-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WrmcrkEVNMrL26yRXUVdiwkkZ8ATd2RPurOBAXwbZKP53KseCCCbUjBcKVzZrr3I 9lOCxpg+vMQfwIa2QGNHXQ== 0001127563-01-500156.txt : 20020410 0001127563-01-500156.hdr.sgml : 20020410 ACCESSION NUMBER: 0001127563-01-500156 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20011114 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: 1791004 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 equity497-2.txt EQUITY PROS [LOGO] CDC NVEST FUNDS(SM) CDC IXIS Asset Management Distributors CDC Nvest Equity Funds Prospectus - May 1, 2001 as revised November 14, 2001 for: o CDC Nvest Capital Growth Fund Westpeak Global Advisors, L.P. o CDC Nvest Targeted Equity Fund (formerly CDC Nvest Growth Fund) Capital Growth Management Limited Partnership o CDC Nvest Growth and Income Fund Westpeak Global Advisors, L.P. o CDC Nvest Balanced Fund Loomis, Sayles & Company, L.P. / Jurika & Voyles, L.P. o CDC Nvest AEW Real Estate Fund AEW Management and Advisors, L.P. o CDC Nvest International Equity Fund Loomis, Sayles & Company, L.P. oo CDC Nvest Large Cap Value Fund (formerly Nvest Equity Income Fund) Vaughan, Nelson, Scarborough & McCullough, L.P. oo CDC Nvest Mid Cap Growth Fund Loomis, Sayles & Company, L.P. oo CDC Nvest Select Fund Harris Associates, L.P. Prospectus - November 14, 2001 for: o CDC Nvest Jurika & Voyles Small Cap Growth Fund (formerly CDC Nvest Bullseye Fund) Jurika & Voyles, L.P. o CDC Nvest Large Cap Growth Fund Vaughan, Nelson, Scarborough & McCullough, L.P. o CDC Nvest Jurika & Voyles Relative Value Fund Jurika & Voyles, L.P. The Securities and Exchange Commission has not approved any Fund's shares or determined whether this Prospectus is accurate or complete. Anyone who tells you otherwise is committing a crime. For general information on the Funds or any of their services and for assistance in opening an account, contact your financial representative or call CDC Nvest Funds. CDC Nvest Funds 399 Boylston Street, Boston, Massachusetts 02116 800-225-5478 www.cdcnvestfunds.com [LOGO] WESTPEAK GLOBAL ADVISORS CAPITAL GROWTH MANAGEMENT [LOGO] LOOMIS + SAYLES & COMPANY L.P. [LOGO] JURIKA & VOYLES [LOGO] AEW HARRIS ASSOCIATES L.P. [LOGO] [LOGO] Vaughan, Nelson Scarborough & McCullough WHAT'S INSIDE 1 Goals, Strategies & Risks ...................................Page 1 2 Fund Fees & Expenses ...................................Page 23 3 Management Team ...................................Page 28 4 Fund Services ...................................Page 37 5 Fund Performance ...................................Page 51 Table of Contents ------------------------------------------------------------------------------------------- Goals, Strategies & Risks ------------------------------------------------------------------------------------------- CDC Nvest Capital Growth Fund........................................................... 1 CDC Nvest Targeted Equity Fund (formerly CDC Nvest Growth Fund)......................... 3 CDC Nvest Growth and Income Fund........................................................ 5 CDC Nvest Balanced Fund................................................................. 7 CDC Nvest AEW Real Estate Fund.......................................................... 10 CDC Nvest International Equity Fund..................................................... 12 CDC Nvest Jurika & Voyles Small Cap Growth Fund (formerly CDC Nvest Bullseye Fund)...... 14 CDC Nvest Large Cap Value Fund (formerly Nvest Equity Income Fund)...................... 17 CDC Nvest Mid Cap Growth Fund........................................................... 19 CDC Nvest Select Fund................................................................... 20 CDC Nvest Large Cap Growth Fund......................................................... 21 CDC Nvest Jurika & Voyles Relative Value Fund........................................... 22 ------------------------------------------------------------------------------------------- Fund Fees & Expenses ------------------------------------------------------------------------------------------- Fund Fees & Expenses.................................................................... 23 ------------------------------------------------------------------------------------------- More About Risk ------------------------------------------------------------------------------------------- More About Risk......................................................................... 27 ------------------------------------------------------------------------------------------- Management Team ------------------------------------------------------------------------------------------- Meet the Funds' Investment Advisers and Subadvisers..................................... 28 Meet the Funds' Portfolio Managers...................................................... 30 Past Performance Information............................................................ 34 ------------------------------------------------------------------------------------------- Fund Services ------------------------------------------------------------------------------------------- Investing in the Funds.................................................................. 37 How Sales Charges Are Calculated........................................................ 38 Ways to Reduce or Eliminate Sales Charge................................................ 40 It's Easy to Open an Account............................................................ 41 Buying Shares........................................................................... 42 Selling Shares.......................................................................... 43 Selling Shares in Writing............................................................... 44 Exchanging Shares....................................................................... 45 Restrictions on Buying, Selling and Exchanging Shares................................... 45 How Fund Shares Are Priced.............................................................. 46 Dividends and Distributions............................................................. 47 Tax Consequences........................................................................ 47 Compensation to Securities Dealers...................................................... 48 Additional Investor Services............................................................ 49 ------------------------------------------------------------------------------------------- Fund Performance ------------------------------------------------------------------------------------------- Fund Performance........................................................................ 50 ------------------------------------------------------------------------------------------- Glossary of Terms ------------------------------------------------------------------------------------------- Glossary of Terms....................................................................... 61
If you have any questions about any of the terms used in this Prospectus, please refer to the "Glossary of Terms." To learn more about the possible risks of investing in the Funds, please refer to the section entitled "More About Risk." This section details the risks of practices in which the Funds may engage. Please read this section carefully before you invest. Fund shares are not bank deposits and are not guaranteed, endorsed or insured by the Federal Deposit Insurance Corporation or any other government agency, and are subject to investment risks, including possible loss of the principal invested. [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Capital Growth Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. X Low X Ticker Symbol: Class A Class B Class C ---------------------------------- NEFCX NECBX NECGX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Westpeak Global Advisors, L.P. ("Westpeak") Manager: Gerald H. Scriver Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all of its assets in the common stock of U.S. large and mid-capitalization companies in any industry. Westpeak constructs a portfolio of large and mid-capitalization stocks that exhibit reasonable growth potential. Westpeak believes risk and return can be accurately measured and controlled through thoughtful portfolio construction. Therefore, its focus will be on the aggregate characteristics of the portfolio and not just individual stocks. The portfolio emphasizes the characteristics that Westpeak believes are most likely to be rewarded by the market in the period ahead based upon current and historical probabilities. Westpeak will seek to construct a portfolio of growth stocks with reasonable relative valuation. The Fund's industry weightings will not vary significantly from the Russell 1000 Growth Index. Using proprietary quantitative research based on macroeconomic, market and company-specific information, Westpeak analyzes each stock and ranks it based on characteristics such as: U earnings growth U potential earnings surprises U earnings-to-price U earnings momentum In selecting investments for the Fund's portfolio, Westpeak employs the following process: o Westpeak invests principally in the stock of large and mid-capitalization companies in the Russell 3000 Growth Index. o Westpeak screens these stocks using fundamental growth and value criteria and calculates a "fundamental rank" for each stock. This rank reflects a historical analysis of the company using approximately 70 growth, value and industry characteristics. o All of the stocks are then screened using various Wall Street analysts' historical and projected earnings estimates for the company and each is assigned an "expectations rank." This rank accounts for the company's recent and historical earnings revisions and the potential for "positive earnings surprises" (whether its business has the potential to improve in the near future). o The fundamental and expectations rank for each stock are placed in a valuation matrix to evaluate whether to buy, sell or hold a stock. o The final step is the use of proprietary methodology to arrange the selected stocks into an optimal portfolio using their respective fundamental and expectation ranks and risk characteristics. The desired result is a diversified portfolio of 75 to 125 stocks that Westpeak believes will produce the highest long-term returns and characteristics similar to that of the Fund's benchmark, the Russell 1000 Growth Index. The Fund may also: o Hold up to 10% of its assets in smaller capitalization companies. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Although the Fund is diversified, its focused approach means that its relatively small number of holdings may result in greater share price fluctuations than a more diversified mutual fund. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. For additional information see the section entitled "More About Risk." - ---------- 1 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The Fund's current subadviser assumed that function on February 16, 1998. This chart and table reflect results achieved by the previous subadviser using different investment policies for periods prior to February 16, 1998. The Fund's performance may have been different under its current advisory arrangements and investment policies. The bar chart shows the Fund's total returns for Class A shares for each calendar year since its first full year of operations.+ The returns for the Classes B and C shares differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1993 1994 1995 1996 1997 1998 1999 2000 7.89% -1.64% 30.76% 17.05% 17.23% 29.08% 24.74% -19.52% [DELTA UP] Highest Quarterly Return: Third Quarter 1998, up 24.26% [DELTA DOWN] Lowest Quarterly Return: Fourth Quarter 2000, down 19.35% + The Fund's Class A shares total return year-to-date as of September 30, 2001 was -29.11%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the Russell 1000 Growth Index, an unmanaged subset of stocks from the larger Russell 1000 Index, selected for their greater growth orientation. They are also compared to the returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Large Growth and Lipper Multi-Cap Growth Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charge that you may be required to pay when you buy or redeem the Fund's shares. The Russell 1000 Growth Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Large Growth Average and Lipper Multi-Cap Growth Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ----------------------------------------------------------------------------------------------------------------------------------- Average Annual Total Returns Since Class A Since Class B Since Class C (for the periods ended December 31, 2000) Past 1 Year Past 5 Years Inception Inception Inception - ----------------------------------------------------------------------------------------------------------------------------------- CDC Nvest Capital Growth Fund: Class A (inception 8/3/92) -24.14% 10.88% 12.40% Class B (inception 9/13/93) -23.31% 11.06% 11.67% Class C (inception 12/30/94) -21.52% 11.06% 13.95% - ----------------------------------------------------------------------------------------------------------------------------------- Russell 1000 Growth Index -22.42% 18.15% 16.31% 18.23% 21.13% Morningstar Large Growth Average -14.09% 18.10% 16.87% 17.06% 21.04% Lipper Multi-Cap Growth Funds Average -11.10% 18.98% 17.08% 16.79% 21.16% - -----------------------------------------------------------------------------------------------------------------------------------
Each index is calculated from 7/31/92 for Class A shares, 9/30/93 for Class B shares and 12/30/94 for Class C shares. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses." ---------- 2 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Targeted Equity Fund (formerly CDC Nvest Growth Fund) ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X ---------------------------------------------- Ticker Symbol: Class A Class B Class C ---------------------------------- NEFGX NEBGX NEGCX Adviser: Capital Growth Management Limited Partnership ("CGM") Manager: G. Kenneth Heebner Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital through investment in equity securities of companies whose earnings are expected to grow at a faster rate than that of the overall United States economy. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all of its assets in a focused portfolio of equity securities. The Fund will generally invest in common stock of large capitalization companies that CGM expects will grow at a faster rate than that of the overall United States economy. When CGM believes that market conditions warrant, however, CGM may select stocks based upon overall economic factors such as the general economic outlook, the level and direction of interest rates and potential impact of inflation. The Fund will not invest in small capitalization companies. In general, CGM seeks companies with the following characteristics, although not all of the companies selected will have these attributes: U well-established, with records of above-average growth U promise of maintaining their leadership positions in their industries U likely to benefit from internal revitalization or innovations, changes in consumer demand, or basic economic forces Rather than following a particular style, CGM employs a flexible approach and seeks to take advantage of opportunities as they arise. In making an investment decision, CGM generally employs the following methods: o It uses a top-down approach, meaning that it analyzes the overall economic factors that may affect a potential investment. o CGM then conducts a thorough analysis of certain industries and companies, evaluating the fundamentals of each on a case-by-case basis and focusing on companies that it determines are attractively valued. o CGM's ultimate decision to purchase a security results from a thorough assessment of all of the information that CGM deems to be relevant at the time of investment. o CGM will sell a stock if it determines that its investment expectations are not being met, if better opportunities are identified or if its price objective has been attained. The Fund may also: o Invest in foreign securities. o Invest in other investment companies. o Invest in real estate investment trusts ("REITs"). o Invest a significant portion of its assets in a single sector. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Although the Fund is diversified, its focused approach means that its relatively small number of holdings may result in greater share price fluctuations than a more diversified mutual fund. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Investments in other investment companies: May indirectly bear service and other fees in addition to its own expenses. Focused investment risk: Because the Fund may invest in a small number of industries, it may have more risk because the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund's net asset value. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." REITs: REITs are subject to changes in underlying real estate values, rising interest rates, limited diversification of holdings, higher costs and prepayment risk associated with related mortgages, as well as other risks particular to investments in real estate. For additional information see the section entitled "More About Risk." - ---------- 3 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The bar chart shows the Fund's total returns for Class A shares for each of the last ten calendar years.+ The returns for the Classes B and C shares differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 56.72% -6.63% 11.29% -7.05% 38.06% 20.88% 23.54% 33.40% 15.18% -4.55% [DELTA UP] Highest Quarterly Return: Fourth Quarter 1998, down 28.51% [DELTA UP] Lowest Quarterly Return: Third Quarter 1998, down 18.07% + The Fund's Class Y shares total return year-to-date as of September 30, 2001 was -28.75%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the S&P 500 Index, a market value-weighted, unmanaged index of common stock prices for 500 selected stocks. They are also compared to the returns, as calculated by Morningstar, Inc. and Lipper Inc., of the Morningstar Large-Cap Blend and Lipper Large-Cap Core Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charges that you may be required to pay when you buy or redeem the Fund's shares. The S&P 500 Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Large-Cap Blend Average and Lipper Large-Cap Core Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ----------------------------------------------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Past 5 Years Past 10 Years Since Class B Since Class C (for the periods ended December 31, 2000) Inception Inception - ----------------------------------------------------------------------------------------------------------------------------------- CDC Nvest Targeted Equity Fund (formerly CDC Nvest Growth Fund): Class A (inception 11/27/68) -10.03% 15.61% 15.74% Class B (inception 2/28/97) -9.45% 13.39% Class C (inception 9/1/98) -7.03% 12.34% - ----------------------------------------------------------------------------------------------------------------------------------- S&P 500 Index -9.10% 18.33% 17.46% 15.92% 16.20% Morningstar Large-Cap Blend Average 5.47% 13.91% 14.95% 11.80% 14.66% Lipper Large-Cap Core Funds Average 1.32% 15.56% 15.65% 12.95% 15.51% - -----------------------------------------------------------------------------------------------------------------------------------
Each index is calculated from 12/28/90 for Class A shares and 2/28/97 for Class B shares. For Class C shares, the S&P 500 Index is calculated from 9/1/98 while the Morningstar Large-Cap Blend Average and the Lipper Large Cap Core Funds Average are calculated from 8/31/98. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses." ---------- 4 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Growth and Income Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. X Low X Ticker Symbol: Class A Class B Class C ---------------------------------- NEFOX NEGBX NECOX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Westpeak Global Advisors, L.P. ("Westpeak") Manager: Gerald H. Scriver Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks opportunities for long-term capital growth and income. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all its assets in common stock of large and mid-capitalization companies in any industry. Westpeak constructs a portfolio of recognizable large and mid-capitalization stocks that exhibit good relative value and reasonable growth potential. Westpeak believes risk and return can be accurately measured and controlled through thoughtful portfolio construction. Therefore, its focus will be on the aggregate characteristics of the portfolio and not just individual stocks. The portfolio emphasizes the characteristics that Westpeak believes are most likely to be rewarded by the market in the period ahead, based upon current and historical probabilities. At times, the portfolio may be biased toward value; at other times toward growth as determined by the characteristics Westpeak favors. The Fund's industry weightings will not vary significantly from the S&P 500 Index. Using proprietary quantitative research based on macroeconomic, market and company-specific information, Westpeak analyzes each stock and ranks it based on characteristics such as: U earnings-to-price U earnings growth U potential earnings surprises U book-to-price In selecting investments for the Fund, Westpeak employs the following process: o It starts with an overall universe of about 800 stocks of large and mid-capitalization companies. o It screens these stocks using fundamental growth and value criteria and calculates a "fundamental rank" for each stock. This rank reflects a historical analysis of the company using approximately 70 growth, value and industry-specific characteristics. o All of the stocks are then screened using various Wall Street analysts' historical and projected earnings estimates for the company and each is assigned an "expectations rank." This rank accounts for the company's recent and historical earnings revisions and the potential for "positive earnings surprises" (whether its business has potential to improve in the near future). o The fundamental and expectations ranks for each stock are placed in a valuation matrix to evaluate whether to buy, sell or hold a stock. o The final step is the use of proprietary methodology to arrange the selected stocks into an optimal portfolio using their respective fundamental and expectation ranks and risk characteristics. The desired result is a diversified portfolio of 75 to 150 stocks, with risk characteristics that approximate that of the benchmark, the S&P 500 Index, which Westpeak believes will produce the highest long-term returns consistent with the portfolio's risk parameters. The Fund may also: o Invest in foreign securities traded in U.S. markets (through American Depositary Receipts ("ADRs") or stocks sold in U.S. dollars). ADRs are securities issued by a U.S. bank that represent shares of a foreign company. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Foreign securities: ADRs may be more volatile than U.S. securities and carry political, economic and information risks that are associated with foreign securities. For additional information see the section entitled "More About Risk." - ---------- 5 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The Fund's current subadviser assumed that function on May 1, 1995. The bar chart shows the Fund's total returns for Class A shares for each of the last ten calendar years.+ The returns for the Classes B and C shares differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 30.61% 9.28% 7.95% 0.99% 35.11% 17.21% 33.43% 23.93% 9.45% -7.31% [DELTA UP] Highest Quarterly Return: Fourth Quarter 1998, up 19.13% [DELTA DOWN] Lowest Quarterly Return: Third Quarter 1998, down 12.27% + The Fund's Class A shares total return year-to-date as of September 30, 2001 was -22.84%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the S&P 500 Index, a market value-weighted, unmanaged index of common stock prices of 500 selected stocks. They are also compared to the returns, as calculated by Morningstar, Inc. and Lipper, Inc., of Morningstar Large-Cap Value and Lipper Multi-Cap Core Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charge that you may be required to pay when you buy or redeem the Fund's shares. The S&P 500 Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Large-Cap Value Average and Lipper Multi-Cap Core Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ------------------------------------------------------------------------------------------------------------------------------------ Average Annual Total Returns Past 1 Year Past 5 Years Past 10 Years Since Class B Since Class C (for the periods ended December 31, 2000) Inception Inception - ------------------------------------------------------------------------------------------------------------------------------------ CDC Nvest Growth and Income Fund: Class A (inception 5/6/31) -12.67% 13.13% 14.57% Class B (inception 9/13/93) -12.53% 13.40% 13.83% Class C (inception 5/1/95) -9.87% 13.38% 15.39% - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 Index -9.10% 18.33% 17.46% 17.94% 20.11% Morningstar Large-Cap Blend Average 5.47% 13.91% 14.95% 14.08% 15.99% Lipper Multi-Cap Core Funds Average 8.86% 13.71% 15.14% 13.92% 15.44% - ------------------------------------------------------------------------------------------------------------------------------------
Morningstar Large-Cap Value Average and Lipper Multi-Cap Core Funds Average are calculated from 12/31/90 for Class A shares, 9/30/93 for Class B shares and 4/30/95 for Class C shares. S&P 500 Index is calculated from 12/31/90 for Class A shares, 9/13/93 for Class B shares and 5/1/95 for Class C shares. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses." ---------- 6 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Balanced Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High Mod. X X X Low Ticker Symbol: Class A Class B Class C ---------------------------------- NEFBX NEBBX NEBCX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadvisers: Loomis, Sayles & Company, L.P. ("Loomis Sayles") and Jurika & Voyles, L.P. ("Jurika & Voyles") Managers: Equity (Value Component): Nicholas E. Moore, Guy Elliffe and Eric Hull (Jurika & Voyles) Equity (Growth Component): Mark Baribeau, Pamela Czekanski and Richard Skaggs (Loomis Sayles) Fixed Income: John Hyll and Kurt Wagner (Loomis Sayles) Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks a reasonable long-term investment return from a combination of long-term capital appreciation and moderate current income. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- The Fund principally invests in common stocks of quality, large to mid-market capitalization companies of any industry and investment grade bonds. Generally, the Fund will invest approximately 65% of its assets in equity securities and approximately 35% of its assets in fixed-income securities, although these allocations may change from time to time, subject to the limits below. The Fund's equity securities are allocated equally between a growth and a value component. In managing their particular components, Jurika & Voyles and Loomis Sayles use a flexible approach to seek investments with the following characteristics, although not all of the companies selected will have these attributes: Equity securities (growth or value component): Jurika & Voyles (Equity-value component) seeks investments with: discounted price compared to Jurika & Voyles' estimation of their true value, sustainable competitive advantage, good growth prospects, predictable cash flows, and a record of creating shareholder value. Loomis Sayles (Equity-growth component) seeks investments with: discounted price compared to its current value for future growth prospects, leading position within industry and superior earnings growth potential. Fixed-income securities: U greater yield-to-maturity than appropriate benchmarks U maturities typically between 1 and 30 years U controlled duration variance compared to index In order to maintain a balanced, flexible portfolio of investments, the Fund will always invest a minimum of 50% of its assets in equity securities and a minimum of 25% in fixed income securities. Loomis Sayles will recommend the Fund's asset allocation periodically as it deems appropriate. Net cash flow will be allocated in accordance with the asset allocation determinations and then the equity portion will be allocated equally to the growth and value components. o For the value component, Jurika & Voyles selects stocks of companies that it believes are undervalued based upon their current operations and have the potential for future earnings growth. Using this value style, Jurika & Voyles generally will seek to invest in 45-60 medium and large capitalization companies. Typically the portfolio's forward price-to-earnings ratio will be at or below the market, and the portfolio will have long-term growth estimates that are near or above the market. Jurika & Voyles will sell a stock when the price target or full valuation is achieved, a better opportunity is identified, a change occurs in the original investment, such as a merger or a regulatory change, or its fundamentals deteriorate. o For the growth component, Loomis Sayles selects stocks from a universe of approximately 500 companies. Loomis Sayles then uses fundamental analysis to identify companies with leading market positions. Valuation analysis follows to find undervalued companies with positive growth catalysts. Portfolio construction then balances opportunities with risks to produce a portfolio of about 50 stocks. Loomis Sayles will sell a stock when its price objective has been attained, its fundamentals deteriorate or when more attractive opportunities are identified. o Loomis Sayles selects bonds by placing a greater emphasis on security and sector selection than interest rate anticipation. They conduct extensive research and credit analysis of over 600 corporate issuers and assign each a proprietary rating. They combine these ratings with internal policy limitations to select bonds for the Fund. They will sell bonds depending on expected credit deterioration or when they identify other securities with better total returns going forward. The Fund may also: o Invest in foreign securities and related currency hedging transactions; Rule 144A securities; mortgage- and asset -backed securities; zero-coupon bonds; and when-issued securities. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - ---------- 7 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Principal Investment Risks - -------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Rule 144A securities may be more illiquid than other equity securities. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." Fixed-income securities: Subject to credit risk, interest rate risk and liquidity risk. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when interest rates rise. Zero-coupon bonds may be subject to these risks to a greater extent than other fixed-income securities. Mortgage- and asset-backed securities: Subject to prepayment risk. With prepayment, the Fund may reinvest the prepaid amounts in securities with lower yields than the prepaid obligations. The Fund may also incur a realized loss when there is a prepayment of securities that were purchased at a premium. For additional information see the section entitled "More About Risk." ---------- 8 [GRAPHIC] Goals, Strategies & Risks ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The Fund became a multi-component fund and added an additional subadviser on March 1, 2001. The Fund's performance may have been different under its current advisory arrangements. The bar chart shows the Fund's total returns for Class A shares for each of the last ten calendar years.+ The returns for the Classes B and C shares differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 29.21% 13.93% 14.18% -2.67 26.31% 17.12% 17.53 8.18% -3.75% -6.41% [DELTA UP] Highest Quarterly Return: Second Quarter 1991, up 15.31% [DELTA UP] Lowest Quarterly Return: Third Quarter 1999, down 8.52% + The Fund's Class A shares total return year-to-date as of September 30, 2001 was -17.19%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of a blend of the S&P 500 Index and the Lehman Government/ Credit Bond Index ("S&P/Lehman G/C Blend"). This index is represented by a 65% weighting in the S&P 500 Index and a 35% weighting in the Lehman G/C Index. Indices are rebalanced to 65% / 35% at the end of each year. They are also compared to the returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Domestic Hybrid and Lipper Balanced Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charges that you maybe required to pay when you buy or redeem the Fund's shares. The S&P/Lehman G/C Blend returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Domestic Hybrid Average and Lipper Balanced Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ----------------------------------------------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Past 5 Years Past 10 Years Since Class B Since Class C (for the periods ended December 31, 2000) Inception Inception - ----------------------------------------------------------------------------------------------------------------------------------- CDC Nvest Balanced Fund: Class A (inception 11/27/68) -11.77% 4.80% 10.08% Class B (inception 9/13/93) -11.78% 4.97% 6.79% Class C (inception 12/30/94) -9.07% 5.01% 8.14% - ----------------------------------------------------------------------------------------------------------------------------------- S&P/Lehman G/C Blend -1.77% 14.10% 14.15% 13.85% 16.78% Morningstar Domestic Hybrid Average 2.06% 10.90% 11.82% 10.45% 12.95% Lipper Balanced Funds Average 1.51% 11.39% 12.21% 11.22% 13.80% - -----------------------------------------------------------------------------------------------------------------------------------
Each index is calculated from 12/31/90 for Class A shares, 9/30/93 for Class B shares and 12/30/94 for Class C shares. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses." - ---------- 9 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest AEW Real Estate Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. X X Low Ticker Symbol: Class A Class B Class C NRFAX NRFAX NRCFX Adviser: AEW Management and Advisors, L.P. ("AEW") Manager: Matthew A. Troxell Category: Mid-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks to provide investors with above-average income and long-term growth of capital. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest at least 65% of its assets in publicly traded equity securities issued by real estate investment trusts ("REITs") or real estate-related companies. REITs are generally dedicated to owning, and usually operating, income-producing real estate, or dedicated to financing real estate. The Fund primarily invests in equity REITs, which own or lease real estate and derive their income primarily from rental income. Real estate-related companies are those companies whose principal activity involves the development, ownership, construction, management or sale of real estate; companies with significant real estate holdings; and companies that provide products or services related to the real estate industry. AEW employs a value-oriented investment strategy designed to identify securities that are priced below what it believes is their intrinsic value. AEW believes that ultimately the performance of real estate equity securities is dependent upon the performance of the underlying real estate assets and company management as well as the overall influence of capital markets. Consequently, when selecting securities for the Fund, AEW draws upon the combined expertise of its real estate, research and securities professionals. When selecting investments for the Fund, AEW generally considers the following factors that it believes help to identify those companies whose shares represent the greatest value and price appreciation potential: o Valuation: AEW has developed a proprietary model to assess the relative value of each stock in the Fund's investment universe. This model is designed to estimate what an issuer's anticipated cash flows are worth to a stock investor (a capital markets value) and to a direct real estate investor (a real estate value). The model helps AEW to identify stocks that it believes trade at discounts to either or both of these model values relative to similar stocks. AEW will generally sell a security once it is considered overvalued or when AEW believes that there is greater relative value in other securities in the Fund's investment universe. o Price: AEW examines the historic pricing of each company in the Fund's universe of potential investments. Those stocks that have under performed in price, either in absolute terms or relative to the Fund's universe in general, are generally given greater weight than those that have over performed. o Income: AEW further evaluates companies and REITs by analyzing their dividend yields as well as other factors that influence the sustainability and growth of dividends. These factors include cash flow, leverage and payout ratios. o Catalysts: When evaluating a security, AEW also seeks to identify potential catalysts that, in its opinion, could cause the marketplace to re-value the security upwards in the near term. These catalysts can be macro-economic, market-driven or company-specific in nature. The Fund may also hold cash and/or invest up to 100% of its assets in U.S. government securities or money market instruments for temporary defensive purposes in response to adverse market, economic or political conditions. These investments may prevent the Fund from achieving its investment goal. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Securities of real estate-related companies and REITs in which the Fund may invest may be considered equity securities, thus subjecting the Fund to market risks. This means that you may lose money on your investment due to sudden, unpredictable drops in value or periods of below-average performance in a given stock or in the stock market as a whole. Realestate securities/REITs: Because the Fund concentrates its investments in the real estate industry, the Fund's performance will be dependent in part on the performance of the real estate market and the real estate industry in general. The real estate industry is particularly sensitive to economic downturns. Securities of companies in the real estate industry, including REITs, are sensitive to factors such as changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use and rents, and the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws. In addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or securing mortgage loans held by the REIT. REITs are dependent upon cash flow from their investments to ---------- 10 [GRAPHIC] Goals, Strategies & Risks ------------------------- - ------------------------------------- Principal Investment Risks- continued - ------------------------------------- repay financing costs and also on the ability of the REITs' managers. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund. Small-cap companies: Companies in the real estate industry, including REITs, in which the Fund may invest may have relatively small market capitalizations. Small-cap companies and REITs, which AEW considers to be those with market capitalization of $1 billion or less, tend to have more limited markets and resources than companies with larger market capitalizations. Consequently, share prices of small-cap companies and REITs can be more volatile than, and perform differently from, larger company stocks. For additional information see the section entitled "More About Risk." - ------------------------------------- Performance - ------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. - ---------- 11 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest International Equity Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class A Class B Class C ---------------------------------- NEFIX NEIBX NECIX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Loomis, Sayles & Company, L.P. ("Loomis Sayles") Managers: Alexander Muromcew, John Tribolet and Eswar Menon Category: International Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks total return from long-term capital growth and dividend income. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest primarily in equity securities of companies organized or headquartered outside of the United States. The Fund will hold securities from at least three different countries, including those within emerging markets. The Fund will focus on securities with large market capitalization but may invest in securities with any size capitalization. Loomis Sayles uses a bottom-up, fundamental research process to build the Fund's portfolio. Combining careful research with visits with management, Loomis Sayles looks for growth oriented stocks of well-managed companies that are industry leaders globally and possess strong competitive positions with pricing power and strong distribution. Improving business or financial fundamentals are catalysts for buy decisions while deteriorating fundamentals or better opportunities in other companies will trigger sell decisions. In addition to its bottom-up approach to security selection, an overlay of country and industry macro data is used to provide guidelines for portfolio weighting with a view towards minimizing portfolio risk. The strong Loomis Sayles research team is combined with a global network of research contacts to provide a steady stream of information and ideas. Together with discipline and a thorough decision-making process, the Loomis Sayles research operation seeks to provide investors with a successful investment strategy. Loomis Sayles uses a "No-Walls Decision MakingSM" investment process, in which the managers all meet in person to exchange ideas and make portfolio decisions. Each buy and sell decision is subject to intense scrutiny by the entire team, which allows the skill and unique perspective of each manager on the team to be leveraged. The Fund may also: o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Small capitalization companies may be subject to more abrupt price movements, limited markets and less liquidity than larger, more established companies, which could adversely affect the value of the portfolio. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." Investments in emerging markets may be subject to these risks to a greater extent than those in more developed markets. For additional information see the section entitled "More About Risk." ---------- 12 [GRAPHIC] Goals, Strategies & Risks ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The Fund's current subadviser assumed that function on February 14, 1997. This chart and table reflect results achieved by the previous subadviser under different investment policies for periods prior to February 1997. The Fund's performance may have been different under its current advisory arrangements and investment policies. The bar chart shows the Fund's total returns for Class A shares for each calendar year since its first full year of operations. + The returns for the Classes B and C shares differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1993 1994 1995 1996 1997 1998 1999 2000 29.39% 8.06% 5.78% 3.27% -7.56% 6.69% 87.59% -28.56% [DELTA UP] Highest Quarterly Return: Fourth Quarter 1999, up 66.97% [DELTA UP] Lowest Quarterly Return: Second Quarter 2000, down 15.59% + The Fund's Class A shares total return year-to-date as of September 30, 2001 was -26.90%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the Morgan Stanley Capital International Europe, Australasia and Far East Index ("MSCI EAFE"), an arithmetical average of the performance of over 1,000 companies representing stock markets in Europe, Australia, New Zealand and the Far East. The returns are also compared to returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Foreign Stock and Lipper International Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect the expenses of the Fund's Class Y shares. The MSCI EAFE returns have not been adjusted for ongoing management, distribution and operating expenses applicable to mutual fund investments. The Morningstar Foreign Stock Average and the Lipper International Funds Average returns have been adjusted for these expenses but do not reflect any sales charge.
- ----------------------------------------------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Past 5 Years Since Class A Since Class B Since Class C (for the periods ended December 31, 2000) Inception Inception Inception - ----------------------------------------------------------------------------------------------------------------------------------- CDC Nvest International Equity Fund: Class A (inception 5/21/92) -32.67% 5.17% 7.12% Class B (inception 9/13/93) -32.38% 5.34% 5.61% Class C (inception 12/30/94) -30.45% 5.48% 5.42% - ----------------------------------------------------------------------------------------------------------------------------------- MSCI EAFE -14.17% 7.13% 8.94% 7.65% 7.80% Morningstar Foreign Stock Average -15.66% 9.43% 9.87% 9.82% 10.13% Lipper International Funds Average -15.60% 9.09% 9.32% 8.80% 9.01% - -----------------------------------------------------------------------------------------------------------------------------------
The MSCI EAFE is calculated from 5/21/92 for Class A shares, 9/13/93 for Class B shares and 12/30/94 for Class C shares. The Morningstar Foreign Stock Average and the Lipper International Funds Average are calculated from 5/31/92 and 5/28/92, respectively, for Class A shares, 9/30/93 for Class B shares and 12/31/94 for Class C shares. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses." - ---------- 13 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest Jurika & Voyles Small Cap Growth Fund (formerly CDC Nvest Bullseye Fund) ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class A Class B Class C ---------------------------------- NFBSX NFBBX NFBCX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Jurika & Voyles, L.P. ("Jurika & Voyles") Manager: Jon Hickman Category: Small-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all of its assets in stocks of quality companies having small market capitalizations. The Fund generally invests in companies that will give it median and weighted average market capitalization of less than $1 billion. The Fund expects to invest at least 80% of its total assets in the common stock of companies with market capitalizations within the Russell 2000 Index, a nationally recognized index of small-cap companies. When selecting small-cap companies, Jurika & Voyles will emphasize "in-house" research, which includes personal contacts, site visits and meetings with company management. Through this research, Jurika & Voyles looks for small-cap companies that possess several of the following characteristics, although not all of the companies selected will have these attributes: U Strong competitive advantage - companies that "do what they do" better than anyone else are prime candidates. U Clearly defined business focus - companies that "stick to their knitting," focusing only on a particular niche or segment of a broader market. U Strong financial health - companies with strong cash flows, low debt-to-total capital ratios, healthy balance sheets and higher returns on equity than the market average. U Quality management - companies with experienced management, low turnover and a long-term track record of success in an industry. U Right price - companies that sell at a discount to Jurika & Voyles' estimation of their true value. U Catalyst for growth - It is not enough to invest in an inexpensive company. There must be some factor (typically a new product, improving industry trend or economic condition) that will lead to an increase in the price of the stock. The Fund may also: o Invest in convertible preferred stock, convertible debt securities, real estate investment trusts ("REITs") and warrants. o Invest up to 25% of its total assets in securities of foreign issuers, primarily through sponsored and unsponsored Depositary Receipts. Some examples of Depositary Receipts are American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"). The Fund will limit its investment in any one foreign country to 5% of its total assets and will invest no more than 5% of its total assets in securities denominated in foreign currencies. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Small capitalization and emerging growth companies may be subject to more abrupt price movements, limited markets and less liquidity than larger, more established companies, which could adversely affect the value of the portfolio. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. The Fund's ---------- 14 [GRAPHIC] Goals, Strategies & Risks ------------------------- - ------------------------------------- Principal Investment Risks- continued - ------------------------------------- investment in short-term trading strategies, with respect to initial public offerings, may make the value of an investment in this Fund fluctuate even more than an investment in other small-cap funds. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. This may impact the Fund's performance and result in increased tax liability to shareholders. REITs: REITs are subject to changes in underlying real estate values, rising interest rates, limited diversification of holdings, higher costs and prepayment risk associated with related mortgages, as well as other risks particular to investments in real estate. Foreign securities: Depositary Receipts may be more volatile than U.S. securities and carry political, economic and information risks that are associated with foreign securities. For additional information see the section entitled "More About Risk." - ---------- 15 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The bar chart shows the Fund's total returns for Class A shares for each calendar year since its first full year of operations. + The returns for the Classes B and C shares differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1999 2000 36.68% -11.16% [DELTA UP] Highest Quarterly Return: Fourth Quarter 1999, up 43.96% [DELTA UP] Lowest Quarterly Return: Third Quarter 1998, down 12.49% + The Fund's Class A shares total return year-to-date as of September 30, 2001 was -18.63%. The table below shows the Fund's average annual total returns for the one-year and five-year and ten-year periods (or since inception if shorter) compared to those of the S&P 500 Index, a market value-weighted, unmanaged index of common stock prices for 500 selected stocks. The returns are also compared to returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Mid Cap Blend Average and Lipper Multi-Cap Core Funds Average, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charge that you may be required to pay when you buy or redeem the Fund's shares. The S&P 500 Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Mid Cap Blend Average and Lipper Multi-Cap Core Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- --------------------------------------------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Since Class (for the periods ended December 31, 2000) Inception - --------------------------------------------------------------------------------------------------------------------------------- CDC Nvest Jurika & Voyles Small Cap Growth Fund (formerly CDC Nvest Bullseye Fund): Class A (inception 3/31/98) Class B (inception 3/31/98) -16.17% 5.52% Class C (inception 3/31/98) -14.96% 6.21% -13.27% 6.64% - --------------------------------------------------------------------------------------------------------------------------------- S&P 500 Index -9.10% 8.18% Morningstar Mid Cap Blend 3.37% 6.42% Lipper Multi-Cap Core Funds Average -2.97% 7.20% - ---------------------------------------------------------------------------------------------------------------------------------
Each index is calculated from 3/31/98 for Classes A, B and C shares. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses." ---------- 16 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Large Cap Value Fund (formerly Nvest Equity Income Fund) ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class A Class B Class C ---------------------------------- NEEIX NEBIX NECEX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Vaughan, Nelson, Scarborough & McCullough, L.P. ("VNSM") Manager: Margaret M. Buescher Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks total return from capital growth and dividend income. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all of its assets in undervalued common stock of medium to large capitalization companies. VNSM uses rigorous fundamental research and active management to analyze a broad selection of company or industry sectors and to seek companies with the following characteristics, although not all of the companies selected will have these attributes: U Higher profitability (return-on-equity) than the market U Strong and growing cash flows and dividends-to-cash flow ratio U Low relative price-to-sales ratio U Low relative price-to-earnings ratio U High relative dividend yield In selecting investments for the Fund, VNSM employs the following strategy: o It uses a value-driven investment philosophy that selects stocks selling at a relatively low value based on their history. VNSM selects companies that it believes are out-of-favor or misunderstood. o VNSM starts with an investment universe of 5,000 securities. VNSM then uses value-driven quantitative screens to seek those companies that generally have a market capitalization in excess of $2 billion. These screens create a research universe of 300 to 400 companies. o VNSM then uses fundamental analysis to build a portfolio of 40 to 50 securities consisting of quality companies in the opinion of VNSM. This fundamental analysis focuses on the strength of a company's balance sheet, cash flow growth and management. o VNSM will generally sell a stock when it reaches its relative historical value, when the company shows a deteriorating financial condition, or when it has repeated negative earnings surprises. The Fund may also: o Invest in convertible and non-convertible preferred stock. o Invest in convertible and non-convertible investment grade bonds. o Invest in foreign securities including American Depositary Receipts ("ADRs"), which are securities issued by a U.S. bank that represent shares of a foreign company. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Fixed-income securities: Subject to credit risk, interest rate risk and liquidity risk. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when interest rates rise. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." For additional information see the section entitled "More About Risk." - ---------- 17 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for the one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The Fund's current subadviser assumed that function on June 1, 1999. This chart and table reflect results achieved by the previous subadviser under different investment policies for periods prior to June 1, 1999. The Fund's performance may have been different under its current advisory arrangements and investment policies. The bar chart shows the Fund's total returns for Class A shares for each calendar year since its first full year of operations. + The returns for the Classes B and C shares differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1996 1997 1998 1999 2000 26.61% 22.64% 2.67% -1.94% 9.01% [DELTA UP] Highest Quarterly Return: Second Quarter 1999, up 12.75% [DELTA DOWN] Lowest Quarterly Return: Third Quarter 1998, down 13.14% + The Fund's Class A shares total return year-to-date as of September 30, 2001 was -9.23%. The table below shows the Fund's average annual total returns for the one-year and ten-year periods (or since inception if shorter) compared to those of the Russell 1000 Value Index, an unmanaged subset of stocks from the larger Russell 1000 Index, selected for their greater value orientation. The returns are also compared to the returns, as calculated by Lipper, Inc. and Morningstar, Inc., of the Morningstar Large Cap Value and Lipper Equity Income Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charges you may be required to pay when you buy or redeem the Fund's shares. The Russell 1000 Value Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Large Cap Value Average and Lipper Equity Income Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ----------------------------------------------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Past 5 Years Since Class A Since Classes B (for the periods ended December 31, 2000) Inception and C Inception - ----------------------------------------------------------------------------------------------------------------------------------- CDC Nvest Large Cap Value Fund (formerly Nvest Equity Income Fund): Class A (inception 11/28/95) 2.67% 9.94% 10.43% Class B (inception 9/15/97) 3.16% 2.46% Class C (inception 9/15/97) 6.11% 3.02% - ----------------------------------------------------------------------------------------------------------------------------------- Russell 1000 Value Index 7.01% 8.18% 17.18% 10.61% Morningstar Large Cap Value Average 5.47% 6.42% 14.41% 7.95% Lipper Equity Income Funds Average 1.32% 7.20% 15.60% 9.19% - -----------------------------------------------------------------------------------------------------------------------------------
