-----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, AMM8aC2fDqvOHqFSqiDF4/4/0cOEnNhMS51PEYvCBhBLpS/+EKL9W8dyq7mXOyAR TYuzl571V18bEs5yZTtI6w== 0000950156-01-500365.txt : 20010903 0000950156-01-500365.hdr.sgml : 20010903 ACCESSION NUMBER: 0000950156-01-500365 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: 1728911 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: 1728912 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 d568161.txt CDC NVEST TAX FREE FUNDS [logo] CDC NVESTFUNDS CDC IXIS Asset Management Distributors CDC NVEST MUNICIPAL INCOME FUND CDC NVEST MASSACHUSETTS TAX FREE INCOME FUND WHERE THE BEST MINDS MEET(R) [graphic omitted] SEMIANNUAL REPORT JUNE 30, 2001 RISKS OF THE CDC NVEST TAX FREE 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 Municipal Income Fund may invest a portion of assets in lower rated bonds that offer higher yields in return for more risk. Some income may be subject to federal and state taxes. Capital gains are fully taxable. Investors may be subject to the Alternative Minimum Tax (AMT). This portfolio may also include U.S. government securities, which are guaranteed if held to maturity; mutual funds that invest in these securities are not guaranteed. CDC Nvest Massachusetts Tax Free Income Fund is non-diversified, meaning that it concentrates its assets in a single state's securities, which can significantly affect your fund's performance and the value of your investment. The fund may invest a portion of assets in lower rated bonds that offer higher yields in return for more risk. Some income may be subject to federal and Massachusetts state taxes. Capital gains are fully taxable. Investors may be subject to the Alternative Minimum Tax (AMT). This portfolio may also include U.S. government securities, which are guaranteed if held to maturity; mutual funds that invest in these securities are not guaranteed. - ------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- SEMIANNUAL REPORT JUNE 30, 2001 - -------------------------------------------------------------------------------- President's Letter..................................................... i Economic Update........................................................ 1 Portfolio Manager's Commentary and Performance CDC Nvest Municipal Income Fund..................................... 2 CDC Nvest Massachusetts Tax Free Income Fund........................ 4 Financial Statements Schedules of Investments CDC Nvest Municipal Income Fund..................................... 7 CDC Nvest Massachusetts Tax Free Income Fund........................ 9 Statements of Assets and Liabilities................................... 11 Statements of Operations............................................... 12 Statements of Changes in Net Assets.................................... 13 Financial Highlights................................................... 14 Notes to Financial Statements.......................................... 16 - -------------------------------------------------------------------------------- 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 approximately $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 depressed 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 moves 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 MUNICIPAL INCOME FUND - -------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGER - -------------------------------------------------------------------------------- Effective in June, Loomis Sayles became porfolio manager of this fund. Q. HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS? For the six months ended June 30, 2001, the total return on Class A shares of CDC Nvest Municipal Income Fund was 2.37% at net asset value, including $0.19 in reinvested dividends. For the same period, the fund's benchmark, Lehman Brothers Municipal Bond Index, returned 2.88% while Morningstar Muni National Long Fund Average returned 2.55%. As of June 30, your Fund's 30-day SEC yield for Class A shares was 4.49%, which is equivalent to a taxable yield of 7.43%, based on the 39.6% maximum federal tax rate. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE FOR FIXED-INCOME SECURITIES? 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 the bond market in general - including tax-exempt securities - benefited as bond prices rose, 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's actions might rekindle inflation. Meanwhile, the supply of high-quality municipal bonds rose by 39% during the period, but strong demand provided price support. Economic uncertainty and the stock market's ongoing volatility has caused many investors to focus on wealth preservation more than wealth creation, increasing the demand for fixed-income securities in general, and municipal bonds in particular. Q. WHAT STRATEGIES DID THE FUND USE? We lengthened the fund's maturity to lock in higher yields and position the fund for potential price appreciation as interest rates declined. The fund's relatively long maturity caused it to underperform its benchmark and peer group by a small margin during the first half of 2001, but we believe this strategy should benefit shareholders in the long run. Even though they have performed well for the fund, we also began to shift assets out of states like New York, with the highest tax rates, into municipal bonds issued in states with low or no income taxes, including Washington and Texas. We believe these bonds are attractively priced and provide good upside potential. In an effort to increase the fund's income, we focused on high-coupon, callable bonds that offered a yield advantage over non-callable issues. Callable bonds give the issuer the right to call the bonds, repaying principal prior to the call date. To compensate the bond buyer for the risk of early repayment, the issuer may offer a higher yield than is available on com-parable, non-callable bonds. Finally, we emphasized higher quality bonds. Issues rated A to AAA accounted for nearly 70% of the portfolio as of June 30 - up from 65% of assets at the beginning of the year. Especially in a slower economy, we believe that higher quality bonds offer better relative value because of the superior creditworthiness of the issuers. Q. WHAT IS YOUR CURRENT OUTLOOK FOR MUNICIPAL BONDS? 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. If so, short-term interest rates should remain fairly stable. However, we expect the difference between long- and short-term yields to narrow slightly by year-end, which would mean that long-term bonds would outperform shorter-term instruments. This should benefit CDC Nvest Municipal Income Fund. PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: - ------------------------------------------------------------------------------- Seeks as high a level of current income exempt from federal income taxes as is consistent with reasonable risk and protection of shareholders' capital. STRATEGY: Invests at least 80% of its assets in municipal securities, including those of states, other political subdividsions of the United States and local governments. - ------------------------------------------------------------------------------ INCEPTION DATE: May 9, 1977 - ------------------------------------------------------------------------------ MANAGER: Kent P. Newmark Loomis, Sayles & Company, L.P. - ------------------------------------------------------------------------------ SYMBOLS: Class A NEFTX Class B NETBX - ------------------------------------------------------------------------------ NET ASSETVALUE PER SHARE: (JUNE 30, 2001) Class A $7.38 Class B 7.38 - ------------------------------------------------------------------------------ INVESTMENT RESULTS THROUGH JUNE 30, 2001 - ------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest Municipal 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 - -------------------------------------------------------------------------------- JUNE 1991 THORUGH JUNE 2001 NET MAXIMUM LEHMAN BROTHERS ASSET SALES MUNICIPAL VALUE(1) CHARGE(2) BOND INDEX(4) - -------------------------------------------------------------------------------- 