-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nrkg3Qbc9eUz69ZoDkDrQyPzvWyF0atGrfofTVYaSnyzvWgOVgGBjheyYrCYOCi6 ErgypuZXU7iFrBhk/IwO5w== 0000950156-01-500364.txt : 20010903 0000950156-01-500364.hdr.sgml : 20010903 ACCESSION NUMBER: 0000950156-01-500364 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010831 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CDC NVEST FUNDS TRUST I CENTRAL INDEX KEY: 0000770540 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04323 FILM NUMBER: 1728903 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8002831155 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS TRUST I DATE OF NAME CHANGE: 19940614 FORMER COMPANY: FORMER CONFORMED NAME: NVEST FUNDS TRUST I DATE OF NAME CHANGE: 20000202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CDC NVEST FUNDS TRUST II CENTRAL INDEX KEY: 0000052136 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 041990692 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00242 FILM NUMBER: 1728904 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST STREET 2: 4TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 617-449-2840 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET STREET 2: 6TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS TRUST II DATE OF NAME CHANGE: 19940615 FORMER COMPANY: FORMER CONFORMED NAME: NVEST FUNDS TRUST II DATE OF NAME CHANGE: 20000202 FORMER COMPANY: FORMER CONFORMED NAME: TNE FUNDS TRUST DATE OF NAME CHANGE: 19940615 N-30D 1 d568141.txt CDC NVEST INCOME FUNDS [Logo] CDC NVEST FUNDS(SM) CDC IXIS Asset Management Distributors CDC NVEST SHORT TERM CORPORATE INCOME FUND CDC NVEST BOND INCOME FUND CDC NVEST HIGH INCOME FUND CDC NVEST STRATEGIC INCOME FUND CDC NVEST LIMITED TERM U.S. GOVERNMENT FUND CDC NVEST GOVERNMENT SECURITIES FUND Where The Best Minds Meet(R) SEMIANNUAL REPORT JUNE 30, 2001 RISKS OF THE CDC NVEST INCOME FUNDS Any mutual fund investment involves risk. The following notes describe some of the risks of the CDC Nvest Funds discussed in this report. These risks may affect the value of your investment. See the funds' prospectus for details. CDC Nvest Short Term Corporate Income Fund invests primarily in short-term corporate securities, including lower rated bonds that may offer higher yields in return for more risk, and mortgage securities that are subject to prepayment risk. The fund may also invest in foreign and emerging market securities, which have special risks. It may also invest in securities issued by the U.S. government and Treasury securities; although the U.S. government guarantees such securities if held to maturity, mutual funds that invest in these securities are not guaranteed. CDC Nvest Bond Income Fund invests primarily in quality corporate and U.S. government bonds. Treasuries and U.S. government securities are guaranteed if held to maturity; mutual funds that invest in these securities are not guaranteed. The fund may invest in lower rated corporate bonds, which offer higher yields in return for more risk, and in mortgage-backed securities that are subject to prepayment risk. The fund is also permitted to invest a portion of assets in foreign and emerging market securities, which have special risk. CDC Nvest High Income Fund may invest in lower rated bonds that may offer higher yields in return for more risk. It may also invest a portion of assets in foreign and emerging market securities, which have special risks, including political, economic, regulatory and currency risks. The fund may also invest in U.S. government securities, which are guaranteed if held to maturity; mutual funds that invest in these securities are not guaranteed. CDC Nvest Strategic Income Fund may invest in foreign and emerging market securities, which have special risks, including political, economic, regulatory and currency risks. It may also invest in lower-rated bonds, which offer higher yields in return for more risk, and in mortgage securities that are subject to prepayment risk. CDC Nvest Limited Term U.S. Government Fund invests primarily in securities issued or backed by the federal government, including Treasury securities that are guaranteed if held to maturity; mutual funds that invest in these securities are not guaranteed. It may also invest a portion of assets in foreign securities, which have special risks, and in mortgage-backed securities that are subject to prepayment risk. CDC Nvest Government Securities Fund invests primarily in U.S. government securities, which are guaranteed if held to maturity; mutual funds that invest in these securities are not guaranteed. The fund may also invest a portion of assets in mortgage-backed securities that are subject to prepayment risk. - ------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - ------------------------------------------------------------------------------- SEMIANNUAL REPORT JUNE 30, 2001 President's Letter i Economic Update 1 Portfolio Managers' Commentary and Performance CDC Nvest Short Term Corporate Income Fund 2 CDC Nvest Bond Income Fund 4 CDC Nvest High Income Fund 6 CDC Nvest Strategic Income Fund 8 CDC Nvest Limited Term U.S. Government Fund 10 CDC Nvest Government Securities Fund 12 Financial Statements Schedules of Investments CDC Nvest Short Term Corporate Income Fund 15 CDC Nvest Bond Income Fund 17 CDC Nvest High Income Fund 20 CDC Nvest Strategic Income Fund 22 CDC Nvest Limited Term U.S. Government Fund 26 CDC Nvest Government Securities Fund 27 Statements of Assets and Liabilities 28 Statements of Operations 30 Statements of Changes in Net Assets 32 Financial Highlights 34 Notes to Financial Statements 43 - ------------------------------------------------------------------------------- PRESIDENT'S LETTER - ------------------------------------------------------------------------------- AUGUST 2001 - ------------------------------------------------------------------------------- [Photo of John T. Hailer] John T. Hailer President and Trustee CDC Nvest Funds Dear Shareholder: As a multi-manager fund group that draws its investment talent from a diverse pool of investment managers, CDC Nvest Funds recently conducted a survey of our portfolio managers. The survey illustrated something we've been saying all along: the Best Minds we draw on to manage our funds don't always think alike. When we surveyed 29 mutual fund managers and teams at 10 different firms we learned they held diverging views on everything from leading industry sectors to inflation estimates for the second half of 2001. Current market conditions have erased obvious trends and standard predictions, showing more clearly the extent to which investment managers' views can differ. Ever since the year 2000 brought an end to the longest economic expansion in peacetime history, investors have been re-learning an old, time-tested lesson: asset allocation is one of the best ways to build for your future. Jumping from fund to fund chasing yesterday's winners doesn't work. For example, during the six months ended June 30, 2001, only small-cap value indices showed gains on the equity side. Aggressive growth stocks - the big winners in 1999 - continued to slump. Meanwhile, high-yield bond prices enjoyed a strong recovery early in the year, only to decline again in June. What's next? In our survey, the consensus of the managers who participated believe the stock market will show modest gains for the second half of 2001, but they were evenly split over whether the technology sector would lag or outperform the market for the balance of the year. What sets CDC Nvest Funds apart is the breadth of diversification we offer you under a single roof - including investment managers with distinctive styles and expertise, as well as portfolios diversified by industry and by security. If you've ever wondered how the performance of other funds in our lineup compared to your fund's results, the new format we are introducing with this series of shareholder reports may help. By grouping comparable funds in a single book, we've made it easier for you to view a "snapshot" of each fund manager's strategies and investments. Everyone needs a portfolio tailored to his or her unique needs and characteristics - one with the right combination of stocks seeking growth or value from large-, mid- and small-cap companies; corporate, government and municipal bonds; domestic and international securities; and such basics as money market funds. Our new format not only enables us to reduce fund expenses, it's designed to help you and your financial adviser review your asset allocation plan and determine any adjustments you may need to make. This information and more is also available on our website, www.cdcnvestfunds.com. As part of a large, multi-national financial firm - CDC IXIS Asset Management - we have new resources and access to more Best Minds, and we are working on more new products and services aimed at helping you and your financial adviser build a diversified, all-market portfolio. As an affiliate of one of the 25 largest investment management firms in the world, with nearly $286 billion* in assets under management, we hope you share our confidence for the future. Sincerely yours, /s/ John T. Hailer *As of June 30, 2001 [callout] "What sets CDC Nvest Funds apart is the breadth of diversification we offer you under a single roof - including investment managers with distinctive styles and expertise, as well as portfolios diversified by industry and by security." - -------------------------------------------------------------------------------- ECONOMIC UPDATE - -------------------------------------------------------------------------------- AUGUST 2001 While U.S. manufacturers retrench and unemployment creeps higher, consumers are pushing slowly ahead. Leading economic indicators have turned modestly positive, led by resilient consumers whose confidence in their business and job prospects moved up in May and again in June, according to the Conference Board. Consumer confidence is viewed as a key indicator because spending by individuals accounts for about two-thirds of U.S. economic output. Homebuilding has been another area of persistent strength despite mortgage rates that have remained relatively high. Corporate retrenchment is the result of slumping profits, which also depress stock prices. Damage to earnings has been greatest in technology, where swollen inventories have only now begun to shrink, and in telecommunications, where overbuilding has left much costly new capacity idle. Meanwhile, international trade has been weak because the U.S. economy is the world's best customer. Much of what we buy - or don't buy - is produced abroad. Global markets turned in mixed results overall. LOWER RATES ARE STARTING TO MAKE AN IMPACT After six closely spaced interest-rate cuts in the first six months of 2001, the Federal Reserve Board has brought down the Discount Rate by 2.75% since January, in a series of moves that reversed its direction during the first half of 2000. (The Discount Rate - the only rate the Board controls directly - is the interest rate the Fed charges banks on short-term loans.) Investors reacted to lower rates by putting money to work in stocks and bonds. Cash reserves currently barely earn enough to offset underlying inflation, now around 3.6%. Low interest rates also encourage business investment. After dropping sharply in February and March, most stock market indices began a steep climb in April, only to sag in June and close the period at or below their levels at the beginning of the year. While no one can state definitively that the low point is behind us, encouraging signs include increased investor participation as stock prices were rising. A further impact of lower rates has been to reduce yields on short-term Treasury bills. Longer-term Treasuries fell in price and their yields moved higher, implying higher rates to come if economic growth resumes. Municipal bonds performed well as higher tax revenues strengthened the finances of many of the nation's cities and towns. On the other hand, high-yield bonds were volatile and offered mixed results. LOOKING AHEAD Except for energy and utility companies, second-quarter corporate earnings were largely disappointing and third quarter earnings may be weak as well. Nevertheless, investors have driven up stock prices in the heavy industry, basic materials and retail sectors, all of which should benefit from a rebounding economy. Uncertainties surrounding the current economic situation are considerable. This summer's tax rebates, together with lower interest rates and falling energy costs, may stimulate consumer spending. In the past, market rallies often have followed tax cuts. In summary, interest rates are lower, inflation is moderate and taxes are coming down. This may be the right mix of ingredients for renewed economic growth late this year or early next. FEDERAL RESERVE BOARD'S CHANGES IN INTEREST RATES DISCOUNT RATE: 2000 THROUGH FIRST HALF OF 2001 12/31/99 5.00% 1/31/00 5.00% 2/29/00 5.25% 3/31/00 5.50% 4/30/00 5.50% 5/31/00 6.00% 6/30/00 6.00% 7/31/00 6.00% 8/31/00 6.00% 9/30/00 6.00% 10/31/00 6.00% 11/30/00 6.00% 12/31/00 6.00% 1/31/01 5.00% 2/28/01 5.00% 3/31/01 4.50% 4/30/01 4.00% 5/31/01 4.00% 6/30/01 3.75% - -------------------------------------------------------------------------------- CDC NVEST SHORT TERM CORPORATE INCOME FUND - -------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGERS - -------------------------------------------------------------------------------- Effective in June, Loomis Sayles became portfolio manager of this fund. Richard Raczkowski, who was one of the fund's former portfolio managers, joined the Loomis organization and continues his previous role. Q. HOW DID THE FUND PERFORM SO FAR THIS YEAR? For the six months ended June 30, 2001, the total return on Class A shares of CDC Nvest Short Term Corporate Income Fund was 3.37% based on net asset value, including $0.21 in reinvested dividends. For the same period, the fund's benchmark, Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index, returned 5.11%, while the average return on a group of similar funds compiled by Morningstar was 3.91%. The 30-day SEC yield on Class A shares of CDC Nvest Short Term Corporate Income Fund was 5.39% as of June 30, 2001. Q. HOW DID THE INVESTMENT ENVIRONMENT AFFECT THE FUND DURING THE PERIOD? Corporate bonds - which accounted for 67% of the fund's assets at the end of June - typically do well on a total return basis when interest rates are declining, and the first six months of 2001 were no exception. The fund's return might have been higher with a greater weighting in corporate securities, but in an environment of disappointing earnings and layoffs, we preferred to maintain this conservative fund's high average rating. The small position the fund had in Southern California Edison bonds hurt performance before it was sold in January, but it's wise to remember that these were once top-rated securities. Bonds on the short end of the spectrum were among the first to benefit from the Federal Reserve's rate cuts - another positive for the fund, which had an average maturity of 3.8 years at mid-year. Mortgage-backed securities - about 10% of the fund's assets - have lagged the market so far this year, although this segment provided valuable stability in previous months. Q. WOULD YOU DESCRIBE LOOMIS SAYLES' INVESTMENT PROCESS? About 95% of our investment process is based on bottom-up research. That means visiting companies, conducting personal meetings and calling the people who manage the companies, as well as talking with other analysts in an effort to really understand the company and the industry. In general, we like companies that are number one or two in their businesses or those with a distinct, identifiable competitive advantage. Since Loomis is one of the largest bond managers in the U.S., many companies visit our headquarters when they are preparing to offer a new bond series. Q. WHAT ARE SOME OF THE CHANGES YOU'VE MADE IN THE PORTFOLIO? We sold Keyspan Corporation and CVS Corporation bonds. Keyspan is a financially strong New York area gas and utility company, but we believe its aggressive acquisition program may weaken its credit rating in time. CVS is also a strong, aggressively expanding company, but we believe this large drugstore chain may be more attractive for equity investors. Portfolio additions have included bonds issued by Countrywide Home Loan, one of the country's largest home lenders, and Conagra, one of the nation's largest food companies. Q. WHAT IS YOUR CURRENT OUTLOOK? We focus on intensive research of individual securities rather than trying to forecast interest rates. Regardless of where interest rates and bond prices go from here, we believe yield will be the largest component of performance for CDC Nvest Short Term Corporate Income Fund. We are confident that if we invest in well-researched companies, and monitor them closely, we should be able to avoid negative surprises, or be able to act quickly to get out of bad situations, if necessary, allowing high interest to accrue for the benefit of shareholders. [sidebar] PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: Seeks a high level of current income consistent with preservation of capital - ------------------------------------------------------------------------------- STRATEGY: Invests primarily in corporate bonds, but will invest at least 10% of its assets in securities issued by the U.S. Treasury or other government agencies - ------------------------------------------------------------------------------- INCEPTION DATE: October 18, 1991 - ------------------------------------------------------------------------------- MANAGERS: Craig Smith Richard G. Raczkowski John Hyll Loomis, Sayles & Company, L.P. - ------------------------------------------------------------------------------- SYMBOLS: Class A NEFAX Class B NEABX Class C NECSX(+) - ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE: (JUNE 30, 2001) Class A $7.05 Class B 7.05 Class C 7.05 + Pending NASDAQ approval. - ------------------------------------------------------------------------------- CDC NVEST SHORT TERM CORPORATE INCOME FUND - ------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 2001 - ------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest Short Term Corporate Income Fund's performance to a benchmark index provide you with a general sense of how the fund performed. To put this information in context, it may be helpful to understand the differences between the two. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. In addition, few investors could purchase all of the securities necessary to match the index and would incur transaction costs and other expenses even if they could. GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES - -------------------------------------------------------------------------------- OCTOBER 1991 (INCEPTION) THROUGH JUNE 2001 LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) NET ASSET VALUE(1) MAXIMUM SALES CHARGE(2) INV. GRADE DEBT INDEX(5) 10/18/91 10000 9700 10000 10031 9730 10112 10057 9756 10212 10113 9809 10394 10168 9863 10387 10222 9915 10436 10233 9926 10425 10297 9988 10520 10337 10027 10659 6/30/92 10408 10095 10808 10467 10153 10985 10512 10196 11082 10581 10263 11206 10553 10236 11076 10575 10258 11049 10613 10295 11182 10683 10362 11369 10739 10417 11523 10778 10455 11579 10845 10519 11687 10854 10529 11670 6/30/93 10920 10592 11815 10944 10615 11849 10995 10666 11999 11031 10700 12039 11023 10693 12085 11013 10682 12074 11048 10716 12135 11099 10766 12265 11102 10769 12140 11063 10732 12002 11038 10707 11930 11031 10700 11950 6/30/94 11068 10736 11984 11093 10760 12141 11163 10828 12194 11143 10808 12127 11171 10836 12141 11153 10819 12072 11139 10805 12099 11266 10928 12298 11391 11050 12543 11512 11167 12622 11571 11224 12771 11697 11346 13099 6/30/95 11727 11375 13186 11774 11421 13220 11834 11479 13334 11908 11551 13420 11967 11608 13552 12040 11679 13715 12097 11734 13845 12172 11807 13989 12210 11844 13888 12251 11884 13834 12308 11939 13822 12350 11980 13833 6/30/96 12390 12018 13963 12449 12076 14016 12510 12134 14045 12586 12208 14223 12681 12301 14444 12758 12376 14604 12802 12418 14553 12847 12462 14627 12921 12534 14665 12967 12578 14599 13046 12654 14751 13110 12716 14869 6/30/97 13189 12794 15000 13290 12891 15261 13372 12971 15215 13436 13033 15374 13519 13114 15481 13529 13123 15507 13595 13187 15610 13678 13268 15797 13701 13290 15808 13748 13335 15868 13793 13379 15956 13838 13423 16064 6/30/98 13882 13465 16148 13908 13490 16212 14026 13605 16350 14046 13624 16687 14053 13632 16657 14081 13659 16735 14144 13719 16790 14200 13774 16915 14114 13691 16767 14222 13795 16923 14290 13862 17005 14182 13756 16899 6/30/99 14212 13785 16945 14241 13814 16923 14231 13804 16945 14342 13912 17104 14352 13922 17171 14342 13912 17217 14407 13975 17208 14381 13950 17172 14496 14061 17305 14548 14112 17405 14433 14000 17363 14465 14031 17405 6/30/00 14686 14245 17675 14802 14358 17821 14855 14410 18008 15058 14607 18199 15058 14607 18217 15210 14753 18391 15369 14908 18668 15484 15020 19006 14881 14435 19183 14234 13807 19350 14682 14241 19388 14638 14199 19534 6/30/01 14368 13937 19620 The illustration represents past performance and does not guarantee future results. Share price and return will vary and you may have a gain or loss when you sell your shares. Other classes of shares are available for which performance, fees, and expenses will differ. All results include reinvestment of dividends and capital gains.
AVERAGE ANNUAL TOTAL RETURNS -- JUNE 30, 2001 - ------------------------------------------------------------------------------------------- CLASS A (Inception 10/18/91) 6 MONTHS(4) 1 YEAR(4) 5 YEARS(4) SINCE INCEPTION(4) Net Asset Value(1) 3.37% 8.18% 5.10% 4.89% With Maximum Sales Charge(2) 0.23 5.00 4.45 4.56 - ------------------------------------------------------------------------------------------- CLASS B (Inception 9/13/93) 6 MONTHS(4) 1 YEAR(4) 5 YEARS(4) SINCE INCEPTION(4) Net Asset Value(1) 3.14% 7.54% 4.35% 4.04% With CDSC(3) -1.86 2.54 4.02 4.04 - ------------------------------------------------------------------------------------------- CLASS C (Inception 12/7/98) 6 MONTHS(4) 1 YEAR(4) SINCE INCEPTION(4) Net Asset Value(1) 3.14% 7.70% 4.10% With CDSC(3) 1.13 5.63 3.71 - -------------------------------------------------------------------------------------------
SINCE SINCE SINCE FUND'S FUND'S FUND'S CLASS A CLASS B CLASS C COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS INCEPTION INCEPTION INCEPTION LB Mutual Fund Short (1-5) Inv. Grade Debt Index(5) 5.11% 11.05% 7.04% 7.10% 6.50% 6.44% Morningstar Short Term Bond Average(6) 3.91 9.11 6.04 5.97 5.40 5.61 Lipper Short Term Investment Grade Funds Average(7) 3.97 8.70 5.99 5.90 5.41 5.69
CREDIT QUALITY A 34.6% AA 2.7% AAA 25.9% BB 2.3% BBB 25.6% NR 8.9% Credit quality is based on bond ratings from Standard & Poor's EFFECTIVE MATURITY LESS THAN 1 YEAR 7.3% 1-5 YEARS 79.5% 6-10 YEARS 9.1% 11-20 YEARS 1.8% 20+ YEARS 2.3% AVERAGE EFFECTIVE MATURITY: 3.8 YEARS NOTES TO CHARTS These returns represent past performance and do not guarantee future results. Share price and returns will vary, and you may have a gain or loss when you sell your shares. Recent returns may be higher or lower than those shown. (1) These results include reinvestment of any dividends and capital gains, but do not include a sales charge. (2) These results include reinvestment of any dividends and capital gains, and the maximum sales charge of 3.00%. (3) These results include reinvestment of any dividends and capital gains. Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares. Class C share performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you sell shares within one year of purchase. (4) The adviser waived certain fees and expenses during the period indicated and the Fund's average annual total returns and yields would have been lower had these not been waived. (5) Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index is an unmanaged index including all publicly issued, fixed-rate, nonconvertible investment-grade domestic corporate debt with maturities of 1 to 5 years. You may not invest directly in an index. Class A since-inception return is calculated from 10/31/91. Class B since-inception return is calculated from 9/30/93. Class C since-inception return is calculated from 12/31/98. (6) Morningstar Short Term Bond Fund Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. Class A since-inception return is calculated from 10/31/91. Class B since-inception return is calculated from 9/30/93. Class C since-inception return is calculated from 12/31/98. (7) Lipper Short Term Investment Grade Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. Class A since-inception return is calculated from 10/31/91. Class B since-inception return is calculated from 9/30/93. Class C since-inception return is calculated from 12/31/98. - -------------------------------------------------------------------------------- CDC NVEST BOND INCOME FUND - -------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGERS - -------------------------------------------------------------------------------- Effective in June, Loomis Sayles became portfolio manager of this fund. Peter Palfrey and Richard Raczkowski, the fund's former portfolio managers, joined the Loomis organization and continue their previous roles. Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 2001? For the six months ended June 30, 2001, the total return on Class A shares of CDC Nvest Bond Income Fund was 3.72% based on net asset value, including $0.39 per share in reinvested dividends. For the same period, the Lehman Brothers Aggregate Bond Index had a total return of 3.62%, while Morningstar Intermediate Bond Fund Average returned 3.39%. Q. HOW WOULD YOU DESCRIBE THE ENVIRONMENT FOR BONDS THIS YEAR? To date the market has been almost a reverse image of last year. During the first half of last year, the Federal Reserve Board raised the discount rate three times, while the magnitude of the Treasury's repurchase of long-term debt triggered a bidding war. Government bond prices soared while short-term securities and corporate bonds lagged. Fast forward to January of 2001, when the Fed startled investors with the first in a series of six rate cuts, bringing the discount rate down by 2.75% in six months. Meanwhile, although budget surpluses remain healthy, planned tax cuts and reduced revenues resulting from a sluggish economy have trimmed the amount of the Treasury's debt buy-back program for this year. Investors have reversed last year's flight to quality and are focusing on yield. Only bonds rated below investment grade (below BBB) have continued to underperform the broader market, as they did last year, reflecting concerns that the slowing economy may impair the ability of some companies - notably those in the high tech and telecommunications sectors - to repay their debt. Q. HOW DID YOU ADJUST THE FUND'S PORTFOLIO IN LIGHT OF THESE EVENTS? For the past 18 months, our strategy has been to reduce the fund's exposure to high-yield securities to about 13% of assets currently, from a high of about 20% in the past 18 months. We continue to favor larger, well-financed companies that we believe will perform well even in a slower economy. These include food and food services, defense, and broadcasting. The portfolio also features some of the stronger financial-service companies, which we think will benefit in a declining interest-rate environment, as well as some large telecom companies in the upper tiers of that market. Although we reduced the fund's high-yield telecom holdings, what little we had hurt us this year. We also continued to reduce our exposure to emerging markets, as slowing economic growth spread around the world. Although the fund's Yankee holdings are denominated in U.S. dollars, the portfolio includes some issues denominated in Australian and Canadian dollars and Euros. So far this year, the Canadian dollar has held up the best, while the Australian dollar and the Euro were both down year to date. Q. WHAT'S YOUR CURRENT OUTLOOK? We are in a manufacturing recession that may be about to turn around. Since manufacturing represents one third of the U.S. economy, it is a major factor. However, consumer spending is still too high. If layoff announcements continue and people become more concerned about losing their jobs, thrifty habits may come back into fashion. We believe the economic slowdown still has farther to go and retail spending will probably weaken in the second half of the year. However, we believe that the corporate bond market, the mortgage and agency markets are providing investors with a healthy yield advantage over Treasuries, paying investors relatively high current income while they wait for the next recovery. [sidebar] PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: Seeks a high level of current income consistent with what the Fund considers reasonable risk - ------------------------------------------------------------------------------- STRATEGY: Invests primarily in U.S. corporate and U.S. government bonds - ------------------------------------------------------------------------------- INCEPTION DATE: November 7, 1973 - ------------------------------------------------------------------------------- MANAGERS: Peter W. Palfrey Curt A. Mitchell Richard G. Raczkowski Loomis, Sayles & Company, L.P. - ------------------------------------------------------------------------------- SYMBOLS: Class A NEFRX Class B NERBX Class C NECRX Class Y NERYX - ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE: (JUNE 30, 2001) Class A $11.56 Class B 11.56 Class C 11.57 Class Y 11.59 - ------------------------------------------------------------------------------- CDC NVEST BOND INCOME FUND - -------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 2001 - -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest Bond Income Fund's performance to a benchmark index provide you with a general sense of how the fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. In addition, few investors could purchase all of the securities necessary to match the index, and would incur transaction costs and other expenses even if they could. GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES - -------------------------------------------------------------------------------- JUNE 1991 THROUGH JUNE 2001 LEHMAN BROTHERS NET ASSET MAXIMUM AGGREGATE LEHMAN BROTHERS VALUE(1) SALES CHARGE(2) BOND INDEX(4) CREDIT INDEX(5) 6/30/91 10000 9550 10000 10000 10113 9658 10139 10144 10385 9917 10358 10373 10625 10147 10568 10587 10735 10252 10686 10688 10830 10342 10784 10792 11262 10755 11104 11145 11119 10618 10953 11006 11171 10668 11024 11112 11109 10609 10963 11064 11114 10614 11042 11119 11363 10851 11250 11367 6/30/92 11547 11027 11405 11544 11921 11385 11638 11853 12022 11481 11756 11945 12201 11652 11896 12090 11963 11425 11737 11874 11914 11378 11740 11893 12123 11577 11926 12113 12407 11849 12155 12396 12715 12143 12368 12681 12739 12166 12420 12725 12840 12262 12507 12823 12857 12279 12523 12838 6/30/93 13133 12542 12750 13150 13239 12643 12823 13245 13503 12896 13047 13575 13511 12903 13082 13608 13601 12989 13131 13676 13455 12849 13019 13507 13561 12950 13089 13587 13772 13152 13266 13851 13470 12864 13035 13524 13110 12520 12713 13109 12975 12391 12612 12983 12907 12326 12610 12935 6/30/94 12827 12250 12582 12902 13068 12480 12833 13229 13137 12546 12848 13243 12998 12413 12659 12997 12963 12380 12648 12967 12928 12346 12620 12946 12995 12410 12707 13054 13213 12619 12959 13331 13648 13034 13267 13714 13652 13038 13348 13827 13921 13294 13535 14061 14534 13880 14059 14723 6/30/95 14664 14004 14162 14855 14585 13929 14130 14790 14844 14176 14301 15028 15030 14354 14440 15205 15230 14544 14628 15403 15468 14772 14847 15697 15693 14987 15055 15956 15759 15050 15154 16060 15417 14723 14891 15678 15340 14650 14787 15545 15211 14526 14704 15416 15198 14514 14674 15388 6/30/96 15420 14726 14871 15614 15459 14764 14911 15644 15459 14764 14886 15595 15819 15107 15145 15926 16220 15490 15481 16361 16610 15863 15746 16711 16417 15678 15599 16480 16508 15766 15648 16503 16612 15864 15687 16572 16364 15628 15513 16314 16544 15800 15745 16562 16767 16013 15895 16749 6/30/97 17062 16294 16084 16987 17748 16950 16518 17609 17446 16661 16378 17348 17793 16992 16620 17652 17961 17153 16861 17876 18044 17232 16939 17976 18231 17410 17110 18166 18473 17642 17329 18383 18533 17699 17315 18377 18647 17808 17374 18445 18733 17890 17464 18561 18923 18072 17630 18782 6/30/98 18994 18139 17780 18921 18944 18092 17817 18904 18756 17912 18108 18993 19481 18604 18532 19608 19276 18408 18433 19306 19659 18774 18538 19669 19690 18804 18594 19726 19902 19006 18726 19922 19500 18622 18398 19450 19768 18879 18500 19588 19925 19029 18559 19644 19492 18615 18395 19381 6/30/99 19367 18495 18337 19280 19290 18422 18260 19174 19214 18349 18250 19128 19539 18660 18462 19337 19584 18703 18530 19426 19613 18730 18529 19447 19622 18739 18440 19344 19540 18661 18379 19276 19761 18871 18601 19456 20031 19130 18847 19621 19662 18777 18792 19448 19517 18639 18783 19376 6/30/00 20108 19203 19173 19863 20226 19316 19348 20103 20487 19565 19628 20354 20518 19594 19752 20466 20401 19483 19882 20470 20594 19668 20208 20714 21073 20125 20584 21099 21596 20624 20922 21703 21809 20828 21104 21887 21836 20854 21209 22021 21713 20736 21120 21948 21851 20868 21247 22143 6/30/01 21857 20873 21328 22254 The illustration represents past performance and does not guarantee future results. Share price and return will vary and you may have a gain or loss when you sell your shares. Other classes of shares are available for which performance, fees, and expenses will differ. All results include reinvestment of dividends and capital gains. AVERAGE ANNUAL TOTAL RETURNS -- JUNE 30, 2001 - -------------------------------------------------------------------------------- CLASS A (Inception 11/7/73) 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Net Asset Value(1) 3.72% 8.69% 7.22% 8.13% With Maximum Sales Charge(2) -0.93 3.78 6.25 7.63 - ------------------------------------------------------------------------------ CLASS B (Inception 9/13/93) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 3.42% 7.88% 6.43% 5.44% With CDSC(3) -1.58 2.88 6.12 5.44 - ------------------------------------------------------------------------------ CLASS C (Inception 12/30/94) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 3.42% 7.88% 6.44% 7.30% With Maximum Sales Charge and CDSC(3) -1.37 5.76 6.23 7.14 - ------------------------------------------------------------------------------ CLASS Y (Inception 12/30/94) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 3.98% 9.04% 7.50% 8.54% - ------------------------------------------------------------------------------
