0001127563-01-500133.txt : 20011009
0001127563-01-500133.hdr.sgml : 20011009
ACCESSION NUMBER: 0001127563-01-500133
CONFORMED SUBMISSION TYPE: 497
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011001
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CDC NVEST FUNDS TRUST II
CENTRAL INDEX KEY: 0000052136
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 041990692
STATE OF INCORPORATION: MA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 497
SEC ACT: 1933 Act
SEC FILE NUMBER: 002-11101
FILM NUMBER: 1749837
BUSINESS ADDRESS:
STREET 1: 399 BOYLSTON ST
STREET 2: 4TH FLOOR
CITY: BOSTON
STATE: MA
ZIP: 02116
BUSINESS PHONE: 617-449-2840
MAIL ADDRESS:
STREET 1: 399 BOYLSTON STREET
STREET 2: 6TH FLOOR
CITY: BOSTON
STATE: MA
ZIP: 02116
FORMER COMPANY:
FORMER CONFORMED NAME: NEW ENGLAND FUNDS TRUST II
DATE OF NAME CHANGE: 19940615
FORMER COMPANY:
FORMER CONFORMED NAME: NVEST FUNDS TRUST II
DATE OF NAME CHANGE: 20000202
FORMER COMPANY:
FORMER CONFORMED NAME: TNE FUNDS TRUST
DATE OF NAME CHANGE: 19940615
497
1
taxfreesai.txt
TAX FREE SAI
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CDC NVEST MUNICIPAL INCOME FUND
CDC NVEST MASSACHUSETTS TAX FREE INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION -- PART I
MAY 1, 2001 (AS REVISED OCTOBER 1, 2001)
This Statement of Additional Information (the "Statement") contains
information which may be useful to investors but which is not included in the
Prospectus of CDC Nvest Funds listed above (the "Funds" and each a "Fund"). This
Statement is not a prospectus and is authorized for distribution only when
accompanied or preceded by the Prospectus of the Funds dated May 1, 2001 (the
"Prospectus"). The Statement should be read together with the Prospectus.
Investors may obtain a free copy of the Prospectus from CDC IXIS Asset
Management Distributors, L.P. (the "Distributor", formerly Nvest Funds
Distributor, L.P.), Prospectus Fulfillment Desk, 399 Boylston Street, Boston, MA
02116, by calling CDC Nvest Funds at 800-225-5478 or by placing an order online
at www.cdcnvestfunds.com. Part I of this Statement contains specific information
about the Funds. Part II includes information about the Funds and other CDC
Nvest Funds.
The CDC Nvest Municipal Income Fund is a diversified fund of CDC Nvest
Funds Trust I, a registered open-end management investment company that offers a
total of twelve funds. The CDC Nvest Massachusetts Tax Free Income Fund is a
series of CDC Nvest Funds Trust II a registered open-end management investment
company that offers a total of five funds. CDC Nvest Funds Trust I and CDC Nvest
Funds Trust II are collectively referred to in this Statement as the "Trusts"
and are each referred to as a "Trust". Each Fund's financial statements and
accompanying notes that appear in such Fund's annual and semi-annual reports are
incorporated by reference into this Statement. The Funds' annual and semiannual
reports contain additional performance information and are available upon
request and without charge, by calling 800-225-5478.