6/30/1991 $10,000 $ 9,550 $10,000 10,139 9,683 10,122 10,275 9,812 10,256 10,400 9,932 10,389 10,522 10,049 10,482 10,551 10,076 10,512 10,846 10,358 10,738 10,816 10,330 10,762 10,832 10,344 10,766 10,846 10,358 10,770 10,928 10,436 10,866 11,080 10,581 10,994 6/30/1992 11,285 10,777 11,179 11,667 11,142 11,514 11,488 10,971 11,401 11,525 11,006 11,475 11,328 10,818 11,363 11,621 11,098 11,566 11,789 11,258 11,684 11,886 11,351 11,820 12,349 11,793 12,248 12,212 11,662 12,118 12,353 11,797 12,240 12,411 11,853 12,309 6/30/1993 12,622 12,054 12,514 12,637 12,068 12,531 12,902 12,321 12,791 13,026 12,439 12,937 13,056 12,469 12,962 12,925 12,344 12,848 13,223 12,628 13,119 13,379 12,777 13,268 12,996 12,411 12,925 12,357 11,801 12,399 12,396 11,839 12,504 12,521 11,958 12,613 6/30/1994 12,441 11,881 12,536 12,670 12,100 12,765 12,710 12,138 12,810 12,489 11,927 12,622 12,214 11,664 12,397 11,850 11,317 12,173 12,162 11,615 12,440 12,586 12,020 12,796 13,023 12,437 13,169 13,192 12,598 13,320 13,217 12,622 13,336 13,586 12,974 13,761 6/30/1995 13,411 12,808 13,642 13,528 12,919 13,771 13,627 13,014 13,946 13,727 13,109 14,034 13,919 13,293 14,238 14,149 13,513 14,474 14,258 13,616 14,613 14,370 13,724 14,724 14,284 13,641 14,624 14,121 13,486 14,437 14,091 13,457 14,396 14,079 13,446 14,390 6/30/1996 14,240 13,600 14,547 14,344 13,699 14,680 14,333 13,688 14,677 14,574 13,918 14,882 14,738 14,075 15,050 14,962 14,288 15,326 14,917 14,246 15,261 14,933 14,261 15,290 15,065 14,387 15,431 14,873 14,204 15,226 14,982 14,308 15,354 15,151 14,470 15,584 6/30/1997 15,362 14,671 15,751 15,777 15,067 16,187 15,683 14,977 16,035 15,814 15,103 16,226 15,926 15,209 16,330 15,975 15,257 16,426 16,196 15,468 16,666 16,397 15,659 16,837 16,447 15,707 16,842 16,472 15,731 16,858 16,394 15,656 16,782 16,570 15,825 17,047 6/30/1998 16,641 15,892 17,113 16,669 15,918 17,156 16,890 16,130 17,422 17,026 16,260 17,640 16,968 16,204 17,640 17,040 16,273 17,702 17,059 16,292 17,746 17,227 16,452 17,957 17,191 16,418 17,878 17,198 16,424 17,903 17,249 16,473 17,948 17,189 16,415 17,844 6/30/1999 16,994 16,229 17,587 17,045 16,278 17,650 16,871 16,112 17,509 16,878 16,119 17,516 16,634 15,885 17,327 16,790 16,034 17,510 16,589 15,843 17,379 16,501 15,758 17,304 16,683 15,933 17,505 16,940 16,177 17,888 16,846 16,088 17,783 16,799 16,043 17,690 6/30/2000 17,106 16,336 18,159 17,295 16,517 18,412 17,533 16,744 18,695 17,486 16,699 18,598 17,630 16,836 18,801 17,750 16,952 18,943 18,043 17,231 19,411 18,168 17,351 19,604 18,197 17,378 19,666 18,347 17,521 19,843 18,151 17,334 19,629 18,324 17,499 19,841 6/30/2001 18,471 17,640 19,974 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 5/9/77) 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Net Asset Value(1) 2.37% 7.98% 5.34% 6.33% With Maximum Sales Charge(2) -2.26 3.12 4.37 5.84 - -------------------------------------------------------------------------------- CLASS B (Inception 9/13/93) 6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Net Asset Value(1) 1.99% 7.17% 4.56% 3.76% With CDSC(3) -3.00 2.17 4.22 3.76 - -------------------------------------------------------------------------------- SINCE FUND'S CLASS B COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPT. Lehman Muncipal Bond Index(4) 2.88% 9.98% 6.54% 7.16% 5.76% Morningstar Muni National Long Fund Avg.(5) 2.55 8.98 5.35 6.48 4.60 Lipper General Municipal Debt Funds Avg.(6) 2.41 9.23 5.43 6.49 4.72 YIELDS AS OF JUNE 30, 2001 - -------------------------------------------------------------------------------- CLASS A CLASS B SEC 30-day yield(7) 4.49% 3.95% Taxable equivalent yield(8) 7.43 6.54 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. (4) Lehman Brothers Municipal Bond Index is an unmanaged composite measure of the performance of the municipal bond market. You may not invest directly in an index. Class B since inception return is calculated from 9/30/93. (5) Morningstar Muni National Long 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 Municipal 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. (7) SEC30-Day Yield is based on the Fund's net investment income over a 30-day period and is calculated in accordance with Securities and Exchange Commission guidelines. (8) Taxable equivalent yield is based on the maximum federal income tax bracket of 39.6%. A portion of income may be subject to federal, state and/or alternative minimum tax. Capital gains distributions, if any, are subject to the capital gains tax. CREDIT QUALITY - -------------------------------------------------------------------------------- A 12.3% AA 20.0% AAA 33.9% BB 3.3% BBB 24.5% NR 6.0% - -------------------------------------------------------------------------------- Credit quality is based on bond ratings from Standard & Poor's EFFECTIVE MATURITY - -------------------------------------------------------------------------------- Less than 1 year 4.5% 1-5 years 25.0% 6-10 years 13.9% 10+ years 56.6% - -------------------------------------------------------------------------------- Average effective maturity: 14.5 years - ------------------------------------------------------------------------------- CDC NVEST MASSACHUSETTS TAX FREE INCOME FUND - ------------------------------------------------------------------------------- INTERVIEW WITH YOUR PORTFOLIO MANAGER - ------------------------------------------------------------------------------- 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 Massachusetts Tax Free Income Fund was 1.32% at net asset value, including $0.39 in reinvested dividends. For the same period, the fund's benchmark, Lehman Brothers Municipal Bond Index, returned 2.88% while Morningstar Muni Single State Long Fund Average returned 2.34%. The 30-day SEC yield for CDC Nvest Massachusetts Tax Free Income Fund Class A shares was 4.58%, which is equivalent to a taxable yield of 8.00%, based on the combined federal and Massachusetts state income tax rate of 42.98%. Q. WHAT WAS THE ENVIRONMENT LIKE FOR MUNICIPAL BONDS? In an effort to address the deteriorating economy, the Federal Reserve Board launched an aggressive program of cutting interest rates, beginning on January 3, 2001. While yields on short- and intermediate-term municipal bonds declined with the rest of the fixed-income market, yields on long-term bonds remained high and prices were flat to slightly up. Your fund's longer overall maturity caused it to lag during the first half of 2001, but we believe shareholders should benefit in the long run. Although the supply of high-quality, tax-exempt issues was heavy during the period, strong demand helped to support prices. Concerns about the economy and the volatility of the stock market continue to fuel demand for fixed-income securities - particularly municipal bonds, which pay interest that is free from income tax. Your fund's current yield - equivalent to 8% on a taxable bond fund - - speaks for itself. Q. HOW DID THE FUND RESPOND? Since the slowing economy and rising unemployment has been especially hard on the technology sector - a major part of Massachusetts' economy - we felt it was important to maintain a relatively high credit quality. Municipal bonds rated A to AAA accounted for nearly 68% of the fund's assets at the end of June. In general, Loomis Sayles strives to identify the best prospects for income and price appreciation, and then invest early, before they are recognized by the marketplace. We rely on our research staff to uncover promising opportunities and sometimes to work directly with bond issuers to resolve issues. One security that has been in the portfolio for some time - Concord Assabet Family Services - found itself in difficulty after attempting to expand too quickly. This human services organization's bonds were downgraded twice in the first half of the year and sank in value. However, our analysts are working with the organization and others, and believe the situation may be resolved or improved later this year. Q. WHAT IS YOUR CURRENT OUTLOOK? Nationally, the Fed may be at or near the end of its program of cutting interest rates, which would