SINCE SINCE SINCE FUND'S FUND'S FUND'S CLASS B CLASS C CLASS Y COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPT. INCEPT. INCEPT. Lehman Bros. Aggregate Bond Index(4) 3.62% 11.23% 7.48% 7.87% 6.51% 8.29% 8.29% Lehman Bros. Credit Index(5) 5.39 12.29 7.37 8.34 6.53 8.57 8.57 Morningstar Int. Bond Fund Average(6) 3.39 9.99 6.48 7.47 5.61 7.37 7.37 Lipper Int. Investment Grade Debt Avg.(7) 3.35 10.17 6.58 7.41 5.65 7.34 7.34
NOTES TO CHARTS These returns represent past performance and do not guarantee future results. Share price and returns will vary and you may have a gain or loss when you sell your shares. Recent returns may be higher or lower than those shown. Class Y shares are available to certain institutional investors only. (1) These results include reinvestment of any dividends and capital gains, but do not include a sales charge. (2) These results include reinvestment of any dividends and capital gains, and the maximum sales charge of 4.50%. (3) These results include reinvestment of any dividends and capital gains. Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares. Class C share performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you sell shares within one year of purchase. (4) Lehman Brothers Aggregate Bond Index is an unmanaged index of nearly all debt issued by the U.S. Treasury, U.S. government agencies and U.S. corporations rated investment-grade, and U.S. agency debt backed by mortgage pools. You may not invest directly in an index. Class B since-inception return is calculated from 9/30/93. (5) The Lehman Brothers Credit Index is an unmanaged index that includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt. You may not invest directly in an index. Class B since-inception return is calculated from 9/30/93. (6) Morningstar Intermediate Bond Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. Class B since-inception return is calculated from 9/30/93. (7) Lipper Intermediate Investment Grade Debt Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. Class B since-inception return is calculated from 9/30/93. [sidebar] PORTFOLIO AS OF JUNE 30, 2001 - ------------------------------------------------------------------------------- CREDIT QUALITY A 18.9% AA 2.8% AAA 31.0% BB 1.9% BBB 10.7% NR 32.1% B and CC 2.6% AVERAGE QUALITY: A Credit quality is based on bond ratings from Standard & Poor's EFFECTIVE MATURITY LESS THAN 1 YEAR 3.3% 1-5 YEARS 19.3% 6-10 YEARS 36.1% 11-20 YEARS 9.3% 20+ YEARS 32.0% AVERAGE EFFECTIVE MATURITY: 14.2 YEARS - ------------------------------------------------------------------------------- CDC NVEST HIGH INCOME FUND - ------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGERS - ------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 2001? For the six months ended June 30, 2001, the total return on Class A shares of CDC Nvest High Income Fund was -3.47% at net asset value, including $0.36 in reinvested dividends. The fund's benchmark, Lehman Brothers High Yield Composite Index, returned 3.93% for the same period, while the return of Morningstar High Yield Bond Fund Average was 1.42%. High-yield bonds rebounded early in the year, but then gave back all that plus some more in June. The fund was hurt most by negative news in the technology and telecommunications sectors, and as a result of the price volatility of its zero-coupon bonds. These bonds offer much higher yields than coupon-bonds of comparable quality, but they are more volatile. Q. WHAT WAS THE ENVIRONMENT LIKE FOR FIXED-INCOME SECURITIES? The market started on a strongly positive note, as the Federal Reserve Board began an aggressive rate-cutting program, but then it seemed to stall. By the end of June, high-yield bond prices were dramatically lower than they had been at the beginning of the month, and some bonds - notably tech and telecom - ended June at new lows for the year. We have been trimming the fund's holdings in these sectors, retaining only those names we feel offer the best potential. In fact, much of the decline in the fund's tech and telecom holdings has been in sympathy with disappointments in other, highly visible companies that are not in the portfolio. For example, the fund's Global Crossing convertible preferred securities declined with the market, even though this company now offers a full spectrum of wireline services, generating approximately $1.5 billion in cash flow every year. Q. IN A WEAK ECONOMY, AREN'T DEFAULTS MORE LIKELY TO HAPPEN? During sluggish periods, concerns about defaults are felt most keenly in the high-yield bond market. Indeed, the default rate on corporate bonds ended June at 7.5%, up from the 2-3% historical average, and Moody's Investor Services expects it to peak some time early in 2002. Although this sounds very negative, rallies typically happen before the market bottoms out, so we believe there is reason to expect a recovery - possibly a dramatic one - before the end of the year. Moreover, price rallies in the high-yield market tend to occur in bursts, similar to stock-price rallies. Things move so fast that investors who jump in and out of the market, trying to guess the next move, may miss out. High-yield investors have an edge over equity investors because they collect high coupons while they wait for the market to turn. Loomis Sayles' credit research department scrutinizes each bond issuer, which makes us confident that the companies in the portfolio have staying power even in a choppy market. Q. WHAT ABOUT THE FUND'S INVESTMENTS IN OTHER COUNTRIES AND SECTORS? Emerging-market securities were bright spots in the portfolio. For example, we continue to like Mexico because of its strengthening ties with U.S. business. Grupo Iusacell, a Mexican cellular phone company, comes to mind. Even in the U.S., the wireless segment of the telecomm industry has held up relatively well; these bonds pay 14.25% and have risen in value by more than eight points since the beginning of the year. Our best-performing sectors were businesses that tend to be least affected by economic slowdowns, including insurance and cable television; tech and telecom were our worst sectors. Q. WHAT'S YOUR CURRENT OUTLOOK? As we see it, the big positive right now is that an overall improvement in credit quality generally follows when the Fed lowers interest rates. It will take several quarters for the effects to work their way through the economy, but we believe that this action will lead to a healing process for the corporate credit markets and ultimately result in much stronger performance for high-yield bonds going forward. [sidebar] PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: Seeks high current income plus the opportunity for capital appreciation to produce a high total return - ------------------------------------------------------------------------------- STRATEGY: Invests at least 65% of its assets in lower- quality fixed-income securities, commonly known as "junk bonds" - ------------------------------------------------------------------------------- INCEPTION DATE: February 22, 1984 - ------------------------------------------------------------------------------- MANAGERS: Michael Millhouse Curt Mitchell Loomis, Sayles & Company, L.P. - ------------------------------------------------------------------------------- Symbols: Class A NEFHX Class B NEHBX Class C NEHCX - ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE: (JUNE 30, 2001) Class A $5.67 Class B 5.67 Class C 5.67 - -------------------------------------------------------------------------------- CDC NVEST HIGH INCOME FUND - -------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 2001 - -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest High Income Fund's performance to a benchmark index provide you with a general sense of how the fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. In addition, few investors could purchase all of the securities necessary to match the index and would incur transaction costs and other expenses even if they could. GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES - ------------------------------------------------------------------------------- JUNE 1991 THROUGH JUNE 2001 LEHMAN BROTHERS NET ASSET VALUE(1) MAXIMUM SALES CHARGE(2) HIGH YIELD INDEX(4) 6/30/91 10000 9550 10000 10331 9866 10320 10529 10055 10557 10730 10247 10704 11130 10629 11062 11182 10679 11119 11264 10757 11279 11711 11184 11676 11998 11458 11965 12108 11563 12113 12194 11646 12159 12355 11799 12331 6/30/92 12504 11941 12446 12715 12143 12634 12818 12241 12800 12917 12336 12930 12693 12122 12748 12905 12324 12909 13042 12455 13056 13367 12766 13436 13611 12999 13672 13842 13219 13849 13934 13307 13969 14141 13504 14135 6/30/93 14449 13799 14432 14543 13888 14572 14579 13923 14695 14547 13892 14733 14876 14207 15030 15006 14331 15103 15197 14513 15290 15545 14845 15622 15575 14874 15581 15177 14494 14992 14930 14258 14890 14992 14317 14898 6/30/94 15054 14377 14944 14960 14287 15071 14896 14226 15178 14928 14256 15179 14904 14233 15216 14668 14008 15024 14707 14045 15135 14813 14147 15341 15198 14514 15867 15296 14608 16039 15599 14897 16446 15887 15172 16906 6/30/95 15867 15153 17015 16140 15413 17229 16151 15424 17282 16233 15503 17495 16298 15565 17604 16328 15593 17758 16439 15699 18037 16739 15986 18355 16855 16096 18369 16822 16065 18357 17024 16257 18397 17208 16433 18507 6/30/96 17317 16538 18661 17484 16698 18747 17692 16896 18949 18236 17416 19406 18197 17378 19555 18572 17736 19941 18885 18035 20084 18899 18049 20281 19561 18681 20616 19302 18433 20308 19410 18536 20522 20055 19152 20961 6/30/97 20185 19276 21252 20735 19802 21837 20867 19928 21786 21489 20522 22218 21302 20343 22238 21588 20616 22451 21788 20808 22649 22115 21120 23056 22085 21091 23192 22313 21309 23410 22434 21424 23502 22398 21390 23584 6/30/98 22475 21464 23669 22441 21431 23804 20884 19944 22490 20686 19755 22591 20252 19341 22128 21707 20731 23046 21418 20454 23072 21900 20915 23413 22039 21047 23275 22395 21387 23496 22877 21848 23952 22316 21312 23629 6/30/99 22253 21252 23579 22164 21167 23673 21819 20837 23410 21677 20701 23242 21872 20888 23089 22017 21026 23361 22275 21272 23623 22028 21037 23521 22128 21132 23566 21459 20494 23071 21446 20481 23108 20848 19909 22870 6/30/00 21480 20513 23336 21607 20635 23514 21521 20553 23674 21076 20128 23468 20025 19124 22717 18361 17535 21817 18691 17850 22238 20861 19923 23904 20757 19823 24222 19696 18810 23652 19091 18232 23357 19141 18280 23777 6/30/01 18043 17231 23109 The illustration represents past performance and does not guarantee future results. Share price and return will vary and you may have a gain or loss when you sell your shares. Other classes of shares are available for which performance, fees, and expenses will differ. All results include reinvestment of dividends and capital gains.
AVERAGE ANNUAL TOTAL RETURNS -- JUNE 30, 2001 - ----------------------------------------------------------------------------------- CLASS A (Inception 2/22/84) 6 MONTHS 1 YEAR 5 YEARS(7) 10 YEARS(7) Net Asset Value(1) -3.47% -16.01% 0.82% 6.07% With Maximum Sales Charge(2) -7.78 -19.82 -0.11 5.59 - ------------------------------------------------------------------------------------ CLASS B (Inception 9/20/93) 6 MONTHS 1 YEAR 5 YEARS(7) SINCE INCEPTION(7) Net Asset Value(1) -3.99% -16.77% 0.09% 2.08% With CDSC(3) -8.54 -20.51 -0.16 2.08 - ------------------------------------------------------------------------------------ CLASS C (Inception 3/2/98) 6 MONTHS 1 YEAR SINCE INCEPTION Net Asset Value(1) 3.99% -16.77% -6.66% With Maximum Sales Charge and CDSC(3) -5.81 -18.38 -6.94 - ------------------------------------------------------------------------------------ SINCE SINCE FUND'S FUND'S CLASS B CLASS C COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION INCEPTION Lehman Brothers High Yield Index(4) 3.93% -0.96% 4.37% 8.74% 5.98% -0.10% Morningstar High Yield Bond Fund Average(5) 1.42 -5.40 2.71 7.74 5.16 -1.63 Lipper High Current Yield Funds Average(6) 1.66 -5.33 2.84 7.80 4.20 -2.30#
NOTES TO CHARTS These returns represent past performance and do not guarantee future results. Share price and returns will vary and you may have a gain or loss when you sell your shares. Recent returns may be higher or lower than those shown. (1) These results include reinvestment of any dividends and capital gains, but do not include a sales charge. (2) These results include reinvestment of any dividends and capital gains, and the maximum sales charge of 4.50%. (3) These results include reinvestment of any dividends and capital gains. Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares. Class C share performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you sell shares within one year of purchase. (4) Lehman Brothers High Yield Composite Index is an unmanaged index of fixed rate, coupon bearing, non-investment grade bonds. You may not invest directly in an index. Class B since inception return is calculated from 9/30/93. Class C since inception return is calculated from 2/28/98. (5) Morningstar High Yield Bond Fund Average is the average performance without sales charges of funds with at least 65% of bond assets rated below BBB, as calculated by Morningstar, Inc. Class B since-inception return is calculated from 9/30/93. Class C since-inception return is calculated from 2/28/98. (6) Lipper High Current Yield Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. Class B since-inception return is calculated from 9/30/93. Class C since-inception return is calculated from 2/28/98. (7) Fund performance has been increased by voluntary expense waivers, without which performance would have been lower. [sidebar] PORTFOLIO AS OF JUNE 30, 2001 - ------------------------------------------------------------------------------- CREDIT QUALITY B 57.4% BB 36.7% BBB 3.1% CCC 2.8% AVERAGE QUALITY: Ba3 EFFECTIVE MATURITY 0-5 YEARS 17.3% 6-10 YEARS 72.1% 10+ YEARS 10.6% AVERAGE EFFECTIVE MATURITY: 7.9 YEARS Credit quality is based on bond ratings from Standard & Poor's - -------------------------------------------------------------------------------- CDC NVEST STRATEGIC INCOME FUND - -------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGER - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 2001? For the six months ended June 30, 2001, the total return on CDC Nvest Strategic Income Fund's Class A shares was -0.58% at net asset value, including $0.50 in reinvested dividends. The fund's benchmark, the Lehman Brothers Aggregate Bond Index returned 3.62% for the same period, while Morningstar Multi-Sector Bond Fund Average returned 1.48%. Unlike its benchmark, CDC Nvest Strategic Income Fund balances income and price appreciation opportunities, and may invest in international fixed-income securities, bonds selling at a discount and convertible bonds - none of which are in the Lehman Index. These differences tend to make the fund more volatile than the index. Q. WHAT WERE THE FIXED-INCOME MARKETS LIKE AND HOW DID YOU RESPOND? In the U.S., the Federal Reserve Board's aggressive efforts to reduce interest rates reflect its concern about a possible recession. A sluggish economy impacts all bond issuers, but especially those in the lower tiers of the market. Fixed-income securities also came under pressure in some world markets, as global economic activity slowed during the period. At the end of June 2001, U.S. securities accounted for approximately one third of the fund's assets, with one-third in emerging market issues and the remaining third in developing economies outside this country. The fund's commitment to Europe was small because of the weakness of the Euro - the single currency slated to replace individual countries' currencies. However, the fund was hurt by its relatively large position in Canadian securities, where the markets were weak in sympathy with the economic slowdown in the U.S. We believe Canadian investments should reward investors in time because Canada's economy is holding up better than our own. If foreign investors continue to leave the volatile U.S. equity markets and avoid sluggish conditions in Europe, we believe they will find more attractive return potential in Canada, as well as some emerging economies. In Latin America, high unemployment and inflation led us to trim holdings in Argentina. Although Brazil's economy is feeling some fallout from Argentina's problems, its currency is reasonably valued and we believe its long-term outlook is positive, so we continue to hold these bonds. Mexico's sensitivity to oil prices was a positive factor during the first half of the year, as energy supplies were tight in the United States and elsewhere. Q. WHICH OTHER INVESTMENTS HELPED OR HINDERED PERFORMANCE? The bonds of Xerox and J.C. Penney performed well. Results were also favorable in the building and energy sectors. Two technology holdings that benefited the fund were Efficient Networks and Kent Electronics, which were acquired by Siemens and Avnet, respectively. Negatives included a default in Singapore-based Asia Pulp and Paper, one of the fund's emerging market holdings. In technology, familiar names whose bonds suffered include Motorola and Lucent Technologies. Telecom holdings were hard hit, as were wireless and internet companies. In time, we believe that consolidation and corporate restructuring will revive the telecom industry. Q. WHAT IS YOUR CURRENT OUTLOOK? Today's environment for higher-yielding bonds recalls the 1990-91 period. Then, as now, the Fed was cutting rates in the hope of guiding the economy to a soft landing. In hindsight, 1990 was an exceptionally good time to have bought high-yield bonds, although there can be no assurances that results will be the same. If investor uncertainty continues to spread and selling pressures mount, selectivity will be especially important. Our research-intensive approach, and our emphasis on bonds selling at a discount, is geared to provide competitive results for CDC Nvest Strategic Income Fund shareholders. [sidebar] PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: Seeks high current income with a secondary objective of capital growth - ------------------------------------------------------------------------------- STRATEGY: Invests substantially all of its assets in debt instruments (including lower-quality securities) with a focus on U.S. corporate bonds, convertible securities, foreign debt instruments (including those in emerging markets) and U.S. government securities - ------------------------------------------------------------------------------- INCEPTION DATE: May 1, 1995 - ------------------------------------------------------------------------------- MANAGERS: Daniel J. Fuss Kathleen C. Gaffney Loomis, Sayles & Company, L.P. - ------------------------------------------------------------------------------- SYMBOLS: Class A NEFZX Class B NEZBX Class C NECZX Class Y NEZYX(+) - ------------------------------------------------------------------------------- Net Asset Value Per Share: (June 30, 2001) Class A $10.25 Class B 10.25 Class C 10.24 Class Y 10.27 +Pending NASDAQ approval. - ------------------------------------------------------------------------------- CDC NVEST STRATEGIC INCOME FUND - ------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 2001 - ------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest Strategic Income Fund's performance to a benchmark index provide you with a general sense of how the fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and management fees. Two bond indices measure the performance of a theoretical portfolio. Unlike a fund, the indices are unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. In addition, few investors could purchase all of the securities necessary to match the index and would incur transaction costs and other expenses even if they could. GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES - -------------------------------------------------------------------------------- JUNE 1991 THROUGH JUNE 2001 LEHMAN BROTHERS NET ASSET MAXIMUM AGGREGATE LEHMAN BROTHERS VALUE(1) SALES CHARGE(2) BOND INDEX(4) UNIVERSAL INDEX(5) 5/1/95 10000 9550 10000 10000 10014 9564 10387 10389 6/30/95 10018 9567 10463 10465 10097 9643 10440 10449 10193 9734 10566 10572 10411 9943 10669 10680 10355 9889 10807 10812 10648 10169 10969 10975 11038 10542 11123 11141 11302 10794 11196 11238 10995 10501 11002 11044 11074 10575 10925 10976 11057 10560 10863 10931 11233 10727 10842 10915 6/30/96 11383 10871 10987 11062 11360 10849 11017 11094 11569 11049 10998 11091 11974 11435 11189 11293 12316 11762 11438 11528 12817 12240 11633 11732 12639 12070 11525 11637 12675 12105 11561 11687 12875 12296 11590 11728 12735 12162 11461 11591 12816 12240 11633 11766 13092 12503 11743 11891 6/30/97 13388 12786 11883 12036 13991 13361 12204 12365 13630 13016 12100 12263 14111 13476 12279 12452 13815 13193 12457 12570 13889 13264 12515 12639 13819 13197 12641 12773 14044 13412 12803 12934 14301 13658 12793 12945 14607 13950 12836 13004 14612 13954 12903 13071 14373 13726 13026 13165 6/30/98 14144 13508 13136 13252 13967 13339 13164 13283 12252 11701 13378 13282 12649 12080 13691 13597 12785 12210 13619 13541 13643 13029 13697 13676 13580 12969 13738 13708 13815 13193 13835 13800 13618 13005 13593 13582 14337 13692 13668 13685 15256 14570 13712 13766 14782 14117 13591 13627 6/30/99 14826 14159 13547 13602 14533 13879 13490 13546 14351 13706 13484 13531 14443 13793 13640 13678 14565 13909 13691 13735 14828 14161 13689 13757 15232 14546 13624 13731 15091 14412 13579 13684 15685 14979 13743 13858 15844 15131 13924 14020 15391 14698 13884 13977 14894 14224 13877 13951 6/30/00 15462 14766 14166 14251 15598 14896 14295 14390 15941 15223 14502 14600 15520 14821 14593 14674 14887 14218 14689 14733 14811 14144 14930 14932 15336 14646 15208 15219 15823 15111 15457 15515 15799 15088 15592 15646 15202 14518 15670 15699 14954 14281 15604 15630 15288 14600 15698 15742 6/30/01 15247 14561 15757 15786 The illustration represents past performance and does not guarantee future results. Share price and return will vary and you may have a gain or loss when you sell your shares. Other classes of shares are available for which performance, fees, and expenses will differ. All results include reinvestment of dividends and capital gains. AVERAGE ANNUAL TOTAL RETURNS -- JUNE 30, 2001 - ------------------------------------------------------------------------------- CLASS A (Inception 5/1/95) 6 MONTHS 1 YEAR 5 YEARS(8) SINCE INCEPTION(8) Net Asset Value(1) -0.58% -1.39% 6.01% 7.08% With Maximum Sales Charge(2) -5.06 -5.87 5.03 6.28 - ------------------------------------------------------------------------------- CLASS B (Inception 5/1/95) 6 MONTHS 1 YEAR 5 YEARS(8) SINCE INCEPTION(8) Net Asset Value(1) -0.86% -2.05% 5.24% 6.26% With CDSC(3) -5.61 -6.56 4.98 6.26 - ------------------------------------------------------------------------------- CLASS C (Inception 5/1/95) 6 MONTHS 1 YEAR 5 YEARS(8) SINCE INCEPTION(8) Net Asset Value(1) -0.86% -2.05% 5.23% 6.22% With CDSC(3) -2.81 -3.89 5.01 6.04 - ------------------------------------------------------------------------------- CLASS Y (Inception 12/1/99) 6 MONTHS 1 YEAR SINCE INCEPTION Net Asset Value(1) -0.31% -0.89% 2.14% - -------------------------------------------------------------------------------
SINCE SINCE FUND'S FUND'S CLASS A, B AND C CLASS Y COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS INCEPTION INCEPTION Lehman Aggregate Bond Index(4) 3.62% 11.23% 7.48% 7.65% 9.29% Lehman Universal Index5 7.61 10.76 7.37 7.68 9.07 Morningstar Multi-Sector Bond Fund Avg.(6) 1.48 2.07 4.86 6.24 2.59 Lipper Multi-Sector Income Funds Avg.(7) 1.14 0.98 4.49 5.71 1.54