T A B L E O F C O N T E N T S
Page
PART I
Investment Restrictions ii
Fund Charges and Expenses iv
Ownership of Fund Shares vii
Investment Performance of the Fund vii
PART II
Miscellaneous Investment Practices 2
Management of the Trusts 27
Portfolio Transactions and Brokerage 47
Description of the Trusts and Ownership of Shares 55
How to Buy Shares 59
Net Asset Value and Public Offering Price 60
Reduced Sales Charges - Class A Shares Only 61
Shareholder Services 63
Redemptions 70
Standard Performance Measures 73
Income Dividends, Capital Gain Distributions and Tax Status 78
Financial Statements 82
Appendix A - Description of Bond Ratings 83
Appendix B - Media That May Contain Fund Information 87
Appendix C - Advertising and Promotional Literature 88
i
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INVESTMENT RESTRICTIONS
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The following is a description of restrictions on the investments to be
made by the Funds. The restrictions marked with an asterisk (*) may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund. The other restrictions set forth below are not fundamental policies
and may be changed by the Trust's Board of Trustees. Except in the case of
restrictions marked with a dagger (+) below, the percentages set forth below and
the percentage limitations set forth in the Prospectus will apply at the time of
the purchase of a security and shall not be considered violated unless an excess
or deficiency occurs or exists immediately after and as a result of a purchase
of such security. The Investment Company Act of 1940, as amended (the "1940
Act"), provides that a "vote of a majority of the outstanding voting securities"
of the Fund means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
CDC NVEST MUNICIPAL INCOME FUND
CDC Nvest Municipal Income Fund (the "Municipal Income Fund") will not:
*(1) With respect to 75% of its total assets, purchase any security if, as a
result, more than 5% of its total assets (based on current value) would
then be invested in the securities of a single issuer or acquire more
than 10% of the outstanding voting securities of any issuer; provided,
however, this limitation does not apply to government securities as
defined in the 1940 Act;
*(2) Purchase any securities (other than U.S. government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry. For purposes of this
restriction, telephone, gas and electric public utilities are each
regarded as separate industries and finance companies whose financing
activities are related primarily to the activities of their parent
companies are classified in the industry of their parents. For purposes
of this restriction with regard to bank obligations, bank obligations
are considered to be one industry, and asset-backed securities are not
considered to be bank obligations;
(3) Invest more than 25% of its total assets (taken at current value) in
industrial development revenue bonds that are based, directly or
indirectly, on the credit of private entities in any one industry or in
securities of private issuers in any one industry. (For the purpose of
this restriction, "private activity bonds" under the Internal Revenue
Code of 1986, as amended (the "Code"), will be treated as industrial
revenue bonds.) (In the utilities category, gas, electric, water and
telephone companies will be considered as being in separate industries);
*(4) Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits
as necessary for the clearance of security transactions, and the Fund
may make any short sales or maintain any short positions where the short
sales or short positions would not constitute "senior securities" under
the 1940 Act;
*(5) Borrow money except for temporary or emergency purposes; provided,
however, that the Fund may loan securities, engage in reverse repurchase
agreements and dollar rolls, in an amount not exceeding 33 1/3% of its
total assets taken at cost;
ii
*(6) Make loans, except that the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies; provided,
however, that this restriction does not apply to repurchase agreements
or loans of portfolio securities;
*(7) Purchase or sell commodities, except that the Fund may purchase and sell
future contracts and options, may enter into swap agreements and other
financial transactions not requiring the delivery of physical
commodities;
*(8) Purchase or sell real estate, although it may purchase securities of
issuers that deal in real estate, securities that are secured by
interests in real estate, and securities that represent interests in
real estate, and it may acquire and dispose of real estate or interests
in real estate acquired through the exercise of its rights as a holder
of debt obligations secured by real estate or interests therein;
*(9) Act as underwriter, except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws;
(10) Write, purchase, or sell puts, calls or combinations thereof, except
that the Fund may write, purchase and sell puts, calls or combinations
thereof with regard to futures contracts;
*(11) Issue senior securities, except for permitted borrowings or as otherwise
permitted under the 1940 Act; or
iii
+(12) Invest more than 15% of the Fund's total net assets in illiquid
securities (excluding Rule 144A securities and certain Section 4(2)
commercial paper deemed to be liquid under guidelines established by the
Trust's trustees).
The Fund may invest more than 25% of its assets in industrial development
revenue bonds, subject to limitation (3) above.