allow short-term rates to stabilize near current levels for the balance of the year, and possibly beyond. If this occurs, we expect the difference between long- and short-term yields to narrow slightly by year-end, with long bonds outperforming short-term issues. We also expect the pace of new issues in the municipal markets to begin to slow from the current high levels, putting upward pressure on prices. This should benefit shareholders of CDC Nvest Massachusetts Tax Free Income Fund. PORTFOLIO PROFILE - ------------------------------------------------------------------------------- OBJECTIVE: Seeks to maintain a high level of current income exempt from federal and Massachusetts personal income taxes - ------------------------------------------------------------------------------- STRATEGY: Invests in a mix of Massachusetts municipal bonds, including general obligation bonds and issues secured by specific revenue streams - -------------------------------------------------------------------------------- INCEPTION DATE: March 23, 1984 - -------------------------------------------------------------------------------- MANAGER: Kent P. Newmark Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- SYMBOLS: Class A NEFMX Class B NEMBX - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE: (JUNE 30, 2001) Class A $15.88 Class B 15.84 - -------------------------------------------------------------------------------- INVESTMENT RESULTS THROUGH JUNE 30, 2001 - -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing CDC Nvest Massachusetts Tax Free 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 - -------------------------------------------------------------------------------- JUNE 1991 THORUGH JUNE 2001 NET MAXIMUM LEHMAN BROTHERS ASSET SALES MUNICIPAL VALUE(1) CHARGE(2) BOND INDEX(4) - -------------------------------------------------------------------------------- 6/30/1991 $10,000 $ 9,575 $10,000 10,145 9,714 10,122 10,249 9,813 10,256 10,363 9,922 10,389 10,454 10,010 10,482 10,490 10,045 10,512 10,685 10,231 10,738 10,735 10,279 10,762 10,777 10,319 10,766 10,785 10,327 10,770 10,859 10,398 10,866 10,999 10,531 10,994 6/30/1992 11,192 10,717 11,179 11,553 11,062 11,514 11,410 10,925 11,401 11,465 10,977 11,475 11,284 10,805 11,363 11,545 11,054 11,566 11,654 11,159 11,684 11,798 11,297 11,820 12,247 11,726 12,248 12,137 11,621 12,118 12,269 11,747 12,240 12,344 11,820 12,309 6/30/1993 12,562 12,028 12,514 12,565 12,031 12,531 12,828 12,283 12,791 12,971 12,420 12,937 12,987 12,435 12,962 12,868 12,321 12,848 13,099 12,542 13,119 13,272 12,708 13,268 12,927 12,378 12,925 12,298 11,776 12,399 12,328 11,804 12,504 12,442 11,913 12,613 6/30/1994 12,332 11,808 12,536 12,572 12,038 12,765 12,598 12,063 12,810 12,388 11,861 12,622 12,089 11,575 12,397 11,797 11,296 12,173 12,134 11,618 12,440 12,548 12,014 12,796 12,957 12,406 13,169 13,050 12,496 13,320 13,071 12,515 13,336 13,484 12,911 13,761 6/30/1995 13,274 12,710 13,642 13,367 12,799 13,771 13,527 12,952 13,946 13,621 13,042 14,034 13,849 13,260 14,238 14,120 13,520 14,474 14,298 13,691 14,613 14,344 13,735 14,724 14,201 13,598 14,624 14,024 13,428 14,437 13,983 13,389 14,396 14,002 13,407 14,390 6/30/1996 14,135 13,534 14,547 14,241 13,636 14,680 14,235 13,630 14,677 14,457 13,842 14,882 14,609 13,988 15,050 14,859 14,228 15,326 14,761 14,134 15,261 14,788 14,159 15,290 14,930 14,295 15,431 14,760 14,133 15,226 14,880 14,248 15,354 15,092 14,451 15,584 6/30/1997 15,250 14,601 15,751 15,683 15,017 16,187 15,538 14,878 16,035 15,744 15,075 16,226 15,821 15,149 16,330 15,917 15,240 16,426 16,137 15,451 16,666 16,267 15,576 16,837 16,245 15,554 16,842 16,199 15,511 16,858 16,142 15,456 16,782 16,391 15,694 17,047 6/30/1998 16,448 15,749 17,113 16,458 15,758 17,156 16,720 16,009 17,422 16,905 16,186 17,640 16,836 16,121 17,640 16,866 16,149 17,702 16,930 16,210 17,746 17,124 16,396 17,957 17,046 16,322 17,878 17,026 16,302 17,903 17,076 16,351 17,948 16,965 16,244 17,844 6/30/1999 16,689 15,980 17,587 16,749 16,037 17,650 16,511 15,809 17,509 16,462 15,762 17,516 16,232 15,542 17,327 16,375 15,679 17,510 16,231 15,541 17,379 16,099 15,414 17,304 16,299 15,606 17,505 16,604 15,899 17,888 16,529 15,827 17,783 16,464 15,764 17,690 6/30/2000 16,795 16,082 18,159 17,009 16,286 18,412 17,222 16,490 18,695 17,154 16,425 18,598 17,292 16,557 18,801 17,365 16,627 18,943 17,734 16,981 19,411 17,796 17,039 19,604 17,858 17,099 19,666 17,853 17,094 19,843 17,669 16,918 19,629 17,840 17,082 19,841 6/30/2001 17,968 17,204 19,974 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 3/23/84) 6 MONTHS(4) 1 YEAR(4) 5 YEARS(4) 10 YEARS(4) Net Asset Value(1) 1.32% 6.98% 4.92% 6.03% With Maximum Sales Charge(2) -2.98 2.46 4.01 5.57 CLASS B (Inception 9/13/93) 6 MONTHS(4) 1 YEAR(4) 5 YEARS(4) SINCE INCEPTION(4) Net Asset Value(1) 0.92% 6.30% 4.23% 3.54% With CDSC(3) -4.02 1.30 3.90 3.54 SINCE FUND'S CLASS B COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION Lehman Municipal Bond Index(5) 2.88% 9.98% 6.54% 7.16% 5.76% Morningstar Muni Single State Long Fund Avg.(6) 2.34 9.20 5.38 6.46 4.57 Lipper MA Municipal Debt Funds Average(7) 2.26 9.56 5.43 6.58 4.67
YIELDS AS OF JUNE 30, 2001 - -------------------------------------------------------------------------------- CLASS A CLASS B SEC 30-day yield(8) 4.58% 4.14% Taxable equivalent yield(9) 8.00 7.24 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 4.25%. (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) Fund performance has been increased by voluntary expense waivers, without which performance would have been lower. (5) Lehman Brothers Municipal Bond Index is an unmanaged composite measure of the performance of the municipal bond market. You may not invest directly in an index. Class B since-inception return is calculated from 9/30/93. (6) Morningstar Muni Single State Long 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. (7) Lipper Massachusetts Municipal 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. (8) SEC yield is based on the Fund's net investment income over a 30-day period and is calculated in accordance with Securities and Exchange Commission guidelines. (9) Taxable equivalent yield is based on the maximum combined federal and MA income tax bracket of 42.98%. A portion of income may be subject to federal, state and/or alternative minimum tax. Capital gains, if any, are subject to capital gains tax. PORTFOLIO AS OF JUNE 30, 2001 - ------------------------------------------------------------------------------- CREDIT QUALITY - ------------------------------------------------------------------------------- A 8.0% AA 7.0% AAA 52.7% BB 5.5% BBB 8.5% NR 18.3% AVERAGE QUALITY: AA - -------------------------------------------------------------------------------- Credit quality is based on bond ratings from Standard & Poor's EFFECTIVE MATURITY - -------------------------------------------------------------------------------- LESS THAN 1 YEAR 13.6% 1-5 YEARS 15.6% 6-10 YEARS 25.5% 10+ YEARS 45.3% AVERAGE EFFECTIVE MATURITY: 10.6 YEARS - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- MUNICIPAL INCOME FUND - SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