NOTES TO CHARTS These returns represent past performance. Share price and returns will vary, and you may have a gain or loss when you sell your shares. Recent returns may be higher or lower than those shown. Class Y shares are available to certain institutional investors only. (1) These results include reinvestment of any dividends and capital gains, but do not include a sales charge. (2) These results include reinvestment of any dividends and capital gains, and the maximum sales charge of 4.50%. (3) These results include reinvestment of any dividends and capital gains. Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares. Class C share performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you sell shares within one year of purchase. (4) Lehman Brothers Aggregate Bond Index is an unmanaged index of domestic debt issued by the U.S. government and its agencies. Since-inception returns for Class A, B and C shares are calculated from 4/30/95. Since-inception return for Class Y shares is calculated from 11/30/99. You may not invest directly in an index. (5) Lehman Brothers Universal Bond Index is an unmanaged index representing a blend of the Lehman Aggregate, High Yield and Emerging Market indices. Since-inception returns for Class A, B and C shares are calculated from 4/30/95. Since-inception return for Class Y shares is calculated from 11/30/99. You may not invest directly in an index. (6) Morningstar Multi-Sector Bond Fund Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. Since-inception returns for Class A, B and C shares are calculated from 4/30/95. Since-inception return for Class Y shares is calculated from 11/30/99. (7) Lipper Multi-Sector Income Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. Since-inception returns for Class A, B and C shares are calculated from 4/30/95. Since-inception return for Class Y shares is calculated from 12/1/99. (8) The adviser waived certain fees and expenses during the periods indicated, without which performance would have been lower. [sidebar] PORTFOLIO AS OF JUNE 30, 2001 - -------------------------------------------------------------------------------- CREDIT QUALITY A 4.0% AAA 7.1% B 15.5% BB 26.5% BBB 10.0% CCC 4.1% NR 32.4% CC and D = 0.4% AVERAGE QUALITY: BAA2 Credit quality is based on bond ratings from Standard & Poor's EFFECTIVE MATURITY LESS THAN 1 YEAR 2.1% 1-5 YEARS 9.3% 5-10 YEARS 25.1% 10+ YEARS 63.5% Average Effective Maturity: 17.5 years - ------------------------------------------------------------------------------- CDC NVEST LIMITED TERM U.S. GOVERNMENT FUND - ------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGERS - ------------------------------------------------------------------------------- Effective in June, Loomis Sayles became portfolio manager of this fund. Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 2001? For the six months ended June 30, 2001, the total return on Class A shares of CDC Nvest Limited Term U.S. Government Fund was 3.05% at net asset value, including $0.29 in reinvested dividends. The fund's benchmark, the Lehman Brothers Intermediate Government Bond Index, returned 3.43% for the same period, while the return of Morningstar Short Government Fund Average was 3.37%. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THIS PERIOD? It was an excellent period for short-term government bonds. The Federal Reserve Board cut the discount rate six times, to 3.75% at the end of June from 6.50% at the end of last year, in an effort to support economic growth and prevent the U.S. economy from falling into a recession. Since interest rates and bond prices move in opposite directions, most bond prices rose during this period. Bonds that offer a yield advantage over Treasury securities performed particularly well. These included government agencies, mortgage-backed and corporate securities, which had been left behind in last year's rally. The combination of declining short-term interest rates and attractive valuations drew investors into these sectors of the bond market. Q. WHAT STRATEGIES DID THE FUND PURSUE? The fund emphasized U.S. government agency securities, mortgage-backed securities, corporate bonds, and asset-backed securities (bonds backed by receipts from auto and other loans). During most of the period, the fund also featured bonds with shorter maturities, since they are among the earliest beneficiaries of the Fed's rate cuts. Q. HAS LOOMIS SAYLES MADE ANY SIGNIFICANT CHANGES TO THE FUND? We continued to add to the fund's mortgage-backed securities. In a declining interest-rate environment, homeowners typically are more inclined to pay off their loans before maturity, compelling holders of mortgage-backed securities to re-invest the principal at lower, prevailing rates. We felt that the prices of many mortgage-backed securities reflected higher prepayment activity than we think is likely to occur in the current, sluggish economy. Loomis Sayles' investment approach is to look for what we believe to be pricing inefficiencies. Right now this means we're focusing on high current income, emphasizing the lower tiers of this fund's fixed-income universe. Q. WHAT IS YOUR CURRENT OUTLOOK? It usually takes six to eight months for the economy to respond to changes in Fed monetary policy, so in the second half of 2001 we expect to begin to see evidence of the effects of the stimulus the Fed provided in the first half. The tax cut recently enacted by Congress should also help energize the economy in the next several months. If the economy rebounds, we believe the Fed may shift to a more neutral stance during the second half of 2001. Stronger growth tends to lead to higher interest rates and lower bond prices. In the market environment we expect - with generally flat interest rates and fewer opportunities for price gains - we believe CDC Nvest Limited Term U.S. Government Fund is well positioned to earn a high current return. [SIDEBAR] PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: Seeks a high current return consistent with preservation of capital - ------------------------------------------------------------------------------- STRATEGY: Invests primarily in U.S. government securities, including bills, notes and bonds (including zero-coupon bonds) and mortgage-backed securities issued or guaranteed by the U.S. Treasury and other governmental agencies - ------------------------------------------------------------------------------- INCEPTION DATE: January 3, 1989 - ------------------------------------------------------------------------------- MANAGERS: Michael F. Harris Cliff Rowe Loomis, Sayles & Company, L.P. - ------------------------------------------------------------------------------- SYMBOLS: Class A NEFLX Class B NELBX Class C NECLX Class Y NELYX(+) - ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE: (JUNE 30, 2001) Class A $11.21 Class B 11.20 Class C 11.21 Class Y 11.34 +Pending NASDAQ approval. INVESTMENT RESULTS THROUGH JUNE 30, 2001 - ------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest Limited Term U.S. Government Fund's performance to a benchmark index provide you with a general sense of how the fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. In addition, few investors could purchase all of the securities necessary to match the index and would incur transaction costs and other expenses even if they could. GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES - -------------------------------------------------------------------------------- JUNE 1991 THROUGH JUNE 2001 LEHMAN BROTHERS NET ASSET VALUE(1) MAXIMUM SALES CHARGE(2) GOVERNMENT BOND INDEX(4) 6/30/91 10000 9700 10000 10116 9812 10108 10286 9977 10300 10501 10186 10475 10606 10288 10595 10688 10367 10719 10995 10665 10979 10842 10517 10874 10901 10574 10907 10838 10513 10864 10906 10579 10961 11077 10744 11125 6/30/92 11231 10894 11285 11418 11075 11502 11536 11190 11619 11689 11338 11779 11527 11182 11638 11482 11138 11590 11617 11268 11740 11793 11439 11958 11924 11566 12134 11961 11602 12179 12046 11684 12274 12065 11703 12241 6/30/93 12199 11833 12418 12266 11898 12443 12441 12068 12628 12463 12089 12680 12490 12115 12711 12422 12050 12648 12441 12068 12700 12550 12174 12826 12410 12038 12650 12239 11872 12465 12169 11804 12384 12169 11803 12393 6/30/94 12158 11794 12396 12261 11893 12558 12292 11923 12594 12199 11833 12490 12199 11833 12492 12157 11792 12437 12165 11800 12478 12328 11958 12682 12502 12127 12927 12537 12161 12998 12661 12281 13148 13015 12624 13519 6/30/95 13072 12680 13606 13065 12673 13613 13180 12785 13724 13262 12864 13816 13445 13042 13968 13606 13198 14139 13749 13336 14279 13824 13410 14398 13659 13249 14246 13573 13165 14180 13538 13132 14139 13491 13087 14132 6/30/96 13597 13189 14276 13626 13217 14321 13620 13212 14336 13793 13379 14521 14015 13595 14759 14190 13764 14938 14076 13654 14857 14136 13712 14914 14154 13729 14938 14080 13657 14852 14203 13777 15020 14291 13862 15137 6/30/97 14428 13995 15268 14667 14227 15549 14642 14202 15489 14794 14350 15658 14960 14511 15841 14986 14536 15876 15099 14646 16005 15318 14859 16213 15283 14825 16195 15257 14799 16245 15316 14857 16323 15416 14953 16436 6/30/98 15529 15063 16546 15549 15082 16609 15797 15323 16923 16248 15761 17317 16091 15608 17347 16042 15561 17293 16075 15593 17360 16161 15676 17438 15976 15496 17200 16050 15569 17313 16098 15615 17360 15977 15498 17254 6/30/99 15874 15397 17280 15797 15323 17281 15792 15318 17306 15971 15492 17455 16002 15521 17489 16017 15537 17502 15967 15488 17447 15898 15421 17388 16039 15558 17532 16237 15750 17732 16185 15700 17725 16193 15707 17773 6/30/00 16424 15931 18056 16506 16011 18175 16680 16179 18378 16808 16304 18538 16869 16363 18666 17099 16586 18941 17298 16779 19274 17518 16992 19530 17649 17119 19710 17760 17227 19852 17725 17193 19788 17813 17279 19869 6/30/01 17826 17291 19933 The illustration represents past performance and does not guarantee future results. Share price and return will vary and you may have a gain or loss when you sell your shares. Other classes of shares are available for which performance, fees, and expenses will differ. All results include reinvestment of dividends and capital gains. AVERAGE ANNUAL TOTAL RETURNS -- JUNE 30, 2001 - ------------------------------------------------------------------------------- CLASS A (Inception 1/3/89) 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Net Asset Value(1) 3.05% 8.54% 5.56% 5.95% With Maximum Sales Charge(2) -0.08 5.27 4.92 5.62 - ------------------------------------------------------------------------------- CLASS B (Inception 9/24/93) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 2.82% 7.94% 4.91% 3.99% With CDSC(3) -2.18 2.94 4.59 3.99 - ------------------------------------------------------------------------------- CLASS C (Inception 12/30/94) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 2.81% 7.94% 4.91% 5.25% With CDSC(3) 0.82 5.87 4.69 5.08 - ------------------------------------------------------------------------------- CLASS Y (Inception 3/31/94) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 3.75% 9.27% 6.07% 5.79% - -------------------------------------------------------------------------------
SINCE SINCE SINCE FUND'S FUND'S FUND'S CLASS B CLASS C CLASS Y COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPT. INCEPT. INCEPT. Lehman Interm. Gov't. Bond Index(4) 3.43% 10.42% 6.91% 7.14% 6.01% 7.47% 6.69% Morningstar Short Gov't. Fund Avg.(5) 3.37 8.75 5.85 6.11 5.10 5.38 5.61 Lipper Short Int. U.S. Gov't. Funds Avg.(6) 3.13 9.01 5.87 6.43 5.08 6.46 5.67
NOTES TO CHARTS These returns represent past performance and do not guarantee future results. Share price and returns will vary, and you may have a gain or loss when you sell your shares. Recent returns may be higher or lower than those shown. Class Y shares are available to certain institutional investors only. (1) These results include reinvestment of any dividends and capital gains, but do not include a sales charge. (2) These results include reinvestment of any dividends and capital gains, and the maximum sales charge of 3.00%. (3) These results include reinvestment of any dividends and capital gains. Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares. Class C share performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you sell shares within one year of purchase. (4) Lehman Brothers Intermediate Government Bond Index is an unmanaged index of bonds issued by the U.S. government and its agencies with maturities of 1 to 10 years. You may not invest directly in an index. Class B since-inception return is calculated from 9/30/93. (5) Morningstar Short Government Fund Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. Class B since-inception return is calculated from 9/30/93. (6) Lipper Short Intermediate U.S. Government Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. Class B since-inception return is calculated from 9/30/93. PORTFOLIO AS OF JUNE 30, 2001 - -------------------------------------------------------------------------------- PORTFOLIO MIX MORTGAGE-BACKED 64.1% U.S. GOVERNMENT 21.6% CORPORATE 5.9% YANKEE SECURITIES 3.9% ASSET BACKED 2.5% SHORT TERM & OTHER 2.0% EFFECTIVE MATURITY LESS THAN 1 YEAR 0.3% 1-5 YEARS 38.8% 6-10 YEARS 20.1% 11-20 YEARS 8.1% 20+ YEARS 32.7% AVERAGE EFFECTIVE MATURITY: 13.2 YEARS All portfolio composition information is subject to change - ------------------------------------------------------------------------------- CDC NVEST GOVERNMENT SECURITIES FUND - ------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGERS - ------------------------------------------------------------------------------- Effective in June, Loomis Sayles became portfolio manager of this fund. Q. HOW HAS THE FUND PERFORMED SO FAR THIS YEAR? For the six months ended June 30, 2001, the total return on Class A shares of CDC Nvest Government Securities Fund was 1.06% at net asset value, including $0.28 in reinvested dividends. For the same period, the fund's benchmark, Lehman Brothers Government Bond Index, returned 2.27% while Morningstar Long Government Fund Average, returned 1.12%. As interest rates fell in the past six months, short- and intermediate-term U.S. government securities were the primary beneficiaries. The fund's longer maturity structure caused it to lag during the period, but we believe it should benefit over time. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE? Faced with a weakening economy, the Federal Reserve Board cut short-term interest rates six times in as many months, reducing rates by a cumulative 2.75%. Although U.S. bonds in general - including government securities - benefited from declining interest rates (and rising bond prices), most gains were in the short end of the market. The rate cuts actually caused yields on long-term bonds to remain flat or inch up, as some investors became concerned that the Fed was being too aggressive and might rekindle inflation. As a result, while the yield on one-year Treasury bonds dropped by more than 2% during the first half of 2001, yields on five-year Treasuries only fell by about 0.5%, and yields on 30-year Treasuries actually rose slightly, sending prices down. Q. WHAT STRATEGIES DID THE FUND PURSUE IN THIS ENVIRONMENT? As the year progressed we lengthened the portfolio's duration, locking in higher yields from bonds with longer maturities, and positioned the fund for potential price appreciation as interest rates declined. A bond fund's maturity refers to the average length of time that must elapse before the securities in the portfolio mature, when the issuer must refund the principal. A fund's duration is a measure of its price sensitivity to changing interest rates. A portfolio with a long duration is generally more volatile, which is a benefit at times like these when interest rates are trending down, sending prices up, but a negative when rising rates send prices down. As of June 30, the fund's duration was 7.19 years and the average maturity of the bonds in the portfolio was 19.14 years. In general, we target a duration of 6-10 years, and a maturity of 10-20 years, which is longer than most government bond funds. However, we believe this range generally offers shareholders the best balance between risk and return. Because it invests primarily in U.S. government securities, the fund's credit quality is always in the top tier. However, we increased its position in mortgage-backed securities, which tend to offer higher returns in exchange for marginally higher credit risk. Year to date, these investments provided generous yields and outperformed the Treasury market. Q. WHAT IS YOUR CURRENT OUTLOOK? The Fed's most recent rate cut in June left the door open for further action if the economy fails to pick up steam. We believe many of the trends that foster strong bond performance - measured economic growth, low inflation and steady to declining interest rates - will remain in place. At the same time, we expect continued stock market volatility, reflecting uncertainties about the future course of economic growth. As a result, we believe investors will continue to seek the relative safety and security of U.S. government securities, creating a positive environment for CDC Nvest Government Securities Fund. [sidebar] PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: Seeks a high level of current income consistent with safety of principal - ------------------------------------------------------------------------------- STRATEGY: Invests in U.S. government securities, including U.S. Treasury bills, notes and bonds, and mortgage-backed securities issued or guaranteed by U.S. government agencies - ------------------------------------------------------------------------------- INCEPTION DATE: September 16, 1985 - ------------------------------------------------------------------------------- MANAGERS: Kent P. Newmark Cliff Rowe Loomis, Sayles & Company, L.P. - ------------------------------------------------------------------------------- SYMBOLS: Class A NEFAX Class B NEUBX Class Y NEUYX - ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE: (JUNE 30, 2001) Class A $11.02 Class B 11.02 Class Y 11.00 - ------------------------------------------------------------------------------- CDC NVEST GOVERNMENT SECURITIES FUND - ------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 2001 - ------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest Government Securities Fund's performance to a benchmark index provide you with a general sense of how the fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. In addition, few investors could purchase all of the securities necessary to match the index and would incur transaction costs and other expenses even if they could. GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES LEHMAN BROTHERS NET ASSET VALUE(1) MAXIMUM SALES CHARGE(2) GOVERNMENT BOND INDEX(4) 6/30/91 10000 9550 10000 10179 9721 10119 10512 10039 10354 10805 10319 10571 10811 10324 10664 10760 10276 10771 11525 11006 11138 11369 10857 10964 11459 10943 11007 11323 10814 10943 11377 10865 11012 11623 11100 11216 6/30/92 11813 11281 11376 12082 11538 11663 12212 11662 11772 12368 11812 11937 12133 11587 11766 12068 11524 11746 12309 11755 11943 12509 11946 12197 12752 12179 12441 12731 12158 12482 12805 12229 12578 12880 12301 12565 6/30/93 13097 12507 12844 13173 12580 12922 13469 12863 13210 13537 12928 13260 13576 12965 13311 13412 12809 13164 13417 12814 13216 13554 12944 13397 13233 12637 13113 12991 12406 12818 12891 12311 12716 12884 12304 12700 6/30/94 12736 12163 12671 12906 12325 12904 12911 12330 12906 12731 12158 12724 12730 12157 12715 12657 12087 12692 12687 12116 12770 12884 12304 13007 13179 12586 13287 13266 12669 13371 13402 12799 13546 14135 13499 14092 6/30/95 14223 13583 14200 14084 13451 14148 14236 13595 14313 14414 13765 14451 14685 14024 14670 14971 14297 14899 15229 14543 15111 15287 14600 15203 14912 14241 14893 14745 14082 14769 14630 13971 14675 14554 13899 14650 6/30/96 14704 14042 14839 14730 14068 14876 14636 13977 14843 14894 14223 15090 15245 14559 15422 15557 14857 15690 15347 14656 15530 15365 14673 15547 15374 14682 15569 15168 14485 15404 15354 14663 15625 15485 14788 15760 6/30/97 15701 14994 15936 16360 15624 16389 15991 15272 16227 16282 15550 16470 16604 15857 16755 16724 15971 16840 16931 16169 17017 17169 16396 17273 17088 16319 17226 17077 16309 17274 17129 16358 17352 17345 16565 17531 6/30/98 17607 16815 17730 17574 16783 17757 18114 17299 18219 18612 17775 18711 18379 17552 18647 18483 17651 18653 18458 17627 18694 18637 17798 18802 17919 17113 18355 17962 17154 18426 18021 17210 18469 17780 16980 18306 6/30/99 17572 16781 18269 17443 16658 18242 17313 16534 18242 17537 16748 18390 17525 16737 18419 17448 16663 18393 17272 16495 18274 17290 16512 18299 17594 16803 18559 17981 17172 18886 17835 17032 18833 17772 16972 18844 6/30/00 18080 17267 19180 18250 17429 19366 18570 17734 19652 18497 17665 19707 18665 17825 19897 19093 18234 20289 19500 18622 20692 19631 18748 20901 19880 18986 21140 19895 19000 21214 19607 18725 20997 19675 18790 21067 6/30/01 19707 18821 21163 The illustration represents past performance and does not guarantee future results. Share price and return will vary and you may have a gain or loss when you sell your shares. Other classes of shares are available for which performance, fees, and expenses will differ. All results include reinvestment of dividends and capital gains. AVERAGE ANNUAL TOTAL RETURNS -- JUNE 30, 2001 - ------------------------------------------------------------------------------- CLASS A (Inception 9/16/85) 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Net Asset Value(1) 1.06% 9.00% 6.03% 7.02% With Maximum Sales Charge(2) -3.51 4.11 5.05 6.52 - ------------------------------------------------------------------------------- CLASS B (Inception 9/23/93) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 0.69% 8.19% 5.21% 4.18% With CDSC(3) -4.24 3.19 4.88 4.18 - ------------------------------------------------------------------------------- CLASS Y (Inception 3/31/94) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 1.16% 9.31% 6.32% 6.23% - -------------------------------------------------------------------------------
SINCE SINCE FUND'S FUND'S CLASS B CLASS Y COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION INCEPTION Lehman Government Bond Index(4) 2.27% 10.33% 7.36% 7.79% 6.22% 7.17% Morningstar Long Government Fund Avg.(5) 1.12 9.01 6.04 7.04 5.54 6.77 Lipper General Government Funds Avg.(6) 1.89 9.52 6.41 6.94 5.33 6.21
NOTES TO CHARTS These returns represent past performance and do not guarantee future results. Share price and returns will vary and you may have a gain or loss when you sell your shares. Recent returns may be higher or lower than those shown. Class Y shares are available to certain institutional investors only. (1) These results include reinvestment of any dividends and capital gains, but do not include a sales charge. (2) These results include reinvestment of any dividends and capital gains, and the maximum sales charge of 4.50%. (3) These results include reinvestment of any dividends and capital gains. Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares. (4) Lehman Brothers Government Bond Index is an unmanaged index of public debt of the U.S. Treasury, government agencies, and their obligations. You may not invest directly in an index. Class B since inception return is calculated from 9/30/93. (5) Morningstar Long Government Fund Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. Class B since-inception return is calculated from 9/30/93. (6) Lipper General Government Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. Class B since-inception return is calculated from 9/30/93. PORTFOLIO AS OF JUNE 30, 2001 - ------------------------------------------------------------------------------- PORTFOLIO MIX U.S. GOVERNMENT 45.2% MORTGAGE-BACKED 52.8% SHORT TERM INVESTMENT & OTHER 2.0% EFFECTIVE MATURITY FIVE YEARS OR LESS 1.4% 6-10 YEARS 23.6% 10+ YEARS 75.0% AVERAGE MATURITY: 19.1 YEARS All portfolio composition information is subject to change FINANCIAL STATEMENTS - --------------------------------------------------------------------------------------------------- SHORT TERM CORPORATE INCOME FUND -- SCHEDULE OF INVESTMENTS - --------------------------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
RATINGS (C) --------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (A) - --------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 95.4% OF TOTAL NET ASSETS AEROSPACE/DEFENSE -- 0.8% $ 500,000 Raytheon Co., 6.300%, 3/15/2005 .......................... Baa3 BBB- $ 491,007 ------------ ASSET BACKED -- 5.9% 1,471,755 AmeriCredit Automobile 7.150%, 8/12/2004 .......................... Aaa AAA 1,509,731 1,000,000 CIT Equipment Collateral Trust, 6.840%, 6/20/2004 .......................... 1,028,246 1,000,000 WFS Financial Owner Trust, 7.750%, 11/20/2004 ......................... Aaa AAA 1,037,661 ------------ 3,575,638 ------------ BANKS -- 1.7% 1,000,000 FleetBoston Financial Corp., 7.250%, 9/15/2005 .......................... A2 A 1,048,952 ------------ CABLE & Media -- 4.2% 500,000 Comcast Cable Communications, 6.375%, 1/30/2006 .......................... Baa2 BBB 503,768 1,000,000 Continental Cablevision, Inc., 8.500%, 9/15/2001 .......................... A3 A 1,007,267 1,000,000 Cox Communications, Inc., 6.875%, 6/15/2005 .......................... Baa2 BBB 1,020,164 ------------ 2,531,199 ------------ CANADIAN -- 1.6% 1,000,000 Quebec Province Canada, 5.500%, 4/11/2006 .......................... A2 A+ 986,135 ------------ CHEMICALS -- 1.2% 750,000 Praxair, Inc., 6.500%, 3/01/2008 .................................. A3 BBB+ 745,463 ------------ COMPUTER SOFTWARE & Services-- 1.7% 1,000,000 Sun Microsystems, Inc., 7.000%, 8/15/2002 .......................... Baa1 BBB+ 1,014,323 ------------ CONSUMER FINANCE -- 3.7% 1,200,000 Countrywide Home Loan, Inc., 6.850%, 6/15/2004 .......................... A3 A 1,236,731 1,000,000 Household Finance Corp., 6.500%, 1/24/2006 .......................... A2 A 1,014,485 ------------ 2,251,216 ------------ CONSUMER PRODUCTS -- 1.7% 1,000,000 Unilever Corp., 6.750%, 11/01/2003 ......................... A1 A+ 1,037,805 ------------ FINANCE-- 11.6% 1,000,000 Boeing Capital Corp., 7.100%, 9/27/2005 .......................... A2 AA- 1,050,754 500,000 CIT Group Inc., Reorganized, 7.500%, 11/14/2003 ......................... A2 A+ 523,354 1,000,000 Ford Motor Credit Co., 7.500%, 6/15/2003 .......................... A2 A 1,040,549 1,000,000 General Electric Capital Corp., Medium Term Note, 6.750%, 9/11/2003 ........ Aaa AAA 1,040,201 1,500,000 General Motors Acceptance Corp., 7.625%, 6/15/2004 .......................... A2 A 1,576,980 1,000,000 John Deere Capital Corp., 7.000%, 10/15/2002 ......................... A2 A+ 1,029,032 750,000 Toyota Motor Credit Corp., 5.625%, 11/13/2003 ......................... Aa1 AAA 759,263 ------------ 7,020,133 ------------ FINANCE & Banking -- 2.5% 800,000 Salomon Smith Barney Holdings, Inc., 5.875%, 3/15/2006 .......................... -- A 795,743 750,000 Wells Fargo & Co., 5.900%, 5/21/2006 .......................... Aa2 A+ 749,375 ------------ 1,545,118 ------------ FINANCIAL SERVICES -- 2.2% 500,000 Dean Witter Discover & Co., 6.875%, 3/01/2003 .......................... Aa3 AA- 515,884 750,000 Lehman Brothers Holdings, 7.750%, 1/15/2005 .......................... A2 A 789,643 ------------ 1,305,527 ------------ FOOD & Beverages -- 1.6% 1,000,000 Aramark Services, Inc., 6.750%, 8/01/2004 .......................... Baa3 BBB- 987,849 ------------ FOODS -- 2.6% 1,025,000 Conagra, Inc., 7.400%, 9/15/2004 .......................... Baa2 BBB 1,063,885 500,000 Kellogg Co., 6.000%, 4/01/2006 .......................... Baa2 BBB 496,028 ------------ 1,559,913 ------------ INSURANCE -- 1.7% 1,000,000 USAA Capital Corp., 144A, 7.410%, 6/30/2003 .......................... Aa1 AAA 1,045,323 ------------ MACHINERY -- 1.2% 750,000 Ingersoll Rand Co., 6.250%, 5/15/2006 .......................... A3 A- 753,793 ------------ MANUFACTURING-DIVERSIFIED -- 3.4% 1,000,000 Honeywell International, Inc., 6.875%, 10/03/2005 ......................... A2 A 1,040,321 1,000,000 United Technologies Corp., 6.625%, 11/15/2004 ......................... A2 A+ 1,033,696 ------------ 2,074,017 ------------ MEDIA & ENTERTAINMENT -- 0.9% 500,000 Viacom, Inc., 7.750%, 6/01/2005 .......................... A3 A- 531,656 ------------ MORTGAGE BACKED -- 10.3% 1,000,000 Federal Home Loan Mortgage Corp., 7.375%, 5/15/2003 .......................... Aaa -- 1,049,530 1,632,807 Federal Home Loan Mortgage Corp., 7.500%, 8/1/2009 ........................... Aaa AAA 1,688,094 341,623 Federal Home Loan Mortgage Corp., 8.340%, 3/1/2025 (d) ....................... Aaa AAA 345,091 162,533 Federal Home Loan Mortgage Corp., 8.410%, 12/1/2025 (d) ...................... Aaa AAA 163,726 272,651 Federal National Mortgage Association, 6.200%, 9/1/2023 (d) ....................... Aaa AAA 274,271 537,849 Federal National Mortgage Association, 7.220%, 1/1/2020 (d) ....................... Aaa AAA 550,203 1,000,000 Federal National Mortgage Association, 7.300%, 7/19/2005 .......................... Aaa -- 1,032,030 202,988 Federal National Mortgage Association, 7.320%, 6/1/2019 (d) ....................... Aaa AAA 206,793 174,471 Federal National Mortgage Association, 7.680%, 5/1/2020 (d) ....................... Aaa AAA 174,742 127,336 Federal National Mortgage Association, 7.820%, 8/1/2017 (d) ....................... Aaa AAA 127,604 583,096 Federal National Mortgage Association, 8.600%, 1/1/2024 (d) ....................... Aaa AAA 599,224 ------------ 6,211,308 ------------ OIL & GAS-MAJOR INTEGRATED -- 3.4% 1,000,000 Coastal Corp., 7.500%, 8/15/2006 .......................... Baa2 BBB 1,031,526 1,000,000 Conoco, Inc., 5.900%, 4/15/2004 .......................... A3 A- 1,012,909 ------------ 2,044,435 ------------ PAPER & FOREST PRODUCTS -- 2.5% 1,500,000 International Paper Co., 5.604%, 7/08/2002 .......................... NA BBB 1,501,713 ------------ RETAIL-DEPARTMENT STORE-- 1.7% 1,000,000 Federated Department Stores, Inc., 8.500%, 6/15/2003 .......................... Baa1 BBB+ 1,054,872 ------------ RETAIL-GENERAL MERCHANDISE -- 1.3% 750,000 Price Costco, Inc., 7.125%, 6/15/2005 .......................... A2 A 764,851 ------------ RETAIL-GROCERY -- 3.4% 1,000,000 Delhaize America, Inc., 7.375%, 4/15/2006 .......................... Baa3 BBB- 1,026,639 1,000,000 Safeway, Inc., 7.000%, 9/15/2002 .......................... Baa2 BBB 1,018,918 ------------ 2,045,557 ------------ TELECOMMUNICATIONS-- 4.3% 1,500,000 Verizon Global Fund Corp., 6.750%, 12/01/2005 ......................... A1 A+ 1,540,762 1,000,000 WorldCom, Inc., 8.000%, 5/15/2006 .......................... A3 BBB+ 1,037,693 ------------ 2,578,455 ------------ U.S. GOVERNMENT-- 9.0% 1,000,000 United States Treasury Notes 5.750%, 11/15/2005 ......................... Aaa AAA 1,024,210 2,000,000 United States Treasury Notes 5.875%, with various maturities to 2004 (e) ................................ Aaa AAA 2,067,180 2,300,000 United States Treasury Notes 6.125%, 8/31/2002 .......................... Aaa AAA 2,354,625 ------------ 5,446,015 ------------ UTILITIES-- 9.3% 1,000,000 Detroit Edison Securitization Funding LLC, 5.510%, 3/01/2007 .......................... 1,000,308 800,000 DTE Energy Co., 6.000%, 6/01/2004 .......................... Baa2 BBB 803,626 1,329,427 Kansas Gas & Electric Co., 6.760%, 9/29/2003 .......................... Ba2 BB- 1,321,303 1,000,000 Nisource Finance Corp., 5.750%, 4/15/2003 .......................... Baa2 BBB 1,002,386 1,000,000 PSE & G Transition Funding LLC, 5.740%, 3/15/2007 .......................... 1,011,296 500,000 Wisconsin Energy Corp., 5.875%, 4/01/2006 .......................... A2 A+ 497,291 ------------ 5,636,210 ------------ Total Bonds and Notes (Identified Cost $56,978,832) .............. 57,788,483 ------------ SHORT TERM INVESTMENTS -- 4.4% OF TOTAL NET ASSETS 1,000,000 American General Finance Corp. 3.870%, 7/05/2001 .......................... 999,570 1,640,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% to be repurchased at $1,640,376 on 7/02/2001, collateralized by $1,310,000 U.S. Treasury Bond, 8.125%, due 8/15/2019 valued at $1,678,946 ....................... 1,640,000 ------------ Total Short Term Investments (Identified Cost $2,639,570) ............... 2,639,570 ------------ Total Investments-- 99.8% (Identified Cost $59,618,402) (b) .......... 60,428,053 Other assets less liabilities .............. 138,279 ------------ Total Net Assets-- 100% .................... $ 60,566,332 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2001 the net unrealized appreciation on investments based on cost of $59,618,402 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 ....................................... $ 988,535 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ..................................... (178,884) ------------ Net unrealized appreciation ......................... $ 809,651 ============ At December 31, 2000, the Fund had a capital loss carryover of approximately $19,538,108 of which $5,625,994 expires on December 31, 2002, $6,075,626 expires on December 31, 2003, $2,134,629 expires on December 31, 2004, $455,288 expires on December 31, 2005, $1,444,376 expires on December 31, 2006, and $1,865,560 expires on December 31, 2007 and $1,936,635 expires on December 31, 2008. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) The ratings shown are believed to be the most recent ratings available at June 30, 2001. Securities are generally rated at the time of issuance. The rating agencies may revise their ratings from time to time. As a result, there can be no assurance that the same ratings would be assigned if the securities were rated at June 30, 2001. The Fund's subadviser independently evaluates the Fund's portfolio securities and in making investment decisions does not rely solely on the ratings of agencies. (d) Variable rate mortgage backed securities. The interest rates change on these instruments monthly based on changes in a designated base rate. The rates shown were those in effect at June 30, 2001. (e) The Fund's investments in United States Treasury Notes, which have the same coupon rate, have been aggregated for the purpose of presentation in the schedule of investments. See accompanying notes to financial statements.