For Class A shares, the Russell 1000 Value Index is calculated from 11/28/95, while the Morningstar Large Value Average and the Lipper Equity Income Funds Average are calculated from 11/30/95. For Classes B and C Shares each index is calculated from 9/30/97. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses". ---------- 18 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Mid Cap Growth Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class A Class B Class C ---------------------------------- NRMAX NRMBX NRMCX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Loomis, Sayles & Company, L.P. ("Loomis Sayles") Managers: Christopher R. Ely, David L. Smith and Philip C. Fine Category: Mid-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term capital growth from investments in common stocks or their equivalent. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund invests primarily in common stocks or other equity securities of companies with market capitalizations that fall within the capitalization range of companies included in the Russell Midcap Growth Index. However, the Fund is not limited to these companies and may invest in companies of any size. In deciding which securities to buy and sell, Loomis Sayles seeks to identify companies that the portfolio managers believe have distinctive products, technologies, or services, dynamic earnings growth, prospects for high levels of profitability, and solid management. Loomis Sayles typically does not consider current income. The Fund may also: o Invest any portion of its assets in securities of Canadian issuers and up to 20% of its assets in other foreign securities. o Engage in foreign currency hedging transactions and securities lending. The Fund may also invest in real estate investment trusts ("REITs"), initial public offerings ("IPOs") and Rule 144A securities. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Rule 144A securities may be more illiquid than other equity securities. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. This may impact the Fund's performance and result in increased tax liability to shareholders. Mid-cap stocks are more volatile and may be less liquid than large-cap stocks. Mid-cap companies may have a shorter history of operations and a smaller market for their shares. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." REITs: REITs are subject to changes in underlying real estate values, rising interest rates, limited diversification of holdings, higher costs and prepayment risk associated with related mortgages, as well as other risks particular to investments in real estate. For additional information see the section entitled "More About Risk." - -------------------------------------------------------------------------------- Performance - -------------------------------------------------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. - ---------- 19 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest Select Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class A Class B Class C ---------------------------------- NRSAX NRSBX NRSCX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Harris Associates, L.P. ("Harris Associates") Managers: William C. Nygren and Floyd J. Bellman Category: Mid-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term capital appreciation. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- CDC Nvest Select Fund invests primarily in common stocks of U.S. companies. The Fund is non-diversified, which means that it is not limited under the Investment Company Act of 1940 to a percentage of assets that it may invest in any one issuer. The Fund could own as few as 12 securities, but generally will have 15 to 20 securities in its portfolio. The Fund will normally invest in companies with mid-to-large capitalizations. Harris Associates uses a value investment philosophy in selecting equity securities. This philosophy is based upon the belief that, over time, a company's stock price converges with the company's true business value. By "true business value," Harris Associates means its estimate of the price a knowledgeable buyer would pay to acquire the entire business. Harris Associates believes that investing in securities priced significantly below their true business value presents the best opportunity to achieve their investment objectives. The Fund may also: o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Non-diversified status: Compared with other mutual funds, the Fund may invest a greater percentage of its assets in a particular issuer. Therefore, the Fund may have more risk because changes in the value of a single security or the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund's net asset value. For additional information see the section entitled "More About Risk." - -------------------------------------------------------------------------------- Performance - -------------------------------------------------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. ---------- 20 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Large Cap Growth Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class A Class B Class C ---------------------------------- NEEIX NEBIX NECEX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Vaughan, Nelson, Scarborough & McCullough, L.P. ("VNSM") Managers: Brian A. Grove, Christopher T. McMillin and William R. Berger Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital by investing at least 65% of its total assets in equity securities of companies with large market capitalizations that the subadviser believes have better than average long-term growth potential. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- VNSM uses rigorous fundamental research and active management to analyze a broad selection of company or industry sectors and to seek companies with the following characteristics, although not all of the companies selected will have these attributes: U Quality management U Strong financials U Competitive products U Positive economic outlooks In selecting investments for the Fund's portfolio, VNSM employs the following strategy: o It starts from a universe of more than 5,000 companies, screening out companies with less than $1 billion market capitalization. o Next, VNSM screens for strong earnings and revenue growth over rolling 5-year periods. o Choosing 100-150 target companies, VNSM then applies growth rate analysis and industry catalyst research to find 40-50 strong stocks for the portfolio. o VNSM targets stocks for sale due to underperformance in earnings relative to targets, unfavorable changes in the company or its industry or when price targets are achieved. The Fund may also: o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Because of these and other risks, the Fund may underperform certain other stock funds during periods when large company growth stocks are generally out of favor. For additional information see the section entitled "More About Risk." - -------------------------------------------------------------------------------- Performance - -------------------------------------------------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. - ---------- 21 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest Jurika & Voyles Relative Value Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. X Low X Ticker Symbol: Class A Class B Class C ---------------------------------- Pending Pending Pending Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Jurika & Voyles, L.P. ("Jurika & Voyles") Managers: Guy Elliffe, Eric Hull and Nicholas E. Moore Category: Mid-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- Fund seeks long-term growth of capital. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- To pursue its investment goal, the Fund invests in equity securities of quality companies with mid to large market capitalizations. The Fund expects to invest approximately 80%, but no less than 65%, of its total assets in equity securities of companies with market capitalizations within the range of the Russell 1000 Index, a nationally recognized index of mid- and large-cap securities. The Fund's average and median market capitalization will fluctuate over time as a result of market valuation levels and the availability of specific investment opportunities. When selecting equity securities for the Fund, Jurika & Voyles will emphasize "in-house" research, which includes personal contacts, site visits and meetings with company management. Through this research, Jurika & Voyles looks for quality companies that possess several of the following characteristics, although not all of the companies selected will have these attributes: U Strong, competitive advantage - companies that "do what they do" better than anyone else are the prime candidates. U Clearly defined business focus - companies that "stick to their knitting" - focusing only on a particular niche or segment of a broader market. U Strong financial health - companies with strong cash flows, low debt-to-total capital ratios, healthy balance sheets and higher returns on equity than the market average. U Quality management - companies with experienced management, low turnover and a long-term track record of success in an industry. U Right price - companies that sell at a discount to Jurika & Voyles' estimation of their true value. U Catalyst for growth - It is not enough to invest in an inexpensive company. There must be some factor (typically a new product, improving industry trend or economic condition) that will lead to an increase in the price of the stock. The Fund may also: o Invest in real estate investment trusts ("REITs"). o Invest in foreign issuers, primarily through depositary receipts. o Invest in other investment companies. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Mid-cap stocks are more volatile and may be less liquid than large-cap stocks. Mid-cap companies may have a shorter history of operations and a smaller market for their shares. Foreign securities: ADRs may be more volatile than U.S. securities and carry political, economic and information risks that are associated with foreign securities. REITs: REITs are subject to changes in underlying real estate values, rising interest rates, limited diversification of holdings, higher costs and prepayment risk associated with related mortgages, as well as other risks particular to investments in real estate. Investments in other investment companies: May indirectly bear service and other fees in addition to its own expenses. For additional information see the section entitled "More About Risk." - -------------------------------------------------------------------------------- Performance - -------------------------------------------------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. ---------- 22 [GRAPHIC] Fund Fees & Expenses The following tables describe the fees and expenses that you may pay if you buy and hold shares of each Fund. - ------------------------------------- Shareholder Fees - ------------------------------------- (fees paid directly from your investment)
- -------------------------------------------------------------------------------------------------- Class A Class B Class C - -------------------------------------------------------------------------------------------------- Maximum sales charge (load) imposed on purchases (as a percentage of offering price)(1)(2) 5.75% None 1.00% - -------------------------------------------------------------------------------------------------- Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable)(2) (3) 5.00% 1.00% - -------------------------------------------------------------------------------------------------- Redemption fees None* None* None*
(1) A reduced sales charge on Class A and Class C shares applies in some cases. See "Ways to Reduce or Eliminate Sales Charges" within the section entitled "Fund Services." (2) Does not apply to reinvested distributions. (3) A 1.00% contingent deferred sales charge applies with respect to certain purchases of Class A shares greater than $1,000,000 redeemed within 1 year after purchase, but not to any other purchases or redemptions of Class A shares. See "How Sales Charges Are Calculated" within the section entitled "Fund Services." (4) Accounts established prior to December 1, 2000 will not be subject to the 1.00% front-end sales charge for exchange or additional purchases of Class C shares. *Generally, a transaction fee will be charged for expedited payment of redemption proceeds such as by wire or overnight delivery. See the section entitled "Investing in the Funds." - ------------------------------------- Annual Fund Operating Expenses - ------------------------------------- (expenses that are deducted from Fund assets, as a percentage of average daily net assets)
- ------------------------------------------------------------------------------------------------------------------------------------ CDC Nvest Targeted Equity Fund CDC Nvest Capital Growth Fund (formerly CDC Nvest Growth Fund) CDC Nvest Growth and Income Fund Class A Class B Class C Class A Class B Class C Class A Class B Class C - ------------------------------------------------------------------------------------------------------------------------------------ Management fees 0.75% 0.75% 0.75% 0.68% 0.68% 0.68% 0.67% 0.67% 0.67% Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* Other expenses** 0.55% 0.55% 0.55% 0.40% 0.40% 0.40% 0.47% 0.47% 0.47% Total annual fund operating expenses 1.55% 2.30% 2.30% 1.33% 2.08% 2.08% 1.39% 2.14% 2.14% - ------------------------------------------------------------------------------------------------------------------------------------ CDC Nvest Balanced Fund CDC Nvest Large Cap Value Fund(1) CDC Nvest Mid Cap Growth Fund(2) Class A Class B Class C Class A Class B Class C Class A Class B Class C - ------------------------------------------------------------------------------------------------------------------------------------ Management fees 0.75% 0.75% 0.75% 0.70% 0.70% 0.70% 0.95% 0.95% 0.95% Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* Other expenses** 0.66% 0.66% 0.66% 1.36% 1.36% 1.36% 0.53% 0.53% 0.53% Total annual fund operating expenses 1.66% 2.41% 2.41% 2.31% 3.06% 3.06% 1.73% 2.48% 2.48% Fee Waiver and/or expense reimbursement 0.00% 0.00% 0.00% 0.81% 0.81% 0.81% 0.03% 0.03% 0.03% Net Expenses 1.66% 2.41% 2.41% 1.50% 2.25% 2.25% 1.70% 2.45% 2.45%
- ---------- 23 Fund Fees & Expenses [GRAPHIC]
- ------------------------------------------------------------------------------------------------------------------------------------ CDC Nvest Jurika & Voyles Small Cap Growth Fund4 CDC Nvest Select Fund(2) CDC Nvest AEW Real Estate Fund(3) (formerly CDC Nvest Bullseye Fund) Class A Class B Class C Class A Class B Class C Class A Class B Class C - ------------------------------------------------------------------------------------------------------------------------------------ Management fees 1.00% 1.00% 1.00% 0.80% 0.80% 0.80% 0.95% 0.95% 0.95% Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* Other expenses** 0.54% 0.54% 0.54% 7.30% 7.30% 7.30% 1.59% 1.59% 1.59% Total annual fund operating expenses 1.79% 2.54% 2.54% 8.35% 9.10% 9.10% 2.79% 3.54% 3.54% Fee Waiver and/or expense reimbursement 0.09% 0.09% 0.09% 6.85% 6.85% 6.85% 1.04% 1.04% 1.04% Net Expenses 1.70% 2.45% 2.45% 1.50% 2.25% 2.25% 1.75% 2.50% 2.50% - ------------------------------------------------------------------------------------------------------------------------------------ CDC Nvest International CDC Nvest Large Cap CDC Nvest Jurika & Voyles Relative Equity Fund Growth Fund(5) Value Fund(6) Class A Class B Class C Class A Class B Class C Class A Class B Class C - ------------------------------------------------------------------------------------------------------------------------------------ Management fees 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.85% 0.85% 0.85% Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* 0.25% 1.00% 1.00% Other expenses** 0.90% 0.90% 0.90% 0.87% 0.87% 0.87% 1.20% 1.20% 1.20% Total annual fund operating expenses 2.05% 2.80% 2.80% 2.02% 2.77% 2.77% 2.30% 3.05% 3.05% Fee Waiver and/or expense reimbursement 0.00% 0.00% 0.00% 0.62% 0.62% 0.62% 0.80% 0.80% 0.80% Net Expenses 2.05% 2.80% 2.80% 1.40% 2.15% 2.15% 1.50% 2.25% 2.25%
*Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charge permitted by the rules of the National Association of Securities Dealers, Inc. **"Other expenses" are based on estimated amounts for the current fiscal year. (1) CDC IXIS Advisers has given a binding undertaking to this Fund to limit the amount of the Fund's total annual fund operating expenses to 1.50%, 2.25% and 2.25% of the Fund's average daily net assets for Classes A, B and C shares, respectively. This undertaking is in effect until May 1, 2002 and will be reevaluated on an annual basis. (2) CDC IXIS Advisers has given binding undertakings to these Funds to limit the amount of each Fund's total annual fund operating expenses to 1.70%, 2.45% and 2.45% of such Fund's average daily net assets for Class A, B and C shares, respectively. These undertakings are in effect until May 1, 2002 and will be reevaluated on an annual basis. (3) AEW has given a binding undertaking to the Fund to limit the amount of the Fund's total fund operating expenses to 1.50%, 2.25% and 2.25% of the Fund's average daily net assets for Classes A, B and C shares, respectively. This undertaking is in effect through May 31, 2002 and will be reevaluated on an annual basis. (4) Beginning upon the merger of the CDC Nvest Jurika & Voyles Small Cap Growth Fund with the Jurika & Voyles Small Cap Growth Fund and continuing through December 31, 2004, CDC IXIS Advisers has given a binding undertaking to this Fund to limit the amount of the Fund's total annual fund operating expenses to 1.75%, 2.50% and 2.50% of the Fund's average daily net assets for Classes A, B and C shares, respectively. (5) CDC IXIS Advisers has given a binding undertaking to this Fund to limit the amount of the Fund's total annual fund operating expenses to 1.40%, 2.15% and 2.15% of the Fund's average daily net assets for Classes A, B and C shares, respectively. This undertaking is in effect through April 30, 2003. ---------- 24 [GRAPHIC] Fund Fees & Expenses (6) CDC IXIS Advisers has given a binding undertaking to this Fund to limit the amount of the Fund's total annual fund operating expenses to 1.50%, 2.25% and 2.25% of the Fund's average daily net assets for Classes A, B and C shares, respectively. This undertaking is in effect through December 31, 2004. - ------------------------------------- Example - ------------------------------------- This example*, which is based upon the expenses shown above, is intended to help you compare the cost of investing in the Funds with the cost of investing in other mutual funds. The example assumes that: o You invest $10,000 in a Fund for the time periods indicated; o Your investment has a 5% return each year; o A Fund's operating expenses remain the same; and o All dividends and distributions are reinvested. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:
- ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest Targeted Equity Fund CDC Nvest Capital Growth Fund (formerly CDC Nvest Growth Fund) Class A Class B Class C Class A Class B Class C (1) (2) (1) (2) (1) (2) (1) (2) - ---------------------------------------------------------------------------------------------------------------------------- 1 year $ 724 $ 733 $ 233 $ 431 $ 331 $ 703 $ 711 $ 211 $ 409 $ 309 3 years $1,036 $1,018 $ 718 $ 811 $ 811 $ 972 $ 952 $ 652 $ 745 $ 745 5 years $1,371 $1,430 $1,230 $1,318 $1,318 $1,262 $1,319 $1,119 $1,207 $1,207 10 years** $2,314 $2,448 $2,448 $2,709 $2,709 $2,084 $2,219 $2,219 $2,486 $2,486 - ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest Growth and Income Fund CDC Nvest Balanced Fund Class A Class B Class C Class A Class B Class C (1) (2) (1) (2) (1) (2) (1) (2) - ---------------------------------------------------------------------------------------------------------------------------- 1 year $ 708 $ 717 $ 217 $ 415 $ 315 $ 734 $ 744 $ 244 $ 442 $ 342 3 years $ 990 $ 970 $ 670 $ 763 $ 763 $1,068 $1,051 $ 751 $ 844 $ 844 5 years $1,292 $1,349 $1,149 $1,238 $1,238 $1,425 $1,485 $1,285 $1,373 $1,373 10 years** $2,148 $2,282 $2,282 $2,548 $2,548 $2,427 $2,561 $2,561 $2,819 $2,819 - ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest Large Cap Value Fund CDC Nvest Mid Cap Growth Fund Class A Class B Class C Class A Class B Class C (1) (2) (1) (2) (1) (2) (1) (2) - ---------------------------------------------------------------------------------------------------------------------------- 1 year $ 796 $ 809 $ 309 $ 506 $ 406 $ 741 $ 751 $ 251 $ 449 $ 349 3 years $1,255 $1,245 $ 945 $1,036 $1,036 $1,089 $1,073 $ 773 $ 865 $ 865 5 years $1,739 $1,806 $1,606 $1,690 $1,690 10 years** $3,069 $3,200 $3,200 $3,440 $3,440 - ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest AEW Real Estate Fund CDC Nvest Select Fund Class A Class B Class C Class A Class B Class C (1) (2) (1) (2) (1) (2) (1) (2) - ---------------------------------------------------------------------------------------------------------------------------- 1 year $1,349 $1,391 $ 891 $1,082 $ 982 $ 746 $ 757 $ 257 $ 455 $ 355 3 years $2,820 $2,866 $2,566 $2,640 $2,640 $1,106 $1,091 $ 791 $ 883 $ 883 5 years $4,193 $4,306 $4,106 $4,165 $4,165 10 years** $7,245 $7,342 $7,342 $7,462 $7,462
- ---------- 25 Fund Fees & Expenses [GRAPHIC]
- ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest Jurika & Voyles Small Cap Growth Fund (formerly CDC Nvest Bullseye Fund) CDC Nvest International Equity Fund Class A Class B Class C Class A Class B Class C (1) (2) (1) (2) (1) (2) (1) (2) - ---------------------------------------------------------------------------------------------------------------------------- 1 year $ 743 $ 753 $ 253 $ 451 $ 351 $ 771 $ 783 $ 283 $ 480 $ 380 3 years $1,094 $1,079 $ 779 $ 871 $ 871 $1,181 $1,168 $ 868 $ 959 $ 959 5 years $1,686 $1,752 $1,552 $1,636 $1,636 $1,615 $1,679 $1,479 $1,564 $1,564 10 years** $3,284 $3,416 $3,416 $3,651 $3,651 $2,817 $2,949 $2,949 $3,197 $3,197 - ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest Large Cap Growth Fund CDC Nvest Jurika & Voyles Relative Value Fund Class A Class B Class C Class A Class B Class C (1) (2) (1) (2) (1) (2) (1) (2) - ---------------------------------------------------------------------------------------------------------------------------- 1 year $ 709 $ 718 $ 218 $ 416 $ 316 $ 719 $ 728 $ 228 $ 426 $ 326 3 years $1,116 $1,101 $ 801 $ 893 $ 893 $1,022 $1,003 $ 703 $ 796 $ 796
(1) Assumes redemption at end of period. (2) Assumes no redemption at end of period. * The example is based on the Net Expenses for the 1-year period for Large Cap Growth Fund and for the 1-year and 3-year periods for Small Cap Growth Fund and Relative Value Fund illustrated in the Example and on the Total Annual Fund Operating Expenses for the remaining years. The example is based on Total Annual Fund Operating Expenses for the remaining Funds for all periods. ** Class B shares automatically convert to Class A shares after 8 years; therefore, in years 9 and 10 Class B amounts are calculated using Class A expenses. ---------- 26 [GRAPHIC] More About Risk The Funds have principal investment strategies that come with inherent risks. The following is a list of risks to which each Fund may be subject by investing in various types of securities or engaging in various practices. Correlation Risk (All Funds except Mid Cap Growth, Select and AEW Real Estate Fund) The risk that changes in the value of a hedging instrument will not match those of the asset being hedged. Credit Risk (All Funds) The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation. Currency Risk (All Funds except Capital Growth, Growth and Income and AEW Real Estate Funds) The risk that fluctuations in the exchange rates between the U.S. dollar and foreign currencies may negatively affect an investment. Emerging Markets Risk (International Equity Fund) The risk associated with investing in securities traded in developing securities markets, which may be smaller and have shorter operating histories than developed markets. Emerging markets involve risks in addition to and greater than those generally associated with investing in developed foreign markets. The extent of economic development, political stability, market depth, infrastructure and capitalization, and regulatory oversight in emerging market economies is generally less than in more developed markets. Euro Conversion Risk (All Funds except Capital Growth, Growth and Income and AEW Real Estate Funds) Many European countries have adopted a single European currency, the "euro." The consequences of this conversion for foreign exchange rates, interest rates and the value of European securities are unclear presently. Such consequences may decrease the value and/or increase the volatility of securities held by a Fund. Extension Risk (Balanced and Large Cap Value Funds) The risk that an unexpected rise in interest rates will extend the life of a mortgage- or asset-backed security beyond the expected prepayment time, typically reducing the security's value. Information Risk (All Funds) The risk that key information about a security is inaccurate or unavailable. Interest Rate Risk (All Funds) The risk of market losses attributable to changes in interest rates. In general, the prices of fixed-income securities rise when interest rates fall, and prices fall when interest rates rise. Leverage Risk (All Funds except Select and Mid Cap Growth Funds) The risk associated with securities or practices (e.g. borrowing) that multiply small index or market movements into large changes in value. When a derivative security (a security whose value is based on another security or index) is used as a hedge against an offsetting position that a Fund also holds, any loss generated by the derivative security should be substantially offset by gains on the hedged instrument, and vice versa. To the extent that a Fund uses a derivative security for purposes other than as a hedge, that Fund is directly exposed to the risks of that derivative security and any loss generated by the derivative security will not be offset by a gain. Liquidity Risk (All Funds except Select Fund) The risk that certain securities may be difficult or impossible to sell at the time and at the price that the seller would like. This may result in a loss or may otherwise be costly to a Fund. These types of risks may also apply to restricted securities, Section 4(2) Commercial Paper, or Rule 144A Securities. Management Risk (All Funds) The risk that a strategy used by a Fund's portfolio management may fail to produce the intended result. Market Risk (All Funds) The risk that the market value of a security may move up and down, sometimes rapidly and unpredictably, based upon a change in an issuer's financial condition as well as overall market and economic conditions. IPO securities tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of public information and trading history. IPO securities tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of public information and trading history. Opportunity Risk (All Funds) The risk of missing out on an investment opportunity because the assets necessary to take advantage of it are invested in less profitable investments. Options, Futures and Swap Contracts Risks (All Funds except Select and AEW Real Estate Funds) These transactions are subject to changes in the underlying security on which such transactions are based. It is important to note that even a small investment in these types of derivative securities may give rise to leverage risk, and can have a significant impact on a Fund's exposure to stock market values, interest rates or the currency exchange rate. These types of transactions will be used primarily for hedging purposes. Political Risk (All Funds) The risk of losses directly attributable to government or political actions. Prepayment Risk (Balanced, Large Cap Value and AEW Real Estate Funds) The risk that unanticipated prepayments may occur, reducing the return from mortgage- or asset-backed securities, or real estate investment trusts. Small Capitalization Companies Risk (Capital Growth, International Equity and Small Cap Growth Funds) These companies carry special risks, including narrower markets, more limited financial and management resources, less liquidity and greater volatility than large company stocks. Valuation Risk (All Funds) The risk that a Fund has valued certain securities at a higher price than it can sell them for. - ---------- 27 Management Team [GRAPHIC] --------------- Meet the Funds' Investment Advisers and Subadvisers The CDC Nvest Funds family currently includes 27 mutual funds with a total of over $5.9 billion in assets under management as of June 30, 2001. CDC Nvest Funds are distributed through CDC IXIS Asset Management Distributors, L.P. (the "Distributor"). This Prospectus covers CDC Nvest Equity Funds (the "Funds" or each a "Fund"), which along with the CDC Nvest Income Funds, CDC Nvest Star Funds, and CDC Nvest Tax Free Income Funds, constitute the "CDC Nvest Funds." CDC Nvest Cash Management Trust - Money Market Series and CDC Nvest Tax Exempt Money Market Trust constitute the "Money Market Funds." - ---------------------------------------- CDC IXIS Asset Management Advisers, L.P. - ---------------------------------------- CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers", formerly Nvest Management, L.P.), located at 399 Boylston Street, Boston, Massachusetts 02116, serves as the adviser to each of the Funds except Targeted Equity Fund (for which CGM serves as adviser) and AEW Real Estate Fund (for which AEW serves as adviser). CDC IXIS Advisers is a subsidiary of CDC IXIS Asset Management North America, L.P. ("CDC IXIS North America", formerly Nvest Companies, L.P.), which is a subsidiary of CDC IXIS Asset Management. CDC IXIS Asset Management is the investment management arm of France's Caisse des Depots et Consignations ("CDC"), a major diversified financial institution. As of June 30, 2001, CDC IXIS North America's 14 principal subsidiary or affiliated asset management firms collectively had $131 billion in assets under management. CDC IXIS Advisers oversees, evaluates, and monitors the subadvisory services provided to each Fund except Targeted Equity Fund and AEW Real Estate Fund. It also provides general business management and administration to each Fund except Targeted Equity Fund and AEW Real Estate Fund. CDC IXIS Advisers does not determine what investments will be purchased by the Funds. The subadvisers listed below, CGM and AEW make the investment decisions for their respective Funds. The combined advisory and subadvisory fees paid by the Funds (except Targeted Equity Fund, Mid Cap Growth Fund, Select Fund, AEW Real Estate Fund, Large Cap Growth Fund and Relative Value Fund) during the fiscal year ended December 31, 2000 as a percentage of each Fund's average daily net assets were, 0.74% for Capital Growth Fund, 0.66% for Growth and Income Fund, 0.75% for Balanced Fund, 0.00% for Large Cap Value Fund (formerly Equity Income Fund) (after waiver or reimbursement), 0.11% for Small Cap Growth Fund (after waiver or reimbursement), and 0.90% for International Equity Fund. CDC Nvest Mid Cap Growth and CDC Nvest Select Funds pay combined advisory and subadvisory fees at an annual rate of 0.95% of the first $1 billion of the average daily net assets of Mid Cap Growth Fund and 0.825% of such assets in excess of $1 billion, and 1.00% of the first $1 billion of the average daily net assets of Select Fund and 0.95% of such assets in excess of $1 billion. Large Cap Growth Fund pays combined advisory and subadvisory fees at an annual rate of 0.90% of the average daily net assets of the Fund. Relative Value Fund pays combined advisory and subadvisory fees at an annual rate of 0.85% of the first $500 million of the average daily assets of the Fund and 0.80% of such assets in excess of $500 million. - ------------------------------------- Subadvisers - ------------------------------------- Harris Associates, located at Two North LaSalle Street, Chicago, Illinois 60602, serves as subadviser to the Select Fund. Harris Associates, a subsidiary of CDC IXIS North America, manages $16.9 billion in assets as of June 30, 2001, and, together with its predecessor, has managed investments since 1970. It also manages investments for other mutual funds as well as assets of individuals, trusts, retirement plans, endowments, foundations, and several private partnerships. Jurika & Voyles, located at Lake Merritt Plaza, 1999 Harrison, Suite 700, Oakland, California 94612, serves as subadviser to one component of the Balanced Fund, the Small Cap Growth Fund and the Relative Value Fund. Jurika & Voyles, founded in 1983, has discretionary management authority with respect to over $2.4 billion of assets as of June 30, 2001 for various clients including corporations, pension plans, 401(k) plans, profit sharing plans, trusts and estates, foundations and charities, mutual funds and individuals. Jurika & Voyles is a subsidiary of CDC IXIS North America. Loomis Sayles, located at One Financial Center, Boston, Massachusetts 02111, serves as subadviser to two components of the Balanced Fund, the Mid Cap Growth Fund and the International Equity Fund. Loomis Sayles is a subsidiary of CDC IXIS North America. Founded in 1926, Loomis Sayles is one of America's oldest investment advisory firms with over $67 billion in assets under management as of June 30, 2001. Loomis Sayles is well known for its professional research staff, which is one of the largest in the industry. Vaughan, Nelson, Scarborough & McCullough, located at 6300 Chase Tower, Houston, Texas 77002, serves as subadviser to the Large Cap Value Fund and Large Cap Growth Fund. VNSM is a subsidiary of CDC IXIS North America. Originally incorporated in 1970, VNSM focuses primarily on managing equity and fixed-income funds for clients who consist of ---------- 28 [GRAPHIC] Management Team --------------- foundations, university endowments and corporate retirement and family/individual core funds. As of June 30, 2001, VNSM had $3.9 billion in assets under management. Westpeak, located at 1470 Walnut Street, Boulder, Colorado 80302, serves as subadviser to Growth and Income Fund and the Capital Growth Fund. Westpeak is a subsidiary of CDC IXIS North America. Founded in 1991, Westpeak has $8.7 billion in assets under management as of June 30, 2001. - ------------------------------------------------------- Capital Growth Management Limited Partnership (Adviser) - ------------------------------------------------------- CGM, located at One International Place, Boston, Massachusetts 02110, has served as adviser to the Targeted Equity Fund since CGM's inception in 1989. It also serves as investment adviser to eight additional mutual funds and various institutional investors. CGM is an affiliate of CDC IXIS North America and has over $5 billion in assets under management as of June 30, 2001. For the fiscal year ended December 31, 2000, Targeted Equity Fund paid 0.67% of its average daily net assets to CGM in advisory fees. - ------------------------------------------- AEW Management and Advisors, L.P. (Adviser) - ------------------------------------------- AEW, located at World Trade Center East, Two Seaport Lane, Boston, Massachusetts 02210, serves as the adviser to the AEW Real Estate Fund. AEW is a subsidiary of CDC IXIS North America. Together with other AEW adviser affiliates, AEW manages over $7 billion of client capital as of June 30, 2001. AEW Real Estate Fund pays advisory fees at the annual rate of 0.80% of the first $500 million of the Fund's average daily net assets and 0.75% of such assets in excess of $500 million. - ------------------------------------- Subadvisory Agreements - ------------------------------------- Each Fund has received an exemptive order from the Securities and Exchange Commission (the "SEC") which permits CDC IXIS Advisers to amend or continue existing subadvisory agreements when approved by the Board of Trustees, without shareholder approval. The exemption also permits CDC IXIS Advisers to enter into new subadvisory agreements with subadvisers that are not affiliated with CDC IXIS Advisers, if approved by the Board of Trustees. Shareholders will be notified of any subadviser changes. - ------------------------------------- Portfolio Trades - ------------------------------------- In placing portfolio trades, each Fund's adviser or subadviser may use brokerage firms that market the Fund's shares or are affiliated with CDC IXIS North America, CDC IXIS Advisers, CGM, AEW or any of the subadvisers. In placing trades, any of the subadvisers will seek to obtain the best combination of price and execution, which involves a number of judgmental factors. Such portfolio trades are subject to applicable regulatory restrictions and related procedures adopted by the Board of Trustees. - ---------- 29 Management Team [GRAPHIC] --------------- Meet the Funds' Portfolio Managers Thomas M. Anichini Thomas M. Anichini co-manages the Growth and Income Fund and the Capital Growth Fund. He also co-manages Westpeak's segment of the CDC Nvest Star Value and Star Growth Funds. Mr. Anichini, Vice President and Portfolio Manager of Westpeak Global Advisors, joined the company in 1999. Prior to joining Westpeak, Mr. Anichini was a Principal at Mercer Investment Consulting, Inc. and Asset Allocation Manager at Carr Asset Management, Inc. Mr. Anichini received a B.S. in Actuarial Science from the University of Illinois and an M.B.A. from the University of Chicago. He holds the designation of Chartered Financial Analyst and has over 10 years of investment experience. Mark B. Baribeau Mark B. Baribeau has co-managed the growth component of the equity portion of the Balanced Fund since March 2000. He also serves as portfolio manager of Loomis Sayles Growth Fund. Mr. Baribeau, Vice President of Loomis Sayles, joined the company in 1989. Mr. Baribeau received a M.A. from University of Maryland and a B.A. from University of Vermont. He holds the designation of Chartered Financial Analyst and has over 14 years of investment experience. Floyd J. Bellman Floyd J. Bellman has co-managed the Select Fund since its inception. Since February 2000, he has also assisted in managing the Harris Associates segment of CDC Nvest Star Value Fund. Mr. Bellman, Vice President of the Investment Advisory Department, joined the firm in 1995. Prior to joining Harris Associates, Mr. Bellman was a Vice President and Chairman of the Personal Trust and Asset Management Committee at Harris Trust and Savings Bank (1987-1995); an Investment Officer at 1st Source Bank (1984-1987); and an Investment Officer at First Bank Milwaukee N.A. (1980-1984). He holds a BBA in Finance from the University of Wisconsin-Whitewater. Mr. Bellman holds the designation of Chartered Financial Analyst and has over 20 years of investment experience. William R. Berger William R. Berger co-manages the Large Cap Growth Fund. He also co-manages VNSM's segment of the CDC Nvest Star Growth Fund. Mr. Berger, Principal of VNSM, joined the firm in 1998. Prior to joining VNSM, he was Vice President and Portfolio Manager at Securities Management from 1993 through 1998 and Research and Portfolio Manager at Trinity Investment Management Corp. from 1989 through 1993. Mr. Berger holds a B.S. from Miami University (Ohio) and an M.B.A. from the Wharton School at the University of Pennsylvania. He holds the designation of Chartered Financial Analyst and Certified Public Accountant. Mr. Berger has 13 years of investment management experience. Margaret M. Buescher Margaret M. Buescher served as co-manager of the Large Cap Value Fund from June 1999 to August 2000 and as sole manager thereafter. She also manages VNSM's segment of the CDC Nvest Star Value Fund. Ms. Buescher, Principal of VNSM, joined the company in 1994. From 1980 to 1994, she was a Managing Director and Senior Portfolio Manager for the Texas Commerce Investment Management Company. Ms. Buescher received a B.A. from Vanderbilt University. She holds the designation of Chartered Financial Analyst and has over 25 years of investment experience. Pamela N. Czekanski Pamela N. Czekanski has co-managed the growth component of the equity portion of the Balanced Fund since March 2000. She also serves as a portfolio manager of Loomis Sayles Growth Fund. Ms. Czekanski, Vice President of Loomis Sayles, joined the company in 1995. Ms. Czekanski received a B.A. from Middlebury College. She holds the designation of Chartered Financial Analyst and has over 16 years of investment experience. Guy Elliffe Guy Elliffe has co-managed the value component of the equity portion of the Balanced Fund since March 2001 and the Relative Value Fund since commencement of operations. Mr. Elliffe, Senior Vice President, Principal and Director of Research of Jurika & Voyles, joined the company in 1995. Prior to joining Jurika & Voyles, he served as Managing Director of Equities at National Mutual Funds Management. Mr. Elliffe earned a B.A. (Hons) from the University of Otago (New Zealand) and a Certificate of Finance and Investment from the Institute of Actuaries in London. He holds the designation of Chartered Financial Analyst and has over 20 years of investment experience. Christopher R. Ely Christopher R. Ely has co-managed the Mid Cap Growth Fund since its inception. He also manages the Mid Cap Growth segment of the CDC Nvest Star Advisers Fund, the Loomis Sayles segment of the CDC Nvest Star Small Cap Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles Aggressive Growth Fund, and leads a team of portfolio managers responsible for the management of the domestic segment of the Loomis Sayles Global Technology Fund. Mr. Ely, Vice President of Loomis Sayles and Loomis Sayles Funds, joined the firm in 1996. Prior to 1996, Mr. Ely was Senior Vice President and Portfolio Manager at Keystone Investment Management Company, Inc. He holds a B.A. from Brown University and an M.B.A. from Babson College. He has over 22 years of investment management experience. - ---------- 30 [GRAPHIC] Management Team --------------- Philip C. Fine Mr. Philip C. Fine has co-managed the Mid Cap Growth Fund since its inception. He also manages the Mid Cap Growth segment of the CDC Nvest Star Advisers Fund, the Loomis Sayles segment of the CDC Nvest Star Small Cap Fund, Loomis Sayles Small Cap Growth Fund and the Loomis Sayles Aggressive Growth Fund. Mr. Fine, Vice President of Loomis Sayles and of Loomis Sayles Funds, joined the firm in 1996. Prior to 1996, Mr. Fine was a Vice President and Portfolio Manager at Keystone Investment Management Company, Inc. He received an A.B. and a Ph.D. from Harvard University. He has over 12 years of investment management experience. Robert A. Franz Robert Franz co-manages the Growth and Income Fund and the Capital Growth Fund. He also co-manages Westpeak's segment of the CDC Nvest Star Value and Star Growth Funds. Mr. Franz is a Principal and the Chief Investment Officer of Westpeak Global Advisors, which he joined in 1991. Mr. Franz received a B.A. in Mathematics from Pomona College and has over 17 years of investment experience. Brian A. Grove Brian A. Grove co-manages the Large Cap Growth Fund. He also co-manages VNSM's segment of the CDC Nvest Star Growth Fund. Mr. Grove, Principal of VNSM, joined the firm in 1997. Prior to joining VNSM, he was Vice President of Daniel Breen & Co., L.P. from 1989 through 1994 and a senior Portfolio Manager for Transamerica Asset Management from 1994 through 1995. Mr. Grove holds a B.A. and M.B.A. from Vanderbilt University, a J.D. from the University of Houston and is a member of the Texas Bar. He holds the designation of Chartered Financial Analyst and has 18 years of investment management experience. G. Kenneth Heebner G. Kenneth Heebner has managed the Targeted Equity Fund since 1976. Mr. Heebner currently serves as senior portfolio manager of CGM, which he co-founded in 1989. Mr. Heebner received a B.S. from Amherst College and an M.B.A. from Harvard Business School. He holds the designation of Chartered Financial Analyst and is a highly regarded 35-year veteran of the investment industry. Jon Hickman Jon Hickman has managed the Small Cap Growth Fund since commencement of operations. Mr. Hickman, Director of the small-cap equity strategy of Jurika & Voyles, joined the company in February 1999. Before joining Jurika & Voyles, he spent fifteen years with Wells Fargo Bank as a portfolio manager responsible for small- and mid-cap strategies. Mr. Hickman received a B.S. and an M.B.A. from Brigham Young University. He has over 16 years of investment experience. Eric Hull Eric Hull has co-managed the value component of the equity portion of the Balanced Fund since March 2001 and the Relative Value Fund since commencement of operations. Mr. Hull, Senior Vice President, Principal and Senior Research Analyst of Jurika & Voyles, joined the company in 1994. Prior to joining Jurika & Voyles, Mr. Hull held positions in both investment management and investment banking. Mr. Hull received a B.S. in Business Administration from the University of California at Berkeley. He holds the designation of Chartered Financial Analyst and has over 15 years of investment experience. John Hyll John Hyll has served the fixed-income portion of the Balanced Fund as portfolio manager from 1994 until 1999 and as co-portfolio manager thereafter. He also serves as portfolio manager of the CDC Nvest Short Term Corporate Income Fund and Loomis Sayles Short Term Bond Fund. Mr. Hyll, Portfolio Manager and Vice President of Loomis Sayles, began his investment career in 1983 and joined Loomis Sayles in 1989. Mr. Hyll received a B.A. and an M.B.A. from Baldwin-Wallace College. He has over 18 years of investment experience. Christopher T. McMillin Christopher (Toby) McMillin co-manages the Large Cap Growth Fund. He also co-manages VNSM's segment of the CDC Nvest Star Growth Fund. Mr. McMillin, an investment research analyst, joined VNSM in 2000. Prior to joining VNSM, he was Portfolio Manager and Research Analyst for Roger H. Jenswold & Company from 1997 through 2000 and a management consultant for PricewaterhouseCoopers from 1995 through 1997. Mr. McMillin holds a B.A. from the University of Texas. He has 4 years of investment management experience. Eswar Menon Eswar Menon serves as co-portfolio manager for the International Equity Fund, concentrating on emerging markets. He also co-manages the Loomis Sayles segment of the CDC Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles Worldwide Fund, Loomis Sayles International Equity Fund, and Loomis Sayles Emerging Markets Fund and leads a team of managers responsible for the management of the International segment of the Loomis Sayles Global Technology Fund. Mr. Menon, Vice President of Loomis Sayles, joined the company in 1999. Prior to joining Loomis Sayles, Mr. Menon was the Portfolio Manager for Emerging Countries at Nicholas Applegate Capital Management from 1995 until 1999. Prior to his position at Nicholas Applegate Capital Management, he spent five years with Koeneman Capital Management and Integrated Device Technology. Mr. Menon received an M.B.A. from the University of Chicago, an M.S. from the University of California, and a - ---------- 31 Management Team [GRAPHIC] --------------- B.S. from Indian Institute of Technology, Madras, India. He has over 11 years of investment experience. Nicholas E. Moore Nicholas Moore has co-managed the value component of the equity portion of the Balanced Fund since March 2001 and the Relative Value Fund since commencement of operations. Mr. Moore, Senior Vice President, Principal and Senior Research Analyst of Jurika & Voyles, joined the company in June 1998. Prior to joining Jurika & Voyles, Mr. Moore was Vice President and Portfolio Manager at Orbitex Management from January until June 1998. Prior to that he served as portfolio manager for the Franklin Templeton Group from 1986 until January 1998. Mr. Moore has a B.A. from Menlo College in California. He has over 15 years of investment experience. Alexander Muromcew Alexander Muromcew serves as co-portfolio manager for the International Equity Fund, concentrating on Asian markets. Mr. Muromcew, Vice President of Loomis Sayles, joined the company in 1999. He also co-manages the Loomis Sayles segment of the CDC Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles Worldwide Fund, Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets Fund. Prior to joining Loomis Sayles, Mr. Muromcew was a portfolio manager at Nicholas Applegate Capital Management since 1996. Prior to 1996, Mr. Muromcew held positions with Jardine Fleming Securities in Japan, Emerging Markets Investors Corporation and Teton Partners L.P. He received an M.B.A. from Stanford University, a B.A. from Dartmouth College and has over 10 years of investment experience. William C. Nygren William C. Nygren has co-managed the Select Fund since its inception. He has also managed Oakmark Select Fund since 1996. Mr. Nygren, Portfolio Manager, joined Harris Associates in 1983 as an analyst and also served as Director of Research from September 1990 to March 1998. Prior to joining Harris Associates, Mr. Nygren was an analyst with Northwestern Mutual Life Insurance Company. He holds an M.S. in Finance from the University of Wisconsin and a B.S. in Accounting from the University of Minnesota. Mr. Nygren has over 19 years of investment management experience. Gerald H. Scriver Gerald Scriver has managed or co-managed the Growth and Income Fund since 1995 and Capital Growth Fund since 1998. He also manages Westpeak's segment of the CDC Nvest Star Value and CDC Nvest Star Growth Funds. Mr. Scriver is President and Chief Executive Officer of Westpeak Global Advisors, which he founded in 1991. Mr. Scriver is a graduate of the State University of N.Y. at Buffalo and has over 35 years of investment experience. Richard D. Skaggs Richard D. Skaggs has co-managed the growth component of the equity portion of the Balanced Fund since March 2000. He also serves as a portfolio manager of Loomis Sayles Growth Fund. Mr. Skaggs, Vice President of Loomis Sayles, joined the company in 1994. Mr. Skaggs received a M.S.M. and a B.S. from Oakland University. He holds the designation of Chartered Financial Analyst and has over 13 years of investment experience. David L. Smith David L. Smith has co-managed the Mid Cap Growth Fund since its inception. He also manages the Mid Cap Growth segment of the CDC Nvest Star Advisers Fund, the Loomis Sayles segment of the CDC Nvest Star Small Cap Fund, the Loomis Sayles Small Cap Growth Fund and the Loomis Sayles Aggressive Growth Fund. Mr. Smith, Vice President of Loomis Sayles and Loomis Sayles Funds, joined the firm in 1996. Prior to 1996, Mr. Smith was a Vice President and Portfolio Manager at Keystone Investment Management Company, Inc. He holds an M.B.A. from Cornell University and a B.A. from the University of Massachusetts at Amherst. Mr. Smith has over 17 years of investment management experience. John Tribolet John Tribolet serves as co-portfolio manager for the International Equity Fund, concentrating on European markets. He also co-manages the Loomis Sayles segment of the CDC Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles Worldwide Fund, Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets Fund. Mr. Tribolet, Vice President of Loomis Sayles, joined the company in 1999. Prior to joining Loomis Sayles, Mr. Tribolet was a portfolio manager for European Equities at Nicholas Applegate Capital Management from 1997 until 1999. From 1995 to 1997 he was a full time MBA student at the University of Chicago. Prior to 1995, he spent three years in the investment banking industry, most recently at Paine Webber Inc. Mr. Tribolet received his B.S. from Columbia University. He has over 9 years of investment experience. Matthew A. Troxell Matthew A. Troxell has managed the AEW Real Estate Fund since its inception. Mr. Troxell joined AEW in 1994 and is a Principal of the company. Prior to joining AEW, Mr. Troxell was a Vice President and Assistant to the President of Landmark Land Company, and an equity analyst at A.G. Becker Paribas. Mr. Troxell, a member of the National Association of Real Estate Investment Trusts, earned a B.A. from Tufts University. He holds the designation of Chartered Financial Analyst and has over 19 years of experience in investment analysis and portfolio management. ---------- 32 [GRAPHIC] Management Team --------------- Kurt L. Wagner Kurt L. Wagner has co-managed the fixed-income portion of the Balanced Fund since May 2000. Mr. Wagner, Vice President and Portfolio Manager of Loomis Sayles, began his investment career in 1978 and joined Loomis Sayles in 1994. Mr. Wagner received an M.B.A. from the University of Chicago and a B.A. from Haverford College. He holds the designation of Chartered Financial Analyst, Chartered Investment Counselor and has over 23 years of investment experience. - ---------- 33 Management Team --------------- Past Performance Information [GRAPHIC] - ------------------------------------- Adviser - AEW - ------------------------------------- The account returns shown below represent composite returns derived from performance data furnished by AEW (the "AEW Composite") relating to all accounts managed by AEW Capital Management, L.P. with substantially similar investment objectives, strategies and policies as the CDC Nvest AEW Real Estate Fund (the "Accounts"). (AEW is a wholly-owned subsidiary of AEW Capital Management, L.P.) Matthew Troxell, CDC Nvest AEW Real Estate Fund's portfolio manager, has been the lead manager for the Accounts since July 1999. The Accounts have not been subject to the same types of expenses to which the CDC Nvest AEW Real Estate Fund is subject nor to the diversification requirements, investment limitations and other restrictions to which the Fund is subject under the Investment Company Act and the Internal Revenue Code. The Accounts' performance results may have been less favorable had they been subject to these expenses or restrictions or to other restrictions applicable to investment companies under relevant laws. The information regarding the performance of the Accounts does not represent CDC Nvest AEW Real Estate Fund's performance. Such information should not be considered a prediction of the future performance of CDC Nvest AEW Real Estate Fund. CDC Nvest AEW Real Estate Fund commenced operations on September 1, 2000 and has a limited performance record. The table below shows the average annual total return of the Accounts managed by AEW Capital Management, L.P. for the one-year period ending December 31, 2000 and for the period from July 1, 1999 until December 31, 2000. The Account returns are also compared against the Morgan Stanley REIT Index. The past performance data for the Accounts has been adjusted to reflect the management fees and other expenses actually paid by the Accounts and assumes the reinvestment of all dividends and distributions. The fees and expenses paid by CDC Nvest AEW Real Estate Fund will be higher than the fees and expenses paid by the Accounts. The performance of the Accounts would have been lower than that shown below if they had been subject to the fees and expenses of CDC Nvest AEW Real Estate Fund. - -------------------------------------------------------------------------------- Average Annual Total Returns (1) (For the period ending December 31, 2000) 1 Year Since July 1, 1999 - -------------------------------------------------------------------------------- AEW Composite 31.00% 13.84% Morgan Stanley REIT Index 26.81% 10.21% - -------------------------------------------------------------------------------- (1) The AEW Composite consists of all client accounts whose portfolios were managed by Matthew Troxell at AEW Capital Management, L.P. for the one-year period ending December 31, 2000 and for the period from July 1, 1999 until December 31, 2000 using investment policies and strategies substantially similar to those that are used to manage CDC Nvest AEW Real Estate Fund. The average annual total return for the Accounts was calculated using a time-weighted rate of return which differs in part from the prescribed formula used by mutual funds to calculate their returns. The Morgan Stanley REIT Index is a market capitalization-weighted, unmanaged, total-return index of REITs that meet certain liquidity requirements. The index was designed to track the total-return performance of a broad group of REIT stocks assuming dividend reinvestment in the index. You cannot invest directly in an index. ---------- 34 [GRAPHIC] Management Team --------------- - ------------------------------------- Subadviser - Loomis Sayles - ------------------------------------- The returns shown below represent the returns derived from performance data furnished by Loomis Sayles relating to a mutual fund (the "Loomis Sayles Aggressive Growth Fund") and a group of private accounts (the "Loomis Sayles Private Accounts and, together with the Loomis Sayles Aggressive Growth Fund, the "Loomis Mid Cap Accounts") advised by Loomis Sayles, with substantially similar investment objectives, strategies and policies as CDC Nvest Mid Cap Growth Fund. The Loomis Mid Cap Accounts, and in particular, the Loomis Sayles Private Accounts, have not been subject to the same types of expense to which CDC Nvest Mid Cap Growth Fund is subject. In addition, the Loomis Sayles Private Accounts have not been subject to the diversification requirements, investment limitations and other restrictions to which CDC Nvest Mid Cap Growth Fund is subject under the Investment Company Act and the Internal Revenue Code. The Loomis Mid Cap Accounts' performance results may have been less favorable had they been subject to these expenses or restrictions or, in the case of the Loomis Sayles Private Accounts, to other restrictions applicable to investment companies under relevant laws. In addition, CDC Nvest Mid Cap Growth Fund may be subject to more frequent inflows and outflows of assets than the Loomis Mid Cap Accounts, which may negatively impact performance. The information regarding the performance of the Loomis Mid Cap Accounts does not represent CDC Nvest Mid Cap Growth Fund's performance. Such information should not be considered a prediction of the future performance of CDC Nvest Mid Cap Growth Fund. CDC Nvest Mid Cap Growth Fund commenced operations on March 15, 2001 and has a limited performance record. The table below shows the average annual total returns for the Loomis Sayles Private Accounts and the Loomis Sayles Aggressive Growth Fund since their inception. The Loomis Mid Cap Accounts are also compared against the Russell Midcap Growth Index, the Morningstar Mid Growth Average and the Lipper Multi-Cap Growth Average. The past performance data for the Loomis Mid Cap Accounts has been adjusted to reflect the management fees and other expenses actually paid by the Loomis Mid Cap Accounts and assumes the reinvestment of all dividends and distributions. The fees and expenses paid by CDC Nvest Mid Cap Growth Fund will be higher than the fees and expenses paid by the corresponding Loomis Mid Cap Accounts. The performance of the Loomis Mid Cap Accounts would have been lower than that shown below if they had been subject to the fees and expenses of CDC Nvest Mid Cap Growth Fund. - -------------------------------------------------------------------------------- Average Annual Total Returns (1) 1 Year Since Inception (For the period ending December 31, 2000) - -------------------------------------------------------------------------------- Loomis Sayles Private Accounts n/a -24.07%(2) Russell Mid Cap Growth Index n/a -27.14%(2) Morningstar Mid Growth Average n/a -20.97%(2) Lipper Multi-Cap Growth Average n/a -22.48%(2) Loomis Sayles Aggressive Growth Fund (Institutional Class Shares) -5.59% 40.01%(3) Russell Midcap Growth Index -11.75% 17.87%(3) Morningstar Mid Growth Average -6.90% 20.40%(3) Lipper Multi-Cap Growth Average -11.10% 19.99%(3) - -------------------------------------------------------------------------------- (1) Average Annual Total Returns: The Loomis Mid Cap Accounts consist of all client accounts whose portfolios are managed using investment policies and strategies substantially similar to those that will be used to manage CDC Nvest Mid Cap Growth Fund. The Russell Midcap Growth Index is a market capitalization weighted index of medium capitalization stocks determined by Russell to be growth stocks as measured by their price-to-book value ratios and forecasted growth values. The index is unmanaged, has no operating costs, and is included in the table to facilitate your comparison of the Loomis Mid Cap Accounts' performance to a broad-based market index. The Morningstar Mid Growth and Lipper Multi-Cap Growth Averages are each an average of the total returns of all mutual funds with an investment style similar to that of the CDC Nvest Mid Cap Growth Fund as calculated by Morningstar, Inc. and Lipper, Inc. These comparative indices' returns have been adjusted for ongoing management, distribution and operating expenses applicable to mutual fund investments but do not reflect any sales charges. (2) As of inception of the Loomis Sayles Private Accounts, March 31, 2000. (3) As of inception of the Loomis Sayles Aggressive Growth Fund, December 31, 1996. - ---------- 35 Management Team [GRAPHIC] --------------- - ------------------------------------- Subadviser - Harris Associates - ------------------------------------- The returns shown below represent the returns derived from performance data furnished by Harris Associates relating to a mutual fund (the "Oakmark Select Fund") and a group of private accounts (the "Harris Private Accounts" and, together with the Oakmark Select Fund, the "Harris Select Accounts") advised by Harris Associates with substantially similar investment objectives, strategies and policies as CDC Nvest Select Fund. The Harris Select Accounts, and in particular, the Harris Private Accounts, have not been subject to the same types of expenses to which CDC Nvest Select Fund is subject. In addition, the Harris Private Accounts have not been subject to the diversification requirements, investment limitations and other restrictions to which CDC Nvest Select Fund is subject under the Investment Company Act and the Internal Revenue Code. The Harris Select Accounts' performance results may have been less favorable had they been subject to these expenses or restrictions or, in the case of the Harris Private Accounts, to other restrictions applicable to investment companies under relevant laws. In addition, CDC Nvest Select Fund may be subject to more frequent inflows and outflows of assets than the Harris Select Accounts, which may negatively impact performance. The information regarding the performance of the Harris Select Accounts does not represent CDC Nvest Select Fund's performance. Such information should not be considered a prediction of the future performance of CDC Nvest Select Fund. CDC Nvest Select Fund commenced operations on March 15, 2001 and has a limited performance record. The table below shows the average annual total returns for the Harris Private Accounts and the Oakmark Select Fund since their inception. The Harris Select Accounts are also compared against the S&P 500 Index, the Morningstar Mid Cap Value Average and the Lipper Multicap Value Average. The past performance data for the Harris Select Accounts has been adjusted to reflect the management fees and other expenses actually paid by the Harris Select Accounts and assumes the reinvestment of all dividends and distributions. The fees and expenses paid by CDC Nvest Select Fund will be higher than the fees and expenses paid by the Harris Select Accounts. The performance of the Harris Select Accounts would have been lower than that shown below if they had been subject to the fees and expenses of CDC Nvest Select Fund.