TAX EXEMPT OBLIGATIONS-- 98.3% OF TOTAL NET ASSETS RATINGS (c) ------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (a) - ---------------------------------------------------------------------------------------------- ALASKA -- 0.3% $ 405,000 Alaska State Housing Finance Corp. Revenue Bond, 6.500%, 6/01/2034, (MBIA insured) ...... Aaa AAA $ 413,161 -------------- CALIFORNIA -- 15.9% 2,000,000 California Pollution Control Finance Authority Revenue Bond, 7.150%, 2/01/2011 ...................... Ba1 BBB 2,077,500 3,000,000 California State, 4.250%, 10/01/2026 ..................... Aaa AAA 2,503,830 2,000,000 California State General Obligation Bond, 5.125%, 6/01/2027 ...................... Aa3 A+ 1,920,960 4,000,000 Foothill/Eastern Transportation Corridor Agency Revenue Bond, 6.500%, 1/01/2032 ...................... Aaa AAA 4,562,400 2,000,000 Los Angeles California Department Water & Power, 5.000%, 7/01/2024 ...................... Aaa AAA 1,932,120 3,000,000 Los Angeles California Department Water & Power, 5.125%, 7/01/2041 ...................... Aa3 AA 2,855,940 2,000,000 Los Angeles Convention & Exhibition Center Authority Pre-Refunded Certificate of Participation, 9.000%, 12/01/2020 ..................... Aaa AAA 2,455,480 2,750,000 Los Angeles Regional Airport Revenue Bond, 6.350%, 11/01/2025,(d) ................. Baa3 BBB- 2,755,555 1,000,000 Sacramento Co-generation Authority Pre-Refunded Revenue Bond, 6.500%, 7/01/2021 ...................... -- AAA 1,136,640 3,000,000 Sacramento Power Authority Revenue Bond, 6.000%, 7/01/2022 ...................... -- BBB- 3,080,790 -------------- 25,281,215 -------------- COLORADO -- 4.7% 1,500,000 Denver City & County Airport Pre-Refunded Revenue Bond, 7.500%, 11/15/2012 ..................... A2 AAA 1,621,890 1,655,000 Denver City & County Airport Revenue Bond, 7.500%, 11/15/2023 ..................... A2 A 1,818,100 3,960,000 Denver City & County Airport Revenue Bond, 7.750%, 11/15/2021 ..................... A2 A 4,085,770 -------------- 7,525,760 -------------- FLORIDA-- 3.2% 3,000,000 Escambia County Pollution Control, 6.900%, 8/01/2022 ...................... Baa1 BBB 3,128,340 2,000,000 Florida State Board Of Education Capital Outlay, 5.000%, 6/01/2026 ...................... Aaa AAA 1,928,180 -------------- 5,056,520 -------------- GEORGIA-- 3.2% 5,000,000 Atlanta Water Revenue, 5.000%, 11/01/2038 ..................... Aaa AAA 4,679,950 500,000 Fulton County Water & Sewage Revenue, 4.750%, 1/01/2028 ...................... Aaa AAA 461,760 -------------- 5,141,710 -------------- ILLINOIS -- 5.0% 2,500,000 Illinois Development Finance Authority Pollution Control Revenue Bond, 7.375%, 7/01/2021 ...................... Baa1 BBB+ 2,728,775 3,000,000 Illinois Educational Facilities Authority Revenues, 5.125%, 7/01/2038 ...................... Aa1 AA $ 2,791,710 2,250,000 O'Hare International Airport Revenue Bond, 8.200%, 12/01/2024 ..................... Baa3 BBB- 2,487,622 -------------- 8,008,107 -------------- INDIANA -- 4.3% 2,000,000 Indiana Transportation Finance Authority Highway, 5.375%, 12/01/2025 ..................... Aa2 AA 2,005,020 4,500,000 Indianapolis Independent Airport Authority Revenue Bond, 7.100%, 1/15/2017 ...................... Baa2 BBB 4,771,980 -------------- 6,777,000 -------------- KANSAS -- 0.9% 1,350,000 Kansas City Utility Systems Pre-Refunded Revenue Bond, 6.375%, 9/01/2023 ...................... Aaa AAA 1,452,438 -------------- MASSACHUSETTS -- 7.4% 1,945,000 Massachusetts State Housing Finance Agency, 6.600%, 12/01/2026 ..................... Aa3 AA 2,016,187 2,500,000 Massachusetts State Housing Finance Agency Revenue Bond, 6.300%, 10/01/2013 ..................... A1 A+ 2,594,025 3,000,000 Massachusetts State Turnpike Authority, 5.000%, 1/01/2039 ...................... Aaa AAA 2,762,910 5,000,000 Massachusetts State Water Resources Authority, 4.750%, 8/01/2037 ...................... Aaa AAA 4,457,100 -------------- 11,830,222 -------------- MINNESOTA -- 1.9% 3,000,000 Bloomington Minnesota Independent School District, 5.125%, 2/01/2024 ...................... Aaa -- 2,962,350 -------------- MISSISSIPPI -- 3.1% 2,000,000 Lowndes County Mississippi Solid Waste Disposal, 6.700%, 4/01/2022 ...................... A3 A- 2,215,280 2,500,000 Lowndes County Mississippi Solid Waste Disposal, 6.800%, 4/01/2022 ...................... A3 A- 2,754,125 -------------- 4,969,405 -------------- NEW JERSEY -- 3.3% 5,000,000 New Jersey Economic Development Authority Revenue Bond, 6.625%, 9/15/2012 ...................... Ba2 BB 5,243,200 -------------- NEW YORK-- 10.4% 3,000,000 New York New York City Transitional, 4.750%, 5/01/2023 ...................... Aa2 AA+ 2,755,170 4,000,000 New York State Dormitory Authority Revenue Bond, 5.500%, 5/15/2013 ...................... A3 AA- 4,307,040 2,740,000 New York State Dormitory Authority Revenue Bond, 5.750%, 7/01/2013 ...................... A3 AA- 3,014,603 3,000,000 New York State Medical Care Facilities Finance Agency Pre-Refunded Revenue Bond, 5.250%, 8/15/2014 ...................... A3 AA- 3,046,410 1,000,000 Onondaga County Industrial Development Agency Revenue Bond, 9.000%, 10/01/2007 ..................... -- A- 1,228,250 2,000,000 Port Authority of New York & New Jersey Special Obligation Revenue Bond, 7.000%, 10/01/2007 ..................... -- -- 2,159,680 -------------- 16,511,153 -------------- OHIO-- 3.1% 1,650,000 Cincinnati Ohio Water Systems Revenue, 5.000%, 12/01/2020 ..................... Aa2 AA+ 1,611,868 3,000,000 Cleveland Public Power Systems Pre-Refunded Revenue Bond, 7.000%, 11/15/2024 ..................... Aaa AAA 3,394,740 -------------- 5,006,608 -------------- OREGON -- 2.6% 4,000,000 Western Generation Agency Revenue Bond, 7.400%, 1/01/2016 ...................... -- -- 4,200,000 -------------- Pennsylvania -- 13.4% 2,725,000 Pennsylvania Convention Center Revenue Bond, 6.700%, 9/01/2014 ...................... Baa2 BBB 2,899,482 2,000,000 Pennsylvania Convention Center Revenue Bond, 6.750%, 9/01/2019 ...................... Baa2 BBB 2,130,460 3,000,000 Pennsylvania Economic Development Financing, 5.375%, 3/01/2031 ...................... Aa2 AA 2,966,850 3,000,000 Pennsylvania Economic Development Financing Authority Revenue Bond, 6.600%, 1/01/2019 ...................... -- BBB- 3,004,560 4,000,000 Pennsylvania Economic Development Financing Authority Revenue Bond, 7.150%, 12/01/2018 ..................... -- BBB- 4,160,800 3,000,000 Pennsylvania Economic Development Financing Authority Revenue Bond, 7.600%, 12/0a .......................... Baa3 BBB 3,188,970 3,125,000 Pennsylvania State Turnpike Commission Revenue, 5.000%, 12/01/2026 ..................... Aaa AAA 2,999,000 -------------- 21,350,122 -------------- PUERTO RICO-- 4.7% 3,000,000 Puerto Rico Commonwealth, 4.750%, 7/01/2023 ...................... Aaa AAA 2,865,930 2,000,000 Puerto Rico Commonwealth Infrastructure Financing Authority, 5.500%, 10/01/2040 ..................... Aaa AAA 2,061,420 2,500,000 Puerto Rico Electric Power Authority Power, 5.250%, 7/01/2029 ...................... Aaa AAA 2,519,325 -------------- 7,446,675 -------------- TENNESSEE-- 1.6% 2,500,000 Maury County Industrial Development Board Revenue Bond, 6.500%, 9/01/2024 ...................... A2 A 2,616,375 -------------- TEXAS -- 5.6% 2,000,000 Alliance Airport Authority Revenue Bond, 6.375%, 4/01/2021 ...................... Baa2 BBB 2,029,780 1,900,000 Denton County Texas, 5.125%, 7/15/2026 ...................... Aa2 AA 1,847,750 3,000,000 Houston Texas Water & Sewer Systems Revenue, 5.250%, 12/01/2023 ..................... Aaa AAA 2,964,810 2,000,000 San Antonio Texas Electric & Gas Revenue, 5.750%, 2/01/2017 ...................... a1 AA 2,096,360 -------------- 8,938,700 -------------- US VIRGIN ISLANDS -- 2.0% 3,000,000 US Virgin Islands Public Finance Authority Pre-Refunded Revenue Bond, Series A, 7.250%, 10/01/2018,(d) ....... -- AAA 3,225,000 -------------- WASHINGTON-- 1.7% 3,000,000 Washington State, 4.500%, 7/01/2023 ...................... Aaa AAA 2,672,610 -------------- Total Tax Exempt Obligations (Identified Cost $149,430,318) ......... 156,628,331 -------------- SHORT TERM INVESTMENT-- 0.1% 173,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% to be repurchased at $173,040 on 7/02/2001, collateralized by $145,000 U.S. Treasury Bond, 7.625%, due 11/15/2016 valued at $181,423 ....................................... 173,000 -------------- Total Short Term Investment (Identified Cost $173,000) ............................... 173,000 -------------- Total Investments-- 98.4% (Identified Cost $149,603,318) (b) 156,801,331 Other assets less liabilities ............................ 2,490,312 -------------- Total Net Assets-- 100% .................................. $ 159,291,643 ============== (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 $149,603,318 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost ................ $ 7,915,862 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ................... (717,849) -------------- Net unrealized appreciation ....................................... $ 7,198,013 ============== At December 31, 2000, the Fund had a capital loss carryover of approximately $7,173,655 of which $4,332,920 expires on December 31, 2002, $25,731 expires on December 31, 2005 and $2,815,004 expires on December 31, 2007. 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) Multi- Coupon: Coupon rate is zero or below market for an initial period and then increases to a coupon rate at a specified date and time. MBIA Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- MASSACHUSETTS TAX FREE INCOME FUND - SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- Investments as of June 30, 2001 (Unaudited)
