10,996 10,575
8/31/2005 10,757 10,139 11,301 10,613
10/31/2005 10,689 10,074 11,203 10,421
12/31/2005 11,098 10,460 11,630 10,567
Average Annual Total Returns -- December 31, 2005
SINCE
1 YEAR/8/ INCEPTION/8/
CLASS A (Inception 7/15/04)
Net Asset Value/1/ 3.52% 7.38%
With Maximum Sales Charge/2/ -2.41 3.12
CLASS C (Inception 7/15/04)
Net Asset Value/1/ 2.73 6.55
With CDSC/3/ 1.73 6.55
- -------------------------------------------------------------------
SINCE
COMPARATIVE PERFORMANCE 1 YEAR INCEPTION/7/
S&P 500 Index/4/ 4.91% 11.24%
Lehman Aggregate Bond Index/5/ 2.43 3.97
Morningstar Moderate Allocation Fund Avg./6/ 5.29 10.23
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.ixisadvisorfunds.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 12/31/05 12/31/04
- ----------------------------------------------------
Common Stocks 66.8 63.1
- ----------------------------------------------------
Bonds and Notes 32.2 30.7
- ----------------------------------------------------
Short-Term Investments
and Other 0.9 6.2
- ----------------------------------------------------
% of Net Assets as of
LARGEST HOLDINGS 12/31/05 12/31/04
- ----------------------------------------------------
Equities
- ----------------------------------------------------
Hewlett-Packard Co. 1.7 --
- ----------------------------------------------------
Google, Inc. 1.1 0.4
- ----------------------------------------------------
Intel Corp. 1.1 --
- ----------------------------------------------------
McDonald's Corp. 1.1 0.8
- ----------------------------------------------------
JP Morgan Chase & Co. 1.0 0.7
- ----------------------------------------------------
Fixed-Income
- ----------------------------------------------------
U.S. Treasury Note,
4.500%, 11/15/2010 1.9 --
- ----------------------------------------------------
U.S. Treasury Bond,
5.375%, 02/15/2031 1.8 0.6
- ----------------------------------------------------
FNMA, 5.000%, 08/01/2035 1.5 --
- ----------------------------------------------------
FNMA, 4.000%, 02/01/2020 1.2 --
- ----------------------------------------------------
U.S. Treasury Note,
6.250%, 05/15/2007 1.2 0.9
- ----------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 12/31/05 12/31/04
- ----------------------------------------------------
Government Agencies 13.4 9.5
- ----------------------------------------------------
Diversified Financial Services 12.5 10.7
- ----------------------------------------------------
Treasuries 6.9 6.1
- ----------------------------------------------------
Retail 5.9 7.9
- ----------------------------------------------------
Media 4.4 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 Fund Average is the average performance
without sales charges of funds with similar current investment objectives,
as calculated by Morningstar, Inc.
/7/The since-inception comparative performance figures shown 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.
9
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 IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor 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 IXIS Advisor Funds at 1-800-225-5478;
on the funds' website at www.ixisadvisorfunds.com; and on the Securities and
Exchange Commission's (SEC) website at www.sec.gov. Information regarding how
the funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2005 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
10
UNDERSTANDING YOUR FUNDS' 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, 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 exceptions 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 for each Class shows the actual account values and
actual fund expenses you would have paid on a $1,000 investment in the fund
from July 1, 2005 (November 17, 2005 for Income Diversified Portfolio) through
December 31, 2005. 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 for each Class 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 VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
IXIS EQUITY DIVERSIFIED PORTFOLIO 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,074.40 $8.63
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.91 $8.39
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,071.60 $12.53
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.12 $12.18
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after advisory fee
waiver): 1.65% and 2.40% for Class A and Class 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
IXIS INCOME DIVERSIFIED PORTFOLIO 11/17/05 12/31/05 11/17/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,011.50 $1.52
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,004.52 $1.51
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,011.10 $2.42
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,003.62 $2.42
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after advisory fee
waiver): 1.25% and 2.00% for Class A and Class 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 365 (to reflect the half-year period).
11
UNDERSTANDING YOUR FUNDS' EXPENSES
12
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
IXIS MODERATE DIVERSIFIED PORTFOLIO 7/1/05 12/31/05 7/1/05 - 12/31/05
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,048.50 $7.80
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.58 $7.68
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,043.90 $11.69
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.79 $11.52
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after advisory fee
waiver): 1.51% and 2.27% for Class A and Class 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 365 (to reflect the half-year period).
IXIS EQUITY DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------------------------
Common Stocks -- 98.2% of Net Assets
Advertising -- 0.6%
2,125 Getty Images, Inc.(c) $ 189,699
---------------
Aerospace & Defense -- 1.5%
3,900 Honeywell International, Inc. 145,275
6,900 Raytheon Co. 277,035
---------------
422,310
---------------
Airlines -- 0.2%
790 British Airways PLC, Sponsored ADR(c)(d) 45,425
---------------
Apparel -- 1.3%
8,175 Coach, Inc.(c) 272,554
3,800 Jones Apparel Group, Inc. 116,736
---------------
389,290
---------------
Auto Manufacturers -- 0.4%
1,600 Navistar International Corp.(c) 45,792
3,823 Nissan Motor Co., Ltd., Sponsored ADR(d) 78,142
---------------
123,934
---------------
Banks -- 3.6%
3,520 ABN AMRO Holding NV, Sponsored ADR 92,013
6,420 Banco Santander Central Hispano SA, ADR 84,680
1,397 Bank of Yokohama, Ltd., Sponsored ADR(d) 114,973
2,310 BNP Paribas, ADR(d) 92,977
1,866 Credit Suisse Group, Sponsored ADR(d) 95,073
1,660 DBS Group Holdings, Ltd., Sponsored ADR(d) 65,570
900 Deutsche Bank AG, Registered,(d) 87,183
723 HSBC Holdings PLC, Sponsored ADR(d) 58,180
18,163 Sumitomo Trust & Banking Co., Ltd. (The), Sponsored ADR 185,262
3,240 U.S. Bancorp 96,844
799 Westpac Banking Corp. 66,780
---------------
1,039,535
---------------
Beverages -- 1.8%
1,380 Coca-Cola Co. (The) 55,628
4,200 Diageo PLC, Sponsored ADR 244,860
3,825 PepsiCo, Inc. 225,981
---------------
526,469
---------------
Biotechnology -- 1.8%
2,100 Amgen, Inc.(c) 165,606
3,300 Genentech, Inc.(c) 305,250
1,000 Invitrogen Corp.(c) 66,640
---------------
537,496
---------------
Building Materials -- 1.5%
2,300 Martin Marietta Materials, Inc. 176,456
9,000 Masco Corp. 271,710
---------------
448,166
---------------
Chemicals -- 2.6%
1,500 Ashland, Inc. 86,850
4,000 Chemtura Corp. 50,800
2,623 Ciba Specialty Chemicals AG, Sponsored ADR 84,723
1,800 Cytec Industries, Inc. 85,734
5,100 Engelhard Corp. 153,765
2,000 FMC Corp.(c) 106,340
11,700 Hercules, Inc.(c) 132,210
900 Minerals Technologies, Inc. 50,301
---------------
750,723
---------------
Shares Description Value (a)
- ----------------------------------------------------------------------------------
Commercial Services -- 3.1%
5,200 Copart, Inc.(c) $ 119,912
8,700 Gartner, Inc.(c) 112,230
1,200 ITT Educational Services, Inc.(c) 70,932
4,100 Keane, Inc.(c) 45,141
3,375 Monster Worldwide, Inc.(c) 137,768
4,425 Moody's Corp. 271,783
3,300 MPS Group, Inc.(c) 45,111
2,575 Paychex, Inc. 98,159
---------------
901,036
---------------
Computers -- 6.5%
5,925 Apple Computer, Inc.(c) 425,948
2,850 Cognizant Technology Solutions Corp.(c) 143,498
9,500 Dell, Inc.(c) 284,905
25,075 Hewlett-Packard Co. 717,897
2,650 SanDisk Corp.(c) 166,473
38,900 Sun Microsystems, Inc.(c) 162,991
---------------
1,901,712
---------------
Distribution & Wholesale -- 0.5%
1,712 Marubeni Corp., ADR 91,678
3,490 Sumitomo Corp., Sponsored ADR 44,323
---------------
136,001
---------------
Diversified Financial Services -- 10.8%
5,800 American Express Co. 298,468
760 Ameriprise Financial, Inc. 31,160
6,175 Ameritrade Holding Corp. 148,200
525 Chicago Mercantile Exchange Holdings, Inc. 192,932
6,300 Citigroup, Inc. 305,739
3,850 Franklin Resources, Inc. 361,938
1,650 Goldman Sachs Group, Inc. 210,722
11,420 JPMorgan Chase & Co. 453,260
2,800 Legg Mason, Inc. 335,132
900 Lehman Brothers Holdings, Inc. 115,353
7,800 Morgan Stanley 442,572
6,370 Nomura Holdings, Inc.(d) 122,431
1,550 T. Rowe Price Group, Inc. 111,647
---------------
3,129,554
---------------
Electric -- 0.3%
2,440 E.ON AG, Sponsored ADR 84,229
---------------
Electrical Components & Equipment -- 0.2%
6,210 Johnson Electric Holdings, Ltd., Sponsored ADR(d) 58,374
---------------
Electronics -- 0.9%
8,806 Celestica, Inc.(c) 92,991
3,500 Koninklijke (Royal) Philips Electronics NV, NY Shares 108,850
11,400 NEC Corp., ADR 70,566
---------------
272,407
---------------
Engineering & Construction -- 0.6%
17,240 ABB, Ltd., Sponsored ADR(c) 167,573
---------------
Environmental Control -- 0.3%
10,100 Allied Waste Industries, Inc.(c) 88,274
---------------
Food -- 1.1%
1,140 Nestle SA, Sponsored ADR 84,987
870 Unilever NV, ADR 59,725
2,125 Whole Foods Market, Inc. 164,454
---------------
309,166
---------------
See accompanying notes to financial statements.
13
IXIS EQUITY DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------------
Hand & Machine Tools -- 0.9%
3,500 Kennametal, Inc. $ 178,640
1,700 Stanley Works (The) 81,668
---------------
260,308
---------------
Health Care -- 0.2%
3,500 Cambrex Corp. 65,695
---------------
Health Care - Capital Equipment -- 0.8%
1,300 Applera Corp. - Applied Biosystems Group 34,528
6,300 Thermo Electron Corp.(c) 189,819
---------------
224,347
---------------
Health Care - Products -- 3.7%
6,700 Baxter International, Inc. 252,255
1,470 Johnson & Johnson 88,347
5,050 Medtronic, Inc. 290,728
4,550 St. Jude Medical, Inc.(c) 228,410
2,000 STERIS Corp. 50,040
2,525 Zimmer Holdings, Inc.(c) 170,286
---------------
1,080,066
---------------
Health Care - Services -- 3.0%
2,725 Aetna, Inc. 256,994
6,350 UnitedHealth Group, Inc. 394,589
2,625 WellPoint, Inc.(c) 209,449
---------------
861,032
---------------
Holding Companies - Diversified -- 0.3%
1,580 Hutchison Whampoa, Ltd., ADR 74,892
---------------
Home Furnishings -- 0.8%
7,100 Furniture Brands International, Inc.(d) 158,543
2,028 Sony Corp., Sponsored ADR 82,742
---------------
241,285
---------------
Household Products & Wares -- 1.2%
2,800 Fortune Brands, Inc. 218,456
5,100 Newell Rubbermaid, Inc. 121,278
---------------
339,734
---------------
Insurance -- 1.8%
2,400 Aflac, Inc. 111,408
3,190 Axa, Sponsored ADR 103,133
2,870 ING Groep NV, Sponsored ADR 99,933
1,450 MGIC Investment Corp. 95,439
1,475 Prudential Financial, Inc. 107,955
---------------
517,868
---------------
Internet -- 3.4%
4,350 eBay, Inc.(c) 188,137
1,150 Google, Inc., Class A(c) 477,089
8,300 Yahoo!, Inc.(c) 325,194
---------------
990,420
---------------
Leisure Time -- 2.2%
7,100 Carnival Corp. 379,637
5,100 Harley-Davidson, Inc. 262,599
---------------
642,236
---------------
Machinery - Diversified -- 0.9%
1,100 Flowserve Corp.(c) 43,516
9,400 Symbol Technologies, Inc. 120,508
2,100 Zebra Technologies Corp.(c) 89,985
---------------
254,009
---------------
Shares Description Value (a)
- ---------------------------------------------------------------------------
Media -- 6.2%
1,930 British Sky Broadcasting PLC $ 66,932
2,500 Comcast Corp., Special Class A(c) 64,225
6,100 DIRECTV Group (The), Inc.(c) 86,132
5,700 Entercom Communications Corp.(c) 169,119
37,200 Liberty Media Corp., Class A(c) 292,764
24,200 Time Warner, Inc. 422,048
8,200 Viacom, Inc., Class B 267,320
2,880 Vivendi Universal SA 90,519
13,800 Walt Disney Co. (The) 330,786
---------------
1,789,845
---------------
Metal Fabricate & Hardware -- 0.3%
3,000 Mueller Industries, Inc. 82,260
---------------
Metals -- 0.3%
2,390 Alcan, Inc. 97,871
---------------
Miscellaneous - Manufacturing -- 3.6%
1,500 Carlisle Cos., Inc. 103,725
3,600 Crane Co. 126,972
7,100 Federal Signal Corp. 106,571
6,050 General Electric Co. 212,053
4,803 Kawasaki Heavy Industries, Ltd., Sponsored ADR 69,163
14,400 Tyco International, Ltd. 415,584
---------------
1,034,068
---------------
Office & Business Equipment -- 0.5%
1,550 Canon, Inc., Sponsored ADR 91,187
3,060 Xerox Corp.(c) 44,829
---------------
136,016
---------------
Oil & Gas -- 1.8%
1,320 BP PLC, Sponsored ADR 84,770
840 ENI SpA, Sponsored ADR(d) 117,147
3,000 Southwestern Energy Co. 107,820
890 Total SA, Sponsored ADR 112,496
2,433 XTO Energy, Inc. 106,906
---------------
529,139
---------------
Packaging & Containers -- 0.5%
500 Aptargroup, Inc. 26,100
900 Ball Corp. 35,748
2,700 Sonoco Products Co. 79,380
---------------
141,228
---------------
Pharmaceuticals -- 3.4%
2,100 Abbott Laboratories 82,803
1,490 AstraZeneca PLC, Sponsored ADR 72,414
6,250 Caremark Rx, Inc.(c) 323,688
3,000 Gilead Sciences, Inc.(c) 157,890
1,860 GlaxoSmithKline PLC, ADR 93,893
1,871 Novartis AG, ADR 98,190
1,480 Schering AG, ADR(d) 99,027
3,576 Serono SA(d) 71,019
---------------
998,924
---------------
Processing/Business Services -- 0.9%
2,025 Express Scripts, Inc.(c) 169,695
2,400 Investors Financial Services Corp.(d) 88,392
---------------
258,087
---------------
Real Estate -- 0.5%
2,650 CB Richard Ellis Group, Inc., Class A(c) 155,953
---------------
Restaurants -- 1.6%
14,200 McDonald's Corp. 478,824
---------------
See accompanying notes to financial statements.