- --------------------------------------------------------------------------------------------- Average Annual Total Returns (1) (For the period ending December 31, 2000) 1 Year 5 Years Since Inception - --------------------------------------------------------------------------------------------- Harris Associates Private Accounts 8.86% 18.32% 20.06%(2) S&P 500 Index -9.10% 18.31% 17.46%(2) Morningstar Mid Cap Value Average 16.82% 14.77% 16.21%(2) Lipper Multicap Value Average 8.86% 13.71% 15.12%(2) Oakmark Select Fund 25.81% n/a 29.76%(3) S&P 500 Index -9.10% n/a 17.93%(3) Morningstar Mid Cap Value Average 16.82% 14.77% 14.62%(3) Lipper Multicap Value Average 8.86% 13.71% 13.13%(3) - ---------------------------------------------------------------------------------------------
(1) Average Annual Total Returns: The Harris Select Accounts consist of all client accounts whose portfolios are managed using investment policies and strategies substantially similar to those that will be used to manage CDC Nvest Select Fund. The S&P 500 Index is a commonly used benchmark of U.S. equity securities. The index is unmanaged, has no operating costs, and is included in the table to facilitate your comparison of the Harris Select Accounts' performance to a broad-based market index. The Morningstar Mid Cap Value and Lipper Multicap Value Averages are each an average of the total returns of all mutual funds with an investment style similar to that of the CDC Nvest Select Fund as calculated by Morningstar, Inc. and Lipper, Inc. These comparative indices' returns have been adjusted for ongoing management, distribution and operating expenses applicable to mutual fund investments but do not reflect any sales charges. (2) As of inception of the Harris Private Accounts, January 1, 1991. (3) As of inception of the Oakmark Select Fund, November 1, 1996.rate of return which differs in part from the prescribed formula used by mutual funds to calculate their returns. The Morgan Stanley REIT Index is a market capitalization-weighted, unmanaged, total-return index of REITs that meet certain liquidity requirements. The index was designed to track the total-return performance of a broad group of REIT stocks assuming dividend reinvestment in the index. You cannot invest directly in an index. ---------- 36 [GRAPHIC] Fund Services ------------- Investing in the Funds - ------------------------------------- Choosing a Share Class - ------------------------------------- Each Fund offers Classes A, B and C shares to the public. Each class has different costs associated with buying, selling and holding Fund shares, which allows you to choose the class that best meets your needs. Which class is best for you depends upon the size of your investment and how long you intend to hold your shares. Class B shares, Class C shares and certain shareholder features may not be available to you if you hold your shares in a street name account. Your financial representative can help you decide which class of shares is most appropriate for you. - -------------------- Class A Shares - -------------------- o You pay a sales charge when you buy Fund shares. There are several ways to reduce this charge. See the section entitled "Ways to Reduce or Eliminate Sales Charges." o You pay lower annual expenses than Class B and Class C shares, giving you the potential for higher returns per share. o You do not pay a sales charge on orders of $1 million or more, but you may pay a charge on redemption if you redeem these shares within 1 year of purchase - -------------------- Class B Shares - -------------------- o You do not pay a sales charge when you buy Fund shares. All of your money goes to work for you right away. o You pay higher annual expenses than Class A shares. o You will pay a charge on redemptions if you sell your shares within 6 years of purchase, as described in the section "How Sales Charges Are Calculated." o Your Class B shares will automatically convert into Class A shares after 8 years, which reduces your annual expenses. o Investors purchasing $1 million or more of Class B shares may want to consider the lower operating expense of Class A shares. You may pay a charge on redemption if you redeem these shares within 1 year of purchase. - -------------------- Class C Shares - -------------------- o You pay a sales charge when you buy Fund shares. There are several ways to reduce this charge. See the section entitled "Ways to Reduce or Eliminate Sales Charges." o You pay higher annual expenses than Class A shares. o You will pay a charge on redemptions if you sell your shares within 1 year of purchase. o Your Class C shares will not automatically convert into Class A shares. If you hold your shares for longer than 8 years, you'll pay higher expenses than shareholders of other classes. o Investors purchasing $1 million or more of Class C shares may want to consider the lower operating expense of Class A shares. You may pay a charge on redemption if you redeem these shares within 1 year of purchase. For past expenses of Classes A, B and C shares, see the section entitled "Fund Fees & Expenses" in this Prospectus. - ------------------------------------- Certificates - ------------------------------------- Certificates will not be issued automatically for any class of shares. Upon written request, you may receive certificates for Class A shares only. - ---------- 37 Fund Services [GRAPHIC] ------------- How Sales Charges Are Calculated - ------------------------------------- Class A Shares - ------------------------------------- The price that you pay when you buy Class A shares ("offering price") is their net asset value plus a sales charge (sometimes called a "front-end sales charge") which varies depending upon the size of your purchase. - -------------------------------------------------------------------------------- Class A Sales Charges Your Investment As a % of offering price As a % of your investment - -------------------------------------------------------------------------------- Less than $ 50,000 5.75% 6.10% $ 50,000 - $ 99,999 4.50% 4.71% $ 100,000 - $249,999 3.50% 3.63% $ 250,000 - $499,999 2.50% 2.56% $ 500,000 - $999,999 2.00% 2.04% $1,000,000 or more* 0.00% 0.00% - -------------------------------------------------------------------------------- * For purchases of Class A shares of the Funds of $1 million or more or purchases by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Internal Revenue Code with investments of $1 million or more or that have 100 or more eligible employees), there is no front-end sales charge, but a CDSC of 1.00% may apply to redemptions of your shares within one year of the date of purchase. See the section entitled "Ways to Reduce or Eliminate Sales Charges." - ------------------------------------- Class B Shares - ------------------------------------- The offering price of Class B shares is their net asset value, without a front-end sales charge. However, there is a CDSC on shares that you sell within 6 years of buying them. The amount of the CDSC, if any, declines each year that you own your shares. The holding period for purposes of timing the conversion to Class A shares and determining the CDSC will continue to run after an exchange to Class B shares of another CDC Nvest Fund. The CDSC equals the following percentages of the dollar amounts subject to the charge: - -------------------------------------------------------------------------------- Class B Contingent Deferred Sales Charges Year Since Purchase CDSC on Shares Being Sold - -------------------------------------------------------------------------------- 1st 5.00% 2nd 4.00% 3rd 3.00% 4th 3.00% 5th 2.00% 6th 1.00% Thereafter 0.00% - -------------------------------------------------------------------------------- - ------------------------------------- Class C Shares - ------------------------------------- The offering price of Class C shares is their net asset value, plus a front-end sales charge of 1.00% (1.01% of your investment). Class C shares are also subject to a CDSC of 1.00% on redemptions made within one year of the date of purchase. The holding period for determining the CDSC will continue to run after an exchange to Class C shares of another CDC Nvest Fund. - -------------------------------------------------------------------------------- Class C Contingent Deferred Sales Charges - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Since Purchase CDSC on Shares Being Sold - -------------------------------------------------------------------------------- 1st 1.00% Thereafter 0.00% - -------------------------------------------------------------------------------- Accounts established in other CDC Nvest Funds prior to December 1, 2000 will not be subject to the 1.00% front-end sales charge for exchange or additional purchases of Class C shares. - ------------------------------------- How the CDC Is Applied to Your Shares - ------------------------------------- The CDSC is a sales charge you pay when you redeem certain Fund shares. The CDSC: o is calculated based on the number of shares you are selling; o is based on either your original purchase price or the current net asset value of the shares being sold, whichever is lower; o is deducted from the proceeds of the redemption, not from the amount remaining in your account; and o for year one applies to redemptions through the day one year after the date on which your purchase was accepted, and so on for subsequent years. A CDSC will not be charged on: o increases in net asset value above the purchase price; or o shares you acquired by reinvesting your dividends or capital gains distributions. To keep your CDSC as low as possible, each time that you place a request to sell shares we will first sell any shares in your account that carry no CDSC. If there are not enough of these shares available to meet your request, we will sell the shares with the lowest CDSC. ---------- 38 [GRAPHIC] Fund Services ------------- - ----------------------------------------------- Exchanges into Shares of the Money Market Funds - ----------------------------------------------- If you exchange shares of a Fund into shares of a Money Market Fund, the holding period for purposes of determining the CDSC and conversion to Class A shares stops until you exchange back into shares of another CDC Nvest Fund. If you choose to redeem those Money Market Fund shares, a CDSC may apply. - ---------- 39 Fund Services [GRAPHIC] ------------- Ways to Reduce or Eliminate Sales Charges - ------------------------------------- Class A or C Shares - ------------------------------------- Reducing Sales Charges There are several ways you can lower your sales charge for Class A shares utilizing the chart on the previous page, including: o Letter of Intent -- allows you to purchase Class A shares of any CDC Nvest Fund over a 13-month period but pay sales charges as if you had purchased all shares at once. This program can save you money if you plan to invest $50,000 or more over 13 months. Purchases of Class B and Class C shares may be used toward meeting the letter of intent. o Combining Accounts -- allows you to combine shares of multiple CDC Nvest Funds and classes for purposes of calculating your sales charge. You may combine your purchases with those of qualified accounts of a spouse, parents, children, siblings, grandparents, grandchildren, in-laws, individual fiduciary accounts, sole proprietorships, single trust estates and any other group of individuals acceptable to the Distributor. These privileges do not apply to the Money Market Funds unless shares are purchased through an exchange from another CDC Nvest Fund. Eliminating Sales Charges and CDSC Class A shares may be offered without front-end sales charges or a CDSC, and Class C shares may be offered without a front-end sales charge, to the following individuals and institutions: o Any government entity that is prohibited from paying a sales charge or commission to purchase mutual fund shares; o Selling brokers, sales representatives, registered investment advisers, financial planners or other intermediaries under arrangements with the Distributor; o Fund Trustees and other individuals who are affiliated with any CDC Nvest Fund or Money Market Fund (this also applies to any spouse, parents, children, siblings, grandparents, grandchildren and in-laws of those mentioned); o Participants in certain Retirement Plans with at least 100 eligible employees (one-year CDSC may apply); o Non-discretionary and non-retirement accounts of bank trust departments or trust companies only if they principally engage in banking or trust activities; o Investments of $25,000 or more in CDC Nvest Funds or Money Market Funds by clients of an adviser or subadviser to any CDC Nvest Fund or Money Market Fund. Repurchasing Fund Shares You may apply proceeds from redeeming Class A or Class C shares of the Funds (without paying a front-end sales charge) to repurchase Class A or Class C shares, respectively, of any CDC Nvest Fund. To qualify, you must reinvest some or all of the proceeds within 120 days after your redemption and notify CDC Nvest Funds or your financial representative at the time of reinvestment that you are taking advantage of this privilege. You may reinvest your proceeds either by returning the redemption check or by sending a new check for some or all of the redemption amount. Please note: for federal income tax purposes, a redemption is a sale that involves tax consequences, even if the proceeds are later reinvested. Please consult your tax adviser for how a redemption would affect you. If you repurchase Class A shares of $1 million or more within 30 days after you redeem such shares, the Distributor will rebate the amount of the CDSC charged on the redemption. - ------------------------------------- Class A, B or C Shares - ------------------------------------- Eliminating the CDSC As long as the Distributor is notified at the time you sell, the CDSC for any share class will generally be eliminated in the following cases: o to make distributions from a retirement plan (a plan termination or total plan redemption may incur a CDSC); o to make payments through a systematic withdrawal plan; or o due to shareholder death or disability. If you think you may be eligible for a sales charge elimination or reduction, contact your financial representative or CDC Nvest Funds. Check the Statement of Additional Information (the "SAI") for details. - ---------- 40 [GRAPHIC] Fund Services ------------- It's Easy to Open an Account - ---------------------------------------- To Open an Account with CDC Nvest Funds: - ---------------------------------------- 1. Read this Prospectus carefully. 2. Determine how much you wish to invest. The following chart shows the investment minimums for various types of accounts:
- ----------------------------------------------------------------------------------------------------------- Minimum to Open Minimum to an Account Using Minimum for Type of Account Open an Account Investment Builder Existing Accounts - ----------------------------------------------------------------------------------------------------------- Any account other than those listed below $2,500 $100 $100 Accounts registered under the Uniform Gifts to Minors Act ("UGMA") or the Uniform Transfers to Minors Act ("UTMA") $2,500 $100 $100 Individual Retirement Accounts ("IRAs") $500 $100 $100 Retirement plans with tax benefits such as corporate pension, profit sharing and Keogh plans $250 $100 $100 Payroll Deduction Investment Programs for SARSEP*, SEP, SIMPLE IRA, 403(b)(7) and certain other retirement plans $25 N/A $25 - -----------------------------------------------------------------------------------------------------------
* Effective January 1, 1997, the Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA became available replacing SARSEP plans. SARSEP plans established prior to January 1, 1997 may remain active and continue to add new employees. 3. Complete the appropriate parts of the account application, carefully following the instructions. If you have any questions, please call your financial representative or CDC Nvest Funds at 800-225-5478. For more information on CDC Nvest Funds' investment programs, refer to the section entitled "Additional Investor Services" in this Prospectus. 4. Use the following sections as your guide for purchasing shares. - ------------------------------------- Self-Servicing Your Account - ------------------------------------- Buying or selling shares is easy with the services described below: - --------------------------------------- CDC Nvest Funds Personal Access Line(R) - --------------------------------------- 800-225-5478, press 1 - ------------------------ CDC Nvest Funds Web Site - ------------------------ www.cdcnvestfunds.com You have access to your account 24 hours a day by calling the Personal Access Line(R) from a touch-tone telephone or by visiting us online. Using these customer service options, you may: o purchase, exchange or redeem shares in your existing accounts (certain restrictions may apply); o review your account balance, recent transactions, Fund prices and recent performance; o order duplicate account statements; and o obtain tax information. Please see the following pages for other ways to buy, exchange or sell your shares. - ---------- 41 Fund Services [GRAPHIC] ------------- Buying Shares Opening an Account Adding to an Account - -------------------------------------------------------------------------------- Through Your Investment Dealer - -------------------------------------------------------------------------------- o Call your investment dealer o Call your investment dealer for information. for information. - -------------------------------------------------------------------------------- By Mail - -------------------------------------------------------------------------------- [GRAPHIC] o Make out a check in U.S. o Make out a check in U.S. dollars for the investment dollars for the investment amount, payable to "CDC amount, payable to "CDC Nvest Funds." Third party Nvest Funds." Third party checks and "starter" checks checks and "starter checks" will not be accepted. will not be excepted. o Mail the check with your o Fill out the detachable completed application to investment slip from an CDC Nvest Funds, P.O. Box account statement. 8551, Boston, MA If no slip is available, 02266-8551. include with the check a letter specifying the Fund name, your class of shares, your account number and the registered account name(s). To make investing even easier, you can order more investment slips by calling 800-225-5478. - -------------------------------------------------------------------------------- By Exchange - -------------------------------------------------------------------------------- [GRAPHIC] o The exchange must be for a o The exchange must be for a minimum of $1,000 or for minimum of $1,000 or for all of your shares. all of your shares. o Obtain a current prospectus for the Fund into which you o Call your investment dealer are exchanging by calling or CDC Nvest Funds at your investment dealer or 800-225-5478 or visit CDC Nvest Funds at www.cdcnvestfunds.com to 800-225-5478. request an exchange. o Call your investment dealer o See the section entitled or CDC Nvest Funds to "Exchanging Shares" for request an exchange. more details. o See the section entitled "Exchanging Shares" for more details. - -------------------------------------------------------------------------------- By Wire - -------------------------------------------------------------------------------- [GRAPHIC] o Call CDC Nvest Funds at o Visit www.cdcnvestfunds.com 800-225-5478 to obtain an to add shares to your account number and wire account by wire. transfer instructions. Your bank may charge you for o Instruct your bank to such a transfer. transfer funds to State Street Bank & Trust Company, ABA# 011000028, and DDA # 99011538. o Specify the Fund name, your class of shares, number and the registered account name(s). Your bank you for such a transfer. - -------------------------------------------------------------------------------- Automatic Investing Through Investment Builder - -------------------------------------------------------------------------------- [GRAPHIC] o Indicate on your o Please call CDC Nvest Funds application that you would at 800-225-5478 for a like to begin an automatic Service Options Form. A investment plan through signature guarantee may be Investment Builder and the required to add this amount of the monthly privilege. investment ($100 minimum). o See the section entitled o Send a check marked "Void" "Additional Investor or a deposit slip from your Services". bank account along with your application. - -------------------------------------------------------------------------------- Through Automated Clearing House (ACH) - -------------------------------------------------------------------------------- [GRAPHIC] o Ask your bank or credit o Call CDC Nvest Funds at union whether it is a 800-225-5478 or visit the member of ACH system. www.cdcnvestfunds.com to add shares to your account o Complete the "Bank through ACH. Information" section on your account application. o If you have not signed up for the ACH system, please o Mail your completed call CDC Nvest Funds for a application to CDC Nvest Service Options Form. A Funds, P.O. Box 8551, signature guarantee may be Boston, MA 02266-8551. required to add this privilege. ---------- 42 [GRAPHIC] Fund Services ------------- Selling Shares To Sell Some or All of Your Shares Certain restrictions may apply. See section entitled "Restrictions on Buying, Selling and Exchanging Shares." - -------------------------------------------------------------------------------- Through Your Investment Dealer - -------------------------------------------------------------------------------- o Call your investment dealer for information. - -------------------------------------------------------------------------------- By Mail - -------------------------------------------------------------------------------- [GRAPHIC] o Write a letter to request a redemption specifying the name of your Fund, your class of shares, your account number, the exact registered account name(s), the number of shares or the dollar amount to be redeemed and the method by which you wish to receive your proceeds. Additional materials may be required. See the section entitled "Selling Shares in Writing." o The request must be signed by all of the owners of the shares and must include the capacity in which they are signing, if appropriate. o Mail your request by regular mail to CDC Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551 or by registered, express or certified mail to CDC Nvest Funds, 66 Brooks Drive, Braintree, MA 02184. o Your proceeds will be delivered by the method chosen in your letter. If you choose to have your proceeds delivered by mail, they will generally be mailed to you on the business day after the request is received in good order. You may also choose to redeem by wire or through ACH (see below). - -------------------------------------------------------------------------------- By Exchange - -------------------------------------------------------------------------------- [GRAPHIC] o Obtain a current prospectus for the Fund into which you are exchanging by calling your investment dealer or CDC Nvest Funds at 800-225-5478. o Call CDC Nvest Funds or visit www.cdcnvestfunds.com to request an exchange. o See the section entitled "Exchanging Shares" for more details. - -------------------------------------------------------------------------------- By Wire - -------------------------------------------------------------------------------- [GRAPHIC] o Fill out the "Bank Information" section on your account application. o Call CDC Nvest Funds at 800-225-5478, visit www.cdcnvestfunds.com or indicate in your redemption request letter (see above) that you wish to have your proceeds wired to your bank. o Proceeds will generally be wired on the next business day. A wire fee (currently $5.00) will be deducted from the proceeds. - -------------------------------------------------------------------------------- Through Automated Clearing House - -------------------------------------------------------------------------------- [GRAPHIC] o Ask your bank or credit union whether it is a member of the ACH system. o Complete the "Bank Information" section on your account application. o If you have not signed up for the ACH system on your application, please call CDC Nvest Funds at 800-225-5478 for a Service Options Form. o Call CDC Nvest Funds or visit www.cdcnvestfunds.com to request a redemption through this system. o Proceeds will generally arrive at your bank within three business days. - -------------------------------------------------------------------------------- By Exchange - -------------------------------------------------------------------------------- [GRAPHIC] o Obtain a current prospectus for the Fund into which you are exchanging by calling your investment dealer or CDC Nvest Funds at 800-225-5478. o Call CDC Nvest Funds or visit www.cdcnvestfunds.com to request an exchange. o See the section entitled "Exchanging Shares" for more details. - -------------------------------------------------------------------------------- By Telephone - -------------------------------------------------------------------------------- [GRAPHIC] o Call CDC Nvest Funds at 800-225-5478 to choose the method you wish to use to redeem. You may receive your proceeds by mail, by wire or through ACH (see above). - ---------- 43 Fund Services [GRAPHIC] ------------- Selling Shares in Writing If you wish to redeem your shares in writing, all owners of the shares must sign the redemption request in the exact names in which the shares are registered and indicate any special capacity in which they are signing. In certain situations, you will be required to make your request to sell shares in writing. In these instances, a letter of instruction signed by the authorized owner is necessary. In certain situations, we also may require a signature guarantee or additional documentation. A signature guarantee protects you against fraudulent orders and is necessary if: o your address of record has been changed within the past 30 days; o you are selling more than $100,000 worth of shares and you are requesting the proceeds by check; or o a proceeds check for any amount is either mailed to an address other than the address of record or not payable to the registered owner(s). A notary public cannot provide a signature guarantee. A signature guarantee can be obtained from one of the following sources: o a financial representative or securities dealer; o a federal savings bank, cooperative, or other type of bank; o a savings and loan or other thrift institution; o a credit union; or o a securities exchange or clearing agency. The table below shows some situations in which additional documentation may be necessary. Please call your financial representative or CDC Nvest Funds regarding requirements for other account types. - -------------------------------------------------------------------------------- Seller (Account Type) Requirements for Written Requests - -------------------------------------------------------------------------------- Individual, joint, sole o The request must include the signatures of proprietorship, UGMA/UTMA all persons authorized to sign, including (minor accounts) title, if applicable. o Signature guarantee, if applicable (see above). - -------------------------------------------------------------------------------- Corporate or association o The request must include the signatures of accounts all persons authorized to sign, including title. - -------------------------------------------------------------------------------- Owners or trustees of o The request must include the signatures of trust accounts all trustees authorized to sign, including title. o If the names of the trustees are not registered on the account, please provide a copy of the trust document certified within the past 60 days. o Signature guarantee, if applicable (see above). - -------------------------------------------------------------------------------- Joint tenancy whose o The request must include the signatures of co-tenants are deceased all surviving tenants of the account. o Copy of the death certificate. o Signature guarantee if proceeds check is issued to other than the surviving tenants. - -------------------------------------------------------------------------------- Power of Attorney (POA) o The request must include the signatures of the attorney-in-fact, indicating such title. o A signature guarantee. o Certified copy of the POA document stating it is still in full force and effect, specifying the exact Fund and account number, and certified within 30 days of receipt of instructions.* - -------------------------------------------------------------------------------- Qualified retirement o The request must include the signatures of benefit plans (except CDC all those authorized to sign, including CDC Nvest Funds prototype title. documents) o Signature guarantee, if applicable (see above). - -------------------------------------------------------------------------------- Executors of estates, o The request must include the signatures of administrators, all those authorized to sign, including guardians, conservators capacity. o A signature guarantee. o Certified copy of court document where signer derives authority, e.g.: Letters of Administration, Conservatorship, Letters Testamentary.* - -------------------------------------------------------------------------------- Individual Retirement o Additional documentation and distribution Accounts forms are required. - -------------------------------------------------------------------------------- * Certification may be made on court documents by the court, usually certified by the clerk of the court. Power of Attorney certification may be made by a commercial bank, broker/member of a domestic stock exchange or a practicing attorney. ---------- 44 [GRAPHIC] Fund Services ------------- Exchanging Shares In general, you may exchange shares of your Fund for shares of the same class of another CDC Nvest Fund without paying a sales charge or a CDSC (see the sections entitled "Buying Shares" and "Selling Shares"). The exchange must be for a minimum of $1,000 (or the total net asset value of your account, whichever is less), or $100 if made under the Automatic Exchange Plan (see the section entitled "Additional Investor Services"). All exchanges are subject to the eligibility requirements of the CDC Nvest Fund or Money Market Fund into which you are exchanging. The exchange privilege may be exercised only in those states where shares of the Funds may be legally sold. For federal income tax purposes, an exchange of Fund shares for shares of another CDC Nvest Fund or Money Market Fund is generally treated as a sale on which gain or loss may be recognized. Please refer to the SAI for more detailed information on exchanging Fund shares. Restrictions on Buying, Selling and Exchanging Shares - ------------------------------------- Purchase and Exchange Restrictions - ------------------------------------- Although the Funds do not anticipate doing so, they reserve the right to suspend or change the terms of purchasing or exchanging shares. The Funds and the Distributor reserve the right to refuse or limit any purchase or exchange order by a particular purchaser (or group of related purchasers) if the transaction is deemed harmful to the best interests of the Fund's other shareholders or would disrupt the management of the Fund. The Funds and the Distributor reserve the right to restrict purchases and exchanges for the accounts of "market timers" by limiting the transaction to a maximum dollar amount. An account will be deemed to be one of a market timer if: (i) more than two exchange purchases of a given Fund are made for the account in a calendar quarter or (ii) the account makes one or more exchange purchases of a given Fund in a calendar quarter in an aggregate amount in excess of 1% of the Fund's total net assets. - ------------------------------------- Selling Restrictions - ------------------------------------- The table below describes restrictions placed on selling shares of any Fund described in this Prospectus: - -------------------------------------------------------------------------------- Restriction Situation - -------------------------------------------------------------------------------- The Fund may suspend the right of o When the New York Stock redemption or postpone payment for Exchange (the "Exchange") is more than 7 days: closed (other than a weekend/holiday) o During an emergency o Any other period permitted by the SEC - -------------------------------------------------------------------------------- The Fund reserves the right to o With a notice of a dispute suspend account services or refuse between registered owners transaction requests: o With suspicion/evidence of a fraudulent act - -------------------------------------------------------------------------------- The Fund may pay the redemption o When it is detrimental for the price in whole or in part by a Fund to make cash payments as distribution in kind of the sole determined in discretion of the Adviser or subadviser readily marketable securities in lieu of cash or may take up to 7 days to pay a redemption request in order to raise capital: - -------------------------------------------------------------------------------- The Fund may withhold redemption o When redemptions are made proceeds until the check or funds within 10 calendar days of have cleared: purchase by check or ACH of the shares being redeemed - -------------------------------------------------------------------------------- Telephone redemptions are not accepted for tax-qualified retirement accounts. - ------------------------------------- Small Account Redemption - ------------------------------------- When the Fund account falls below a set minimum (currently $1,000 as set by the Board of Trustees), the Fund may close your account and send you the proceeds. You will have 60 days after being notified of the Fund's intention to close your account to increase its amount to the set minimum. This does not apply to certain qualified retirement plans or accounts that have fallen below the minimum solely because of fluctuations in the Fund's net asset value per share. - ---------- 45 Fund Services [GRAPHIC] ------------- How Fund Shares Are Priced "Net asset value" is the price of one share of a Fund without a sales charge, and is calculated each business day using this formula: - -------------------------------------------------------------------------------- Total market value of securities + Cash and other assets - Liabilities Net Asset Value = ---------------------------------------------------------- Number of outstanding shares - -------------------------------------------------------------------------------- The net asset value of Fund shares is determined according to this schedule: o A share's net asset value is determined at the close of regular trading on the Exchange on the days the Exchange is open for trading. This is normally 4:00 p.m. Eastern time. Fund shares will not be priced on the days on which the Exchange is closed for trading. o The price you pay for purchasing, redeeming or exchanging a share will be based upon the net asset value next calculated after your order is received "in good order" by State Street Bank and Trust Company, each Fund's custodian (plus or minus applicable sales charges as described earlier in this Prospectus). o Requests received by the Distributor after the Exchange closes will be processed based upon the net asset value determined at the close of regular trading on the next day that the Exchange is open, with the exception that those orders received by your investment dealer before the close of the Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the same day will be based on the net asset value determined on that day. o A Fund heavily invested in foreign securities may have net asset value changes on days when you cannot buy or sell its shares. * Under limited circumstances, the Distributor may enter into a contractual agreement pursuant to which it may accept orders after 5:00 p.m., but not later than 8:00 p.m. Generally, during times of substantial economic or market change, it may be difficult to place your order by phone. During these times, you may deliver your order in person to the Distributor or send your order by mail as described in "Buying Shares" and "Selling Shares." Generally, Fund securities are valued as follows: o Equity securities-- most recent sales or quoted bid price or as provided by a pricing service if a sales or quoted bid price is unavailable. o Debt securities (other than short-term obligations) -- based upon pricing service valuations, which 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.. o Short-term obligations (remaining maturity of less than 60 days)-- amortized cost (which approximates market value). o Securities traded on foreign exchanges -- most recent sale/bid price on the non-U.S. exchange, unless an occurrence after the close of the exchange will materially affect its value. In that case, it is given fair value as determined by or under the direction of the Board of Trustees at the close of regular trading on the Exchange. o Options -- last sale price, or if not available, last offering price. o Futures-- unrealized gain or loss on the contract using current settlement price. When a settlement price is not used, futures contracts will be valued at their fair value as determined by or under the direction of the Board of Trustees. o All other securities-- fair market value as determined by the adviser or subadviser of the Fund under the direction of the Board of Trustees. The effect of fair value pricing as described above for "Securities traded on foreign exchanges" and "All other securities" is that securities may not be priced on the basis of quotations from the primary market in which they are traded but rather may be priced by another method that the Board of Trustees believes actually reflects fair value. In unusual circumstances, instead of valuing securities in the usual manner, the Funds may value securities at fair value or estimate their value as determined in good faith by the Board of Trustees or persons acting at their direction pursuant to procedures approved by the Board of Trustees. Fair valuation may also be used by the Board of Trustees if extraordinary events occur after the close of the relevant market but prior to the close of the Exchange. ---------- 46 [GRAPHIC] Fund Services ------------- Dividends and Distributions The Funds generally distribute most or all of their net investment income (other than capital gains) in the form of dividends. The following table shows when each Fund expects to distribute dividends. Each Fund expects to distribute all net realized long- and short-term capital gains annually, after applying any available capital loss carryovers. The Board of Trustees may adopt a different schedule as long as payments are made at least annually. - -------------------------------------------------------------------------------- Dividend Payment Schedule Annually Semi-Annually Quarterly - -------------------------------------------------------------------------------- Capital Growth Growth and Income Balanced Targeted Equity Large Cap Value Mid Cap Growth AEW Real Estate Select Small Cap Growth International Equity Large Cap Growth Relative Value - -------------------------------------------------------------------------------- Distributions will automatically be reinvested in shares of the same class of the distributing Fund at net asset value, unless you select one of the following alternatives: o Participate in the Dividend Diversification Program, which allows you to have all dividends and distributions automatically invested at net asset value in shares of the same class of another CDC Nvest Fund registered in your name. Certain investment minimums and restrictions may apply. For more information about this program, see the section entitled "Additional Investor Services." o Receive distributions from dividends and interest in cash while reinvesting distributions from capital gains in additional shares of the same class of the Fund, or in the same class of another CDC Nvest Fund. o Receive all distributions in cash. For more information or to change your distribution option, contact CDC Nvest Funds in writing or call 800-225-5478. If you earn more than $10 annually in taxable income from a non-retirement plan CDC Nvest Fund, you will receive a Form 1099 to help you report the prior calendar year's distributions on your federal income tax return. Be sure to keep this Form 1099 as a permanent record. A fee may be charged for any duplicate information requested. Tax Consequences Each Fund intends to meet all requirements under Subchapter M of the Internal Revenue Code necessary to qualify for treatment as a "regulated investment company" and thus does not expect to pay any federal income tax on income and capital gains distributed to shareholders. Distributions derived from net short-term capital gains i.e., gains from investments that a Fund held one year or less or investment income are generally taxable at ordinary income rates. If you are a corporation investing in a Fund, a portion of these dividends may qualify for the dividends-received deduction provided that you meet certain holding period requirements. However, distributions by a Fund from REITs will not qualify for the corporate dividends received distribution. Distributions of gains from investments that a Fund owned for more than one year that are designated by a Fund as capital gain dividends will generally be taxable to a shareholder receiving such distributions as long-term capital gain, regardless of how long the shareholder has held Fund shares. Fund distributions paid to you are taxable whether you receive them in cash or reinvest them in additional shares. Distributions are taxable to you even if they are paid from income or gains earned by the Fund before your investment (and thus were included in the price you paid). Such distributions are likely to occur in respect of shares purchased at the time when a Fund's net asset value reflects gains that are either unrealized or realized but not distributed. The Funds' investments in foreign securities may be subject to foreign withholding taxes. In that case, the Funds' yield on those securities would be decreased. We do not expect the shareholders to be entitled to claim a credit or deduction with respect to foreign taxes. In addition, the Funds' investments in foreign securities or foreign currencies may increase or accelerate the Funds' recognition of ordinary income and may affect the timing or amount of the Funds' distributions. - ---------- 47 Fund Services [GRAPHIC] ------------- Because the Funds invest in foreign securities, shareholders should consult their tax advisers about consequences of their investments under foreign laws. Dividends derived from Interest on securities issued by the U.S. Government or its agencies or instrumentalities may be exempt from state and local taxes. AEW Real Estate Fund advises shareholders of the proportion of the Fund's dividends that are derived from such interest. REITs attempt to minimize their corporate tax costs by distributing at least 90% of their REIT taxable income to their interest holders. If a REIT failed to distribute such a percentage of its REIT taxable income or to satisfy the other requirements of REIT status, it would be taxed as a corporation, and amounts available for distribution to its shareholders (including the AEW Real Estate, Targeted Equity, Mid Cap Growth, Small Cap Growth and Relative Value Funds) would be reduced by any corporate taxes payable by the REIT. The redemption, sale or exchange of Fund shares (including an exchange of Fund shares for shares of another CDC Nvest Fund or CDC Nvest Money Market Fund) is a taxable event and may result in the recognition of a gain or loss. Gain or loss, if any, recognized on the redemption, sale, exchanges or other disposition of Fund shares will be taxed as a long-term capital gain or loss if the shares are capital assets in the shareholder's hands and if the shareholder held the shares for more than one year. You should consult your tax adviser for more information on your own situation, including possible foreign, state or local taxes. Compensation to Securities Dealers As part of their business strategies, the Funds pay securities dealers that sell their shares. This compensation originates from two sources: sales charges (front-end or deferred) and 12b-1 fees (comprising the annual service and/or distribution fees of a plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940). The sales charges are detailed in the section entitled "How Sales Charges Are Calculated." Each class of Fund shares pays an annual service fee of 0.25% of its average daily net assets. In addition to this service fee, Class B shares pay an annual distribution fee of 0.75% of their average daily net assets for 8 years (at which time they automatically convert into Class A shares). Class C shares are subject to a distribution fee of 0.75% of their average daily net assets. Generally, the 12b-1 fees are paid to securities dealers on a quarterly basis. The Distributor retains the first year of such fees for Class C shares. Because these distribution fees are paid out of the Funds' assets on an ongoing basis, over time these fees for Class B and Class C shares will increase the cost of your investment and may cost you more than paying the front-end sales charge on Class A shares. The Distributor may, at its expense, pay concessions in addition to the payments described above to dealers, which satisfy certain criteria established from time to time by the Distributor relating to increasing net sales of shares of the CDC Nvest Funds over prior periods, and certain other factors. See the SAI for more details. ---------- 48 [GRAPHIC] Fund Services ------------- Additional Investor Services Retirement Plans CDC Nvest Funds offer a range of retirement plans, including IRAs, SEPs, SARSEPs*, SIMPLE IRAs, 403(b) plans and other pension and profit sharing plans. Refer to the section entitled "It's Easy to Open an Account" for investment minimums. For more information about our Retirement Plans, call us at 800-225-5478. Investment Builder Program This is CDC Nvest Funds' automatic investment plan. You may authorize automatic monthly transfers of $100 or more from your bank checking or savings account to purchase shares of one or more CDC Nvest Funds. To join the Investment Builder Program, please refer to the section entitled "Buying Shares." Dividend Diversification Program This program allows you to have all dividends and any other distributions automatically invested in shares of the same class of another CDC Nvest Fund or Money Market Fund, subject to the eligibility requirements of that other fund and to state securities law requirements. Shares will be purchased at the selected Fund's net asset value without a front-end sales charge or CDSC on the dividend record date. Before establishing a Dividend Diversification Program into any other CDC Nvest Fund or Money Market Fund, please read its prospectus carefully. Automatic Exchange Plan CDC Nvest Funds have an automatic exchange plan under which shares of a class of a CDC Nvest Fund are automatically exchanged each month for shares of the same class of another CDC Nvest Fund or Money Market Fund. There is no fee for exchanges made under this plan, but there may be a sales charge in certain circumstances. Please refer to the SAI for more information on the Automatic Exchange Plan. Systematic Withdrawal Plan This plan allows you to redeem shares and receive payments from your Fund on a regular schedule. Redemption of shares that are part of the Systematic Withdrawal Plan are not subject to a CDSC. However, the amount or percentage you specify in the plan may not exceed, on an annualized basis, 10% of the value of your Fund account based upon the value of your Fund account on the day you establish your plan. To establish a Systematic Withdrawal Plan, please refer to the section entitled "Selling Shares." CDC Nvest Funds Personal Access Line(R) This automated customer service system allows you to have access to your account 24 hours a day by calling 800-225-5478, press 1. With a touch-tone telephone, you can obtain information about your current account balance, recent transactions, Fund prices and recent performance. You may also use Personal Access Line(R) to purchase, exchange or redeem shares in any of your existing accounts. Certain restrictions may apply. CDC Nvest Funds Web Site Visit us at www.cdcnvestfunds.com to review your account balance and recent transactions, to view daily prices and performance information or to order duplicate account statements and tax information. You may also go online to purchase, exchange or redeem shares in your existing accounts. Certain restrictions may apply. Electronic Mail Delivery This delivery option allows you to receive important fund documents via the Internet instead of in paper form through regular U.S. mail. Eligible documents include confirmation statements, quarterly statements, prospectuses, annual and semiannual reports and proxies. Electronic Delivery will cut down on the amount of paper mail you receive; speed up the availability of your documents; and lower expenses to your fund. To establish this option on your account(s), complete the appropriate section of your new account application or visit us at www.cdcnvestfunds.com. *Effective January 1, 1997, the Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA became available, replacing SARSEP plans. SARSEP plans established prior to January 1, 1997 may remain active and continue to add new employees. - ---------- 49 This page left blank intentionally. ---------- 50 [GRAPHIC] Fund Performance ---------------- The financial highlights tables are intended to help you understand each Fund's financial performance for the last five years (or, if shorter, the period of the Fund's operations). Certain information reflects financial results for a single Fund share. The total returns in the table represent the return that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information (except for information for the semi-annual period ended June 30, 2001 and July 31, 2001) has been audited by PricewaterhouseCoopers LLP, independent accountants, whose report for December 31, 2000 and January 31, 2001, along with each Fund's financial statements, are incorporated by reference in the Statement of Additional Information, which is available without charge upon request. For a share outstanding throughout each period.