TAX EXEMPT OBLIGATIONS-- 98.5% OF TOTAL NET ASSETS RATINGS (c) ------------------- PRINCIPAL STANDARD AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (a) - ---------------------------------------------------------------------------------------------- BOSTON, MASSACHUSETTS WATER AND SEWER COMMISSION REVENUE-- 1.0% $ 1,075,000 General Senior Series D, 5.000%, 11/01/2028 ..................... Aaa AAA $ 1,024,174 -------------- GUAM AIRPORT AUTHORITY-- 1.6% 1,500,000 Airport Authority Revenue Bond, Series B, 6.600%, 10/01/2010 ..................... -- BBB 1,597,380 -------------- MASSACHUSETTS BAY TRANSPORTATION AUTHORITY-- 2.0% 2,000,000 Assessment Series A, 5.250%, 7/01/2030 ...................... Aa1 AAA 1,970,700 -------------- METROPOLITAN PIER & Expo, Illinois-- 4.6% 4,500,000 McCormick Place Expansion Project Series A, 5.500%, 12/15/2024 ..................... Aaa AAA 4,556,925 -------------- MASSACHUSETTS EDUCATION LOAN AUTHORITY REVENUE-- 0.7% 700,000 Educational Loan Revenue Bond, Issue D-Series A, 7.250%, 1/01/2009, (AMBAC insured) ........................ Aaa AAA 713,958 -------------- MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC CO.-- 4.2% 1,500,000 Wholesale Electric, 6.750%, 7/01/2008 ...................... Baa2 BBB+ 1,564,110 2,500,000 Wholesale Electric, 6.750%, 7/01/2011 ...................... Baa2 BBB+ 2,598,425 -------------- 4,162,535 -------------- MASSACHUSETTS STATE-- 4.8% 4,000,000 State Refunding, Series A, 6.500%, 11/01/2014, (MBIA insured) ......................... Aaa AAA 4,732,840 -------------- MASSACHUSETTS STATE DEVELOPMENT FINANCE AGENCY -- 12.0% 2,950,000 Concord-Assabet Family Services, 5.900%, 11/01/2018 ..................... B2 -- 1,829,000 3,000,000 Health Care Facility Alliance, 7.100%, 7/01/2032 ...................... -- -- 2,749,380 2,000,000 Mount Holyoke College, 5.250%, 7/01/2031 ...................... Aa3 AA- 1,967,340 2,500,000 Ogden Haverhill A Rmk, 6.700%, 12/01/2014 ..................... -- BBB 2,604,350 2,800,000 Refunding Springfield Resource Recovery-A, 5.625%, 6/01/2019 ...................... A2 -- 2,809,324 -------------- 11,959,394 -------------- MASSACHUSETTS STATE HEALTH & EDUCATION FACILITY AUTHORITY-- 29.1% 1,500,000 Beverly Hospital Rib, 8.070%, 6/18/2020,(MBIA insured)(d) .... Aaa AAA 1,608,780 3,000,000 Boston University Rib, Series L, 10.500%, 10/01/2031, (MBIA insured)(d) . Aaa AAA 3,149,580 1,250,000 Charlton Memorial Hospital, Series B, Pre-Refunded, 7.250%, 7/01/2013 ...................... -- A 1,275,000 3,000,000 Dana Farber, Series G-1, 6.250%, 12/01/2022 ..................... A1 A 3,085,710 1,000,000 Faulkner Hospital, Series C, Pre-Refunded, 6.000%, 7/01/2013 ...................... Baa1 -- 1,072,920 3,000,000 Harvard University, Series N, 6.250%, 4/01/2020 ...................... Aaa AAA 3,460,410 2,000,000 Harvard University, Series W, 6.000%, 7/01/2035 ...................... Aaa AAA 2,166,780 1,400,000 Medical Center of Central Mass., CIass A, Pre-Refunded, 7.000%, 7/01/2012 ...................... A3 AAA 1,428,000 1,000,000 New England Baptist Hospital, Series B, Pre-Refunded, 7.300%, 7/01/2011 ...................... Baa1 AAA 1,020,000 1,000,000 New England Deaconess Hospital, Series D, Pre-Refunded, 6.875%, 4/01/2022, (AMBAC insured) ..... Aaa AAA 1,050,500 1,190,000 New England Medical Center, Series F, 6.625%, 7/01/2025, (FGIC insured) ......................... Aaa AAA 1,236,719 6,000,000 Nichols College , Series C, 6.000%, 10/01/2017 ..................... -- BB+ 5,437,500 2,000,000 Partners Healthcare Systems Series C, 5.750%, 7/01/2021 ...................... A1 AA- 2,012,940 1,250,000 Saints Memorial Medical Center, Series A, 6.000%, 10/01/2023 ..................... Ba2 -- 976,925 -------------- 28,981,764 -------------- MASSACHUSETTS STATE HOUSING FINANCE AGENCY -- 7.8% 1,000,000 Residential Development, Series A, 6.900%, 11/15/2024, (FNMA collateralized) Aaa AAA 1,040,180 2,500,000 Residential Development, Series E, 6.250%, 11/15/2012, (FNMA collateralized) Aaa AAA 2,608,425 1,300,000 Residential Development, Series I, 6.900%, 11/15/2025, (FNMA collateralized) Aaa AAA 1,366,378 2,715,000 Single Family Mortgage, Series 21, 7.125%, 6/01/2025 ...................... Aa AA 2,794,251 -------------- 7,809,234 -------------- MASSACHUSETTS STATE INDUSTRIAL FINANCE AGENCY -- 7.4% 2,000,000 FHA Briscoe House Assisted Living, 7.125%, 2/01/2036 ...................... -- AAA 2,229,900 5,000,000 Newton Group Properties LLC Project, 8.000%, 9/01/2027 ...................... -- -- 5,156,000 -------------- 7,385,900 -------------- MASSACHUSETTS STATE TURNPIKE AUTHORITY-- 3.7% 5,800,000 Metropolitan Highway System, Capital Appreciation, Senior Series C, Zero Coupon, 1/01/2016, (MBIA insured) . Aaa AAA 2,749,026 1,000,000 Metropolitan Highway System, Subordinated, Series A, 5.000%, 1/01/2039 Aaa AAA 920,970 -------------- 3,669,996 -------------- MASSACHUSETTS STATE WATER RESOURCES AUTHORITY-- 5.6% 1,000,000 General Series A, 4.750%, 8/01/2027 ...................... Aaa AAA 914,810 1,000,000 Refunding General Series B, 4.500%, 8/01/2022 ...................... Aaa AAA 893,310 3,240,000 Series A (FGIC insured), 6.500%, 7/15/2019 ...................... Aaa AAA 3,800,131 -------------- 5,608,251 -------------- NEW ENGLAND EDUCATION LOAN MARKETING-- 3.4% 3,000,000 Student Loan Revenue Bond, Sub-Issue H, 6.900%, 11/01/2009 ..................... A3 -- 3,399,180 -------------- PUERTO RICO COMMONWEALTH AQUEDUCT & SEWER AUTHORITY-- 4.7% 3,000,000 Aqueduct & Sewer Authority, 6.250%, 7/01/2013 ...................... Baa1 A 3,455,250 940,000 Aqueduct & Sewer Authority, 10.250%, 7/01/2009 ..................... Aaa AAA 1,184,729 -------------- 4,639,979 -------------- PUERTO RICO COMMONWEALTH INFRASTRUCTURE-- 2.6% 2,500,000 Series A, 5.500%, 10/01/2040 ..................... Aaa AAA 2,576,775 ----------- US VIRGIN ISLANDS-- 3.3% 3,045,000 Public Finance Authority, Pre-Refunded Revenue Bond, 7.250%, 10/01/2018 ..................... -- AAA 3,273,375 -------------- Total Tax Exempt Obligations (Identified Cost $97,189,558) ............................ 98,062,360 -------------- SHORT TERM INVESTMENT -- 0.1% 108,000 Repurchase Agreement with State Street Bank and Trust Co. dated 6/29/2001 at 2.75% to be repurchased at $108,025 on 7/02/2001, collateralized by $105,000 U.S. Treasury Bond, 6.00%, due 8/15/2009 valued at $111,663 ....................................... 108,000 -------------- Total Short Term Investment (Identified Cost $108,000) ............................... 108,000 -------------- Total Investments-- 98.6% (Identified Cost $97,297,558) (b) ........................ 98,170,360 Other assets less liabilities ............................ 1,425,339 -------------- Total Net Assets-- 100% .................................. $ 99,595,699 ============== (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 $97,297,558 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost ................ $ 3,108,412 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value ................ (2,235,610) -------------- Net unrealized appreciation ....................................... $ 872,802 ============== At December 31, 2000, the Fund had a capital loss carryover of $2,704,754 of which $2,588,254 expires on December 31, 2007 and $116,500 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) Inverse floating rate security Legend of Portfolio Abbreviations: AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Company FNMA Federal National Mortgage Association MBIA Municipal Bond Investors Assurance Corp. Rib Residual interest bond