CDC NVEST MASSACHUSETTS TAX FREE INCOME FUND
CDC Nvest Massachusetts Tax Free Income Fund (the "Massachusetts Fund") will
not:
*(1) Borrow money except for temporary or emergency purposes; provided,
however, that the Fund may loan securities, engage in reverse repurchase
agreements and dollar rolls, in an amount not exceeding 33 1/3% of its
total assets taken at cost;
*(2) Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits
as necessary for the clearance of security transactions, and the Fund
may make any short sales or maintain any short positions where the short
sales or short positions would not constitute "senior securities" under
the 1940 Act;
*(3) Act as underwriter, except to the extent that in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws;
*(4) Purchase or sell real estate, although it may purchase securities of
issuers that deal in real estate, securities that are secured by
interests in real estate, and securities that represent interests in
real estate, and it may acquire and dispose of real estate or interests
in real estate acquired through the exercise of its rights as a holder
of debt obligations secured by real estate or interests therein;
*(5) Purchase or sell commodities, except that the Fund may purchase and sell
future contracts and options, may enter into foreign exchange contracts
and swap agreements and other financial transactions not requiring the
delivery of physical commodities;
*(6) Make loans, except that the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies; provided,
however, that this restriction does not apply to repurchase agreements
or loans of portfolio securities;
iv
(7) Purchase securities restricted as to resale, if, as a result, such
investments would exceed 5% of the value of the Fund's net
assets;
*(8) Purchase any securities (other than U.S. government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current
value) would be invested in any one industry. For purposes of this
restriction, telephone, gas and electric public utilities are each
regarded as separate industries and finance companies whose financing
activities are related primarily to the activities of their parent
companies are classified in the industry of their parents. For purposes
of this restriction with regard to bank obligations, bank obligations
are considered to be one industry, and asset-backed securities are not
considered to be bank obligations;
*(9) With respect to 75% of its total assets, purchase any security if, as a
result, more than 5% of its total assets (based on current value) would
then be invested in the securities of a single issuer or acquire more
than 10% of the outstanding voting securities of any issuer; provided,
however, this limitation does not apply to government securities as
defined in the 1940 Act; or
(10) Issue senior securities, except for permitted borrowings or as otherwise
permitted under the 1940 Act.
The Fund will not purchase an investment if, immediately after and as a
result of such purchase, less than 85% of the Fund's assets would consist of
securities rated AAA, AA, A or BBB by Standard & Poor's or Fitch,. or Aaa, Aa,
A, or Baa by Moody's or are non-rated but are considered to be of comparable
quality by the Fund's subadviser.
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FUND CHARGES AND EXPENSES
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ADVISORY FEES
Pursuant to separate advisory agreements, each dated October 30, 2000, CDC
IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers", formerly Nvest Funds
Management, L.P.) has agreed, subject to the supervision of the Board of
Trustees of the Trusts, to manage the investment and reinvestment of the assets
v
of each Fund and to provide a range of administrative services to each Fund. For
the services described in the advisory agreements, each Fund has agreed to pay
CDC IXIS Advisers a gross advisory fee at the annual rates set forth in the
following table, which fees maybe reduced by the amount of any subadvisory fees
payable by the Fund to the subadviser pursuant to the subadvisory agreement:
Advisory Fee payable by the Fund to CDC IXIS Advisers
(as a % of average daily net assets of the Fund)
------------------------------------------------
Fund
Municipal Income Fund 0.50% of the first $100 million
0.375% of amounts in excess of $100 million
Massachusetts Fund 0.60% of the first $100 million
0.50% of amounts in excess of $100 million
Each advisory agreement provides that CDC IXIS Advisers may delegate its
responsibilities thereunder to other parties.