14
IXIS EQUITY DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------------------
Retail -- 8.5%
3,850 Chico's FAS, Inc.(c) $ 169,130
2,740 Costco Wholesale Corp. 135,548
7,400 Foot Locker, Inc. 174,566
8,300 Home Depot, Inc. 335,984
13,660 Kingfisher PLC, Sponsored ADR(d) 112,695
3,500 Kohl's Corp.(c) 170,100
3,950 Lowe's Cos, Inc. 263,307
5,200 NBTY, Inc.(c) 84,500
4,200 RadioShack Corp. 88,326
2,000 Regis Corp. 77,140
4,260 Signet Group PLC, Sponsored ADR 79,619
5,350 Starbucks Corp.(c) 160,554
2,700 Target Corp. 148,419
3,850 Urban Outfitters, Inc.(c) 97,444
7,990 Wal-Mart Stores, Inc. 373,932
---------------
2,471,264
---------------
Semiconductors -- 3.7%
4,075 Advanced Micro Devices, Inc.(c) 124,695
20,675 Intel Corp. 516,048
1,900 International Rectifier Corp.(c) 60,610
5,080 STMicroelectronics NV 91,440
8,600 Texas Instruments, Inc. 275,802
---------------
1,068,595
---------------
Software -- 2.1%
2,800 Acxiom Corp. 64,400
5,250 Adobe Systems, Inc. 194,040
7,575 Microsoft Corp. 198,086
2,100 ProQuest Co.(c)(d) 58,611
3,800 Reynolds & Reynolds Co. (The), Class A 106,666
---------------
621,803
---------------
Telecommunications -- 3.9%
1,300 ADTRAN, Inc. 38,662
10,725 Corning, Inc.(c) 210,853
3,520 France Telecom SA,(d) 87,437
5,325 Juniper Networks, Inc.(c) 118,748
10,475 Motorola, Inc. 236,630
3,770 Nokia OYJ, Sponsored ADR 68,991
5,850 QUALCOMM, Inc. 252,018
3,240 Telefonica Moviles SA ADR 33,890
4,540 Vodafone Group PLC, Sponsored ADR 97,474
---------------
1,144,703
---------------
Toys, Games & Hobbies -- 0.4%
7,740 Nintendo Co., Ltd., ADR(d) 115,713
---------------
Transportation -- 0.9%
3,100 Union Pacific Corp. 249,581
---------------
Water -- 0.3%
2,362 Suez SA, ADR(d) 73,789
---------------
Total Common Stocks (Identified Cost $26,576,132) 28,520,928
---------------
Shares/
Principal
Amount Description Value (a)
- ----------------------------------------------------------------------------------------------------
Short Term Investments -- 8.2%
1,616,555 State Street Navigator Securities Lending Prime Portfolio(e) $ 1,616,555
$ 772,347 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$772,523 on 1/03/2006, collateralized by $660,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $798,389 772,347
---------------
Total Short-Term Investments (Identified Cost $2,388,902) 2,388,902
---------------
Total Investments -- 106.4%
(Identified Cost $28,965,034)(b) 30,909,830
Other assets less liabilities -- (6.4)% (1,853,339)
---------------
Net Assets -- 100% $ 29,056,491
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $29,023,329 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 $ 2,367,460
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (480,959)
---------------
Net unrealized appreciation $ 1,886,501
===============
(c) Non-income producing security.
(d) All or a portion of this security was on loan to brokers at December 31, 2005.
(e) Represents investment 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, 2005 as a Percentage of Net Assets (unaudited)
Diversified Financial Services 10.8%
Retail 8.5
Computers 6.5
Media 6.2
Telecommunications 3.9
Health Care - Products 3.7
Semiconductors 3.7
Banks 3.6
Miscellaneous - Manufacturing 3.6
Internet 3.4
Pharmaceuticals 3.4
Commercial Services 3.1
Health Care - Services 3.0
Chemicals 2.6
Leisure Time 2.2
Software 2.1
Others, less than 2% each 27.9
See accompanying notes to financial statements.
15
IXIS INCOME DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- ----------------------------------------------------------------------
Common Stocks -- 44.5% of Net Assets
Agriculture -- 0.3%
307 Universal Corp. $ 13,312
---------------
Auto Manufacturers -- 0.3%
702 General Motors Corp. 13,633
---------------
Banks -- 5.6%
304 AmSouth Bancorporation 7,968
260 Associated Banc Corp. 8,463
334 Bank of America Corp. 15,414
200 Bank of Hawaii Corp. 10,308
201 Bank of New York Co., Inc. 6,402
275 BB&T Corp. 11,525
302 Citizens Banking Corp. 8,380
197 Colonial BancGroup, Inc. 4,693
298 Comerica, Inc. 16,914
220 Compass Bancshares, Inc. 10,624
407 F.N.B. Corp. 7,066
301 Fifth Third Bancorp 11,354
361 First Horizon National Corp. 13,877
338 FirstMerit Corp. 8,758
271 Hudson United Bancorp 11,295
281 Huntington Bancshares, Inc. 6,674
307 Keycorp 10,110
336 National City Corp. 11,279
245 North Fork Bancorporation, Inc. 6,703
246 PNC Financial Services Group, Inc. 15,210
246 Provident Bankshares Corp. 8,307
313 Regions Financial Corp. 10,692
349 Republic Bancorp, Inc. 4,153
250 Sky Financial Group, Inc. 6,955
231 Suntrust Banks, Inc. 16,808
204 Synovus Financial Corp. 5,510
236 TCF Financial Corp. 6,405
306 U.S. Bancorp 9,146
256 Wells Fargo & Co. 16,084
---------------
287,077
---------------
Beverages -- 0.2%
216 Coca-Cola Co. (The) 8,707
---------------
Chemicals -- 1.1%
233 Dow Chemical Co. (The) 10,210
268 Eastman Chemical Co. 13,826
189 Lubrizol Corp. 8,208
286 Lyondell Chemical Co. 6,813
260 PPG Industries, Inc. 15,054
277 RPM International, Inc. 4,811
---------------
58,922
---------------
Commercial Services -- 0.4%
400 Deluxe Corp. 12,056
236 R R Donnelley & Sons Co. 8,074
---------------
20,130
---------------
Cosmetics & Personal Care -- 0.3%
240 Kimberly Clark Corp. 14,316
---------------
Distribution & Wholesale -- 0.2%
224 Genuine Parts Co. 9,838
---------------
Diversified Financial Services -- 0.6%
277 Citigroup, Inc. 13,443
273 JPMorgan Chase & Co. 10,835
219 Waddell & Reed Financial, Inc. 4,593
---------------
28,871
---------------
Shares Description Value (a)
- ----------------------------------------------------------------------
Electric -- 3.1%
271 Black Hills Corp. $ 9,379
291 DPL, Inc. 7,569
366 DTE Energy Co. 15,808
466 Duquesne Light Holdings, Inc. 7,605
394 Energy East Corp. 8,983
241 Entergy Corp. 16,545
231 Exelon Corp. 12,275
287 Firstenergy Corp. 14,060
258 FPL Group, Inc. 10,722
176 MDU Resources Group, Inc. 5,762
279 Northeast Utilities 5,494
368 Pinnacle West Capital Corp. 15,217
251 PNM Resources, Inc. 6,147
264 PPL Corp. 7,762
304 SCANA Corp. 11,972
187 Unisource Energy Corp. 5,834
---------------
161,134
---------------
Electrical Components & Equipment -- 0.3%
180 Emerson Electric Co. 13,446
---------------
Environmental Control -- 0.1%
202 Waste Management, Inc. 6,131
---------------
Food -- 0.4%
250 Albertsons, Inc. 5,338
208 General Mills, Inc. 10,259
345 Sara Lee Corp. 6,520
---------------
22,117
---------------
Forest Products & Paper -- 0.1%
256 Meadwestvaco Corp. 7,176
---------------
Gas -- 0.8%
336 AGL Resources, Inc. 11,696
351 Nicor, Inc. 13,798
335 Nisource, Inc. 6,988
316 Oneok, Inc. 8,415
---------------
40,897
---------------
Home Furnishings -- 0.4%
242 La-Z-Boy, Inc. 3,282
151 Maytag Corp. 2,842
157 Whirlpool Corp. 13,150
---------------
19,274
---------------
Household Products & Wares -- 0.2%
216 Avery Dennison Corp. 11,938
---------------
Insurance -- 1.1%
285 Arthur J Gallagher & Co. 8,801
208 Cincinnati Financial Corp. 9,293
234 Jefferson-Pilot Corp. 13,322
229 Lincoln National Corp. 12,144
288 Unitrin, Inc. 12,974
---------------
56,534
---------------
Lodging & Gaming -- 1.0%
1,100 Hilton Hotels Corp. 26,521
400 Starwood Hotels & Resorts Worldwide, Inc. 25,544
---------------
52,065
---------------
Office & Business Equipment -- 0.2%
233 Pitney Bowes, Inc. 9,844
---------------
See accompanying notes to financial statements.