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS & LIABILITIES - -------------------------------------------------------------------------------- June 30, 2001 (unaudited)
MASSACHUSETTS MUNICIPAL INCOME TAX FREE INCOME FUND FUND ------------ ------------ ASSETS Investments at cost .................................................. $ 149,603,318 $ 97,297,558 Net unrealized appreciation (depreciation) ........................... 7,198,013 872,802 ------------- ------------- Investments at value ............................................... 156,801,331 98,170,360 Cash ................................................................. 210 53,208 Receivable for Fund shares sold ...................................... 150,707 89,150 Receivable for securities sold ....................................... 1,901,833 -- Interest receivable .................................................. 2,788,622 1,635,181 ------------- ------------- TOTAL ASSETS ....................................................... 161,642,703 99,947,899 ------------- ------------- LIABILITIES Payable for securities purchased ..................................... 1,874,116 -- Payable for Fund shares redeemed ..................................... 62,749 18,193 Dividends payable .................................................... 212,211 116,839 Management fees payable .............................................. 59,142 141,780 Deferred Trustees' fees .............................................. 59,941 21,254 Transfer agent fees payable .......................................... 22,232 14,595 Accounting and administrative fees payable ........................... 5,838 3,664 Other accounts payable and accrued expenses .......................... 54,831 35,875 ------------- ------------- TOTAL LIABILITIES .................................................. 2,351,060 352,200 ------------- ------------- NET ASSETS .............................................................. $ 159,291,643 $ 99,595,699 ============= ============= NET ASSETS CONSIST OF: Paid in capital ...................................................... $ 157,921,359 $ 102,013,729 Undistributed (overdistributed) net investment income ................ 94,166 42,943 Accumulated net realized gain (loss) on investments .................. (5,921,895) (3,333,775) Net unrealized appreciation (depreciation) of investments ............ 7,198,013 872,802 ------------- ------------- NET ASSETS .............................................................. $ 159,291,643 $ 99,595,699 ============= ============= COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: CLASS A SHARES: Net assets ......................................................... $ 144,451,910 $ 91,085,623 ============= ============= Shares of beneficial interest ...................................... 19,579,485 5,737,104 ------------- ------------- Net asset value and redemption price per share ..................... $ 7.38 $ 15.88 ============= ============= Offering price per share ........................................... $ 7.73 $ 16.58 ============= ============= CLASS B SHARES: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets ......................................................... $ 14,839,733 $ 8,510,076 ============= ============= Shares of beneficial interest ...................................... 2,011,067 537,215 ============= ============= Net asset value and offering price per share ....................... $ 7.38 $ 15.84 ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- For the Period Ended June 30, 2001 (unaudited)
MASSACHUSETTS MUNICIPAL INCOME TAX FREE INCOME FUND FUND ------------ ------------ INVESTMENT INCOME Interest ............................................................. $ 4,710,503 $ 3,056,956 ------------- ------------- Expenses Management fees .................................................... 353,915 296,838 Service and distribution fees - Class A ........................... 176,333 158,283 Service and distribution fees - Class B ........................... 73,143 42,745 Trustees' fees and expenses ........................................ 7,271 5,684 Accounting and administrative ...................................... 33,747 21,456 Custodian .......................................................... 44,182 39,077 Transfer agent ..................................................... 129,049 84,797 Audit and tax services ............................................. 16,630 13,363 Legal .............................................................. 4,330 2,669 Printing ........................................................... 21,046 10,787 Registration ....................................................... 10,598 4,970 Miscellaneous ...................................................... 2,417 3,753 ------------- ------------- Total expenses before reductions ..................................... 872,661 684,422 Less waiver/reimbursement .......................................... -- (29,568) ------------- ------------- Net expenses ......................................................... 872,661 654,854 ------------- ------------- Net investment income (loss) ......................................... 3,837,842 2,402,102 ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS Realized gain (loss) on: Investments - net .................................................. 2,654,661 114,407 Futures contracts - net ............................................ (123,938) (7,281) Change in unrealized appreciation (depreciation) of investments - net (2,733,362) (1,284,213) ------------- ------------- Net realized and unrealized gain (loss) on investments and futures contracts ................................................. (202,639) (1,177,087) ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 3,635,203 $ 1,225,015 ============= =============
See accompanying notes to financial statemsnts. - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL INCOME TAX FREE INCOME FUND FUND ----------------------------------- ----------------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, JUNE 30, 2001 DECEMBER 31, (UNAUDITED) 2000 (UNAUDITED) 2000 ------------- ------------- ---------------- ------------- FROM OPERATIONS Net investment income ....................... $ 3,837,842 $ 8,438,809 $ 2,402,102 $ 5,167,160 Net realized gain (loss) on investments and futures contracts ......................... 2,530,723 819,863 107,126 509,203 Net change in unrealized appreciation (depreciation) of investments and futures contracts ......................... (2,733,362) 3,914,616 (1,284,213) 3,074,461 ------------- ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations ........................... 3,635,203 13,173,288 1,225,015 8,750,824 ------------- ------------- ------------- ------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class A ................................... (3,530,377) (7,750,121) (2,218,736) (4,741,935) Class B ................................... (310,935) (680,002) (182,031) (386,686) ------------- ------------- ------------- ------------- (3,841,312) (8,430,123) (2,400,767) (5,128,621) ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS ..... 2,438,904 (16,157,951) 271,558 (9,266,215) ------------- ------------- ------------- ------------- Total increase (decrease) in net assets ........ 2,232,795 (11,414,786) (904,194) (5,644,012) NET ASSETS Beginning of the period ..................... 157,058,848 168,473,634 100,499,893 106,143,905 ------------- ------------- ------------- ------------- End of the period ........................... $ 159,291,643 $ 157,058,848 $ 99,595,699 $ 100,499,893 ============= ============= ============= ============= UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME ........................... $ 94,166 $ 97,636 $ 42,943 $ 41,608 ============= ============= ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- For a share outstanding throughout each period.