- --------------------------------------------------------------------------------------------------- BOND INCOME FUND -- SCHEDULE OF INVESTMENTS - --------------------------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
RATINGS (C) --------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (A) - --------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 97.3% OF TOTAL NET ASSETS AEROSPACE -- 1.0% $ 490,000 Lockheed Martin Corp., 8.200%, 12/01/2009 ......................... Baa3 BBB- $ 528,573 1,045,000 Lockheed Martin Corp., 8.500%, 12/01/2029 ......................... Baa3 BBB- 1,162,164 1,400,000 Northrop Grumman Corp., 7.125%, 2/15/2011, 144A .................... Baa3 BBB- 1,385,839 ------------ 3,076,576 ------------ ALUMINUM-- 0.6% 1,970,000 Alcan Aluminum Ltd, 6.450%, 3/15/2011 .......................... A2 A- 1,929,940 ------------ ASSET BACKED-- 0.8% 2,413,679 Americredit Automobile 7.150%, 8/12/2004 .......................... Aaa AAA 2,475,959 ------------ BANKS-- 0.7% 2,340,000 Capital One Bank, 6.875%, 2/01/2006 .......................... Baa2 BBB- 2,286,531 ------------ BUSINESS SERVICES-- 0.7% 2,630,000 Equifax, Inc., 6.900%, 7/01/2028 .......................... Baa1 A- 2,294,715 ------------ CABLE & MEDIA-- 5.8% 1,500,000 AOL Time Warner Inc., 6.750%, 4/15/2011 .......................... Baa1 BBB+ 1,478,763 1,990,000 British Sky Broadcasting Group, 8.200%, 7/15/2009 .......................... Ba1 BB+ 1,970,534 2,625,000 Comcast Cable Communications, 6.750%, 1/30/2011 .......................... Baa2 BBB 2,570,014 1,200,000 Continental Cablevision, Inc., 9.500%, 8/01/2013 .......................... A3 A 1,334,092 2,000,000 CSC Holdings, Inc., 7.625%, 7/15/2018 .......................... Ba1 BB+ 1,805,844 3,500,000 CSC Holdings, Inc., 7.875%, 2/15/2018 .......................... Ba1 BB+ 3,239,554 840,000 News America Holdings Inc., 10.125%, 10/15/2012 ........................ Baa3 BBB- 914,429 3,000,000 News America Holdings, Inc., 7.750%, 2/01/2024 .......................... Baa3 BBB- 2,837,589 2,245,000 News America Holdings, Inc., 8.250%, 8/10/2018 .......................... Baa3 BBB- 2,240,750 ------------ 18,391,569 ------------ CHEMICALS-DIVERSIFIED-- 0.4% 1,330,000 Chevron Phillips Chemical, 7.000%, 3/15/2011 .......................... Baa1 BBB+ 1,314,176 ------------ ELECTRIC UTILITIES-- 7.0% 910,000 American Electric Power Inc., 6.125%, 5/15/2006 .......................... Baa1 BBB+ 899,164 1,945,000 Arizona Public Service Corp., 8.000%, 12/30/2015 ......................... Baa2 BBB 1,968,583 450,000 Exelon Corp., 6.750%, 5/01/2011 .......................... Baa1 BBB+ 443,754 3,170,000 HQI Transelec Chile S A, 7.875%, 4/15/2011, 144A .................... Baa1 A- 3,187,616 3,050,000 Hydro Quebec, 8.050%, 7/07/2024 .......................... A2 A+ 3,430,552 3,542,000 New Mexico Public Service Corp., 10.250%, 10/01/2012 ........................ Ba2 BBB- 3,802,160 1,110,000 NRG Energy Inc., 7.750%, 4/01/2011 .......................... Baa3 BBB- 1,125,119 1,912,000 Ohio Edison Corp., 8.680%, 6/01/2017 .......................... Baa2 BB- 2,043,997 1,580,000 Progress Energy Inc., 7.100%, 3/01/2011 .......................... Baa1 BBB 1,602,949 2,470,000 PSE&G Power LLC, 7.750%, 4/15/2011, 144A .................... Baa1 BBB 2,549,284 1,390,000 Southern California Edison Co., 7.200%, 11/03/2003 ......................... -- CC 1,021,650 ------------ 22,074,828 ------------ ENERGY-- 3.1% 1,860,000 AES Corp., 8.875%, 2/15/2011 .......................... Ba1 BB 1,827,450 1,745,000 AES Corp., 9.375%, 9/15/2010 .......................... Ba1 BB 1,771,175 990,000 AES Eastern Energy LP 9.670%, 1/2/2029 ........................... Ba1 BBB- 986,901 645,000 Pioneer Natural Resources Co., 9.625%, 4/01/2010 .......................... Ba1 BB+ 707,852 1,300,000 Sempra Energy, 6.950%, 12/01/2005 ......................... A2 A 1,280,270 2,990,000 Southern Energy, 8.625%, 6/30/2012 .......................... Baa3 BBB- 3,082,173 ------------ 9,655,821 ------------ FEDERAL AGENCIES-- 24.5% 6,630,000 Federal Home Loan Mortgage Corp. 5.000%, 1/15/2004 (e) ...................... Aaa AAA 6,648,631 6,500,000 Federal National Mortgage Association 5.250%, 1/15/2009 .......................... Aaa AAA 6,214,585 22,083,377 Federal National Mortgage Association 6.500%, with various maturities to 2031(d) .................................... Aaa AAA 22,084,800 940,000 Federal National Mortgage Association 6.625%, 11/15/2010 ......................... Aaa AAA 971,133 12,940,983 Federal National Mortgage Association 7.000%, 10/1/2030 .......................... Aaa AAA 13,001,383 5,857,352 Federal National Mortgage Association 7.500%, with various maturities to 2030 (d) ................................... Aaa AAA 5,980,530 2,709,085 Government National Mortgage Association 6.000%, 1/15/2029 .......................... Aaa AAA 2,624,724 6,991,260 Government National Mortgage Association 6.500%, with various maturities to 2031 (d) ................................... Aaa AAA 6,928,200 6,324,675 Government National Mortgage Association 7.000%, with various maturities to 2029 (d) ................................... Aaa AAA 6,395,500 2,519,925 Government National Mortgage Association 7.500%, with various maturities to 2030 (d) ................................... Aaa AAA 2,588,122 2,133,035 Government National Mortgage Association 8.000%, 11/15/2029 ......................... Aaa AAA 2,210,422 1,286,882 Government National Mortgage Association 8.500%, with various maturities to 2023 (d) ................................... Aaa AAA 1,362,969 102,850 Government National Mortgage Association 9.000%, with various maturities to 2016 (d) ................................... Aaa AAA 111,241 145,172 Government National Mortgage Association 11.500%, with various maturities to 2018 (d) ................................... Aaa AAA 165,503 ------------ 77,287,743 ------------ FINANCE & BANKING-- 8.6% 3,575,000 American General Finance Corp., 8.450%, 10/15/2009 ......................... A2 A+ 3,976,844 4,040,000 Ford Motor Credit Co., 7.375%, 2/01/2011 (e) ...................... A2 A 4,086,028 1,990,000 General Electric Capital Corp., 6.800%, 11/01/2005 ......................... Aaa AAA 2,086,278 3,450,000 General Motors Acceptance Corp., 6.750%, 1/15/2006 (e) ...................... A2 A 3,506,697 1,600,000 General Motors Acceptance Corp., 7.250%, 3/02/2011 .......................... A2 A 1,621,368 2,500,000 Merita Bank, Ltd., 7.150%, 12/29/2049 ......................... A1 A- 2,544,550 2,000,000 Merita Bank, Ltd., 7.150%, 12/29/2049 ......................... A1 A- 2,035,640 2,500,000 Nisource Finance Corp., 7.875%, 11/15/2010 ......................... Baa2 BBB 2,653,053 2,200,000 State Street Institutional Capital A, 7.940%, 12/30/2026 ......................... Aa3 A 2,230,155 2,100,000 UBS Preferred Funding, 8.622%, 10/29/2049 ......................... Aa2 AA- 2,273,687 ------------ 27,014,300 ------------ FINANCIAL SERVICES-- 1.9% 1,780,000 Citigroup, Inc., 6.500%, 1/18/2011 .......................... Aa2 AA- 1,769,843 560,000 Citigroup, Inc., 6.750%, 12/01/2005 ......................... Aa2 AA- 579,369 1,600,000 Qwest Capital Funding, Inc., 7.250%, 2/15/2011 .......................... Baa1 BBB+ 1,586,653 2,000,000 Qwest Capital Funding, Inc., 7.750%, 2/15/2031 .......................... Baa1 BBB+ 1,967,372 ------------ 5,903,237 ------------ FOOD & BEVERAGES -- 1.8% 4,600,000 Aramark Services, Inc., 7.000%, 7/15/2006 (e) ...................... Baa3 BBB- 4,415,489 740,000 Kellogg Co., 6.600%, 4/01/2011 .......................... Baa2 BBB 724,408 550,000 Kellogg Co., 7.450%, 4/01/2031 .......................... Baa2 BBB 551,318 ------------ 5,691,215 ------------ FOOD-RETAILERS/WHOLESALERS -- 2.1% 4,205,000 Great Atlantic and Pacific Tea, Inc., 7.750%, 4/15/2007 .......................... B2 BB 3,368,234 2,920,000 Kroger Co., 7.800%, 8/15/2007 .......................... Baa3 BBB- 3,096,234 ------------ 6,464,468 ------------ FOREIGN GOVERNMENTS AND GOVERNMENT AGENCIES-- 3.5% 1,720,000 Panama Republic, 8.875%, 9/30/2027 .......................... Ba1 BB+ 1,548,000 1,600,000 Panama Republic, 8.875%, 9/30/2027 .......................... Ba1 BB+ 1,464,000 560,000 Panama Republic, 9.625%, 2/08/2011 .......................... Ba1 BB+ 568,400 5,000,000 Province of British Columbia, 7.750%, 6/16/2003 (CAD) .................... -- AA- 3,449,559 3,000,000 United Mexican States, 8.500%, 2/01/2006 (e) ...................... Baa3 BB+ 3,150,000 660,000 United Mexican States, 9.875%, 2/01/2010 .......................... Baa3 BB+ 723,690 ------------ 10,903,649 ------------ GENERAL OBLIGATIONS-- 0.6% 1,900,000 Connecticut RRB Special Purpose Trust 5.360%, 3/30/2007 .......................... -- -- 1,900,441 ------------ INDUSTRIALS-- 1.9% 3,380,000 Kinder Morgan Energy Partners, 6.750%, 3/15/2011 .......................... Baa1 A- 3,332,636 1,040,000 Praxair, Inc., 6.500%, 3/01/2008 .......................... A3 BBB+ 1,033,709 1,750,000 Transocean Sedco Forex, Inc., 6.625%, 4/15/2011 .......................... Baa2 A- 1,720,789 ------------ 6,087,134 ------------ INSURANCE-- 0.5% 1,810,000 Conseco, Inc., 9.000%, 10/15/2006 ......................... B1 BB- 1,696,875 ------------ METAL-- 1.4% 4,510,000 Phelps Dodge Corp., 9.500%, 6/01/2031 .......................... Baa2 BBB 4,429,564 ------------ OIL-FOREIGN-- 2.3% 345,000 PDVSA Finance Ltd., 8.750%, 2/15/2004 (yankee) ......................... Baa1 -- 350,006 3,535,000 Pemex Finance, Ltd., 8.020%, 5/15/2007 (yankee) (e) ..................... -- BBB+ 3,684,053 3,000,000 Pemex Finance, Ltd., 9.150%, 11/15/2018 (yankee) (e) .................... -- BBB+ 3,256,125 ------------ 7,290,184 ------------ OIL & Gas-- 1.2% 1,750,000 Alliance Pipeline LP, 6.996%, 12/31/2019 ......................... A3 BBB 1,719,483 2,140,000 Dynegy Holdings Inc., 6.875%, 4/01/2011 .......................... Baa2 BBB+ 2,095,116 ------------ 3,814,599 ------------ PAPER & FOREST PRODUCTS-- 2.0% 840,000 Abitibi Consolidated, Inc, 8.550%, 8/01/2010 (e) ...................... Baa3 BBB- 882,066 2,190,000 Abitibi-Consolidated, Inc., 6.950%, 4/01/2008 .......................... Baa3 BBB- 2,134,438 480,000 Georgia Pacific Corp., 8.875%, 5/15/2031 .......................... Baa2 BBB- 481,840 900,000 Kappa Beheer BV, 10.625%, 7/15/2009 ......................... B2 B 949,500 1,100,000 Kappa Beheer BV, 10.625%, 7/15/2009 (EUR) ................... B2 B 1,007,702 740,000 Stora Enso Corp., 7.375%, 5/15/2011 .......................... Baa1 BBB+ 751,073 ------------ 6,206,619 ------------ RAILROADS-- 0.9% 2,810,000 CSX Corp., 6.750%, 3/15/2011 .......................... Baa2 BBB 2,761,758 ------------ RETAIL-DEPARTMENT STORE -- 0.5% 1,785,000 Penney J C, Inc., 9.750%, 6/15/2021 .......................... Ba2 BBB- 1,570,738 ------------ RETAIL-FOOD & Drug -- 0.6% 1,370,000 Rite Aid Corp., 7.125%, 1/15/2007 .......................... B1 B- 1,150,800 750,000 Rite Aid Corp., 7.700%, 2/15/2027 .......................... B1 B- 558,750 ------------ 1,709,550 ------------ RETAIL-GROCERY -- 0.5% 970,000 Delhaize America, Inc., 8.125%, 4/15/2011 .......................... Baa3 BBB- 1,013,503 560,000 Delhaize America, Inc., 9.000%, 4/15/2031 .......................... Baa3 BBB- 610,807 ------------ 1,624,310 ------------ SUPRANATIONAL-- 0.8% 5,000,000 World Bank, 5.500%, 5/14/2003 (AUD) .................... Aaa AAA 2,542,599 ------------ TELEPHONE-- 1.6% 1,265,000 Sprint Capital Corp., 7.625%, 1/30/2011 .......................... Baa1 BBB+ 1,257,259 3,630,000 Telefonos de Mexico SA de CV, 8.250%, 1/26/2006 .......................... Baa3 BB+ 3,761,588 ------------ 5,018,847 ------------ TELECOMMUNICATIONS -- 15.6% 2,040,000 AT&T Wireless Services, Inc., 8.750%, 3/01/2031 .......................... Baa2 BBB 2,125,152 2,750,000 British Telecommunications PLC, 1.000%, 12/15/2010 ......................... Baa1 A- 2,926,060 1,970,000 Citizens Communications Co., 9.250%, 5/15/2011 .......................... Baa2 BBB 2,051,294 1,885,000 Corning, Inc., 5.625%, 2/18/2005 (EUR) .................... -- -- 1,559,104 2,970,000 Global Crossing Holdings Ltd, 8.700%, 8/01/2007 .......................... Ba2 BB 2,272,050 1,650,000 GTE Corp., 7.900%, 2/01/2027 (e) ...................... A2 A+ 1,640,532 3,055,000 KPNqwest BV, 7.125%, 6/01/2009 (EUR) .................... Ba1 BB 1,410,983 1,735,000 KPNqwest BV, 8.125%, 6/01/2009 .......................... Ba1 BB 997,625 3,200,000 LCI International, Inc., 7.250%, 6/15/2007 .......................... Baa1 BBB+ 3,293,466 4,260,000 MCI Communications Corp., 7.125%, 6/15/2027 .......................... A3 BBB+ 4,344,092 2,000,000 McLeod USA, Inc., 8.375%, 3/15/2008 .......................... B1 B+ 1,090,000 500,000 McLeod USA, Inc., 9.500%, 11/01/2008 ......................... B1 B+ 282,500 660,000 Royal KPN NV, 8.000%, 10/01/2010 ......................... Baa2 BBB+ 634,198 2,700,000 SK Telecom Co., Ltd., 7.750%, 4/29/2004 .......................... Baa2 BBB 2,810,519 1,010,000 Sprint Capital Corp., 6.900%, 5/01/2019 .......................... Baa1 BBB+ 887,036 9,342,000 Tele-Communications, Inc., 9.250%, 1/15/2023 .......................... A3 A 9,861,406 680,000 Telefonica Europe BV, 7.750%, 9/15/2010 .......................... A2 A+ 700,767 3,920,000 Verizon Global Funding Corp., 7.750%, 12/01/2030, 144A ................... A1 A+ 4,043,688 6,061,000 WorldCom, Inc., 8.875%, 1/15/2006 .......................... A3 BBB+ 6,249,830 ------------ 49,180,302 ------------ U.S. GOVERNMENT-- 4.4% 1,690,000 United States Treasury Bonds 8.125%, 8/15/2021 .......................... Aaa AAA 2,123,586 865,000 United States Treasury Notes 5.000%, 2/15/2011 (e) ...................... Aaa AAA 839,180 3,725,000 United States Treasury Notes 5.750%, 11/15/2005 (e) ..................... Aaa AAA 3,815,182 1,680,000 United States Treasury Notes 6.000%, 8/15/2009 (e) ...................... Aaa AAA 1,762,942 5,000,000 United States Treasury Notes 6.500%, 2/15/2010 (e) ...................... Aaa AAA 5,373,045 ------------ 13,913,935 ------------ Total Bonds and Notes (Identified Cost $309,456,795) ............. 306,512,182 ------------ SHORT TERM INVESMENT -- 1.0% OF TOTAL NET ASSETS 3,214,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% to be repurchased at $3,214,737 on 7/02/2001, collateralized by $3,485,000 U.S. Treasury Bond, 5.25%, due 2/15/2029 valued at $3,278,284 ....................... 3,214,000 ------------ Total Short Term Investment (Identified Cost $3,214,000) ............... 3,214,000 ------------ Total Investments-- 98.3% (Identified Cost $312,670,795) (b) ......... 309,726,182 Other assets less liabilities .............. 5,450,300 ------------ Total Net Assets-- 100% .................... $315,176,482 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2001 the net unrealized depreciation on investments based on cost of $312,670,795 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost ...................................... $ 6,527,668 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value .................................... (9,472,281) ------------ Net unrealized depreciation ........................ $ (2,944,613) ============ At December 31, 2000, the Fund had a capital loss carryover of approximately $10,681,396 of which $2,808,699 expires on December 31, 2007 and $7,872,697 expires on December 31, 2008. this may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) The ratings shown are believed to be the most recent ratings available at June 30, 2001. Securities are generally rated at the time of issuance. The rating agencies may revise their rating from time to time. As a result, there can be no assurance that the same ratings would be assigned if the securities were rated at June 30, 2001. The Fund's subadviser independently evaluates the Fund's portfolio securities and in making investment decisions does not rely solely on the ratings of agencies. (d) The Fund's investments in Government National Mortgage Association securities, which have the same coupon rate, have been aggregated for the purpose of presentation in the schedule of investments. (e) All or a portion of this security was on loan to brokers at June 30, 2001. AUD Australian Dollars CAD Canadian Dollars. EUR Euro 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 June 30, 2001, the value of these securities amounted to $11,166,427 or 3.5% of net assets. See accompanying notes to financial statements.
- --------------------------------------------------------------------------------------------------- HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS - --------------------------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
RATINGS (C) --------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (A) - --------------------------------------------------------------------------------------------------- BONDS AND NOTES-- 87.8% OF TOTAL NET ASSETS AGRICULTURE-- 3.3% $ 3,000,000 IMC Global, Inc., 11.250%, 6/01/2011 ......................... Ba2 BB $ 2,946,960 ------------ AIRLINES-- 3.4% 3,250,000 US Airways, Inc., 10.375%, 3/01/2013 ......................... Ba3 BB- 3,027,017 ------------ CABLE & MEDIA-- 13.5% 3,000,000 Adelphia Communications Corp., 10.875%, 10/01/2010 ........................ B2 B+ 3,022,500 5,500,000 Charter Communications Holdings, 0/9.920%, 4/01/2011 (d) .................... B2 B+ 3,740,000 3,500,000 NTL Communications Corp., 11.500%, 10/01/2008 ........................ B2 B 2,310,000 3,000,000 NTL, Inc., 0/9.750%, 4/01/2008 (d) .................... B2 B 1,305,000 3,500,000 Telewest Communication PLC, 0/11.375%, 2/01/2010 (d) (yankee) .......... B2 B 1,627,500 ------------ 12,005,000 ------------ CHEMICALS-- 6.9% 11,000,000 Huntsman ICI Chemicals, 144A, Zero Coupon, 12/31/2009 .................... B3 B+ 3,410,000 2,750,000 Lyondell Chemical Co., 10.875%, 5/01/2009 ......................... B2 B+ 2,708,750 ------------ 6,118,750 ------------ FINANCE & BANKING-- 7.7% 1,000,000 Conseco Inc, 10.750%, 6/15/2008 ......................... B1 BB- 980,000 2,500,000 Conseco, Inc., 9.000%, 10/15/2006 ......................... B1 BB- 2,312,500 1,950,000 Hanvit Bank, 144A, 12.750%, 3/01/2010 ......................... Ba3 B 2,096,250 1,500,000 Willis Corroon Corp., 9.000%, 2/01/2009 .......................... Ba3 B+ 1,526,250 ------------ 6,915,000 ------------ GOVERNMENT-- 1.1% 1,000,000 Brazil Federative Rep, 11.625%, 4/15/2004 ......................... B1 BB- 1,020,500 ------------ HEALTH CARE SERVICES-- 3.0% 2,500,000 Healthsouth Corp., 10.750%, 10/01/2008 ........................ Ba3 BB+ 2,693,750 ------------ INDUSTRIAL SERVICES-- 4.2% 4,000,000 United Rentals, Inc., 9.250%, 1/15/2009 .......................... B2 BB- 3,720,000 ------------ INDUSTRIALS-- 2.7% 3,750,000 Owens Illinois, Inc., 7.800%, 5/15/2018 .......................... B3 B+ 2,400,000 ------------ MEDIA & ENTERTAINMENT-- 4.9% 4,890,000 Fox Family Worldwide, Inc., 0/10.25%, 11/01/2007 (d) ................... B1 B 4,352,100 ------------ RAILROADS & EQUIPMENT-- 3.1% 3,250,000 TFM SA de CV, 0/11.750%, 6/15/2009 (d) (yankee) .......... B1 BB- 2,795,000 ------------ Restaurants-- 2.9% 2,500,000 Dominos, Inc., 10.375%, 1/15/2009 ......................... B3 B- 2,550,000 ------------ RETAIL-DEPARTMENT STORE-- 2.2% 2,000,000 K Mart Corp., 9.875%, 6/15/2008 .......................... Baa3 BB+ 1,960,000 ------------ STEEL-- 1.0% 3,250,000 Altos Hornos de Mexico SA de CV, 11.875%, 4/30/2004 (e) (yankee) ............ B3 -- 877,500 ------------ TECHNOLOGY-- 2.5% 2,000,000 Exodus Communications, Inc., 11.625%, 7/15/2010 ......................... B3 B 690,000 2,000,000 Xerox Capital Europe PLC, 5.875%, 5/15/2004 .......................... Ba1 BBB- 1,520,000 ------------ 2,210,000 ------------ TELECOMMUNICATIONS-- 12.5% 2,000,000 Alestra SA de Rl de CV, 144A, 12.625%, 5/15/2009 (yankee) ................ B2 BB- 1,770,000 3,000,000 Intermedia Communications, Inc., 0/12.250%, 3/01/2009 (d) ................... B3 CCC+ 2,190,000 6,750,000 Level 3 Communications, Inc., 0/12.875% 3/15/2010 ........................ B3 B 1,417,500 3,500,000 Philippine Long Distance Telephone Co., 10.500%, 4/15/2009 (yankee) ................ Ba2 BB+ 3,198,125 3,775,000 Williams Communications Group, Inc., 10.875%, 10/01/2009 ........................ B2 B+ 1,510,000 6,960,000 XO Communications, Inc., 0/12.250%, 6/01/2009 (d) ................... B2 B 1,044,000 ------------ 11,129,625 ------------ TELECOMMUNICATIONS-CELLULAR-- 6.2% 3,000,000 Grupo Iusacell SA de CV, 14.250%, 12/01/2006 (yankee) ............... B1 B+ 3,180,000 4,250,000 Nextel International, Inc., 0/12.125%, 4/15/2008 (d) ................... B- 935,000 2,600,000 Nextel Partners, Inc., 0/14.000%, 2/01/2009 (d) ................... B3 CCC+ 1,456,000 ------------ 5,571,000 ------------ UTILITIES-- 3.3% 2,957,679 Panda Funding Corp., 11.625%, 8/20/2012 ......................... Ba3 BB- 2,957,679 ------------ WASTE MANAGEMENT-- 3.4% 3,000,000 Allied Waste Industries, Inc., 144A, 10.000%, 8/01/2009 ......................... B2 B+ 3,082,500 ------------ Total Bonds and Notes (Identified Cost $94,708,764) ..................................... 78,332,381 ------------ SHARES - ------------ COMMON STOCK-- 0.0% 1,237 Mothers Work, Inc. (e) ............................................ 9,624 ------------ PREFERRED STOCK-- 8.9% CABLE & MEDIA-- 4.6% 38,435 CSC Holdings, Inc., 11.125%, 04/01/2001, (pay-in-kind) ............ 4,112,545 MEDIA & ENTERTAINMENT-- 1.1% 61,840 Liberty Group Publishing, Inc. 14.750%, 02/01/2010, (paid-in-kind). .............................. 1,004,904 TELECOMMUNICATIONS-- 3.2% 3,929 Adelphia Business Solutions, Inc. 12.875%, 10/15/2007, (paid-in-kind) ............................... 903,718 20,000 Global Crossing Ltd. .............................................. 1,900,000 ------------ 2,803,718 ------------ Total Preferred Stock (Identified Cost $12,279,703) ............... 7,921,167 ------------ SHORT TERM INVESTMENT-- 2.3% 2,028,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% to be repurchased at $2,028,465 on 7/02/2001, collateralized by $1,755,000 U.S. Treasury Bond, 7.500%, due 11/15/2016 valued at $2,070,268 .............................................. 2,028,000 ------------ Total Short Term Investment (Identified Cost $2,028,000) ...................................... 2,028,000 ------------ Total Investments-- 99.0% (Identified Cost $109,016,467) (b) ................................ 88,291,172 Other assets less liabilities ..................................... 875,478 ------------ Total Net Assets-- 100% ........................................... $ 89,166,650 ============ (a) See Note 2a of Notes to the Financial Statements. (b) Federal Tax Information: At June 30, 2001 the net unrealized depreciation on investments based on cost of $109,016,467 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 ............................................................ $ 2,932,369 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value .......................................................... (23,657,664) ------------ Net unrealized depreciation $(20,725,295) ============ At December 31, 2000, the Fund had a net tax basis capital loss carryover of $18,552,106 of which $1,019,386 expires on December 31, 2004 and $918,790 expires on December 31, 2007 and $16,613,930 expires on December 31, 2008. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) The ratings shown are believed to be the most recent ratings available at June 30, 2001. Securities are generally rated at the time of issuance. The rating agencies may revise their rating from time to time. As a result, there can be no assurance that the same ratings would be assigned if the securities were rated at June 30, 2001. The Fund's subadviser independently evaluates the Fund's portfolio securities and in making investment decisions does not rely solely on the ratings of agencies. (d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. (e) Non-income producing security 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 the period end, the value of these securities amounted to $10,358,750 or 11.6% of net assets. See accompanying notes to financial statements.