16
IXIS INCOME DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- ---------------------------------------------------------------------------
Oil & Gas -- 0.5%
239 Chevron Corp. $ 13,568
163 Marathon Oil Corp. 9,938
---------------
23,506
---------------
Packaging & Containers -- 0.1%
238 Sonoco Products Co. 6,997
---------------
Pharmaceuticals -- 1.0%
221 Abbott Laboratories 8,714
399 Bristol-Myers Squibb Co. 9,169
214 Eli Lilly & Co. 12,110
410 Merck & Co., Inc. 13,042
265 Pfizer, Inc. 6,180
---------------
49,215
---------------
Pipelines -- 0.6%
170 Equitable Resources, Inc. 6,237
252 Kinder Morgan, Inc. 23,172
---------------
29,409
---------------
Real Estate -- 0.5%
900 Brookfield Properties Corp. 26,478
---------------
Real Estate Investment Trusts -- 23.2%
REITs - Apartments -- 4.6%
400 Apartment Investment & Management Co., Class A 15,148
1,200 Archstone Smith Trust 50,268
700 Avalonbay Communities, Inc. 62,475
600 Camden Property Trust 34,752
1,400 Equity Residential Properties Trust 54,768
700 United Dominion Realty Trust, Inc. 16,408
---------------
233,819
---------------
REITs - Diversified -- 1.4%
300 iStar Financial, Inc. 10,695
300 PS Business Parks, Inc. 14,760
400 Spirit Finance Corp. 4,540
500 Vornado Realty Trust 41,735
---------------
71,730
---------------
REITs - Healthcare -- 0.5%
500 Healthcare Realty Trust, Inc. 16,635
800 Omega Healthcare Investors, Inc. 10,072
---------------
26,707
---------------
REITs - Hotels -- 0.1%
200 Strategic Hotel Capital, Inc. 4,116
---------------
REITs - Industrial -- 3.5%
700 AMB Property Corp. 34,419
500 Duke Realty Corp. 16,700
200 First Potomac Realty Trust 5,320
1,100 Liberty Property Trust 47,135
1,600 ProLogis Trust 74,752
---------------
178,326
---------------
REITs - Lodging/Resorts -- 1.0%
200 Hospitality Properties Trust 8,020
2,300 Host Marriott Corp. 43,585
---------------
51,605
---------------
REITs - Manufactured Homes -- 0.1%
100 Sun Communities, Inc. 3,140
---------------
REITs - Office -- 4.4%
400 BioMed Realty Trust, Inc. 9,760
900 Boston Properties, Inc. 66,717
600 Brandywine Realty Trust, Inc. 16,746
Shares Description Value (a)
- ---------------------------------------------------------------------------------
REITs - Office - continued
300 Carramerica Realty Corp. $ 10,389
400 Corporate Office Properties Trust 14,216
600 Equity Office Properties Trust 18,198
800 Highwoods Properties, Inc. 22,760
400 Kilroy Realty Corp. 24,760
500 Prentiss Properties Trust 20,340
900 Trizec Properties, Inc. 20,628
---------------
224,514
---------------
REITs - Regional Malls -- 3.3%
800 General Growth Properties, Inc. 37,592
100 Macerich Co. (The) 6,714
200 Mills Corp. (The) 8,388
1,200 Simon Property Group, Inc. 91,956
800 Taubman Centers, Inc. 27,800
---------------
172,450
---------------
REITs - Self Storage -- 1.0%
600 Public Storage, Inc. 40,632
200 Shurgard Storage Centers, Inc., Class A 11,342
---------------
51,974
---------------
REITs - Shopping Centers -- 3.3%
900 Developers Diversified Realty Corp. 42,318
500 Federal Realty Investment Trust 30,325
800 Kimco Realty Corp. 25,664
500 Kite Realty Group Trust 7,735
400 Pan Pacific Retail Properties, Inc. 26,756
300 Realty Income Corp. 6,486
500 Regency Centers Corp. 29,475
---------------
168,759
---------------
Total Real Estate Investment Trusts 1,187,140
---------------
Savings & Loans -- 0.8%
216 Astoria Financial Corp. 6,350
462 New York Community Bancorp, Inc. 7,632
215 Peoples Bank 6,678
258 Washington Federal, Inc. 5,931
349 Washington Mutual, Inc. 15,182
---------------
41,773
---------------
Telecommunications -- 0.6%
186 Alltel Corp. 11,737
411 AT&T, Inc. 10,065
328 BellSouth Corp. 8,889
---------------
30,691
---------------
Tobacco -- 0.5%
341 Altria Group, Inc. 25,479
---------------
Total Common Stocks
(Identified Cost $2,242,812) 2,276,050
---------------
Principal
Amount
- ---------------------------------------------------------------------------------
Bonds and Notes -- 52.2%
Airlines -- 0.3%
$ 3,073 Continental Airlines, Inc., Series 1999-1, Class C,
6.954%, 8/02/2009 2,751
16,612 Continental Airlines, Inc., Series 2002-2, Class B,
8.307%, 10/02/2019 14,645
---------------
17,396
---------------
Auto Manufacturers -- 0.4%
30,000 Ford Motor Co.,
6.375%, 2/01/2029 18,900
---------------
See accompanying notes to financial statements.
17
IXIS INCOME DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------------------
Auto Parts & Equipment -- 0.2%
$ 10,000 Goodyear Tire & Rubber Co., 144A
9.000%, 7/01/2015 $ 9,850
---------------
Biotechnology -- 0.1%
5,000 Invitrogen Corp., Convertible,
1.500%, 2/15/2024 4,225
---------------
Commercial Services -- 0.2%
10,000 United Rentals North America, Inc., Senior Subordinated Note,
7.000%, 2/15/2014 9,350
---------------
Diversified Financial Services -- 3.5%
20,000 Capital One Bank.,
5.125%, 2/15/2014 19,681
20,000 CIT Group, Inc.,
4.125%, 2/21/2006 19,992
60,000 General Electric Capital Corp.,
4.750%, 9/15/2014 59,011
45,000 General Motors Acceptance Corp., (MTN),
6.750%, 12/01/2014 40,483
20,000 Goldman Sachs Group, Inc.,
4.750%, 7/15/2013 19,399
10,000 JPMorgan Chase & Co.,
5.125%, 9/15/2014 9,899
10,000 Merrill Lynch & Co., Inc., (MTN),
4.500%, 11/04/2010 9,779
---------------
178,244
---------------
Electric -- 0.8%
20,000 Dominion Resources, Inc.,
5.000%, 3/15/2013 19,473
20,000 Exelon Generation Co. LLC,
5.350%, 1/15/2014 19,941
---------------
39,414
---------------
Food -- 0.8%
15,000 Albertsons, Inc.,
7.450%, 8/01/2029 13,906
15,000 Albertsons, Inc.,
8.000%, 5/01/2031 14,758
10,000 Albertsons, Inc.,
8.700%, 5/01/2030 9,948
---------------
38,612
---------------
Forest Products & Paper -- 0.4%
20,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028 16,300
5,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 4,562
---------------
20,862
---------------
Government Agencies -- 20.3%
75,000 FHLMC, MTN,
4.375%, 11/16/2007 74,502
1,000,000 FNMA,
3.250%, 8/15/2008 964,118
---------------
1,038,620
---------------
Health Care - Products -- 0.1%
5,000 Epix Pharmaceuticals, Inc., Senior Note, Convertible,
3.000%, 6/15/2024 3,000
---------------
Health Care - Services -- 0.4%
20,000 Columbia / HCA, Inc.,
7.050%, 12/01/2027 19,149
---------------
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------
Insurance -- 1.2%
$ 65,000 Berkshire Hathaway Finance Corp.,
4.125%, 1/15/2010 $ 63,163
---------------
Lodging & Gaming -- 0.6%
30,000 Harrah's Operating Co., Inc.,
5.625%, 6/01/2015 29,473
---------------
Media -- 1.0%
20,000 British Sky Broadcasting Finance PLC, 144A
6.500%, 10/15/2035 19,929
10,000 CSC Holdings, Inc., Senior Note,
7.625%, 7/15/2018 9,500
20,000 Time Warner, Inc.,
6.625%, 5/15/2029 19,972
---------------
49,401
---------------
Metals & Mining -- 0.5%
30,000 Glencore Funding LLC, Guaranteed Note, 144A
6.000%, 4/15/2014 28,216
---------------
Miscellaneous - Manufacturing -- 0.7%
20,000 Bombardier, Inc., 144A
7.450%, 5/01/2034 16,900
25,000 Borden, Inc.,
7.875%, 2/15/2023 20,000
---------------
36,900
---------------
Pharmaceuticals -- 0.7%
15,000 AmerisourceBergen Corp.,144A
5.875%, 9/15/2015 15,131
25,000 Elan Finance Corp., Senior Note,
7.750%, 11/15/2011 23,375
---------------
38,506
---------------
Pipelines -- 1.2%
25,000 El Paso Energy Corp., (MTN),
7.750%, 1/15/2032 25,062
20,000 Kinder Morgan Energy Partners LP,
5.000%, 12/15/2013 19,490
20,000 NGC Corp. Capital Trust, Series B,
8.316%, 6/01/2027 17,700
---------------
62,252
---------------
Real Estate -- 0.4%
20,000 EOP Operating LP, Guaranteed Note,
4.650%, 10/01/2010 19,378
---------------
Real Estate Investment Trusts -- 1.0%
10,000 FelCor Lodging LP, Senior Note,
9.000%, 6/01/2011 10,950
20,000 Host Marriott LP,
6.375%, 3/15/2015 19,950
20,000 Simon Property Group LP,
4.875%, 8/15/2010 19,723
---------------
50,623
---------------
Telecommunications -- 2.9%
50,000 Corning, Inc.,
5.900%, 3/15/2014 50,480
5,000 Level 3 Communications, Inc.,
2.875%, 7/15/2010 3,156
35,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 30,012
See accompanying notes to financial statements.
18
IXIS INCOME DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Principal
Amount Description Value (a)
- ------------------------------------------------------------------------------------------------
Telecommunications - continued
$ 25,000 Nortel Networks Corp.,
6.875%, 9/01/2023 $ 22,375
45,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 43,200
---------------
149,223
---------------
Treasuries -- 14.5%
58,119 U.S. Treasury Bond,
2.375%, 1/15/2025(c) 61,084
117,829 U.S. Treasury Bond,
3.375%, 4/15/2032(c) 153,279
26,079 U.S. Treasury Note,
1.625%, 1/15/2015 25,124
54,226 U.S. Treasury Note,
1.875%, 7/15/2013(c) 53,485
101,452 U.S. Treasury Note,
2.000%, with various maturities to 2014(c)(d) 100,881
88,626 U.S. Treasury Note,
3.000%, 7/15/2012 93,709
34,334 U.S. Treasury Note,
3.500%, 1/15/2011(c) 36,694
117,129 U.S. Treasury Note,
3.625%, 1/15/2008(c) 120,272
30,364 U.S. Treasury Note,
3.875%, 1/15/2009(c) 31,913
59,196 U.S. Treasury Note,
4.250%, 1/15/2010(c) 64,172
---------------
740,613
---------------
Total Bonds and Notes (Identified Cost $2,664,751) 2,665,370
---------------
Shares
- ------------------------------------------------------------------------------------------------
Preferred Stocks -- 0.2%
Diversified Financial Services -- 0.2%
250 Newell Financial Trust I,
5.250%, 12/01/27 10,250
---------------
Total Preferred Stocks (Identified Cost $10,563) 10,250
---------------
Total Investments -- 96.9%
(Identified Cost $4,918,126)(b) 4,951,670
Other assets less liabilities -- 3.1% 160,578
---------------
Net Assets -- 100% $ 5,112,248
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on
investments based on cost of $4,918,397 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 $ 66,080
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (32,807)
---------------
Net unrealized appreciation $ 33,273
===============
(c) Treasury Inflation Protected Security (TIPS).
(d) All separate investments in United States Treasury Notes which
have the same coupon rate have been aggregated for the purpose
of presentation in the Portfolio of Investments.
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers. At December 31, 2005, the value of these securities amounted to
$90,026 or 1.8% of net assets.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
REIT Real Estate Investment Trust
Holdings at December 31, 2005 as a Percentage of Net Assets (unaudited)
Government Agencies 20.3%
Treasuries 14.5
Banks 5.6
REITs - Apartments 4.6
REITs - Office 4.4
Diversified Financial Services 4.3
Electric 3.9
Telecommunications 3.5
REITs - Industrial 3.5
REITs - Regional Malls 3.3
REITs - Shopping Centers 3.3
Insurance 2.3
Others, less than 2% each 23.4
See accompanying notes to financial statements.