Income (loss) from investment operations: ------------------------------------------------------------ Net realized Net asset and value, unrealized beginning Net gain (loss) Total from of the investment on investment period income (loss) investments operations ------ ------------- ----------- ---------- Capital Growth Fund Class A 2001(f) $ 15.04 $ (0.07)(d) $ (1.33) $ (1.40) 2000 22.86 (0.18)(d) (4.14) (4.32) 1999 20.67 (0.13)(d) 5.05 4.92 1998 19.95 (0.13)(d) 5.18 5.05 1997 19.27 (0.18)(d) 3.43 3.25 1996 18.41 (0.14)(d) 3.22 3.08 2001(f) 13.47 (0.11)(d) (1.19) (1.30) 2000 21.06 (0.32)(d) (3.77) (4.09) 1999 19.37 (0.27)(d) 4.69 4.42 1998 19.10 (0.27)(d) 4.87 4.60 1997 18.74 (0.32)(d) 3.25 2.93 1996 18.09 (0.28)(d) 3.15 2.87 2001(f) 13.47 (0.11)(d) (1.19) (1.30) 2000 21.06 (0.32)(d) (3.77) (4.09) 1999 19.37 (0.27)(d) 4.69 4.42 1998 19.11 (0.27)(d) 4.86 4.59 1997 18.74 (0.34)(d) 3.28 2.94 1996 18.08 (0.28)(d) 3.16 2.88 Targeted Equity Fund (formerly Growth Fund) Class A 2001(f) $ 9.36 $ 0.00(d)(e) $ (1.08) $ (1.08) 2000 11.00 0.09(d) (0.60) (0.51) 1999 11.36 0.02 1.57 1.59 1998 10.41 0.08(d) 3.00 3.08 1997 11.63 0.01 2.79 2.80 1996 10.55 0.04 2.07 2.11 Less distributions: ------------------------------------------------------------------------------------------------ Dividends Dividends in excess of Distributions Distributions from net net from net in excess of investment investment realized net realized Return of Total income income capital gains capital gains capital distributions ------ ------ ------------- ------------- ------- ------------- Capital Growth Fund Class A 2001(f) $ -- $ -- $ 0.00(e) $ -- $ -- $ -- 2000 -- -- (3.50) 0.00(e) -- (3.50) 1999 -- -- (2.73) -- -- (2.73) 1998 -- -- (4.33) -- -- (4.33) 1997 -- -- (2.57) -- -- (2.57) 1996 -- -- (2.22) -- -- (2.22) Class B 2001(f) -- -- 0.00(e) -- -- -- 2000 -- -- (3.50) 0.00(e) -- (3.50) 1999 -- -- (2.73) -- -- (2.73) 1998 -- -- (4.33) -- -- (4.33) 1997 -- -- (2.57) -- -- (2.57) 1996 -- -- (2.22) -- -- (2.22) Class C 2001(f) -- -- 0.00(e) -- -- -- 2000 -- -- (3.50) 0.00(e) -- (3.50) 1999 -- -- (2.73) -- -- (2.73) 1998 -- -- (4.33) -- -- (4.33) 1997 -- -- (2.57) -- -- (2.57) 1996 -- -- (2.22) -- -- (2.22) Targeted Equity Fund (formerly Growth Fund) Class A 2001(f) $ (0.03) $ -- $ -- $ -- $ -- $ (0.03) 2000 (0.06) -- (0.62) (0.45) -- (1.13) 1999 -- -- (1.95) -- -- (1.95) 1998 (0.10) -- (1.32) (0.35) (0.36) (2.13) 1997 -- -- (4.02) -- -- (4.02) 1996 (0.04) -- (0.99) -- -- (1.03)
(a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Certain Funds have entered into agreements with certain brokers to rebate a portion of brokerage commissions. The rebated commissions are used to reduce operating expenses of the Fund. (d) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. - ---------- 31 Fund Performance [GRAPHIC] ----------------
Ratios to average net assets ------------------------------------------------------- Net Net Expenses Net asset assets, after investment Portfolio value, end Total end of the expense income turnover of the Return period Expenses reductions (loss) rate period (%)(a) (000) (%)(b) (%)(b)(c) (%)(b) (%) ------ ------ ----- ------ --------- ------ --- $ 13.64 (9.3) $ 118,764 1.55 1.52 (1.03) 46 15.04 (19.5) 143,425 1.40 1.37 (0.80) 118 22.86 24.7 200,821 1.39 1.39 (0.61) 124 20.67 29.0 175,511 1.46 1.46 (0.62) 136 19.95 17.2 149,734 1.45 1.45 (0.87) 48 19.27 17.1 141,326 1.50 1.50 (0.71) 74 12.17 (9.6) 46,243 2.30 2.27 (1.78) 46 13.47 (20.1) 56,884 2.15 2.12 (1.55) 118 21.06 23.8 74,774 2.14 2.14 (1.36) 124 19.37 28.2 57,796 2.21 2.21 (1.37) 136 19.10 15.9 45,546 2.20 2.20 (1.62) 48 18.74 16.2 37,439 2.25 2.25 (1.46) 74 12.17 (9.6) 1,996 2.30 2.27 (1.79) 46 13.47 (20.1) 2,487 2.15 2.12 (1.55) 118 21.06 23.8 3,110 2.14 2.14 (1.36) 124 19.37 28.1 1,609 2.21 2.21 (1.37) 136 19.11 15.9 979 2.20 2.20 (1.62) 48 18.74 16.2 504 2.25 2.25 (1.46) 74 $ 8.25 (11.5) $1,157,690 1.33 1.29 (0.03) 140 9.36 (4.6) 1,413,685 1.18 1.16 0.83 266 11.00 15.2 1,871,138 1.12 1.12 0.23 206 11.36 33.4 1,825,107 1.12 1.12 0.74 202 10.41 23.5 1,459,747 1.12 1.12 0.08 214 11.63 20.9 1,296,542 1.18 1.18 0.33 199
(e) Amount rounds to less than $0.01 per share. (f) For the six months ended June 30, 2001 (unaudited). ---------- 52 [GRAPHIC] Fund Performance ----------------
Income (loss) from investment operations: ----------------------------------------------------------- Net realized Net asset and value, unrealized beginning Net gain (loss) Total from of the investment on investment period income (loss) investments operations ------ ------------- ----------- ---------- Targeted Equity Fund (formerly Growth Fund)(continued) Class B 2001(f) 9.02 (0.03)(d) (1.05) (1.08) 2000 10.67 0.01(d) (0.58) (0.57) 1999 11.15 (0.05)(d) 1.52 1.47 1998 10.32 0.00(d)(e) 2.95 2.95 1997(g) 12.47 (0.07) 1.94 1.87 Class C 2001(f) 9.02 (0.03)(d) (1.04) (1.07) 2000 10.67 0.01(d) (0.58) (0.57) 1999 11.15 (0.05)(d) 1.52 1.47 1998(h) 11.18 0.00(d)(e) 2.09 2.09 Growth and Income Fund Class A 2001(f) $ 13.79 $ (0.01)(d) $ (0.97) $ (0.98) 2000 15.33 0.01(d) (1.09) (1.08) 1999 16.57 0.08 1.40 1.48 1998 15.35 0.04 3.29 3.33 1997 13.87 0.07(d) 4.40 4.47 1996 14.39 0.13 2.07 2.20 Class B 2001(f) 13.40 (0.05)(d) (0.94) (0.99) 2000 15.03 (0.10)(d) (1.07) (1.17) 1999 16.37 (0.04) 1.36 1.32 1998 15.28 (0.05) 3.24 3.19 1997 13.87 (0.05)(d) 4.40 4.35 1996 14.40 0.03 2.07 2.10 Class C 2001(f) 13.38 (0.05)(d) (0.94) (0.99) 2000 15.01 (0.10)(d) (1.07) (1.17) 1999 16.35 (0.04) 1.36 1.32 1998 15.28 (0.04) 3.21 3.17 1997 13.85 (0.05)(d) 4.42 4.37 1996 14.39 0.04 2.05 2.09 Less distributions: ----------------------------------------------------------------------------------------- Dividends Dividends in excess of Distributions Distributions from net net from net in excess of investment investment realized net realized Return of Total income income capital gains capital gains capital distributions ------ ------ ------------- ------------- ------- ------------- Targeted Equity Fund (formerly Growth Fund)(continued) Class B 2001(f) (0.03) -- -- -- -- (0.03) 2000 (0.01) -- (0.62) (0.45) -- (1.08) 1999 -- -- (1.95) -- -- (1.95) 1998 (0.06) -- (1.32) (0.35) (0.39) (2.12) 1997(g) -- -- (4.02) -- -- (4.02) Class C 2001(f) (0.03) -- -- -- -- (0.03) 2000 (0.01) -- (0.62) (0.45) -- (1.08) 1999 -- -- (1.95) -- -- (1.95) 1998(h) (0.06) -- (1.32) (0.35) (0.39) (2.12) Growth and Income Fund Class A 2001(f) $ -- $ -- $ -- $ -- $ -- $ -- 2000 -- -- (0.46) -- -- (0.46) 1999 (0.06) 0.00(e) (2.66) -- -- (2.72) 1998 (0.01) -- (2.10) -- -- (2.11) 1997 (0.06) -- (2.93) -- -- (2.99) 1996 (0.13) -- (2.59) -- -- (2.72) Class B 2001(f) -- -- -- -- -- -- 2000 -- -- (0.46) -- -- (0.46) 1999 -- 0.00(e) (2.66) -- -- (2.66) 1998 -- -- (2.10) -- -- (2.10) 1997 (0.01) -- (2.93) -- -- (2.94) 1996 (0.04) -- (2.59) -- -- (2.63) Class C 2001(f) -- -- -- -- -- -- 2000 -- -- (0.46) -- -- (0.46) 1999 -- 0.00(e) (2.66) -- -- (2.66) 1998 -- -- (2.10) -- -- (2.10) 1997 (0.01) -- (2.93) -- -- (2.94) 1996 (0.04) -- (2.59) -- -- (2.63)
(a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Certain Funds have entered into agreements with certain brokers to rebate a portion of brokerage commissions. The rebated commissions are used to reduce operating expenses of the Fund. (d) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (e) Amount rounds to less than $0.01 per share. - ---------- 53 Fund Performance [GRAPHIC] ----------------
Ratios to average net assets ------------------------------------------------------- Net Net Expenses Net asset assets, after investment Portfolio value, end Total end of the expense income turnover of the Return period Expenses reductions (loss) rate period (%)(a) (000) (%)(b) (%)(b)(c) (%)(b) (%) ------ ------ ----- ------ --------- ------ --- 7.91 (11.9) 89,290 2.08 2.04 (0.78) 140 9.02 (5.2) 107,594 1.93 1.91 0.08 266 10.67 14.4 135,786 1.87 1.87 (0.52) 206 11.15 32.4 75,444 1.87 1.87 (0.01) 202 10.32 14.4 17,757 1.87 1.87 (0.67) 214 $ 7.92 (11.8) 4,532 2.08 2.04 (0.78) 140 9.02 (5.2) 5,830 1.93 1.91 0.08 266 10.67 14.4 8,754 1.87 1.87 (0.52) 206 11.15 22.2 2,030 1.87 1.87 (0.01) 202 $12.81 (7.1) $253,002 1.39 1.36 (0.10) 72 13.79 (7.3) 290,714 1.31 1.28 0.04 139 15.33 9.5 375,676 1.21 1.21 0.48 133 16.57 23.9 304,139 1.23 1.23 0.33 114 15.35 33.4 220,912 1.25 1.25 0.46 103 13.87 17.2 166,963 1.30 1.30 0.92 127 12.41 (7.4) 143,249 2.14 2.11 (0.85) 72 13.40 (8.1) 165,767 2.06 2.03 (0.71) 139 15.03 8.6 216,457 1.96 1.96 (0.27) 133 16.37 23.1 153,369 1.98 1.98 (0.42) 114 15.28 32.4 81,066 2.00 2.00 (0.29) 103 13.87 16.3 46,856 2.05 2.05 0.17 127 12.39 (7.4) 12,730 2.14 2.11 (0.86) 72 13.38 (8.1) 19,373 2.06 2.03 (0.71) 139 15.01 8.6 26,983 1.96 1.96 (0.27) 133 16.35 22.9 18,288 1.98 1.98 (0.42) 114 15.28 32.6 6,735 2.00 2.00 (0.29) 103 13.85 16.3 3,912 2.05 2.05 0.17 127
(f) For the six months ended June 30, 2001 (unaudited). (g) For the period February 28, 1997 (inception) through December 31, 1997. (h) For the period September 1, 1998 (inception) through December 31, 1998. ---------- 54 [GRAPHIC] Fund Performance ----------------
Income (loss) from investment operations: ----------------------------------------------------------- Net realized Net asset and value, unrealized beginning Net gain (loss) Total from of the investment on investment period income (loss) investments operations ------ ------------- ----------- ---------- Balanced Fund Class A 2001(f) $10.70 $ 0.10 $(0.80) $(0.70) 2000 11.69 0.23 (0.98) (0.75) 1999 13.52 0.32 (0.82) (0.50) 1998 14.25 0.33 0.74 1.07 1997 13.94 0.33 2.05 2.38 1996 13.14 0.38 1.76 2.14 Class B 2001(f) 10.68 0.07 (0.80) (0.73) 2000 11.58 0.16 (0.99) (0.83) 1999 13.40 0.21 (0.80) (0.59) 1998 14.15 0.21 0.74 0.95 1997 13.86 0.23 2.03 2.26 1996 13.08 0.29 1.74 2.03 Class C 2001(f) 10.63 0.07 (0.80) (0.73) 2000 11.53 0.16 (0.99) (0.83) 1999 13.35 0.21 (0.80) (0.59) 1998 14.10 0.21 0.74 0.95 1997 13.82 0.23 2.02 2.25 1996 13.05 0.29 1.73 2.02 AEW Real Estate Fund Class A 2001(g) $10.49 $ 0.18(j) $ 0.66 $ 0.84 2001(h) 10.58 0.02(j) (0.11)(i) (0.09) Class B 2001(g) 10.49 0.14(j) 0.66 0.80 2001(h) 10.58 0.02(j) (0.11)(i) (0.09) Class C 2001(g) 10.49 0.14(j) 0.66 0.80 2001(h) 10.58 0.02(j) (0.11)(i) (0.09) Less distributions: ------------------------------------------------------------------------------------------ Dividends Dividends in excess of Distributions Distributions from net net from net in excess of investment investment realized net realized Return of Total income income capital gains capital gains capital distributions ------ ------ ------------- ------------- ------- ------------- Balanced Fund Class A 2001(f) $(0.11) $ -- $ -- $ -- $ -- $(0.11) 2000 (0.24) -- $ 0.00(d) -- -- (0.24) 1999 (0.32) -- (1.01) -- -- (1.33) 1998 (0.32) -- (1.48) -- -- (1.80) 1997 (0.33) -- (1.74) -- -- (2.07) 1996 (0.39) -- (0.95) -- -- (1.34) Class B 2001(f) (0.05) -- -- -- -- (0.05) 2000 (0.07) -- $ 0.00(d) -- -- (0.07) 1999 (0.22) -- (1.01) -- -- (1.23) 1998 (0.22) -- (1.48) -- -- (1.70) 1997 (0.23) -- (1.74) -- -- (1.97) 1996 (0.30) -- (0.95) -- -- (1.25) Class C 2001(f) (0.05) -- -- -- -- (0.05) 2000 (0.07) -- $ 0.00(d) -- -- (0.07) 1999 (0.22) -- (1.01) -- -- (1.23) 1998 (0.22) -- (1.48) -- -- (1.70) 1997 (0.23) -- (1.74) -- -- (1.97) 1996 (0.30) -- (0.95) -- -- (1.25) AEW Real Estate Fund Class A 2001(g) $(0.13) $ -- $ 0.00(d) $ -- $ -- $(0.13) 2001(h) 0.00 -- 0.00 -- -- 0.00 Class B 2001(g) (0.09) -- 0.00(d) -- -- (0.09) 2001(h) 0.00 -- 0.00 -- -- 0.00 Class C 2001(g) (0.09) -- 0.00(d) -- -- (0.09) 2001(h) 0.00 -- 0.00 -- -- 0.00
(a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Certain Funds have entered into agreements with certain brokers to rebate a portion of brokerage commissions. The rebated commissions are used to reduce operating expenses of the Fund. (d) Amount rounds to less than $0.01 per share. (e) Had certain expenses not been reduced during the period, total returns would have been lower. - ---------- 55 Fund Performance [GRAPHIC] ----------------
Ratios to average net assets -------------------------------------------------------- Net Net Expenses Net asset assets, after investment Portfolio value, end Total end of the expense income turnover of the Return period Expenses reductions (loss) rate period (%)(a) (000) (%)(b) (%)(b)(c) (%)(b) (%) ------ ------ ----- ------ --------- ------ --- $ 9.89 (6.5) $84,263 1.66 1.62 1.89 123 10.70 (6.4) 100,993 1.56 1.52 2.08 133 11.69 (3.8) 167,943 1.33 1.33 2.30 61 13.52 8.2 222,866 1.30 1.30 2.25 81 14.25 17.5 233,421 1.29 1.29 2.25 69 13.94 17.1 219,626 1.33 1.33 2.79 70 9.90 (6.8) 33,363 2.41 2.37 1.14 123 10.68 (7.2) 39,548 2.31 2.27 1.33 133 11.58 (4.4) 65,492 2.08 2.08 1.55 61 13.40 7.3 84,255 2.05 2.05 1.50 81 14.15 16.7 76,558 2.04 2.04 1.50 69 13.86 16.3 58,367 2.08 2.08 2.04 70 9.85 (6.8) 1,647 2.41 2.37 1.14 123 10.63 (7.2) 2,022 2.31 2.27 1.33 133 11.53 (4.5) 4,454 2.08 2.08 1.55 61 13.35 7.3 5,480 2.05 2.05 1.50 81 14.10 16.6 4,596 2.04 2.04 1.50 69 13.82 16.2 2,538 2.08 2.08 2.04 70 $11.20 8.2(e) 3,830 1.50(k) 1.50(k) 4.02 18 10.49 (0.9)(e) 820 1.50(k) 1.50(k) 2.30 12 11.20 7.7(e) 2,206 2.25(k) 2.25(k) 4.15 18 10.49 (0.9)(e) 87 2.25(k) 2.25(k) 2.14 12 11.20 7.7(e) 487 2.25(k) 2.25(k) 4.30 18 10.49 (0.9)(e) 44 2.25(k) 2.25(k) 1.79 12
(f) For the six months ended June 30, 2001 (unaudited). As required, effective January 1, 2001, the Balanced Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change was to decrease the ratio of net investment income to average net assets from 1.90% to 1.89% for Class A, 1.15% to 1.14% for Class B and 1.15% to 1.14% for Class C. (g) For the six months ended July 31, 2001 (unaudited). (h) For the period December 29, 2000 (commencement of operations) through January 31, 2001. (i) The amount shown for a share outstanding does not correspond with the aggregate net gain/(loss) on investments for the period due to the timing of purchases and redemptions of Fund shares in relation to fluctuating values of the investments of the Fund. (j) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (k) 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. ---------- 56 [GRAPHIC] Fund Performance ----------------
Income (loss) from investment operations: ----------------------------------------------------------- Net realized Net asset and value, unrealized beginning Net gain (loss) Total from of the investment on investment period income (loss) investments operations ------ ------------- ----------- ---------- International Equity Fund Class A 2001(f) $16.62 $(0.02) $(2.56) $(2.58) 2000 25.39 (0.22) (6.90) (7.12) 1999 14.26 (0.03) 12.31 12.28 1998 14.06 0.15 0.77 0.92 1997 16.31 0.09 (1.25) (1.16) 1996 16.13 0.02 0.51 0.53 Class B 2001(f) $15.99 $(0.08) $(2.45) $(2.53) 2000 24.71 (0.37) (6.70) (7.07) 1999 13.98 (0.15) 12.01 11.86 1998 13.71 0.04 0.75 0.79 1997 16.00 (0.03) (1.17) (1.20) 1996 15.93 (0.10) 0.50 0.40 Class C 2001(f) 16.05 (0.08) (2.46) (2.54) 2000 24.78 (0.34) (6.74) (7.08) 1999 14.02 (0.15) 12.04 11.89 1998 13.74 0.05 0.75 0.80 1997 16.03 (0.03) (1.17) (1.20) 1996 15.96 (0.10) 0.50 0.40 Small Cap Growth Fund (formerly Bullseye Fund) Class A 2001(f) $10.98 $(0.03) $(0.11) $(0.14) 2000 17.29 (0.12) (1.55) (1.67) 1999 12.65 (0.09) 4.73 4.64 1998(g) 12.50 (0.02) 0.17 0.15 Less distributions: ----------------------------------------------------------------------------------------- Dividends Dividends in excess of Distributions Distributions from net net from net in excess of investment investment realized net realized Return of Total income income capital gains capital gains capital distributions ------ ------ ------------- ------------- ------- ------------- International Equity Fund Class A 2001(f) $ -- $ -- $ -- $ -- $ -- $ -- 2000 (0.17) -- (1.35) (0.13) -- (1.65) 1999 (0.02) -- (1.13) -- -- (1.15) 1998 (0.23) (0.21) (0.19) (0.09) -- (0.72) 1997 -- -- (1.05) (0.04) -- (1.09) 1996 (0.02) -- (0.33) -- -- (0.35) Class B 2001(f) $ -- $ -- $ -- $ -- $ -- $ -- 2000 (0.17) -- (1.35) (0.13) -- (1.65) 1999 -- -- (1.13) -- -- (1.13) 1998 (0.12) (0.12) (0.19) (0.09) -- (0.52) 1997 -- -- (1.05) (0.04) -- (1.09) 1996 -- -- (0.33) -- (0.33) Class C 2001(f) -- -- -- -- -- -- 2000 (0.17) -- (1.35) (0.13) -- (1.65) 1999 -- -- (1.13) -- -- (1.13) 1998 (0.12) (0.12) (0.19) (0.09) -- (0.52) 1997 -- -- (1.05) (0.04) -- (1.09) 1996 -- -- (0.33) -- -- (0.33) Small Cap Growth Fund (formerly Bullseye Fund) Class A 2001(f) $ -- $ -- $(0.05) $ -- $ -- $(0.05) 2000 -- -- (4.64) -- -- (4.64) 1999 -- -- -- -- -- -- 1998(g) -- -- -- -- -- --
(a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Certain Funds have entered into agreements with certain brokers to rebate a portion of brokerage commissions. The rebated commissions are used to reduce operating expenses of the Fund. (d) Had certain expenses not been reduced during the period, total returns would have been lower. (e) 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. - ---------- 57 Fund Performance [GRAPHIC] ----------------
Ratios to average net assets ----------------------------------------------------- Net Net Expenses Net asset assets, after investment Portfolio value, end Total end of the expense income turnover of the Return period Expenses reductions (loss) rate period (%)(a) (000) (%)(b) (%)(b)(c) (%)(b) (%) ------ ------ ----- ------ --------- ------ --- $14.04 (15.5) $ 42,005 2.05 2.05 (0.34) 107 16.62 (28.6) 54,826 1.96 1.96 (1.01) 212 25.39 87.6(d) 67,197 2.00(e) 2.00(d) (0.15) 229 14.26 6.7(d) 47,444 1.91(e) 1.91(d) 1.04 105 14.06 (7.6)(d) 57,845 1.75(e) 1.75(d) 0.62 154 16.31 3.3(d) 109,773 1.75(e) 1.75(d) 0.14 59 13.46 (15.8) 22,322 2.80 2.80 (1.08) 107 15.99 (29.2) 29,013 2.71 2.71 (1.76) 212 24.71 86.3(d) 29,045 2.75(e) 2.75(e) (0.90) 229 13.98 5.8(d) 19,797 2.66(e) 2.66(e) 0.29 105 13.71 (8.0)(d) 25,216 2.50(e) 2.50(e) (0.13) 154 16.00 2.5(d) 45,974 2.50(e) 2.50(e) (0.61) 59 13.51 (15.8) 3,307 2.80 2.80 (1.18) 107 16.05 (29.1) 5,656 2.71 2.71 (1.76) 212 24.78 86.2(d) 1,267 2.75(e) 2.75(e) (0.90) 229 14.02 5.9(d) 860 2.66(e) 2.66(e) 0.29 105 13.74 (8.0)(d) 843 2.50(e) 2.50(e) (0.13) 154 16.03 2.5d 850 2.50(e) 2.50(e) (0.61) 59 $10.79 (1.2(d) $ 7,895 1.75(e) 1.75(e) (0.60) 97 10.98 (11.2(d) 8,453 1.75(e) 1.74(e) (0.76) 265 17.29 36.7(d) 10,549 1.75(e) 1.75(e) (0.71) 138 12.65 1.2(d) 9,653 1.75(e) 1.75(e) (0.28) 68
(f) For the six months ended June 30, 2001 (unaudited). (g) For the period March 31, 1998 (inception) through December 31, 1998. ---------- 58 [GRAPHIC] Fund Performance
Income (loss) from investment operations: ----------------------------------------------------------- Net realized Net asset and value, unrealized beginning Net gain (loss) Total from of the investment on investment period income (loss) investments operations ------ ------------- ----------- ---------- Small Cap Growth Fund (continued) Class B 2001(h) 10.70 (0.07) (0.11) (0.18) 2000 17.10 (0.24) (1.52) (1.76) 1999 12.60 (0.19) 4.69 4.50 1998(i) 12.50 (0.08) 0.18 0.10 Class C 2001(h) 10.70 (0.07) (0.11) (0.18) 2000 17.09 (0.24) (1.51) (1.75) 1999 12.59 (0.18) 4.68 4.50 1998(i) 12.50 (0.08) 0.17 0.09 Large Cap Value Fund Class A 2001(h) $18.49 $(0.06)(d) $(0.11) $(0.05) 2000 17.16 0.16(d) 1.37 1.53 1999 17.62 0.17 (0.51) (0.34) 1998 17.59 0.26(d) 0.20(f) 0.46 1997 15.15 0.25 3.15 3.40 1996 12.86 0.31 3.11 3.42 Class B 2001(h) 18.46 (0.01)(d) (0.10) (0.11) 2000 17.10 0.04(d) 1.35 1.39 1999 17.62 0.03 (0.50) (0.47) 1998 17.59 0.13(d) 0.20(f) 0.33 1997(k) 17.06 0.03 0.60 0.63 Class C 2001(h) 18.48 (0.01)(d) (0.11) (0.12) 2000 17.11 0.04(d) 1.36 1.40 1999 17.63 0.03 (0.50) (0.47) 1998 17.59 0.13(d) 0.21(f) 0.34 1997(k) 17.06 0.03 0.60 0.63 Less distributions: ----------------------------------------------------------------------------------------- Dividends Dividends in excess of Distributions Distributions from net net from net in excess of investment investment realized net realized Return of Total income income capital gains capital gains capital distributions ------ ------ ------------- ------------- ------- ------------- Small Cap Growth Fund (continued) Class B 2001(h) -- -- (0.05) -- -- (0.05) 2000 -- -- (4.64) -- -- (4.64) 1999 -- -- -- -- -- -- 1998(i) -- -- -- -- -- -- Class C 2001(h) -- -- (0.05) -- -- (0.05) 2000 -- -- (4.64) -- -- (4.64) 1999 -- -- -- -- -- -- 1998(i) -- -- -- -- -- -- Large Cap Value Fund Class A 2001(h) $(0.01) $ -- $ -- $ -- -- $(0.01) 2000 (0.20) -- -- -- -- (0.20) 1999 (0.12) -- 0.00(e) -- -- (0.12) 1998 (0.26) -- (0.17) -- -- (0.43) 1997 (0.26) -- (0.70) -- -- (0.96) 1996 (0.30) -- (0.83) -- -- (1.13) Class B 2001(h) (0.01) -- -- -- -- (0.01) 2000 (0.03) -- -- -- -- (0.03) 1999 (0.05) -- 0.00(e) -- -- (0.05) 1998 (0.13) -- (0.17) -- -- (0.30) 1997(k) (0.04) -- (0.06) -- -- (0.10) Class C 2001(h) (0.01) -- -- -- -- (0.01) 2000 (0.03) -- -- -- -- (0.03) 1999 (0.05) -- 0.00(e) -- -- (0.05) 1998 (0.13) -- (0.17) -- -- (0.30) 1997(k) (0.04) -- (0.06) -- -- (0.10)
(a) A sales charge for Class A and Class C shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Certain Funds have entered into agreements with certain brokers to rebate a portion of brokerage commissions. The rebated commissions are used to reduce operating expenses of the Fund. (d) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (e) Amount rounds to less than $0.01 per share. (f) The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) for the period ended December 31, 1998, due to the timing of purchases and redemptions of Fund shares in relation to fluctuating market values of the investments of the Fund. (g) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period. Without this reimbursement, expense ratios would have been higher. - ---------- 59 Fund Performance [GRAPHIC] ----------------
Ratios to average net assets ------------------------------------------------------ Net Net Expenses Net asset assets, after investment Portfolio value, end Total end of the expense income turnover of the Return period Expenses reductions (loss) rate period (%)(a) (000) (%)(b) (%)(b)(c) (%)(b) (%) ------ ------ ----- ------ --------- ------ --- 10.47 (1.6)(j) 2.50(g) 2.50(g) (1.35) 97 8,346 10.70 (11.8)(j) 8,664 2.50(g) 2.49(g) (1.51) 265 17.10 35.7(j) 9,774 2.50(g) 2.50(g) (1.45) 138 12.60 0.7(j) 8,618 2.50(g) 2.50(g) (1.03) 68 10.47 (1.6)(j) 2.50(g) 2.50(g) (1.35) 97 1,013 10.70 (11.8)(j) 1,102 2.50(g) 2.49(g) (1.51) 265 17.09 35.7)(j) 2,218 2.50(g) 2.50(g) (1.45) 138 12.59 0.8(j) 2,987 2.50(g) 2.50(g) (1.03) 68 $18.43 (0.2)(j) $ 9,946 1.50(g) 1.50(g) 0.68 13 18.49 9.0(j) 8,510 1.50(g) 1.47(g) 0.96 31 17.16 (1.9)(j) 11,291 1.50(g) 1.50(g) 0.94 93 17.62 2.7(j) 17,839 1.50(g) 1.50(g) 1.48 61 17.59 22.6(j) 14,681 1.50(g) 1.50(g) 1.76 33 15.15 26.6(j) 2,613 1.50(g) 1.50(g) 2.06 45 18.34 (0.06)(j) 9,146 2.25(g) 2.20(g) (0.07) 13 18.46 8.2(j) 7,839 2.25(g) 2.20(g) 0.21 31 17.10 (2.7)(j) 9,643 2.25(g) 2.25(g) 0.19 93 17.62 2.0(j) 16,623 2.25(g) 2.25(g) 0.73 61 17.59 3.7(j) 9,375 2.25(g) 2.25(g) 1.01 33 18.35 (0.06)(j) 980 2.25(g) 2.20(g) (0.08) 13 18.48 8.2(j) 799 2.25(g) 2.22(g) 0.21 31 17.11 (2.7)(j) 1,336 2.25(g) 2.25(g) 0.19 93 17.63 2.0(j) 2,101 2.25(g) 2.25(g) 0.73 61 17.59 3.7(j) 1,596 2.25(g) 2.25(g) 1.01 33
(h) For the six months ended June 30, 2001 (unaudited). (i) For the period March 31, 1998 (inception) through December 31, 1998. (j) Had certain expenses not been reduced during the period, total returns would have been lower. (k) For the period September 15, 1997 (inception) through December 31, 1997. ---------- 60 Glossary of Terms Bid price -- The price a prospective buyer is ready to pay. This term is used by traders who maintain firm bid and offer prices in a given security by standing ready to buy or sell security units at publicly quoted prices. Bottom-up analysis -- The search for outstanding performance of individual stocks before considering the impact of economic trends. Such companies may be identified from research reports, stock screens or personal knowledge of the products and services. Capital gain distributions -- Payments to a Fund's shareholders, of profits earned from selling securities in a Fund's portfolio. Capital gain distributions are usually paid once a year. Credit rating-- Independent evaluation of a bond's creditworthiness. This measurement is usually calculated through an index compiled by companies such as Standard & Poor's Rating Service, Inc. ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or Fitch Investors Services, Inc. ("Fitch"). Bonds with a credit rating of BBB or higher by S&P or Fitch, or Baa or higher by Moody's are generally considered investment grade. Debt-to-Total Capital Ratio -- Total debt (current and long-term) divided by total capital (debt and equity). This ratio provides information regarding the extent of a company's reliance on debt financing. A high ration indicates a high degree of financial leverage and a high degree of risk. Derivative -- A financial instrument whose value and performance are based on the value and performance of another security or financial instrument. Discounted price -- The difference between a bond's current market price and its face or redemption value. Diversification -- The strategy of investing in a wide range of securities representing different market sectors to reduce the risk if an individual company or one sector suffers losses. Dividend yield -- The current or estimated annual dividend divided by the market price per share of a security. Duration -- An estimate of how much a bond's price fluctuates with changes in comparable interest rates. Earnings growth -- A pattern of increasing rate of growth in earnings per share from one period to another, which usually causes a stock's price to rise. FFO Multiple - The price per share of a REIT divided by its Funds from Operations (FFO). The FFO of a REIT is the measure of its operating performance showing its net income plus depreciation of real estate and excluding gains or losses from sales of property or debt restructuring. Fundamental analysis -- An analysis of the balance sheet and income statements of a company in order to forecast its future stock price movements. Fundamental analysis considers records of assets, earnings, sales, products, management and markets in predicting future trends in these indicators of a company's success or failure. By appraising a company's prospects, analysts using such an approach assess whether a particular stock or group of stocks is undervalued or overvalued at its current market price. Growth investing -- An investment style that emphasizes companies with strong earnings growth. Growth investing is generally considered more aggressive than "value" investing. Income distributions -- Payments to a Fund's shareholders resulting from the net interest or dividend income earned by a Fund's portfolio. Inflation -- A general increase in prices coinciding with a fall in the real value of money, as measured by the Consumer Price Index. Interest rate -- Rate of interest charged for the use of money, usually expressed at an annual rate. Market capitalization -- Market price multiplied by number of shares outstanding. Large capitalization companies generally have over $5 billion in market capitalization; medium cap companies between $1.5 billion and $5 billion; and small cap companies less than $1.5 billion. These capitalization figures may vary depending upon the index being used and/or the guidelines used by the portfolio manager. Maturity -- The final date on which the payment of a debt instrument (e.g. bonds, notes, repurchase agreements) becomes due and payable. Short-term bonds generally have maturities of up to 5 years; intermediate-term bonds between 5 and 15 years; and long-term bonds over 15 years. Net asset value (NAV) -- The market value of one share of a Fund on any given day without taking into account any front-end sales charge or CDSC. It is determined by dividing a Fund's total net assets by the number of shares outstanding. Price-to-book value ratio -- Current market price of a stock divided by its book value, or net asset value. Some firms use the inverse ratio for this calculation (i.e. book to price ratio). - ---------- 61 Glossary of Terms Price-to-earnings ratio -- Current market price of a stock divided by its earnings per share. Also known as the "multiple," the price-to-earnings ratio gives investors an idea of how much they are paying for a company's earning power and is a useful tool for evaluating the costs of different securities. Some firms use the inverse ratio for this calculation (i.e. earnings-to-price ratio). Qualitative analysis -- An analysis of the qualities possessed by a company, including its management, products and competitive positions, to help determine if the company can execute its strategies. Return on equity -- The amount, expressed as a percentage, earned on a company's common stock investment for a given period. It is calculated by dividing common stock equity (net worth) at the beginning of the accounting period into net income for the period after preferred stock dividends but before common stock dividends. This tells common shareholders how effectively their money is being employed. Rule 144A securities -- Rule 144A securities are privately offered securities that can be resold only to certain qualified institutional buyers. Rule 144A securities are treated as illiquid, unless a manager has determined, under guidelines established by a Fund's trustees, that a particular issue of Rule 144A securities is liquid. Target price -- Price that an investor is hoping a stock he or she has just bought will rise to within a specified period of time. An investor may buy XYZ at $20, with a target price of $40 in one year's time, for instance. Technical analysis -- The research into the demand and supply for securities, options, mutual funds and commodities based on trading volume and price studies. Technical analysis uses charts or computer programs to identify and project price trends in a market, security, mutual fund or futures contract. Top-down approach -- The method in which an investor first looks at trends in the general economy, and next selects attractive industries and then companies that should benefit from those trends. Total return -- The change in value of an investment in a Fund over a specific time period expressed as a percentage. Total returns assume all earnings are reinvested in additional shares of a Fund. Value investing -- A relatively conservative investment approach that focuses on companies that may be temporarily out of favor or whose earnings or assets are not fully reflected in their stock prices. Value stocks will tend to have a lower price-to-earnings ratio than growth stocks. Volatility -- The general variability of a portfolio's value resulting from price fluctuations of its investments. In most cases, the more diversified a portfolio is, the less volatile it will be. Yield - The rate at which a Fund earns income, expressed as a percentage. Mutual fund yield calculations are standardized, based upon a formula developed by the SEC. Yield-to-maturity -- The concept used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield (the interest rate on a debt security the issuer promises to pay to the holder until maturity, expressed as an annual percentage of face value) and the time between interest payments. ---------- 62 Notes -- - ---------- 63 Notes -- ---------- 64 If you would like more information about the Funds, the following documents are available free upon request: Annual and Semi-annual Reports -- Provide additional information about each Fund's investments. Each report includes a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. To reduce costs, we mail one copy per household. For more copies call CDC IXIS Asset Management Distributors, L.P. at the number below. Statement of Additional Information (SAI) -- Provides more detailed information about the Funds and their investment limitations and policies, has been filed with the SEC and is incorporated into this Prospectus by reference. To order a free copy of a Fund's annual or semi-annual report or its SAI, contact your financial representative, or the Funds at: CDC IXIS Asset Management Distributors, L.P., 399 Boylston Street, Boston, MA 02116 Telephone: 800-225-5478 Internet: www.cdcnvestfunds.com Your financial representative or CDC Nvest Funds will also be happy to answer your questions or to provide any additional information that you may require. You can review and copy a Fund's reports and SAI at the Public Reference Room of the SEC in Washington, D.C. Text-only copies are available free from the Commission's Web site at: www.sec.gov. Copies of these publications are also available for a fee and information on the operation of the Public Reference Room may be obtained by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing or calling the Public Reference Section of the SEC, Washington, D.C. 20549-0102 Telephone: 1-202-942-8090 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 Web site at www.NASDR.com. (Investment Company Act File No. 811-4323) (Investment Company Act File No. 811-242) (Investment Company Act File No. 811-7345) (Investment Company Act File No. 811-09945) XS51-1101 [LOGO] CDC NVEST FUNDS(SM) CDC IXIS Asset Management Distributors CDC Nvest Equity Funds -- Class Y Shares Prospectus - May 1, 2001 as revised November 14, 2001 for: o CDC Nvest Targeted Equity Fund (formerly CDC Nvest Growth Fund) Capital Growth Management Limited Partnership o CDC Nvest Growth and Income Fund Westpeak Global Advisors, L.P. o CDC Nvest Balanced Fund Loomis, Sayles & Company, L.P. Jurika & Voyles, L.P. o CDC Nvest AEW Real Estate Fund AEW Management and Advisors, L.P. o CDC Nvest International Equity Fund Loomis, Sayles & Company, L.P. Prospectus - November 14, 2001 for: o CDC Nvest Jurika & Voyles Small Cap Growth Fund (formerly CDC Nvest Bullseye Fund) Jurika & Voyles, L.P. o CDC Nvest Large Cap Growth Fund Vaughan, Nelson, Scarborough & McCullough, L.P. o CDC Nvest Jurika & Voyles Relative Value Fund Jurika & Voyles, L.P. The Securities and Exchange Commission has not approved any Fund's shares or determined whether this Prospectus is accurate or complete. Anyone who tells you otherwise is committing a crime. For general information on the Funds or any of their services and for assistance in opening an account, contact your financial representative or call CDC Nvest Funds. CDC Nvest Funds 399 Boylston Street, Boston, Massachusetts 02116 800-225-5478 www.cdcnvestfunds.com Capital Growth Management [LOGO] WESTPEAK GLOBAL ADVISORS [LOGO] LOOMIS + SAYLES & COMPANY L.P. [LOGO] JURIKA & VOYLES [LOGO] AEW [LOGO] Vaughan, Nelson Scarborough & McCullough WHAT'S INSIDE 1 Goals, Strategies & Risks ...................................Page 1 2 Fund Fees & Expenses ...................................Page 17 3 Management Team ...................................Page 21 4 Fund Services ...................................Page 27 5 Fund Performance ...................................Page 35
Table of Contents ------------------------------------------------------------------------------------------- Goals, Strategies & Risks ------------------------------------------------------------------------------------------- CDC Nvest Targeted Equity Fund (Formerly CDC Nvest Growth Fund)........................ 1 CDC Nvest Growth and Income Fund....................................................... 3 CDC Nvest Balanced Fund................................................................ 5 CDC Nvest AEW Real Estate Fund......................................................... 8 CDC Nvest International Equity Fund.................................................... 10 CDC Nvest Jurika & Voyles Small Cap Growth Fund (Formerly CDC Nvest Bullseye Fund)..... 12 CDC Nvest Large Cap Growth Fund........................................................ 15 CDC Nvest Jurika & Voyles Relative Value Fund.......................................... 16 ------------------------------------------------------------------------------------------- Fund Fees & Expenses ------------------------------------------------------------------------------------------- Fund Fees & Expenses................................................................... 17 ------------------------------------------------------------------------------------------- More About Risk ------------------------------------------------------------------------------------------- More About Risk........................................................................ 20 ------------------------------------------------------------------------------------------- Management Team ------------------------------------------------------------------------------------------- Meet the Funds' Investment Advisers and Subadvisers.................................... 21 Meet the Funds' Portfolio Managers..................................................... 23 Past Performance Information........................................................... 26 ------------------------------------------------------------------------------------------- Fund Services ------------------------------------------------------------------------------------------- It's Easy to Open an Account........................................................... 27 Buying Shares.......................................................................... 28 Selling Shares......................................................................... 29 Selling Shares in Writing.............................................................. 30 Exchanging Shares...................................................................... 31 Restrictions on Buying, Selling and Exchanging Shares.................................. 31 How Fund Shares Are Priced............................................................. 32 Dividends and Distributions............................................................ 33 Tax Consequences....................................................................... 33 Compensation to Securities Dealers..................................................... 34 ------------------------------------------------------------------------------------------- Fund Performance ------------------------------------------------------------------------------------------- Fund Performance....................................................................... 35 ------------------------------------------------------------------------------------------- Glossary of Terms ------------------------------------------------------------------------------------------- Glossary of Terms...................................................................... 37
If you have any questions about any of the terms used in this Prospectus, please refer to the "Glossary of Terms." To learn more about the possible risks of investing in the Funds, please refer to the section entitled "More About Risk." This section details the risks of practices in which the Funds may engage. Please read this section carefully before you invest. Fund shares are not bank deposits and are not guaranteed, endorsed or insured by the Federal Deposit Insurance Corporation or any other government agency, and are subject to investment risks, including possible loss of the principal invested. [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Targeted Equity Fund (formerly CDC Nvest Growth Fund) ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class Y ------- NEGYX Adviser: Capital Growth Management Limited Partnership ("CGM") Manager: G. Kenneth Heebner Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital through investment in equity securities of companies whose earnings are expected to grow at a faster rate than that of the overall United States economy. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all of its assets in a focused portfolio of equity securities. The Fund will generally invest in common stock of large capitalization companies that CGM expects will grow at a faster rate than that of the overall United States economy. When CGM believes that market conditions warrant, however, CGM may select stocks based upon overall economic factors such as the general economic outlook, the level and direction of interest rates and potential impact of inflation. The Fund will not invest in small capitalization companies. In general, CGM seeks companies with the following characteristics, although not all of the companies selected will have these attributes: U well-established, with records of above-average growth U promise of maintaining their leadership positions in their industries U likely to benefit from internal revitalization or innovations, changes in consumer demand, or basic economic forces Rather than following a particular style, CGM employs a flexible approach and seeks to take advantage of opportunities as they arise. In making an investment decision, CGM generally employs the following methods: o It uses a top-down approach, meaning that it analyzes the overall economic factors that may affect a potential investment. o CGM then conducts a thorough analysis of certain industries and companies, evaluating the fundamentals of each on a case-by-case basis and focusing on companies that it determines are attractively valued. o CGM's ultimate decision to purchase a security results from a thorough assessment of all of the information that CGM deems to be relevant at the time of investment. o CGM will sell a stock if it determines that its investment expectations are not being met, if better opportunities are identified or if its price objective has been attained. The Fund may also: o Invest in foreign securities. o Invest in other investment companies. o Invest in real estate investment trusts ("REITs"). o Invest a significant portion of its assets in a single sector. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Although the Fund is diversified, its focused approach means that its relatively small number of holdings may result in greater share price fluctuations than a more diversified mutual fund. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Investments in other investment companies: May indirectly bear service and other fees in addition to its own expenses. Focused investment risk: Because the Fund may invest in a small number of industries, it may have more risk because the impact of a single economic, political or regulatory occurrence may have a greater adverse impact on the Fund's net asset value. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." REITs: REITs are subject to changes in underlying real estate values, rising interest rates, limited diversification of holdings, higher costs and prepayment risk associated with related mortgages, as well as other risks particular to investments in real estate. For additional information see the section entitled "More About Risk." - ---------- 1 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The bar chart shows the Fund's total returns for Class Y shares for each calendar year since it first offered Class Y shares.+ 2000 -4.23% [DELTA UP] Highest Quarterly Return: Fourth Quarter 2000, down 4.05% [DELTA DOWN] Lowest Quarterly Return: Second Quarter 2000, down 7.07% + The Fund's Class Y shares total return year-to-date as of September 30, 2001 was -28.62%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the S&P 500 Index, a market value-weighted, unmanaged index of common stock prices for 500 selected stocks. They are also compared to the returns, as calculated by Morningstar, Inc. and Lipper Inc., of the Morningstar Large-Cap Blend and Lipper Large-Cap Core Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charges that you may be required to pay when you buy or redeem the Fund's shares. The S&P 500 Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Large-Cap Blend Average and Lipper Large-Cap Core Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Since Class (for the periods ended December 31, 2000) Inception - ------------------------------------------------------------------------------------------- CDC Nvest Targeted Equity Fund (formerly CDC Nvest Growth Fund): Class Y (inception 6/30/99) -4.23% 3.32% - ------------------------------------------------------------------------------------------- S&P 500 Index -9.10% -1.41% Morningstar Large-Cap Blend Average 5.47% 1.24% Lipper Large-Cap Core Funds Average 1.32% 0.87% - -------------------------------------------------------------------------------------------
Each index is calculated from 6/30/99. For past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses." ---------- 2 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Growth and Income Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. X Low X Ticker Symbol: Class Y ------- NEOYX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Westpeak Global Advisors, L.P. ("Westpeak") Manager: Gerald H. Scriver Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks opportunities for long-term capital growth and income. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all its assets in common stock of large and mid-capitalization companies in any industry. Westpeak constructs a portfolio of recognizable large and mid-capitalization stocks that exhibit good relative value and reasonable growth potential. Westpeak believes risk and return can be accurately measured and controlled through thoughtful portfolio construction. Therefore, its focus will be on the aggregate characteristics of the portfolio and not just individual stocks. The portfolio emphasizes the characteristics that Westpeak believes are most likely to be rewarded by the market in the period ahead, based upon current and historical probabilities. At times, the portfolio may be biased toward value; at other times toward growth as determined by the characteristics Westpeak favors. The Fund's industry weightings will not vary significantly from the S&P 500 Index. Using proprietary quantitative research based on macroeconomic, market and company-specific information, Westpeak analyzes each stock and ranks it based on characteristics such as: U earnings-to-price U earnings growth U potential earnings surprises U book-to-price In selecting investments for the Fund, Westpeak employs the following process: o It starts with an overall universe of about 800 stocks of large and mid-capitalization companies. o It screens these stocks using fundamental growth and value criteria and calculates a "fundamental rank" for each stock. This rank reflects a historical analysis of the company using approximately 70 growth, value and industry-specific characteristics. o All of the stocks are then screened using various Wall Street analysts' historical and projected earnings estimates for the company and each is assigned an "expectations rank." This rank accounts for the company's recent and historical earnings revisions and the potential for "positive earnings surprises" (whether its business has the potential to improve in the near future). o The fundamental and expectations ranks for each stock are placed in a valuation matrix to evaluate whether to buy, sell or hold a stock. o The final step is the use of proprietary methodology to arrange the selected stocks into an optimal portfolio using their respective fundamental and expectation ranks and risk characteristics. The desired result is a diversified portfolio of 75 to 150 stocks, with risk characteristics that approximate that of the benchmark, the S&P 500 Index, which Westpeak believes will produce the highest long-term returns consistent with the portfolio's risk parameters. The Fund may also: o Invest in foreign securities traded in U.S. markets (through American Depositary Receipts ("ADRs") or stocks sold in U.S. dollars). ADRs are securities issued by a U.S. bank that represent shares of a foreign company. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Foreign securities: ADRs may be more volatile than U.S. securities and carry political, economic and information risks that are associated with foreign securities. For additional information see the section entitled "More About Risk." - ---------- 3 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The bar chart shows the Fund's total returns for Class Y shares for each calendar year since it first offered Class Y shares. + 1999 2000 9.77% -6.97% [DELTA UP] Highest Quarterly Return: Second Quarter 1999, up 8.75% [DELTA DOWN] Lowest Quarterly Return: Third Quarter 1999, down 8.04% + The Fund's Class Y shares total return year-to-date as of September 30, 2001 was -22.57%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the S&P 500 Index, a market value-weighted, unmanaged index of common stock prices of 500 selected stocks. They are also compared to returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Large-Cap Value and Lipper Multi-Cap Core Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect the expenses of the Fund's Class Y shares. The S&P 500 Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Large-Cap Value Average and Lipper Multi-Cap Core Funds Average returns have been adjusted for these expenses but do not reflect any sales charges. - -------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Since Class (for the periods ended December 31, 2000) Inception - -------------------------------------------------------------------------------- CDC Nvest Growth and Income Fund: Class Y (inception 11/18/98) -6.97% 4.76% - -------------------------------------------------------------------------------- S&P 500 Index -9.10% 7.54% Morningstar Large-Cap Value Average 5.47% 7.53% Lipper Multi-Cap Core Funds Average 8.86% 8.69% - -------------------------------------------------------------------------------- The S&P 500 Index is calculated from 11/18/98 and the Morningstar Large-Cap Value Average and the Lipper Multi-Cap Core Funds Average are calculated from 11/30/98. For past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses." ---------- 4 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Balanced Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High Mod. X X X Low Ticker Symbol: Class Y ------- NEBYX Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Loomis, Sayles & Company, L.P. ("Loomis Sayles") and Jurika & Voyles, L.P. ("Jurika & Voyles") Manager: Equity (Value Component): Nicholas E. Moore, Guy Elliffe and Eric Hull (Jurika & Voyles) Equity (Growth Component): Mark Baribeau, Pamela Czekanski and Richard Skaggs (Loomis Sayles) Fixed Income: John Hyll and Kurt Wagner (Loomis Sayles) Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks a reasonable long-term investment return from a combination of long-term capital appreciation and moderate current income. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- The Fund principally invests in common stocks of quality, large to mid-market capitalization companies of any industry and investment grade bonds. Generally, the Fund will invest approximately 65% of its assets in equity securities and approximately 35% of its assets in fixed-income securities, although these allocations may change from time to time, subject to the limits below. The Fund's equity securities are allocated equally between a growth and a value component. In managing their particular components, Jurika & Voyles and Loomis Sayles use a flexible approach to seek investments with the following characteristics, although not all of the investments selected will have these attributes: Equity securities (growth or value component): Jurika & Voyles (Equity-value component) seeks investments with: discounted price compared to Jurika & Voyles' estimation of their true value, sustainable competitive advantage, good growth prospects, predictable cash flows, and a record of creating shareholder value. Loomis Sayles (Equity-growth component) seeks investments with: discounted price compared to its current value for future growth prospects, leading position within industry and superior earnings growth potential. Fixed-income securities: U greater yield-to-maturity than appropriate benchmarks U maturities typically between 1 and 30 years U controlled duration variance compared to index In order to maintain a balanced, flexible portfolio of investments, the Fund will always invest a minimum of 50% of its assets in equity securities and a minimum of 25% in fixed income securities. Loomis Sayles will recommend the Fund's asset allocation periodically as it deems appropriate. Net cash flow will be allocated in accordance with the asset allocation determinations and then the equity portion will be allocated equally to the growth and value components. o For the value component, Jurika & Voyles selects stocks of companies that it believes are undervalued based upon their current operations and have the potential for future earnings growth. Using this value style, Jurika & Voyles generally will seek to invest in 45-60 medium and large capitalization companies. Typically the portfolio's forward price-to-earnings ratio will be at or below the market, and the portfolio will have long-term growth estimates that are near or above the market. Jurika & Voyles will sell a stock when the price target or full valuation is achieved, a better opportunity is identified, a change occurs in the original investment, such as a merger or a regulatory change, or its fundamentals deteriorate. o For the growth component, Loomis Sayles selects stocks from a universe of approximately 500 companies. Loomis Sayles then uses fundamental analysis to identify companies with leading market positions. Valuation analysis follows to find undervalued companies with positive growth catalysts. Portfolio construction then balances opportunities with risks to produce a portfolio of about 50 stocks. Loomis Sayles will sell a stock when its price objective has been attained, its fundamentals deteriorate or when more attractive opportunities are identified. o Loomis Sayles selects bonds by placing a greater emphasis on security and sector selection than interest rate anticipation. They conduct extensive research and credit analysis of over 600 corporate issuers and assign each a proprietary rating. They combine these ratings with internal policy limitations to select bonds for the Fund. They will sell bonds depending on expected credit deterioration or when they identify other securities with better total returns going forward. The Fund may also: o Invest in foreign securities and related currency hedging transactions; Rule 144A securities; mortgage- and asset-backed securities; zero-coupon bonds; and when-issued securities. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other - ---------- 5 Goals, Strategies & Risks [GRAPHIC] ------------------------- conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------- Principal Investment Risks - -------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Rule 144A securities may be more illiquid than other equity securities. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." Fixed-income securities: Subject to credit risk, interest rate risk and liquidity risk. Generally, the value of fixed-income securities rises when prevailing interest rates fall and falls when interest rates rise. Zero-coupon bonds may be subject to these risks to a greater extent than other fixed-income securities. Mortgage- and asset-backed securities: Subject to prepayment risk. With prepayment, the Fund may reinvest the prepaid amounts in securities with lower yields than the prepaid obligations. The Fund may also incur a realized loss when there is a prepayment of securities that were purchased at a premium. For additional information see the section entitled "More About Risk." ---------- 6 [GRAPHIC] Goals, Strategies & Risks ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The Fund became a multi-component fund and added an additional subadviser on March 1, 2001. The Fund's performance may have been under its current advisory arrangements. The bar chart shows the Fund's total returns for Class Y shares for each calendar year since it first offered Class Y shares.+ 1995 1996 1997 1998 1999 2000 26.84% 17.63% 18.12% 8.59% -3.32% -5.97% [DELTA UP] Highest Quarterly Return: Second Quarter 1997, up 10.33% [DELTA DOWN] Lowest Quarterly Return: Third Quarter 1999, down 8.48% + The Fund's Class Y shares total return year-to-date as of September 30, 2001 was -16.87%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of a blend of the S&P 500 Index and the Lehman Government/Credit Bond Index ("S&P/Lehman G/C Blend"). This index is represented by a 65% weighting in the S&P 500 Index and a 35% weighting in the Lehman G/C Index. Indices are rebalanced to 65%/35% at the end of each year. The returns are also compared to the returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Domestic Hybrid and Lipper Balanced Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect the expenses of the Fund's Class Y shares. The S&P/Lehman G/C Blend returns have not been adjusted for ongoing management, distribution and operating expenses applicable to mutual fund investments. The Morningstar Domestic Hybrid Average and the Lipper Balanced Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ----------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Past 5 Years Since Class (for the periods ended December 31, 2000) Inception - ----------------------------------------------------------------------------------------------- CDC Nvest Balanced Fund: Class Y (inception 3/8/94) -5.97% 6.52% 8.01% - ----------------------------------------------------------------------------------------------- S&P/Lehman G/C Blend -1.77% 14.10% 15.33% Morningstar Domestic Hybrid Average 2.06% 10.90% 11.52% Lipper Balanced Funds Average 1.51% 11.39% 12.39% - -----------------------------------------------------------------------------------------------
Each index is calculated from 03/31/94 for Class Y shares. For past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses." - ---------- 7 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest AEW Real Estate Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. X X Low Ticker Symbol: Class Y ------- NRFYX Adviser: AEW Management and Advisors, L.P. ("AEW") Manager: Matthew A. Troxell Category: Mid-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks to provide investors with above-average income and long-term growth of capital. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest at least 65% of its assets in publicly traded equity securities issued by real estate investment trusts ("REITs") or real estate-related companies. REITs are generally dedicated to owning, and usually operating, income-producing real estate, or dedicated to financing real estate. The Fund primarily invests in equity REITs, which own or lease real estate and derive their income primarily from rental income. Real estate-related companies are those companies whose principal activity involves the development, ownership, construction, management or sale of real estate; companies with significant real estate holdings; and companies that provide products or services related to the real estate industry. AEW employs a value-oriented investment strategy designed to identify securities that are priced below what it believes is their intrinsic value. AEW believes that ultimately the performance of real estate equity securities is dependent upon the performance of the underlying real estate assets and company management as well as the overall influence of capital markets. Consequently, when selecting securities for the Fund, AEW draws upon the combined expertise of its real estate, research and securities professionals. When selecting investments for the Fund, AEW generally considers the following factors that it believes help to identify those companies whose shares represent the greatest value and price appreciation potential: o Valuation: AEW has developed a proprietary model to assess the relative value of each stock in the Fund's investment universe. This model is designed to estimate what an issuer's anticipated cash flows are worth to a stock investor (a capital markets value) and to a direct real estate investor (a real estate value). The model helps AEW to identify stocks that it believes trade at discounts to either or both of these model values relative to similar stocks. AEW will generally sell a security once it is considered overvalued or when AEW believes that there is greater relative value in other securities in the Fund's investment universe. o Price: AEW examines the historic pricing of each company in the Fund's universe of potential investments. Those stocks that have under performed in price, either in absolute terms or relative to the Fund's universe in general, are generally given greater weight than those that have over performed. o Income: AEW further evaluates companies and REITs by analyzing their dividend yields as well as other factors that influence the sustainability and growth of dividends. These factors include cash flow, leverage and payout ratios. o Catalysts: When evaluating a security, AEW also seeks to identify potential catalysts that, in its opinion, could cause the marketplace to re-value the security upwards in the near term. These catalysts can be macro-economic, market-driven or company-specific in nature. The Fund may also hold cash and/or invest up to 100% of its assets in U.S. government securities or money market instruments for temporary defensive purposes in response to adverse market, economic or political conditions. These investments may prevent the Fund from achieving its investment goal. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Securities of real estate-related companies and REITs in which the Fund may invest may be considered equity securities, thus subjecting the Fund to market risks. This means that you may lose money on your investment due to sudden, unpredictable drops in value or periods of below-average performance in a given stock or in the stock market as a whole. Real estate securities/REITs: Because the Fund concentrates its investments in the real estate industry, the Fund's performance will be dependent in part on the performance of the real estate market and the real estate industry in general. The real estate industry is particularly sensitive to economic downturns. Securities of companies in the real estate industry, including REITs, are sensitive to factors such as changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use and rents, and the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws. In ---------- 8 [GRAPHIC] Goals, Strategies & Risks ------------------------- - ------------------------------------- Principal Investment Risks- continued - ------------------------------------- addition, the value of a REIT is affected by changes in the value of the properties owned by the REIT or securing mortgage loans held by the REIT. REITs are dependent upon cash flow from their investments to repay financing costs and also on the ability of the REITs' managers. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund. Small-cap companies: Companies in the real estate industry, including REITs, in which the Fund may invest may have relatively small market capitalizations. Small-cap companies and REITs, which AEW considers to be those with market capitalization of $1 billion or less, tend to have more limited markets and resources than companies with larger market capitalizations. Consequently, share prices of small-cap companies and REITs can be more volatile than, and perform differently from, larger company stocks. For additional information see the section entitled "More About Risk." - ------------------------------------- Performance - ------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. - ---------- 9 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest International Equity Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class Y ------- NEIYX Adviser: CDC IXIS Asset Management Advisors, L.P. ("CDC IXIS Advisers") Subadvisers: Loomis, Sayles & Company, L.P. ("Loomis Sayles") Managers: Alexander Muromcew, John Tribolet and Eswar Menon Category: International Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks total return from long-term capital growth and dividend income. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest primarily in equity securities of companies organized or headquartered outside of the United States. The Fund will hold securities from at least three different countries, including those within emerging markets. The Fund will focus on securities with large market capitalization but may invest in securities with any size capitalization. Loomis Sayles uses a bottom-up, fundamental research process to build the Fund's portfolio. Combining careful research with visits with management, Loomis Sayles looks for growth oriented stocks of well-managed companies that are industry leaders globally and possess strong competitive positions with pricing power and strong distribution. Improving business or financial fundamentals are catalysts for buy decisions while deteriorating fundamentals or better opportunities in other companies will trigger sell decisions. In addition to its bottom-up approach to security selection, an overlay of country and industry macro data is used to provide guidelines for portfolio weighting with a view towards minimizing portfolio risk. The strong Loomis Sayles research team is combined with a global network of research contacts to provide a steady stream of information and ideas. Together with discipline and a thorough decision-making process, the Loomis Sayles research operation seeks to provide investors with a successful investment strategy. Loomis Sayles uses a "No-Walls Decision Making(SM") investment process, in which the managers all meet in person to exchange ideas and make portfolio decisions. Each buy and sell decision is subject to intense scrutiny by the entire team, which allows the skill and unique perspective of each manager on the team to be leveraged. The Fund may also: o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Small capitalization companies may be subject to more abrupt price movements, limited markets and less liquidity than larger, more established companies, which could adversely affect the value of the portfolio. Foreign securities: May be affected by foreign currency fluctuations, higher volatility than U.S. securities and limited liquidity. Political, economic and information risks are also associated with foreign securities. These investments may also be affected by the conversion of the currency of several European countries to the "euro." Investments in emerging markets may be subject to these risks to a greater extent than those in more developed markets. For additional information see the section entitled "More About Risk." ---------- 10 [GRAPHIC] Goals, Strategies & Risks ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The Fund's current subadviser assumed that function on February 14, 1997. This chart and table reflect results achieved by the previous subadviser under different investment policies for periods prior to February 14, 1997. The Fund's performance may have been different under its current advisory arrangements and investment policies. The bar chart shows the Fund's total returns for Class Y shares for each calendar year since it first offered Class Y shares. + 1994 1995 1996 1997 1998 1999 2000 8.93% 6.56% 3.95% -6.74% 7.29% 88.61% -28.16% [DELTA UP] Highest Quarterly Return: Fourth Quarter 1999, up 66.97% [DELTA DOWN] Lowest Quarterly Return: Second Quarter 2000, down 15.47% + The Fund's Class Y shares total return year-to-date as of September 30, 2001 was -26.56%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the Morgan Stanley Capital International Europe, Australasia and Far East Index (" MSCI EAFE"), an arithmetical average of the performance of over 1,000 companies representing stock markets in Europe, Australia, New Zealand and the Far East. The returns are also compared to returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Foreign Stock and Lipper International Funds Averages, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect the expenses of the Fund's Class Y shares. The MSCI EAFE returns have not been adjusted for ongoing management, distribution and operating expenses applicable to mutual fund investments. The Morningstar Foreign Stock Average and the Lipper International Funds Average returns have been adjusted for these expenses but do not reflect any sales charge.