- --------------------------------------------------------------------------------------------------- STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS - --------------------------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
RATINGS (C) --------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (A) - --------------------------------------------------------------------------------------------------- BONDS AND NOTES-- 89.0% OF TOTAL NET ASSETS CONVERTIBLE BONDS-- 14.0% CANADA-- 0.1% $ 500,000 Rogers Communications, Inc,. yankee, 2.000%, 11/26/2005 ......................... Ba2 BB- $ 382,915 HONG KONG-- 0.8% 4,075,000 Bangkok Bank PLC, 4.589%, 3/03/2004 ........ -- -- 2,088,438 MEXICO-- 0.9% 3,325,000 Empresas ICA Sociedad, yankee, 5.000%, 3/15/2004 .......................... B3 CCC+ 2,227,750 NETHERLANDS-- 0.4% 1,000,000 Burns Philp Treasury Co., Ltd., 144A, 5.500%, 4/30/2004 .......................... -- B- 700,000 500,000 KPNqwest BV, 7.125%, 6/01/2009 .......................... -- -- 231,257 ------------ 931,257 ------------ SOUTH KOREA-- 0.3% 1,000,000 Ssangyong Oil Refining Corp., Ltd., 3.000%, 12/31/2004 ......................... -- -- 775,000 ------------ THAILAND-- 0.4% 910,714 Loxley, Zero Coupon ........................ -- -- 201,107 1,398,564 Loxley Public Co., Ltd., 7.000%, 4/30/2008 .......................... -- -- 559,425 601,000 Siam Commercial Bank Co., 3.250%, 1/24/2004 .......................... B2 BBB 302,003 ------------ 1,062,535 ------------ UNITED KINGDOM-- 1.1% 3,475,000 Colt Telecom Group PLC, 2.000%, 12/16/2006 ......................... -- -- 1,872,652 1,500,000 Jazztel PLC, 14.000%, 7/15/2010 ......................... -- -- 483,731 1,075,000 Jazztel PLC, 13.250%, 12/15/2009 ........................ -- CCC+ 328,428 ------------ 2,684,811 ------------ UNITED STATES-- 10.0% 1,000,000 Analog Devices, Inc., 4.750%, 10/01/2005 ......................... A3 BBB 915,000 3,910,000 Broadband Technologies, Inc., Zero Coupon, 5/15/2049 (e)(g) .............. -- -- 78,200 1,000,000 Builders Transport, Inc., 8.000%, 8/15/2005, (e ) (g) ................ B3 -- 1,250 200,000 Builders Transport, Inc., 6.500%, 5/01/2011, (e) (g) ................. B3 -- 250 1,000,000 Cablevision SA, 144A, 13.750%, 4/30/2007 ......................... B2 BB- 730,000 275,000 CML Group, Inc., 5.500%, 1/15/2003, (e) (g) ................. -- -- 173 500,000 Columbia/HCA Healthcare Corp., Medium Term Note, 7.580%, 9/15/2025 ........ Ba1 BB+ 447,500 802,000 Cray Research, Inc., 6.125%, 2/01/2011 .......................... C CCC- 80,200 1,825,000 Delta Air Lines, Inc., 8.300%, 12/15/2029 ......................... Baa3 BBB- 1,610,097 1,000,000 Dillards, Inc., 6.430%, 8/01/2004 .......................... Ba1 BBB- 933,080 250,000 Dillards, Inc., 6.625%, 1/15/2018 .......................... Ba1 BBB- 189,538 250,000 Dixie Group, Inc., 7.000%, 5/15/2012 .......................... B3 CCC+ 75,000 950,000 Edo Corp., 7.000%, 12/15/2011 ......................... B3 -- 908,190 1,400,000 Exide Corp., 144A, 2.900%, 12/15/2005 ................... B3 B- 617,750 250,000 Federal Realty Investment Trust, 5.250%, 10/28/2003, (REIT) ................. Baa3 BBB- 224,500 575,000 Glycomed, Inc., 7.500%, 1/01/2003 .......................... Caa -- 467,906 250,000 Hilton Hotels Corp., 5.000%, 5/15/2006 .......................... Ba2 BB+ 224,625 375,000 IMC Global, Inc., 7.300%, 1/15/2028 .......................... Ba2 B+ 249,026 2,500,000 Intermedia Communications, Inc., 8.600%, 6/01/2008 .......................... B2 B 2,450,000 525,000 Intevac, Inc., 6.500%, 3/01/2004 .......................... -- -- 250,688 1,375,000 Kent Electronics Corp., 4.500%, 9/01/2004 .......................... -- BBB+ 1,355,887 550,000 Level 3 Communications, Inc., 0/12.875%, 3/15/2010 (d) ................... B3 B 115,500 1,525,000 Level 3 Communications, Inc., 6.000%, 3/15/2010 .......................... -- CCC 324,367 4,250,000 Loews Corp., 3.125%, 9/15/2007 .......................... A2 A+ 3,615,050 250,000 LSI Logic Corp., 4.000%, 2/15/2005 .......................... B1 B 205,400 350,000 MascoTech, Inc., 4.500%, 12/15/2003 ......................... B2 B 276,500 1,464,000 Maxtor Corp., 5.750%, 3/01/2012 .......................... B3 -- 1,024,800 1,098,000 Nabi, Inc., 6.500%, 2/01/2003 .......................... B3 CCC- 941,535 125,000 NorAm Energy Corp., 6.000%, 3/15/2012 .......................... Baa2 BBB 115,469 500,000 NTL Communications Corp., 0/11.500%, 11/15/2009 (d) .................. B2 -- 144,271 3,100,000 NTL Communications Corp., Series B, 0/9.750%, 4/15/2009 (d) .................... -- -- 1,413,146 500,000 Preston Corp., 7.000%, 5/01/2011 .......................... B2 -- 380,000 355,000 Richardson Electronics Ltd., 7.250%, 12/15/2006 ......................... B3 -- 305,300 450,000 S3, Inc., 5.750%, 10/01/2003 ......................... -- -- 305,438 500,000 Schuler Homes, Inc., 6.500%, 1/15/2003 .......................... Ba3 -- 486,700 500,000 Sizeler Property Investments, Inc., 8.000%, 7/15/2003, (REIT) .................. -- -- 490,150 250,000 Southern California Edison Co., 7.625%, 1/15/2010 .......................... -- D 175,000 600,000 Telxon Corp., 5.750%, 1/01/2003 .......................... -- CCC+ 578,250 150,000 Thermedics Corp., Zero Coupon, 6/01/2003 ..................... -- -- 125,250 350,000 Thermo Electron Corp., 144A, 4.250%, 1/01/2003 .......................... Baa3 BBB 333,165 3,000,000 Western Digital Corp., 144A, Zero Coupon, 2/18/2018 ..................... B3 -- 960,000 250,000 Xerox Capital Europe PLC, 5.875%, 5/15/2004 .......................... Ba1 BBB- 190,000 2,750,000 Xerox Corp., 144A, 0.570%, 4/21/2018 .......................... Ba3 BB+ 1,182,500 500,000 XO Communications, Inc., 0/9.45%, 4/15/2008 (d) ..................... B2 -- 75,000 ------------ 25,571,651 ------------ Total Convertible Bonds (Identified Cost $48,489,023) ..................................... 35,724,357 ------------ NON-CONVERTIBLE BONDS-- 75.0% ARGENTINA-- 1.7% $ 1,879,058 Argentina Republic, 7.000%, 12/19/2008 ......................... -- -- $ 1,428,084 3,500,000 Argentina Republic, yankee, 8.875%, 3/01/2029, (ARS) ................... B2 BB 2,078,720 1,000,000 Compania de Alimentos Fargo SA, yankee, 13.250%, 8/01/2008, (ARS) .................. B1 B- 700,000 ------------ 4,206,804 ------------ BRAZIL-- 5.9% 6,711,181 Federal Republic of Brazil, 8.000%, 4/15/2014, (f) ..................... B1 BB- 4,966,274 14,008,000 Federal Republic of Brazil, 10.125%, 5/15/2027 ......................... B1 BB- 10,169,808 ------------ 15,136,082 ------------ CANADA-- 21.1% 2,628,000 Alberta Province, 5.930%, 9/16/2016, (CAD) ................... Aaa AAA 1,698,498 18,505,000 British Columbia Province, Zero Coupon, 9/05/2020, (CAD) .............. Aa2 AA- 3,319,869 17,900,000 British Columbia Province, Zero Coupon, 6/09/2022, (CAD) .............. Aa2 AA- 2,871,492 9,775,000 British Columbia Province, Zero Coupon, 8/19/2022, (CAD) .............. Aa2 AA- 1,549,378 35,000,000 British Columbia Province, Zero Coupon, 8/23/2024, (CAD) .............. Aa2 AA- 4,881,539 11,250,000 British Columbia Province, Zero Coupon, 11/19/2027, (CAD) ............. Aa2 AA- 1,317,457 84,475,000 Canada Government, Zero Coupon, 6/01/2025, (CAD) .............. Aa1 AAA 12,937,387 3,399,000 Manitoba Province, 7.750%, 12/22/2025, (CAD) .................. Aa3 AA- 2,556,884 17,135,000 Manitoba Province, Zero Coupon, 3/05/2031, (CAD) .............. Aa3 AA- 1,669,668 7,950,000 Manitoba Province Medium Term Note, 6.500%, 9/22/2017, (CAD) ................... Aa3 AA- 5,267,620 2,345,000 Microcell Telecommunications, 0/11.125%, 10/15/2007, (CAD) (d) ........... B3 B- 851,404 500,000 New Brunswick FM Project, Inc., 0/6.470%, 11/30/2027, (CAD) (d) ............ -- A 279,995 29,550,000 Ontario Hydro Bank, Zero Coupon, 10/15/2021, (CAD) ............. Aa3 AA- 4,931,925 750,000 Ontario Province, Zero Coupon, 7/13/2022, (CAD) .............. Aa3 AA- 120,245 12,600,000 Ontario Province, Zero Coupon, 6/02/2027, (CAD) .............. Aa3 AA- 1,555,901 8,800,000 Ontario Province, Zero Coupon, 3/08/2029, (CAD) .............. Aa3 AA- 995,747 8,500,000 Saskatchewan Province, Zero Coupon, 4/10/2014, (CAD) .............. A1 A+ 2,401,951 8,250,000 Saskatchewan Province, Zero Coupon, 2/04/2022, (CAD) .............. A1 A+ 1,355,748 9,605,000 Saskatchewan Province, Zero Coupon, 5/30/2025, (CAD) .............. A1 A+ 1,283,774 3,750,000 Saskatchewan Province, 5.750%, 3/05/2029, (CAD) ................... A1 A+ 2,214,600 ------------ 54,061,082 ------------ CAYMAN ISLANDS-- 0.5% 1,365,000 Enersis SA (yankee), 7.400%, 12/01/2016 ......................... Baa1 A- 1,202,173 ------------ COLOMBIA-- 0.3% 961,535 Transgas de Occidente SA, 9.790%, 11/01/2010 ......................... Baa3 BB+ 826,920 ------------ HONG KONG-- 2.6% 8,475,000 Bangkok Bank PLC, 9.025%, 3/15/2029 .......................... Ba3 B+ 6,610,500 ------------ INDIA-- 1.5% 585,000 Reliance Industries Ltd., 144A, 10.375%, 6/24/2016 ......................... Ba2 BB 577,260 4,000,000 Tata Electric Companies, 144A, 8.500%, 8/19/2017 .......................... Ba2 BB 3,271,880 ------------ 3,849,140 ------------ ISRAEL-- 0.5% 3,000,000 Barak ITC International, Series B (yankee), 0/12.500%, 11/15/2007, (d) ................. B3 CCC+ 1,380,000 ------------ IVORY COAST-- 0.1% 926,250 Ivory Coast PDI, 2.000%, 3/31/2018 .......................... -- -- 152,831 ------------ MALAYSIA-- 2.0% 1,750,000 Telekom Malaysia Berhad, 144A, 7.875%, 8/01/2025 .......................... Baa3 BBB 1,538,827 4,300,000 Tenaga Nasional Berhad, 144A, 7.500%, 11/01/2025 ......................... Baa3 BBB 3,441,243 ------------ 4,980,070 ------------ MAURITIUS-- 1.0% $ 800,000 Indah Kiat Finance Mauritius Ltd., 10.000%, 7/01/2007 (e) ..................... B3 CCC- $ 152,000 2,700,000 Pindo Deli Finance Mauritius Ltd. (yankee), 10.750%, 10/01/2007 (e) .................... B3 CCC+ 418,500 2,650,000 Pindo Deli Finance Mauritius Ltd. (yankee), 11.750%, 10/01/2017 (e) .................... -- D 318,000 5,000,000 Pindo Deli Finance Mauritius Ltd. (yankee), 10.875%, 10/01/2027 (e) .................... -- CCC+ 650,000 6,625,000 Tjiwi Kimia Mauritius Ltd. (yankee), 10.000%, 8/01/2004 (e) ..................... B3 CCC+ 993,750 ------------ 2,532,250 ------------ MEXICO-- 7.5% 1,000,000 Alestra SA de RL de CV (yankee), 12.125%, 5/15/2006 ......................... B2 BB- 892,500 2,400,000 Espirito Santo Escelsa, 10.000%, 7/15/2007 ......................... B1 BB- 1,824,000 1,585,000 Perez Companc SA, 144A, 8.125%, 7/15/2007 .......................... B2 BB 1,442,350 1,000,000 Petroleos Mexicanos (yankee), 9.250%, 3/30/2018 .......................... Baa3 BB+ 1,052,500 3,000,000 Petroleos Mexicanos , 144A, (yankee), 8.625%, 12/01/2023 ......................... Baa3 NA 2,970,000 4,350,000 Petroleos Mexicanos (yankee), 9.500%, 9/15/2027 .......................... Baa3 BB+ 4,589,250 6,960,000 TFM SA de CV (yankee), 0/11.750%, 6/15/2009, (d) .................. B1 BB- 5,985,600 500,000 Transportacion Maritima Mexica, SA de CV (yankee), 10.250%, 11/15/2006 .............. Ba3 B+ 455,000 ------------ 19,211,200 ------------ PERU-- 0.2% 750,000 Republic of Peru, 3.750%, 3/07/2017 .......................... Ba3 BB- 466,875 PHILIPPINES-- 2.8% 5,150,000 Bangko Sentral Ng Philipinas (yankee), 8.600%, 6/15/2027 .......................... Ba1 BB+ 3,759,500 1,750,000 Philippine Long Distance Telephone Co., 8.350%, 3/06/2017 .......................... Ba2 BB+ 1,184,757 2,750,000 Quezon Power Philippines Ltd. (yankee), 8.860%, 6/15/2017 .......................... Ba1 BB+ 2,145,000 ------------ 7,089,257 ------------ SOUTH AFRICA-- 2.3% 15,100,000 Republic of South Africa, 12.500%, 12/21/2006, (ZAR) ................. -- -- 2,009,327 10,150,000 Republic of South Africa, 13.000%, 8/31/2010, (ZAR) .................. -- -- 1,415,755 17,000,000 Republic of South Africa, 13.500%, 9/15/2015, (ZAR) .................. -- -- 2,504,229 ------------ 5,929,311 ------------ SOUTH KOREA-- 2.6% 2,000,000 Hyundai Semiconductor America, 8.625%, 5/15/2007 .......................... B3 B 1,440,000 3,378,649 Korea Electric Power Corp. yankee, 7.400%, 4/01/2016 .......................... Baa3 BBB 3,240,563 2,500,000 Samsung Electronics Ltd., 144A, 7.700%, 10/01/2027 ......................... Baa2 BBB 2,023,000 ------------ 6,703,563 ------------ THAILAND-- 1.9% 2,850,000 Siam Commercial Bank PLC, 144A, 7.500%, 3/15/2006 .......................... B2 B- 2,664,750 2,175,000 Thai Farmers Bank PLC, 144A, 8.250%, 8/21/2016 .......................... B2 B+ 1,674,750 690,000 Total Access Communications PLC, 144A, 8.375%, 11/04/2006 ......................... B2 BB- 631,350 ------------ 4,970,850 ------------ UNITED KINGDOM-- 0.0% 2,875,000 Dolphin Telecom PLC, 0/11.500%, 6/01/2008, (d)(EUR) ............. -- -- 24,399 ------------ UNITED STATES-- 17.9% 375,000 Affymetrix, Inc., 4.750%, 2/15/2007 .......................... -- CCC+ 240,469 500,000 At Home Corp., 4.750%, 12/15/2006 ......................... B3 B- 165,625 500,000 Bausch & Lomb, Inc., 7.125%, 8/01/2028 .......................... Baa2 BBB- 355,625 2,000,000 Borden, Inc., 7.875%, 2/15/2023 .......................... Ba1 BB+ 1,423,560 142,000 Boston Celtics LP, 6.000%, 6/30/2038 .......................... -- -- 90,880 250,000 CBS, Inc., 7.125%, 11/01/2023 ......................... A3 A- 240,775 1,000,000 Century Communications Corp., 8.375%, 11/15/2017 ......................... B2 B+ 800,000 500,000 Columbia/HCA Healthcare Corp., 7.500%, 12/15/2023 ......................... Ba1 BB+ 442,500 820,000 Columbia/HCA Healthcare Corp., 7.050%, 12/01/2027 ......................... Ba1 BB+ 697,000 500,000 Conseco, Inc., 8.500%, 10/15/2002 ......................... B1 BB- 490,000 1,000,000 Dana Corp., 7.000%, 3/01/2029 .......................... Ba1 BBB 730,000 250,000 DR Structured Finance Corp., 8.550%, 8/15/2019 .......................... -- BB+ 181,725 875,961 DR Structured Finance Corp., 6.660%, 8/15/2010 .......................... -- BB+ 746,056 175,000 DR Structured Finance Corp., 9.350%, 8/15/2019 .......................... -- BB+ 143,692 34,000,000 Fannie Mae, Zero Coupon, 10/29/2007, (NZD) ............. Aaa -- 8,600,479 1,000,000 First Industrial LP, 7.600%, 7/15/2028 .......................... Baa2 BBB 908,350 1,050,000 Georgia Pacific Corp., 7.750%, 11/15/2029 ......................... Baa3 BBB- 927,223 246,904 Green Tree Financial Corp., 8.070%, 3/01/2030 .......................... -- B- 153,081 22,300,000 International Bank of Reconstruction & Development, Zero Coupon, 8/20/2007, (NZD) .............. Aaa AAA 5,907,036 250,000 Kmart Corp., 9.440%, 7/01/2018 .......................... Ba2 BB+ 215,290 4,050,000 Kmart Corp., 7.950%, 2/01/2023 .......................... Baa3 BB+ 3,219,750 500,000 Level 3 Communications, Inc., 10.750%, 3/15/2008 ......................... B3 CCC+ 165,487 1,000,000 Level 3 Communications, Inc., 0/10.500%, 12/01/2008 (d) .................. B3 CCC+ 215,000 1,425,000 Lucent Technologies, Inc., 6.450%, 3/15/2029 .......................... Ba1 BB+ 812,250 66,000 Missouri Pacific Railroad Co., 4.250%, 1/01/2005 .......................... Baa1 BBB+ 62,150 5,375,000 Nextel Communications, Inc., 0/9.750, 10/31/2007, (d) ................... B1 B 3,493,750 1,000,000 Nextel International, Inc., 0/12.125%, 4/15/2008 (d) ................... -- B- 220,000 500,000 Nextlink Communications, Inc., 0/12.125%,, 12/01/2009 (d) ................. B2 B 75,000 925,000 NTL (Delaware), Inc., 5.750%, 12/15/2009 ......................... B3 -- 300,625 2,250,000 NTL, Inc., 0/9.750%, 4/01/2008 (d) .................... B2 B 978,750 1,405,000 PDVSA Finance Ltd. (yankee), 7.400%, 8/15/2016 .......................... Baa1 -- 1,180,200 525,000 Penney JC Co., Inc., 7.125%, 11/15/2023 ......................... Ba2 BBB- 405,212 500,000 Pennzoil Quaker State Co., 7.375%, 4/01/2029 .......................... Ba1 BB+ 362,570 250,000 Phillips Van Heusen Corp., 7.750%, 11/15/2023 ......................... Ba2 BB 200,000 775,000 Pioneer Standard Electronics, Inc., 9.500%, 8/01/2006 .......................... Baa3 BB 759,705 2,500,000 RCN Corp., 0/11.125%, 10/15/2007, (d) ................. B3 B- 750,000 4,000,000 RCN Corp., 0/9.800%, 2/15/2008, (d) ................... B3 B- 1,120,000 1,000,000 Security Capital Industrial Trust, 7.625%, 7/01/2017, (REIT) .................. Baa1 BBB+ 948,110 500,000 Southern California Edison Co., 7.200%, 11/03/2003 ......................... -- CC 360,000 3,500,000 Teligent, Inc., Series B, 0/11.500%, 3/01/2008 (e) (g) ............... -- -- 17,500 1,000,000 TRW, Inc., 7.750%, 6/01/2029 .......................... Baa2 BBB 949,959 1,500,000 Westinghouse Electric Corp., 7.875%, 9/01/2023 .......................... A3 A- 1,565,415 750,000 Williams Communications Group, Inc., 10.700%, 10/01/2007 ........................ B2 B+ 307,500 1,000,000 Woolworth Corp., 8.500%, 1/15/2022 .......................... Baa3 BB 877,557 1,000,000 Woolworth Corp. Medium Term Note, 7.000%, 10/15/2002 ......................... B1 BB 964,996 500,000 Worldcom, Inc., 6.950%, 8/15/2028 .......................... A3 BBB+ 422,070 1,600,000 Xerox Corp, 3.500%, 2/04/2004 .......................... -- -- 1,004,802 500,000 Xerox Corp., 5.500%, 11/15/2003 ......................... Ba1 BBB- 405,000 750,000 XO Communications, Inc., 0/12.250%, 6/01/2009 ....................... B2 B 112,500 699,000 Zenith Corp., 8.190%, 11/01/2009 ......................... -- -- 69,900 ------------ 45,785,124 ------------ VENEZUELA-- 2.6% 500,000 Cerro Negro Finance Ltd., 144A, 7.900%, 12/01/2020 ......................... Baa2 -- 402,350 9,000,000 Republic of Venezuela, 9.250%, 9/15/2027 .......................... B2 B 6,221,700 ------------ 6,624,050 ------------ Total Non-Convertible Bonds (Identified Cost $226,071,797) .................................... 191,742,481 ------------ SHARES - ------------ COMMON STOCK-- 5.7% BRITISH VIRGIN ISLANDS-- 2.1% 589,300 Sappi Ltd., (sponsored ADR) ....................................... 5,274,235 ------------ INDONESIA-- 0.1% 6,786,500 PT Indah Kiat Pulp & Paper Corp. (IDR) ............................ 220,457 ------------ THAILAND-- 0.0% 122,000 Siam Commercial Bank PLC, (THB) ................................... 53,881 122,000 Siam Commercial Bank PLC, Warrants (THB) (e) ...................... 7,004 ------------ 60,885 ------------ UNITED STATES-- 3.3% 25,461 Seabulk International, Inc. ....................................... 127,305 162,900 Associated Estates Realty Corp. (REIT) ............................ 1,573,614 177,100 Developers Diversified Realty Corp., (REIT) ....................... 3,255,098 26,666 Park Electrochemical Corp. ........................................ 703,982 111,700 Simon Property Group, Inc. ........................................ 3,347,649 ------------ 9,007,648 ------------ UNITED KINGDOM-- 0.0% 1,500 Jazztel PLC Warrants (e) .......................................... 12,730 ------------ Total Common Stock (Identified Cost $14,359,738) .................. 14,575,955 PREFERRED STOCK-- 2.2% PHILIPPINES-- 0.6% 47,800 Philippine Long Distance Telephone Co., Series 3 (GDR) ............ 1,486,580 ------------ UNITED STATES-- 1.6% 2,897 Adelphia Business Solutions, Inc. ................................. 666,310 33,500 Arkansas Best Corp., Class A ...................................... 2,043,500 35,000 Bethlehem Steel Corp., ............................................ 350,000 22,500 Owens Corning Capital LLC (e)(g) .................................. 56,250 37,500 Pacific Gas & Electric Co. (e)(g) ................................. 365,625 12,500 Western Gas Resources, Inc. ....................................... 608,750 ------------ 4,090,435 ------------ Total Preferred Stock (Identified Cost $8,679,181) ................ 5,577,015 ------------ PRINCIPAL AMOUNT DESCRIPTION VALUE (A) - ----------------------------------------------------------------------------------------------------- SHORT TERM INVESTMENT-- 1.5% 3,824,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% to be repurchased at $3,824,876 on 7/02/2001, collateralized by $3,310,000 U.S. Treasury Bond, 7.500%, due 11/15/2016 valued at $3,904,608 ................................... 3,824,000 ------------ Total Short Term Investment (Identified Cost $3,824,000) .......... 3,824,000 ------------ Total Investments-- 98.4% (Identified Cost $304,307,947) (b) ...... 251,443,808 Other assets less liabilities ..................................... 4,164,150 ------------ Total Net Assets-- 100% ........................................... $255,607,958 ============ (a) See Note 2a of Notes to the Financial Statements. (b) Federal Tax Information: At June 30, 2001 the net unrealized depreciation on investments based on cost of $304,307,947 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 ....................................... $ 14,786,550 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ....................................... (67,650,689) ------------ Net unrealized depreciation ............................................... $(52,864,139) ============ At December 31, 2000, the Fund had a net tax basis capital loss carryover of $19,857,873 of which $13,337,197 expires on December 31, 2007 and $6,520,676 expires on December 31, 2008. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) The ratings shown are believed to be the most recent ratings available at June 30, 2001. Securities are generally rated at the time of issuance. The rating agencies may revise their rating from time to time. As a result, there can be no assurance that the same ratings would be assigned if the securities were rated at June 30, 2001. The Fund's subadviser independently evaluates the Fund's portfolio securities and in making investment decisions does not rely solely on the ratings of agencies. (d) Step Bond: Coupon rate is zero or below market for an initial period and then increases to a higher coupon rate at a specified date and rate. (e) Non-income producing security (f) Pay in kind securities. (g) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code. ADR/GDR - An American Depositary Receipt (ADR) or Global Depository Receipt (GDR) is a certificate issued by a Custodian 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. REIT Real Estate Investment Trust 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 the period end, the value of these amounted to $25,161,175 or 9.8% of net assets. ARS - Argentine Peso CAD - Canadian Dollars EUR - Euro Currency IDR - Indonesian Rupiah NZD - New Zealand Dollars ZAR - South African Rand Top Sectors: Government 36.5% Finance & Banking 8.4% Industrials 7.4% Electric 6.3% Telecommunication - Services 3.9% Real Estate Investment Trust 3.8% Oil & Gas - Exploration & Production 3.4% Telephone 2.6% Retail - Department Store 2.5% Transportation 2.4% Telecommunications 2.3% Supranational 2.3% Electronics 2.1% Telecommunications - Cellular 1.7% Insurance 1.6% See accompanying notes to financial statements.