19
IXIS MODERATE DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS
Investments as of December 31, 2005
Shares Description Value (a)
- ------------------------------------------------------------------------------------------
Common Stocks -- 66.8% of Net Assets
Advertising -- 0.4%
6,825 Getty Images, Inc.(d) $ 609,268
---------------
Aerospace & Defense -- 1.0%
12,000 Honeywell International, Inc. 447,000
21,300 Raytheon Co. 855,195
---------------
1,302,195
---------------
Airlines -- 0.1%
2,650 British Airways PLC, Sponsored ADR(d)(e) 152,375
---------------
Apparel -- 0.9%
26,325 Coach, Inc.(d) 877,675
12,200 Jones Apparel Group, Inc. 374,784
---------------
1,252,459
---------------
Auto Manufacturers -- 0.3%
5,100 Navistar International Corp.(d) 145,962
12,830 Nissan Motor Co., Ltd., Sponsored ADR(e) 262,245
---------------
408,207
---------------
Banks -- 2.5%
11,835 ABN AMRO Holding NV, Sponsored ADR 309,367
21,580 Banco Santander Central Hispano SA, ADR 284,640
4,710 Bank of Yokohama, Ltd., Sponsored ADR(e) 387,633
7,750 BNP Paribas, ADR(e) 311,938
6,270 Credit Suisse Group, Sponsored ADR(e) 319,456
5,575 DBS Group Holdings, Ltd., Sponsored ADR(e) 220,213
3,010 Deutsche Bank AG, Registered(e) 291,579
2,435 HSBC Holdings PLC, Sponsored ADR(e) 195,944
59,230 Sumitomo Trust & Banking Co., Ltd. (The), Sponsored ADR(e) 604,146
9,800 U.S. Bancorp 292,922
2,600 Westpac Banking Corp. 217,308
---------------
3,435,146
---------------
Beverages -- 1.2%
3,900 Coca-Cola Co. (The) 157,209
13,000 Diageo PLC, Sponsored ADR 757,900
12,325 PepsiCo, Inc. 728,161
---------------
1,643,270
---------------
Biotechnology -- 1.3%
6,700 Amgen, Inc.(d) 528,362
10,600 Genentech, Inc.(d) 980,500
3,000 Invitrogen Corp.(d) 199,920
---------------
1,708,782
---------------
Building Materials -- 1.0%
7,900 Martin Marietta Materials, Inc. 606,088
25,800 Masco Corp. 778,902
---------------
1,384,990
---------------
Chemicals -- 1.8%
4,800 Ashland, Inc. 277,920
13,000 Chemtura Corp. 165,100
8,800 Ciba Specialty Chemicals AG, Sponsored ADR(e) 284,240
5,900 Cytec Industries, Inc. 281,017
16,600 Engelhard Corp. 500,490
6,100 FMC Corp.(d) 324,337
35,800 Hercules, Inc.(d) 404,540
3,200 Minerals Technologies, Inc. 178,848
---------------
2,416,492
---------------
Shares Description Value (a)
- -------------------------------------------------------------------------------------
Commercial Services -- 2.1%
16,200 Copart, Inc.(d) $ 373,572
27,400 Gartner, Inc.(d) 353,460
4,100 ITT Educational Services, Inc.(d) 242,351
13,500 Keane, Inc.(d) 148,635
10,775 Monster Worldwide, Inc.(d) 439,836
14,125 Moody's Corp. 867,557
9,000 MPS Group, Inc.(d) 123,030
8,200 Paychex, Inc. 312,584
---------------
2,861,025
---------------
Computers -- 4.3%
18,775 Apple Computer, Inc.(d) 1,349,735
9,150 Cognizant Technology Solutions Corp.(d) 460,703
27,000 Dell, Inc.(d) 809,730
78,750 Hewlett-Packard Co. 2,254,612
8,450 SanDisk Corp.(d) 530,829
120,800 Sun Microsystems, Inc.(d) 506,152
---------------
5,911,761
---------------
Distribution & Wholesale -- 0.3%
5,620 Marubeni Corp., ADR 300,951
11,200 Sumitomo Corp., Sponsored ADR 142,240
---------------
443,191
---------------
Diversified Financial Services -- 7.2%
16,100 American Express Co. 828,506
3,220 Ameriprise Financial, Inc. 132,020
19,850 Ameritrade Holding Corp. 476,400
1,700 Chicago Mercantile Exchange Holdings, Inc. 624,733
19,700 Citigroup, Inc. 956,041
12,375 Franklin Resources, Inc. 1,163,373
5,300 Goldman Sachs Group, Inc. 676,863
35,600 JPMorgan Chase & Co. 1,412,964
9,000 Legg Mason, Inc. 1,077,210
2,875 Lehman Brothers Holdings, Inc. 368,489
23,900 Morgan Stanley 1,356,086
21,400 Nomura Holdings, Inc.(e) 411,308
5,025 T. Rowe Price Group, Inc. 361,951
---------------
9,845,944
---------------
Electric -- 0.2%
7,400 E.ON AG, Sponsored ADR 255,448
---------------
Electrical Components & Equipment -- 0.1%
21,165 Johnson Electric Holdings, Ltd., Sponsored ADR(e) 198,951
---------------
Electronics -- 0.7%
29,170 Celestica, Inc.(d) 308,035
10,855 Koninklijke (Royal) Philips Electronics NV, NY Shares 337,591
38,315 NEC Corp., ADR(e) 237,170
---------------
882,796
---------------
Engineering & Construction -- 0.4%
54,945 ABB, Ltd., Sponsored ADR(d) 534,065
---------------
Environmental Control -- 0.2%
31,400 Allied Waste Industries, Inc.(d)(e) 274,436
---------------
Food -- 0.7%
3,820 Nestle SA, Sponsored ADR 284,781
4,760 Unilever PLC, Sponsored ADR 190,971
6,800 Whole Foods Market, Inc. 526,252
---------------
1,002,004
---------------
See accompanying notes to financial statements.
20
IXIS MODERATE DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- ---------------------------------------------------------------------
Hand & Machine Tools -- 0.6%
11,200 Kennametal, Inc. $ 571,648
6,000 Stanley Works (The) 288,240
---------------
859,888
---------------
Health Care -- 0.2%
12,000 Cambrex Corp.(e) 225,240
---------------
Health Care - Capital Equipment -- 0.5%
4,000 Applera Corp. - Applied Biosystems Group 106,240
19,400 Thermo Electron Corp.(d) 584,522
---------------
690,762
---------------
Health Care - Products -- 2.5%
20,800 Baxter International, Inc. 783,120
4,700 Johnson & Johnson 282,470
16,300 Medtronic, Inc. 938,391
14,575 St. Jude Medical, Inc.(d) 731,665
6,400 STERIS Corp. 160,128
8,075 Zimmer Holdings, Inc.(d) 544,578
---------------
3,440,352
---------------
Health Care - Services -- 2.0%
8,750 Aetna, Inc. 825,213
20,300 UnitedHealth Group, Inc. 1,261,442
8,475 WellPoint, Inc.(d) 676,220
---------------
2,762,875
---------------
Holding Companies - Diversified -- 0.2%
5,300 Hutchison Whampoa, Ltd., ADR 251,220
---------------
Home Furnishings -- 0.6%
22,300 Furniture Brands International, Inc.(e) 497,959
6,815 Sony Corp., Sponsored ADR 278,052
---------------
776,011
---------------
Household Products & Wares -- 0.8%
8,500 Fortune Brands, Inc. 663,170
17,100 Newell Rubbermaid, Inc. 406,638
---------------
1,069,808
---------------
Insurance -- 1.2%
6,800 Aflac, Inc. 315,656
9,820 Axa, Sponsored ADR 317,481
9,645 ING Groep NV, Sponsored ADR 335,839
4,100 MGIC Investment Corp. 269,862
4,775 Prudential Financial, Inc. 349,482
---------------
1,588,320
---------------
Internet -- 2.3%
13,975 eBay, Inc.(d) 604,419
3,700 Google, Inc., Class A(d) 1,534,982
26,525 Yahoo!, Inc.(d) 1,039,249
---------------
3,178,650
---------------
Leisure Time -- 1.4%
20,500 Carnival Corp. 1,096,135
15,900 Harley-Davidson, Inc. 818,691
---------------
1,914,826
---------------
Machinery - Diversified -- 0.6%
3,700 Flowserve Corp.(d) 146,372
30,800 Symbol Technologies, Inc. 394,856
6,600 Zebra Technologies Corp.(d) 282,810
---------------
824,038
---------------
Shares Description Value (a)
- ---------------------------------------------------------------------------
Media -- 4.1%
6,350 British Sky Broadcasting PLC(e) $ 220,218
9,400 Comcast Corp., Special Class A(d) 241,486
20,300 DIRECTV Group (The), Inc.(d) 286,636
18,100 Entercom Communications Corp.(d) 537,027
116,200 Liberty Media Corp., Class A(d) 914,494
75,200 Time Warner, Inc. 1,311,488
25,400 Viacom, Inc., Class B 828,040
9,500 Vivendi Universal SA 298,585
40,300 Walt Disney Co. (The) 965,991
---------------
5,603,965
---------------
Metal Fabricate & Hardware -- 0.2%
10,300 Mueller Industries, Inc. 282,426
---------------
Metals -- 0.2%
7,940 Alcan, Inc. 325,143
---------------
Miscellaneous - Manufacturing -- 2.4%
4,700 Carlisle Cos., Inc. 325,005
11,600 Crane Co. 409,132
22,200 Federal Signal Corp.(e) 333,222
19,450 General Electric Co. 681,722
15,750 Kawasaki Heavy Industries, Ltd., Sponsored ADR 226,800
45,100 Tyco International, Ltd. 1,301,586
---------------
3,277,467
---------------
Office & Business Equipment -- 0.6%
5,210 Canon, Inc., Sponsored ADR 306,504
31,100 Xerox Corp.(d) 455,615
---------------
762,119
---------------
Oil & Gas -- 1.3%
4,440 BP PLC, Sponsored ADR 285,137
2,835 ENI SpA, Sponsored ADR(e) 395,369
9,600 Southwestern Energy Co. 345,024
2,790 Total SA, Sponsored ADR(e) 352,656
7,825 XTO Energy, Inc. 343,830
---------------
1,722,016
---------------
Packaging & Containers -- 0.3%
1,700 Aptargroup, Inc. 88,740
3,100 Ball Corp. 123,132
8,500 Sonoco Products Co. 249,900
---------------
461,772
---------------
Pharmaceuticals -- 2.4%
5,800 Abbott Laboratories 228,694
4,990 AstraZeneca PLC, Sponsored ADR 242,514
20,075 Caremark Rx, Inc.(d) 1,039,684
9,550 Gilead Sciences, Inc.(d) 502,617
6,255 GlaxoSmithKline PLC, ADR 315,752
6,020 Novartis AG, ADR 315,930
4,965 Schering AG, ADR(e) 332,208
12,030 Serono SA(e) 238,916
---------------
3,216,315
---------------
Processing/Business Services -- 0.6%
6,475 Express Scripts, Inc.(d) 542,605
7,500 Investors Financial Services Corp.(e) 276,225
---------------
818,830
---------------
Real Estate -- 0.4%
8,475 CB Richard Ellis Group, Inc., Class A(d) 498,754
---------------
See accompanying notes to financial statements.
21
IXIS MODERATE DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Shares Description Value (a)
- --------------------------------------------------------------------------------------------
Restaurants -- 1.1%
43,900 McDonald's Corp. $ 1,480,308
---------------
Retail -- 5.9%
12,400 Chico's FAS, Inc.(d) 544,732
8,400 Costco Wholesale Corp. 415,548
23,200 Foot Locker, Inc. 547,288
16,000 Gap (The), Inc. 282,240
25,600 Home Depot, Inc. 1,036,288
45,060 Kingfisher PLC, Sponsored ADR(e) 371,745
9,800 Kohl's Corp.(d) 476,280
3,800 Limited Brands, Inc. 84,930
12,750 Lowe's Cos, Inc. 849,915
16,100 NBTY, Inc.(d)(e) 261,625
13,500 RadioShack Corp. 283,905
6,200 Regis Corp. 239,134
14,280 Signet Group PLC, Sponsored ADR(e) 266,893
17,225 Starbucks Corp.(d) 516,923
8,625 Target Corp. 474,116
12,300 Urban Outfitters, Inc.(d) 311,313
23,200 Wal-Mart Stores, Inc. 1,085,760
---------------
8,048,635
---------------
Semiconductors -- 2.4%
12,975 Advanced Micro Devices, Inc.(d) 397,035
61,100 Intel Corp. 1,525,056
6,700 International Rectifier Corp.(d) 213,730
17,120 STMicroelectronics NV(e) 308,160
26,500 Texas Instruments, Inc. 849,855
---------------
3,293,836
---------------
Software -- 1.5%
8,800 Acxiom Corp. 202,400
16,775 Adobe Systems, Inc. 620,004
24,225 Microsoft Corp. 633,484
7,100 ProQuest Co., (d)(e) 198,161
12,200 Reynolds & Reynolds Co. (The), Class A 342,454
---------------
1,996,503
---------------
Telecommunications -- 2.7%
4,500 ADTRAN, Inc. 133,830
34,500 Corning, Inc.(d) 678,270
11,400 France Telecom SA, (e) 283,176
17,075 Juniper Networks, Inc.(d) 380,772
33,700 Motorola, Inc. 761,283
12,670 Nokia OYJ, Sponsored ADR 231,861
18,900 QUALCOMM, Inc. 814,212
10,875 Telefonica Moviles SA, ADR(e) 113,753
15,255 Vodafone Group PLC, Sponsored ADR 327,525
---------------
3,724,682
---------------
Toys, Games & Hobbies -- 0.3%
25,080 Nintendo Co., Ltd., ADR(e) 374,946
---------------
Transportation -- 0.6%
9,800 Union Pacific Corp. 788,998
---------------
Water -- 0.2%
7,020 Suez SA, ADR(e) 219,305
---------------
Total Common Stocks (Identified Cost $83,028,525) 91,000,815
---------------
Principal
Amount
- --------------------------------------------------------------------------------------------
Bonds and Notes -- 32.2%
Asset Backed Securities -- 0.3%
$ 100,000 Citibank Credit Card Issuance Trust, Series 2003-A3, Class A3,
3.100%, 3/10/2010(e) 96,452
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------------------
Asset Backed Securities - continued
$ 277,000 Citibank Credit Card Issuance Trust, Series 2003-A6, Class A6,
2.900%, 5/17/2010 $ 265,188
---------------
361,640
---------------
Auto Manufacturers -- 0.3%
445,000 DaimlerChrysler North America Holding Corp.,
6.400%, 5/15/2006 447,207
---------------
Banks -- 0.7%
820,000 Bank of America Corp., Subordinated Note,
7.400%, 1/15/2011 903,250
---------------
Diversified Financial Services -- 5.3%
450,000 American General Finance Corp.,
5.375%, 10/01/2012 452,288
475,000 CIT Group, Inc., Senior Note,
4.000%, 5/08/2008 464,660
895,000 Countrywide Home Loans, Inc., (MTN),
5.500%, 2/01/2007 899,347
850,000 General Electric Capital Corp., (MTN),
6.000%, 6/15/2012 895,212
825,000 Household Finance Corp.,
4.625%, 1/15/2008 819,562
90,000 Household Finance Corp.,
8.000%, 7/15/2010 100,402
910,000 John Deere Capital Corp., Global Note,
4.500%, 8/22/2007 904,334
913,000 Lehman Brothers Holdings, Inc., Global Note,
6.250%, 5/15/2006(e) 917,625
900,000 Morgan Stanley Dean Witter & Co., Global Note,
6.100%, 4/15/2006 903,162
885,000 USA Education, Inc.,
5.625%, 4/10/2007(e) 890,298
---------------
7,246,890
---------------
Electric -- 1.7%
220,000 Carolina Power & Light,
6.500%, 7/15/2012 235,706
865,000 Dominion Resources, Inc.,
5.700%, 9/17/2012 879,543
910,000 Duke Energy Corp., Senior Note,
4.200%, 10/01/2008 889,998
255,000 Progress Energy, Inc.,
7.100%, 3/01/2011(e) 275,125
---------------
2,280,372
---------------
Government Agencies -- 13.4%
2,178,023 FHLMC,
4.000%, with various maturities to 2020(c) 2,079,198
1,218,271 FHLMC,
4.500%, 6/01/2035 1,146,190
845,000 FHLMC,
4.875%, 3/15/2007 845,947
945,000 FHLMC,
5.250%, 1/15/2006 945,169
658,197 FHLMC,
5.500%, with various maturities to 2020(c) 662,381
33,909 FHLMC,
6.000%, 6/01/2035 34,287
1,237,034 FHLMC,
6.500%, with various maturities to 2035(c) 1,267,914
See accompanying notes to financial statements.
