<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>d568161.txt
<DESCRIPTION>CDC NVEST TAX FREE FUNDS
<TEXT>
<PAGE>
[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
<PAGE>
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
-------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
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
<PAGE>
--------------------------------------------------------------------------------
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."
<PAGE>
--------------------------------------------------------------------------------
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%
<PAGE>
--------------------------------------------------------------------------------
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
------------------------------------------------------------------------------
<PAGE>
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
<PAGE>
-------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A (Inception 3/23/84) 6 MONTHS(4) 1 YEAR(4) 5 YEARS(4) 10 YEARS(4)
<S> <C> <C> <C> <C>
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
<CAPTION>
CLASS B (Inception 9/13/93) 6 MONTHS(4) 1 YEAR(4) 5 YEARS(4) SINCE INCEPTION(4)
<S> <C> <C> <C> <C>
Net Asset Value(1) 0.92% 6.30% 4.23% 3.54%
With CDSC(3) -4.02 1.30 3.90 3.54
<CAPTION>
SINCE
FUND'S
CLASS B
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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
--------------------------------------------------------------------------------
<PAGE>
FINANCIAL
STATEMENTS
<PAGE>
--------------------------------------------------------------------------------
MUNICIPAL INCOME FUND - SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
Investments as of June 30, 2001 (Unaudited)
<TABLE>
<CAPTION>
TAX EXEMPT OBLIGATIONS-- 98.3% OF TOTAL NET ASSETS
RATINGS (c)
-------------------
PRINCIPAL STANDARD
AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (a)
----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
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.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
MASSACHUSETTS TAX FREE INCOME FUND - SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
Investments as of June 30, 2001 (Unaudited)
<TABLE>
<CAPTION>
TAX EXEMPT OBLIGATIONS-- 98.5% OF TOTAL NET ASSETS
RATINGS (c)
-------------------
PRINCIPAL STANDARD
AMOUNT DESCRIPTION MOODY'S & POOR'S VALUE (a)
----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
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
</TABLE>
See accompanying notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES
--------------------------------------------------------------------------------
June 30, 2001 (unaudited)
<TABLE>
<CAPTION>
MASSACHUSETTS
MUNICIPAL INCOME TAX FREE INCOME
FUND FUND
------------ ------------
<S> <C> <C>
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
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
For the Period Ended June 30, 2001 (unaudited)
<TABLE>
<CAPTION>
MASSACHUSETTS
MUNICIPAL INCOME TAX FREE INCOME
FUND FUND
------------ ------------
<S> <C> <C>
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
============= =============
</TABLE>
See accompanying notes to financial statemsnts.
<PAGE>
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
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
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
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
--------- ----------- ---------- ---------- ----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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 (%)
---------- --------- ----------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
$ 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
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Gross Waiver of Net Percentage of Average
Management Management Management Daily Net Assets
Fund Fee Fee Fee Gross Net
---- ---------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
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%
</TABLE>
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:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
---------------------------- ----------------------------
MUNICIPAL INCOME FUND SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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)
============ ============ ============ ============
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
---------------------------- ----------------------------
MASSACHUSETTS TAX FREE INCOME FUND SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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)
============ ============ ============ ============
</TABLE>
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.
<PAGE>
--------------------------------------------------------------------------------
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.
<PAGE>
--------------------------------------------------------------------------------
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
<PAGE>
--------------------------------------------------------------------------------
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.
<PAGE>
[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
</TEXT>
</DOCUMENT>