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ------------------------------------------------ --------------------------------------------------------- DISTRI- NET DISTRI- BUTIONS NET ASSET REALIZED AND DIVIDENDS BUTIONS IN EXCESS VALUE, NET UNREALIZED DIVIDENDS IN EXCESS FROM NET OF NET BEGINNING INVESTMENT GAIN TOTAL FROM FROM NET OF NET REALIZED REALIZED TOTAL OF INCOME (LOSS) ON INVESTMENT INVESTMENT INVESTMENT CAPITAL CAPITAL DISTRI- THE PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS GAINS BUTIONS --------- ----------- ---------- ---------- ----------- ---------- --------- ---------- --------- MUNICIPAL INCOME FUND CLASS A 2001 (f) $ 7.39 $0.19 $(0.01) $0.18 $(0.19) $ -- $ -- $ -- $(0.19) 2000 7.17 0.40 0.21 0.61 (0.39) -- -- -- (0.39) 1999 7.76 0.39 (0.59) (0.20) (0.39) -- -- -- (0.39) 1998 7.75 0.39 0.01 0.40 (0.39) -- -- -- (0.39) 1997 7.53 0.40 0.23 0.63 (0.41) -- -- -- (0.41) 1996 7.60 0.41 (0.07) 0.34 (0.41) -- -- -- (0.41) CLASS B 2001 (f) 7.39 0.16 (0.01) 0.15 (0.16) -- -- -- (0.16) 2000 7.17 0.35 0.21 0.56 (0.34) -- -- -- (0.34) 1999 7.76 0.33 (0.59) (0.26) (0.33) -- -- -- (0.33) 1998 7.75 0.33 0.01 0.34 (0.33) -- -- -- (0.33) 1997 7.53 0.34 0.23 0.57 (0.35) -- -- -- (0.35) 1996 7.60 0.35 (0.07) 0.28 (0.35) -- -- -- (0.35) MASSACHUSETTS TAX FREE INCOME FUND CLASS A 2001 (f) $16.06 $0.39 $(0.18) $0.21 $(0.39) $ -- $ -- $ -- $(0.39) 2000 15.48 0.82 0.57 1.39 (0.81) -- -- -- (0.81) 1999 17.02 0.82 (1.50) (0.68) (0.83) (0.03) -- 0.00(e) (0.86) 1998 17.13 0.86 (0.04) 0.82 (0.85) (0.08) -- -- (0.93) 1997 16.50 0.86 0.63 1.49 (0.86) -- -- -- (0.86) 1996 16.85 0.87 (0.35) 0.52 (0.87) -- -- -- (0.87) CLASS B 2001 (f) 16.03 0.34 (0.19) 0.15 (0.34) -- -- -- (0.34) 2000 15.45 0.71 0.58 1.29 (0.71) -- -- -- (0.71) 1999 16.98 0.71 (1.49) (0.78) (0.72) (0.03) -- 0.00(e) (0.75) 1998 17.09 0.74 (0.03) 0.71 (0.74) (0.08) -- -- (0.82) 1997 16.47 0.76 0.62 1.38 (0.76) -- -- -- (0.76) 1996 16.82 0.75 (0.34) 0.41 (0.76) -- -- -- (0.76) (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) 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) Amount rounds to less than $0.01 per share. (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 discount on debt securities. For Municipal Income Fund, the effect of this change was to increase the ratio of net investment income to average net assets from 4.97% to 5.01% for Class A and 4.22% to 4.26% for Class B. 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 (%) ---------- --------- ----------- --------- -------------- ---------- $ 7.38 2.4 $144,452 1.05 5.01 59 7.39 8.8 142,539 0.93 5.39 156 7.17 (2.8) 152,829 0.93 5.13 137 7.76 5.3 172,643 0.93 5.03 26 7.75 8.6 177,099 0.93 5.19 14 7.53 4.6 180,983 0.92 5.46 24 7.38 2.0 14,840 1.80 4.26 59 7.39 8.0 14,520 1.70 4.64 156 7.17 (3.5) 15,644 1.68 4.38 137 7.76 4.5 15,878 1.68 4.28 26 7.75 7.8 13,356 1.68 4.44 14 7.53 3.9 12,568 1.67 4.71 24 $15.88 1.3(d) $ 91,086 1.27(c) 4.91 39 16.06 9.3(d) 91,785 1.13(c) 5.24 68 15.48 (4.1)(d) 97,270 1.00(c) 5.02 73 17.02 4.9(d) 113,910 1.00(c) 4.93 125 17.13 9.3(d) 113,869 1.00(c) 5.17 132 16.50 3.2(d) 112,934 0.90(c) 5.31 140 15.84 0.9(d) 8,510 1.92(c) 4.26 39 16.03 8.6(d) 8,715 1.78(c) 4.59 68 15.45 (4.7)(d) 8,874 1.65(c) 4.37 73 16.98 4.2(d) 9,026 1.65(c) 4.28 125 17.09 8.6(d) 7,399 1.65(c) 4.52 132 16.47 2.6(d) 7,442 1.55(c) 4.66 140
- -------------------------------------------------------------------------------- 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 tax free 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 Municipal Income Fund (the "Municipal Income Fund"), formerly Nvest Municipal Income Fund CDC Nvest Funds Trust II: - ------------------------- CDC Nvest Massachusetts Tax Free Income Fund (the "Massachusetts Tax Free Income Fund"), formerly Nvest Massachusetts Tax Free Income Fund Each Fund offers Class A and Class B shares. Class A shares of Municipal Income Fund are sold with a maximum front end sales charge of 4.50%. Class A shares of Massachusetts Tax Free Income Fund are sold with a maximum front end sales charge of 4.25%. 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). 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 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. 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. OPTIONS. Each Fund may use options to hedge against changes in the values of securities the Funds own or expect 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. D. INTEREST RATE FUTURES CONTRACTS. Each Fund may purchase or sell interest rate futures contracts to hedge against changes in the values of securities the Funds own or expect 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. E. FEDERAL 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. F. 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 market discount. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital accounts. G. REPURCHASE AGREEMENTS. Each Fund, through its custodian, receives delivery of the underlying securities collateralizing repurchase agreements. It is each Fund's policy that the market value of the collateral be at least equal to 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: Fund Purchases Sales ---- --------- ----- Municipal Income Fund $91,752,773 $90,763,109 Massachusetts Tax Free Income Fund 37,855,464 37,612,676 3A. 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 Over Fund $100 million $100 million ---- ------------ ------------ Municipal Income Fund 0.500% 0.375% Massachusetts Tax Free Income Fund 0.600% 0.500% 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 ---- ---------- --------- --------- --------- ----- Municipal Income Fund $ 353,915 $ -- $ 353,915 0.45% 0.45% Massachusetts Tax Free Income Fund 296,838 29,568 267,270 0.60% 0.54%
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 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 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 - ----- -------------- --------------------- Municipal Income Fund $33,747 0.043% Massachusetts Tax Free Income Fund 21,456 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 and Class B 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 the annual aggregate minimum fee of $2.5 million. In addition, pursuant to other servicing agreements, shareholders pay service fees to other firms that provide similar services for their own shareholder accounts. 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 ---- -------------- --------------------- Municipal Income Fund $113,616 0.146% Massachusetts Tax Free Income Fund 75,156 0.152% 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 a Service and Distribution Plan relating to each Fund's Class B shares (the "Class B Plan"). 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, Massachusetts Tax Free Income 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 Plan, 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 shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in providing personal services to investors in Class B shares and/or the maintenance of shareholder accounts. Also under the Class B Plan, 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 C shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in connection with the marketing or sale of Class B 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 A Class B ------- ------- ------- ------- Municipal Income Fund $176,333 $18,286 $ -- $54,857 Massachusetts Tax Free Income Fund 113,059 10,686 45,224 32,059 Prior to September 13, 1993, for Municipal Income 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 $1,700,600. 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 Municipal Income Fund $ 67,199 Massachusetts Tax Free Income Fund 45,499 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. 4. CAPITAL SHARES. Each Fund may issue an unlimited number of shares of beneficial interest. Transactions in capital shares were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, 2000 ---------------------------- ---------------------------- MUNICIPAL INCOME FUND SHARES AMOUNT SHARES AMOUNT ------------ ------------ ------------ ------------ CLASS A Shares sold .............................................. 