22
IXIS MODERATE DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of December 31, 2005
Principal
Amount Description Value (a)
- ---------------------------------------------------------------------------------
Government Agencies - continued
$ 1,500,000 FNMA,
3.250%, 1/15/2008 $ 1,457,165
1,273,093 FNMA,
4.000%, with various maturities to 2020(c) 1,216,304
1,239,430 FNMA,
4.500%, with various maturities to 2035(c) 1,167,259
3,353,074 FNMA,
5.000%, with various maturities to 2035(c) 3,248,990
2,627,884 FNMA,
5.500%, with various maturities to 2034(c) 2,644,313
1,344,926 FNMA,
6.500%, with various maturities to 2034(c) 1,381,299
160,606 GNMA,
6.500%, 10/20/2034 166,506
---------------
18,262,922
---------------
Insurance -- 0.7%
900,000 Marsh & McLennan Cos, Inc.,
5.750%, 9/15/2015 907,232
---------------
Media -- 0.3%
390,000 Time Warner, Inc.,
7.625%, 4/15/2031 434,323
---------------
Metals -- 0.6%
910,000 Alcan, Inc., Senior Note,
4.875%, 9/15/2012 891,168
---------------
Pipelines -- 0.7%
845,000 Kinder Morgan, Inc., Senior Note,
6.500%, 9/01/2012(e) 895,179
---------------
Real Estate Investment Trusts -- 0.3%
450,000 Simon Property Group LP,
4.600%, 6/15/2010 438,683
---------------
Telecommunications -- 1.0%
900,000 SBC Communications,
5.100%, 9/15/2014 879,194
415,000 Sprint Capital Corp.,
6.875%, 11/15/2028 453,466
---------------
1,332,660
---------------
Treasuries -- 6.9%
1,305,000 U.S. Treasury Bond,
5.250%, with various maturities to 2029(c)(e) 1,423,776
2,180,000 U.S. Treasury Bond,
5.375%, 2/15/2031 2,448,752
870,000 U.S. Treasury Note,
2.375%, 8/15/2006(e) 859,295
375,000 U.S. Treasury Note,
3.250%, 1/15/2009(e) 363,091
2,630,000 U.S. Treasury Note,
4.500%, 11/15/2010(e) 2,644,178
1,615,000 U.S. Treasury Note,
6.250%, 2/15/2007(e) 1,646,039
---------------
9,385,131
---------------
Total Bonds and Notes (Identified Cost $44,174,425) 43,786,657
---------------
Shares/
Principal
Amount Description Value (a)
- ---------------------------------------------------------------------------------------------------------
Short Term Investments -- 10.5%
13,111,913 State Street Navigator Securities Lending Prime Portfolio(f) $ 13,111,913
$ 1,193,335 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 12/30/2005 at 2.05% to be repurchased at
$1,193,606 on 1/03/2006, collateralized by $1,015,000 U.S.
Treasury Bond, 6.00% due 2/15/2026 valued at $1,227,826 1,193,335
---------------
Total Short-Term Investments (Identified Cost $14,305,248) 14,305,248
---------------
Total Investments -- 109.5%
(Identified Cost $141,508,198)(b) 149,092,720
Other assets less liabilities -- (9.5)% (12,915,916)
---------------
Net Assets -- 100% 136,176,804
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At December 31, 2005, the net unrealized appreciation on investments based on cost of
$141,856,055 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 $ 9,872,107
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (2,635,442)
---------------
Net unrealized appreciation $ 7,236,665
===============
(c) All separate investments in mortgage related securities of the Federal Home Loan Mortgage
Corporation and Federal National Mortgage Association which are interests in separate pools
of mortgages, and in United States Treasury Bonds which have the same coupon rate have
been aggregated for the purpose of presentation in the Portfolio of Investments.
(d) Non-income producing security.
(e) All or a portion of this security was on loan to brokers at December 31, 2005.
(f) Represents investment 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.
MTN Medium Term Note
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
Holdings at December 31, 2005 as a Percentage of Net Assets (unaudited)
Government Agencies 13.4%
Diversified Financial Services 12.5
Treasuries 6.9
Retail 5.9
Media 4.4
Computers 4.3
Telecommunications 3.7
Banks 3.2
Health Care - Products 2.5
Semiconductors 2.4
Miscellaneous - Manufacturing 2.4
Pharmaceuticals 2.4
Internet 2.3
Commercial Services 2.1
Health Care - Services 2.0
Others, less than 2% each 28.6
See accompanying notes to financial statements.
23
STATEMENTS OF ASSETS & LIABILITIES
December 31, 2005
IXIS IXIS IXIS
Equity Income Moderate
Diversified Diversified Diversified
Portfolio Portfolio Portfolio
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
ASSETS
Investments at cost $ 28,965,034 $ 4,918,126 $ 141,508,198
Net unrealized appreciation 1,944,796 33,544 7,584,522
--------------------- --------------------- ---------------------
Investments at value (a) 30,909,830 4,951,670 149,092,720
Cash 137,957 152,649 206,759
Receivable for Fund shares sold 69,195 -- 160,168
Receivable for securities sold 41,251 -- 242,280
Dividends and interest receivable 25,677 46,303 574,668
Tax reclaims receivable 811 -- 3,845
Receivable from investment adviser -- 36,985 4,645
Securities lending income receivable 140 -- 1,018
--------------------- --------------------- ---------------------
TOTAL ASSETS 31,184,861 5,187,607 150,286,103
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value (Note 2) 1,616,555 -- 13,111,913
Payable for securities purchased 336,761 9,232 270,636
Payable for Fund shares redeemed -- -- 275,605
Dividends payable -- 16,438 --
Management fees payable 134,426 2,384 87,642
Deferred Trustees' fees 7,867 -- 14,457
Administrative fees payable 9,452 9,247 6,856
Expense recapture payable (Note 4) -- -- 263,368
Other accounts payable and accrued
expenses 23,309 38,058 78,822
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 2,128,370 75,359 14,109,299
--------------------- --------------------- ---------------------
NET ASSETS $ 29,056,491 $ 5,112,248 $ 136,176,804
===================== ===================== =====================
NET ASSETS CONSIST OF:
Paid-in capital $ 27,177,857 $ 5,075,126 $ 128,486,169
Undistributed (overdistributed) net
investment income (loss) (7,867) -- 68,273
Accumulated net realized gain (loss)
on investments (58,295) 3,578 37,840
Net unrealized appreciation on
investments 1,944,796 33,544 7,584,522
--------------------- --------------------- ---------------------
NET ASSETS $ 29,056,491 $ 5,112,248 $ 136,176,804
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE:
Class A shares:
Net assets $ 11,651,569 $ 5,073,507 $ 47,908,241
===================== ===================== =====================
Shares of beneficial interest 1,075,765 503,779 4,378,905
===================== ===================== =====================
Net asset value and redemption price
per share $ 10.83 $ 10.07 $ 10.94
===================== ===================== =====================
Offering price per share
(100/[100-maximum sales charge] of
net asset value) (See Note 1) $ 11.49 $ 10.54 $ 11.61
===================== ===================== =====================
Class C shares:
Net assets $ 17,404,922 $ 38,741 $ 88,268,563
===================== ===================== =====================
Shares of beneficial interest 1,616,747 3,848 8,094,457
===================== ===================== =====================
Net asset value and offering price
per share (redemption price per
share is equal to net asset value
less any applicable contingent
deferred sales charge) (See Note 1) $ 10.77 $ 10.07 $ 10.90
===================== ===================== =====================
(a) Including securities on loan with
market values of: $ 1,563,053 $ -- $ 12,740,013
===================== ===================== =====================
See accompanying notes to financial statements.
24
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2005
IXIS IXIS IXIS
Equity Income Moderate
Diversified Diversified Diversified
Portfolio (a) Portfolio (b) Portfolio
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ 199,044 $ 12,042 $ 967,081
Interest 15,221 17,826 1,674,468
Securities lending income 420 -- 19,545
Less net foreign taxes withheld (6,092) (24) (31,481)
--------------------- --------------------- ---------------------
208,593 29,844 2,629,613
--------------------- --------------------- ---------------------
Expenses
Management fees 133,846 3,374 897,702
Service fees - Class A 18,145 1,526 107,928
Service and distribution fees - Class C 94,729 30 765,226
Trustees' fees and expenses 14,093 30 19,378
Administrative fees 94,459 13,562 64,343
Custodian fees 118,417 1,838 133,665
Transfer agent fees and expenses 42,976 245 160,445
Audit fees 25,000 30,000 12,713
Legal fees 1,184 31 7,502
Shareholder reporting 12,604 7,500 29,651
Registration 11,977 590 6,140
Expense waiver recapture (Note 4) -- -- 263,368
Miscellaneous 4,934 -- 3,445
--------------------- --------------------- ---------------------
Total expenses before reimbursement/waiver 572,364 58,726 2,471,506
Less reimbursement/waiver (223,494) (51,035) (13,660)
--------------------- --------------------- ---------------------
Net expenses 348,870 7,691 2,457,846
--------------------- --------------------- ---------------------
Net investment income (loss) (140,277) 22,153 171,767
--------------------- --------------------- ---------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on:
Investments - net 9,421 2,634 890,157
Change in unrealized appreciation (depreciation) on:
Investments - net 1,944,796 33,544 4,320,133
--------------------- --------------------- ---------------------
Net realized and unrealized gain on investments 1,954,217 36,178 5,210,290
--------------------- --------------------- ---------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,813,940 $ 58,331 $ 5,382,057
===================== ===================== =====================
(a)Commenced operations on January 31, 2005.
(b)Commenced operations on November 17, 2005.
See accompanying notes to financial statements.
25
STATEMENTS OF CHANGES IN NET ASSETS
IXIS Equity IXIS Income
Diversified Portfolio Diversified Portfolio
--------------------- ---------------------
For the Period For the Period
January 31, 2005 (a) November 17, 2005 (a)
through through
December 31, December 31,
2005 2005
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (140,277) $ 22,153
Net realized gain on investments 9,421 2,634
Net change in unrealized appreciation (depreciation) of investments 1,944,796 33,544
--------------------- ---------------------
Net increase in net assets resulting from operations 1,813,940 58,331
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A -- (22,662)
Class C -- (103)
Net realized capital gain
Class A -- --
Class C -- --
--------------------- ---------------------
-- (22,765)
--------------------- ---------------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (Note 9): 27,242,551 5,076,682
--------------------- ---------------------
Total increase in net assets 29,056,491 5,112,248
NET ASSETS
Beginning of the period -- --
--------------------- ---------------------
End of the period $ 29,056,491 $ 5,112,248
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (7,867) $ --
===================== =====================
IXIS Moderate
Diversified Portfolio
--------------------------------------------
For the Period
July 15, 2004 (a)
Year Ended through
December 31, December 31,
2005 2004
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 171,767 $ 49,574
Net realized gain on investments 890,157 141,889
Net change in unrealized appreciation (depreciation) of investments 4,320,133 3,264,389
--------------------- ---------------------
Net increase in net assets resulting from operations 5,382,057 3,455,852
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (360,094) (45,390)
Class C (74,730) (43,309)
Net realized capital gain
Class A (221,549) --
Class C (402,202) --
--------------------- ---------------------
(1,058,575) (88,699)
--------------------- ---------------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (Note 9): 59,020,971 69,465,198
--------------------- ---------------------
Total increase in net assets 63,344,453 72,832,351
NET ASSETS
Beginning of the period 72,832,351 --
--------------------- ---------------------
End of the period $ 136,176,804 $ 72,832,351
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 68,273 $ (34,846)
===================== =====================
(a)Commencement of operations.