- --------------------------------------------------------------------------------------------------- LIMITED TERM US GOVERNMENT FUND -- SCHEDULE OF INVESTMENTS - --------------------------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
RATINGS (C) --------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (A) - --------------------------------------------------------------------------------------------------- BONDS AND NOTES-- 98.0% OF TOTAL NET ASSETS ASSET BACKED-- 2.5% $ 3,500,000 Connecticut RRB Special Purpose Trust 5.360%, 3/30/2007 .......................... -- -- $ 3,500,813 ------------ ELECTRIC UTILITIES-- 2.2% 2,000,000 Dominion Resources, Inc. Virginia, 6.000%, 1/31/2003 .......................... Baa1 BBB+ 2,023,386 1,000,000 Progress Energy, Inc., 6.750%, 3/01/2006 .......................... Baa1 BBB 1,017,990 ------------ 3,041,376 ------------ FINANCE & BANKING-- 2.2% 3,000,000 General Motors Acceptance Corp., 6.380%, 1/30/2004 .......................... A2 A 3,074,565 ------------ MORTGAGE-BACKED-- 64.1% 4,000,000 Federal Home Loan Banks 4.875%, 4/16/2004 ......................... Aaa AAA 3,988,760 12,000,000 Federal Home Loan Mortgage Corp. 5.250%, 2/15/2004 ......................... Aaa AAA 12,095,640 3,500,000 Federal Home Loan Mortgage Corp. 7.000%, 2/1/2016 .......................... Aaa AAA 3,565,625 45,317 Federal Home Loan Mortgage Corp., 7.500%, 6/1/2026 .......................... Aaa AAA 46,379 18,417 Federal Home Loan Mortgage Corp., 10.000%, 7/1/2019 ......................... Aaa AAA 20,513 2,397,999 Federal Home Loan Mortgage Corp., 11.500%, with various maturities to 2020 (d) (e) Aaa AAA 2,703,851 5,000,000 Federal National Mortgage Association 4.750%, 11/14/2003 ........................ Aaa AAA 4,997,650 10,000,000 Federal National Mortgage Association 5.500%, with various maturities to 2006 ........... Aaa AAA 9,954,040 7,000,000 Federal National Mortgage Association 5.625%, 5/14/2004 ......................... Aaa AAA 7,113,610 7,980,558 Federal National Mortgage Association 6.000%, with various maturities to 2031 ........... Aaa AAA 7,765,097 3,500,000 Federal National Mortgage Association 7.500%, 7/1/2031 .......................... Aaa AAA 3,572,905 3,000,000 Federal National Mortgage Association, 6.000%, 12/15/2005 ........................ Aaa AAA 3,059,520 3,108,161 Federal National Mortgage Association, 7.000%, 12/1/2022 (d) (e) ................. Aaa AAA 3,141,600 8,531,025 Federal National Mortgage Association, 7.500%, 12/1/2030 ......................... Aaa AAA 8,704,290 9,740,260 Government National Mortgage Association 7.000%, with various maturities to 2031 Aaa AAA 9,837,371 7,541,294 Government National Mortgage Association, 7.000%, 10/15/2028 ........................ Aaa AAA 7,618,818 39,193 Government National Mortgage Association, 12.500%, with various maturities to 2015 (d) Aaa AAA 45,177 497,860 Government National Mortgage Association, 16.000%, with various maturities to 2012 (d) Aaa AAA 592,211 187,703 Government National Mortgage Association, 17.000%, with various maturities to 2012 (d) Aaa AAA 225,362 ------------ 89,048,419 ------------ INDUSTRIALS-- 1.5% 1,000,000 Kellogg Co., 6.000%, 4/01/2006 Baa2 BBB 992,055 1,000,000 Sprint Capital Corp., 7.125%, 1/30/2006 Baa1 BBB+ 1,009,699 ------------ 2,001,754 ------------ U.S. GOVERNMENT-- 21.6% 7,655,130 United States Treasury Bonds 3.625%, 4/15/2028 .......................... Aaa AAA 7,836,939 10,162,700 United States Treasury Notes 3.500%, 1/15/2011 .......................... Aaa AAA 10,200,810 3,500,000 United States Treasury Notes 5.000%, 2/15/2011 .......................... Aaa AAA 3,395,525 1,600,000 United States Treasury Notes 5.750%, 11/15/2005 ......................... Aaa AAA 1,638,736 2,000,000 United States Treasury Notes 6.000%, 8/15/2004 .......................... Aaa AAA 2,075,620 4,500,000 United States Treasury Notes, 7.000%, 7/15/2006 .......................... Aaa AAA 4,881,105 ------------ 30,028,735 ------------ YANKEE-- 3.9% 3,960,000 Inter-American Development Bank Bonds, 12.250%, 12/15/2008 ........................ Aaa AAA 5,440,288 ------------ Total Bonds and Notes (Identified Cost $136,302,629) ............. 136,135,950 ------------ SHORT TERM INVESTMENT-- 0.2% 351,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% collateralized by $285,000 U.S. Treasury Bond, 7.500%, due 11/15/2016 valued at $362,733 ......................... 351,000 ------------ Total Short Term Investments (Identified Cost $351,000) ........................................ 351,000 ------------ Total Investments-- 98.2% (Identified Cost $136,653,629) (b) ................................ 136,486,950 Other assets less liabilities ..................................... 2,460,305 ------------ Total Net Assets-- 100% 138,947,255 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2001 the net unrealized depreciation on investments based on cost of for federal income tax purposes of $136,849,462 was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost ........................... $517,596 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ........................... (684,275) ------------ Net unrealized depreciation ............................................... (166,679) ============ (c) The ratings shown are believed to be the most recent ratings available at June 30, 2001. Securities are generally rated at the time of issuance. The rating agencies may revise their ratings from time to time. As a result there can be no assurance that the same ratings would be assigned if the securities were rated at June 30, 2001. The Fund's advisor independently evaluates the Fund's portfolio securities and in making investment decisions does not rely solely on the ratings of agencies. (d) The Fund's investments in mortgage backed securities of the Federal Home Loan Mortgage Corporation and Government National Mortgage Association are interest in separate pools of mortgages. All separate investment in securities of these issuers which have the same coupon rate have been aggregated for the purpose of presentation in the schedule of investments. See accompanying notes to financial statements.#Investments as of June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------------------------- LIMITED TERM US GOVERNMENT FUND -- SCHEDULE OF INVESTMENTS - --------------------------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
RATINGS (C) --------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (A) - --------------------------------------------------------------------------------------------------- BONDS AND NOTES-- 98.0% OF TOTAL NET ASSETS MORTGAGE BACKED-- 52.8% $ 1,537,818 Federal Home Loan Mortgage Corp., 7.500%, 4/1/2012 ........................... Aaa AAA $ 1,586,352 19,000,000 Federal National Mortgage Association 6.625%, with various maturities to 2010 .... Aaa AAA 19,648,200 2,132,756 Federal National Mortgage Association 7.500%, 12/1/2030 .......................... Aaa AAA 2,177,182 19,574,431 Government National Mortgage Association 7.000%, with various maturities to 2031 .... Aaa AAA 19,769,588 1,299,166 Government National Mortgage Association, 7.500%, 4/15/2027 .......................... Aaa AAA 1,334,802 134,332 Government National Mortgage Association, 8.500%, 2/15/2006 .......................... Aaa AAA 140,978 231,046 Government National Mortgage Association, 9.000%, with various maturities to 2016 (d) Aaa AAA 247,771 81,702 Government National Mortgage Association, 9.500%, with various maturities to 2009 (d) Aaa AAA 89,059 93,389 Government National Mortgage Association, 10.000%, with various maturities to 2016 (d) Aaa AAA 103,830 18,411 Government National Mortgage Association, 12.500%, with various maturities to 2014 (d) ... Aaa AAA 21,168 ------------ 45,118,930 ------------ U.S. GOVERNMENT-- 45.2% 3,280,770 United States Treasury Bonds 3.625%, 4/15/2028 .......................... Aaa AAA 3,358,688 1,900,000 United States Treasury Bonds 5.375%, 2/15/2031 .......................... Aaa AAA 1,800,250 3,500,000 United States Treasury Bonds 7.250%, 5/15/2016 .......................... Aaa AAA 3,986,710 3,000,000 United States Treasury Bonds 7.500%, 11/15/2024 ......................... Aaa AAA 3,600,930 5,000,000 United States Treasury Bonds 8.125%, 8/15/2021 .......................... Aaa AAA 6,282,800 5,000,000 United States Treasury Bonds 8.750%, 8/15/2020 .......................... Aaa AAA 6,621,100 10,000,000 United States Treasury Bonds, 8.750%, 5/15/2017 .......................... Aaa AAA 12,976,600 ------------ 38,627,078 ------------ Total Bonds and Notes (Identified Cost $84,559,577) ............... 83,746,008 ------------ SHORT TERM INVESTMENT-- 1.3% 1,068,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% to be repurchased at $1,068,245 on 7/02/2001, collateralized by $1,025,000 U.S. Treasury Bond, 6.125%, due 8/15/2029 valued at $1,092,763 .............................................. 1,068,000 ------------ Total Short Term Investment (Identified Cost $1,068,000) ...................................... 1,068,000 ------------ Total Investments-- 99.3% (Identified Cost $85,627,577) (b) ................................. 84,814,008 Other assets less liabilities ..................................... 616,728 ------------ Total Net Assets-- 100% 85,430,736 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2001 the net unrealized depreciation on investments based on cost of $85,627,577 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 ........................ 115,126 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ....................................... (928,695) ------------ Net unrealized depreciation ............................................... (813,569) ============ At December 31, 2000 the Fund had a net tax basis capital loss carryover of approximately $13,920,897 of which $4,040,060 expires on December 31, 2002, $3,530,050 expires on December 31, 2004, $5,687,678 expires on December 31, 2007 and $663,109 expires on December 31, 2008. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) The ratings shown are believed to be the most recent ratings available at June 30, 2001. Securities are generally rated at the time of issuance. The rating agencies may revise their ratings from time to time. As a result there can be no assurance that the same ratings would be assigned if the securities were rated at June 30, 2001. The Fund's advisor independently evaluates the Fund's portfolio securities and in making investment decisions does not rely solely on the ratings of agencies. (d) The Fund's investment in mortgage backed securities of the Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of this issuer which have the same coupon rate have been aggregated for the purpose of presentation in the schedule of investments. See accompanying notes to financial statements.
- --------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF ASSETS & LIABILITIES - --------------------------------------------------------------------------------------------------------------------------- June 30, 2001 (unaudited) SHORT TERM CORPORATE BOND INCOME HIGH INCOME INCOME FUND FUND INCOME FUND -------------------- ----------- ----------- ASSETS Investments at cost ............................................ $ 59,618,402 $312,670,795 $109,016,467 Net unrealized appreciation (depreciation) ..................... 809,651 (2,944,613) (20,725,295) ------------ ------------ ------------ Investments at value ......................................... 60,428,053 309,726,182 88,291,172 Cash ........................................................... 187 525 850 Foreign cash at value (identified cost $330,075) ............... -- -- -- Investments held as collateral for loaned securities ........... -- 29,053,581 22,467,000 Receivable for Fund shares sold ................................ 18,230 841,999 72,065 Receivable for securities sold ................................. 748,818 -- 1,468,688 Dividends and interest receivable .............................. 795,266 6,130,417 1,777,349 ------------ ------------ ------------ TOTAL ASSETS ................................................. 61,990,554 345,752,704 114,077,124 ------------ ------------ ------------ LIABILITIES Collateral on securities loaned, at value ...................... -- 29,053,581 22,467,000 Payable for securities purchased ............................... 1,060,640 -- 1,466,850 Payable for Fund shares redeemed ............................... 183,690 807,224 339,389 Dividends payable .............................................. 97,326 363,541 479,172 Withholding taxes payable ...................................... -- -- -- Management fees payable ........................................ 9,227 107,981 54,028 Deferred Trustees' fees ........................................ 21,419 103,099 19,398 Transfer agent fees payable .................................... -- 57,524 19,827 Accounting and administrative fees payable ..................... 2,243 11,672 3,458 Other accounts payable and accrued expenses .................... 49,677 71,600 61,352 ------------ ------------ ------------ TOTAL LIABILITIES ............................................ 1,424,222 30,576,222 24,910,474 ------------ ------------ ------------ NET ASSETS ........................................................ $ 60,566,332 $315,176,482 $ 89,166,650 ============ ============ ============ NET ASSETS CONSIST OF: Paid in capital ................................................ $ 80,009,126 $330,532,182 $157,246,347 Undistributed (overdistributed) net investment income (loss) ... (40,285) (428,712) (182,266) Accumulated net realized gain (loss) on investments ............ (20,212,160) (11,977,944) (47,172,136) Net unrealized appreciation (depreciation) of investments and foreign currency transactions .............................. 809,651 (2,949,044) (20,725,295) ------------ ------------ ------------ NET ASSETS ........................................................ $ 60,566,332 $315,176,482 $ 89,166,650 ============ ============ ============ COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: CLASS A shares: Net assets ..................................................... $ 56,273,898 $173,322,989 $ 41,797,076 ============ ============ ============ Shares of beneficial interest .................................. 7,978,363 14,992,619 7,375,898 ============ ============ ============ Net asset value and redemption price per share ................. $ 7.05 $ 11.56 $ 5.67 ======== ======== ======== Offering price per share ....................................... $ 7.27 $ 12.10 $ 5.94 ======== ======== ======== CLASS B shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets .................................................... $ 3,915,152 $114,417,223 $ 42,599,553 ============ ============ ============ Shares of beneficial interest ................................. 555,187 9,900,660 7,510,202 ============ ============ ============ Net asset value and offering price per share ................... $ 7.05 $ 11.56 $ 5.67 ======== ======== ======== CLASS C shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets .................................................... $ 377,282 $ 12,361,488 $ 4,770,021 ============ ============ ============ Shares of beneficial interest ................................. 53,541 1,068,574 841,433 ============ ============ ============ Net asset value per share ..................................... $ 7.05 $ 11.57 $ 5.67 ======== ======== ======== Offering price per share ...................................... $ 7.12 $ 11.69 $ 5.73 ======== ======== ======== Class Y shares: Net assets ..................................................... $ -- $ 15,074,782 $ -- ============ ============ ============ Shares of beneficial interest ................................. -- 1,300,530 -- ============ ============ ============ Net asset value, offering and redemption price per share ....... $ -- $ 11.59 $ -- ======== ======== ========
See accompanying notes to financial statements.
STRATEGIC INCOME LIMITED TERM U.S. GOVERNMENT FUND GOVERNMENT FUND SECURITIES FUND $304,307,947 $136,653,629 $ 85,627,577 (52,864,139) (166,679) (813,569) ------------ ------------ ------------ 251,443,808 136,486,950 84,814,008 889 735 143 326,935 -- -- 12,943,260 33,405,200 -- 168,293 1,265,767 42,955 361,553 -- -- 4,574,387 1,641,498 985,282 ------------ ------------ ------------ 269,819,125 172,800,150 85,842,388 ------------ ------------ ------------ 12,943,260 33,405,200 -- -- -- -- 396,959 157,670 186,250 536,486 119,029 57,770 7,381 -- -- 136,058 74,827 46,296 38,901 28,810 55,083 49,178 23,774 16,275 9,544 5,157 3,191 93,400 38,428 46,787 ------------ ------------ ------------ 14,211,167 33,852,895 411,652 ------------ ------------ ------------ $255,607,958 $138,947,255 $ 85,430,736 ============ ============ ============ $330,809,601 $186,909,037 $ 98,770,677 2,676,376 (133,123) (13,687) (25,006,469) (47,661,980) (12,512,685) (52,871,550) (166,679) (813,569) ------------ ------------ ------------ $255,607,958 $138,947,255 $ 85,430,736 ============ ============ ============ $106,219,357 $116,046,576 $ 69,608,832 ============ ============ ============ 10,359,723 10,347,689 6,317,578 ============ ============ ============ $ 10.25 $ 11.21 $ 11.02 ======== ======== ======== $ 10.73 $ 11.56 $ 11.54 ======== ======== ======== $113,725,841 $ 12,253,242 $ 11,181,589 ============ ============ ============ 11,093,242 1,094,345 1,014,826 ============ ============ ============ $ 10.25 $ 11.20 $ 11.02 ======== ======== ======== $ 35,254,020 $ 7,601,893 $ -- ============ ============ ============ 3,441,591 678,426 -- ============ ============ ============ $ 10.24 $ 11.21 $ -- ======== ======== ======== $ 10.34 $ 11.32 $ -- ======== ======== ======== $ 408,740 $ 3,045,544 $ 4,640,315 ============ ============ ============ 39,799 268,679 421,663 ============ ============ ============ $ 10.27 $ 11.34 $ 11.00 ======== ======== ========
- --------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------------------------------------------------- For the Six Months Ended June 30, 2001 (Unaudited) SHORT TERM CORPORATE BOND INCOME HIGH INCOME INCOME FUND FUND FUND -------------------- ----------- ----------- INVESTMENT INCOME Dividends ...................................................... $ -- $ -- $ 605,247 Interest ....................................................... 2,041,439 11,769,517 5,595,452 Securities lending income ...................................... -- 66,254 52,365 Less net foreign taxes withheld ................................ -- -- -- ------------ ------------ ------------ 2,041,439 11,835,771 6,253,064 Expenses Management fees .............................................. 169,206 642,851 355,448 Service and distribution fees - Class A ...................... 71,723 220,079 59,424 Service and distribution fees - Class B ...................... 18,445 530,911 242,800 Service and distribution fees - Class C ...................... 2,311 63,148 27,287 Trustees' fees and expenses .................................. 4,635 11,637 5,794 Accounting and administrative ................................ 13,335 67,187 21,980 Custodian .................................................... 37,672 59,924 37,700 Transfer agent - Class A, Class B, Class C ................... 70,205 295,092 108,277 Transfer agent - Class Y ..................................... -- 7,460 -- Audit and tax services ....................................... 13,067 17,960 16,826 Legal ........................................................ 1,700 9,131 3,456 Printing ..................................................... 11,848 37,454 24,771 Registration ................................................. 14,413 12,378 12,764 Miscellaneous ................................................ (3,037) 2,488 4,797 ------------ ------------ ------------ Total expenses before reductions ................................ 425,523 1,977,700 921,324 Less waiver/reimbursement .................................... (133,073) -- -- ------------ ------------ ------------ Net expenses .................................................... 292,450 1,977,700 921,324 ------------ ------------ ------------ Net investment income ........................................... 1,748,989 9,858,071 5,331,740 ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments - net ..................... (172,612) (1,014,279) (14,263,035) Futures contracts - net ...................................... -- -- -- Foreign currency transactions - net .......................... -- (2,777) -- Change in unrealized appreciation (depreciation) of: Investments - net ............................................ 545,013 2,081,494 5,723,307 Foreign currency transactions - net .......................... -- (11,405) -- ------------ ------------ ------------ Net realized and unrealized gain (loss) on investments, futures contracts and foreign currency transactions .......... 372,401 1,053,033 (8,539,728) ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... $ 2,121,390 $ 10,911,104 $ (3,207,988) ============ ============ ============
See accompanying notes to financial statements.#
STRATEGIC INCOME LIMITED TERM U.S. GOVERNMENT FUND GOVERNMENT FUND SECURITIES FUND ---------------- ----------------- --------------- $ 731,303 $ -- $ -- 13,395,428 4,463,312 2,691,895 20,729 61,448 -- (14,762) -- -- ------------ ------------ ------------ 14,132,698 4,524,760 2,691,895 846,547 455,312 277,863 140,043 205,303 87,515 586,273 60,788 54,536 179,978 37,541 -- 10,360 6,840 5,317 57,529 30,366 18,537 85,000 42,737 31,484 277,233 134,663 88,658 184 1,557 1,686 20,207 13,666 16,566 8,925 4,390 1,859 35,464 21,910 23,764 31,871 18,576 12,057 9,738 3,015 1,794 ------------ ------------ ------------ 2,289,352 1,036,664 621,636 -- -- -- ------------ ------------ ------------ 2,289,352 1,036,664 621,636 ------------ ------------ ------------ 11,843,346 3,488,096 2,070,259 ------------ ------------ ------------ (4,235,481) 2,248,851 1,432,798 -- -- (14,563) (1,018,364) -- -- (8,394,673) (1,420,295) (2,658,135) (14,510) -- -- ------------ ------------ ------------ (13,663,028) 828,556 (1,239,900) ------------ ------------ ------------ $ (1,819,682) $ 4,316,652 $ 830,359 ============ ============ ============
- ----------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- SHORT TERM CORPORATE BOND INCOME HIGH INCOME INCOME FUND FUND FUND -------------------------- -------------------------- --------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2001 DECEMBER 31, 2001 DECEMBER 31, 2001 DECEMBER 31, (UNAUDITED) 2000 (UNAUDITED) 2000 (UNAUDITED) 2000 ---------- ------------ ----------- ------------ ----------- ------------ FROM OPERATIONS: Net investment income $ 1,748,989 $ 4,367,272 $ 9,858,071 $ 20,157,061 $ 5,331,740 $ 14,340,344 Net realized gain (loss) on investments, written options, futures contracts and foreign currency transactions (172,612) (2,114,099) (1,017,056) (8,127,204) (14,263,035) (26,382,414) Net change in unrealized appreciation (depreciation) of investments, written options, futures contracts and foreign currency transactions 545,013 2,026,060 2,070,089 8,042,701 5,723,307 (9,573,036) ----------- ----------- ------------ ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations 2,121,390 4,279,233 10,911,104 20,072,558 (3,207,988) (21,615,106) ----------- ----------- ------------ ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS NET INVESTMENT INCOME Class A (1,673,829) (4,054,995) (5,881,852) (12,765,917) (2,647,312) (6,907,867) Class B (94,054) (193,059) (3,147,298) (5,797,554) (2,521,680) (6,381,249) Class C (11,807) (25,252) (374,806) (851,085) (282,759) (769,066) Class Y -- -- (523,842) (797,445) -- -- ----------- ----------- ------------ ------------ ------------ ------------ (1,779,690) (4,273,306) (9,927,798) (20,212,001) (5,451,751) (14,058,182) ----------- ----------- ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (2,330,035) (14,416,185) 12,316,334 (26,157,588) (2,295,266) (18,149,684) ----------- ----------- ------------ ------------ ------------ ------------ Total increase (decrease) in net assets (1,988,335) (14,410,258) 13,299,640 (26,297,031) (10,955,005) (53,822,972) ----------- ----------- ------------ ------------ ------------ ------------ NET ASSETS Beginning of the period 62,554,667 76,964,925 301,876,842 328,173,873 100,121,655 153,944,627 ----------- ----------- ------------ ------------ ------------ ------------ End of the period $60,566,332 $62,554,667 $315,176,482 $301,876,842 $ 89,166,650 $100,121,655 =========== =========== ============ ============ ============ ============ UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (40,285) $ (9,584) $ (428,712) $ (358,985) $ (182,266) $ (62,255) =========== =========== ============ ============ ============ ============
See accompanying notes to financial statements.
STRATEGIC INCOME LIMITED TERM U.S. GOVERNMENT SECURITIES FUND GOVERNMENT FUND FUND -------------------------- -------------------------- --------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2001 DECEMBER 31, 2001 DECEMBER 31, 2001 DECEMBER 31, (UNAUDITED) 2000 (UNAUDITED) 2000 (UNAUDITED) 2000 ---------- ------------ ----------- ------------ ----------- ------------- $11,843,346 $23,813,833 $ 3,488,096 $ 9,250,260 $ 2,070,259 $ 4,885,075 (5,253,845) (5,542,426) 2,248,851 (3,166,237) 1,418,235 (273,037) (8,409,183) (17,596,169) (1,420,295) 5,546,929 (2,658,135) 5,818,695 ------------ ------------ ------------ ------------ ------------ ----------- (1,819,682) 675,238 4,316,652 11,630,952 830,359 10,430,733 ------------ ------------ ------------ ------------ ------------ ----------- (5,227,883) (10,114,949) (3,030,608) (8,075,830) (1,765,243) (4,191,119) (5,030,947) (9,337,429) (275,060) (685,214) (234,408) (430,843) (1,543,351) (2,943,092) (169,541) (404,716) -- -- (18,242) (12,570) (78,255) (218,791) (124,035) (188,421) ------------ ------------ ------------ ------------ ------------ ----------- (11,820,423) (22,408,040) (3,553,464) (9,384,551) (2,123,686) (4,810,383) ------------ ------------ ------------ ------------ ------------ ----------- (5,481,122) 3,604,585 (2,404,658) (42,154,629) 878,263 (16,862,002) ------------ ------------ ------------ ------------ ------------ ----------- (19,121,227) (18,128,217) (1,641,470) (39,908,228) (415,064) (11,241,652) ------------ ------------ ------------ ------------ ------------ ----------- 274,729,185 292,857,402 140,588,725 180,496,953 85,845,800 97,087,452 ------------ ------------ ------------ ------------ ------------ ----------- $255,607,958 $274,729,185 $138,947,255 $140,588,725 $ 85,430,736 $85,845,800 ============ ============ ============ ============ ============ =========== $ 2,676,376 $ 2,653,453 $ (133,123) $ (67,755) $ (13,687) $ 39,740 ============ ============ ============ ============ ============ =========== See accompanying notes to financial statements.
- ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ----------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period.
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ---------------------------------------- ------------------------------------------------------------------- NET NET ASSET REALIZED DIVIDENDS VALUE, UNREALIZED DIVIDENDS IN EXCESS DISTRIBUTIONS DISTRIBUTIONS BEGINNING NET AND GAIN TOTAL FROM FROM NET OF NET FROM NET IN EXCESS OF OF INVESTMENT (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED NET REALIZED TOTAL THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS CAPITAL GAINS DISTRIBUTIONS ---------- ------ ----------- ---------- ------ ------ ------------- ------------- ------------- SHORT TERM CORPORATE INCOME FUND - -------------------------------- CLASS A 2001 (i) $ 7.02 $ 0.20 $ 0.04 $ 0.24 $(0.21) $ -- $ -- $ -- $(0.21) 2000 7.01 0.44 0.01(f) 0.45 (0.44) -- -- -- (0.44) 1999 7.30 0.41 (0.28) 0.13 (0.42) -- -- -- (0.42) 1998 7.39 0.38 (0.09) 0.29 (0.38) -- -- -- (0.38) 1997 7.37 0.47(e) (0.02) 0.45 (0.43) -- -- -- (0.43) 1996 7.37 0.43 (0.01) 0.42 (0.42) -- -- -- (0.42) CLASS B 2001 (i) 7.01 0.18 0.04 0.22 (0.18) -- -- -- (0.18) 2000 7.00 0.39 0.01(f) 0.40 (0.39) -- -- -- (0.39) 1999 7.29 0.36 (0.28) 0.08 (0.37) -- -- -- (0.37) 1998 7.38 0.33 (0.09) 0.24 (0.33) -- -- -- (0.33) 1997 7.36 0.41(e) (0.02) 0.39 (0.37) -- -- -- (0.37) 1996 7.37 0.37 (0.02) 0.35 (0.36) -- -- -- (0.36) CLASS C 2001 (ij) 7.01 0.18 0.04 0.22 (0.18) -- -- -- (0.18) 2000 7.00 0.39 0.01(f) 0.40 (0.39) -- -- -- (0.39) 1999 7.29 0.36 (0.28) 0.08 (0.37) -- -- -- (0.37) 1998(g) 7.28 0.01 0.01(c) 0.02 (0.01) -- -- -- (0.01) BOND INCOME FUND - ---------------- CLASS A 2001 (i) $11.52 $ 0.37 $ 0.06 $ 0.43 $(0.39) $ -- $ -- $ -- $(0.39) 2000 11.51 0.78 0.03 0.81 (0.80) -- -- -- (0.80) 1999 12.36 0.81 (0.86) (0.05) (0.79) -- (0.01) 0.00(h) (0.80) 1998 12.39 0.81 0.15 0.96 (0.78) (0.03) (0.17) (0.01) (0.99) 1997 12.05 0.83 0.45 1.28 (0.81) (0.01) (0.12) -- (0.94) 1996 12.36 0.84 (0.31) 0.53 (0.84) -- -- -- (0.84) CLASS B 2001 (i) 11.51 0.35 0.05 0.40 (0.35) -- -- -- (0.35) 2000 11.51 0.70 0.02 0.72 (0.72) -- -- -- (0.72) 1999 12.36 0.72 (0.86) (0.14) (0.70) -- (0.01) 0.00(h) (0.71) 1998 12.39 0.71 0.15 0.86 (0.69) (0.02) (0.17) (0.01) (0.89) 1997 12.04 0.74 0.46 1.20 (0.72) (0.01) (0.12) -- (0.85) 1996 12.36 0.75 (0.32) 0.43 (0.75) -- -- -- (0.75) CLASS C 2001 (i) 11.52 0.35 0.05 0.40 (0.35) -- -- -- (0.35) 2000 11.52 0.70 0.02 0.72 (0.72) -- -- -- (0.72) 1999 12.37 0.72 (0.86) (0.14) (0.70) -- (0.01) 0.00(h) (0.71) 1998 12.40 0.71 0.15 0.86 (0.69) (0.02) (0.17) (0.01) (0.89) 1997 12.06 0.74 0.45 1.19 (0.72) (0.01) (0.12) -- (0.85) 1996 12.36 0.75 (0.30) 0.45 (0.75) -- -- -- (0.75) (a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period. Without this reimbursement, expense ratios would have been higher. (d) Had certain expenses not been reduced during the period, total returns would have been lower. (e) Per share net investment income does not reflect the period's reclassifcation of permanent differences between book and tax basis net investment income. (f) The amount shown for a share outstanding does not correspond with the aggregate net gain/(loss) on investments for the period due to the timing of purchases and redemptions of Fund shares in relation to fluctuating values of the investments of the Fund. (g) For the period December 7, 1998 (inception) through December 31, 1998. See accompanying notes to financial statements.