Pursuant to separate subadvisory agreements each dated October 1, 2001, CDC
IXIS Advisers has delegated responsibility for managing the investment and
reinvestment of each Fund's assets to Loomis, Sayles & Company, L.P. ("Loomis
Sayles") as subadviser. For providing such subadvisory services to the Fund, the
Fund pays Loomis Sayles a subadvisory fee at the annual rates set forth in the
following table:
Fund Subadvisory Fees
---- ----------------
Municipal Income Fund 0.250% of the first $100 million
0.1875% of amounts in excess of $100 million
Massachusetts Fund 0.30% of the first $100 million
0.25% of amounts in excess of $100 million
CDC IXIS Advisers has given a binding undertaking to the Massachusetts Fund
to reduce its fees and, if necessary, to bear certain expenses associated with
operating the Fund in order to limit the Fund's total operating expenses to an
annual rate of 1.40% of the average daily net assets attributable to the Fund's
Class A shares and 2.05% of such assets attributable to the Fund's Class B
shares. The undertaking will be binding on CDC IXIS Advisers until May 1, 2002,
subject to the obligation of the Fund to pay such deferred fees and expenses in
later periods to the extent that the expenses of the Massachusetts Fund fall
below the annual rate of 1.40% of average daily net assets for Class A shares
and 2.05% for Class B shares; provided, however, that the Fund is not obligated
to pay any such deferred fees or expense reimbursement more than one year after
the end of the fiscal year in which the fee or expense was deferred.
In 1998, each subadvisory agreement was amended to add the relevant Fund as
a party and to provide that the subadvisory fees payable under such agreement
are payable by the Fund rather than by CDC IXIS Advisers. Also in 1998, the
advisory agreements for each Fund were amended to provide that the advisory fees
payable by the Fund to CDC IXIS Advisers are reduced by the amounts of any
subadvisory fees paid directly by the Fund to its subadviser. These amendments
to the Funds' advisory and
vi
subadvisory agreements did not change the management and subadvisory fee rates
under the agreements, or the services to be provided to each Fund by CDC IXIS
Advisers and the subadviser under the agreements. Furthermore, these amendments
did not change the overall level of fees payable by each Fund.
For the last three fiscal years, the advisory fees payable by the Funds
(before any voluntary reductions and any reduction by the amount of any
subadvisory fees paid by the Fund to its subadviser) and the advisory fees
actually paid by the Fund were as follows:
MUNICIPAL INCOME FUND
1998 1999 2000
---- ---- ----
Total Advisory Fee $834,043 $803,051 $720,304
CDC IXIS Advisers
Fee Earned $417,021 $401,526 $360,152
-------- -------- --------
Total Paid $417,021 $401,526 $360,152
Back Bay Advisors*
Fee Earned $417,022 $401,525 $360,152
-------- -------- --------
Total Paid $417,022 $401,525 $360,152
MASSACHUSETTS FUND
1998 1999 2000
---- ---- ----
Total Advisory Fee $704,088 $690,093 $597,512
CDC IXIS Advisers
Fee Earned $352,044 $345,047 $298,756
Amount Waived $190,258 $181,710 $128,411
-------- -------- --------
Total Paid $161,786 $163,337 $170,345
Back Bay Advisors*
Fee Earned $352,044 $345,046 $298,756
Amount Waived $190,258 $181,710 $128,411
-------- -------- --------
Total Paid $161,786 $163,336 $170,345
* The subadviser to each Fund prior to June 1, 2001 was Back Bay
Advisors, L.P. ("Back Bay Advisors"). Effective June 1, 2001, Loomis
Sayles became subadviser to each Fund.
BROKERAGE COMMISSIONS
For the fiscal years ended December 31, 1998, 1999 and 2000, Municipal
Income Fund paid no brokerage commissions on portfolio transactions.
For the fiscal years ended December 31, 1998, 1999 and 2000, Massachusetts
Fund paid total brokerage commissions of $190,195, $0 and $0, respectively, on
portfolio transactions.
For more information about Fund portfolio transactions, see "Portfolio
Transactions and Brokerage" in Part II of this Statement.