See accompanying notes to financial statements.
26
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
Income (loss) from investment operations:
---------------------------------------------
Net asset
value, Net Net realized
beginning investment and unrealized Total from
of income gain (loss) on investment
period (loss) (b) investments operations
------------- ------------- -------------- -------------
IXIS EQUITY DIVERSIFIED PORTFOLIO
Class A
12/31/2005(g) $ 10.00 $ (0.04) $ 0.87 $ 0.83
Class C
12/31/2005(g) $ 10.00 $ (0.11) $ 0.88 $ 0.77
IXIS INCOME DIVERSIFIED PORTFOLIO
Class A
12/31/2005(i) $ 10.00 $ 0.04 $ 0.08 $ 0.12
Class C
12/31/2005(i) $ 10.00 $ 0.04 $ 0.07 $ 0.11
IXIS MODERATE DIVERSIFIED PORTFOLIO
Class A
12/31/2005 $ 10.70 $ 0.07 $ 0.30 $ 0.37
12/31/2004(e) $ 10.00 $ 0.03(h) $ 0.69 $ 0.72
Class C
12/31/2005 $ 10.67 $ (0.01) $ 0.30 $ 0.29
12/31/2004(e) $ 10.00 $ 0.01(h) $ 0.67 $ 0.68
Less distributions:
-------------------------------------------
Dividends Distributions
from from net
net investment realized Total
income capital gains distributions
-------------- ------------- -------------
IXIS EQUITY DIVERSIFIED PORTFOLIO
Class A
12/31/2005(g) $ -- $ -- $ --
Class C
12/31/2005(g) $ -- $ -- $ --
IXIS INCOME DIVERSIFIED PORTFOLIO
Class A
12/31/2005(i) $ (0.05) $ -- $ (0.05)
Class C
12/31/2005(i) $ (0.04) $ -- $ (0.04)
IXIS MODERATE DIVERSIFIED PORTFOLIO
Class A
12/31/2005 $ (0.08) $ (0.05) $ (0.13)
12/31/2004(e) $ (0.02) $ -- $ (0.02)
Class C
12/31/2005 $ (0.01) $ (0.05) $ (0.06)
12/31/2004(e) $ (0.01) $ -- $ (0.01)
(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 (loss) 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 and/or waive its management fee during the period. Without this
reimbursement/waiver, expenses would have been higher. See Note 4.
(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)For the period January 31, 2005 (inception) through December 31, 2005.
(h)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.
(i)For the period November 17, 2005 (inception) through December 31, 2005.
(j)Includes payment of expense waiver recapture of 0.22%. See Note 4.
See accompanying notes to financial statements.
27
Ratios to average net assets:
---------------------------------------------
Net asset Net assets,
value, Total end of Gross Net Net investment Portfolio
end of return period expenses expenses income (loss) turnover
period (%) (a) (000's) (%) (f) (%) (f) (%) (f) rate (%)
- ------------- ------------ ------------- ------------ ------------ -------------- ------------
$ 10.83 8.3(d) $ 11,652 3.15 1.65(c) (0.41) 72
$ 10.77 7.7(d) $ 17,405 3.61 2.40(c) (1.17) 72
$ 10.07 1.2(d) $ 5,074 9.57 1.25(c) 3.61 2
$ 10.07 1.1(d) $ 39 10.31 2.00(c) 3.25 2
$ 10.94 3.5(d) $ 47,908 1.59(j) 1.58(c) 0.62 88
$ 10.70 7.2(d) $ 25,660 3.51 1.65(c) 0.71(h) 33
$ 10.90 2.7(d) $ 88,269 2.33(j) 2.32(c) (0.13) 88
$ 10.67 6.8(d) $ 47,173 4.26 2.40(c) 0.12(h) 33
28
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
1. Organization. IXIS Advisor Funds Trust I and IXIS Advisor Funds Trust III
(the "Trusts" and each a "Trust") are each organized as a Massachusetts
business trust. 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 Funds of the Trusts; the financial
statements of the other Funds of the Trusts are presented in separate reports.
The following Funds (the "Portfolios" and each a "Portfolio") are included in
this report:
IXIS Advisor Funds Trust I:
IXIS Income Diversified Portfolio (the "Income Diversified Portfolio")
IXIS Advisor Funds Trust III:
IXIS Equity Diversified Portfolio (the "Equity Diversified Portfolio")
IXIS Moderate Diversified Portfolio (the "Moderate Diversified Portfolio")
Income Diversified Portfolio commenced operations on November 17, 2005. Equity
Diversified Portfolio commenced operations on January 31, 2005.
Each Portfolio offers Class A and Class C shares. Class A shares are sold with
a maximum front-end sales charge of 5.75%, except Class A shares of Income
Diversified Portfolio which are sold with a maximum front-end sales charge of
4.50%. 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.
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 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 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 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 each Portfolio in the preparation
of its financial statements. The Portfolios' 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 Portfolios 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 to the
Portfolios 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. Securities traded on foreign exchanges are valued at
the market price on the non--U.S. exchange, unless a Portfolio believes that an
occurrence after the closing of that exchange will materially affect a
security's value. In that case, the security may be fair valued at the time the
Portfolio determines its net asset value by or pursuant to procedures approved
by the Board of Trustees. When fair valuing their securities, the Portfolios
may, among other things, use modeling tools or other processes that may take
into account factors such as securities market activity and/or significant
events that occur after the close of the local market and before the time a
Portfolio's net asset value is calculated. All other securities and assets are
valued at their fair value as determined in good faith by the Portfolios'
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 thereafter 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 applicable. In determining net gain or loss on securities sold,
the cost of securities has been determined on an identified cost basis.
Investment income and non-class specific expenses are allocated on a pro rata
basis to each class based on the relative value of settled shares of each class
to the total Portfolio for the Income Diversified Portfolio and allocated on a
pro rata basis to each class based on the relative net assets of each class to
the total net assets for the Equity Diversified Portfolio and Moderate
Diversified Portfolio. 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 Portfolios 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.
29
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
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 and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Portfolios'
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.
The Portfolios may use foreign currency exchange contracts to facilitate
transactions in foreign-denominated investments. Losses may arise from changes
in the value of the foreign currency or if the counterparties do not perform
under the contracts' terms.
Each Portfolio may purchase investments of foreign issuers. Investing in
securities of foreign issuers involves special risks and considerations not
typically associated with investing in U.S. companies and securities of the
U.S. government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the price of such securities may be more volatile that those
of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. The Portfolios may use forward foreign
currency contracts. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the Portfolios'
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 Portfolios' Statements of Assets
and Liabilities. The U.S. dollar value of the currencies a Portfolio has
committed to buy or sell represents 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. At December 31, 2005, there were no open forward currency
contracts.
e. Federal and Foreign Income Taxes. The Trusts treat each Portfolio as a
separate entity for federal income tax purposes. Each 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 gain, at least
annually. Accordingly, no provision for federal income tax has been made. A
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 gain distributions are determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. Permanent differences are primarily due to
differing treatments for book and tax purposes of items such as paydowns on
mortgage-backed securities and net operating losses. Permanent book and tax
basis differences relating to shareholder distributions, net investment income,
and net realized gains will result in reclassifications to the capital
accounts. Temporary differences between book and tax distributable earnings are
primarily due to deferred Trustees' fees, wash sales, distributions from real
estate investment trusts, gains realized from passive foreign investment
companies, and premium amortization. Distributions from net investment income
and short-term capital gains are considered to be ordinary income for tax
purposes.
The tax character of distributions paid to shareholders during the years ended
December 31, 2005 and 2004 was as follows:
2005 Distributions Paid From: 2004 Distributions Paid From:
- - ----------------------------- -----------------------------
Ordinary Long-Term Ordinary Long-Term
Income Capital Gains Total Income Capital Gains Total
- - ------ ------------- ----- ------ ------------- -----
------------ ------------ ------------ ------------ ------------ ------------
Equity Diversified Portfolio $ -- $ -- $ -- $ -- $ -- $ --
Income Diversified Portfolio 22,765 -- 22,765 -- -- --
Moderate Diversified Portfolio 966,317 92,258 1,058,575 88,699 .-- 88,699
As of December 31, 2005, the components of distributable earnings on a tax
basis were as follows:
Equity Income Moderate
Diversified Diversified Diversified
Portfolio Portfolio Portfolio
- --------- --------- ---------
Undistributed ordinary income $ -- $ 2,416 $ 318,234
Undistributed long-term capital gains -- 1,433 150,193
---------- ------- ----------
Total undistributed earnings -- 3,849 468,427
Unrealized appreciation 1,886,501 33,273 7,236,665
---------- ------- ----------
Total accumulated earnings $1,886,501 $37,122 $7,705,092
========== ======= ==========
30
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
g. Repurchase Agreements. Each Portfolio, through its custodian, receives
delivery of the underlying securities collateralizing repurchase agreements. It
is each Portfolio's policy that the market value of the collateral be at least
equal to 102% of the repurchase price, including interest. The repurchase
agreements are tri-party agreements whereby the collateral is held at the
custodian bank in a segregated account for the benefit of the Portfolio and the
counterparty. Repurchase agreements could involve certain risks in the event of
default or insolvency of the counterparty including possible delays or
restrictions upon a Portfolio's ability to dispose of the underlying securities.
h. Delayed Delivery Commitments. Each 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.
i. Indemnifications. Under the Portfolios' organizational documents, their
officers and Trustees are indemnified against certain liability arising out of
the performance of their duties to the Portfolios. Additionally, in the normal
course of business, the Portfolios enter into contracts with service providers
that contain general indemnification clauses. The Portfolios' maximum exposure
under these arrangements is unknown as this would involve future claims that
may be made against the Portfolios that have not yet occurred. However, based
on experience, the Portfolios expect the risk of loss to be remote.
3. Purchases and Sales of Securities. For the year ended December 31, 2005,
purchases and sales of securities (excluding short-term investments and
including paydowns) were as follows:
U.S. Government and Agency Other Securities
- - -------------------------- ----------------
Fund Purchases Sales Purchases Sales
- ---- --------- ----- --------- -----
Equity Diversified Portfolio $ -- $ -- $ 39,012,219 $12,432,238
Income Diversified Portfolio 1,774,185 -- 3,243,172 106,771
Moderate Diversified Portfolio 44,649,609 29,672,798 117,432,334 70,710,788
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. IXIS Asset Management Advisors, L.P. ("IXIS Advisors") is
the investment adviser to each of the Portfolios. Under the terms of the
management agreements, each Portfolio pays a management fee at the following
annual rates, calculated daily and payable monthly, based on the Portfolio's
average daily net assets:
Percentage of Average Daily Net Assets
- --------------------------------------
First Over
Fund $1 billion $1 billion
---- ---------- ----------
Equity Diversified Portfolio 0.80% 0.75%
Income Diversified Portfolio 0.55% 0.50%
Moderate Diversified Portfolio 0.75% 0.70%
IXIS Advisors has entered into subadvisory agreements for each Portfolio as
listed below.
Equity Diversified Portfolio Hansberger Global Investors, Inc. ("Hansberger")
Harris Associates, L.P. ("Harris Associates")
Loomis, Sayles & Company, L.P. ("Loomis Sayles")
Reich & Tang Asset Management, LLC ("Reich & Tang")
Income Diversified Portfolio AEW Management and Advisors, L.P. ("AEW")
Active Investment Advisors
Loomis Sayles
Moderate Diversified Portfolio Hansberger
Harris Associates
Loomis Sayles
Reich & Tang
Active Investment Advisors is a division of IXIS Advisors.
Payments to IXIS Advisors are reduced in the amount of payments to the
subadvisers. Effective July 1, 2005, IXIS Advisors voluntarily agreed to waive
a portion of the management fee it retains for the Moderate Diversified
Portfolio after payment to subadvisers.
IXIS Advisors has given binding undertakings to certain Portfolios to waive its
management fees and/or reimburse certain expenses associated with these
Portfolios to limit their operating expenses. These undertakings are in effect
until April 30, 2006, and will be reevaluated on an annual basis.