RATIOS TO AVERAGE NET ASSETS: ----------------------------- NET ASSET NET ASSETS, VALUE, TOTAL END OF NET INVESTMENT PORTFOLIO END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER THE PERIOD (%) (a) (000) (%) (b) (%) (b) RATE (%) ---------- ------- ----- ------- ------- -------- $ 7.05 3.4(d) $ 56,274 0.90(c) 5.73 45 7.02 6.7(d) 58,540 0.83(c) 6.43 108 7.01 1.9(d) 72,680 0.70(c) 5.88 139 7.30 4.0(d) 92,669 0.70(c) 5.93 105 7.39 6.2(d) 196,928 0.70(c) 6.27 49 7.37 5.8(d) 222,809 0.70(c) 6.39 54 7.05 3.1(d) 3,915 1.65(c) 5.00 45 7.01 5.9(d) 3,553 1.58(c) 5.68 108 7.00 1.1(d) 3,796 1.45(c) 5.13 139 7.29 3.4(d) 3,761 1.45(c) 5.18 105 7.38 5.4(d) 2,961 1.45(c) 5.52 49 7.36 4.9(d) 2,821 1.45(c) 5.64 54 7.05 3.1(d) 377 1.65(c) 5.01 45 7.01 5.9(d) 461 1.58(c) 5.68 108 7.00 1.2(d) 489 1.45(c) 5.13 139 7.29 0.3(d) 233 1.45(c) 5.18 105 $ 11.56 3.7 $173,323 1.01 6.64 41 11.52 7.4 174,969 1.04 7.03 83 11.51 (0.3) 213,769 0.97 6.87 63 12.36 8.0 221,799 1.01 6.44 65 12.39 11.0 93,513 1.05 6.73 54 12.05 4.6 189,685 1.05 7.00 104 11.56 3.4 114,417 1.76 5.88 41 11.51 6.5 100,353 1.79 6.28 83 11.51 (1.1) 89,213 1.72 6.12 63 12.36 7.2 64,240 1.76 5.69 65 12.39 10.3 37,559 1.80 5.98 54 12.04 3.7 31,191 1.80 6.25 104 11.57 3.4 12,361 1.76 5.89 41 11.52 6.5 12,541 1.79 6.28 83 11.52 (1.1) 14,872 1.72 6.12 63 12.37 7.2 8,969 1.76 5.69 65 12.40 10.2 5,276 1.80 5.98 54 12.06 3.9 2,391 1.80 6.25 104 (h) Amount rounds to less than $0.01 per share. (i) For the six months ended June 30, 2001 (unaudited). As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. For Short Term Corporate Income Fund, the effect of this change was to decrease the ratio of net investment income to average net assets from 5.83% to 5.73% for Class A, 5.10% to 5.00% for Class B and 5.11% to 5.01% for Class C. For Bond Income Fund, the effect of this change was to decrease the ratio of net investment income to average net assets from 6.67% to 6.64% for Class A, 5.92% to 5.88% for Class B and 5.93% to 5.89% for Class C.
- ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) - -----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period. INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ---------------------------------------- ------------------------------------------------------------------- NET NET ASSET REALIZED DIVIDENDS VALUE, UNREALIZED DIVIDENDS IN EXCESS DISTRIBUTIONS DISTRIBUTIONS BEGINNING NET AND GAIN TOTAL FROM FROM NET OF NET FROM NET IN EXCESS OF OF INVESTMENT (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED NET REALIZED TOTAL THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS CAPITAL GAINS DISTRIBUTIONS ---------- ------ ----------- ---------- ------ ------ ------------- ------------- ------------- BOND INCOME FUND (continued) - ---------------------------- CLASS Y 2001 (i) $11.54 $ 0.40 $ 0.06 $ 0.46 $(0.41) $ -- $ -- $ -- $(0.41) 2000 11.54 0.83 0.01 0.84 (0.84) -- -- -- (0.84) 1999 12.38 0.85 (0.86) (0.01) (0.82) -- (0.01) 0.00(f) (0.83) 1998 12.41 0.84 0.15 0.99 (0.81) (0.03) (0.17) (0.01) (1.02) 1997 12.06 0.86 0.46 1.32 (0.84) (0.01) (0.12) -- (0.97) 1996 12.40 0.87 (0.34) 0.53 (0.87) -- -- -- (0.87) HIGH INCOME FUND - ---------------- Class A 2001 (i) $ 6.21 $ 0.36 $ (0.54) $ (0.18) $(0.36) $ -- $ -- $ -- $(0.36) 2000 8.30 0.86 (2.11) (1.25) (0.84) -- -- -- (0.84) 1999 8.86 0.89 (0.54) 0.35 (0.90) (0.01) -- -- (0.91) 1998 9.94 0.92 (1.08) (0.16) (0.92) -- -- -- (0.92) 1997 9.42 0.87 0.52 1.39 (0.87) -- -- -- (0.87) 1996 8.98 0.84 0.44 1.28 (0.83) (0.01) -- -- (0.84) Class B 2001 (i) 6.22 0.33 (0.55) (0.22) (0.33) -- -- -- (0.33) 2000 8.30 0.81 (2.11) (1.30) (0.78) -- -- -- (0.78) 1999 8.85 0.82 (0.53) 0.29 (0.83) (0.01) -- -- (0.84) 1998 9.93 0.85 (1.08) (0.23) (0.85) -- -- -- (0.85) 1997 9.42 0.80 0.51 1.31 (0.80) -- -- -- (0.80) 1996 8.98 0.79 0.42 1.21 (0.76) (0.01) -- -- (0.77) Class C 2001 (i) 6.22 0.33 (0.55) (0.22) (0.33) -- -- -- (0.33) 2000 8.30 0.81 (2.11) (1.30) (0.78) -- -- -- (0.78) 1999 8.85 0.82 (0.53) 0.29 (0.83) (0.01) -- -- (0.84) 1998(g) 9.96 0.69 (1.08) (0.39) (0.72) -- -- -- (0.72) STRATEGIC INCOME FUND - --------------------- CLASS A 2001 (i) $10.80 $ 0.49(e) $(0.54) $(0.05) $(0.50) $ -- $ -- $-- $(0.50) 2000 11.65 0.99(e) (0.91) 0.08 (0.93) -- -- -- (0.93) 1999 11.37 1.03 0.31 1.34 (1.02) -- (0.04) 0.00(f) (1.06) 1998 13.42 1.05 (1.30) (0.25) (1.05) -- (0.70) (0.05) (1.80) 1997 13.36 1.01 0.21 1.22 (1.01) -- (0.15) -- (1.16) 1996 12.99 1.05 0.73 1.78 (1.05) -- (0.36) -- (1.41) Class B 2001 (i) 10.79 0.45(e) (0.53) (0.08) (0.46) -- -- -- (0.46) 2000 11.65 0.90(e) (0.91) (0.01) (0.85) -- -- -- (0.85) 1999 11.37 0.94 0.31 1.25 (0.93) -- (0.04) 0.00(f) (0.97) 1998 13.42 0.95 (1.30) (0.35) (0.95) -- (0.70) (0.05) (1.70) 1997 13.36 0.91 0.21 1.12 (0.91) -- (0.15) -- (1.06) 1996 12.99 0.95 0.73 1.68 (0.95) -- (0.36) -- (1.31) (a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period. Without this reimbursement, expense ratios would have been higher. (d) Had certain expenses not been reduced during the period, total returns would have been lower. (e) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (f) Amount rounds to less than $0.01 per share. (g) For the period March 2, 1998 (inception) through December 31, 1998. See accompanying notes to financial statements.
RATIOS TO AVERAGE NET ASSETS: ----------------------------- NET ASSET NET ASSETS, VALUE, TOTAL END OF NET INVESTMENT PORTFOLIO END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER THE PERIOD (%) (a) (000) (%) (b) (%) (b) RATE (%) ---------- ------- ----- ------- ------- -------- $ 11.59 4.0 $ 15,075 0.66 6.98 41 11.54 7.6 14,013 0.67 7.40 83 11.54 (0.0)(h) 10,320 0.72 7.12 63 12.38 8.2 9,289 0.76 6.69 65 12.41 11.4 4,153 0.80 6.98 54 12.06 4.6 1,844 0.80 7.25 104 $ 5.67 (3.5) $ 41,797 1.42 10.90 37 6.21 (16.1) 46,960 1.36 11.47 60 8.30 4.0 74,589 1.28 10.22 89 8.86 (1.8) 73,023 1.32 9.81 75 9.94 15.4 62,739 1.36 9.03 99 9.42 14.9(d) 42,992 1.53(c) 9.32 134 5.67 (4.0) 42,600 2.17 10.15 37 6.22 (16.6) 47,793 2.11 10.72 60 8.30 3.3 70,218 2.03 9.47 89 8.85 (2.5) 60,322 2.07 9.06 75 9.93 14.4 42,401 2.11 8.28 99 9.42 14.1(d) 17,767 2.19(c) 8.33 134 5.67 (4.0) 4,770 2.17 10.13 37 6.22 (16.6) 5,369 2.11 10.72 60 8.30 3.3 9,138 2.03 9.47 89 8.85 (4.1) 7,732 2.07 9.06 75 $ 10.25 (0.6) $106,219 1.29 9.37 7 10.80 0.7 116,986 1.24 8.73 13 11.65 12.2 124,869 1.21 9.09 19 11.37 (1.7) 127,306 1.19 8.33 33 13.42 9.3 144,706 1.18 7.36 37 13.36 14.5(d) 90,729 0.96(c) 8.23 52 10.25 (0.9) 113,726 2.05 8.62 7 10.79 (0.2) 120,200 1.99 7.98 13 11.65 11.3 127,723 1.96 8.34 19 11.37 (2.5) 134,049 1.94 7.58 33 13.42 8.5 146,083 1.93 6.61 37 13.36 13.7(d) 93,408 1.71(c) 7.48 52 (h) Amount is less than one tenth of one percent. (i) For the six months ended June 30, 2001 (unaudited). As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. For Bond Income Fund, the effect of this change was to decrease the ratio of net investment income to average net assets from 7.02% to 6.98% for Class Y. For High Income Fund, the effect of this change was to decrease the ratio of net investment income to average net assets from 11.11% to 10.90% for Class A, 10.36% to 10.15% for Class B and 10.34% to 10.13% for Class C. For Strategic Income Fund, the effect of this change was to decrease the ratio of net investment income to average net assets from 9.38% to 9.37% for Class A and 8.63% to 8.62% for Class B.
- ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) - ----------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period.
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ---------------------------------------- ------------------------------------------------------------------- NET NET ASSET REALIZED DIVIDENDS VALUE, UNREALIZED DIVIDENDS IN EXCESS DISTRIBUTIONS DISTRIBUTIONS BEGINNING NET AND GAIN TOTAL FROM FROM NET OF NET FROM NET IN EXCESS OF OF INVESTMENT (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED NET REALIZED TOTAL THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS CAPITAL GAINS DISTRIBUTIONS ---------- ------ ----------- ---------- ------ ------ ------------- ------------- ------------- STRATEGIC INCOME FUND (continued) - --------------------------------- CLASS C 2001 (f) $10.78 $ 0.45(e) $(0.53) $(0.08) $(0.46) $ -- $ -- $ -- $(0.46) 2000 11.64 0.90(e) (0.91) (0.01) (0.85) -- -- -- (0.85) 1999 11.36 0.94 0.31 1.25 (0.93) -- (0.04) 0.00(d) (0.97) 1998 13.41 0.95 (1.30) (0.35) (0.95) -- (0.70) (0.05) (1.70) 1997 13.35 0.91 0.21 1.12 (0.91) -- (0.15) -- (1.06) 1996 12.99 0.95 0.72 1.67 (0.95) -- (0.36) -- (1.31) CLASS Y 2001 (f) 10.81 0.51(e) (0.53) (0.02) (0.52) -- -- -- (0.52) 2000 11.65 0.96(e) (0.84) 0.12 (0.96) -- -- -- (0.96) 1999(e) 11.45 0.86 (0.56) 0.30 (0.10) -- -- 0.00(d) (0.10) LIMITED TERM U.S. GOVERNMENT FUND - --------------------------------- CLASS A 2001 (f) $11.16 $ 0.29 $ 0.05 $ 0.34 $(0.29) $ -- $ -- $ -- $(0.29) 2000 10.97 0.69 0.20 0.89 (0.70) -- -- -- (0.70) 1999 11.70 0.66 (0.74) (0.08) (0.65) -- -- -- (0.65) 1998 11.64 0.67 0.06 0.73 (0.67) -- -- -- (0.67) 1997 11.55 0.72 0.09 0.81 (0.72) -- -- -- (0.72) 1996 12.10 0.81 (0.54) 0.27 (0.82) -- -- -- (0.82) CLASS B 2001 (f) 11.14 0.26 0.06 0.32 (0.26) -- -- -- (0.26) 2000 10.95 0.62 0.20 0.82 (0.63) -- -- -- (0.63) 1999 11.69 0.59 (0.75) (0.16) (0.58) -- -- -- (0.58) 1998 11.62 0.60 0.07 0.67 (0.60) -- -- -- (0.60) 1997 11.54 0.65 0.08 0.73 (0.65) -- -- -- (0.65) 1996 12.09 0.73 (0.54) 0.19 (0.74) -- -- -- (0.74) CLASS C 2001 (f) 11.15 0.26 0.06 0.32 (0.26) -- -- -- (0.26) 2000 10.96 0.62 0.20 0.82 (0.63) -- -- -- (0.63) 1999 11.70 0.59 (0.75) (0.16) (0.58) -- -- -- (0.58) 1998 11.63 0.60 0.07 0.67 (0.60) -- -- -- (0.60) 1997 11.54 0.65 0.09 0.74 (0.65) -- -- -- (0.65) 1996 12.10 0.75 (0.57) 0.18 (0.74) -- -- -- (0.74) CLASS Y 2001 (f) 11.20 0.32 0.10 0.42 (0.28) -- -- -- (0.28) 2000 11.00 0.75 0.19 0.94 (0.74) -- -- -- (0.74) 1999 11.73 0.70 (0.74) (0.04) (0.69) -- -- -- (0.69) 1998 11.66 0.72 0.06 0.78 (0.71) -- -- -- (0.71) 1997 11.58 0.76 0.08 0.84 (0.76) -- -- -- (0.76) 1996 12.13 0.85 (0.54) 0.31 (0.86) -- -- -- (0.86) (a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Had certain expenses not been reduced during the preiod, total returns would have been lower. (d) Amount rounds to less than $0.01 per share. (e) For the period December 1, 1999 (inception) through December 31, 1999. (f) For the six months ended June 30, 2001 (unaudited). As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. For Strategic Income Fund, the effect of this change was to decrease the ratio of net investment income to average net assets from 8.62% to 8.61% for Class C and 9.78% to 9.77% for Class Y. For Limited Term U.S. Government Fund, the effect of this change was to decrease the ratio of net investment income to average net assets from 5.17% to 5.06% for Class A, 4.52% to 4.42% for Class B, 4.52% to 4.41% for Class C and 5.62% to 5.51% for Class Y. (g) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period. Without this reimbursement, expense ratios would have been higher.See accompanying notes to financial statements.
RATIOS TO AVERAGE NET ASSETS: ----------------------------- NET ASSET NET ASSETS, VALUE, TOTAL END OF NET INVESTMENT PORTFOLIO END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER THE PERIOD (%) (a) (000) (%) (b) (%) (b) RATE (%) ---------- ------- ----- ------- ------- -------- $ 10.24 (0.9) $ 35,254 2.05 8.61 7 10.78 (0.2) 37,208 1.99 7.98 13 11.64 11.3 40,265 1.96 8.34 19 11.36 (2.5) 45,457 1.94 7.58 33 13.41 8.5 6,515 1.93 6.61 37 13.35 13.6(c) 31,746 1.71(g) 7.48 52 10.27 (0.3) 409 0.93 9.77 7 10.81 1.0 335 0.90 9.07 13 11.65 2.7(c) 0.2 0.96(g) 9.34 19 $ 11.21 3.1 $116,047 1.40 5.06 245 11.16 8.3 118,833 1.40 6.18 384 10.97 (0.7) 149,756 1.33 5.91 400 11.70 6.5 194,032 1.31 5.81 1,376 11.64 7.3 222,185 1.28 6.40 533 11.55 2.4 276,178 1.25 7.13 327 11.20 2.8 12,253 2.05 4.42 245 11.14 7.7 11,884 2.05 5.53 384 10.95 (1.4) 14,601 1.98 5.26 400 11.69 5.9 18,116 1.96 5.16 1,376 11.62 6.5 16,060 1.93 5.75 533 11.54 1.7 18,503 1.90 6.48 327 11.21 2.8 7,602 2.05 4.41 245 11.15 7.7 6,617 2.05 5.53 384 10.96 (1.4) 9,054 1.98 5.26 400 11.70 5.9 13,962 1.96 5.16 1,376 11.63 6.6 15,699 1.93 5.75 533 11.54 1.6 14,903 1.90 6.48 327 11.34 3.8 3,046 0.95 5.51 245 11.20 8.8 3,254 0.95 6.63 384 11.00 (0.3) 7,086 0.98 6.26 400 11.73 6.9 8,345 0.96 6.16 1,376 11.66 7.5 5,262 0.93 6.75 533 11.58 2.8 5,313 0.90 7.48 327
- ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) - ----------------------------------------------------------------------------------------------------------------------------------- For a share outstanding throughout each period.
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ---------------------------------------- ------------------------------------------------------------------- NET NET ASSET REALIZED DIVIDENDS VALUE, UNREALIZED DIVIDENDS IN EXCESS DISTRIBUTIONS DISTRIBUTIONS BEGINNING NET AND GAIN TOTAL FROM FROM NET OF NET FROM NET IN EXCESS OF OF INVESTMENT (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED NET REALIZED TOTAL THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS CAPITAL GAINS DISTRIBUTIONS ---------- ------ ----------- ---------- ------ ------ ------------- ------------- ------------- GOVERNMENT SECURITIES FUND CLASS A 2001 (c) $11.18 $ 0.28 $(0.16) $ 0.12 $(0.28) $ -- $ -- $ -- $(0.28) 2000 10.47 0.62 0.69 1.31 (0.60) -- -- -- (0.60) 1999 11.90 0.67 (1.42) (0.75) (0.68) -- -- -- (0.68) 1998 11.56 0.68 0.33 1.01 (0.67) -- -- -- (0.67) 1997 11.08 0.62 0.48 1.10 (0.62) -- -- -- (0.62) 1996 11.73 0.71 (0.64) 0.07 (0.72) -- -- -- (0.72) CLASS B 2001 (c) 11.18 0.24 (0.16) 0.08 (0.24) -- -- -- (0.24) 2000 10.47 0.54 0.69 1.23 (0.52) -- -- -- (0.52) 1999 11.90 0.59 (1.42) (0.83) (0.60) -- -- -- (0.60) 1998 11.56 0.58 0.34 0.92 (0.58) -- -- -- (0.58) 1997 11.08 0.54 0.48 1.02 (0.54) -- -- -- (0.54) 1996 11.74 0.63 (0.65) (0.02) (0.64) -- -- -- (0.64) CLASS Y 2001 (c) 11.17 0.30 (0.17) 0.13 (0.30) -- -- -- (0.30) 2000 10.44 0.65 0.71 1.36 (0.63) -- -- -- (0.63) 1999 11.88 0.70 (1.43) (0.73) (0.71) -- -- -- (0.71) 1998 11.54 0.72 0.32 1.04 (0.70) -- -- -- (0.70) 1997 11.07 0.65 0.47 1.12 (0.65) -- -- -- (0.65) 1996 11.71 0.74 (0.63) 0.11 (0.75) -- -- -- (0.75) (a) A sales charge for Class A shares and a contingent deferred sales charge for Class B shares are not reflected in in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) For the six months ended June 30, 2001 (unaudited). As required, effective January 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change was to decrease the ratio of net investment income to average net assets from 5.02% to 4.92% for Class A, 4.27% to 4.17% for Class B and 5.39% to 5.29% for Class Y. See accompanying notes to financial statements.