1,103,616 $ 8,144,479 914,212 $ 6,619,134 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 323,812 2,390,205 730,138 5,295,697 ------------ ------------ ------------ ------------ 1,427,428 10,534,684 1,644,350 11,914,831 Shares repurchased ....................................... (1,140,615) (8,440,801) (3,677,160) (26,511,156) ------------ ------------ ------------ ------------ Net increase (decrease) .................................... 286,813 $ 2,093,883 (2,032,810) $(14,596,325) ------------ ------------ ------------ ------------ CLASS B Shares sold .............................................. 181,663 $ 1,346,350 287,955 $ 2,090,539 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 23,243 171,587 50,401 365,704 ------------ ------------ ------------ ------------ 204,906 1,517,937 338,356 2,456,243 Shares repurchased ....................................... (158,753) (1,172,916) (556,033) (4,017,869) ------------ ------------ ------------ ------------ Net increase (decrease) .................................. 46,153 $ 345,021 (217,677) $ (1,561,626) ------------ ------------ ------------ ------------ Increase (decrease) derived from capital shares transactions 332,966 $ 2,438,904 (2,250,487) $(16,157,951) ============ ============ ============ ============ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2001 DECEMBER 31, 2000 ---------------------------- ---------------------------- MASSACHUSETTS TAX FREE INCOME FUND SHARES AMOUNT SHARES AMOUNT ------------ ------------ ------------ ------------ CLASS A Shares sold .............................................. 276,054 $ 4,396,536 408,646 $ 6,382,632 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 99,164 1,579,783 217,950 3,409,985 ------------ ------------ ------------ ------------ 375,218 5,976,319 626,596 9,792,617 Shares repurchased ....................................... (352,152) (5,601,160) (1,195,990) (18,590,931) ------------ ------------ ------------ ------------ Net increase (decrease) .................................. 23,066 $ 375,159 (569,394) $ (8,798,314) ------------ ------------ ------------ ------------ Class B ------------ Shares sold .............................................. 38,537 $ 615,659 79,931 $ 1,248,728 Shares issued in connection with the reinvestment of: Dividends from net investment income ................... 6,370 101,240 15,136 236,083 ------------ ------------ ------------ ------------ 44,907 716,899 95,067 1,484,811 Shares repurchased ....................................... (51,478) (820,500) (125,688) (1,952,712) ------------ ------------ ------------ ------------ Net increase (decrease) .................................. (6,571) $ (103,601) (30,621) $ (467,901) ------------ ------------ ------------ ------------ Increase (decrease) derived from capital shares transactions 16,495 $ 271,558 (600,015) $ (9,266,215) ============ ============ ============ ============
6. CONTINGENT EXPENSE OBLIGATION. CDC IXIS Advisers has given a binding undertaking to Massachusetts Tax Free 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 year following a deferral or reimbursement of expenses the actual operating expenses of the Fund are less than its expense limit, 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 Cumulative of Average Daily Expenses Waived Net Assets or Reimbursed ------------------- Subject Class A Class B to Future Payment ------- ------- ----------------- Massachusetts Tax Free Income Fund 1.40% 2.05% $286,390 Prior to May 1, 2001, expenses were limited to the annual rates of 1.20% and 1.85% of the average net assets of the Fund's Class A and Class B shares, respectively. 7. CONCENTRATION OF CREDIT. At June 30, 2001, the Municipal Income Fund had the following concentrations by revenue source in excess of 10% as a percentage of the Fund's net assets: Pollution Control 17.6%, Utilities 13.3% and Airports 12.3%. The Fund also had more than 10% of its net assets invested in : California 15.9%, Pennsylvania 13.4% and New York 10.4%. Certain revenue or tax related events in a state may impair the ability of issuers of municipal securities to pay principal and interest on their obligations. The Massachusetts Tax Free Income Fund primarily invests in debt obligations issued by the Commonwealth of Massachusetts and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Fund is more susceptible to factors adversely affecting issuers of Massachusetts municipal securities than is a comparable municipal bond fund that is not so concentrated. Uncertain economic and fiscal conditions may affect the ability of issuers of Massachusetts municipal securities to meet their financial obligations. At June 30, 2001, the Fund had the following concentrations by revenue source in excess of 10% as a percentage of the Fund's net assets: Education 20.4%, Utilities 15.5%, Industrial Development 15.4% and Health Care 12.8%. The Fund had investments in securities of issuers insured by Municipal Bond Investors Assurance Corporation (MBIA) which aggregated 12.3% of its net assets at June 30, 2001. 8. 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 discount on debt securities. Prior to January 1, 2001, the Funds did not amortize discount on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Funds, but resulted in a $396,338 increase in cost of securities and a corresponding $396,338 decrease in net unrealized appreciation (depreciation) for Municipal Income Fund and a $15,534 increase in cost of securities and a corresponding $ 15,534 decrease in net unrealized appreciation (depreciation) for Massachusetts Tax Free Income Fund, based on securities held by the Funds on January 1, 2001. The effect of this change for the period ended June 30, 2001, for Municipal Income Fund, was to increase net investment income by $35, 447: increase net unrealized appreciation (depreciation) by $18,687, increase net realized gains (losses) by $54,134. The effect of this change, for Massachusetts Tax Free Income Fund, was to increase net investment income by $1,336: increase net unrealized appreciation (depreciation) by $4,727, increase net realized gains (losses) by $6,063. The statements of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- SAVING FOR RETIREMENT - -------------------------------------------------------------------------------- AN EARLY START CAN MAKE A BIG DIFFERENCE - -------------------------------------------------------------------------------- With today's life spans, you may be retired for 20 years or more after you complete your working career. Living these retirement years the way you've dreamed of will require considerable financial resources. While it's never too late to start a retirement savings program, it's certainly never too early: The sooner you begin, the longer the time your money has to grow. The chart below illustrates this point dramatically. One investor starts at age 30, saves for just 10 years, then leaves the investment to grow. The second investor starts 10 years later but saves much longer -- for 25 years, in fact. Can you guess which investor accumulated the greater retirement nest egg? For the answer, look at the chart. TWO HYPOTHETICAL INVESTMENTS Investor A: 0 - $214,295 Investor B: 0 - $157,909 Assumes an 8% fixed rate of return. This illustration does not reflect the effect of any taxes. Results are not indicative of the past or future results of any Nvest Fund. The value and returns on CDC Nvest funds will fluctuate with changing market conditions. Investor A invested $20,000, less than half of Investor B's commitment -- and for less than half the time. Yet Investor A wound up with a much greater retirement nest egg. The reason? It's all thanks to an early start and the power of compounding. CDC Nvest Funds has prepared a number of informative retirement planning guides. Call your financial representative or CDC Nvest Funds today at 800-225-5478, and ask for the guide that best fits your personal needs. We will include a prospectus, which contains more information, including charges and other ongoing expenses. Please read the prospectus carefully before you invest.#CDC Nvest AEW Real Estate Fund - -------------------------------------------------------------------------------- CDC NVEST FUNDS - -------------------------------------------------------------------------------- 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 TF58-0601 -----END PRIVACY-ENHANCED MESSAGE-----