- ------------------------------------------------------------------------------------------------- Average Annual Total Returns Past 1 Year Past 5 Years Since Class (for the periods ended December 31, 2000) Inception - ------------------------------------------------------------------------------------------------- CDC Nvest International Equity Fund: Class Y (inception 9/9/93) -28.16% 7.10% 7.07% - ------------------------------------------------------------------------------------------------- MSCI EAFE -14.17% 7.13% 7.65% Morningstar Foreign Stock Average -15.66% 9.43% 9.82% Lipper International Funds Average -15.60% 9.09% 8.80% - -------------------------------------------------------------------------------------------------
The MSCI EAFE Index is calculated from 9/19/93 and the Morningstar Foreign Stock Average and the Lipper International Funds Average are calculated as of 9/30/90. For past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses." - ---------- 11 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest Jurika & Voyles Small Cap Growth Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class Y ------- Pending Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Jurika & Voyles, L.P. ("Jurika & Voyles") Manager: Jon Hickman Category: Small-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- Under normal market conditions, the Fund will invest substantially all of its assets in stocks of quality companies having small market capitalizations. The Fund generally invests in companies that will give it median and weighted average market capitalization of less than $1 billion. The Fund expects to invest at least 80% of its total assets in the common stock of companies with market capitalizations within the Russell 2000 Index, a nationally recognized index of small-cap companies. When selecting small-cap companies, Jurika & Voyles will emphasize "in-house" research, which includes personal contacts, site visits and meetings with company management. Through this research, Jurika & Voyles looks for small-cap companies that possess several of the following characteristics, although not all of the companies selected will have these attributes: U Strong competitive advantage - companies that "do what they do" better than anyone else are prime candidates. U Clearly defined business focus - companies that "stick to their knitting," focusing only on a particular niche or segment of a broader market. U Strong financial health - companies with strong cash flows, low debt-to-total capital ratios, healthy balance sheets and higher returns on equity than the market average. U Quality management - companies with experienced management, low turnover and a long-term track record of success in an industry. U Right price - companies that sell at a discount to Jurika & Voyles' estimation of their true value. U Catalyst for growth - It is not enough to invest in an inexpensive company. There must be some factor (typically a new product, improving industry trend or economic condition) that will lead to an increase in the price of the stock. The Fund may also: o Invest in convertible preferred stock, convertible debt securities, real estate investment trusts ("REITs") and warrants. o Invest up to 25% of its total assets in securities of foreign issuers, primarily through sponsored and unsponsored Depositary Receipts. Some examples of Depositary Receipts are American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"). The Fund will limit its investment in any one foreign country to 5% of its total assets and will invest no more than 5% of its total assets in securities denominated in foreign currencies. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. o Engage in active and frequent trading of securities. Frequent trading may produce higher transaction costs and a higher level of taxable capital gains, which may lower the Fund's return. A "snapshot" of the Fund's investments may be found in the current annual or semiannual report. (See back cover.) - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Small capitalization and emerging growth companies may be subject to more abrupt price movements, limited markets and less liquidity than larger, more established companies, which could adversely affect the value of the portfolio. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. The Fund's investment in short-term trading strategies, with respect to initial public offerings, may make the value of an investment in this Fund fluctuate even more than an investment in other ---------- 12 [GRAPHIC] Goals, Strategies & Risks ------------------------- - ------------------------------------- Principal Investment Risks- continued - ------------------------------------- small-cap funds. Securities issued in IPOs tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of publicly available information and trading history. This may impact the Fund's performance and result in increased tax liability to shareholders. REITs: REITs are subject to changes in underlying real estate values, rising interest rates, limited diversification of holdings, higher costs and prepayment risk associated with related mortgages, as well as other risks particular to investments in real estate. Foreign securities: Depositary Receipts may be more volatile than U.S. securities and carry political, economic and information risks that are associated with foreign securities. For additional information see the section entitled "More About Risk." - ---------- 13 Goals, Strategies & Risks [GRAPHIC] ------------------------- - -------------------------------------- Evaluating the Fund's Past Performance - -------------------------------------- The bar chart and table shown below give an indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for one-year, five-year and ten-year periods (or since inception if shorter) compare with those of a broad measure of market performance and those indices of funds with similar objectives. The Fund's past performance does not necessarily indicate how the Fund will perform in the future. The returns shown are those of the Fund's Classes A, B and C shares which are not offered in this Prospectus. Class Y shares would have substantially similar annual returns because they would be invested in the same portfolio of securities as Classes A, B and C shares and would only differ to the extent that the classes do not have the same expenses. The Class Y returns may be higher than the returns of Classes A, B and C shares because those classes are subject to sales charges and higher expenses. The bar chart shows the Fund's total returns for Class A shares for each calendar year since its first full year of operations.+ The returns for the other classes of shares offered by this Prospectus differ from the Class A returns shown in the bar chart to the extent their respective expenses differ. The chart does not reflect any sales charge that you may be required to pay when you buy or redeem the Fund's shares. A sales charge will reduce your return. 1999 2000 36.68% -11.16 [DELTA UP] Highest Quarterly Return: Fourth Quarter 1999, up 43.96% [DELTA DOWN] Lowest Quarterly Return: Third Quarter 1998, down 12.49% + The Fund's Class A shares total return year-to-date as of September 30, 2001 was -18.63%. The table below shows the Fund's average annual total returns for the one-year, five-year and ten-year periods (or since inception if shorter) compared to those of the S&P 500 Index, a market value-weighted, unmanaged index of common stock prices for 500 selected stocks. The returns are also compared to returns, as calculated by Morningstar, Inc. and Lipper, Inc., of the Morningstar Mid Cap Blend and Lipper Multi-Cap Core Funds Average, each an average of the total returns of all mutual funds with an investment style similar to that of the Fund. You may not invest directly in an index. The Fund's total returns reflect its expenses and the maximum sales charge that you may be required to pay when you buy or redeem the Fund's shares. The S&P 500 Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments. The Morningstar Mid Cap Blend and Lipper Multi-Cap Core Funds Average returns have been adjusted for these expenses but do not reflect any sales charges.
- ------------------------------------------------------------------------------------ Average Annual Total Returns Past 1 Year Since Class (for the periods ended December 31, 2000) Inception - ------------------------------------------------------------------------------------ CDC Nvest Jurika & Voyles Small Cap Growth Fund (formerly CDC Nvest Bullseye Fund): Class A (inception 3/31/98) -16.17% 5.52% Class B (inception 3/31/98) -14.96% 6.21% Class C (inception 3/31/98) -13.27% 6.64% - ------------------------------------------------------------------------------------ S&P 500 Index -9.10% 8.18% Morningstar Mid Cap Blend 3.37% 6.42% Lipper Multi-Cap Core Funds Average -2.97% 7.20% - ------------------------------------------------------------------------------------
Each index is calculated from 3/31/98 for Classes A, B and C shares. For estimated past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses." ---------- 14 [GRAPHIC] Goals, Strategies & Risks ------------------------- CDC Nvest Large Cap Growth Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. Low X X Ticker Symbol: Class Y ------- Pending Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Vaughan, Nelson, Scarborough & McCullough, L.P. ("VNSM") Managers: Brian A. Grove, Christopher T. McMillin and William R. Berger Category: Large-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital by investing at least 65% of its total assets in equity securities of companies with large market capitalizations that the subadviser believes have better than average long-term growth potential. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- VNSM uses rigorous fundamental research and active management to analyze a broad selection of company or industry sectors and to seek companies with the following characteristics, although not all of the companies selected will have these attributes: U Quality management U Strong financials U Competitive products U Positive economic outlooks In selecting investments for the Fund's portfolio, VNSM employs the following strategy: o It starts from a universe of more than 5,000 companies, screening out companies with less than $1 billion market capitalization. o Next, VNSM screens for strong earnings and revenue growth over rolling 5-year periods. o Choosing 100-150 target companies, VNSM then applies growth rate analysis and industry catalyst research to find 40-50 strong stocks for the portfolio. VNSM targets stocks for sale due to underperformance in earnings relative to targets, unfavorable changes in the company or its industry or when price targets are achieved. The Fund may also: o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Because of these and other risks, the Fund may underperform certain other stock funds during periods when large company growth stocks are generally out of favor. For additional information see the section entitled "More About Risk." - -------------------------------------------------------------------------------- Performance - -------------------------------------------------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. - ---------- 15 Goals, Strategies & Risks [GRAPHIC] ------------------------- CDC Nvest Jurika & Voyles Relative Value Fund ---------------------------------------------- Fund Focus ---------------------------------------------- Stability Income Growth High X Mod. X Low X Ticker Symbol: Class Y ------- Pending Adviser: CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") Subadviser: Jurika & Voyles, L.P. ("Jurika & Voyles") Managers: Guy Elliffe, Eric Hull and Nicholas E. Moore Category: Mid-Cap Equity - -------------------------------------------------------------------------------- Investment Goal - -------------------------------------------------------------------------------- The Fund seeks long-term growth of capital. The Fund's investment goal may be changed without shareholder approval. - -------------------------------------------------------------------------------- Principal Investment Strategies - -------------------------------------------------------------------------------- To pursue its investment goal, the Fund invests in equity securities of quality companies with mid to large market capitalizations. The Fund expects to invest approximately 80%, but no less than 65%, of its total assets in equity securities of companies with market capitalizations within the range of the Russell 1000 Index, a nationally recognized index of mid- and large-cap securities. The Fund's average and median market capitalization will fluctuate over time as a result of market valuation levels and the availability of specific investment opportunities. When selecting equity securities for the Fund, Jurika & Voyles will emphasize "in-house" research, which includes personal contacts, site visits and meetings with company management. Through this research, Jurika & Voyles looks for quality companies that possess several of the following characteristics, although not all of the companies selected will have these attributes: U Strong, competitive advantage - companies that "do what they do" better than anyone else are the prime candidates. U Clearly defined business focus - companies that "stick to their knitting" - focusing only on a particular niche or segment of a broader market. U Strong financial health - companies with strong cash flows, low debt-to-total capital ratios, healthy balance sheets and higher returns on equity than the market average. U Quality management - companies with experienced management, low turnover and a long-term track record of success in an industry. U Right price - companies that sell at a discount to Jurika & Voyles' estimation of their true value. U Catalyst for growth - It is not enough to invest in an inexpensive company. There must be some factor (typically a new product, improving industry trend or economic condition) that will lead to an increase in the price of the stock. The Fund may also: o Invest in real estate investment trusts ("REITs"). o Invest in foreign issuers, primarily through depositary receipts. o Invest in other investment companies. o Purchase money market or high quality debt securities for temporary defensive purposes in response to adverse market, economic, political or other conditions. These investments may prevent the Fund from achieving its investment goal. - -------------------------------------------------------------------------------- Principal Investment Risks - -------------------------------------------------------------------------------- Equity securities: Because the Fund may invest in equity securities, it is subject to the risks commonly associated with investing in stocks. This means that you may lose money on your investment due to unpredictable drops in a stock's value or periods of below-average performance in a given stock or in the stock market as a whole. Growth stocks are generally more sensitive to market movements than other types of stocks, primarily because their stock prices are based heavily on future expectations. Value stocks present the risk that they may fall out of favor with investors and underperform growth stocks during any given period. Mid-cap stocks are more volatile and may be less liquid than large-cap stocks. Mid-cap companies may have a shorter history of operations and a smaller market for their shares. Foreign securities: ADRs may be more volatile than U.S. securities and carry political, economic and information risks that are associated with foreign securities. REITs: REITs are subject to changes in underlying real estate values, rising interest rates, limited diversification of holdings, higher costs and prepayment risk associated with related mortgages, as well as other risks particular to investments in real estate. Investments in other investment companies: May indirectly bear service and other fees in addition to its own expenses. For additional information see the section entitled "More About Risk." - -------------------------------------------------------------------------------- Performance - -------------------------------------------------------------------------------- No performance information is available for the Fund because it has not yet been in operation for a full calendar year. ---------- 16 [GRAPHIC] Fund Fees & Expenses The following tables describe the fees and expenses that you may pay if you buy and hold shares of each Fund. - --------------------------------------- Shareholder Fees - --------------------------------------- (fees paid directly from your investment) - -------------------------------------------------------------------------------- All Funds Class Y - -------------------------------------------------------------------------------- Maximum sales charge (load) imposed on purchases None - -------------------------------------------------------------------------------- Maximum deferred sales charge (load) None - -------------------------------------------------------------------------------- Redemption fees None* *Generally, a transaction fee will be charged for expedited payment of redemption proceeds such as by wire or overnight delivery. - --------------------------------------- Annual Fund Operating Expenses - --------------------------------------- (expenses that are deducted from Fund assets, as a percentage of average daily net assets)
- ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest Targeted Equity CDC Nvest CDC Nvest Fund Growth and Income Fund Balanced Fund(1) (formerly CDC Nvest Growth Fund) Class Y Class Y Class Y - ---------------------------------------------------------------------------------------------------------------------------- Management fees 0.68% 0.67% 0.75% Distribution and/or 0.00% 0.00% 0.00% service (12b-1) fees Other expenses** 0.19% 0.23% 0.40% Total annual fund 0.87% 0.90% 1.15% operating expenses Fee Waiver/Expense 0.00% 0.00% 0.20% Reimbursement Net Expenses 0.87% 0.90% 0.95% - ---------------------------------------------------------------------------------------------------------------------------- CDC Nvest Jurika & Voyles Small Cap Growth Fund(3) CDC Nvest CDC Nvest (formerly CDC Nvest AEW Real Estate Fund(2) International Equity Fund Bullseye Fund) Class Y Class Y Class Y - ---------------------------------------------------------------------------------------------------------------------------- Management fees 0.80% 0.90% 0.95% Distribution and/or 0.00% 0.00% 0.00% service (12b-1) fees Other expenses** 5.75% 0.60% 1.25% Total annual fund 6.55% 1.50% 2.20% operating expenses Fee Waiver/Expense 5.30% 0.00% 0.70% Reimbursement Net Expenses 1.25% 1.50% 1.50%
- ---------- 17 Fund Fees & Expenses [GRAPHIC] - -------------------------------------------------------------------------------- CDC Nvest CDC Nvest Jurika & Voyles Large Cap Growth Fund(4) Relative Value Fund(5) Class Y Class Y - -------------------------------------------------------------------------------- Management fees 0.90% 0.85% Distribution and/or 0.00% 0.00% service (12b-1) fees Other expenses** 0.56% 0.76% Total annual fund 1.46% 1.61% operating expenses Fee Waiver/Expense 0.31% 0.36% Reimbursement Net Expenses 1.15% 1.25% **"Other expenses" are based on estimated amounts for the current fiscal year. (1) Beginning upon the merger of the CDC Nvest Balanced Fund with the Jurika & Voyles Balanced Fund and continuing through December 31, 2003, CDC IXIS Advisers has given a binding undertaking to this Fund to limit the amount of the Fund's total annual fund operating expenses to 0.95% of the Fund's average daily net assets for Class Y shares. (2) AEW has given a binding undertaking to the Fund to limit the amount of the Fund's total fund operating expenses to 1.25%, of the Fund's average daily net assets for Class Y shares. This undertaking is in effect through May 31, 2002 and will be reevaluated on an annual basis. (3) Beginning upon the merger of the CDC Nvest Jurika & Voyles Small Cap Growth Fund with the Jurika & Voyles Small Cap Fund and continuing through December 31, 2004, CDC IXIS Advisers has given a binding undertaking to this Fund to limit the amount of the Fund's total annual fund operating expenses to 1.50% of the Fund's average daily net assets for Class Y shares. (4) CDC IXIS Advisers has given a binding undertaking to this Fund to limit the amount of the Fund's total annual fund operating expenses to 1.15% of the Fund's average daily net assets for Class Y shares. This undertaking is in effect through April 30, 2003 and will be reevaluated on an annual basis. (5) CDC IXIS Advisers has given binding undertakings to this Fund to limit the amount of the Fund's total annual fund operating expenses to 1.25% of the Fund's average daily net assets for Class Y shares. This undertaking is in effect through December 31, 2004 and will be reevaluated on an annual basis. ---------- 18 [GRAPHIC] Fund Fees & Expenses - --------------------------------------- Example - --------------------------------------- This example*, which is based upon the expenses shown above, is intended to help you compare the cost of investing in the Funds with the cost of investing in other mutual funds. The example assumes that: o You invest $10,000 in a Fund for the time periods indicated; o Your investment has a 5% return each year; o A Fund's operating expenses remain the same; and o All dividends and distributions are reinvested. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:
- ----------------------------------------------------------------------------------- CDC Nvest Targeted Equity Fund CDC Nvest Growth and Income (formerly CDC Nvest Growth Fund) Fund Class Y Class Y - ----------------------------------------------------------------------------------- 1 year $ 89 $ 92 - ----------------------------------------------------------------------------------- 3 years $ 278 $ 287 - ----------------------------------------------------------------------------------- 5 years $ 482 $ 498 - ----------------------------------------------------------------------------------- 10 years $1,073 $1,108 - ----------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------ CDC Nvest Jurika & Voyles Small Cap Growth Fund CDC Nvest International Equity CDC Nvest Balanced Fund (formerly CDC Nvest Bullseye Fund) Fund Class Y Class Y Class Y - ------------------------------------------------------------------------------------------------------------------------------ 1 year $ 97 $ 153 $ 153 - ------------------------------------------------------------------------------------------------------------------------------ 3 years $ 346 $ 474 $ 474 - ------------------------------------------------------------------------------------------------------------------------------ 5 years $ 614 $ 975 $ 818 - ------------------------------------------------------------------------------------------------------------------------------ 10 years $1,380 $2,358 $1,791 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ CDC Nvest AEW Real Estate CDC Nvest Large Cap Growth Fund CDC Nvest Jurika & Voyles Relative Fund Value Fund Class Y Class Y Class Y - ------------------------------------------------------------------------------------------------------------------------------ 1 year $ 650 $ 117 $ 127 - ------------------------------------------------------------------------------------------------------------------------------ 3 years $1,920 $ 431 $ 397 - ------------------------------------------------------------------------------------------------------------------------------ 5 years $3,150 10 years $6,064
* The example is based on the Net Expenses shown above for the 1-year period for Balanced Fund and Large Cap Growth Fund and for the 1-year and 3-year periods for the Small Cap Growth Fund and Relative Value Fund illustrated in the Example and on the Total Annual Fund Operating Expenses for the remaining years. The example is based on Total Annual Operating Expenses for the remaining Funds for all periods. - ---------- 19 More About Risk [GRAPHIC] The Funds have principal investment strategies that come with inherent risks. The following is a list of risks to which each Fund may be subject by investing in various types of securities or engaging in various practices. Correlation Risk (All Funds except AEW Real Estate Fund) The risk that changes in the value of a hedging instrument will not match those of the asset being hedged. Credit Risk (All Funds) The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable to honor a financial obligation. Currency Risk (All Funds except Growth and Income and AEW Real Estate Funds) The risk that fluctuations in the exchange rates between the U.S. dollar and foreign currencies may negatively affect an investment. Emerging Markets Risk (International Equity Fund) The risk associated with investing in securities traded in developing securities markets, which may be smaller and have shorter operating histories than developed markets. Emerging markets involve risks in addition to and greater than those generally associated with investing in developed foreign markets. The extent of economic development, political stability, market depth, infrastructure and capitalization, and regulatory oversight in emerging market economies is generally less than in more developed markets. Euro Conversion Risk (All Funds except Growth and Income and AEW Real Estate Funds) Many European countries have adopted a single European currency, the "euro." The consequences of this conversion for foreign exchange rates, interest rates and the value of European securities are unclear presently. Such consequences may decrease the value and/or increase the volatility of securities held by a Fund. Extension Risk (Balanced Fund) The risk that an unexpected rise in interest rates will extend the life of a mortgage- or asset-backed security beyond the expected prepayment time, typically reducing the security's value. Information Risk (All Funds) The risk that key information about a security is inaccurate or unavailable. Interest Rate Risk (All Funds) The risk of market losses attributable to changes in interest rates. In general, the prices of fixed-income securities rise when interest rates fall, and prices fall when interest rates rise. Leverage Risk (All Funds) The risk associated with securities or practices (e.g. borrowing) that multiply small index or market movements into large changes in value. When a derivative security (a security whose value is based on another security or index) is used as a hedge against an offsetting position that a Fund also holds, any loss generated by the derivative security should be substantially offset by gains on the hedged instrument, and vice versa. To the extent that a Fund uses a derivative security for purposes other than as a hedge, that Fund is directly exposed to the risks of that derivative security and any loss generated by the derivative security will not be offset by a gain. Liquidity Risk (All Funds) The risk that certain securities may be difficult or impossible to sell at the time and at the price that the seller would like. This may result in a loss or may otherwise be costly to a Fund. These types of risks may also apply to restricted securities, Section 4(2) Commercial Paper, or Rule 144A Securities. Management Risk (All Funds) The risk that a strategy used by a Fund's portfolio management may fail to produce the intended result. Market Risk (All Funds) The risk that the market value of a security may move up and down, sometimes rapidly and unpredictably, based upon a change in an issuer's financial condition as well as overall market and economic conditions. IPO securities tend to involve greater market risk than other equity securities due, in part, to public perception and the lack of public information and trading history. Opportunity Risk (All Funds) The risk of missing out on an investment opportunity because the assets necessary to take advantage of it are invested in less profitable investments. Options, Futures and Swap Contracts Risks (All Funds except AEW Real Estate Fund) These transactions are subject to changes in the underlying security on which such transactions are based. It is important to note that even a small investment in these types of derivative securities may give rise to leverage risk, and can have a significant impact on a Fund's exposure to stock market values, interest rates or the currency exchange rate. These types of transactions will be used primarily for hedging purposes. Political Risk (All Funds) The risk of losses directly attributable to government or political actions. Prepayment Risk (Balanced and AEW Real Estate Funds) The risk that unanticipated prepayments may occur, reducing the return from mortgage- or asset-backed securities, or real estate investment trusts. Small Capitalization Companies Risk (International Equity and Small Cap Growth Funds) These companies carry special risks, including narrower markets, more limited financial and management resources, less liquidity and greater volatility than large company stocks. Valuation Risk (All Funds) The risk that a Fund has valued certain securities at a higher price than it can sell them for. ---------- 20 [GRAPHIC] Management Team --------------- Meet the Funds' Investment Advisers and Subadvisers The CDC Nvest Funds family currently includes 27 mutual funds with a total of over $5.9 billion in assets under management as of June 30, 2001. CDC Nvest Funds are distributed through CDC IXIS Asset Management Distributors, L.P. (the "Distributor"). This Prospectus covers Class Y shares of CDC Nvest Equity Funds (the "Funds" or each a "Fund"), which along with the CDC Nvest Income Funds, CDC Nvest Star Funds, and CDC Nvest Tax Free Income Funds, constitute the "CDC Nvest Funds." CDC Nvest Cash Management Trust - Money Market Series and CDC Nvest Tax Exempt Money Market Trust constitute the "Money Market Funds." - -------------------------------------- CDC IXIS Asset Management Advisers, L.P. - -------------------------------------- CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers", formerly CDC IXIS Advisers.), located at 399 Boylston Street, Boston, Massachusetts 02116, serves as the adviser to each of the Funds except Targeted Equity Fund (for which CGM serves as adviser) and AEW Real Estate Fund (for which AEW serves as adviser). CDC IXIS Advisers is a subsidiary of CDC IXIS Asset Management North America, L.P. ("CDC IXIS North America", formerly Nvest Companies, L.P.), which is a subsidiary of CDC IXIS Asset Management. CDC IXIS Asset Management is the investment management arm of France's Caisse des Depots et Consignations ("CDC"), a major diversified financial institution. As of June 30, 2001, CDC IXIS North America's 14 principal subsidiary or affiliated asset management firms collectively had $131 billion in assets under management. CDC IXIS Advisers oversees, evaluates, and monitors the subadvisory services provided to each Fund except Targeted Equity Fund and AEW Real Estate Fund. It also provides general business management and administration to each Fund except Targeted Equity Fund and AEW Real Estate Fund. CDC IXIS Advisers does not determine what investments will be purchased by the Funds. The subadvisers listed below, CGM and AEW make the investment decisions for their respective Funds. The combined advisory and subadvisory fees paid by the Funds (except Targeted Equity Fund, AEW Real Estate Fund, Large Cap Growth Fund and Relative Value Fund) in 2000 as a percentage of each Fund's average daily net assets were 0.66% for Growth and Income Fund, 0.75% for Balanced Fund, 0.11% for the Small Cap Growth Fund and 0.90% for International Equity Fund. Large Cap Growth Fund pays combined advisory and subadvisory fees at the annual rates of 0.90% of the average daily net assets of the Fund. Relative Value Fund pays combined advisory fees at an annual rate of 0.85% of the first $500 million of the average daily net assets of the Fund and 0.80% of such assets in excess of $500 million. - -------------------------------------- Subadvisers - -------------------------------------- Loomis Sayles, located at One Financial Center, Boston, Massachusetts 02111, serves as subadviser to two components of the Balanced Fund and the International Equity Fund. Loomis Sayles is a subsidiary of CDC IXIS North America. Founded in 1926, Loomis Sayles is one of America's oldest investment advisory firms with over $67 billion in assets under management as of June 30, 2001. Loomis Sayles is well known for its professional research staff, which is one of the largest in the industry. Westpeak, located at 1470 Walnut Street, Boulder, Colorado 80302, serves as subadviser to Growth and Income Fund. Westpeak is a subsidiary of CDC IXIS North America. Founded in 1991, Westpeak has approximately $8.7 billion in assets under management as of June 30, 2001. Jurika & Voyles, located at Lake Merritt Plaza, 1999 Harrison, Suite 700, Oakland, California 94612, serves as subadviser to one component of the Balanced Fund, the Small Cap Growth Fund and the Relative Value Fund. Jurika & Voyles, founded in 1983, has discretionary management authority with respect to over $2.4 billion of assets as of June 30, 2001 for various clients including corporations, pension plans, 401(k) plans, profit sharing plans, trusts and estates, foundations and charities, mutual funds and individuals. Jurika & Voyles is a subsidiary of CDC IXIS North America. Vaughan, Nelson, Scarborough & McCullough, located at 6300 Chase Tower, Houston, Texas 77002, serves as subadvisor to Large Cap Growth Fund. VNSM is a subsidiary of CDC IXIS North America. Originally incorporated in 1970, VNSM focuses primarily on managing equity and fixed-income funds for clients who consist of foundations, university endowments and corporate retirement and family/individual core funds. As of June 30, 2001, VNSM had $3.9 billion in assets under management. - ---------- 21 Management Team [GRAPHIC] --------------- - -------------------------------------------------------------------------------- Capital Growth Management Limited Partnership (Adviser) - -------------------------------------------------------------------------------- CGM, located at One International Place, Boston, Massachusetts 02110, has served as adviser to the Targeted Equity Fund since CGM's inception in 1989. It also serves as investment adviser to eight additional mutual funds and various institutional investors. CGM is an affiliate of CDC IXIS North America and has over $5 billion in assets under management as of June 30, 2001. For the fiscal year ended December 31, 2000, Targeted Equity Fund paid 0.67% of its average daily net assets to CGM in advisory fees. AEW Management and Advisors, L.P. (Adviser) - -------------------------------------------------------------------------------- AEW Management and Advisors, L.P. (Adviser) - -------------------------------------------------------------------------------- AEW, located at World Trade Center East, Two Seaport Lane, Boston, Massachusetts 02210, serves as the adviser to the AEW Real Estate Fund. AEW is a subsidiary of CDC IXIS North America. Together with other AEW adviser affiliates, AEW manages over $7 billion of client capital as of June 30, 2001. AEW Real Estate Fund pays advisory fees at the annual rate of 0.80% of the first $500 million of the Fund's average daily net assets and 0.75% of such assets in excess of $500 million. - -------------------------------------------------------------------------------- Subadvisory Agreements - -------------------------------------------------------------------------------- Each Fund has received an exemptive order from the Securities and Exchange Commission (the "SEC") which permits CDC IXIS Advisers to amend or continue existing subadvisory agreements when approved by the Board of Trustees, without shareholder approval. The exemption also permits CDC IXIS Advisers to enter into new subadvisory agreements with subadvisers that are not affiliated with CDC IXIS Advisers, if approved by the Board of Trustees. Shareholders will be notified of any subadviser changes. - -------------------------------------------------------------------------------- Portfolio Trades - -------------------------------------------------------------------------------- In placing portfolio trades, each Fund's adviser or subadviser may use brokerage firms that market the Fund's shares or are affiliated with CDC IXIS North America, CDC IXIS Advisers, CGM, AEW or any of the subadvisers. In placing trades, any of the subadvisers will seek to obtain the best combination of price and execution, which involves a number of judgmental factors. Such portfolio trades are subject to applicable regulatory restrictions and related procedures adopted by the Board of Trustees. ---------- 22 [GRAPHIC] Management Team --------------- Meet the Funds' Portfolio Managers Thomas M. Anichini Thomas Anichini co-manages the Growth and Income Fund. He also co-manages Westpeak's segment of the CDC Nvest Star Value and Star Growth Funds. Mr. Anichini is a Vice President and Portfolio Manager at Westpeak Global Advisors, which he joined in 1999. Prior to joining Westpeak, Mr. Anichini was a Principal at Mercer Investment Consulting, Inc. and Asset Allocation Manager at Carr Asset Management, Inc. Mr. Anichini received a B.S. in Actuarial Science from the University of Illinois, and an M.B.A. from the University of Chicago. He holds the designation of Chartered Financial Analyst and has over 10 years of investment experience. Mark B. Baribeau Mark B. Baribeau has co-managed the growth component of the equity portion of the Balanced Fund since March 2000. He also serves as portfolio manager of Loomis Sayles Growth Fund. Mr. Baribeau, Vice President of Loomis Sayles, joined the company in 1989. Mr. Baribeau received a M.A. from University of Maryland and a B.A. from University of Vermont. He holds the designation of Chartered Financial Analyst and has over 14 years of investment experience. William R. Berger William R. Berger co-manages the Large Cap Growth Fund. He also co-manages VNSM's segment of the CDC Nvest Star Growth Fund. Mr. Berger, Principal of VNSM, joined the firm in 1998. Prior to joining VNSM, he was Vice President and Portfolio Manager at Securities Management from 1993 through 1998 and Research and Portfolio Manager at Trinity Investment Management Corp. from 1989 through 1993. Mr. Berger holds a B.S. from Miami University (Ohio) and an M.B.A. from the Wharton School at the University of Pennsylvania. He holds the designation of Chartered Financial Analyst and Certified Public Accountant. Mr. Berger has 13 years of investment management experience. Pamela N. Czekanski Pamela N. Czekanski has co-managed the growth component of the equity portion of the Balanced Fund since March 2000. She also serves as a portfolio manager of Loomis Sayles Growth Fund. Ms. Czekanski, Vice President of Loomis Sayles, joined the company in 1995. Ms. Czekanski received a B.A. from Middlebury College. She holds the designation of Chartered Financial Analyst and has over 16 years of investment experience. Guy Elliffe Guy Elliffe has co-managed the value component of the equity portion of the Balanced Fund since March 2001 and Relative Value Fund since commencement of operations. Mr. Elliffe, Senior Vice President, Principal and Director of Research of Jurika & Voyles, joined the company in 1995. Prior to joining Jurika & Voyles, he served as Managing Director of Equities at National Mutual Funds Management. Mr. Elliffe earned a B.A. (Hons) from the University of Otago (New Zealand) and a Certificate of Finance and Investment from the Institute of Actuaries in London. He holds the designation of Chartered Financial Analyst and has over 20 years of investment experience. Robert A. Franz Robert Franz co-manages the Growth and Income Fund. He also co-manages the CDC Nvest Capital Growth Fund, Westpeak's segment of the CDC Nvest Star Value Fund and Westpeak's segment of CDC Nvest Star Growth Fund. Mr. Franz is Principal and Chief Investment Officer of Westpeak Global Advisors, which he joined in 1991. Mr. Franz received a B.A. in Mathematics from Pomona College and has over 17 years of investment experience. Brian A. Grove Brian A. Grove co-manages the Large Cap Growth Fund. He also co-manages VNSM's segment of the CDC Nvest Star Growth Fund. Mr. Grove, Principal of VNSM, joined the firm in 1997. Prior to joining VNSM, he was Vice President of Daniel Breen & Co., L.P. from 1989 through 1994 and a senior Portfolio Manager for Transamerica Asset Management from 1994 through 1995. Mr. Grove holds a B.A. and M.B.A. from Vanderbilt University, a J.D. from the University of Houston and is a member of the Texas Bar. He holds the designation of Chartered Financial Analyst and has 18 years of investment management experience. G. Kenneth Heebner G. Kenneth Heebner has managed the Targeted Equity Fund since 1976. Mr. Heebner currently serves as senior portfolio manager of CGM, which he co-founded in 1989. Mr. Heebner received a B.S. from Amherst College and an M.B.A. from Harvard Business School. He holds the designation of Chartered Financial Analyst and is a highly regarded 35-year veteran of the investment industry. Jon Hickman Jon Hickman has managed the Small Cap Growth Fund since commencement of operations. Mr. Hickman, Director of the small-cap equity strategy of Jurika & Voyles, joined the company in February 1999. Before joining Jurika & Voyles, he spent fifteen years with Wells Fargo Bank as a portfolio manager responsible for small- and mid-cap strategies. Mr. Hickman received a B.S. and an M.B.A. from Brigham Young University. He has over 16 years of investment experience. Eric Hull Eric Hull has co-managed the value component of the equity portion of the Balanced Fund since March 2001 and the Relative Value Fund since commencement of - ---------- 23 Management Team [GRAPHIC] --------------- operations. Mr. Hull, Senior Vice President, Principal and Senior Research Analyst of Jurika & Voyles, joined the company in 1994. Prior to joining Jurika & Voyles, Mr. Hull held positions in both investment management and investment banking. Mr. Hull received a B.S. in Business Administration from the University of California at Berkeley. He holds the designation of Chartered Financial Analyst and has over 15 years of investment experience. John Hyll John Hyll has served the fixed-income portion of the Balanced Fund as portfolio manager from 1994 until 1999 and as co-portfolio manager thereafter. He also serves as portfolio manager of CDC Nvest Short Term Corporate Income Fund and Loomis Sayles Short Term Bond Fund. Mr. Hyll, Portfolio Manager and Vice President of Loomis Sayles, began his investment career in 1983 and joined Loomis Sayles in 1989. Mr. Hyll received a B.A. and an M.B.A. from Baldwin-Wallace College. He has over 18 years of investment experience. Christopher T. McMillin Christopher (Toby) McMillin co-manages the Large Cap Growth Fund. He also co-manages VNSM's segment of the CDC Nvest Star Growth Fund. Mr. McMillin, an investment research analyst, joined VNSM in 1998. Prior to joining VNSM, he was Portfolio Manager and Research Analyst for Roger H. Jenswold & Company from 1997 through 2000 and a management consultant for PricewaterhouseCoopers from 1995 through 1997. Mr. McMillin holds a B.A. from the University of Texas. He has 4 years of investment management experience. Eswar Menon Eswar Menon serves as co-portfolio manager for the International Equity Fund, concentrating on emerging markets. He also co-manages the Loomis Sayles segment of CDC Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles Worldwide Fund, Loomis Sayles International Equity Fund, and Loomis Sayles Emerging Markets Fund and leads a team of managers responsible for the management of the International segment of the Loomis Sayles Global Technology Fund. Mr. Menon, Vice President of Loomis Sayles, joined the company in 1999. Prior to joining Loomis Sayles, Mr. Menon was the Portfolio Manager for Emerging Countries at Nicholas Applegate Capital Management from 1995 until 1999. Prior to his position at Nicholas Applegate Capital Management, he spent five years with Koeneman Capital Management and Integrated Device Technology. Mr. Menon received an M.B.A. from the University of Chicago, an M.S. from the University of California, and a B.S. from Indian Institute of Technology, Madras, India. He has over 11 years of investment experience. Nicholas E. Moore Nicholas Moore has co-managed the value component of the equity portion of the Balanced Fund since March 2001 and the Relative Value Fund since commencement of operations. Mr. Moore, Senior Vice President, Principal and Senior Research Analyst of Jurika & Voyles, joined the company in June 1998. Prior to joining Jurika & Voyles, Mr. Moore was Vice President and Portfolio Manager at Orbitex Management from January until June 1998. Prior to that he served as portfolio manager for the Franklin Templeton Group from 1986 until January 1998. Mr. Moore has a B.A. from Menlo College in California. He has over 15 years of investment experience. Alexander Muromcew Alexander Muromcew serves as co-portfolio manager for the International Equity Fund, concentrating on Asian markets. He also co-manages the Loomis Sayles segment of CDC Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles Worldwide Fund, Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets Fund. Mr. Muromcew, Vice President of Loomis Sayles, joined the company in 1999. Prior to joining Loomis Sayles, Mr. Muromcew was a portfolio manager at Nicholas Applegate Capital Management from 1996 until 1999. Prior to 1996, Mr. Muromcew held positions with Jardine Fleming Securities in Japan, Emerging Markets Investors Corporation and Teton Partners L.P. He received an M.B.A. from Stanford University and a B.A. from Dartmouth College. He has over 10 years of investment experience. Gerald H. Scriver Gerald Scriver has managed the Growth and Income Fund since 1995. He also co-manages CDC Nvest Capital Growth Fund, Westpeak's segment of CDC Nvest Star Value Fund and Westpeak's segment of CDC Nvest Star Growth Fund. Mr. Scriver is President and Chief Executive Officer of Westpeak Global Advisors, which he founded in 1991. Mr. Scriver is a graduate of the State University of N.Y. at Buffalo and has over 35 years of investment experience. Richard D. Skaggs Richard D. Skaggs has co-managed the growth component of the equity portion of the Balanced Fund since March 2000. He also serves as a portfolio manager of Loomis Sayles Growth Fund. Mr. Skaggs, Vice President of Loomis Sayles, joined the company in 1994. Mr. Skaggs received a M.S.M. and a B.S. from Oakland University. He holds the designation of Chartered Financial Analyst and has over 13 years of investment experience. ---------- 24 [GRAPHIC] Management Team --------------- John Tribolet John Tribolet serves as co-portfolio manager for the International Equity Fund, concentrating on European markets. He also co-manages the Loomis Sayles segment of CDC Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles Worldwide Fund, Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets Fund. Mr. Tribolet, Vice President of Loomis Sayles, joined the company in 1999. Prior to joining Loomis Sayles, Mr. Tribolet was a portfolio manager for European Equities at Nicholas Applegate Capital Management from 1997 until 1999. From 1995 to 1997 he was a full time MBA student at the University of Chicago. Prior to 1995, he spent three years in the investment banking industry, most recently at Paine Webber Inc. Mr. Tribolet received his B.S. from Columbia University. He has over 9 years of investment experience. Matthew A. Troxell Matthew A. Troxell has managed the AEW Real Estate Fund since its inception. Mr. Troxell joined AEW in 1994 and is a Principal of the company. Prior to joining AEW, Mr. Troxell was a Vice President and Assistant to the President of Landmark Land Company, and an equity analyst at A.G. Becker Paribas. Mr. Troxell, a member of the National Association of Real Estate Investment Trusts, earned a B.A. from Tufts University. He holds the designation of Chartered Financial Analyst and has over 19 years of experience in investment analysis and portfolio management. Kurt L. Wagner Kurt L. Wagner has co-managed the fixed-income portion of the Balanced Fund since May 2000. Mr. Wagner, Vice President and Portfolio Manager of Loomis Sayles, began his investment career in 1978 and joined Loomis Sayles in 1994. Mr. Wagner received an M.B.A. from the University of Chicago and a B.A. from Haverford College. He holds the designation of Chartered Financial Analyst, Chartered Investment Counselor and has over 23 years of investment experience. - ---------- 25 Management Team [GRAPHIC] --------------- Past Performance Information - -------------------------------------- Adviser - AEW - -------------------------------------- The account returns shown below represent composite returns derived from performance data furnished by AEW (the "AEW Composite") relating to all accounts managed by AEW Capital Management, L.P. with substantially similar investment objectives, strategies and policies as the CDC Nvest AEW Real Estate Fund (the "Accounts"). (AEW is a wholly-owned subsidiary of AEW Capital Management, L.P.) Matthew Troxell, CDC Nvest AEW Real Estate Fund's portfolio manager, has been the lead manager for the Accounts since July 1999. The Accounts have not been subject to the same types of expenses to which the CDC Nvest AEW Real Estate Fund is subject nor to the diversification requirements, investment limitations and other restrictions to which the Fund is subject under the Investment Company Act and the Internal Revenue Code. The Accounts' performance results may have been less favorable had they been subject to these expenses or restrictions or to other restrictions applicable to investment companies under relevant laws. The information regarding the performance of the Accounts does not represent CDC Nvest AEW Real Estate Fund's performance. Such information should not be considered a prediction of the future performance of CDC Nvest AEW Real Estate Fund. CDC Nvest AEW Real Estate Fund commenced operations on September 1, 2000 and has a limited performance record. The table below shows the average annual total return of the Accounts managed by AEW Capital Management, L.P. for the one-year period ending December 31, 2000 and for the period from July 1, 1999 until December 31, 2000. The Account returns are also compared against the Morgan Stanley REIT Index. The past performance data for the Accounts has been adjusted to reflect the management fees and other expenses actually paid by the Accounts and assumes the reinvestment of all dividends and distributions. The fees and expenses paid by CDC Nvest AEW Real Estate Fund will be higher than the fees and expenses paid by the Accounts. The performance of the Accounts would have been lower than that shown below if they had been subject to the fees and expenses of CDC Nvest AEW Real Estate Fund. - -------------------------------------------------------------------------------- Average Annual Total Returns (1) 1 Year Since July 1, 1999 (For the period ending December 31, 2000) - -------------------------------------------------------------------------------- AEW Composite 31.00% 13.84% Morgan Stanley REIT Index 26.81% 10.21% - -------------------------------------------------------------------------------- (1) The AEW Composite consists of all client accounts whose portfolios were managed by Matthew Troxell at AEW Capital Management, L.P. for the one-year period ending December 31, 2000 and for the period from July 1, 1999 until December 31, 2000 using investment policies and strategies substantially similar to those that are used to manage CDC Nvest AEW Real Estate Fund. The average annual total return for the Accounts was calculated using a time-weighted rate of return which differs in part from the prescribed formula used by mutual funds to calculate their returns. The Morgan Stanley REIT Index is a market capitalization-weighted, unmanaged, total-return index of REITs that meet certain liquidity requirements. The index was designed to track the total-return performance of a broad group of REIT stocks assuming dividend reinvestment in the index. You cannot invest directly in an index. ---------- 26 [GRAPHIC] Fund Services ------------- It's Easy to Open an Account - ----------------------------------------- To Open an Account with CDC Nvest Funds: - ----------------------------------------- 1. Read this Prospectus carefully. 2. Read the following eligibility and minimum investment requirements to determine if you may purchase Class Y shares: Class Y shares of the Fund may be purchased by the following entities at the following investment minimums. A minimum initial investment is $1 million and $10,000 is the minimum subsequent investment for: o Other mutual funds, endowments, foundations, bank trust departments or trust companies. There is no initial or subsequent investment minimum for: o Retirement Plans (401(a), 401(k), 457 or 403(b) plans) that have total investment assets of at least $10 million. Plan sponsor accounts can be aggregated to meet this minimum. o Insurance Company Accounts of New England Financial, Metropolitan Life Insurance Company ("MetLife") or their affiliates. o Separate Accounts of New England Financial, MetLife or their affiliates. o Wrap Fee Programs of certain broker-dealers not being paid by the Fund, CDC IXIS Advisers or the Distributor. Such wrap fee programs may be subject to additional or different conditions, including a wrap account fee. Each broker-dealer is responsible for transmitting to its customer a schedule of fees and other information regarding any such conditions. If the participant who purchased Class Y shares through a wrap fee program should terminate the wrap fee arrangement with the broker-dealer, then the Class Y shares will, at the discretion of the broker-dealer, automatically be converted to a number of Class A shares of the same Fund having the same dollar value of the shares converted, and the broker-dealer may thereafter be entitled to receive from that Fund an annual service fee of 0.25% of the value of Class A shares owned by that shareholder. o Certain Individual Retirement Accounts if the amounts invested represent rollover distributions from investments by any of the Retirement Plans set forth above. o Deferred Compensation Plan Accounts of New England Life Insurance Company ("NELICO"), MetLife or their affiliates ("Deferred Compensation Accounts"). o Service Accounts through an omnibus account by investment advisers, financial planners, broker-dealers or other intermediaries who have entered into a service agreement with a Fund. A fee may be charged to shareholders purchasing through a service account if they effect transactions through such parties and they should contact such parties regarding information regarding such fees. 3. You should contact CDC Nvest Funds at 800-225-5478 for an application or if you have any questions about purchasing Fund shares. 