RATIOS TO AVERAGE NET ASSETS: ----------------------------- NET ASSET NET ASSETS, VALUE, TOTAL END OF NET INVESTMENT PORTFOLIO END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER THE PERIOD (%) (a) (000) (%) (b) (%) (b) RATE (%) ---------- ------- ----- ------- ------- -------- $ 11.02 1.1 $ 69,609 1.38 4.92 287 11.18 12.9 70,909 1.41 5.69 622 10.47 (6.4) 84,904 1.36 6.00 313 11.90 9.0 103,032 1.38 5.80 106 11.56 10.3 103,583 1.36 5.63 391 11.08 0.8 120,607 1.32 6.45 462 11.02 0.7 11,182 2.13 4.17 287 11.18 12.1 10,343 2.16 4.94 622 10.47 (7.1) 9,430 2.11 5.25 313 11.90 8.2 9,657 2.13 5.05 106 11.56 9.5 5,654 2.11 4.88 391 11.08 (0.1) 5,385 2.07 5.70 462 11.00 1.2 4,640 1.01 5.29 287 11.17 13.5 4,593 1.01 6.09 622 10.44 (6.3) 2,754 1.11 6.25 313 11.88 9.3 3,404 1.13 6.05 106 11.54 10.5 6,658 1.11 5.88 391 11.07 1.1 6,384 1.07 6.70 462
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- For the Six Months Ended June 30, 2001 (Unaudited) 1. ORGANIZATION. CDC Nvest Funds Trust I, formerly Nvest Funds Trust I, and CDC Nvest Funds Trust II, formerly Nvest Funds Trust II, (the "Trusts" and each a "Trust") are organized as Massachusetts business trusts. Each Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Each Declaration of Trust permits the Trustees to issue an unlimited number of shares of the Trust in multiple series (individually, a "Fund" and, collectively, the "Funds"). Information presented in these financial statements pertains to the income funds of the Trusts, the financial statements of the other Funds of the Trusts are presented in separate reports. The following table provides a list of the Funds included in this report. CDC Nvest Funds Trust I: - ------------------------ CDC Nvest Bond Income Fund (the "Bond Income Fund"), formerly Nvest Bond Income Fund CDC Nvest Strategic Income Fund (the "Strategic Income Fund"), formerly Nvest Strategic Income Fund CDC Nvest Government Securities Fund (the "Government Securities Fund"), formerly Nvest Government Securities Fund CDC Nvest Funds Trust II: - ------------------------- CDC Nvest Short Term Corporate Income Fund (the "Short Term Corporate Income Fund"), formerly Nvest Short Term Corporate Income Fund CDC Nvest High Income Fund (the "High Income Fund"), formerly Nvest High Income Fund CDC Nvest Limited Term U.S. Government Fund (the Limited Term U.S. Government Fund"), formerly Nvest Limited Term U.S. Government Fund Short Term Corporate Income Fund and High Income Fund each offer Class A, Class B, and Class C shares. Bond Income Fund, Strategic Income Fund and Limited Term U.S. Government Fund each offer Class A, Class B, Class C and Class Y shares. Government Securities Fund offers Class A, Class B and Class Y shares. Class A shares of all Funds except Short Term Corporate Income Fund and Limited Term U.S. Government Fund are sold with a maximum front end sales charge of 4.50%. Class A shares of Short Term Corporate Income and Limited Term U.S. Government Fund are sold with a maximum front end sales charge of 3.00%. Class B shares do not pay a front end sales charge, but pay a higher ongoing distribution fee than Class A shares for eight years (at which point they automatically convert to Class A shares), and are subject to a contingent deferred sales charge ("CDSC") if those shares are redeemed within six years of purchase (or five years if purchased before May 1, 1997). Class C shares are sold with a maximum front end sales charge of 1.00%, do not convert to any other class of shares and pay a higher ongoing distribution fee than Class A shares and may be subject to a CDSC of 1.00% if those shares are redeemed within one year. Class Y shares do not pay a front end sales charge, a CDSC or distribution fees. They are intended for institutional investors with a minimum initial investment of $1,000,000. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees and transfer agent fees applicable to such class), and votes as a class only with respect to its own Rule 12b-1 Plan. Shares of each class would receive their pro rata share of the net assets of a Fund, if the Fund were liquidated. The Trustees approve separate dividends from net investment income on each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds' financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. SECURITY VALUATION. Debt securities (other than short-term obligations with a remaining maturity of less than sixty days) are valued on the basis of valuations furnished to the Fund by a pricing service, which has been authorized by the Trustees. The pricing 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. Equity securities are valued on the basis of valuations furnished to the Fund by a pricing service, which has been authorized by the Board of Trustees. The pricing service provides the last reported sale price for securities listed on an applicable securities exchange or on the NASDAQ national market system, or, if no sale was reported and in the case of over-the-counter securities not so listed, the last reported bid price. All other securities and assets are valued at their fair value as determined in good faith by the Fund's investment adviser and subadviser, under the supervision of the Fund's Trustees. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions are accounted for on trade date. Dividend income is recorded on ex-dividend date 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. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. Since the values of investment securities are presented at the foreign exchange rates prevailing at the end of the period, it is not practical to isolate that portion of the results of operations arising from changes in exchange rates from fluctuations arising from changes in market prices of the investment securities. Such changes are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from: sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities at the end of the fiscal periods, resulting from changes in exchange rates. D. OPTIONS. The Limited Term U.S. Government Fund and Government Securities Fund may use options to hedge against changes in the values of securities each Fund owns or expects to purchase. Writing puts and buying calls tends to increase a Fund's exposure to the underlying instrument and writing calls or buying puts tends to decrease a Fund's exposure to the underlying instrument, or hedge other Fund investments. For options purchased to hedge a Fund's investments, the potential risk to the Fund is that the change in the value of option contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty is unable to perform. The maximum loss for purchased options is limited to the premium initially paid for the option. For options written by the Fund, the maximum loss is not limited to the premium initially received for the option. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over the counter are valued using prices supplied by the dealers. E. INTEREST RATE FUTURES CONTRACTS. The Limited Term U.S. Government Fund and Government Securities Fund may purchase or sell interest rate futures contracts to hedge against changes in the values of securities each Fund owns or expects to purchase. An interest rate futures contract is an agreement between two parties to buy and sell a security for a set price (or to deliver an amount of cash) on a future date. Upon entering into such a contract, the purchasing Fund is required to pledge to the broker an amount of cash, U.S. government securities or other high quality debt securities equal to the minimum "initial margin" requirements of the exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as "variation margin" and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The potential risk to the Fund is that the change in value of futures contracts primarily corresponds with the value of underlying instruments which may not correspond to the change in the value of the hedged instruments. In addition, there is a risk that the Fund may not be able to close out its futures positions due to an illiquid secondary market. F. 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 which 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. G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily to shareholders of record and are paid monthly. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for book and tax purposes of items such as distributions from real estate investment trusts, capital loss carryforwards, paydowns on mortgage-backed securities and foreign currency transactions. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital accounts. H. 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 100% of the repurchase price, including interest. Each Fund's subadviser is responsible for determining that the value of the collateral is at all times at least equal to the repurchase price, including interest. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities. 3. PURCHASES AND SALES OF SECURITIES. For the period ended June 30, 2001, purchases and sales of securities (excluding short-term investments) were as follows:
U.S. Government/Agency Other Securities ---------------------- ---------------- Fund Purchases Sales Purchases Sales ---- --------- ----- --------- ----- Short Term Corporate Income Fund $ 3,111,016 $ 7,621,397 $ 23,801,916 $ 23,601,346 Bond Income Fund 31,316,547 46,243,085 104,752,027 77,485,681 High Income Fund 3,247,702 3,367,220 32,667,425 37,750,882 Strategic Income Fund 1,575,909 998,471 16,039,081 20,741,608 Limited Term U.S. Government Fund 311,883,512 310,053,047 23,197,975 28,960,338 Government Securities Fund 241,070,671 239,948,120 51,000 6,000
4A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") is the investment adviser to each of the Funds. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund's average daily net assets:
Percentage of Average Daily Net Assets -------------------------------------- First Next Next Over Fund $100 million $100 million $300 million $500 million ---- ------------ ------------ ------------ ------------ Short Term Corporate Income Fund 0.550% 0.550% 0.510% 0.470% Bond Income Fund 0.500% 0.375% 0.375% 0.375% High Income Fund 0.700% 0.700% 0.650% 0.650% Strategic Income Fund 0.650% 0.650% 0.600% 0.600% Limited Term U.S. Government Fund 0.650% 0.650% 0.625% 0.600% Government Securities Fund 0.650% 0.650% 0.625% 0.600%
For the period ended June 30, 2001, the management fees and waivers for each Fund were as follows:
Gross Waiver of Net Percentage of Average Management Management Management Daily Net Assets Fund Fee Fee Fee Gross Net ---- ---------- ---------- ---------- ----- --- Short Term Corporate Income Fund $ 169,206 $ 133,073 $ 36,133 0.55% 0.12% Bond Income Fund 642,851 -- 642,851 0.42% 0.42% High Income Fund 355,448 -- 355,448 0.70% 0.70% Strategic Income Fund 846,547 -- 846,547 0.64% 0.64% Limited Term U.S. Government Fund 455,312 -- 455,312 0.65% 0.65% Government Securities Fund 277,863 -- 277,863 0.65% 0.65%
CDC IXIS Advisers has entered into a subadviser agreement for each Fund with Loomis, Sayles & Company, L.P. ("Loomis Sayles"). Payments to CDC IXIS Advisers are reduced by payments to the subadvisers. Prior to June, 2001, each Fund except High Income Fund and Strategic Income Fund was subadvised by Back Bay Advisors, L.P. ("Back Bay"). CDC IXIS Advisers, Loomis Sayles and Back Bay are wholly-owned subsidiaries of CDC IXIS Asset Management North America, L.P. Certain officers and directors of CDC IXIS Advisers are also officers or Trustees of the Funds. B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. CDC IXIS Asset Management Services, Inc. ("CIS"), a wholly owned subsidiary of CDC IXIS Asset Management North America, L.P., performs certain accounting and administrative services for the Funds. Pursuant to an agreement among the Trusts, CDC Nvest Funds Trust III, CDC Nvest Cash Management Trust, CDC Nvest Tax Exempt Money Market Trust, CDC Nvest Companies Trust I and CIS each Fund pays CIS its pro rata portion of a group fee for these services representing the higher amount based on the following calculations: (1) Percentage of Eligible Average Daily Net Assets ----------------------------------------------- First Next Over $5 billion $5 billion $10 billion 0.0350% 0.0325% 0.0300% or (2) Each Trust's pro rata portion, based on eligible assets, of the annual aggregate minimum fee of $2.5 million. For the period ended June 30, 2001, amounts paid to CIS for accounting and administrative expense were as follows: Accounting And Percentage of Average Fund Administrative Daily Net Assets ---- -------------- ---------------- Short Term Corporate Income Fund $ 13,335 0.043% Bond Income Fund 67,187 0.043% High Income Fund 21,980 0.043% Strategic Income Fund 57,529 0.043% Limited Term U.S. Government Fund 30,366 0.043% Government Securities Fund 18,537 0.043% C. TRANSFER AGENT FEES. CIS is the transfer and shareholder servicing agent for each Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. Each Fund pays CIS service fees for servicing shareholder accounts. Class A, B and C shareholders pay service fees monthly representing the higher amount based on the following calculations: (1) Annual aggregate fee determined by applying an annual fee rate (see schedule below) to the eligible average daily net assets. Eligible assets are the average daily net assets of all non-networked accounts in bond funds offered within the CDC Nvest Family of Funds for which there are exchange privileges among the Funds. First Next Over $1.2 billion Next $5 billion $6.2 billion ------------ --------------- ------------ 0.142% 0.135% 0.130% Each Class of shares is subject to an annual class minimum of $18,000. or (2) An allocated portion, based on eligible assets, of an annual aggregate minimum fee of $2.5 million. In addition, pursuant to other servicing agreements, Class A, B and C shareholders pay service fees to other firms that provide similar services for their own shareholder accounts. Class Y shareholders pay service fees monthly at an annual rate of 0.10% of their average daily net assets. CIS, BFDS and other firms are also reimbursed by the Funds for out-of-pocket expenses. For the period ended June 30, 2001, amounts paid to CIS as compensation for its services as transfer agent were as follows: Transfer Agent Percentage of Average Fund Fee Daily Net Assets ---- -------------- --------------------- Short Term Corporate Income Fund $ 60,198 0.196% Bond Income Fund 208,096 0.134% High Income Fund 76,290 0.150% Strategic Income Fund 190,530 0.143% Limited Term U.S. Government Fund 136,220 0.194% Government Securities Fund 63,021 0.147% 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, the Fund pays CDC IXIS Asset Management Distributors, L.P. ("CDC IXIS Distributors"), the Fund's distributor (a wholly owned subsidiary of CDC IXIS Asset Management North America, L.P. ), a monthly service fee at the annual rate of 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses incurred by CDC IXIS Distributors in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. Also under the Class A Plan, Limited Term U.S. Government Fund pays CDC IXIS Distributors a monthly distribution fee at the annual rate of 0.10% of the average daily net assets attributable to the Fund's Class A shares as reimbursement for expenses incurred by CDC IXIS Distributors in connection with the marketing or sale the Fund's Class A shares. Under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a monthly service fee at the annual rate of 0.25% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in providing personal services to investors in Class B and Class C shares and/or the maintenance of shareholder accounts. Also under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a monthly distribution fee at the annual rate of 0.75% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in connection with the marketing or sale of Class B and Class C shares. For the period ended June 30, 2001, the Funds paid the following service and distribution fees:
Service Fee Distribution Fee ------------------------------- --------------------------------- Class A Class B Class C Class A Class B Class C ------- ------- ------- ------- ------- ------- Short Term Corporate Income Fund $ 71,223 $ 4,611 $ 578 $ -- $ 13,834 $ 1,733 Bond Income Fund 220,079 132,728 15,787 -- 398,183 47,361 High Income Fund 59,424 60,700 6,822 -- 182,100 20,465 Strategic Income Fund 140,043 146,568 44,995 -- 439,705 134,983 Limited Term U.S. Government Fund 146,645 15,197 9,385 58,658 45,591 28,156 Government Securities Fund 87,515 13,634 -- -- 40,902 --
Prior to September 13, 1993 for Short Term Corporate Income Fund and Bond Income Fund and September 24, 1993 for Limited Term U.S. Government Fund and Government Securities Fund, to the extent that reimburseable expenses of CDC IXIS Distributors in prior years exceeded the maximum amount payable under the Plan for that year, such expenses could be carried forward for reimbursement in future years in which the Class A Plan remains in effect. Unreimbursed expenses carried forward at December 31, 2000 were as follows: Fund ---- Short Term Corporate Income Fund $ 1,929,283 Bond Income Fund 1,919,349 Limited Term U.S. Government Fund 2,272,723 Government Securities Fund 1,583,658 Commissions (including contingent deferred sales charges) on Fund shares paid to CDC IXIS Distributors by investors in shares of the Funds during the period ended June 30, 2001 were as follows: Fund ---- Short Term Corporate Income Fund $ 13,531 Bond Income Fund 289,755 High Income Fund 140,953 Strategic Income Fund 247,520 Limited Term U.S. Government Fund 54,366 Government Securities Fund 94,653 E. TRUSTEES FEES AND EXPENSES. The Funds do not pay any compensation directly to their officers or Trustees who are directors, officers or employees of CDC IXIS Advisers, CDC IXIS Distributors, CDC IXIS Asset Management North America, L.P., CIS or their affiliates. Each other Trustee receives a retainer fee at the annual rate of $40,000 and meeting attendance fees of $3,500 for each meeting of the Board of Trustees attended. Each committee member receives an additional retainer fee at the annual rate of $6,000 while each committee chairman receives a retainer fee (beyond the $6,000 fee) at the annual rate of $4,000. These fees are allocated to the various CDC Nvest Funds based on a formula that takes into account, among other factors, the relative net assets of each Fund. 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 the Funds or certain other CDC Nvest Funds on the normal payment date. Deferred amounts remain in the Funds until distributed in accordance with the Plan. 5. CAPITAL SHARES. Each Fund may issue an unlimited number of shares of beneficial interest. Transactions in capital shares were as follows:
SHORT TERM CORPORATE INCOME FUND -------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, 2000 ------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS A Shares sold ............................................. 218,720 $ 1,545,043 749,039 $ 5,234,440 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 157,724 1,114,297 397,101 2,765,364 ---------- ------------ ---------- ------------ 376,444 2,659,340 1,146,140 7,999,804 Shares repurchased ...................................... (732,062) (5,245,937) (3,181,705) (22,139,392) ---------- ------------ ---------- ------------ Net increase (decrease) ................................. (355,618) $ (2,586,597) (2,035,565) $(14,139,588) ---------- ------------ ---------- ------------ CLASS B Shares sold ............................................. 74,437 $ 526,274 190,107 $ 1,320,535 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 11,591 81,775 24,494 170,389 ---------- ------------ ---------- ------------ 86,028 608,049 214,601 1,490,924 Shares repurchased ...................................... (37,467) (264,387) (250,248) (1,738,688) ---------- ------------ ---------- ------------ Net increase (decrease) ................................. 48,561 $ 343,662 (35,647) $ (247,764) ---------- ------------ ---------- ------------ CLASS C Shares sold ............................................. 3,562 $ 25,210 17,569 $ 121,940 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 1,685 11,875 3,664 25,483 ---------- ------------ ---------- ------------ 5,247 37,085 21,233 147,423 Shares repurchased ...................................... (17,564) (124,185) (25,262) (176,256) ---------- ------------ ---------- ------------ Net increase (decrease) ................................. (12,317) $ (87,100) (4,029) $ (28,833) ---------- ------------ ---------- ------------ CLASS Y Shares sold ............................................. -- $ -- -- $ -- Shares issued in connection with the reinvestment of: Dividends from net investment income ................... -- -- -- -- ---------- ------------ ---------- ------------ -- -- -- -- Shares repurchased ...................................... -- -- -- -- ---------- ------------ ---------- ------------ Net increase (decrease) ................................. -- $ -- -- $ -- ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions .......................................... (319,374) $ (2,330,035) (2,075,241) $(14,416,185) ========== ============ ========== ============ BOND INCOME FUND HIGH INCOME FUND ---------------- ---------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, 2000 JUNE 30, 2001 DECEMBER 31, 2000 -------------------------- -------------------------- -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 2,086,901 $ 24,367,277 5,539,363 $ 62,399,490 837,404 $ 5,441,835 1,717,005 $ 13,101,290 416,719 4,870,407 926,682 10,556,925 261,548 1,650,760 578,375 4,247,799 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 2,503,620 29,237,684 6,466,045 72,956,415 1,098,952 7,092,595 2,295,380 17,349,089 (2,705,302) (31,534,299) (9,837,004) (112,051,525) (1,282,946) (8,201,646) (3,723,936) (28,123,632) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ (201,682) $ (2,296,615) (3,370,959) $(39,095,110) (183,994) $ (1,109,051) (1,428,556) $(10,774,543) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 1,788,854 $ 20,894,760 2,643,742 $ 30,750,636 785,479 $ 5,060,091 1,757,076 $ 13,136,120 200,715 2,344,557 385,949 4,394,805 157,027 989,915 329,652 2,418,231 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 1,989,569 23,239,317 3,029,691 35,145,441 942,506 6,050,006 2,086,728 15,554,351 (806,802) (9,420,840) (2,062,798) (23,510,872) (1,119,126) (7,100,494) (2,855,061) (21,157,055) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 1,182,767 $ 13,818,477 966,893 $ 11,634,569 (176,620) $ (1,050,488) (768,333) $ (5,602,704) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 83,683 $ 978,131 290,185 $ 3,311,389 183,835 $ 1,209,293 231,080 $ 1,717,419 21,461 250,964 49,574 564,991 23,621 149,404 63,645 468,916 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 105,144 1,229,095 339,759 3,876,380 207,456 1,358,697 294,725 2,186,335 (124,952) (1,460,322) (542,083) (6,187,351) (229,773) (1,494,424) (531,837) (3,958,772) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ (19,808) $ (231,227) (202,324) $ (2,310,971) (22,317) $ (135,727) (237,112) $ (1,772,437) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 296,706 $ 3,484,720 556,735 $ 6,338,929 -- $ -- -- $ -- 34,983 409,946 51,551 588,651 -- -- -- -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 331,689 3,894,666 608,286 6,927,580 -- -- -- -- (245,002) (2,868,967) (289,046) (3,313,656) -- -- -- -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 86,687 $ 1,025,699 319,240 $ 3,613,924 -- $ -- -- $ -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 1,047,964 $ 12,316,334 (2,287,150) $(26,157,588) (382,931) $ (2,295,266) (2,434,001) $(18,149,684) ========== ============ ========== ============ ========== ============ ========== ============
STRATEGIC INCOME FUND --------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, 2000 ------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS A Shares sold ............................................. 591,714 $ 6,336,919 2,213,180 $ 25,281,376 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 389,109 4,110,310 701,656 7,899,022 ---------- ------------ ---------- ------------ 980,823 10,447,229 2,914,836 33,180,398 Shares repurchased ...................................... (1,456,917) (15,464,717) (2,796,975) (31,690,868) ---------- ------------ ---------- ------------ Net increase (decrease) ................................. (476,094) $ (5,017,488) 117,861 $ 1,489,530 ---------- ------------ ---------- ------------ CLASS B Shares sold ............................................. 725,759 $ 7,715,424 2,029,777 $ 23,008,589 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 325,584 3,438,221 550,085 6,189,182 ---------- ------------ ---------- ------------ 1,051,343 11,153,645 2,579,862 29,197,771 Shares repurchased ...................................... (1,093,082) (11,597,024) (2,408,804) (27,321,187) ---------- ------------ ---------- ------------ Net increase (decrease) ................................. (41,739) $ (443,379) 171,058 $ 1,876,584 ---------- ------------ ---------- ------------ CLASS C Shares sold ............................................. 261,122 $ 2,789,413 602,299 $ 6,832,461 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 107,955 1,139,055 200,658 2,257,365 ---------- ------------ ---------- ------------ 369,077 3,928,468 802,957 9,089,826 Shares repurchased ...................................... (377,887) (4,043,725) (812,058) (9,201,152) ---------- ------------ ---------- ------------ Net increase (decrease) ................................. (8,810) $ (115,257) (9,101) $ (111,326) ---------- ------------ ---------- ------------ CLASS Y Shares sold ............................................. 19,136 $ 202,097 33,074 $ 374,798 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 1,726 18,242 1,129 12,412 ---------- ------------ ---------- ------------ 20,862 220,339 34,203 387,210 Shares repurchased ...................................... (12,031) (125,337) (3,250) (37,413) ---------- ------------ ---------- ------------ Net increase (decrease) ................................. 8,831 $ 95,002 30,953 $ 349,797 ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions .......................................... (517,812) $ (5,481,122) 310,771 $ 3,604,585 ========== ============ ========== ============ LIMITED TERM U.S. GOVERNMENT FUND GOVERNMENT SECURITIES FUND --------------------------------- -------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, 2000 JUNE 30, 2001 DECEMBER 31, 2000 -------------------------- -------------------------- -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 1,406,152 $ 15,831,588 3,001,259 $ 32,964,633 851,939 $ 9,513,489 1,404,259 $ 15,121,192 214,113 2,411,834 579,635 6,371,109 141,038 1,574,193 347,841 3,727,503 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 1,620,265 18,243,422 3,580,894 39,335,742 992,977 11,087,682 1,752,100 18,848,695 (1,924,693) (21,670,096) (6,582,209) (72,192,361) (1,016,776) (11,343,222) (3,523,641) (37,613,974) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ (304,428) $ (3,426,674) (3,001,315) $(32,856,619) (23,799) $ (255,540) (1,771,541) $(18,765,279) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 127,125 $ 1,432,613 192,297 $ 2,115,999 204,044 $ 2,291,127 302,365 $ 3,270,971 20,504 230,577 52,413 575,303 16,418 183,172 29,227 313,755 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 147,629 1,663,190 244,710 2,691,302 220,462 2,474,299 331,592 3,584,726 (120,226) (1,350,880) (510,853) (5,580,593) (130,636) (1,456,659) (307,592) (3,283,748) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 27,403 $ 312,310 (266,143) $ (2,889,291) 89,826 $ 1,017,640 24,000 $ 300,978 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 189,055 $ 2,118,786 468,444 $ 5,129,636 -- $ -- -- $ -- 11,840 133,254 27,936 306,813 -- -- -- -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 200,895 2,252,040 496,380 5,436,449 -- -- -- -- (116,110) (1,305,862) (728,858) (7,963,206) -- -- -- -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 84,785 $ 946,178 (232,478) $ (2,526,757) -- $ -- -- $ -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 19,823 $ 237,935 60,347 $ 660,534 25,833 $ 289,819 182,156 $ 1,963,176 6,900 78,255 20,417 225,415 11,305 125,994 17,534 188,421 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ 26,723 316,190 80,764 885,949 37,138 415,813 199,690 2,151,597 (48,696) (552,662) (434,313) (4,767,911) (26,758) (299,650) (52,065) (549,298) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ (21,973) $ (236,472) (353,549) $ (3,881,962) 10,380 $ 116,163 147,625 $ 1,602,299 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ (214,213) $ (2,404,658) (3,853,485) $(42,154,629) 76,407 $ 878,263 (1,599,916) $(16,862,002) ========== ============ ========== ============ ========== ============ ========== ============
6. LINE OF CREDIT. High Income Fund and Strategic Income Fund, along with certain other portfolios that comprise the CDC Nvest Funds Trusts participate in a $100,000,000 committed line of credit provided by Citibank, N.A. under a credit agreement (the "Agreement") dated March 2, 2001. Advances under the Agreement are taken primarily for temporary or emergency purposes. Borrowings under the Agreement bear interest at a rate tied to one of several short-term rates that may be selected by the lender from time to time. In addition, the Funds are charged a facility fee equal to 0.08% per annum on the unused portion of the line of credit. The annual cost of maintaining the line of credit and the facility fee is apportioned pro rata among the participating Funds. There were no borrowings as of or during the period ended June 30, 2001. 7. SECURITY LENDING. The Funds have each entered into an agreement with a third party to lend their securities. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The Funds receive fees for lending their securities. The market value of securities on loan to third parties and the value of collateral held by the Funds with respect to such loans at June 30, 2001, is as follows: Market Value of Value of Collateral Fund Securities on Loan Received ---- ------------------ -------- Short Term Corporate Income Fund $ -- $ -- Bond Income Fund 28,418,202 29,053,581 High Income Fund 21,905,435 22,467,000 Strategic Income Fund 12,460,124 12,943,260 Limited Term U.S. Government Fund 32,743,832 33,405,200 Government Securities Fund -- -- 8. CONTINGENT EXPENSE OBLIGATION. CDC IXIS Advisers has given a binding undertaking to Short Term Corporate Income Fund to defer its management fee and, if necessary, bear certain expenses associated with the Fund to limit its operating expenses. This limitation is in effect until May 1, 2002 and will be reevaluated on an annual basis. If in the following fiscal year the actual operating expenses of a Fund that previously received a deferral or reimbursement are less than the expense limit for that Fund, the Fund is required to pay an amount of additional expense that is the lower of the difference between the expense limit and the actual amount of fees previously waived or expenses reimbursed. At June 30, 2001, the expense limits as a percentage of average daily net assets and amount subject to possible reimbursement under the expense limitation agreement were as follows: Expense Limit as a Percentage Expenses Subject of Average Daily Net Assets to Possible --------------------------- --------------- Class A Class B Class C Reimbursement ------- ------- ------- ------------- Short Term Corporate Income Fund 0.90% 1.65% 1.65% $ 424,830 9. CHANGE IN ACCOUNTING PRINCIPLE. As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. Prior to January 1, 2001, the Funds did not amortize premium on debt securities. The cumulative effect of this accounting change had no impact on total net assets of each Fund, but resulted in a reduction in cost of securities and a corresponding increase in net unrealized appreciation based on securities held by the Funds on January 1, 2001. Cost of Unrealized Securities Appreciation ---------- ------------ Short Term Corporate Income Fund $ 198,026 $ 198,026 Bond Income Fund 564,343 564,343 High Income Fund 92,976 92,976 Strategic Income Fund 596,851 596,851 Limited Term U.S. Government Fund 318,505 318,505 Government Securities Fund 53,332 53,332 The effect of this change for the period ended June 30, 2001, was to decrease net investment income, decrease net unrealized appreciation and increase net realized gains. The statements of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. Net Net Net Investment Unrealized Realized Income Appreciation Gains ------ ------------ ----- Short Term Corporate Income Fund $ 30,126 $ 125,916 $ 154,042 Bond Income Fund 61,478 126,316 187,794 High Income Fund 106,978 127,602 20,624 Strategic Income Fund 8,495 6,636 1,859 Limited Term U.S. Government Fund 74,341 122,672 197,013 Government Securities Fund 43,173 56,753 99,926 10. OTHER. High Income Fund and Strategic Income Fund pursue their objectives by investing in domestic and foreign securities. There are certain risks involved in investing in foreign securities which 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. - -------------------------------------------------------------------------------- REGULAR INVESTING PAYS - -------------------------------------------------------------------------------- FIVE GOOD REASONS TO INVEST REGULARLY - -------------------------------------------------------------------------------- 1. It's an easy way to build assets. 2. It's convenient and effortless. 3. It requires a low minimum to get started. 4. It can help you reach important long-term goals like financing retirement or college funding. 5. It can help you benefit from the ups and downs of the market. With Investment Builder, CDC Nvest Funds' automatic investment program, you can invest as little as $100 a month in your CDC Nvest fund automatically -- without even writing a check. And, as you can see from the chart below, your monthly investments can really add up over time. THE POWER OF MONTHLY INVESTING - -------------------------------------------------------------------------------- MONTHLY INVESTMENT $ 100.00 $ 200.00 $ 500.00 - ------------------ ----------- - --------- - --------- 5 YEARS $ 7,496.67 $ 14,993.34 $ 37,483.35 10 YEARS $ 18,516.57 $ 37,033.14 $ 92,582.84 15 YEARS $ 34,934.52 $ 69,869.03 $ 174,672.58 20 YEARS $ 59,394.72 $ 118,789.45 $ 296,973.62 25 YEARS $ 95,836.66 $ 191,673.33 $ 479,183.32 Assumes an 8% fixed rate of return compounded monthly and does not allow for taxes. Results are not indicative of the past or future results of any CDC Nvest Funds. The value and return on CDC Nvest Funds fluctuate with changing market conditions. This program cannot assure a profit nor protect against a loss in a declining market. It does, however, ensure that you buy more shares when the price is low and fewer shares when the price is high. Because this program involves continuous investment in securities regardless of fluctuating prices, investors should consider their financial ability to continue purchases during periods of high or low prices. You can start an Investment Builder program with your current CDC Nvest Funds account. To add Investment Builder to your account today, call your financial representative or CDC Nvest Funds at 800-225-5478. Please call CDC Nvest Funds for a prospectus, which contains more information, including charges and other ongoing expenses. Please read the prospectus carefully before you invest. - ------------------------------------------------------------------------------- CDC NVEST FUNDS - ------------------------------------------------------------------------------- CDC Nvest AEW Real Estate Fund CDC Nvest Balanced Fund CDC Nvest Bond Income Fund CDC Nvest Bullseye Fund CDC Nvest Capital Growth Fund CDC Nvest Cash Management Trust-- Money Market Series* CDC Nvest Government Securities Fund CDC Nvest Growth Fund CDC Nvest Growth and Income Fund CDC Nvest High Income Fund CDC Nvest International Equity Fund CDC Nvest Large Cap Value Fund CDC Nvest Limited Term U.S. Government Fund CDC Nvest Massachusetts Tax Free Income Fund CDC Nvest Mid Cap Growth Fund CDC Nvest Municipal Income Fund CDC Nvest Select Fund CDC Nvest Short Term Corporate Income Fund CDC Nvest Star Advisers Fund CDC Nvest Star Small Cap Fund CDC Nvest Star Value Fund CDC Nvest Star Worldwide Fund CDC Nvest Strategic Income Fund CDC Nvest Tax Exempt Money Market Trust* Kobrick Capital Fund Kobrick Emerging Growth Fund Kobrick Growth Fund * Investments in money market funds are not insured or guaranteed by the FDIC or any government agency. - -------------------------------------------------------------------------------- INVESETMENT MANAGERS AEW Management and Advisors Montgomery Asset Management Capital Growth Management Reich & Tang Asset Management Harris Associates/Oakmark Funds RS Investment Management Jurika & Voyles Vaughan, Nelson, Scarborough Loomis, Sayles & Company & McCullough Mercury Advisors Westpeak Investment Advisors - -------------------------------------------------------------------------------- For current fund performance, ask your financial representative, access the CDC Nvest Funds website at www.cdcnvestfunds.com, or call CDC Nvest Funds at 800-225-5478 for the current edition of FUND FACTS. This material is authorized for distribution to prospective investors when it is preceded or accompanied by the Fund's current prospectus, which contains information about sales charges, management and other items of interest. Investors are advised to read the prospectus carefully before investing. CDC IXIS Asset Management Distributors, L.P., and other firms selling shares of CDC Nvest Funds are members of the National Association of Securities Dealers, Inc. (NASD). As a service to investors, the NASD has asked that we inform you of the availability of a brochure on its Public Disclosure Program. The program provides access to information about securities firms and their representatives. Investors may obtain a copy by contacting the NASD at 800-289-9999 or by visiting their website at www.NASDR.com. [logo] CDC NVESTFUNDS(SM) CDC IXIS Asset Management Distributors - --------------------- ---------------- P.O. Box 8551 PRESORT STANDARD U.S. POSTAGE Boston, Massachusetts PAID BROCKTON, MA 02266-8551 PERMIT NO. 770 - --------------------- ---------------- www.cdcnvestfunds.com TO THE HOUSEHOLD OF: DROWNING IN PAPER? Go to: www.cdcnvestfunds.com Click on: Sign up now for E-delivery* Get your next CDC Nvest Funds report online. * Not available for Corporate Retirement Plans and SIMPLE IRAs IF58-0601 -----END PRIVACY-ENHANCED MESSAGE-----