SALES CHARGES AND 12B-1 FEES
As explained in Part II of this Statement, the Class A and Class B shares
of each Fund pay the Distributor fees under separate plans adopted pursuant to
Rule 12b-1 under the 1940 Act. The following table shows the amounts of Rule
12b-1 fees paid by the Fund during the fiscal years ended December 31, 1998,
1999 and 2000:
vii
FUND 1998 1999 2000
---- ---- ---- ----
Municipal Income Fund $436,749 $411,552 $360,102 (Class A)
$143,798 $161,938 $147,075 (Class B)
Massachusetts Fund $394,314 $380,755 $319,292 (Class A)
$81,563 $90,314 $84,737 (Class B)
During the fiscal year ended December 31, 2000, the Distributor's expenses
relating to the Fund's 12b-1 plans were as follows (Class B compensation to
investment dealers excludes advance commissions sold to a third party):
MUNICIPAL INCOME FUND
(Class A Shares)
Compensation to Investment Dealers $362,011
Compensation to Distributor's Sales Personnel and Other Related Costs $101,664
--------
TOTAL $463,675
(Class B Shares)
Compensation to Investment Dealers $140,693
Compensation to Distributor's Sales Personnel and Other Related Costs $50,035
-------
TOTAL $190,728
MASSACHUSETTS FUND
(Class A Shares)
Compensation to Investment Dealers $229,590
Compensation to Distributor's Sales Personnel and Other Related Costs $137,715
--------
TOTAL $367,304
(Class B Shares)
Compensation to Investment Dealers $79,157
Compensation to Distributor's Sales Personnel and Other Related Costs $29,752
-------
TOTAL $108,909
Of the amounts listed above as compensation to investment dealers, the
amounts appearing in the table below were paid by the Distributor to New England
Securities Corporation ("New England Securities"), MetLife Securities, Inc.
("MetLife Securities"), and Nathan & Lewis Securities, Inc. ("Nathan & Lewis")
broker-dealer affiliates of the Distributor until October 30, 2000. New England
Securities, MetLife Securities and Nathan & Lewis paid substantially all of the
fees it received from the Distributor (a) in commissions to its sales personnel
and (b) to defray sales-related overhead costs.
NEW ENGLAND SECURITIES
Class A Class B
Municipal Income Fund $206,224 $8,614
Massachusetts Fund $21,718 $5,546
METLIFE SECURITIES
Class A Class B
Municipal Income Fund $4,210 $3,108
Massachusetts Fund $2,375 $2,007
NATHAN & LEWIS
Class A Class B
Municipal Income Fund $859 $0
Massachusetts Fund $459 $0
viii
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OWNERSHIP OF FUND SHARES
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As of April 2, 2001, to the Trust's knowledge, the following persons owned
of record or beneficially 5% or more of the outstanding shares of the indicated
classes of the Fund set forth below.