4. Use the sections of this Prospectus that follow as your guide for purchasing shares. - -------------------------------------- Certificates - -------------------------------------- You will not receive certificates representing Class Y shares. - ---------- 27 Fund Services [GRAPHIC] ------------- Buying Shares Opening an Account Adding to an Account - -------------------------------------------------------------------------------- Through Your Investment Dealer - -------------------------------------------------------------------------------- o Call your investment dealer for o Call your investment dealer for information. information. - -------------------------------------------------------------------------------- By Mail - -------------------------------------------------------------------------------- [GRAPHIC] o Make out a check in U.S. o Make out a check in U.S. dollars for the investment dollars for the investment amount, payable to "CDC Nvest amount, payable to "CDC Nvest Funds." Third party checks and Funds." Third party checks and "starter" checks will not be "starter" checks will not be accepted. accepted. o Mail the check with your o Fill out the detachable completed application to CDC investment slip from an account Nvest Funds, P.O. Box 8551, statement. If no slip is Boston, MA 02266-8551. available, include with the check a letter specifying the Fund name, your class of shares, your account number and the registered account name(s). To make investing even easier, you can order more investment slips by calling 800-225-5478. - -------------------------------------------------------------------------------- By Exchange - -------------------------------------------------------------------------------- [GRAPHIC] o The exchange must be for a o The exchange must be for a minimum of $1,000 or for all of minimum of $1,000 or for all of your shares. your shares. o Obtain a current prospectus for o Call your investment dealer or the Fund into which you are CDC Nvest Funds at 800-225-5478 exchanging by calling your to request an exchange. investment dealer or CDC Nvest Funds at 800-225-5478. o See the section entitled o Call your investment dealer or "Exchanging Shares" for more CDC Nvest Funds to request an details. exchange. o See the section entitled "Exchanging Shares" for more details. - -------------------------------------------------------------------------------- By Wire - -------------------------------------------------------------------------------- [GRAPHIC] o Call CDC Nvest Funds at o Instruct your bank to transfer 800-225-5478 to obtain an funds to State Street Bank & account number and wire Trust Company, ABA# 011000028, transfer instructions. Your and DDA # 99011538. bank may charge you for such a transfer. o Specify the Fund name, your class of shares, your account number and the registered account name(s). Your bank may charge you for such a transfer. - -------------------------------------------------------------------------------- Automatic Investing Through Investment Builder - -------------------------------------------------------------------------------- [GRAPHIC] o Indicate on your application o Please call CDC Nvest Funds at that you would like to begin an 800-225-5478 for a Service automatic investment plan Options Form. A signature through Investment Builder and guarantee may be required to the amount of the monthly add this privilege. investment ($100 minimum). o See the section entitled o Send a check marked "Void" or a "Additional Investor Services". deposit slip from your bank account along with your application. - -------------------------------------------------------------------------------- Through Automated Clearing House (ACH) - -------------------------------------------------------------------------------- [GRAPHIC] o Ask your bank or credit union o Call CDC Nvest Funds at whether it is a member of the 800-225-5478 to add shares to ACH system. your account through ACH. o Complete the "Bank Information" section on your account application. o If you have not signed up for the ACH system, please call CDC o Mail your completed application Nvest Funds for a Service to CDC Nvest Funds, P.O. Box Options Form. A signature 8551, Boston, MA 02266-8551. guarantee may be required to add this privilege. ---------- 28 [GRAPHIC] Fund Services ------------- Selling Shares To Sell Some or All of Your Shares Certain restrictions may apply. See section entitled "Restrictions on Buying, Selling and Exchanging Shares." - -------------------------------------------------------------------------------- Through Your Investment Dealer - -------------------------------------------------------------------------------- o Call your investment dealer for information. - -------------------------------------------------------------------------------- By Mail - -------------------------------------------------------------------------------- [GRAPHIC] o Write a letter to request a redemption specifying the name of your Fund, your class of shares, your account number, the exact registered account name(s), the number of shares or the dollar amount to be redeemed and the method by which you wish to receive your proceeds. Additional materials may be required. See the section entitled "Selling Shares in Writing." o The request must be signed by all of the owners of the shares and must include the capacity in which they are signing, if appropriate. o Mail your request by regular mail to CDC Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551 or by registered, express or certified mail to CDC Nvest Funds, 66 Brooks Drive, Braintree, MA 02184. o Your proceeds will be delivered by the method chosen in your letter. If you choose to have your proceeds delivered by mail, they will generally be mailed to you on the business day after the request is received in good order. You may also choose to redeem by wire or through ACH (see below). - -------------------------------------------------------------------------------- By Exchange - -------------------------------------------------------------------------------- [GRAPHIC] o Obtain a current prospectus for the Fund into which you are exchanging by calling your investment dealer or CDC Nvest Funds at 800-225-5478. o Call CDC Nvest Funds to request an exchange. o See the section entitled "Exchanging Shares" for more details. - -------------------------------------------------------------------------------- By Wire - -------------------------------------------------------------------------------- [GRAPHIC] o Fill out the "Bank Information" section on your account application. o Call CDC Nvest Funds at 800-225-5478 or indicate in your redemption request letter (see above) that you wish to have your proceeds wired to your bank. o Proceeds will generally be wired on the next business day. A wire fee (currently $5.00) will be deducted from the proceeds. - -------------------------------------------------------------------------------- Through Automated Clearing House - -------------------------------------------------------------------------------- [GRAPHIC] o Ask your bank or credit union whether it is a member of the ACH system. o Complete the "Bank Information" section on your account application. o If you have not signed up for the ACH system on your application, please call CDC Nvest Funds at 800-225-5478 for a Service Options Form. o Call CDC Nvest Funds to request a redemption through this system. o Proceeds will generally arrive at your bank within three business days. - -------------------------------------------------------------------------------- By Telephone - -------------------------------------------------------------------------------- [GRAPHIC] o Call CDC Nvest Funds at 800-225-5478 to choose the method you wish to use to redeem. You may receive your proceeds by mail, by wire or through ACH (see above). - ---------- 29 Fund Services [GRAPHIC] ------------- Selling Shares in Writing If you wish to redeem your shares in writing, all owners of the shares must sign the redemption request in the exact names in which the shares are registered and indicate any special capacity in which they are signing. In certain situations, you will be required to make your request to sell shares in writing. In these instances, a letter of instruction signed by the authorized owner is necessary. In certain situations, we also may require a signature guarantee or additional documentation. A signature guarantee protects you against fraudulent orders and is necessary if: o your address of record has been changed within the past 30 days; o you are selling more than $100,000 worth of shares and you are requesting the proceeds by check; or o a proceeds check for any amount is either mailed to an address other than the address of record or not payable to the registered owner(s). A notary public cannot provide a signature guarantee. A signature guarantee can be obtained from one of the following sources: o a financial representative or securities dealer; o a federal savings bank, cooperative, or other type of bank; o a savings and loan or other thrift institution; o a credit union; or o a securities exchange or clearing agency. ---------- 30 [GRAPHIC] Fund Services ------------- Exchanging Shares You may exchange Class Y shares of your Fund for Class Y shares of any other CDC Nvest Fund which offers Class Y shares or for Class A shares of the Money Market Funds. Former shareholders of the Jurika & Voyles Balanced Fund or the Jurika & Voyles Small Cap Growth Fund who received shares in the reorganization of their Funds may also exchange their shares (load free) for Class A shares of any CDC Nvest Fund that does not offer Class Y shares. Agents, general agents, directors and senior officers of NELICO and its insurance company subsidiaries may, at the discretion of NELICO, elect to exchange Class Y shares of any CDC Nvest Fund in a NELICO Deferred Compensation Account for Class A shares of any other CDC Nvest Fund which does not offer Class Y shares. Class A shares of any CDC Nvest Fund in a NELICO Deferred Compensation Account may also be exchanged for Class Y shares of any CDC Nvest Fund. All exchanges are subject to the eligibility requirements of the CDC Nvest Fund or Money Market Fund into which you are exchanging. The exchange privilege may be exercised only in those states where shares of the Funds may be legally sold. For federal income tax purposes, an exchange of Fund shares for shares of another CDC Nvest Fund or Money Market Fund is treated as a sale on which gain or loss may be recognized. Please refer to the Statement of Additional Information (the "SAI") for more detailed information on exchanging Fund shares. Restrictions on Buying, Selling and Exchanging Shares - -------------------------------------- Purchase and Exchange Restrictions - -------------------------------------- Although the Funds do not anticipate doing so, they reserve the right to suspend or change the terms of purchasing or exchanging shares. The Funds and the Distributor reserve the right to refuse or limit any purchase or exchange order by a particular purchaser (or group of related purchasers) if the transaction is deemed harmful to the best interests of the Fund's other shareholders or would disrupt the management of the Fund. The Funds and the Distributor reserve the right to restrict purchases and exchanges for the accounts of "market timers" by limiting the transaction to a maximum dollar amount. An account will be deemed to be one of a market timer if: (i) more than two exchange purchases of a given Fund are made for the account in a calendar quarter or (ii) the account makes one or more exchange purchases of a given Fund in a calendar quarter in an aggregate amount in excess of 1% of the Fund's total net assets. - -------------------------------------- Selling Restrictions - -------------------------------------- The table below describes restrictions placed on selling shares of any Fund described in this Prospectus: - -------------------------------------------------------------------------------- Restriction Situation - -------------------------------------------------------------------------------- The Fund may suspend the right of o When the New York Stock redemption or postpone payment for Exchange (the "Exchange") is more than 7 days: closed (other than a weekend/holiday) o During an emergency o Any other period permitted by the SEC - -------------------------------------------------------------------------------- The Fund reserves the right to o With a notice of a dispute suspend account services or refuse between registered owners transaction requests: o With suspicion/evidence of a fraudulent act - -------------------------------------------------------------------------------- The Fund may pay the redemption o When it is detrimental for the price in whole or in part by a Fund to make cash payments as distribution in kind of readily determined in the sole marketable securities in lieu of discretion of the Adviser or cash or may take up to 7 days to pay subadviser a redemption request in order to raise capital: - -------------------------------------------------------------------------------- The Fund may withhold redemption o When redemptions are made proceeds until the check or funds within 10 calendar days of have cleared: purchase by check or ACH of the shares being redeemed - -------------------------------------------------------------------------------- Telephone redemptions are not accepted for tax-qualified retirement accounts. - -------------------------------------- Small Account Redemption - -------------------------------------- When the Fund account falls below a set minimum (currently $1,000 as set by the Board of Trustees), the Fund may close your account and send you the proceeds. You will have 60 days after being notified of the Fund's intention to close your account to increase its amount to the set minimum. This does not apply to certain qualified retirement plans or accounts that have fallen below the minimum solely because of fluctuations in the Fund's net asset value per share. - ---------- 31 Fund Services [GRAPHIC] ------------- How Fund Shares Are Priced "Net asset value" is the price of one share of a Fund without a sales charge, and is calculated each business day using this formula: - -------------------------------------------------------------------------------- Total market value of securities + Cash and other assets - Liabilities Net Asset Value = ---------------------------------------------------------- Number of outstanding shares - -------------------------------------------------------------------------------- The net asset value of Fund shares is determined according to this schedule: o A share's net asset value is determined at the close of regular trading on the Exchange on the days the Exchange is open for trading. This is normally 4:00 p.m. Eastern time. Fund shares will not be priced on the days on which the Exchange is closed for trading. o The price you pay for purchasing, redeeming or exchanging a share will be based upon the net asset value next calculated after your order is received "in good order" by State Street Bank and Trust Company, each Fund's custodian (plus or minus applicable sales charges as described earlier in this Prospectus). o Requests received by the Distributor after the Exchange closes will be processed based upon the net asset value determined at the close of regular trading on the next day that the Exchange is open, with the exception that those orders received by your investment dealer before the close of the Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the same day will be based on the net asset value determined on that day. o A Fund heavily invested in foreign securities may have net asset value changes on days when you cannot buy or sell its shares. * Under limited circumstances, the Distributor may enter into a contractual agreement pursuant to which it may accept orders after 5:00 p.m., but not later than 8:00 p.m. Generally, during times of substantial economic or market change, it may be difficult to place your order by phone. During these times, you may deliver your order in person to the Distributor or send your order by mail as described in "Buying Shares" and "Selling Shares." Generally, Fund securities are valued as follows: o Equity securities-- most recent sales or quoted bid price or as provided by a pricing service if a sales or quoted bid price is unavailable. o Debt securities (other than short-term obligations) -- based upon pricing service valuations, which 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. o Short-term obligations (remaining maturity of less than 60 days)-- amortized cost (which approximates market value). o Securities traded on foreign exchanges -- most recent sale/bid price on the non-U.S. exchange, unless an occurrence after the close of the exchange will materially affect its value. In that case, it is given fair value as determined by or under the direction of the Board of Trustees at the close of regular trading on the Exchange. o Options -- last sale price, or if not available, last offering price. o Futures -- unrealized gain or loss on the contract using current settlement price. When a settlement price is not used, futures contracts will be valued at their fair value as determined by or under the direction of the Board of Trustees. o All other securities-- fair market value as determined by the adviser or subadviser of the Fund under the direction of the Board of Trustees. The effect of fair value pricing as described above for "Securities traded on foreign exchanges" and "All other securities" is that securities may not be priced on the basis of quotations from the primary market in which they are traded but rather may be priced by another method that the Board of Trustees believes actually reflects fair value. In unusual circumstances, instead of valuing securities in the usual manner, the Funds may value securities at fair value or estimate their value as determined in good faith by the Board of Trustees or persons acting at their direction pursuant to procedures approved by the Board of Trustees. Fair valuation may also be used by the Board of Trustees if extraordinary events occur after the close of the relevant market but prior to the close of the Exchange. ---------- 32 [GRAPHIC] Fund Services ------------- Dividends and Distributions The Funds generally distribute most or all of their net investment income (other than capital gains) in the form of dividends. The Fund expects to distribute all net realized long- and short-term capital gains annually, after applying any available capital loss carryovers. The Board of Trustees may adopt a different schedule as long as payments are made at least annually. - -------------------------------------------------------------------------------- Dividend Payment Schedule Annually Semi-Annually Quarterly - -------------------------------------------------------------------------------- Targeted Equity Growth and Income Balanced Small Cap Growth AEW Real Estate International Equity Large Cap Growth Fund Relative Value Fund - -------------------------------------------------------------------------------- Distributions will automatically be reinvested in shares of the same class of the distributing Fund at net asset value, unless you select one of the following alternatives: o Receive distributions from dividends and interest in cash while reinvesting distributions from capital gains in additional Class Y shares of the Fund or in Class Y shares of another CDC Nvest Fund. o Receive all distributions in cash. For more information or to change your distribution option, contact CDC Nvest Funds in writing or call 800-225-5478. If you earn more than $10 annually in taxable income from a non-retirement plan CDC Nvest Fund, you will receive a Form 1099 to help you report the prior calendar year's distributions on your federal income tax return. Be sure to keep this Form 1099 as a permanent record. A fee may be charged for any duplicate information requested. Tax Consequences Each Fund intends to meet all requirements under Subchapter M of the Internal Revenue Code necessary to qualify for treatment as a "regulated investment company" and thus does not expect to pay any federal income tax on income and capital gains distributed to shareholders. Distributions derived from net short-term capital gains i.e., gains from investments that a Fund held one year or less, or investment income are generally taxable at ordinary income rates. If you are a corporation investing in a Fund, a portion of these dividends may qualify for the dividends-received deduction provided that you meet certain holding period requirements. However, distributions by a Fund from REITs will not qualify for the corporate dividends received deduction. Distributions of gains from investments that a Fund owned for more than one year that are designated by a Fund as capital gain dividends will generally be taxable to a shareholder receiving such distributions as long-term capital gain, regardless of how long the shareholder has held Fund shares. Fund distributions paid to you are taxable whether you receive them in cash or reinvest them in additional shares. Distributions are taxable to you even if they are paid from income or gains earned by the Fund before your investment (and thus were included in the price you paid). Such distributions are likely to occur in respect of shares purchased at the time when a Fund's net asset value reflects gains that are either unrealized or realized but not distributed. The Funds' investments in foreign securities may be subject to foreign withholding taxes. In that case, the Funds' yield on those securities would be decreased. We do not expect shareholders to be entitled to claim a credit or deduction with respect to foreign taxes. In addition, the Funds' investments in foreign securities or foreign currencies may increase or accelerate the Funds' recognition of ordinary income and may affect the timing or amount of the Funds' distributions. Because the Funds invest in foreign securities, shareholders should consult their tax advisers about consequences of their investments under foreign laws. Dividends derived from interest on securities issued by the U.S. government or its agencies or instrumentalities may be exempt from state and local taxes. AEW Real Estate Fund advises shareholders of the proportion of the Fund's dividends that are derived from such interest. REITs attempt to minimize their corporate tax costs by distributing at least 90% of their REIT taxable income to their interest holders. If a REIT failed to distribute such a percentage of its REIT taxable income or to satisfy the other requirements of REIT status, it would be taxed as a corporation, and amounts available for distribution to its shareholders (including the AEW Real Estate, Targeted Equity, Mid Cap Growth, Small Cap Growth and Relative Value Funds) would be reduced by any corporate taxes payable by the REIT. The redemption, sale or exchange of Fund shares (including an exchange of Fund shares of another CDC Nvest Fund or CDC Nvest Money Market Fund) is a taxable event and many result in the recognition of a gain or loss. Gain or loss, if any, recognized on the - ---------- 33 Fund Services [GRAPHIC] ------------- redemption sale, exchange or other disposition of Fund shares will be taxed as a long term capital gain or less if the shares are capital assets in the shareholder's hands and if the shareholder held the shares for more than one year. You should consult your tax adviser for more information on your own situation, including possible foreign, state or local taxes. Compensation to Securities Dealers The Distributor may, at its expense, pay concessions to dealers which satisfy certain criteria established from time to time by the Distributor relating to increasing net sales of shares of the CDC Nvest Funds over prior periods, and certain other factors. See the SAI for more details. Without this reimbursement, expense ratios have been higher. ---------- 34 [GRAPHIC] Fund Performance ---------------- The financial highlights tables are intended to help you understand each Fund's financial performance for the last five years (or, if shorter, the period of the Fund's operations). Certain information reflects financial results for a single Fund share. The total returns in the table represent the return that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information (except for information for the semi-annual period ended June 30, 2001 and July 31, 2001) has been audited by PricewaterhouseCoopers LLP, independent accountants, whose report for December 31, 2000 and January 31, 2001 along with each Fund's financial statements, are incorporated by reference in the Statement of Additional Information, which is available without charge upon request. For a share outstanding throughout each period.
Income (loss) from investment operations: ---------------------------------------------------- Net realized Net asset and value, Net unrealized Total beginning investment gain from of the income (loss) on investment period (loss) investments operations ------ ------- ----------- ---------- Targeted Equity Fund (formerly Growth Fund) Class Y 2001(h) $ 9.37 $0.02(d) $(1.09) $(1.07) 2000 11.01 0.12(d) (0.60) (0.48) 1999(i) 11.94 0.03 0.99 1.02 Growth and Income Fund Class Y 2001(h) $13.87 $0.03(d) $(0.97) $(0.94) 2000 15.36 0.07(d) (1.10) (1.03) 1999 16.57 0.02(d) 1.51 1.53 1998(j) 15.42 0.02(d) 1.22 1.24 Balanced Fund Class Y 2001(k) $10.62 $0.11 $(0.78) $(0.67) 2000 11.71 0.28 (0.98) (0.70) 1999 13.54 0.36 (0.81) (0.45) 1998 14.27 0.39 0.74 1.13 1997 13.95 0.40 2.06 2.46 1996 13.15 0.44 1.76 2.20 AEW Real Estate Fund Class Y 2001(l) $10.49 $0.19(d) $ 0.66 $ 0.85 2001(m) 10.00 0.23(d) 0.55 0.78 International Equity Fund Class Y 2001(h) $17.02 $0.01 $(2.61) $(2.60) 2000 25.81 (0.10) (7.04) (7.14) 1999 14.45 0.02 12.54 12.56 1998 14.35 0.25 0.77 1.02 1997 16.48 0.19 (1.23) (1.04) 1996 16.25 0.11 0.54 0.65 Less distributions: ------------------------------------------------------------------------------- Distributions Dividends Distributions in excess Dividends in excess from net of net from net of net realized realized Return investment investment capital capital of Total income income gains gains capital distributions ------ ------ --------- ------- ------- ------------- Targeted Equity Fund (formerly Growth Fund) Class Y 2001(h) $(0.03) $ -- $ -- $ -- $ -- $(0.03) 2000 (0.09) -- (0.62) (0.45) -- (1.16) 1999(i) -- -- (1.95) -- -- (1.95) Growth and Income Fund Class Y 2001(h) $ -- $ -- $ -- $ -- $ -- $ -- 2000 -- -- (0.46) -- -- (0.46) 1999 (0.08) 0.00(e) (2.66) -- -- (2.74) 1998(j) (0.02) -- (0.07) -- -- (0.09) Balanced Fund Class Y 2001(k) $(0.15) $ -- $ -- $ -- $ -- $(0.15) 2000 (0.39) -- 0.00(e) -- -- (0.39) 1999 (0.37) -- (1.01) -- -- (1.38) 1998 (0.38) -- (1.48) -- -- (1.86) 1997 (0.40) -- (1.74) -- -- (2.14) 1996 (0.45) -- (0.95) -- -- (1.40) AEW Real Estate Fund Class Y 2001(l) $(0.22) $ -- $ 0.00(e) $ -- -- $(0.22) 2001(m) (0.25) (0.04) -- -- -- (0.29) International Equity Fund Class Y 2001(h) $ -- $ -- $ -- $ -- $ -- $ -- 2000 (0.17) -- (1.35) (0.13) -- (1.65) 1999 (0.07) -- (1.13) -- -- (1.20) 1998 (0.33) (0.31) (0.19) (0.09) -- (0.92) 1997 -- -- (1.05) (0.04) -- (1.09) 1996 (0.09) -- (0.33) -- -- (0.42)
(a) Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Certain Funds have entered into agreements with certain brokers to rebate a portion of brokerage commissions. The rebate commissions are used to reduce operating expenses of the Fund. (d) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (e) Amount rounds to less than $0.01 per share. (f) Had certain expenses not been reduced during the period, total returns would have been lower. (g) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period. - ---------- 35 Fund Performance [GRAPHIC] ----------------
Ratios to average net assets ----------------------------------------------------- Net Net Expenses Net asset assets, after investment Portfolio value, end Total end of the expense income turnover of the return period Expenses reductions (loss) rate period (%)(a) (000) (%)(b) (%)(b)(c) (%)(b) (%) ------ ------ ----- ------ --------- ------ --- Targeted Equity Fund (formerly Growth Fund) Class Y 2001(h) $8.27 (11.4) $ 9,822 0.87 0.84 0.43 140 2000 9.37 (4.2) 12,260 0.85 0.83 1.16 2.66 1999(i) 11.01 9.7 15,418 0.87 0.87 0.48 2.06 Growth and Income Fund Class Y 2001(h) 12.93 (6.8) 13,031 0.90 0.86 0.42 72 2000 13.87 (7.0) 10,131 0.87 0.84 0.48 139 1999 15.36 9.8 14,377 0.96 0.96 (0.73) 133 1998(j) 16.57 8.1 1 0.98 0.98 0.58 114 Balanced Fund Class Y 2001(k) 9.80 (6.3) 21,930 1.15 1.11 2.40 1.23 2000 10.62 (6.0) 28,740 1.02 0.97 2.63 1.33 1999 11.71 (3.3) 47,130 0.93 0.93 2.68 61 1998 13.54 8.6 73,212 0.90 0.90 2.65 81 1997 14.27 18.1 85,620 0.88 0.88 2.66 69 1996 13.95 17.6 77,665 0.88 0.88 3.24 70 AEW Real Estate Fund Class Y 2001(l) 11.12 8.2(f) 583 1.25(g) 1.25(g) 5.15 18 2001(m) 10.49 7.8(f) 539 1.25(g) 1.25(g) 5.40 12 International Equity Fund Class Y 2001(h) 14.42 (15.3) 7,965 1.50 1.50 0.19 107 2000 17.02 (28.2) 11,940 1.39 1.39 (0.44) 212 1999 25.81 88.6(f) 14,441 1.55(g) 1.55(g) 0.10 229 1998 14.45 7.3(f) 5,552 1.31(g) 1.31(g) 1.64 105 1997 14.35 (6.7)(f) 4,752 1.15(g) 1.15(g) 1.22 154 1996 16.48 4.0(f) 52,161 1.00(g) 1.00(g) 0.89 59
(h) For the six months ended June 30, 2001 (unaudited). (i) For the period June 30, 1999 (inception) through December 31, 1999. (j) For the period November 18, 1998 (inception) through December 31, 1998. (k) For the six months ended June 30, 2001 (unaudited). As required, effective January 1, 2001, the Balanced Fund has adopted provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change was to decrease the ratio of net investment income to average net assets from 2.42% to 2.40% for Class Y. (l) For the six months ended July 31, 2001 (unaudited). (m) For the period August 31, 2000 (commencement of operations) through January 31, 2001. ---------- 36 Glossary of Terms Bid price -- The price a prospective buyer is ready to pay. This term is used by traders who maintain firm bid and offer prices in a given security by standing ready to buy or sell security units at publicly quoted prices. Bottom-up analysis -- The search for outstanding performance of individual stocks before considering the impact of economic trends. Such companies may be identified from research reports, stock screens or personal knowledge of the products and services. Capital gain distributions -- Payments to a Fund's shareholders, of profits earned from selling securities in a Fund's portfolio. Capital gain distributions are usually paid once a year. Credit rating -- Independent evaluation of a bond's creditworthiness. This measurement is usually calculated through an index compiled by companies such as Standard & Poor's Rating Service, Inc. ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or Fitch Investors Services, Inc. ("Fitch"). Bonds with a credit rating of BBB or higher by S&P or Fitch, or Baa or higher by Moody's are generally considered investment grade. Debt-to-Total Capital Ratio -- Total debt (current and long-term) divided by total capital (debt and equity). This ratio provides information regarding the extent of a company's reliance on debt financing. A high ration indicates a high degree of financial leverage and a high degree of risk. Derivative -- A financial instrument whose value and performance are based on the value and performance of another security or financial instrument. Discounted price -- The difference between a bond's current market price and its face or redemption value. Diversification -- The strategy of investing in a wide range of securities representing different market sectors to reduce the risk if an individual company or one sector suffers losses. Dividend yield -- The current or estimated annual dividend divided by the market price per share of a security. Duration -- An estimate of how much a bond's price fluctuates with changes in comparable interest rates. Earnings growth -- A pattern of increasing rate of growth in earnings per share from one period to another, which usually causes a stock's price to rise. FFO Multiple - The price per share of a REIT divided by its Funds from Operations (FFO). The FFO of a REIT is the measure of its operating performance showing its net income plus depreciation of real estate and excluding gains or losses from sales of property or debt restructuring. Fundamental analysis -- An analysis of the balance sheet and income statements of a company in order to forecast its future stock price movements. Fundamental analysis considers records of assets, earnings, sales, products, management and markets in predicting future trends in these indicators of a company's success or failure. By appraising a company's prospects, analysts using such an approach assess whether a particular stock or group of stocks is undervalued or overvalued at its current market price. Growth investing -- An investment style that emphasizes companies with strong earnings growth. Growth investing is generally considered more aggressive than "value" investing. Income distributions -- Payments to a Fund's shareholders resulting from the net interest or dividend income earned by a Fund's portfolio. Inflation -- A general increase in prices coinciding with a fall in the real value of money, as measured by the Consumer Price Index. Interest rate -- Rate of interest charged for the use of money, usually expressed at an annual rate. Market capitalization -- Market price multiplied by number of shares outstanding. Large capitalization companies generally have over $5 billion in market capitalization; medium cap companies between $1.5 billion and $5 billion; and small cap companies less than $1.5 billion. These capitalization figures may vary depending upon the index being used and/or the guidelines used by the portfolio manager. Maturity -- The final date on which the payment of a debt instrument (e.g. bonds, notes, repurchase agreements) becomes due and payable. Short-term bonds generally have maturities of up to 5 years; intermediate-term bonds between 5 and 15 years; and long-term bonds over 15 years. Net asset value (NAV) -- The market value of one share of a Fund on any given day without taking into account any front-end sales charge or CDSC. It is determined by dividing a Fund's total net assets by the number of shares outstanding. Price-to-book value ratio -- Current market price of a stock divided by its book value, or net asset value. Some firms use the inverse ratio for this calculation (i.e. book to price ratio). - ---------- 37 Glossary of Terms Price-to-earnings ratio -- Current market price of a stock divided by its earnings per share. Also known as the "multiple," the price-to-earnings ratio gives investors an idea of how much they are paying for a company's earning power and is a useful tool for evaluating the costs of different securities. Some firms use the inverse ratio for this calculation (i.e. earnings-to-price ratio). Qualitative analysis -- An analysis of the qualities possessed by a company, including its management, products and competitive positions, to help determine if the company can execute its strategies. Return on equity -- The amount, expressed as a percentage, earned on a company's common stock investment for a given period. It is calculated by dividing common stock equity (net worth) at the beginning of the accounting period into net income for the period after preferred stock dividends but before common stock dividends. This tells common shareholders how effectively their money is being employed. Rule 144A securities -- Rule 144A securities are privately offered securities that can be resold only to certain qualified institutional buyers. Rule 144A securities are treated as illiquid, unless a manager has determined, under guidelines established by a Fund's trustees, that a particular issue of Rule 144A securities is liquid. Target price -- Price that an investor is hoping a stock he or she has just bought will rise to within a specified period of time. An investor may buy XYZ at $20, with a target price of $40 in one year's time, for instance. Technical analysis -- The research into the demand and supply for securities, options, mutual funds and commodities based on trading volume and price studies. Technical analysis uses charts or computer programs to identify and project price trends in a market, security, mutual fund or futures contract. Top-down approach -- The method in which an investor first looks at trends in the general economy, and next selects attractive industries and then companies that should benefit from those trends. Total return -- The change in value of an investment in a Fund over a specific time period expressed as a percentage. Total returns assume all earnings are reinvested in additional shares of a Fund. Value investing -- A relatively conservative investment approach that focuses on companies that may be temporarily out of favor or whose earnings or assets are not fully reflected in their stock prices. Value stocks will tend to have a lower price-to-earnings ratio than growth stocks. Volatility -- The general variability of a portfolio's value resulting from price fluctuations of its investments. In most cases, the more diversified a portfolio is, the less volatile it will be. Yield -- The rate at which a Fund earns income, expressed as a percentage. Mutual fund yield calculations are standardized, based upon a formula developed by the SEC. Yield-to-maturity -- The concept used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield (the interest rate on a debt security the issuer promises to pay to the holder until maturity, expressed as an annual percentage of face value) and the time between interest payments. ---------- 38 Notes -- - ---------- 39 Notes -- ---------- 40 - -------------------------------------------------------------------------------- If you would like more information about the Funds, the following documents are available free upon request: Annual and Semi-annual Reports -- Provide additional information about each Fund's investments. Each report includes a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. To reduce costs, we mail one copy per household. For more copies call CDC IXIS Asset Management Distributors, L.P. at the number below. Statement of Additional Information (SAI) -- Provides more detailed information about the Funds and their investment limitations and policies, has been filed with the SEC and is incorporated into this Prospectus by reference. To order a free copy of a Fund's annual or semiannual report or its SAI, contact your financial representative, or the Funds at: CDC IXIS Asset Management Distributors L.P., 399 Boylston Street Boston, MA 02116 Telephone: 800-225-5478 Internet: www.cdcnvestfunds.com Your financial representative or CDC Nvest Funds will also be happy to answer your questions or to provide any additional information that you may require. You can review and copy a Fund's reports and SAI at the Public Reference Room of the SEC in Washington, D.C. Text- only copies are available free from the Commission's Web site at: www.sec.gov. Copies of these publications are also available for a fee and information on the operation of the Public Reference Room may be obtained by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing or calling the Public Reference Section of the SEC, Washington, D.C. 20549-0102 Telephone: 1-202-942-8090 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 Web site at www.NASDR.com. (Investment Company Act File No. 811-4323) (Investment Company Act File No. 811-242) (Investment Company Act File No. 811-7345) (Investment Company Act File No. 811-09945) - -------------------------------------------------------------------------------- YS51-1101 CDC NVEST FUNDS(SM) CDC IXIX Asset Management Distributors Statement of Additional Information -- PART I May 1, 2001 as revised November 14, 2001 for: - -------------------------------------------------------------------------------- CDC NVEST CAPITAL GROWTH FUND CDC NVEST INTERNATIONAL EQUITY FUND CDC NVEST TARGETED EQUITY FUND CDC NVEST LARGE CAP VALUE FUND (FORMERLY CDC NVEST GROWTH FUND) (FORMERLY NVEST EQUITY INCOME FUND) CDC NVEST GROWTH AND INCOME FUND CDC NVEST MID CAP GROWTH FUND CDC NVEST BALANCED FUND CDC NVEST SELECT FUND CDC NVEST AEW REAL ESTATE FUND Statement of Additional Information -- PART I November 14, 2001 for: CDC NVEST JURIKA & VOYLES SMALL CAP GROWTH FUND (FORMERLY CDC NVEST BULLSEYE FUND) CDC NVEST LARGE CAP GROWTH FUND CDC NVEST JURIKA & VOYLES RELATIVE VALUE FUND This Statement of Additional Information (the "Statement") contains information which may be useful to investors but which is not included in the Prospectuses of the 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 as revised November 14, 2001 for all Funds except for CDC Nvest Jurika & Voyles Small Cap Growth Fund, CDC Nvest Large Cap Growth Fund and CDC Nvest Jurika & Voyles Relative Value Fund and dated November 14, 2001 for the CDC Nvest Jurika & Voyles Small Cap Growth Fund, CDC Nvest Large Cap Growth Fund and CDC Nvest Jurika & Voyles Relative Value Fund for Class A, Class B and Class C shares or the Prospectus of the Funds dated May 1, 2001 as revised November 14, 2001 for all Funds except for CDC Nvest Jurika & Voyles Small Cap Growth Fund, CDC Nvest Large Cap Growth Fund and CDC Nvest Jurika & Voyles Relative Value Fund and dated November 14, 2001 for the CDC Nvest Jurika & Voyles Small Cap Growth Fund, CDC Nvest Large Cap Growth Fund and CDC Nvest Jurika & Voyles Relative Value Fund for Class Y shares (the "Prospectus" or "Prospectuses"). The Statement should be read together with the Prospectuses. Investors may obtain a free copy of the Prospectuses from CDC IXIS Asset Management Distributors, L.P. (the "Distributor", formerly CDC Nvest Funds Distributor, L.P.), Prospectus Fulfillment Desk, 399 Boylston Street, Boston, Massachusetts 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 as well as other CDC Nvest Funds. CDC Nvest Capital Growth Fund, CDC Nvest Targeted Equity Fund, CDC Nvest Balanced Fund, CDC Nvest International Equity Fund, CDC Large Cap Growth Fund and CDC Nvest Jurika & Voyles Relative Value Fund are each a diversified fund of CDC Nvest Funds Trust I, a registered open-end management investment company that offers a total of twelve funds; CDC Nvest Growth and Income Fund is a diversified fund of CDC Nvest Funds Trust II, a registered open-end management investment company that offers a total of six funds; and CDC Nvest Large Cap Value Fund, CDC Nvest Mid Cap Growth Fund, and CDC Nvest Jurika & Voyles Small Cap Growth Fund are each a diversified fund and CDC Nvest Select Fund is a non-diversified fund of CDC Nvest Funds Trust III, a registered open-end management investment company that currently offers a total of four funds. CDC Nvest AEW Real Estate Fund is a diversified fund of CDC Nvest Companies Trust I, a registered open-end management investment company that currently offers one fund. CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III and CDC Nvest Companies Trust I are collectively referred to in this Statement as the "Trusts" and are each referred to as a "Trust." The Funds' financial statements and accompanying notes that appear in the Funds' annual and i semiannual reports are incorporated by reference into this Statement. Each Fund's 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 Part I Page ---- Investment Restrictions iii Fund Charges and Expenses xvi Ownership of Fund Shares xxviii Investment Performance of the Funds xxxii Part II Miscellaneous Investment Practices 3 Management of the Trusts 27 Portfolio Transactions and Brokerage 46 Description of the Trusts and Ownership of Shares 54 How to Buy Shares 59 Net Asset Value and Public Offering Price 59 Reduced Sales Charges - Class A Shares Only 60 Shareholder Services 63 Redemptions 69 Standard Performance Measures 72 Income Dividends, Capital Gain Distributions and Tax Status 78 Financial Statements 81 Appendix A - Description of Bond Ratings 82 Appendix B - Media That May Contain Fund Information 86 Appendix C - Advertising and Promotional Literature 87 ii - -------------------------------------------------------------------------------- INVESTMENT RESTRICTIONS - -------------------------------------------------------------------------------- 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 relevant Fund (as defined in the Investment Company Act of 1940, as amended [the "1940 Act"]). 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. CDC Nvest Capital Growth Fund CDC Nvest Capital Growth Fund (the "Capital Growth Fund") may not: (1) With respect to 75% of its total assets, purchase any security (other than U.S. government securities) if, as a result, more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer; *(2) Purchase any security (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 (in the utilities category, gas, electric, water and telephone companies will be considered as being in separate industries, and each foreign country's government (together with subdivisions thereof) will be considered to be a separate industry); (3) Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities), or make short sales except where, by virtue of ownership of other securities, it has the right to obtain, without payment of further consideration, securities equivalent in kind and amount to those sold, and the Fund will not deposit or pledge more than 10% of its total assets (taken at current value) as collateral for such sales. (For this purpose, the deposit or payment by the Fund of initial or variation margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin); (4) Acquire more than 10% of any class of securities of an issuer (other than U.S. government securities and taking all preferred stock issues of an issuer as a single class and all debt issues of an issuer as a single class) or with respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of an issuer; *(5) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of its total assets (taken at current value), whichever is lower, and then only as a temporary measure for extraordinary or emergency purposes; (6) Pledge more than 15% of its total assets (taken at cost). (For the purpose of this restriction, collateral arrangements with respect to options, futures contracts and options on futures contracts and with respect to initial and variation margin are not deemed to be a pledge of assets); *(7) Make loans, except by entering into repurchase agreements or by purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness, which are a part of an issue to the public or to financial institutions, or through the lending of the Fund's portfolio securities; *(8) Buy or sell oil, gas or other mineral leases, rights or royalty contracts, real estate or commodities or commodity contracts, except that the Fund may buy and sell futures contracts and related options. (This restriction does not prevent the Fund from purchasing securities of companies investing in the foregoing); iii *(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) Except to the extent permitted by rule or order of the SEC, participate on a joint or joint and several basis in any trading account in securities. (The "bunching" of orders for the purchase or sale of portfolio securities with the Fund's adviser or subadviser or accounts under its management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction); (11) Write, purchase or sell options, except that the Fund may (a) write, purchase and sell put and call options on securities or securities indexes and (b) enter into currency forward contracts; +(12) Invest more than 15% of its net assets (taken at current value) in illiquid securities (excluding Rule 144A securities and certain Section 4(2) commercial paper deemed to be liquid under guidelines established by CDC Nvest Funds Trust I's trustees); or *(13) Issue senior securities. (For the purpose of this restriction, none of the following is deemed to be a senior security: any pledge or other encumbrance of assets permitted by restriction (6) above; any borrowing permitted by restriction (5) above; any collateral arrangements with respect to options, futures contracts and options on futures contracts and with respect to initial and variation margin; the purchase or sale of options, forward contracts, futures contracts or options on futures contracts; and the issuance of shares of beneficial interest permitted from time to time by the provisions of CDC Nvest Funds Trust I's Agreement and Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom.) The staff of the Securities and Exchange Commission (the "SEC") is currently of the view that repurchase agreements maturing in more than seven days are illiquid and thus subject to restriction (12) above. CDC Nvest Targeted Equity Fund CDC Nvest Targeted Equity Fund (the "Targeted Equity Fund") will not: *(1) Purchase any security (other than U.S. government securities) if, as a result, more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer or 25% of the Fund's total assets (taken at current value) would be invested in any one industry; *(2) Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities), or make short sales except where, by virtue of ownership of other securities, it has the right to obtain, without payment of further consideration, securities equivalent in kind and amount to those sold, and the Fund will not deposit or pledge more than 10% of its total assets (taken at current value) as collateral for such sales; *(3) Acquire more than 10% of any class of securities of an issuer (taking all preferred stock issues of an issuer as a single class and all debt issues of an issuer as a single class) or acquire more than 10% of the outstanding voting securities of an issuer; *(4) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of its total assets (taken at current value), whichever is lower, and then only as a temporary measure for extraordinary or emergency purposes; *(5) Pledge more than 15% of its total assets (taken at cost); *(6) Invest more than 5% of its total assets (taken at current value) in securities of businesses (including predecessors) less than three years old; iv *(7) Purchase or retain securities of any issuer if officers and trustees of CDC Nvest Funds Trust I or of the investment adviser of the Fund who individually own more than1/2of 1% of the shares or securities of that issuer together own more than 5%; *(8) Make loans, except by purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness, which are a part of an issue to the public or to financial institutions; *(9) Buy or sell oil, gas or other mineral leases, rights or royalty contracts, real estate or commodities or commodity contracts. (This restriction does not prevent such Funds from purchasing securities of companies investing in the foregoing); *(10) 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; *(11) Make investments for the purpose of exercising control or management; *(12) Participate on a joint or joint and several basis in any trading account in securities; *(13) Purchase options or warrants if, as a result, more than 1% of its total assets (taken at current value) would be invested in such securities; *(14) Write options or warrants; *(15) Invest in the securities of other investment companies, except by purchases in the open market involving only customary brokers' commissions. (Under the 1940 Act, the Targeted Equity Fund may not (a) invest more than 10% of its total assets [taken at current value] in such securities, (b) own securities of any one investment company having a value in excess of 5% of the total assets of the Fund [taken at current value], or (c) own more than 3% of the outstanding voting stock of any one investment company); *(16) Issue senior securities. For the purpose of this restriction, none of the following is deemed to be a senior security: any borrowing permitted by restriction (4) above; any pledge or other encumbrance of assets permitted by restriction (5) above; any collateral arrangements with respect to options, forward contracts, futures contracts, swap contracts and other similar contracts and options on futures contracts and with respect to initial and variation margin; the purchase or sale of options, forward contracts, futures contracts, swap contracts and other similar contracts or options on futures contracts; and the issuance of shares of beneficial interest permitted from time to time by the provisions of CDC Nvest Funds Trust I's Agreement and Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom; or +(17) 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 CDC Nvest Funds Trust I's trustees.) The staff of the SEC is currently of the view that repurchase agreements maturing in more than seven days are illiquid and thus subject to restriction (17) above. CDC Nvest Growth and Income Fund CDC Nvest Growth and Income Fund (the "Growth and Income Fund") will not: *(1) Purchase securities of an issuer if such purchase would cause more than 5% of the market value of the total Fund assets to be invested in the securities of such issuer (exclusive of United States or Canadian government obligations), or if such purchase would cause more than 10% of the securities of such issuer to be held by the Fund; v *(2) Purchase or retain the securities of any issuer if the officers and trustees of CDC Nvest Funds Trust II owning beneficially1/2of 1% of the securities of such issuer together own beneficially more than 5% of the securities of such issuer; *(3) Purchase the securities issued by any other investment company, except that a purchase involving no commission or profit to a sponsor or dealer (other than a customary broker's commission) is permitted and except that a purchase that is part of a plan of merger or consolidation is permitted; *(4) Purchase securities issued by companies with a record (including that of their predecessors) of less than three years of continuous operation; *(5) Purchase securities for the portfolio on margin, make short sales or make loans to persons affiliated with CDC Nvest Funds Trust II; *(6) Act as underwriter of securities of other issuers, or invest directly in real estate or in commodities or commodity contracts; *(7) Make loans to other persons, provided, however, that this restriction shall not prohibit the Fund from entering into repurchase agreements with respect to not more than 25% of the Fund's total assets taken at current value. The purchase of a portion of an issue of bonds, notes or debentures publicly distributed or of a type customarily purchased by institutional investors does not constitute the making of loans within the meaning of this restriction; *(8) Borrow money, except that the Fund may make secured or unsecured bank borrowings, provided that an asset coverage of at least 300% for all such borrowings (including the amount then being borrowed) is maintained as required by the 1940 Act; *(9) Issue senior securities. (For the purpose of this restriction, none of the following is deemed to be a senior security; any borrowing permitted by restriction (8) above; any collateral arrangements with respect to options, futures contracts, swap contracts and other similar contracts and options on futures contracts and with respect to initial and variation margin; the purchase or sale of options, forward contracts, futures contracts, swap contracts and other similar contracts or options on futures contracts; and the issuance of shares of beneficial interest permitted from time to time by the provisions of CDC Nvest Funds Trust II's Agreement and Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom); or +(10) 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 CDC Nvest Funds Trust II's trustees). The staff of the SEC is currently of the view that repurchase agreements maturing in more than seven days are illiquid and thus subject to restriction (10) above. It is a fundamental policy of the Fund that it will not concentrate its assets in the securities of issuers in the same industry. The Fund intends to abide by the views of the SEC staff on what constitutes industry