31
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
At December 31, 2005, the expense limits as a percentage of average daily net
assets under the expense limitation agreements were as follows:
Expense Limit as a Percentage of Average Daily Net Assets
- ---------------------------------------------------------
Fund Class A Class C
---- ------- -------
Equity Diversified Portfolio 1.65% 2.40%
Income Diversified Portfolio 1.25% 2.00%
Moderate Diversified Portfolio 1.65% 2.40%
For the year ended December 31, 2005, the management fees and waivers for each
Portfolio were as follows:
Percentage of Average Daily
Gross Waiver of Net Net Assets
Management Management Management ---------------------------
Fund Fee Fee Fee Gross Net
- ---- ------------- ------------- ------------- ------------ ------------
Equity Diversified Portfolio $ 133,846 $ 133,846 $ -- 0.80% 0.00%
Income Diversified Portfolio 3,374 3,374 -- 0.55% 0.00%
Moderate Diversified Portfolio 897,702 13,660 884,042 0.75% 0.74%
For the year ended December 31, 2005, in addition to the waiver of management
fees, expenses have been reimbursed as follows:
Fund Amount
---- -------
Equity Diversified Portfolio $89,648
Income Diversified Portfolio 47,661
IXIS Advisors is permitted to recover expenses it has borne under the expense
limitation agreements (whether through reduction of its management fees or
otherwise) in later periods to the extent the Portfolio's expenses fall below
the expense limits, provided, however, that the Portfolios 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, 2005, the amounts subject to possible reimbursement under the
expense limitation agreements were as follows:
Expenses Subject to Possible
Reimbursement Until
Fund December 31, 2006
---- ----------------------------
Equity Diversified Portfolio $ 223,494
Income Diversified Portfolio $ 51,035
Moderate Diversified Portfolio $ --
IXIS Advisors, Loomis Sayles, Harris Associates and Reich & Tang are
subsidiaries of IXIS Asset Management North America, L.P. ("IXIS North
America"), which is part of IXIS Asset Management Group, an international asset
management group based in Paris, France. IXIS Asset Management Group is
ultimately owned principally, directly or indirectly by the following three
large affiliated French financial services entities: the Caisse des Depots et
Consignations ("CDC"), a public sector financial institution created by the
French government in 1816; the Caisse Nationale des Caisses d'Epargne, a
financial institution owned by CDC and by the French regional savings banks
known as Caisses d'Epargne; and CNP Assurances, a large French life insurance
company. Hansberger is an affiliated money manager of IXIS North America. AEW
is an affiliate of AEW Capital Management, L.P., a wholly-owned subsidiary of
IXIS North America. Certain officers and directors of IXIS Advisors and its
affiliates are also officers or Trustees of the Portfolios.
b. Administrative Expense. IXIS Advisors provides certain administrative
services to the Portfolios and subcontracts with State Street Bank and Trust
Company ("State Street Bank") to serve as subadministrator.
Pursuant to an agreement among IXIS Advisor Funds Trust I, IXIS Advisor Funds
Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV and IXIS
Advisor Cash Management Trust ("IXIS Advisor Funds Trusts"), Loomis Sayles
Funds I and Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS
Advisors, each Portfolio in existence at the beginning of the year pays IXIS
Advisors monthly its pro rata portion of fees equal to an annual rate of
0.0675% of the first $5 billion of the average daily net assets of the IXIS
Advisor Funds Trusts and Loomis Sayles Funds Trusts, 0.0625% of the next $5
billion, and 0.0500% of such assets in excess of $10 billion, subject to an
annual aggregate minimum fee for the IXIS Advisor Funds Trusts and Loomis
Sayles Funds Trusts of $5 million, which is reevaluated on an annual basis. New
Funds are subject to a prorated annual fee of $50,000 plus $12,500 per class
and an additional $50,000 if managed by multiple sub-advisers in their first
year of operations.
Prior to September 1, 2005, Investors Bank & Trust Company ("IBT") served as
the subadministrator.
32
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
For the year ended December 31, 2005, Equity Diversified Portfolio, Income
Diversified Portfolio and Moderate Diversified Portfolio paid $94,459, $13,562
and $64,343, respectively, to IXIS Advisors for administrative expenses.
c. Transfer Agent Fees. Prior to October 1, 2005, IXIS Asset Management
Services Company ("IXIS Services"), a wholly-owned subsidiary of IXIS North
America, was the transfer and shareholder servicing agent for the Equity
Diversified Portfolio and Moderate Diversified Portfolio and had subcontracted
with Boston Financial Data Services ("Boston Financial") to serve as
sub-transfer agent. During this period, each Portfolio, for its Class A and C
shares, paid fees monthly to IXIS Services equal to an annual rate of $25.44
for each open account and $2.00 for each closed account, subject to a monthly
minimum of $1,500 per class and an annual aggregate minimum fee for all Load
Equity Funds of approximately $6.8 million. Load Equity Funds consisted of all
equity Funds within the IXIS Advisor Funds Trusts, Loomis Sayles Growth Fund
and Loomis Sayles Research Fund.
Effective October 1, 2005, Boston Financial became the transfer and shareholder
servicing agent for the Portfolios under a new agreement with the Trusts. Under
this new agreement, the Portfolios pay fees to Boston Financial pursuant to a
different schedule.
For the year ended December 31, 2005, Equity Diversified Portfolio and Moderate
Diversified Portfolio paid $24,000 and $27,000, respectively, to IXIS Services
as compensation for its services as transfer agent.
IXIS Services (prior to October 1, 2005), Boston Financial and other firms are
also reimbursed by the Portfolios for out-of-pocket expenses. In addition,
pursuant to other servicing agreements, each Portfolio pays service fees to
other firms that provide similar services for their own shareholder accounts.
d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act,
the Trusts have adopted a Service Plan relating to each Portfolio's Class A
shares (the "Class A Plan") and a Service and Distribution Plan relating to
each Portfolio's Class C shares (the "Class C Plan").
Under the Class A Plan, each Portfolio pays IXIS Asset Management Distributors,
L.P. ("IXIS Distributors"), the Portfolios' distributor (a wholly-owned
subsidiary of IXIS North America), a monthly service fee at the annual rate not
to exceed 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, each Portfolio pays IXIS Distributors a monthly service
fee at the annual rate not to exceed 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, each Portfolio pays IXIS Distributors a monthly
distribution fee at the annual rate not to exceed 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.
For the year ended December 31, 2005, the Portfolios paid the following service
and distribution fees:
Service Fee Distribution Fee
- ----------- ----------------
Fund Class A Class C Class C
---- ------- ------- -------
Equity Diversified Portfolio $ 18,145 $ 23,682 $ 71,047
Income Diversified Portfolio 1,526 8 22
Moderate Diversified Portfolio 107,928 191,306 573,920
e. Commissions. The Portfolios were informed that commissions (including CDSC)
on Portfolio shares paid to IXIS Distributors by investors in shares of the
Portfolios during the year ended December 31, 2005 were as follows:
Fund Commission
---- ----------
Equity Diversified Portfolio $119,052
Income Diversified Portfolio --
Moderate Diversified Portfolio 460,253
For the year ended December 31, 2005, brokerage commissions paid to affiliated
broker/dealers by Equity Diversified Portfolio and Moderate Diversified
Portfolio were $2,960 and $9,483, respectively.
f. Trustees Fees and Expenses. The 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 or their affiliates. The
Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any
33
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
meeting attendance fees for Board of Trustees meetings or committee meetings
that she attends. Each independent Trustee (other than the Chairperson)
receives, in the aggregate, a retainer fee at the annual rate of $55,000. Each
independent Trustee also receives a meeting attendance fee of $6,000 for each
meeting of the Board of Trustees that he or she attends in person and $3,000
for each meeting of the Board of Trustees that he or she attends
telephonically. In addition, each committee chairman receives an additional
retainer fee at the annual rate of $10,000. Each committee member receives
$4,000 for each committee meeting that he or she attends in person and $2,000
for each committee meeting that he or she attends telephonically. These fees
are allocated among the Funds in the IXIS Advisor Funds Trusts and Loomis
Sayles Funds Trusts based on a formula that takes into account, among other
factors, the relative net assets of each Fund. Trustees are reimbursed for
travel expenses in connection with attendance at meetings.
Prior to November 18, 2005, the Trusts had co-chairmen of the Board. Prior to
October 1, 2005, each independent Trustee received, 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 that he or she attended. The
co-chairmen of the Board each received an additional annual retainer of
$25,000. Each committee chairman received an additional retainer fee at the
annual rate of $7,000. Each committee member received $3,750 for each committee
meeting that he or she attended.
Effective January 1, 2006, each committee member will be compensated $5,000 for
each Audit Committee meeting that he or she attends in person and $2,500 for
such meeting he or she attends telephonically.
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 Portfolio or certain other Funds of the IXIS Advisor 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.
Additionally, the Board of Trustees has approved the use of Portfolio assets to
pay its portion of the annual salary of 2005 of an employee of IXIS Advisors
who supports the Funds' Chief Compliance Officer. For the year ended
December 31, 2005, each Portfolio's portion of such expense was approximately
$1,500.
5. Line of Credit. The Portfolios, together with certain other Funds of IXIS
Advisor Funds Trusts and Loomis Sayles Funds Trusts, participate in a
$75,000,000 committed line of credit provided by State Street Bank. Advances
under the line are taken primarily for temporary or emergency purposes.
Interest is charged to a Portfolio based on its borrowing at a rate per annum
equal to the Federal Funds rate plus .50%. In addition, a Portfolio is charged
its pro rata portion of a facility fee equal to 0.09% per annum on the unused
portion of the line of credit. Prior to September 1, 2005, Equity Diversified
Portfolio and Moderate Diversified Portfolio, together with certain other
Funds, participated in a $50,000,000 committed line of credit provided by IBT.
There were no borrowings by the Portfolios during the year ended December 31,
2005.
6. Securities Lending. The Portfolios have entered into an agreement with State
Street Bank, as agent of the Portfolios, to lend securities to certain
designated borrowers. The loans are collateralized with cash or securities in
an amount equal to at least 105% or 102% of the market value of the loaned
international equity or domestic securities, respectively, when the loan is
initiated. Thereafter, the value of the collateral must remain at least 102% of
the market value of loaned securities for U.S. equities and U.S. corporate
debt; at least 105% of the market value of loaned securities for non-U.S.
equities; and at least 100% of the market value of loaned securities for U.S.
government and agency securities, sovereign debt issued by non- U.S.
governments and non-U.S. corporate debt. The Portfolios invest cash collateral
in short-term investments, a portion of the income from which is remitted to
the borrowers and the remainder allocated between the Portfolios and State
Street Bank as lending agent. As with other extensions of credit, the
Portfolios may bear the risk of loss with respect to the investment of the
collateral.
Prior to September 1, 2005, IBT served as the securities lending agent for the
Portfolios.
The market value of securities on loan to borrowers and the value of collateral
held by the Portfolios with respect to such loans at December 31, 2005 were as
follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
---- ------------------ -------------------
Equity Diversified Portfolio $ 1,563,053 $ 1,616,555
Income Diversified Portfolio -- --
Moderate Diversified Portfolio 12,740,013 13,111,913
7. Broker Commission Recapture. Each 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 Portfolios
under such agreements and are included in realized gains in the Statements of
Operations. For the year ended December 31, 2005, the amounts rebated under
these agreements for Equity Diversified Portfolio, Income Diversified Portfolio
and Moderate Diversified Portfolio were $7,476, $0 and $24,402, respectively.
8. Shareholders. At December 31, 2005, IXIS Asset Management Group and its
affiliates owned shares equating to 11.32% and 98.69% of Equity Diversified
Portfolio's and Income Diversified Portfolio's net assets, respectively.
34
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2005
9. Capital Shares. The Portfolios may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
For the period
January 31, 2005*
through
December 31, 2005
----------------------
Equity Diversified Portfolio Shares Amount
- ---------------------------- --------- -----------
Class A
Shares sold 1,433,489 $14,431,086
Shares repurchased (357,724) (3,555,004)
--------- -----------
Net increase (decrease) 1,075,765 $10,876,082
--------- -----------
Class C
Shares sold 1,675,129 $16,957,327
Shares repurchased (58,382) (590,858)
--------- -----------
Net increase (decrease) 1,616,747 $16,366,469
--------- -----------
Increase (decrease) from capital share transactions 2,692,512 $27,242,551
========= ===========
For the period
November 17, 2005*
through
December 31, 2005
----------------------
Income Diversified Portfolio Shares Amount
- ---------------------------- --------- -----------
Class A
Shares sold 503,771 $ 5,038,040
Shares issued in connection with the reinvestment of distributions 8 77
--------- -----------
Net increase (decrease) 503,779 $ 5,038,117
--------- -----------
Class C
Shares sold 3,838 $ 38,462
Shares issued in connection with the reinvestment of distributions 10 103
--------- -----------
Net increase (decrease) 3,848 $ 38,565
--------- -----------
Increase (decrease) from capital share transactions 507,627 $ 5,076,682
========= ===========
For the Period
July 15, 2004*
Year Ended through
December 31, 2005 December 31, 2004
------------------------ ----------------------
Moderate Diversified Portfolio Shares Amount Shares Amount
- ------------------------------ ---------- ------------ --------- -----------
Class A
Shares sold 3,027,859 $ 31,745,974 2,418,837 $24,714,691
Shares issued in connection with the reinvestment of distributions 9,030 96,760 849 8,967
---------- ------------ --------- -----------
3,036,889 31,842,734 2,419,686 24,723,658
Shares repurchased (1,056,600) (11,146,771) (21,070 ) (222,356 )
---------- ------------ --------- -----------
Net increase (decrease) 1,980,289 $ 20,695,963 2,398,616 $24,501,302
---------- ------------ --------- -----------
Class C
Shares sold 4,541,434 $ 47,600,241 4,441,511 $45,170,380
Shares issued in connection with the reinvestment of distributions 2,815 30,460 252 2,656
---------- ------------ --------- -----------
4,544,249 47,630,701 4,441,763 45,173,036
Shares repurchased (871,085) (9,305,693) (20,470) (209,140)
---------- ------------ --------- -----------
Net increase (decrease) 3,673,164 $ 38,325,008 4,421,293 $44,963,896
---------- ------------ --------- -----------
Increase (decrease) from capital share transactions 5,653,453 $ 59,020,971 6,819,909 $69,465,198
========== ============ ========= ===========
* Commencement of operations
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of IXIS Advisor Funds Trust I and IXIS Advisor Funds Trust III
and Shareholders of IXIS Income Diversified Portfolio, IXIS Equity Diversified
Portfolio and IXIS Moderate Diversified Portfolio:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios 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 IXIS Income
Diversified Portfolio, a series of IXIS Advisor Funds Trust I and the IXIS
Equity Diversified Portfolio and IXIS Moderate Diversified Portfolio, each a
series of IXIS Advisor Funds Trust III (collectively, the "Funds"), at
December 31, 2005, 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, 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 audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 2005 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2006
36
2005 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
Corporate Dividends Received Deduction. For the fiscal year ended December 31,
2005, a percentage of dividends distributed by the Portfolio listed below
qualify for the dividends received deduction for corporate shareholders. These
percentages are as follows:
Qualifying
Portfolio Percentage
--------- ----------
Moderate Diversified Portfolio 60.22%
Capital Gains Distributions. Pursuant to Internal Revenue Section 852(b), the
following Portfolio paid distributions, which have been designated as capital
gains distributions for the fiscal year ended December 31, 2005.