FUND SHAREHOLDER AND ADDRESS OWNERSHIP PERCENTAGE
MUNICIPAL INCOME FUND
Class B Shares MLPF&S For the Sole Benefit of It's Customers 5.48%
Attn Fund Administration ML#97CH7
4800 Deer Lake Drive East - 2nd FL
Jacksonville, FL 32246-6484
MASSACHUSETTS FUND
Class B Shares MLPF&S For the Sole Benefit of It's Customers 17.05%
Attn Fund Administration ML#97CJ1
4800 Deer Lake Drive East - 2nd FL
Jacksonville, FL 32246-6484
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INVESTMENT PERFORMANCE OF THE FUND
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PERFORMANCE RESULTS - PERCENT CHANGE
FOR THE PERIODS ENDED 12/31/00*
MUNICIPAL INCOME FUND
Aggregate Average Annual
Total Return Total Return
--------------------------------------- --------------------------------------
Class A shares: As a % of 5 Years 10 Years 1 Year 5 Years 10 Years
------- -------- ------ ------- --------
-----------------------------------------------
Net Asset Value 26.54 85.70 8.76 4.82 6.38
Maximum Sales Charge 20.82 77.33 3.83 3.86 5.90
Aggregate Average Annual
Total Return Total Return
---------------------------------------- -------------------------------------
Since Since
- -
Class B shares: As a % of 5 Years 9/13/93** 1 Year 5 Years 9/13/93**
------- --------- ------ ------- ---------
-----------------------------------------------
Net Asset Value 21.90 30.76 7.96 4.04 3.74
Maximum Sales Charge and Redemption at End of 19.96 30.76 2.96 3.71 3.74
Period
MASSACHUSETTS FUND
Aggregate Average Annual
Total Return Total Return
--------------------------------------- -------------------------------------
Class A shares: As a % of 5 Years 10 Years 1 Year 5 Years 10 Years
------- -------- ------ ------- --------
-----------------------------------------------
Net Asset Value 24.04 84.99 9.27 4.40 6.34
Maximum Sales Charge 18.74 77.14 4.60 3.50 5.88
ix
Aggregate Average Annual
Total Return Total Return
---------------------------------------- -------------------------------------
Since Since
Class B shares: As a % of 5 Years 9/13/93** 1 Year 5 Years 9/13/93**
------- --------- ------- ---------
-----------------------------------------------
Net Asset Value 20.13 29.91 8.59 3.74 3.65
Maximum Sales Charge and Redemption at End of 18.22 29.91 3.59 3.41 3.65
Period
* Federal regulations require this example to be calculated using a
$1,000 investment. The normal minimum initial investment in shares of
each Fund is $2,500, however.
** Commencement of Fund operations or offering of the indicated class of
shares.
The foregoing data represent past performance only and are not a prediction
as to the future returns of the Fund. The investment return and principal value
of an investment in the Fund will fluctuate so that the investor's shares, when
redeemed, may be worth more or less than their original cost.
YIELD AND TAXABLE EQUIVALENT YIELDS
FOR THE 30-DAY PERIOD ENDED 12/31/00*
Fund Class A Class B
----- ------- -------
Municipal Income Fund 4.96 4.43
Massachusetts Fund 4.76 4.34
Taxable equivalent yields:
Combined Tax Rate** Taxable Equivalent Yield
Fund Class A Class B Class A Class B
Massachusetts Fund 43.13 43.13 8.37 7.63
* Yields for Class A shares are based on the public offering price of a
share of the Fund and yields for Class B shares are based on the net
asset value of a share of the Fund.
** Based on combined federal and Massachusetts marginal tax rates for
individuals, assuming deduction of state income taxes for purposes of
calculating federal taxable income.
DISTRIBUTION RATE OF RETURN
Each class of the Fund may include in their written sales material rates of
return based on that class's distributions from net investment income and
short-term capital gains for a recent 30-day, three-month or one-year period.
Distributions of less than one year are annualized by multiplying the factor
necessary to produce 12 months of distributions. The distribution rates are
determined by dividing the amount of a class's distributions per share over the
relevant period by either the maximum offering price in the case of Class A
shares or the price assuming redemption at the end of the period in the case of
Class B shares or the net asset value of a share of a class on the last day of
the period.
DISTRIBUTION RATES
FOR PERIODS ENDING 12/31/00
AS A % OF 1 MONTH
--------------------------------------------------------- --------
MUNICIPAL INCOME FUND
(Class A shares)
Net Asset Value....................................... 8.04%
Maximum Offering Price................................ 7.67%
(Class B shares)
Net Asset Value....................................... 7.23%
x
MASSACHUSETTS FUND
(Class A shares)
Net Asset Value....................................... 5.57%
Maximum Offering Price................................ 5.34%
(Class B shares)
Net Asset Value....................................... 4.90%
The foregoing data represent past performance only, and are not a
representation as to the future results of any Fund. The investment return and
principle value of any investment in any Fund will fluctuate so that the
investor's shares, when redeemed, may be worth more or less than their original
cost.
xi