concentration. Accordingly, the Fund will not make an investment if, immediately thereafter, the Fund would hold more than 25% of its total assets in securities of issuers in any one industry. This limitation does not apply to securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities. The Fund has no present intention of borrowing money except on a temporary basis, as may be needed, to cover redemptions of shares. Should this intention change, the Prospectus will be amended. vi CDC Nvest Balanced Fund CDC Nvest Balanced Fund (the "Balanced 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 security (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; *(3) 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; *(4) 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; *(5) 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; *(6) 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; *(7) 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; *(8) Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act; +(9) 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 CDC Nvest Funds Trust I's trustees.) (10) Purchase options or warrants if, as a result, more than 1% of its total assets (taken at current value) would be invested in such securities; or (11) Write options or warrants. Restrictions (3) and (8) shall be interpreted based upon no action letters and other pronouncements of the staff of the SEC. Under current pronouncements, certain fund positions are excluded from the definition of "senior security" so long as the Fund maintains adequate cover, segregation of assets or otherwise. vii CDC Nvest Large Cap Value Fund (formerly Nvest Equity Income Fund) CDC Nvest Large Cap Value Fund (the "Large Cap Value Fund") will not: *(1) Purchase any security (other than U.S. government securities) if, as a result, more that 25% of the Fund's total assets (taken at current value) would be invested in any one industry (in the utilities category, gas, electric, water and telephone companies will be considered as being in separate industries, and each foreign country's government (together with subdivisions thereof) will be considered to be a separate industry); (2) Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities), or make short sales except where, by virtue of ownership of other securities, it has the right to obtain, without payment of further considerations, securities equivalent in kind and amount to those sold, and the Fund will not deposit or pledge more than 10% of its total assets (taken at current value) as collateral for such sales. (For this purpose, the deposit or payment by the Fund of initial or variation margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin); *(3) Borrow money in excess of 25% of its total assets, and then only as a temporary measure for extraordinary or emergency purposes; (4) Pledge more than 25% of its total assets (taken at cost). (For the purpose of this restriction, collateral arrangements with respect to options, futures contracts, options on futures contracts and swap contracts and with respect to initial and variation margin are not deemed to be a pledge of assets); *(5) Make loans, except by entering into repurchase agreements or by purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness, which are a part of an issue to the public or to financial institutions, or through the lending of the Fund's portfolio securities; *(6) Buy or sell oil, gas or other mineral leases, rights or royalty contracts, real estate or commodities or commodity contracts, except that the Fund may buy and sell futures contracts, swap contracts and related options. (This restriction does not prevent the Fund from purchasing securities of companies investing in the foregoing); *(7) 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; (8) Participate on a joint or joint and several basis in any trading account in securities. (The "bunching" of orders for the purchase or sale of portfolio securities with the Fund's adviser or subadviser or accounts under its management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction); (9) Write, purchase or sell options, except that the Fund may (a) write, purchase and sell put and call options on securities, securities indexes or futures contracts and (b) enter into currency forward contracts; +(10) Purchase any illiquid security if, as a result, more than 15% of its net assets (taken at current value) would be invested in such securities (excluding Rule 144A securities and certain Section 4(2) commercial paper deemed to be liquid under guidelines established by CDC Nvest Funds Trust III's trustees); *(11) Issue senior securities. (For the purpose of this restriction none of the following is deemed to be a senior security: any pledge or other encumbrance of assets permitted by restrictions (2) or (4) above; any borrowing permitted by restriction (3) above; any collateral arrangements with respect to forward contracts, options, futures contracts, swap contracts and options on futures contracts or swap contracts and with respect to initial and variation margin, the purchase or sale of options, forward contracts, future viii contracts, swap contracts or options on futures contracts or swap contracts; and the issuance of shares of beneficial interest permitted from time to time by the provisions of the CDC Nvest Funds Trust III's Agreement and Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom); (12) With respect to 75% of its total assets, purchase any security (other than U.S. government securities) if, as a result, more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer; or (13) Acquire more than 10% of any class of securities of an issuer (taking all preferred stock issues of an issuer as a single class and all debt issues of an issuer as a single class) or acquire more than 10% of the outstanding voting securities of an issuer. The staff of the SEC is currently of the view that repurchase agreements maturing in more than seven days are illiquid and thus subject to restriction (10) above. CDC Nvest Mid Cap Growth Fund CDC Nvest Mid Cap Growth Fund (the "Mid Cap Growth Fund") will not: *(1) With respect to 75% of its total assets, purchase any security if, as a result, more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer. This limitation does not apply to U.S. government securities (as defined in the 1940 Act). *(2) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer. *(3) Invest more than 25% of its net assets in any one industry. This restriction does not apply to U.S. government securities. For the purposes of this restriction, gas, electric, water and telephone companies will be considered as being in 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. *(4) Make short sales of securities or 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 to the extent permitted under the 1940 Act. *(6) Make loans, except that the Fund may lend its portfolio securities to the extent permitted under the 1940 Act. (For purposes of this investment restriction, neither (i) entering into repurchase agreements nor (ii) purchasing debt obligations in which a Fund may invest consistent with its investment policies is considered the making of a loan.) *(7) Act as underwriter of securities of other issuers except that, in the disposition of portfolio securities, it may be deemed to be an underwriter under the federal securities laws. *(8) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which 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. ix *(9) Purchase or sell commodities, except that the Fund may purchase and sell futures contracts and options, may enter into foreign exchange contracts and may enter into swap agreements and other financial transactions not requiring the delivery of physical commodities. *(10) Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act. Restrictions (4) and (10) shall be interpreted based upon no-action letters and other pronouncements of the staff of the SEC. Under current pronouncements, certain Fund positions are excluded from the definition of "senior security" so long as the Fund maintains adequate cover, segregation of assets or otherwise. CDC Nvest Select Fund CDC Nvest Select Fund (the "Select Fund") may not: +(1) Acquire securities of any one issuer which (a) represent more than 10% of the voting securities of the issuer or (b) have a value greater than 10% of the value of the outstanding securities of the issuer. *(2) Invest more than 25% of its net assets in any one industry. This restriction does not apply to U.S. government securities. 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) Make short sales of securities or 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. +*(4) Borrow money, except to the extent permitted under the 1940 Act. *(5) Make loans, except that the Fund may lend its portfolio securities to the extent permitted under the 1940 Act. (For the purposes of this investment restriction, neither (i) entering into repurchase agreements nor (ii) purchasing debt obligations in which a Fund may invest consistent with its investment policies is considered the making of a loan.) *(6) Act as an underwriter of securities of other issuers except that, in the disposition of portfolio securities, it may be deemed to be an underwriter under the federal securities laws. *(7) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which 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. *(8) Purchase or sell commodities, except that the Fund may purchase and sell futures contracts and options, may enter into foreign exchange contracts and may enter into swap agreements and other financial transactions not requiring the delivery of physical commodities. *(9) Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act; Restrictions (3) and (9) shall be interpreted based upon no-action letters and other pronouncements of the staff of the SEC. Under current pronouncements, certain Fund positions are excluded from the definition of "senior security" so long as the Fund maintains adequate cover, segregation of assets or otherwise. x In addition, it is contrary to Mid Cap Growth Fund's and Select Fund's present policy, which may be xi changed without shareholder vote, to purchase any illiquid security, including any securities whose disposition is restricted under federal securities laws and securities that are not readily marketable, if, as a result, more than 15% of the Fund's total assets (based on current value) would then be invested in such securities. The staff of the SEC is presently of the view that repurchase agreements maturing in more than seven days are subject to this restriction. Until that position is revised, modified or rescinded, each Fund will conduct its operations in a manner consistent with this view. This limitation on investment in illiquid securities does not apply to certain restricted securities, including securities pursuant to Rule 144A under the Securities Act of 1933 and certain commercial paper, that the Adviser has determined to be liquid under procedures approved by the Board of Trustees. CDC Nvest AEW Real Estate Fund CDC Nvest AEW Real Estate Fund (the "AEW Real Estate Fund") may not: *(1) with respect to 75% of the Fund's total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities ("U.S. government securities")) if, as a result, (a) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (b) the Fund would hold more than 10% of the outstanding voting securities of that issuer; *(2) purchase the securities of any issuer (other than U.S. government securities) if, as a result, 25% or more of the Fund's total assets would be invested in the securities of companies whose principal business activities are in the same industry, except that the Fund will invest more than 25% of its total assets in securities of companies primarily engaged in the real estate industry; *(3) issue senior securities, except as otherwise permitted by the 1940 Act; +*(4) borrow money or pledge its assets; provided, however, that the Fund may borrow money as a temporary measure for extraordinary or emergency purposes or to meet redemptions, in amounts not exceeding 33 1/3% of its total assets and pledge its assets to secure such borrowings; and, provided, further, that the Fund will not purchase any additional portfolio securities at any time that its borrowings exceed 5% of its total assets; for the purpose of this restriction, collateral arrangements with respect to the writing of options, interest rate futures contracts, options on interest rate futures contracts, and collateral arrangements with respect to initial and variation margin are not deemed to be a pledge of assets and neither such arrangements nor the purchase or sale of futures or related options are deemed to be the issuance of a senior security; *(5) underwrite securities of other issuers except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933, as amended (the "1933 Act"), in the disposition of restricted securities; *(6) purchase and sell real estate unless acquired as a result of ownership of securities or other instruments; provided, however, that this limitation shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business; *(7) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments; provided, however, that this limitation shall not prevent the Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities; or *(8) lend any portfolio security or make any other loan, if, as a result, more than 33 1/3% of its total assets would be lent to other parties, it being understood that this limitation does not apply to purchases of debt securities or to repurchase agreements. (9) purchase any security on margin, except that the Fund may obtain such short-term credits as may be necessary for the clearance of transactions; for this purpose, the deposit or payment by the Fund of initial or variation margin in connection with interest rate futures contracts or related options transactions is not considered the purchase of a security on margin; xii (10) make short sales of securities or maintain a short position, unless at all times when a short position is open it owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short, and unless not more than 10% of the Fund's net assets (taken at market value) is held as collateral for such sales at any one time; +(11) invest more than 15% of the Fund's 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 Fund's Board of Trustees); (12) write, purchase or sell puts, calls or combinations thereof, except that the Fund may write, purchase and sell puts, calls or combinations thereof with respect to U.S. government securities and with respect to interest rate futures contracts; or (13) invest in the securities of other investment companies, except by purchases in the open market involving only customary brokers' commissions, or in connection with a merger, consolidation or similar transaction; under the 1940 Act, the Fund may not (a) invest more than 10% of its total assets (taken at current value) in such securities, (b) own securities of any one investment company having a value in excess of 5% of the Fund's total assets taken at current value, or (c) own more than 3% of the outstanding voting stock of any one investment company. The Fund may (but does not currently intend to) , notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company managed by AEW Management and Advisors, L.P. ("AEW") or an affiliate or successor with substantially the same fundamental investment objective, policies and limitations as the Fund. Restrictions (3) and (10) shall be interpreted based upon no-action letters and other pronouncements of the staff of the SEC. Under current pronouncements, certain Fund positions are excluded from the definition of "senior security" so long as the Fund maintains adequate cover, segregation of assets or otherwise. CDC Nvest International Equity Fund CDC Nvest International Equity Fund (the "International Equity Fund") may not: (1) With respect to 75% of its total assets, purchase any security (other than U.S. government securities) if, as a result, more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer; *(2) Purchase any security (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 (in the utilities category, gas, electric, water and telephone companies will be considered as being in separate industries, and each foreign country's government (together with subdivisions thereof) will be considered to be a separate industry); (3) Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities), or make short sales except where, by virtue of ownership of other securities, it has the right to obtain, without payment of further consideration, securities equivalent in kind and amount to those sold, and the Fund will not deposit or pledge more than 10% of its total assets (taken at current value) as collateral for such sales. (For this purpose, the deposit or payment by the Fund of initial or variation margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin); (4) Acquire more than 10% of any class of securities of an issuer (other than U.S. government securities and taking all preferred stock issues of an issuer as a single class and all debt issues of an issuer as a single class) or with respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of an issuer (such percentage limitations apply to closed-end management investment companies as well); xiii *(5) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of its total assets (taken at current value), whichever is lower, and then only as a temporary measure for extraordinary or emergency purposes; (6) Pledge more than 15% of its total assets (taken at cost). (For the purpose of this restriction, collateral arrangements with respect to options, futures contracts and options on futures contracts and with respect to initial and variation margin are not deemed to be a pledge of assets); *(7) Make loans, except by entering into repurchase agreements or by purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness, which are a part of an issue to the public or to financial institutions, or through the lending of the Fund's portfolio securities; *(8) Buy or sell oil, gas or other mineral leases, rights or royalty contracts, real estate or commodities or commodity contracts, except that the Fund may buy and sell futures contracts and related options. (This restriction does not prevent the Fund from purchasing securities of companies investing in the foregoing); *(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) Except to the extent permitted by rule or order of the SEC, participate on a joint or joint and several basis in any trading account in securities. (The "bunching" of orders for the purchase or sale of portfolio securities with the Fund's adviser or subadviser or accounts under its management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction); (11) Write, purchase or sell options, except that the Fund may (a) write, purchase and sell put and call options on securities, securities indexes, currencies, futures contracts, swap contracts and other similar instruments and (b) enter into currency forward contracts; +(12) Purchase any illiquid security if, as a result, more than 15% of its net assets (taken at current value) would be invested in such securities (excluding Rule 144A securities and certain Section 4(2) commercial paper deemed to be liquid under guidelines established by CDC Nvest Funds Trust I's trustees); or *(13) Issue senior securities. (For the purpose of this restriction none of the following is deemed to be a senior security: any pledge or other encumbrance of assets permitted by restriction (6) above; any borrowing permitted by restriction (5) above; any collateral arrangements with respect to options, futures contracts and options on futures contracts and with respect to initial and variation margin; the purchase or sale of options, forward contracts, futures contracts or options on futures contracts; and the issuance of shares of beneficial interest permitted from time to time by the provisions of CDC Nvest Funds Trust I's Agreement and Declaration of Trust and by the 1940 Act, the rules thereunder, or any exemption therefrom.) The staff of the SEC is currently of the view that repurchase agreements maturing in more than seven days are illiquid and thus subject to restriction (12) above. CDC Nvest Jurika & Voyles Small Cap Growth Fund CDC Nvest Jurika & Voyles Small Cap Growth Fund (the "Small Cap Growth Fund") may 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; xiv *(2) Invest more than 25% of the Fund's total assets in the securities of issuers engaged in any one industry (except securities issued by the U.S. government, its agencies or instrumentalities); (3) Purchase securities on margin (but it may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities), or make short sales except where it owns or, by virtue of ownership of other securities, it has the right to obtain, without payment of further consideration, securities equivalent in kind and amount to those sold. (For this purpose, the deposit or payment by the Fund of initial or variation margin in connection with futures contracts or related options transactions is not considered the purchase of a security on margin); *(4) Borrow money in excess of 33 1/3% of its total assets; *(5) Make loans, except by entering into repurchase agreements or by purchase of bonds, debentures, commercial paper, corporate notes and similar evidences of indebtedness, which are a part of an issue to the public or to financial institutions, or through the lending of the Fund's portfolio securities; *(6) Buy or sell real estate or commodities or commodity contracts, except that the Fund may buy and sell financial futures contracts and options, swap contracts, currency forward contracts, structured notes and other similar instruments. (This restriction does not prevent the Fund from purchasing securities of issuers that invest in the foregoing); *(7) 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; +(8) Purchase any illiquid security if, as a result, more than 15% of its net assets (taken at current value) would be invested in such securities (excluding Rule 144A securities and certain Section 4(2) commercial paper deemed to be liquid under guidelines established by CDC Nvest Fund Trust III's trustees); *(9) Issue senior securities, except as permitted by the 1940 Act or any relevant exemption thereunder. (For the purpose of this restriction none of the following is deemed to be a senior security: any pledge or other encumbrance of assets; any borrowing permitted by restriction (3) above; any collateral arrangements with respect to options or futures contracts, and with respect to initial and variation margin; and the purchase or sale of options, forward contracts, futures contracts, swap contracts and other similar instruments.) Although the Fund is permitted to borrow money to a limited extent, it does not currently intend to do so. The staff of the SEC is currently of the view that repurchase agreements maturing in more than seven days are illiquid and thus subject to restriction (8) above. CDC Nvest Large Cap Growth Fund CDC Nvest Large Cap Growth Fund (the "Large Cap Growth Fund") will not: *(1) With respect to 75% of its total assets, purchase any security if, as a result, more than 5% of the Fund's total assets (based on current value) would then be invested in 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 security (other than government securities) if, as a result, more than 25% of its total assets (taken at current value) would be invested in any one industry; *(3) 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 xv 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; *(4) 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; *(5) 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; *(6) 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; *(7) 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 the federal securities laws; *(8) Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act; *(9) Purchase or sell commodities, except that the Fund may purchase and sell futures contracts and options, may enter into foreign exchange contracts and may enter into swap agreements and other financial transactions not requiring the delivery of physical commodities; and +(10) 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). Restrictions (3) and (8) shall be interpreted based upon no-action letters and other pronouncements of the staff of the Securities and Exchange Commission (the "SEC"). Under current pronouncements, certain Fund positions are excluded from the definition of "senior security" so long as the Fund maintains adequate cover, segregation of assets or otherwise. CDC Nvest Jurika & Voyles Relative Value Fund CDC Nvest Jurika & Voyles Relative Value Fund (the "Relative Value Fund") will not: *(1) With respect to 75% of its total assets, purchase any security if, as a result, more than 5% of the Fund's total assets (based on current value) would then be invested in 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 security (other than government securities) if, as a result, more than 25% of its total assets (taken at current value) would be invested in any one industry; *(3) 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; *(4) 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; xvi *(5) 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; *(6) 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; *(7) 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 the federal securities laws; *(8) Issue senior securities, except for permitted borrowings or as otherwise permitted under the 1940 Act; *(9) Purchase or sell commodities, except that the Fund may purchase and sell futures contracts and options, may enter into foreign exchange contracts and may enter into swap agreements and other financial transactions not requiring the delivery of physical commodities; and +(10) 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). Restrictions (3) and (8) shall be interpreted based upon no-action letters and other pronouncements of the staff of the Securities and Exchange Commission (the "SEC"). Under current pronouncements, certain Fund positions are excluded from the definition of "senior security" so long as the Fund maintains adequate cover, segregation of assets or otherwise. - -------------------------------------------------------------------------------- FUND CHARGES AND EXPENSES - -------------------------------------------------------------------------------- Advisory FEES Pursuant to an advisory agreement dated October 30, 2000, Capital Growth Management Limited Partnership ("CGM") has agreed to manage the investment and reinvestment of the assets of the Targeted Equity Fund, subject to the supervision of the Board of Trustees of CDC Nvest Funds Trust I. For the services described in the advisory agreements, the Targeted Equity Fund has agreed to pay CGM an advisory fee at the annual rate set forth in the following table:
Advisory fee payable by Fund to CGM Fund (as a percentage of average daily net assets of the Fund) - ------------------------------------- --------------------------------------------------------- Targeted Equity Fund 0.75% of the first $200 million 0.70% of the next $300 million 0.65% of the next $1.5 billion 0.60% of amounts in excess of $2 billion
Pursuant to an advisory agreement dated October 30, 2000, AEW Management & Advisors, L.P. ("AEW") has agreed to manage the investment and reinvestment of the assets of the AEW Real Estate Fund, subject to the supervision of the Board of Trustees of CDC Nvest Companies Trust I. xvii For the services described in the advisory agreement, the AEW Real Estate Fund has agreed to pay AEW an advisory fee at the annual rate set forth in the following table:
Advisory fee payable by Fund to AEW Fund (as a percentage of average daily net assets of the Fund) - ------------------------------------- --------------------------------------------------------- AEW Real Estate Fund 0.80% of the first $500 million 0.75% of amounts in excess of $500 million
Pursuant to separate advisory agreements, each dated October 30, 2000 (March 15, 2001 for Mid Cap Growth Fund and Select Fund) 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 relevant Trust, to manage the investment and reinvestment of the assets of the Capital Growth, Growth and Income, Balanced, Large Cap Value, Mid Cap Growth, Select, International Equity and Small Cap Growth Funds and to provide a range of administrative services to such Funds. For the services described in the advisory agreements, each such Fund has agreed to pay CDC IXIS Advisers an advisory fee at the annual rate set forth in the following table, reduced by the amount of any sub-advisory fees payable by the Fund to the subadviser pursuant to any sub-advisory agreement:
Advisory fee payable by Fund to CDC IXIS Advisers Fund (as a percentage of average daily net assets of the Fund) - ------------------------------------- --------------------------------------------------------- Capital Growth Fund and 0.75% of the first $200 million Balanced Fund 0.70% of the next $300 million 0.65% of amounts in excess of $500 million Growth and Income Fund and 0.70% of the first $200 million Large Cap Value Fund 0.65% of the next $300 million 0.60% of amounts in excess of $500 million Mid Cap Growth Fund 0.95% of the first $1 billion 0.825% of amounts in excess of $1 billion Select Fund 1.00% of the first $1 billion 0.95% of amounts in excess of $1 billion International Equity Fund 0.90% of the first $200 million 0.85% of the next $300 million 0.80% of amounts in excess of $500 million Small Cap Growth Fund 0.95% of the first $200 million 0.90% of the next $300 million 0.85% of amounts in excess of $500 million Large Cap Growth Fund 0.90% Relative Value Fund 0.85% of the first $500 million 0.80% of amounts in excess of $500 million
xviii The advisory agreements for the Capital Growth, Growth and Income, Balanced Large Cap Value, Mid Cap Growth, Select, International Equity and Small Cap Growth Funds each provide that CDC IXIS Advisers may delegate its responsibilities thereunder to other parties. Pursuant to separate subadvisory agreements, each dated October 30, 2000 (March 15, 2001 for Mid Cap Growth Fund and Select Fund and April 20, 2001 for Balanced Fund), CDC IXIS Advisers has delegated responsibility for managing the investment and reinvestment of each of these Funds' assets to a subadviser. The subadviser is Loomis, Sayles & Company, L.P. ("Loomis Sayles"), in the case of the Fixed Income and Equity Growth segments of the Balanced Fund, Mid Cap Growth Fund and the International Equity Fund, Westpeak Global Advisors, L.P. ("Westpeak"), in the case of the Capital Growth Fund, and Growth and Income Fund, Jurika & Voyles, L.P. ("Jurika & Voyles") in the case of the Small Cap Growth Fund, the Value Equity segment of the Balanced Fund and the Relative Value Fund, Harris Associates, L.P. ("Harris Associates") in the case of the Select Fund and Vaughan, Nelson, Scarborough & McCullough ("VNSM") in the case of the Large Cap Value Fund and Large Cap Growth Fund. For the services described in the subadvisory agreements, each such Fund has agreed to pay its respective subadviser a subadvisory fee at the annual rate set forth in the following table:
Subadvisory fee payable to subadviser Fund Subadviser (as a percentage of average daily net assets of the Fund - ----------------------------- ------------------ -------------------------------------------------------- Capital Growth Fund* Westpeak 0.40% of the first $200 million 0.35% of the next $300 million 0.30% of amounts in excess of $500 million Growth and Income Fund Westpeak 0.50% of the first $25 million 0.40% of the next $75 million 0.35% of the next $100 million 0.30% of amounts in excess of $200 million Balanced Fund Loomis Sayles and 0.535% of the first $200 million Jurika & Voyles 0.350% of the next $300 million 0.300% of amounts in excess of $500 million Large Cap Value Fund VNSM 0.400% of the first $200 million 0.325% of the next $300 million 0.275% of amounts in excess of $500 million Mid Cap Growth Fund Loomis Sayles 0.550% of the first $1 billion 0.425% of amounts in excess of $1 billion Select Fund Harris Associates 0.60% of the first $1 billion 0.55% of amounts in excess of $1 billion International Equity Fund Loomis Sayles 0.40% of the first $200 million 0.35% of amounts in excess of $200 million Small Cap Growth Fund Jurika & Voyles 0.57% of the first $200 million 0.50% of the next $300 million 0.43% of amounts in excess of $500 million Large Cap Growth Fund VNSM 0.50% Relative Value Fund Jurika & Voyles 0.450% of the first $500 million 0.425% of amounts in excess of $500 million
xix xx CDC IXIS Advisers has given a binding undertaking for Classes A, B, C and Y shares through December 31, 2004 to the Small Cap Growth Fund to reduce its advisory fee and, if necessary, to bear certain expenses associated with the Fund, to the extent necessary to limit the Fund's expenses to the annual rate of 1.75% for Class A shares, 2.50% for Class B shares, 2.50% for Class C shares and 1.50% for Class Y shares. This undertaking is subject to the obligation of the Fund to pay CDC IXIS Advisers such deferred fees or expense reimbursement in later periods to the extent that the Fund's expenses fall below the annual rate of 1.75% for Class A shares, 2.50% for Class B shares, 2.50% for Class C shares and 1.50% for Class Y 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. The recapture period for expenses incurred prior to December 31, 1998 is two years. AEW has given a binding undertaking to the AEW Real Estate Fund to reduce its advisory fee and, if necessary, to bear certain expenses related to operating the Fund, to the extent necessary to limit the Fund's total operating expenses to the annual rate of 1.50% of average daily net assets for Class A Shares, 2.25% of such assets for Class B shares, 2.25% of such assets for Class C shares and 1.25% of such assets for Class Y shares. The undertaking will be binding on AEW through May 31, 2002 and will be reevaluated on an annual basis thereafter, subject to the obligation of the Fund to pay such deferred fees or expense reimbursement in later periods to the extent that the Fund's expenses fall below the annual rate of 1.50% of average daily net assets for Class A Shares, 2.25% of such assets for Class B and Class C shares, or 1.25% of such assets for Class Y 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 was deferred. CDC IXIS Advisers has given a binding undertaking to the Mid Cap Growth and Select Funds to reduce each Fund's fees and, if necessary, to bear certain expenses related to operating each Fund in order to limit each Fund's expenses to an annual rate of 1.70% of the average daily net assets of the Fund's Class A shares, 2.45% of the average daily net assets of the Fund's Class B shares, and 2.45% of the average daily net assets of the Fund's Class C shares. The undertaking will be binding on CDC IXIS Advisers until May 1, 2002 and will be reevaluated on an annual basis thereafter, subject to the obligation of each Fund to pay such deferred fees or expense reimbursement in later periods to the extent that each Fund's expenses fall below the annual rate of 1.70% of average daily net assets for Class A Shares, or 2.45% of such assets for Class B and Class C shares; provided, however, that each 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 was deferred. CDC IXIS Advisers has given a binding undertaking to the Balanced Fund to reduce the Fund's fees, and if necessary, to bear certain expenses relating to operating the Fund in order to limit the operating expenses to the annual rate of 0.95% of the average daily net assets of the Fund's Class Y shares. This undertaking will be binding on CDC IXIS Advisers through December 31, 2003 subject to the obligation of the Fund to pay CDC IXIS Advisers such deferred fees or expense reimbursement in later periods to the extent that the Fund's expenses fall below the annual rate of 0.95% for Class Y 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. The recapture period for expenses incurred prior to December 31, 1998 is two years. CDC IXIS Advisers has given a binding undertaking to the Large Cap Growth and Relative Value to reduce each Fund's fees and, if necessary, to bear certain expenses related to operating each Fund in order to limit each Fund's expenses to an annual rate of 1.40%, 2.15%, 2.15% and 1.15% of the average daily net assets of Classes A, B, C and Y shares, respectively, for the CDC Nvest Large Cap Growth Fund and 1.50%, 2.25%, 2.25% and 1.25% of the average daily net assets of Classes A, B, C and Y shares, respectively, for the CDC Nvest Relative Value Fund. These undertakings are in effect through April 30, 2003 for the Large Cap Growth Fund and December 31, 2004 for the Relative Value Fund and will be reevaluated on an annual basis thereafter. xxi 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 agreement was amended to provide that the advisory fees payable by the Fund to CDC IXIS Advisers are reduced by the amounts of any subadvisory fees payable directly by the Fund to its subadviser. These amendments to the Funds' advisory and subadvisory agreements did not change the management and subadvisory fee rates under the agreements, or the services to be provided to the Funds by CDC IXIS Advisers and the subadvisers under the agreements. Furthermore, these amendments did not change the overall level of fees payable by any Fund. For the last three fiscal years (or the period from March 31, 1998 to December 31, 1998 and the fiscal years ending December 31, 1999 and December 31, 2000 in the case of the Small Cap Growth Fund or the period from September 1, 2000 to January 31, 2001 for the AEW Real Estate Fund), the advisory fees payable by the Funds (before any voluntary reductions) and the advisory fees actually paid by the Funds were as follows: Capital Growth Fund+
1998 1999 2000 ---- ---- ---- Total Advisory Fee $1,546,360 $1,826,043 $1,933,858 CDC IXIS Advisers Fee Earned $637,723 $862,232 $916,955 Total Paid $637,723 $862,232 $916,955 Loomis Sayles (1/01 - 1/30) Fee Earned $262,382 -- -- Total Paid $262,382 -- -- Westpeak (1/30 - 12/31) Fee Earned $646,255 $963,811 $1,016,903 Total Paid $646,255 $963,811 $1,016,903 Targeted Equity Fund++ 1998 1999 2000 ---- ---- ---- Total Advisory Fee $11,260,645 $12,879,997 $11,676,626 Capital Growth Management Fee Earned $11,260,645 $12,879,997 $11,676,626 Total Paid $11,260,645 $12,879,997 $11,676,626 Growth and Income Fund 1998 1999 2000 ---- ---- ---- Total Advisory Fee $2,586,482 $3,843,930 $3,609,994 CDC IXIS Advisers Fee Earned $1,263,874 $1,921,579 $1,819,201 Total Paid $1,263,874 $1,921,579 $1,819,201
xxii Westpeak Fee Earned $1,322,608 $1,922,351 $1,790,793 Total Paid $1,322,608 $1,922,351 $1,790,793 Balanced Fund
1998 1999 2000 ---- ---- ---- Total Advisory Fee $2,876,837 $2,517,100 $1,569,212 CDC IXIS Advisers Fee Earned $1,216,764 $1,047,478 $474,070 Total Paid $1,216,764 $1,047,478 $474,070 Loomis Sayles Fee Earned $1,660,073 $1,469,622 $1,095,142 Total Paid $1,660,073 $1,469,622 $1,095,142 Large Cap Value Fund+++ 1998 1999 2000 ---- ---- ---- Total Advisory Fee $248,935 $196,897 $120,587 CDC IXIS Advisers Fee Earned $106,686 $84,835 $51,680 Amount Waived $29,753 $62,069 $51,680* Total Paid $76,933 $22,766 --**** Loomis Sayles (1/1 - 5/31) Fee Earned $142,249 $51,737 -- Amount Waived $142,249 $51,737 -- Total Paid $0 $0 -- VNSM (6/1 - 12/31) Fee Earned -- $60,775 $68,907 Amount Waived -- $60,775 $68,907* Total Paid -- $0 -- AEW Real Estate Fund 1998 1999 2000 ---- ---- ---- Total Advisory Fee -- -- AEW Fee Earned -- -- $1,989 Amount Waived -- -- $1,989 Total Paid -- -- --*****
xxiii International Equity Fund++++
1998 1999 2000 ---- ---- ---- Total Advisory Fee $734,344 $634,275 $1,076,376 CDC IXIS Advisers Fee Earned $407,969 $352,375 $597,986 Amount Waived $164,220 $102,021 -- Total Paid $243,749 $250,354 $597,986 Loomis Sayles Fee Earned $326,375 $281,900 $478,390 Amount Waived $109,352 $81,617 -- Total Paid $217,023 $200,283 $478,390 Small Cap Growth Fund 1998 1999 2000 ---- ---- ---- Total Advisory Fee $115,268 $183,892 $205,861 CDC IXIS Advisers Fee Earned $46,107 $110,335 $82,344 Amount Waived $46,107 $110,335 $72,723* Total Paid $0 $0*** $9,621 Jurika & Voyles Fee Earned $69,161 $73,557 $123,517 Amount Waived $69,161 $73,557 $109,085* Total Paid $0 $0 $14,432
* Deferred. ** CDC IXIS Advisers assumed additional expenses of $53,944. *** CDC IXIS Advisers assumed additional expense of $12,990. **** CDC IXIS Advisers assumed additional expense of $54,748. *****CDC IXIS Advisers assumed additional expense of $87,814. +From August 30, 1996 to January 30, 1998, Loomis Sayles served as subadviser to the Capital Growth Fund pursuant to a subadvisory agreement between CDC IXIS Advisers and Loomis Sayles providing for the same subadvisory fee as is currently payable by the Capital Growth Fund to Westpeak. ++Prior to June 1, 1999, CGM served as adviser to the Targeted Equity Fund pursuant to an advisory agreement providing for an advisory fee at the annual rate of 0.75% of the first $200 million of the Fund's average daily net assets, 0.70% of the next $300 million of such assets and 0.65% of such assets in excess of $500 million. +++From August 30, 1996 to May 31, 1999, Loomis Sayles served as subadviser to the Large Cap Value Fund pursuant to a subadvisory agreement between CDC IXIS Advisers and Loomis Sayles providing for the same subadvisory fee as xxiv is currently payable by the Large Cap Value Fund to VNSM. For the period June 1, 1999 to July 27, 1999, VNSM served as subadviser to the Large Cap Value Fund under an interim subadvisory agreement dated June 1, 1999 providing for the same fee that was paid to Loomis Sayles. VNSM agreed to voluntarily waive its subadvisory fee under the interim agreement until June 30, 1999, and during this period, the Large Cap Value Fund continued to pay Loomis Sayles the subadvisory fee it would have earned if it had continued to manage the Fund's portfolio. From September 1, 1997 to June 30, 1999, Loomis Sayles voluntarily agreed to waive its entire subadvisory fee for such Fund. Since the Fund's inception and effective until May 1, 2002, CDC IXIS Advisers has given a binding undertaking to Large Cap Value Fund to reduce its advisory fee and, if necessary, to bear certain expenses associated with operating the Fund to the extent necessary to limit the Fund's expenses to the annual rate of 1.50% of average daily net assets for Class A shares, 2.25% for Class B shares and 2.25% for Class C shares ("Expense Caps"). Beginning July 1, 1999, VNSM and CDC IXIS Advisers split any fee waivers required in proportion to the subadvisory and advisory fees collected. CDC IXIS Advisers also bears any additional expense reimbursement above the fee waivers required for the Fund to meet the relevant Expense Cap. This undertaking will be binding on CDC IXIS Advisers for the life of the Fund's current Prospectus, subject to the obligation of the Fund to pay such deferred fees or expense reimbursement in later periods to the extent that the Fund's expenses fall below the annual rate of 1.50% of average daily net assets for Class A shares, 2.25% for Class B shares and 2.25% for Class C 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 was deferred. The recapture period for expenses incurred prior to December 31, 1998 is two years. ++++From December 29, 1995 until April 30, 1998, CDC IXIS Advisers had voluntarily agreed to reduce its fees and, if necessary, to bear certain operating expenses in order to limit the International Equity Fund's expenses to an annual rate of 1.75% for Class A shares, 2.50% for Class B shares and 2.50% for Class C shares and 1.15% for Class Y shares (prior to December 31, 1996, 1.00%) of the Fund's average daily net assets. From May 1, 1998 to April 30, 2000, CDC IXIS Advisers gave a binding undertaking to International Equity Fund to reduce its fees and, if necessary, to bear certain expenses related to operating the Fund in order to limit the Fund's expenses to an annual rate of 2.00% of the average daily net assets of the Fund's Class A shares, 2.75% of the average daily net assets of the Fund's Class B shares, 2.75% of the average daily net assets of the Fund's Class C shares and 1.75% (prior to August 23, 1999, 1.40%) of the average daily net assets of the Fund's Class Y shares. Loomis Sayles voluntarily agreed to waive in its entirety its subadvisory fee for the International Equity Fund from February 14, 1997 through February 13, 1998. For more information about the Funds' advisory and subadvisory agreements, see "Management of the Trusts" in Part II of this Statement. Brokerage Commissions In 1998, 1999 and 2000, brokerage transactions for Capital Growth Fund aggregating $179,733,449, $115,631,790 and $44,322,400, respectively, were allocated to brokers providing research services and $63,846, $101,489, and $46,620, respectively, in commissions were paid on these transactions in such years. During 1998, 1999 and 2000, the Fund paid total brokerage commissions of $366,221, $421,774 and $446,645, respectively. In 1998, 1999 and 2000, brokerage transactions for Targeted Equity Fund aggregating $839,415,762, $1,012,285,354 and $1,038,557,109, respectively, were allocated to brokers providing research services, and $925,576, $1,195,756 and $1,177,018, respectively, in commissions were paid on these transactions in such years. During 1998, 1999 and 2000, the Fund paid total brokerage commissions of $6,163,593, $8,113,289 and $10,192,921, respectively. In 1998, 1999 and 2000, brokerage transactions for Growth and Income Fund aggregating $365,997,958, $228,379,147 and $149,319,644, respectively, were allocated to brokers providing research services and $154,557, $215,531 and $167,304, respectively, in commissions were paid on these transactions in such years. During 1998, 1999 and 2000, the Fund paid total brokerage commissions of $619,719, $952,681 and $1,110,676, respectively. In 1998, 1999 and 2000, brokerage transactions for Balanced Fund aggregating $68,151,350, $61,715,360 and $58,789,402, respectively, were allocated to brokers providing research services, and $107,472, $81,418 and $84,368, respectively, in commissions were paid on these transactions in such years. During 1998, 1999 and 2000 the Fund paid total brokerage commissions of $563,035, $441,089 and $464,155, respectively. In 1998, 1999 and 2000, brokerage transactions for Large Cap Value Fund aggregating $44,172, $13,398,277 and $10,780,671, respectively, were allocated to brokers providing research services and $2,508, $22,238 and $16,643, respectively, in commissions were paid on these transactions in such years. During 1998, 1999 and 2000, the Fund paid total brokerage commissions of $69,295, $40,928 and $24,468, respectively. xxv In 1998, 1999 and 2000, brokerage transactions for International Equity Fund aggregating $15,145, $7,568,359 and $47,940,552, respectively, were allocated to brokers providing research services and $0, $7,758 and $93,587, respectively, in commissions were paid on these transactions in such years. During 1998, 1999 and 2000, the Fund paid total brokerage commissions of $506,328, $751,900 and $767,454, respectively. For the period from September 1, 2000 to December 31, 2000, there were no brokerage transactions for AEW Real Estate Fund allocated to brokers providing research services. During this period, the AEW Real Estate Fund paid total brokerage commissions of $925. For the period from March 31, 1998 to December 31, 1998 and the fiscal years ended December 31, 1999 and 2000, brokerage transactions for Small Cap Growth Fund aggregating $4,560,101, $9,010,123 and $61,168,960, respectively, were allocated to brokers providing research services, and $4,375, $10,667 and $67,473, respectively, in commissions were paid on these transactions. During 1998, 1999 and 2000, the Small Cap Growth Fund paid total brokerage commissions of $35,314, $63,487 and $69,331, respectively. For more information about the Funds' 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 Classes A, B and C shares of each Fund pay the Distributor fees under plans adopted pursuant to Rule 12b-1 under the 1940 Act. The following table shows the amounts of Rule 12b-1 fees paid by each Fund during the fiscal years ended December 31, 1998, 1999 and 2000:
Fund 1998 1999 2000 - ----------------------------- ---- ---- ---- Capital Growth Fund $390,354 $449,506 $466,657 (Class A) $496,089 $640,502 $722,386 (Class B) $10,563 $24,404 $30,728 (Class C) Targeted Equity Fund* $4,095,985 $4,507,150 $4,014,853 (Class A) $398,656 $1,130,273 $1,172,243 (Class B) $3,017 $67,804 $60,690 (Class C) Growth and Income Fund $645,966 $876,555 $813,590 (Class A) $1,126,326 $1,953,852 $1,848,154 (Class B) $115,169 $244,663 $221,749 (Class C) Balanced Fund $574,918 $500,098 $310,460 (Class A) $810,837 $784,237 $477,052 (Class B) $54,042 $52,722 $26,362 (Class C) Large Cap Value Fund $46,136 $35,201 $21,525 (Class A) $149,076 $122,010 $77,120 (Class B) $20,584 $17,052 $9,048 (Class C) AEW Real Estate Fund** -- -- $203 (Class A) -- -- $185 (Class B) -- -- $90 (Class C) International Equity Fund $132,001 $110,048 $170,958 (Class A) $255,391 $185,331 $330,653 (Class B) $10,161 $7,292 $37,710 (Class C)
xxvi Small Cap Growth Fund*** $14,605 $22,304 $25,940 (Class A) $45,443 $81,204 $96,885 (Class B) $17,474 $23,148 $16,050 (Class C)
* Class C shares of the Targeted Equity Fund were first offered on September 1, 1998. ** The AEW Real Estate Fund commenced operations on December 29, 2000, offering Classes A, B and C shares (and on August 31, 2000, offering Class Y shares). *** The Small Cap Growth Fund commenced operations on March 31, 1998, offering Classes A, B and C shares. During the fiscal year ended December 31, 2000, the Distributor's expenses relating to each Fund's 12b-1 plans were as follows (Class B compensation to investment dealers excludes advanced commissions sold to a third party): Capital Growth Fund (Class A shares) Compensation to Investment Dealers $467,724 Compensation to Distributor's Sales Personnel and Other Related Costs $288,137 -------- TOTAL $755,861 (Class B shares) Compensation to Investment Dealers $679,409 Compensation to Distributor's Sales Personnel and Other Related Costs $201,759 -------- TOTAL $881,168 (Class C shares) Compensation to Investment Dealers $27,831 Compensation to Distributor's Sales Personnel and Other Related Costs $23,897 ------- TOTAL $51,728 Targeted Equity Fund (Class A shares) Compensation to Investment Dealers $3,996,399 Compensation to Distributor's Sales Personnel and Other Related Costs $1,158,092 ---------- TOTAL $5,154,491 (Class B shares) Compensation to Investment Dealers $1,052,723 Compensation to Distributor's Sales Personnel and Other Related Costs $343,750 -------- TOTAL $1,396,473 (Class C shares) Compensation to Investment Dealers $36,085 Compensation to Distributor's Sales Personnel and Other Related Costs $25,357 ------- TOTAL $61,442 Growth and Income Fund (Class A shares) Compensation to Investment Dealers $798,860 Compensation to Distributor's Sales Personnel and Other Related Costs $765,780 -------- TOTAL $1,564,640 (Class B shares) Compensation to Investment Dealers $1,683,147 Compensation to Distributor's Sales Personnel and Other Related Costs $482,110 -------- TOTAL $2,165,257
xxvii (Class C shares) Compensation to Investment Dealers $156,514 Compensation to Distributor's Sales Personnel and Other Related Costs $70,217 ------- TOTAL $226,731 Balanced Fund (Class A shares) Compensation to Investment Dealers $310,479 Compensation to Distributor's Sales Personnel and Other Related Costs $104,447 -------- TOTAL $414,926 (Class B shares) Compensation to Investment Dealers $453,324 Compensation to Distributor's Sales Personnel and Other Related Costs $77,374 ------- TOTAL $530,698 (Class C shares) Compensation to Investment Dealers $23,021 Compensation to Distributor's Sales Personnel and Other Related Costs $6,398 ------ TOTAL $29,389
xxviii Large Cap Value Fund (Class A shares) Compensation to Investment Dealers $21,483 Compensation to Distributor's Sales Personnel and Other Related Costs $13,148 ------- TOTAL $34,631 (Class B shares) Compensation to Investment Dealers $75,433 Compensation to Distributor's Sales Personnel and Other Related Costs $15,817 ------- TOTAL $81,250 (Class C shares) Compensation to Investment Dealers $8,486 Compensation to Distributor's Sales Personnel and Other Related Costs $2,078 ------ TOTAL $10,565 AEW Real Estate Fund (Class A shares) Compensation to Investment Dealers $213 Compensation to Distributor's Sales Personnel and Other Related Costs $17,245 ------- TOTAL $17,458 (Class B shares) Compensation to Investment Dealers $9 Compensation to Distributor's Sales Personnel and Other Related Costs $5,162 ------ TOTAL $5,171 (Class C shares) Compensation to Investment Dealers $975 Compensation to Distributor's Sales Personnel and Other Related Costs $3,348 ------ TOTAL $4,323 International Equity Fund (Class A shares) Compensation to Investment Dealers $172,381 Compensation to Distributor's Sales Personnel and Other Related Costs $626,362 -------- TOTAL $798,743 (Class B shares) Compensation to Investment Dealers $306,635 Compensation to Distributor's Sales Personnel and Other Related Costs $272,537 -------- TOTAL $549,171 (Class C shares) Compensation to Investment Dealers $80,180 Compensation to Distributor's Sales Personnel and Other Related Costs $183,470 -------- TOTAL $263,650 Small Cap Growth Fund (Class A shares) Compensation to Investment Dealers $26,064 Compensation to Distributor's Sales Personnel and Other Related Costs $39,813 ------- TOTAL $65,877
xxix (Class B shares) Compensation to Investment Dealers $92,981 Compensation to Distributor's Sales Personnel and Other Related Costs $30,085 ------- TOTAL $123,066 (Class C shares) Compensation to Investment Dealers $15,791 Compensation to Distributor's Sales Personnel and Other Related Costs $4,916 ------ TOTAL $20,707
Of the amounts listed above as compensation to investment dealers, the amounts shown on 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), which were 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 Class C ------- ------- ------- Capital Growth Fund $276,748 $78,483 $8,636 Targeted Equity Fund $2,339,880 $58,406 $6,289 Growth and Income Fund $273,858 $123,832 $35,596 Balanced Fund $196,683 $52,871 $6,502 Large Cap Value Fund $12,486 $6,860 $2,769 AEW Real Estate Fund $25 $0 $87 International Equity Fund $91,539 $28,326 $14,311 Small Cap Growth Fund $12,268 $5,642 $4,026 17 MetLife Securities Class A Class B Class C ------- ------- ------- Capital Growth Fund $2,746 $1,938 $0 Targeted Equity Fund $23,351 $15,256 $0 Growth and Income Fund $12,764 $14,312 $0 Balanced Fund $1,590 $3,107 $0 Large Cap Value Fund $183 $151 $0 AEW Real Estate Fund $14 $0 $0 International Equity Fund $1,703 $543 $0 Small Cap Growth Fund $732 $2,074 $0 Nathan & Lewis Class A Class B Class C ------- ------- ------- Capital Growth Fund $1,277 $1,340 $131 Targeted Equity Fund $23,229 $260 $12 Growth and Income Fund $1,944 $549 $143 Balanced Fund $1,162 $724 $39 Large Cap Value Fund $17 $19 $0 International Equity Fund $428 $520 $24 Small Cap Growth Fund $84 $23 $0 xxxi xxxii - -------------------------------------------------------------------------------- OWNERSHIP OF FUND SHARES - -------------------------------------------------------------------------------- As of October 31, 2001, to the Trusts' knowledge, the following persons owned of record or beneficially 5% or more of the outstanding shares of the indicated classes of the Funds set forth below.