Portfolio Amount
--------- ------
Moderate Diversified Portfolio $92,258
Qualified Dividend Income. A percentage of dividends distributed by the
Portfolios during the fiscal year ended December 31, 2005 are considered
qualified dividend income, and are eligible for reduced tax rates. These lower
rates range from 5% to 15% depending on an individual's tax bracket. These
percentages are noted below:
Portfolio Percentage
--------- ----------
Moderate Diversified Portfolio 96.51%
37
TRUSTEE AND OFFICER INFORMATION
The table below provides certain information regarding the Trustees and
Officers of IXIS Advisor Funds Trust I and IXIS Advisor 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 Trust and is
available by calling IXIS Advisor 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 since 1984 for IXIS Douglas Dillon Professor and 38
(3/23/40) Advisor Funds Trust I; 1995 Director of the Belfer Center Director, Taubman Centers,
for IXIS Advisor Funds of Science for International Inc. (real estate investment
Trust III Affairs, John F. Kennedy trust)
Contract Review and School of Government,
Governance Committee Harvard University
Member
Charles D. Baker Trustee since 2005 for IXIS President and Chief Executive 38
(11/13/56) Advisor Funds Trust I and Officer, Harvard Pilgrim None
IXIS Advisor Funds Health Care (health plan)
Trust III
Contract Review and
Governance Committee
Member
Edward A. Benjamin Trustee since 2003 for IXIS Retired 38
(5/30/38) Advisor Funds Trust I and Director, Precision Optics
IXIS Advisor Funds Corporation (optics
Trust III manufacturer)
Contract Review and
Governance Committee
Member
Daniel M. Cain Trustee since 1996 for IXIS President and Chief Executive 38
(2/24/45) Advisor Funds Trust I and Officer, Cain Brothers & Director, Sheridan
IXIS Advisor Funds Company, Incorporated Healthcare Inc. (physician
Trust III (investment banking) practice management)
Chairman of the Audit
Committee
Paul G. Chenault Trustee since 2003 for IXIS Retired; Trustee, First Variable 38
(9/12/33) Advisor Funds Trust I and Life (variable life insurance) Director, Mailco Office
IXIS Advisor Funds Products, Inc. (mailing
Trust III equipment)
Contract Review and
Governance Committee
Member
Kenneth J. Cowan Trustee since 1993 for IXIS Retired 38
(4/05/32) Advisor Funds Trust I; 1995 None
for IXIS Advisor Funds
Trust III
Chairman of the Contract
Review and Governance
Committee
38
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
Richard Darman Trustee since 1996 for IXIS Partner, The Carlyle Group 38
(5/10/43) Advisor Funds Trust I and (investments); formerly, Director and Chairman of
IXIS Advisor Funds Professor, John F. Kennedy Board of Directors, AES
Trust III School of Government, Corporation (international
Contract Review and Harvard University power company)
Governance Committee
Member
Sandra O. Moose Chairperson of the Board of President, Strategic Advisory 38
(2/17/42) Trustees since November Services (management Director, Verizon
2005 consulting); formerly, Senior Communications;
Trustee since 1984 for IXIS Vice President and Director, Director, Rohm and Haas
Advisor Funds Trust I; 1995 The Boston Consulting Group, Company (specialty
for IXIS Advisor Funds Inc. (management consulting) chemicals);
Trust III Director, AES Corporation
Ex officio member of the
Audit Committee and
Contract Review and
Governance Committee
John A. Shane Trustee since 1982 for IXIS President, Palmer Service 38
(2/22/33) Advisor Funds Trust I; 1995 Corporation (venture capital Director, Gensym
for IXIS Advisor Funds organization) Corporation (software and
Trust III technology service provider);
Audit Committee Member Director and Chairman of the
Board, Abt Associates Inc.
(research and consulting
firm)
Cynthia L. Walker Trustee since 2005 for IXIS Executive Dean for 38
(7/25/56) Advisor Funds Trust I and Administration (formerly, None
IXIS Advisor Funds Dean for Finance and CFO),
Trust III Harvard Medical School
Audit Committee Member
INTERESTED TRUSTEES
Robert J. Blanding/1/ Trustee since 2003 for IXIS President, Chairman, Director, 38
(4/14/47) Advisor Funds Trust I and and Chief Executive Officer, None
555 California Street IXIS Advisor Funds Loomis, Sayles & Company,
San Francisco, CA 94104 Trust III L.P.; President and Chief
Chief Executive Officer for Executive Officer -- Loomis
Loomis Sayles Trust II Sayles Funds I
39
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
- ---------------------- -------------------------- --------------------- ----------------------------
INTERESTED TRUSTEES
continued
John T. Hailer/2/ President, Chief Executive President and Chief Executive 38
(11/23/60) Officer and Trustee since Officer, IXIS Asset None
2000 for IXIS Advisor Management Advisors, L.P.
Funds Trust I and IXIS and IXIS Asset Management
Advisor Funds Trust III Distributors, L.P.; Executive
Vice President, Loomis Sayles
Funds I; President and Chief
Executive Officer, AEW Real
Estate Income Fund, IXIS
Advisor Cash Management
Trust, IXIS Advisor Funds
Trust II, IXIS Advisor Funds
Trust III and IXIS Advisor
Funds Trust IV
OFFICERS
Coleen Downs Dinneen Secretary, Senior Vice President, General Not Applicable
(12/16/60) Clerk and Chief Legal Counsel, Secretary and Clerk
Officer, since 2004 (formerly, Deputy General
Counsel, Assistant Secretary and
Assistant Clerk), IXIS Asset
Management Distribution
Corporation, IXIS Asset
Management Distributors, L.P.
and IXIS Asset Management
Advisors, L.P.
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 Director,
PFPC Inc; formerly, Vice
President -- Division
Manager, First Data Investor
Services, Inc.
Max J. Mahoney Anti-Money Laundering Senior Vice President, Deputy Not Applicable
(5/01/62) Officer and Assistant General Counsel, Assistant
Secretary, since 2005 Secretary and Assistant Clerk,
IXIS Asset Management
Distribution Corporation, IXIS
Asset Management
Distributors, L.P. and IXIS
Asset Management Advisors,
L.P.; Chief Compliance Officer,
IXIS Asset Management
Advisors, L.P.; formerly, Senior
Counsel, MetLife, Inc.;
formerly, Associate Counsel,
LPL Financial Services, Inc.
40
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)
John E. Pelletier Chief Operating Officer, Executive Vice President and Not Applicable
(6/24/64) since 2004 Chief Operating Officer
(formerly, Senior Vice
President, General Counsel,
Secretary and Clerk), IXIS
Asset Management
Distributors, L.P. and IXIS
Asset Management Advisors,
L.P.; Executive Vice President
and Chief Operating Officer
(formerly, Senior Vice
President, General Counsel,
Secretary and Clerk), IXIS
Asset Management
Distribution Corporation;
Executive Vice President, Chief
Operating Officer and
Director (formerly, President,
Chief Operating Officer and
Director), IXIS Asset
Management Services
Company.
Kristin Vigneaux Chief Compliance Officer, Chief Compliance Officer for Not Applicable
(9/25/69) since 2004 Mutual Funds, IXIS Asset
Management Distributors, L.P.
and IXIS Asset Management
Advisors, L.P.; formerly, Vice
President, IXIS Asset
Management Services
Company.
* The year provided is the earliest year during which a Trustee was elected or
appointed to the Trust. Each Trustee serves until retirement, resignation or
removal from the Board of Trustees. The current retirement age is 72, but
the retirement policy was suspended for the calendar year 2005. At a meeting
held on August 26, 2005, the Trustees voted to lift the suspension of the
retirement policy and to designate 2006 as a transition period so that any
Trustees who are currently age 72 or older or who reach age 72 during the
remainder of 2005 or in 2006 will not be required to retire until the end of
calendar year 2006. The position of Chairperson of the Board is appointed
for a two-year term.
** Each person listed above, except as noted, holds the same position(s) with
the Trusts. Previous positions during the past five years with IXIS Asset
Management Distributors, L.P. (the "Distributor"), IXIS Asset Management
Advisors, L.P. ("IXIS Advisors") or Loomis, Sayles & Company, L.P. are
omitted if not materially different from a Trustee's or officer's current
position with such entity.
***The Trustees of the Trust serve as Trustees of a fund complex that includes
all series of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS
Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash
Management Trust, AEW Real Estate Income Fund, Loomis Sayles Funds I and
Loomis Sayles Funds II.
/1/ Mr. Blanding is deemed an "interested person" of the Trust because he
holds the following positions with affiliated persons of the Trust:
President, Chairman, Director and Chief Executive Officer of Loomis,
Sayles & Company, L.P.
/2/ Mr. Hailer is deemed an "interested person" of the Trust because he holds
the following positions with affiliated persons of the Trust: Director and
Executive Vice President of IXIS Asset Management Distribution
Corporation, President and Chief Executive Officer of IXIS Advisors.
41
This Page Intentionally Left Blank
Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's
principal executive officer, principal financial officer and persons performing
similar functions.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has established an audit committee.
Ms. Cynthia L. Walker, Mr. Daniel M. Cain and Mr. John Shane are members of the
audit committee and have been designated as 'audit committee financial experts"
by the Board of Trustees. Each of these individuals is also an Independent
Trustee of the Registrant.
Item 4. Principal Accountant Fees and Services.
Fees paid to Principal Accountant by the Fund.
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 Registrant'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 Registrant, 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
--------------- ------------- -------------- --------------
2004 2005 2004 2005 2004 2005 2004 2005
------- ------- ---- ------ ------- ------ ---- ----
IXIS Advisor Funds Trust III $45,000 $70,900 -- $2,186 $13,330 $4,321 -- --
- --------
1. The audit related fees consist of $2,186 related to the performance of
agreed upon procedures relating to the Trust's deferred compensation plan.
2. The tax fees consist of a review of a) the Trust's tax returns (2004), b)
year-end shareholder reporting (2004 and 2005), and tax compliance
(2004/2005).
Aggregate fees billed to the Registrant for non-audit services during 2004 and
2005 were $13,330 and $6,507, 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 Tax fees All other fees
----------------- ------------ ---------------
2004 2005 2004 2005 2004 2005
-------- -------- ---- ------- ------- -------
Control Affiliates $115,650 $102,000 -- $44,030 $12,000 $35,000
Aggregate fees billed to Control Affiliates for non-audit services during 2004
and 2005 were $127,650 and $181,030, respectively.
None of the series described above were approved pursuant to (c)(7)(i)(C) of
Regulation S-X.
Audit Committee Pre Approval Policies.
Annually, the Registrant'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 Registrant'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.
There were no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Trustees.
Item 11. Controls and Procedures.
The Registrant's principal executive officer and principal financial officer
have concluded that the Registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the
Registrant 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 changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal quarter of the
period covered by the report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a) (1)Not applicable.
(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), filed as exhibits (a)(2)(1) and a(2)(2),
respectively
(a) (3)Not applicable.
(b) Certification of Principal Executive Officer and Principal Financial
Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 is
filed herewith as exhibit (b).
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.
IXIS Advisor Funds Trust III
By: /s/ John T. Hailer
-----------------------------
Name: John T. Hailer
Title: President and Chief Executive
Officer
Date: February 27, 2006
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 27, 2006
By: /s/ Michael C. Kardok
-----------------------------
Name: Michael C. Kardok
Title: Treasurer
Date: February 27, 2006