Fund Shareholder and Address Ownership Percentage ---- ----------------------- -------------------- Capital Growth Fund Class A Deferred Compensation Plan for General Agents 6.08% of New England Financial Met Life Securities Accting Attn: Jay Langone 4100 Boyscout Ave Tampa, FL 33607-5740 Targeted Equity Fund Class B MLPF&S for the Sole Benefit of It's Customers 6.03% Attn Fund Administration ML#97CH 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class C MLPF&S for the Sole Benefit of It's Customers 18.27% Attn Fund Administration ML#97UR 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class Y Chase Manhattan Bank Directed Trustee 99.39% MetLife Define Contribution Group 4 New York Plaza FL2 New York, NY 1004-2413 Growth and Income Fund Class C MLPF&S For the Sole Benefit of It's Customers 11.21% ATTN Fund Administration ML#97UA 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class Y Metropolitan Life Ins 37.14% GADC Dianne Lunny 501-6 Boylston Boston, MA 02116-3769 T Rowe Price Trust Co 28.29% FBO Retirement Plan Clients PO Box 17251 Baltimore, MD 21297-1215 Chase Manhattan Bank Directed Trustee for 27.28% MetLife Defined Contribution Group 770 Broadway 10th FL New York, NY 10003-9522
xxxiii Balanced Fund Class C Donaldson Lufkin Jenrette 16.20% Securities Corporation Inc PO Box 2052 Jersey City, NJ 07303-2052 Class Y New England Mutual Life Ins Co 75.31% Separate Investment Accounting Attn Brenda Harmon 501 Boylston Street 6th FL Boston, MA 02116-3769 Metropolitan Life Insurance Co 13.85% C/O GADC-Gerald Hart-Agency Operations NELICO 501 Boylston Street 10th FL Boston, MA 02116-3769 Chase Manhattan Bank Directed 9.70% Trustee for MetLife Defined Contribution Group 770 Broadway 10th FL New York, NY 10003-9522 AEW Real Estate Fund* Class A Wexford Clearing Services Corp 17.78% Ruth R. Remmel TTEE Ruth R. Remmel REV TR UA DTD 10/01/93 11219 Fincl Ctr Pkwy #311 Little Rock, AR 72211 G Neal Ryland 6.06% 55 Beaver Pond Rd Beverly, MA 01915-1266 Class B MLPF&S For the Sole Benefit of It's Customers 12.47% ATTN Fund Administration 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Donaldson Lufkin Jenrette 5.46% Securities Corporation Inc PO Box 2052 Jersey City, NJ 07303-2052 Class C MLPF&S For the Sole Benefit of It's Customers 34.22% ATTN Fund Administration 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Wexford Clearing Services Corp 16.00% Beneva C Farris TTEE Beneva C Farris REV TR UA DTD 04/17/00 721 Farris RD Conway, AR 72034-4906
xxxiv Class Y AEW Capital Management LP 79.96% Two Seaport LN Attn James J Finnegan Boston, MA 02110-2001 AEW Capital Management LP 20.01% Two Seaport LN Attn James J Finnegan Boston, MA 02110-2001 International Equity Fund Class C MLPF&S For the Sole Benefit of It's Customers 44.13% ATTN Fund Administration ML#97UB 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class Y Metropolitan Life Insurance Co 51.35% C/O GADC-Gerald Hart-Agency Operations NELICO 501 Boylston ST 10th FL Boston, MA 02112-3769 Chase Manhattan Bank Directed 42.24% Trustee for MetLife Defined Contribution Group 4 New York Plaza FL 2 New York, NY 10004-2413 Large Cap Value Fund Class C MLPF&S For the Sole Benefit of It's Customers 23.58% ATTN Fund Administration ML#97UA 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Painewebber for the Benefit of 12.25% Robert Adam, Brian King, Robert Campagone & Kathleen Lomeli Willimantic PST DTD 5/1/73 PO Box 23 Willimantic, CT 06226-0023 State Street Bank & Trust Co 6.16% Cust for the IRA Rollover of Jack M Jensen 805 Tipperary RD Oregon, WI 53575-2641 Wexford Clearing Services Corp 5.27% Ellen C Davidson 4520 Kenyon DR Little Rock, AR 72205-2017 Resources Trust CO TR IRA 5.16 U/A 11/18/97 FBO Billy F Watkins R-456-34-8235 PO Box 5900 Denver, CO 80217-5900
xxxv Mid Cap Growth Fund** Class A MLPF&S For the Sole Benefit of It's Customers 8.60% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class B MLPF&S For the Sole Benefit of It's Customers 5.65% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class C MLPF&S For the Sole Benefit of It's Customers 39.15% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Select Fund Class A MLPF&S For the Sole Benefit of It's Customers 33.58% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 MLPF&S For the Sole Benefit of It's Customers 11.15% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class B MLPF&S For the Sole Benefit of It's Customers 30.36% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 MLPF&S For the Sole Benefit of It's Customers 13.33% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Class C MLPF&S For the Sole Benefit of It's Customers 38.28% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 MLPF&S For the Sole Benefit of It's Customers 8.74% ATTN Fund Administration ML#97GM 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484 Small Cap Growth Fund Class C MLPF&S For the Sole Benefit of It's Customers 10.22% ATTN Fund Administration ML#97UR 4800 Deer Lake DR East 2nd FL Jacksonville, FL 32246-6484
* As of October 31, 2001, the Donaldson Lufkin Jenrette Securities Corporation, Inc., PO Box 2052, Jersey City, NJ 07303-2052 owned of record 217,498.622 shares of the AEW Real Estate Fund in the aggregate which constituted 27.71% of the AEW Real Estate Fund, and therefore may be presumed to "control" the Fund, as xxxvi that term is defined in the Investment Company Act of 1940. However, such ownership may be beneficially held by individuals or entities other than Donaldson Lufkin Jenrette Securities, Inc. ** As of October 31, 2001, the Donaldson Lufkin Jenrette Securities Corporation, Inc., PO Box 2052, Jersey City, NJ 07303-2052 owned of record 314,034.178 shares of the Mid Cap Growth Fund in the aggregate which constituted 29.00% of the Mid Cap Growth Fund, and therefore may be presumed to "control" the Fund, as that term is defined in the Investment Company Act of 1940. However, such ownership may be beneficially held by individuals or entities other than Donaldson Lufkin Jenrette Securities, Inc. xxxvii xxxviii - -------------------------------------------------------------------------------- INVESTMENT PERFORMANCE OF THE FUNDS - -------------------------------------------------------------------------------- Performance Results - Percent Change* For the Periods Ended 9/30/01 Capital Growth Fund
Aggregate Average Annual Total Return Total Return ------------------------- ------------------------------------ Since Since Class A shares: As a % of 5 Years 8/3/92*** 1 Year 5 Years 8/3/92*** - ------------------------------------- ------- --------- ------ ------- --------- Net Asset Value 9.04 100.99 -42.83 1.75 7.92 Maximum Sales Charge 2.76 89.47 -46.11 0.55 7.23 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 4.52 57.75 -43.27 0.89 5.83 Redemption at End of Period 3.52 57.75 -45.58 0.69 5.83 Aggregate Average Annual Total Return Total Return -------------------------- ------------------------------------- Since Since Class C shares: As a % of 5 Years 12/30/94*** 1 Year 5 Years 12/30/94*** - ------------------------------------- ------- ----------- ------ ------- ----------- Net Asset Value 4.49 55.90 -43.24 0.88 6.80 Maximum Sales Charge and Redemption at End of Period**** 3.46 54.34 -44.27 0.68 6.64 Targeted Equity 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 45.88 142.17 -26.05 7.85 9.25 Maximum Sales Charge 37.54 128.19 -30.33 6.58 8.60
xxxix
Aggregate Average Annual Total Return Total Return ------------ ------------------------------ Since Since Class B shares: As a % of 2/28/97*** 1 Year 2/28/97*** - ------------------------------------- ----------- ------- ---------- Net Asset Value 16.28 -26.57 3.34 Redemption at End of Period 15.26 -30.02 3.14 Aggregate Average Annual Total Return Total Return ------------ ------------------------------ Since Since Class C shares: As a % of 9/1/98*** 1 Year 9/1/98*** - ------------------------------------- --------- ------ --------- Net Asset Value -6.18 -26.57 -2.05 Maximum Sales Charge and Redemption at End of Period**** -7.09 -27.97 -2.36
xl
Aggregate Average Annual Total Return Total Return ---------------- ------------------------------- Class Y shares: As a % of Since 6/30/99*** 1 Year Since 6/30/99*** - ------------------------------------- ---------------- ------ ---------------- Net Asset Value -25.02 -25.73 -12.00 Growth and 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 42.76 164.13 -26.11 7.38 10.20 Maximum Sales Charge 34.58 148.89 -30.37 6.12 9.55 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 37.59 97.43 -26.68 6.59 8.82 Redemption at End of Period 36.01 97.43 -30.34 6.34 8.82 Aggregate Average Annual Total Return Total Return ---------------------- ---------------------------------- Since Since Class C shares: As a % of 5 Years 5/1/95*** 1 Year 5 Years 5/1/95*** - ------------------------------------- ------- --------- ------ ------- --------- Net Asset Value 37.61 74.58 -26.64 6.59 9.07 Maximum Sales Charge and Redemption at End of Period**** 36.24 72.83 -28.10 6.38 8.90 Aggregate Annualized Total Return Total Return ------------ ---------------------------- Since Since Class Y shares: As a % of 11/18/98*** 1 Year 11/18/98*** - ------------------------------------- ----------- ------ ----------- Net Asset Value -14.55 -25.73 -5.34
xli Balanced 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 2.60 89.21 -20.33 0.52 6.58 Maximum Sales Charge -3.27 78.25 -24.90 -0.66 5.95
xlii
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 -1.23 33.03 -20.96 -0.25 3.61 Redemption at End of Period -2.57 33.03 -24.89 -0.52 3.61 Aggregate Average Annual Total Return Total Return ------------------------- -------------------------------- Since Since Class C shares: As a % of 5 Years 12/30/94*** 1 Year 5 Years 12/30/94*** - ------------------------------------- ------- ----------- ------ ------- ----------- Net Asset Value -1.32 33.03 -20.89 -0.27 4.32 Maximum Sales Charge and Redemption at End of Period**** -2.29 31.75 -22.45 -0.46 4.17 Aggregate Average Annual Total Return Total Return ------------------------ -------------------------------- Since Since Class Y shares: As a % of 5 Years 3/8/94*** 1 Year 5 Years 3/8/94*** - ------------------------------------- ------- --------- ------ ------- --------- Net Asset Value 4.98 40.56 -19.86 0.98 4.60 Large Cap Value Fund Aggregate Average Annual Total Return Total Return ------------------------- -------------------------------- Since Since Class A shares: As a % of 5 Years 11/28/95*** 1 Year 5 Years 11/28/95*** - ------------------------------------- ------- ----------- ------ ------- ----------- Net Asset Value 36.44 59.65 -6.40 6.41 8.34 Maximum Sales Charge 28.59 50.50 -11.79 5.16 7.25
xliii
Aggregate Average Annual Total Return Total Return ------------ --------------------------- Since Since Class B shares: As a % of 9/15/97*** 1 Year 9/15/97*** - ------------------------------------- ---------- ------ ---------- Net Asset Value 0.50 -7.12 0.12 Redemption at End of Period -1.45 -11.76 -0.36 Aggregate Average Annual Total Return Total Return ------------ ------------------------------ Since Since Class C shares: As a % of 9/15/97*** 1 Year 9/15/97*** - ------------------------------------- ---------- ------ ---------- Net Asset Value 0.56 -7.06 0.14 Maximum Sales Charge and Redemption at End of Period**** -0.43 -8.90 -0.11 International Equity Fund Aggregate Average Annual Total Return Total Return ------------------------- ----------------------------------- Since Since Class A shares: As a % of 5 Years 5/21/92*** 1 Year 5 Years 5/21/92*** - ------------------------------------- ------- ---------- ------ ------- ---------- Net Asset Value -4.10 40.24 -34.91 -0.83 3.68 Maximum Sales Charge -9.59 32.20 -38.66 -2.00 3.03 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 -7.50 8.23 -35.39 -1.55 0.99 Redemption at End of Period -8.94 8.23 -38.49 -1.85 0.99 Aggregate Average Annual Total Return Total Return ------------------------ ------------------------------------ Since Since Class C shares: As a % of 5 Years 12/30/94*** 1 Year 5 Years 12/30/94*** - ------------------------------------- ------- ----------- ------ ------- ----------- Net Asset Value -7.34 0.88 -35.36 -1.51 0.13 Maximum Sales Charge and Redemption at End of Period**** -8.24 -0.16 -36.62 -1.71 -0.02
xliv
Aggregate Average Annual Total Return Total Return ----------------------- ----------------------------------- Since Since Class Y shares: As a % of 5 Years 9/9/93*** 1 Year 5 Years 9/9/93*** - ------------------------------------- ------- --------- ------ ------- --------- Net Asset Value -1.03 21.02 -34.41 -0.21 2.40 Small Cap Growth Fund Aggregate Average Annual Total Return Total Return ------------ ----------------------------- Since Since Class A shares: As a % of 3/31/98*** 1 Year 3/31/98*** - ------------------------------------- ---------- ------ ---------- Net Asset Value -0.01 -22.96 0.00 Maximum Sales Charge -5.74 -27.41 -1.67 Aggregate Average Annual Total Return Total Return ------------ ----------------------------- Since Since Class B shares: As a % of 3/31/98*** 1 Year 3/31/98*** - ------------------------------------- ---------- ------ ---------- Net Asset Value -2.44 -23.51 -0.70 Redemption at End of Period -4.51 -26.64 -1.31 Aggregate Average Annual Total Return Total Return ------------ ----------------------------- Since Since Class C shares: As a % of 3/31/98*** 1 Year 3/31/98*** - ------------------------------------- ---------- ------ ---------- Net Asset Value -2.44 -23.73 -0.70 Maximum Sales Charge and Redemption at End of Period**** -3.45 -25.11 -1.00
* Federal regulations require this example to be calculated using a $1,000 investment. The normal minimum initial investment in shares of the Funds is $2,500, however. ** The numbers presented for Class A shares reflect the maximum front-end sales charge currently in effect. Prior to March 3, 1997, a higher maximum front-end sales charge was in effect, so that the total returns achieved by investors may have been lower than those shown above. *** Commencement of Fund operations or offering of specified class of shares. **** Class C share performance assumes a 1.00% front-end sales charge and, for the 1 year period, a 1.00% CDSC when you sell shares within one year of purchase. Class C shares for accounts established on or after December 1, 2000 are subject to the 1.00% front-end load. Class C shares for accounts established before December 1, 2000 are not subject to the 1.00% front-end load. xlv The foregoing data represent past performance only and are not a prediction as to the future returns of any Fund. The investment return and principal value of an investment in any Fund will fluctuate so that the investor's shares, when redeemed, may be worth more or less than their original cost. xlvi [CDC NVEST FUNDS LOGO] - -------------------------------------------------------------------------------- Statement of Additional Information -- PART II May 1, 2001 as revised November 14, 2001 for: CDC NVEST FUNDS TRUST I (EXCEPT CDC NVEST LARGE CAP GROWTH FUND AND CDC NVEST JURIKA & VOYLES RELATIVE VALUE FUND) CDC NVEST FUNDS TRUST II CDC NVEST FUNDS TRUST III (EXCEPT CDC NVEST JURIKA & VOYLES SMALL CAP GROWTH FUND) CDC NVEST COMPANIES TRUST I Statement of Additional Information -- PART II November 14, 2001 for: CDC NVEST FUNDS TRUST I CDC NVEST LARGE CAP GROWTH FUND AND CDC NVEST JURIKA & VOYLES RELATIVE VALUE FUND CDC NVEST FUNDS TRUST III CDC NVEST JURIKA & VOYLES SMALL CAP GROWTH FUND The following information applies generally to the funds listed below (the "Funds" and each a "Fund"). The Funds constitute all of the series of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Companies Trust I and CDC Nvest Funds Trust III (the "Trusts" and each a "Trust"). In certain cases, the discussion applies to some but not all of the Funds. Certain data applicable to particular Funds is found in Part I of this Statement of Additional Information (the "Statement") as well as in the Prospectuses of the Funds dated May 1, 2001 as revised November 14, 2001 and dated November 14, 2001 for CDC Nvest Large Cap Growth Fund, CDC Nvest Jurika & Voyles Relative Value Fund and CDC Nvest Jurika & Voyles Small Cap Growth Fund (the "Prospectus" or "Prospectuses"). The following Funds are described in this Statement:
Series of CDC Nvest Funds Trust I Series of CDC Nvest Funds Trust I (continued) - --------------------------------- --------------------------------------------- CDC Nvest Balanced Fund (the "Balanced Fund") CDC Nvest Strategic Income Fund CDC Nvest Bond Income Fund (the "Strategic Income Fund") (the "Bond Income Fund") CDC Nvest Capital Growth Fund Series of CDC Nvest Funds Trust II (the "Capital Growth Fund") ---------------------------------- CDC Nvest Government Securities Fund CDC Nvest Growth and Income Fund (the "Government Securities Fund") (the "Growth and Income Fund") CDC Nvest International Equity Fund CDC Nvest High Income Fund (the "High Income Fund") (the "International Equity Fund") CDC Nvest Limited Term U.S. Government Fund CDC Nvest Large Cap Growth Fund (the "Limited Term U.S. Government Fund") (the "Large Cap Growth Fund") CDC Nvest Massachusetts Tax Free Income Fund CDC Nvest Municipal Income Fund (the "Massachusetts Fund") (the "Municipal Income Fund") CDC Nvest Short Term Corporate Income Fund CDC Nvest Jurika & Voyles Relative Value Fund (the "Short Term Corporate Income Fund") (the "Relative Value Fund") CDC Nvest Targeted Equity Fund Series of CDC Nvest Companies Trust I (the "Targeted Equity Fund", formerly Growth Fund) ------------------------------------- CDC Nvest Star Advisers Fund (the "Star Advisers Fund") CDC Nvest AEW Real Estate Fund ("AEW Real Estate Fund") CDC Nvest Star Small Cap Fund (the "Star Small Cap Fund") Series of CDC Nvest Funds Trust III CDC Nvest Star Value Fund (the "Star Value Fund") ----------------------------------- CDC Nvest Star Worldwide Fund CDC Nvest Jurika & Voyles Small Cap Growth Fund (the "Star Worldwide Fund") (the "Small Cap Growth Fund", formerly CDC Nvest Bullseye Fund) CDC Nvest Large Cap Value Fund ("Large Cap Value Fund", formerly Equity Income Fund) CDC Nvest Mid Cap Growth Fund ("Mid Cap Growth Fund") CDC Nvest Select Fund ("Select Fund")
1 Table of Contents Part II Miscellaneous Investment Practices 3 Management of the Trusts 27 Portfolio Transactions and Brokerage 46 Description of the Trusts and Ownership of Shares 54 How to Buy Shares 59 Net Asset Value and Public Offering Price 59 Reduced Sales Charges - Class A Shares Only 60 Shareholder Services 63 Redemptions 69 Standard Performance Measures 72 Income Dividends, Capital Gain Distributions and Tax Status 78 Financial Statements 81 Appendix A - Description of Bond Ratings 82 Appendix B - Media that May Contain Fund Information 86 Appendix C - Advertising and Promotional Literature 87 2 - -------------------------------------------------------------------------------- MISCELLANEOUS INVESTMENT PRACTICES - -------------------------------------------------------------------------------- The following is a list of certain investment practices in which a Fund may engage as secondary investment strategies. A Fund's primary strategies are detailed in its Prospectus.
Balanced Fund Bond Income Fund Capital Growth Fund - ------------- ---------------- ------------------- Various Equity Securities Various Equity Securities Various Equity Securities IPOs Asset-backed Securities IPOs Non-Convertible Preferred Stock Collateralized Mortgage Obligations Corporate Fixed Income Securities Lower Quality Corporate Fixed When-issued Securities (investment grade) Income Securities Convertible Securities U.S. Government Securities Repurchase Agreements Illiquid Securities Repurchase Agreements Investments in Other Investment Section 4(2) Commercial Paper Zero-coupon Securities Companies (liquidity determination required) Convertible Securities Futures, Options and Swap Contracts Loans of Portfolio Securities Foreign Securities (Foreign Short Sales Against the Box Short-term Investments Equity Illiquid Securities Money Market Instruments Securities, Supranational Borrowing/Reverse Repurchase Repurchase Agreements Agencies, Agreements Structured Notes Depositary Receipts) Short-term Investments Futures, Options and Swap Foreign Currency Hedging Money Market Instruments Contracts Transactions Securities of Emerging Markets Depositary Receipts Investments in Other Investment Section 4(2) Commercial Paper Pay-in-kind Securities Companies (liquidity determination required) Stripped Securities Futures, Options and Swap Structured Notes Zero-coupon Securities Contracts Step Coupon Bonds Short Sales Against the Box Stripped Securities Illiquid Securities CMO's Section 4(2) Commercial Paper and Rule 144A Securities (liquidity determination required) Loans of Portfolio Securities Borrowing/Reverse Repurchase Agreements Short-term Investments Money Market Instruments Foreign Bonds
Government Securities Fund International Equity Fund Municipal Income Fund - -------------------------- ------------------------- --------------------- Repurchase Agreements Various Foreign Equity Securities Repurchase Agreements When-issued Securities Foreign IPOs Stripped Securities Futures and Options Lower-quality Foreign Fixed Income When-issued Securities Money Market Instruments Securities Futures and Options Repurchase Agreements Short-term Investments Zero-coupon Securities Money Market Instruments When-issued Securities U.S. Government Securities Foreign Currency Hedging Section 4(2) Commercial Paper and Transactions Rule 144A Securities (liquidity Foreign Corporate Bonds determination required) Foreign Convertible Bonds Foreign Government Bonds Supranational Agencies Foreign Warrants Investments in Other Investment Companies Futures, Options and Swap Contracts Short Sales Against the Box Illiquid Securities Section 4(2) Commercial Paper and Rule 144A Securities (liquidity determination required) Loans of Portfolio Securities Borrowing/Reverse Repurchase Agreements Short-term Investments Money Market Instruments
3
Strategic Income Fund Targeted Equity Fund Growth and Income Fund - --------------------- -------------------- ---------------------- Various Equity Securities Various Equity Securities Various Equity Securities IPOs IPOs IPOs When-issued Securities Corporate Fixed Income Securities Corporate Fixed Income Securities Asset-backed Securities (investment grade) (investment grade) Collateralized Mortgage Obligations U.S. Government Securities U.S. Government Securities Repurchase Agreements Repurchase Agreements Zero-coupon Securities Foreign Currency Hedging Transactions Zero-coupon Securities Repurchase Agreements Investments in Other Convertible Securities Convertible Securities Investment Companies Futures, Options and Swap Foreign Securities (Foreign Equity Futures, Options and Swap Contracts Contracts Securities, Supranational Short Sales Against the Box Short Sales Against the Box Agencies, Illiquid Securities Illiquid Securities Depositary Receipts) Section 4(2) Commercial Paper and Rule Section 4(2) Commercial Paper and Foreign Currency Hedging 144A Securities (liquidity Rule 144A Securities (liquidity Transactions determination required) determination required) Investments in Other Investment Loans of Portfolio Securities Borrowing/Reverse Repurchase Companies Borrowing/Reverse Repurchase Agreements Futures, Options and Swap Agreements Short-term Investments Contracts Illiquid Securities Short-term Investments Money Market Instruments Section 4(2) Commercial Paper and Money Market Instruments Rule 144A Securities (liquidity Step Coupon Bonds determination required) Borrowing Short-term Investments Money Market Instruments Foreign Bonds
High Income Fund Limited Term U.S. Government Fund Massachusetts Fund - ---------------- --------------------------------- ------------------ Various Equity Securities Mortgage-backed Securities U.S. Government Securities U.S. Government Securities Collateralized Mortgage Obligations Mortgage-related Securities Mortgage-related Securities Stripped Securities Stripped Securities Asset-backed Securities Repurchase Agreements Repurchase Agreements Collateralized Mortgage Obligations When-issued Securities When-issued Securities Stripped Securities Foreign Equity Securities Futures and Options Repurchase Agreements Foreign Currency Hedging Illiquid Securities When-issued Securities Transactions Section 4(2) Commercial Paper and Convertible Securities Futures and Options Rule Foreign Currency Hedging Illiquid Securities 144A Securities (liquidity Transactions Section 4(2) Commercial Paper and determination required) Illiquid Securities Rule 144A Securities (liquidity Money Market Instruments Section 4(2) Commercial Paper determination required) Pay-in-kind Securities (liquidity determination required) Loans of Portfolio Securities Borrowing/Reverse Repurchase Loans of Portfolio Securities Short-term Investments Agreements Short-term Investments Money Market Instruments Money Market Instruments Structured Notes Step Coupon Bonds
4
Short Term Corporate Income Fund Small Cap Growth Fund Large Cap Value Fund - -------------------------------- --------------------- -------------------- Convertible Bonds Various Equity Securities Various Equity Securities Stripped Securities Convertible Securities Lower Quality Corporate Fixed Repurchase Agreements U.S. Government Securities Income Securities When-issued Securities Repurchase Agreements U.S. Government Securities Futures, Options and Swap Contracts When-issued Securities Repurchase Agreements Illiquid Securities Foreign Securities (Equity Zero-coupon Securities Section 4(2) Commercial Paper Securities, Securities of Emerging Markets (liquidity determination required) Supranational Agencies, Foreign Currency Hedging Short-term Investments Emerging Markets) Transactions Money Market Instruments Futures, Options and Swap Investments in Other Investment Zero-coupon Securities Contracts Companies Structured Notes Investments in Other Investment Futures, Options and Swap Non-Convertible Preferred Stocks, Companies Contracts Notes or Bonds Short Sales Against the Box Short Sales Against the Box Step Coupon Bonds Illiquid Securities Section 4(2) Illiquid Securities Loans of Portfolio Securities Commercial Paper and Rule 144A Section 4(2) Commercial Paper and Securities (liquidity Rule 144A Securities determination required) (liquidity determination Loans of Portfolio Securities required) Borrowing/Reverse Repurchase Loans of Portfolio Securities Agreements Borrowing/Reverse Repurchase Short-term Investments Agreements Money Market Instruments IPOs
5
Mid Cap Growth Fund Select Fund AEW Real Estate Fund - ------------------- ----------- -------------------- Various Equity Securities Various Equity Securities Mortgage Real Estate Investment Convertible Securities IPOs Trusts Corporate Fixed Income Securities Convertible Securities Hybrid Real Estate Investment (investment grade) Corporate Fixed Income Securities Trusts U.S. Government Securities (investment grade) Foreign Securities (Foreign Equity When-issued Securities U.S. Government Securities Securities and Depository Futures, Options and Swap Contracts When-Issued Securities Receipts) Foreign Securities (Foreign Equity Repurchase Agreements Certificates of Deposit, Demand Securities, Depositary Receipts) Zero-coupon Securities and Privatizations Money Market Instruments Time Deposits and Banker's Zero-coupon Securities Pay-in-kind Securities Acceptances Repurchase Agreements Lower Quality Corporate Fixed Prime Commercial Paper, Short-term Investments Income Securities (including Master Demand Notes) Short Sales Against the Box Foreign Securities (Foreign Equity Repurchase Agreements secured by Illiquid Securities Securities, Supranational U.S. Section 4(2) Commercial Paper Agencies, Government Securities (liquidity determination required) Depositary Receipts) When-issued Securities Borrowing/Reverse Repurchase Foreign Bonds Zero-Coupon Securities Agreements Foreign Currency Hedging Convertible Securities Investments in Other Investment transactions Illiquid Securities and Companies Futures and Options Restricted Securities (including Rule Money Market Instruments Short-term Investments 144A Securities) Short Sales Loans of Portfolio Securities Illiquid Securities Short-term Investments Section 4(2) Commercial Paper and Fixed-income Securities Rule 144A Securities (liquidity Borrowing/Reverse Repurchase Agreements Investments in Other Investment Companies
6
Large Cap Growth Fund Relative Value Fund - --------------------- ------------------- Various Equity Securities Various Equity Securities IPOs IPOs Convertible Securities Convertible Securities Corporate Fixed-Income Securities Government Securities (investment grade) When-Issued Securities Government Securities Futures, Options and Swap Contracts When-Issued Securities Foreign Securities (Equity Securities, Futures, Options and Swap Contracts Depositary Receipts, Supranational Foreign Securities (Equity Securities, Agencies) Depositary Receipts) Foreign Currency Hedging Foreign Currency Hedging Transactions Transactions Repurchase Agreements Securities of Emerging Markets Short Sales Against the Box Repurchase Agreements Illiquid Securities Short Sales against the Box Section 4(2) Commercial Paper And Illiquid Securities Rule 144A Securities (liquidity Section 4(2) Commercial Paper and determination required) Rule 144A Securities (liquidity Borrowing/Reverse Repurchase determination required) Agreements Borrowing/Reverse Repurchase Investments in other Investment Agreements Companies Money Market Instruments Money Market Instruments Stripped Securities Securities of Emerging Markets Mortgage-Related Securities Foreign Bonds CMOs Short-Term Investments Foreign Bonds Short-Term Investments
The following is a list of some of the investment practices employed by the various subadvisers of CDC Nvest Star Funds as secondary strategies. Due to the multi-subadviser approach of CDC Nvest Star Funds, investing in a certain security may be a primary strategy for one segment of the Fund and a secondary strategy for another segment of such Fund. 7
Star Advisers Fund Star Small Cap Fund Star Value Fund - ------------------ ------------------- --------------- Various Equity Securities Various Equity Securities Various Equity Securities IPOs IPOs IPOs U.S. Government Securities U.S. Government Securities Corporate Fixed Income Securities Repurchase Agreements Repurchase Agreements (investment grade) Structured Notes Structured Notes U.S. Government Securities Zero-coupon; Pay-in Kind; When-issued Repurchase Agreements Step Coupon and Strips Securities Zero-coupon Securities When-issued Securities Foreign Currency Hedging When-issued Securities Foreign Currency Hedging Transactions Convertible Securities Transactions Privatizations Foreign Currency Hedging Privatizations Investments in Other Investment Transactions Investments in Other Investment Companies Foreign Securities (Depositary Companies Futures, Options and Swap Receipts) Futures, Options and Swap Contracts Contracts Investments in Other Investment Short Sales Against the Box Short Sales Against the Box Companies Illiquid Securities Illiquid Securities Futures, Options and Swap Contracts Section 4(2) Commercial Paper and Section 4(2) Commercial Paper and Short Sales Against the Box Rule 144A Securities (liquidity Rule 144A Securities (liquidity Illiquid Securities determination required) determination required) Section 4(2) Commercial Paper and Borrowing/Reverse Repurchase Borrowing/Reverse Repurchase Rule 144A Securities Agreements Agreements (liquidity determination required) Short-term Investments Short-term Investments Borrowing/Reverse Repurchase Money Market Instruments Money Market Instruments Agreements Loans of Portfolio Securities Mortgage- and Asset-backed Short-term Investments Mortgage- and Asset backed Securities Securities Money Market Instruments Foreign Bonds Loans of Portfolio Securities Foreign Bonds Collateralized Mortgage Obligations Foreign Bonds Lower Quality Fixed-Income Foreign Securities (Equity Securities, Collateralized Mortgage Obligations Securities Supranational Agencies) Step Coupon Bonds Securities of Emerging Markets Pay-in-kind Securities Foreign Depositary Receipts Foreign Currency Speculation Foreign Currency Speculation Transactions Transactions Zero-coupon Securities Stripped Securities Convertible Bonds Foreign Securities (Equity Securities, Emerging Markets, Depositary Receipts, Supranational Agencies)
Star Worldwide Fund Star Worldwide Fund (continued) - ------------------------------ ------------------------------- Various Equity Securities Rule 144A Securities (liquidity IPOs determination required) U.S. Government Securities Borrowing/Reverse Repurchase Repurchase Agreements Agreements Structured Notes Short-term Investments Zero-coupon and Strips Money Market Instruments When-issued Securities Loans of Portfolio Securities Foreign Currency Hedging Mortgage- and Asset-backed Securities Transactions Foreign Bonds Privatizations Step Coupon Bonds Investments in Other Investment Pay-in-kind Securities Companies Foreign Currency Speculation Futures, Options and Swap Transactions Contracts Collateralized Mortgage Obligations Short Sales Against the Box Foreign Securities (Supranational Illiquid Securities Agencies, Emerging Markets) Section 4(2) Commercial Paper and Convertible Preferred Stocks
8 The following is a description of the various investment practices in which a Fund may engage, whether as a primary or secondary strategy, and a summary of certain attendant risks: Equity Securities Equity securities are securities that represent an ownership interest (or the right to acquire such an interest) in a company and include common and preferred stocks and securities exercisable for, or convertible into, common or preferred stocks (such as warrants, convertible debt securities and convertible preferred stock). While offering greater potential for long-term growth, equity securities are more volatile and more risky than some other forms of investment. Therefore, the value of your investment in a Fund may sometimes decrease instead of increase. A Fund may invest in equity securities of companies with relatively small market capitalization. Securities of such companies may be more volatile than the securities of larger, more established companies and the broad equity market indices. See "Small Companies" below. A Fund's investments may include securities traded "over-the-counter" as well as those traded on a securities exchange. Some over-the-counter securities may be more difficult to sell under some market conditions. o Small Companies - Certain Funds may invest in companies with relatively small market capitalization. Such investments may involve greater risk than is usually associated with more established companies. These companies often have sales and earnings growth rates that exceed those of companies with larger market capitalization. Such growth rates may in turn be reflected in more rapid share price appreciation. However, companies with smaller market capitalization often have limited product lines, markets or financial resources and may be dependent upon a relatively small management group. These securities may have limited marketability and may be subject to more abrupt or erratic movements in price than securities of companies with larger market capitalization or market averages in general. The net asset value of Funds that invest in companies with relatively small market capitalization therefore may fluctuate more widely than market averages. o Warrants - Certain Funds may invest in warrants. A warrant is an instrument that gives the holder a right to purchase a given number of shares of a particular security at a specified price until a stated expiration date. Buying a warrant generally can provide a greater potential for profit or loss than an investment of equivalent amounts in the underlying common stock. The market value of a warrant does not necessarily move with the value of the underlying securities. If a holder does not sell the warrant, it risks the loss of its entire investment if the market price of the underlying security does not, before the expiration date, exceed the exercise price of the warrant plus the cost thereof. Investment in warrants is a speculative activity. Warrants pay no dividends and confer no rights (other than the right to purchase the underlying securities) with respect to the assets of the issuer. o Real estate investment trusts (REITs) - Certain Funds may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate related loans. The value of a REIT is affected by changes in the value of the properties owned by the REIT or securing mortgage loans held by the REIT. REITs are dependent upon cash flow from their investments to repay financing costs and the ability of the REITs' managers. REITs are also subject to risks generally associated with real estate securities. A Fund will indirectly bear its proportionate share of expenses, including advisory fees, paid by each REIT in which it invests. o Real Estate Securities - The AEW Real Estate Fund invests primarily in securities of companies in the real estate industry, including REITs, and is, therefore, subject to the special risks associated with the real estate market and the real estate industry in general. Companies in the real estate industry are those that (i) have principal activity involving the development, ownership, construction management or sale of real estate; (ii) have significant real estate holdings, such as hospitality companies, supermarkets and mining, lumber and paper companies; and/or (iii) provide products or services related to the real estate industry, such as financial institutions that make and/or service mortgage loans and manufacturers or distributors of building supplies. Securities of companies in the real estate industry are sensitive to factors such as changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use, and rents, and the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws. 9 Initial Public Offerings Certain funds may purchase securities of companies that are offered pursuant to an initial public offering ("IPO"). An IPO is a company's first offering of stock to the public in the primary market, typically to raise additional capital. The Funds may purchase a "hot" IPO (also known as a "hot issue"), which is an IPO that is oversubscribed and, as a result, is an investment opportunity of limited availability. As a consequence, the price at which these IPO shares open in the secondary market may be significantly higher than the original IPO price. IPO securities tend to involve greater risk due, in part, to public perception and the lack of publicly available information and trading history. There is the possibility of losses resulting from the difference between the issue price and potential diminished value of the stock once traded in the secondary market. Although the Funds will make diligent efforts to research a company prior to purchasing IPO securities, including reviewing the company's prospectus, there is no guarantee against significant losses. The Funds' investment in IPO securities may have a significant impact on a Fund's performance and may result in significant capital gains. Fixed-income Securities Certain Funds may invest in fixed-income securities. Fixed-income securities include a broad array of short, medium and long term obligations issued by the U.S. or foreign governments, government or international agencies and instrumentalities, and corporate issuers of various types. Some fixed-income securities represent uncollateralized obligations of their issuers; in other cases, the securities may be backed by specific assets (such as mortgages or other receivables) that have been set aside as collateral for the issuer's obligation. Fixed-income securities generally involve an obligation of the issuer to pay interest or dividends on either a current basis or at the maturity of the securities, as well as the obligation to repay the principal amount of the security at maturity. Fixed-income securities are subject to market and credit risk. Credit risk relates to the ability of the issuer to make payments of principal and interest and includes the risk of default. In the case of municipal bonds, the issuer may make these payments from money raised through a variety of sources, including (1) the issuer's general taxing power, (2) a specific type of tax such as a property tax, or (3) a particular facility or project such as a highway. The ability of an issuer of municipal bonds to make these payments could be affected by litigation, legislation or other political events, or the bankruptcy of the issuer. U.S. government securities do not involve the credit risks associated with other types of fixed-income securities; as a result, the yields available from U.S. government securities are generally lower than the yields available from corporate fixed-income securities. Market risk is the risk that the value of the security will fall because of changes in market rates of interest. (Generally, the value of fixed-income securities falls when market rates of interest are rising.) Some fixed-income securities also involve prepayment or call risk. This is the risk that the issuer will repay a Fund the principal on the security before it is due, thus depriving the Fund of a favorable stream of future interest payments. Because interest rates vary, it is impossible to predict the income of a fund that invests in fixed-income securities for any particular period. Fluctuations in the value of a Fund's investments in fixed-income securities will cause the Fund's net asset value to increase or decrease. Lower Quality Fixed-income Securities Certain Funds may invest in lower quality fixed-income securities. Fixed-income securities rated BB or lower by Standard & Poor's Ratings Group ("Standard & Poor's" or "S&P") or Ba or lower by Moody's Investor's Service, Inc. ("Moody's") (and comparable unrated securities) are of below "investment grade" quality. Lower quality fixed-income securities generally provide higher yields, but are subject to greater credit and market risk than higher quality fixed-income securities, including U.S. government and many foreign government securities. Lower quality fixed-income securities are considered predominantly speculative with respect to the ability of the issuer to meet principal and interest payments. Achievement of the investment objective of a Fund investing in lower quality fixed-income securities may be more dependent on the Fund's adviser's or subadviser's own credit analysis than for a Fund investing in higher quality bonds. The market for lower quality fixed-income securities may be more severely affected than some other financial markets by economic recession or substantial interest rate increases, by changing public perceptions of this market or by legislation that limits the ability of certain categories of financial institutions to invest in these securities. In addition, the secondary market may be less liquid for lower rated fixed-income securities. This lack of liquidity at certain times may affect the valuation of these securities and may make the valuation and sale of these securities more difficult. Securities of below investment grade quality are considered high yield, high risk securities and are commonly known as "junk bonds." For more information, including a detailed description of the ratings assigned by S&P and Moody's, please refer to the Statement's "Appendix A -- Description of Securities Ratings." Structured Notes Certain Funds may invest in a broad category of instruments known as "structured notes." These instruments are debt obligations issued by industrial corporations, financial institutions or governmental or international 10 agencies. Traditional debt obligations typically obligate the issuer to repay the principal plus a specified rate of interest. Structured notes, by contrast, obligate the issuer to pay amounts of principal or interest that are determined by reference to changes in some external factor or factors. For example, the issuer's obligations could be determined by reference to changes in the value of a commodity (such as gold or oil), a foreign currency, an index of securities (such as the S&P 500 Index) or an interest rate (such as the U.S. Treasury bill rate). In some cases, the issuer's obligations are determined by reference to changes over time in the difference (or "spread") between two or more external factors (such as the U.S. prime lending rate and the total return of the stock market in a particular country, as measured by a stock index). In some cases, the issuer's obligations may fluctuate inversely with changes in an external factor or factors (for example, if the U.S. prime lending rate goes up, the issuer's interest payment obligations are reduced). In some cases, the issuer's obligations may be determined by some multiple of the change in an external factor or factors (for example, three times the change in the U.S. Treasury bill rate). In some cases, the issuer's obligations remain fixed (as with a traditional debt instrument) so long as an external factor or factors do not change by more than the specified amount (for example, if the value of a stock index does not exceed some specified maximum), but if the external factor or factors change by more than the specified amount, the issuer's obligations may be sharply reduced. Structured notes can serve many different purposes in the management of a mutual fund. For example, they can be used to increase the Fund's exposure to changes in the value of assets that the Fund would not ordinarily purchase directly (such as stocks traded in a market that is not open to U.S. investors). They can also be used to hedge the risks associated with other investments the Fund holds. For example, if a structured note has an interest rate that fluctuates inversely with general changes in a country's stock market index, the value of the structured note would generally move in the opposite direction to the value of holdings of stocks in that market, thus moderating the effect of stock market movements on the value of the Fund's portfolio as a whole. Structured notes involve special risks. As with any debt obligation, structured notes involve the risk that the issuer will become insolvent or otherwise default on its payment obligations. This risk is in addition to the risk that the issuer's obligations (and thus the value of the Fund's investment) will be reduced because of adverse changes in the external factor or factors to which the obligations are linked. The value of structured notes will in many cases be more volatile (that is, will change more rapidly or severely) than the value of traditional debt instruments. Volatility will be especially high if the issuer's obligations are determined by reference to some multiple of the change in the external factor or factors. Many structured notes have limited or no liquidity, so that the Fund would be unable to dispose of the investment prior to maturity. (The Funds are not permitted to invest more than 15% of their net assets in illiquid investments.) As with all investments, successful use of structured notes depends in significant part on the accuracy of the relevant adviser's or subadviser's analysis of the issuer's creditworthiness and financial prospects, and of the adviser's or subadviser's forecast as to changes in relevant economic and financial market conditions and factors. In instances where the issuer of a structured note is a foreign entity, the usual risks associated with investments in foreign securities (described below) apply. U.S. Government Securities Certain Funds may invest in some or all of the following U.S. government securities: o U.S. Treasury Bills - Direct obligations of the U.S. Treasury that are issued in maturities of one year or less. No interest is paid on Treasury bills; instead, they are issued at a discount and repaid at full face value when they mature. They are backed by the full faith and credit of the U.S. government. o U.S. Treasury Notes and Bonds - Direct obligations of the U.S. Treasury issued in maturities that vary between one and 40 years, with interest normally payable every six months. These obligations are backed by the full faith and credit of the U.S. government. o "Ginnie Maes" - Debt securities issued by a mortgage banker or other mortgagee which represent an interest in a pool of mortgages insured by the Federal Housing Administration or the Farmer's Home Administration or guaranteed by the Veterans Administration. The Government National Mortgage Association ("GNMA") guarantees the timely payment of principal and interest when such payments are due, whether or not these amounts are collected by the issuer of these certificates on the underlying mortgages. An assistant attorney general of the United States has rendered an opinion that the guarantee by GNMA is a general obligation of the United States backed by its full faith and credit. Mortgages included in single, family or multi-family residential mortgage pools backing an issue of Ginnie Maes have a maximum maturity of 30 years. Scheduled payments of principal and interest are made to the registered holders of Ginnie Maes (such as a Fund) each month. 11 Unscheduled prepayments may be made by homeowners, or as a result of a default. Prepayments are passed through to the registered holder (such as the Fund, which reinvests any prepayments) of Ginnie Maes along with regular monthly payments of principal and interest. o "Fannie Maes" - The Federal National Mortgage Association ("FNMA") is a government-sponsored corporation owned entirely by private stockholders that purchases residential mortgages from a list of approved seller/servicers. Fannie Maes are pass-through securities issued by FNMA that are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the U.S. government. o "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC") is a corporate instrumentality of the U.S. government. Freddie Macs are participation certificates issued by FHLMC that represent an interest in residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but Freddie Macs are not backed by the full faith and credit of the U.S. government. U.S. government securities generally do not involve the credit risks associated with investments in other types of fixed-income securities, although, as a result, the yields available from U.S. government securities are generally lower than the yields available from corporate fixed-income securities. Like other fixed-income securities, however, the values of U.S. government securities change as interest rates fluctuate. Fluctuations in the value of portfolio securities will not affect interest income on existing portfolio securities but will be reflected in the Fund's net asset value. Since the magnitude of these fluctuations will generally be greater at times when the Fund's average maturity is longer, under certain market conditions the Fund may, for temporary defensive purposes, accept lower current income from short-term investments rather than investing in higher yielding long-term securities. Tax Exempt Securities. The Municipal Income Fund and the Massachusetts Fund (the "Tax Exempt Funds") may invest in "Tax Exempt Securities", which term refers to debt securities the interest from which is, in the opinion of bond counsel, exempt from federal income tax and, in the case of the Massachusetts Fund, exempt from state personal income taxes (other than the possible incidence of any alternative minimum taxes). Tax Exempt Securities include debt obligations issued by or on behalf of states, territories and possessions of the United States and their political subdivisions (for example, counties, cities, towns, villages and school districts) and authorities to obtain funds for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which certain Tax Exempt Securities may be issued include the refunding of outstanding obligations, obtaining funds for federal operating expenses, or obtaining funds to lend to public or private institutions for the construction of facilities such as educational, hospital and housing facilities. In addition, certain types of private activity bonds have been or may be issued by public authorities or on behalf of state or local governmental units to finance privately operated housing facilities, sports facilities, convention or trade facilities, air or water pollution control facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal. Such obligations are included within the term "Tax Exempt Securities" if the interest paid thereon, is, in the opinion of bond counsel, exempt from federal income tax and, in the case of the Massachusetts Fund, exempt from state personal income taxes. The Massachusetts Fund may invest more than 25% of the value of its total assets in private activity bonds, the interest from which is exempt from both federal and state personal income taxes, but not more than 25% in bonds backed by non-governmental users in any one industry (see "Investment Restrictions" in Part I of this Statement). However, the income from certain private activity bonds is an item of tax preference for purposes of the federal alternative minimum tax, and it is a fundamental policy of the Massachusetts Fund that distributions from interest income on such private activity bonds, together with distributions of interest income on investments other than Tax Exempt Securities, will normally not exceed 10% of the total amount of the Fund's income distributions. Funds that invest in tax exempt bonds or private activity bonds may not be a desirable investment for "substantial users" of facilities financed by such obligations or bonds or for "related persons" of substantial users. You should contact your financial adviser or attorney for more information if you think you may be a "substantial user" or a "related person" of a substantial user. 12 There are, of course, variations in the quality of Tax Exempt Securities, both within a particular classification and between classifications, depending on numerous factors (see Appendix A). The two principal classifications of tax-exempt bonds are general obligations bonds and limited obligation (or revenue) bonds. General obligation bonds are obligations involving the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues and not from any particular fund or source. The characteristics and method of enforcement of general obligation bonds vary according to the law applicable to the particular issuer, and payment may be dependent upon an appropriation by the issuer's legislative body. Limited obligation bonds are payable only from the revenues derived from a particular facility or class of facilities, or in some cases from the proceeds of a special excise or other specific revenue source such as the user of the facility. Tax exempt private activity bonds are in most cases revenue bonds and generally are not payable from the unrestricted revenues of the issuer. The credit and quality of such bonds is usually directly related to the credit standing of the corporate user of the facilities. Principal and interest on such bonds are the responsibilities of the corporate user (and any guarantor). The yields on Tax Exempt Securities are dependent on a variety of factors, including general money market conditions, the financial condition of the issuer, general conditions of the Tax Exempt Securities market, the size of a particular offering, the maturity of the obligation and the rating of the issue. Further, information about the financial condition of an issuer of tax-exempt bonds may not be as extensive as that made available by corporations whose securities are publicly traded. The ratings of Moody's and S&P represent their opinions as to the quality of the Tax Exempt Securities, which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax Exempt Securities with the same maturity, interest rate and rating may have different yields while Tax Exempt Securities of the same maturity and interest rates with different ratings may have the same yield. Subsequent to its purchase by the Fund, an issue of Tax Exempt Securities or other investments may cease to be rated or the rating may be reduced below the minimum rating required for purchase by the Fund. Neither event will require the elimination of an investment from the Fund's portfolio, but the Fund's subadviser will consider such an event as part of its normal, ongoing review of all the Fund's portfolio securities. Although the yield of a Tax Exempt Fund generally will be lower than that of another Fund, the net after-tax return to investors may be greater. The tables below illustrate what tax-free investing can mean for you. They show what you must earn from a taxable investment to equal a tax-free yield ranging from 4% to 8% under current federal tax rates, in the case of the Municipal Income Fund, and under combined federal and state tax rates, in the case of the Massachusetts Fund. For example, while a married couple with a taxable income of $40,000 filing a joint return would have to earn a taxable yield of 7.06% to equal a tax-free yield of 6.0% in the Municipal Income Fund, a single person with a taxable income of $300,000 would have to earn a taxable yield of 9.85% to equal a tax-free yield of 6.0%. This example and these tables do not take into account the effects of state income tax, in the case of the Municipal Income Fund, local income taxes, if any, or federal income taxes on social security benefits that may arise as a result of receiving tax-exempt income, or any federal alternative minimum tax that may be payable to the extent that Fund dividends are derived from interest on "private activity bonds." Also, a portion of a Tax Exempt Fund's distributions may consist of ordinary income, short-term capital gain or long-term capital gain and will be taxable to you as such. Yields shown do not represent actual yields achieved by the Fund and are not intended as a prediction of future yields.
Taxable Equivalent Yields - Municipal Income Fund Taxable Income* If Tax Exempt Yield is - ------------------------------------- Federal ------------------------------------------ Marginal 4.0% 5.0% 6.0% 7.0% 8.0% Single Return ($) Joint Return ($) Tax Rate Then The Equivalent Taxable Yield Would Be: (2001) - ----------------- ----------------- -------- ------------------------------------------ 0 - 27,050 0 - 45,200 15.00% 4.71% 5.88% 7.06% 8.25% 9.41% 27,051 - 65,550 45,201 - 109,250 27.50% 5.52% 6.90% 8.27% 9.66% 11.03% 65,551 - 136,750 109,251 - 166,450 30.50% 5.76% 7.19% 8.63% 10.07% 11.51% 136,751 - 297,300 166,451 - 297,300 35.50% 6.20% 7.75% 9.30% 10.85% 12.40% 297,301 and over 297,301 and over 39.10% 6.57% 8.21% 9.85% 11.49% 13.14%
* This amount represents taxable income as defined in the Internal Revenue Code of 1986, as amended (the "Code"). 13 TAX FREE INVESTING
Massachusetts Fund 2001 Combined Taxable Income* MA and If Tax Exempt Yield is - ------------------------------------- Federal -------------------------------------------- Single Joint Tax 4.00% 5.00% 6.00% 7.00% 8.00% Return ($) Return ($) Bracket** Then the Equivalent Taxable Yield would be: - --------------------------------------------------------------------------------------------------------- 0 - 27,050 0 - 45,200 19.97% 4.99% 6.23% 7.48% 8.72% 9.97% 27,051 - 65,550 45,201 - 109,250 31.56% 5.84% 7.31% 8.77% 10.23% 11.69% 65,551 - 136,750 109,251 - 166,450 34.39% 6.10% 7.62% 9.14% 10.67% 12.19% 136,751 - 297,300 166,451 - 297,300 39.11% 6.57% 8.21% 9.85% 11.50% 13.14% 297,301 and over 297,301 and over 42.51% 6.96% 8.70% 10.44% 12.18% 13.92%
* This amount represents taxable income as defined in the Code and the Massachusetts tax law. Note that Massachusetts taxable income and federal taxable income may differ due to differences in exemptions, itemized deductions and other items. ** These combined rates reflect the 2001 federal and Massachusetts applicable marginal rates. These rates include the effect of deducting state taxes on a federal return. The Tax Exempt Funds do not currently intend to invest in so-called "moral obligation" bonds, in which repayment is backed by a moral commitment of an entity other than the issuer, unless the credit of the issuer itself, without regard to the "moral obligation," meets the investment criteria established for investments by such Fund. Securities in which a Tax Exempt Fund may invest, including Tax Exempt Securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code, and laws, if any, which may be enacted by Congress or the state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that as a result of litigation or other conditions the power or ability of issuers to meet their obligations for the payment of interest and principal on their Tax Exempt Securities may be materially affected or that their obligations may be found to be invalid and unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for tax-exempt bonds or certain segments thereof, or materially affecting the credit risk with respect to particular bonds. Adverse economic, legal or political developments might affect all or a substantial portion of the Fund's Tax Exempt Securities in the same manner. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions and similar proposals may well be introduced in the future. If such a proposal were enacted, the availability of tax-exempt securities for investment by the Tax Exempt Funds and the value of such Funds' portfolios could be materially affected, in which event such Funds would reevaluate their investment objectives and policies and consider changes in their structure or dissolution. All debt securities, including tax-exempt bonds, are subject to credit and market risk. Generally, for any given change in the level of interest rates, prices for longer maturity issues tend to fluctuate more than prices for shorter maturity issues. The ability of the Tax Exempt Funds to invest in securities other than tax-exempt bonds is limited by a requirement of the Code that at least 50% of such Funds total assets be invested in tax-exempt bonds at the end of each calendar quarter. The Massachusetts Fund's named state and certain of its cities and towns and public bodies have from time to time encountered financial difficulties that have adversely affected their respective credit standings and borrowing abilities. Such difficulties could, of course, affect outstanding obligations of such entities, including obligations held by the Massachusetts Fund. 14 Insurance on Portfolio Holdings of Tax Exempt Funds Tax Exempt Funds may obtain insurance on any of their portfolio holdings from a nationally recognized private insurer, which may include one or more of the following: Financial Guaranty Insurance Company, which is owned by FGIC Corporation, which in turn is owned by General Electric Credit Corporation; AMBAC Indemnity Corporation; Financial Security Assurance, Inc.; and Municipal Bond Investors Assurance Corporation, a wholly-owned subsidiary of MBIA Incorporated, the principal shareholders of which are: The Aetna Life & Casualty Company, Fireman's Fund Insurance Company, subsidiaries of the CIGNA Corporation and affiliates of the Continental Insurance Company. Insurance on individual securities, whether obtained by the issuer or a Tax Exempt Fund, is non-cancelable and runs for the life of the security. To the extent that a Tax Exempt Fund obtains insurance on any of its securities, the insurance must provide for the unconditional payment of scheduled principal and interest when due. In the event of a default by the issuer in the payment of principal or interest, the insurer will, within 30 days of notice of such default, provide to its agent or the trustee funds needed to make any such payments. Such agent or trustee will bear the responsibility of seeing that such funds are used to make such payments to the appropriate parties. Such insurance will not guarantee the market value of a security. Insurance on the Tax Exempt Funds' portfolio of securities will in some cases continue in the event the securities are sold by such Funds, while in other cases it may not. The Tax Exempt Funds have the option to procure individual secondary market insurance, which would continue to cover any such security after its sale by such Funds. Such guaranteed renewable insurance continues so long as premiums are paid by such Funds and, in the judgment of such Funds' subadviser, coverage should be continued. In the case of securities that are insured by a nationally recognized private insurer, default by the issuer is not expected to affect the market value of the security relative to other insured securities of the same maturity value and coupon and covered by the same insurer. 15 Premiums for insurance may be payable in advance or may be paid periodically over the term of the security by the party then owning the security, and the costs will be reflected in the price of the security. The cost of insurance for longer-term securities, expressed in terms of income on the security, is likely to reduce such income by from 10 to 60 basis points. Thus, a security yielding 10% might have a net insured yield of 9.9% to 9.4%. The impact of the cost of the Tax Exempt Funds' portfolio insurance on such Funds' net yield is somewhat less. The cost of insurance for shorter-term securities, which are generally lower yielding, is expected to be less. It should be noted that insurance raises the rating of a municipal security. Lower rated securities generally pay a higher rate of interest than higher rated securities. Thus, while there is no assurance that this will always be the case, the Tax Exempt Funds may purchase lower rated securities, which, when insured, will bear a higher rating, and may pay a higher net rate of interest than other equivalently rated securities that are not insured. Nationally recognized private insurers have certain eligibility standards as to the municipal securities they will insure. Such standards may be more or less strict than standards that would be applied for purchase of a security for the Funds. To the extent nationally recognized private insurers apply stricter standards, the Tax Exempt Funds will be restricted by such standards in the purchase and retention of municipal securities. The Internal Revenue Service (the "IRS") has issued revenue rulings indicating that (i) the fact that municipal obligations are insured will not affect their tax-exempt status and (ii) insurance proceeds representing maturing interest on defaulted municipal obligations paid to certain municipal bond funds will be excludable from federal gross income under Section 103(a) of the Code. While operation of the Tax Exempt Funds and the terms of the insurance policies on such Funds' portfolio of securities may differ somewhat from those addressed by the revenue rulings, the Funds do not anticipate that any differences will be material or change the result with respect to the Funds. Insurers of the Tax Exempt Funds' municipal securities are subject to regulation by the department of insurance in each state in which they are qualified to do business. Such regulation, however, is no guarantee that an insurer will be able to perform on its contract of insurance in the event a claim should be made thereunder at some time in the future. The Tax Exempt Funds' subadviser reviews the financial condition of each insurer of their securities at least annually, and in the event of any material development, with respect to its continuing ability to meet its commitments to any contract of bond insurance. Mortgage-related Securities Certain Funds may invest in mortgage-related securities, such as GNMA or FNMA certificates, which differ from traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans generally may be prepaid at any time. As a result, if a Fund purchases these assets at a premium, a faster-than-expected prepayment rate will reduce yield to maturity, and a slower-than-expected prepayment rate will have the opposite effect of increasing yield to maturity. If a Fund purchases mortgage-related securities at a discount, faster-than-expected prepayments will increase, and slower-than-expected prepayments will reduce, yield to maturity. Prepayments, and resulting amounts available for reinvestment by the Fund, are likely to be greater during a period of declining interest rates and, as a result, are likely to be reinvested at lower interest rates. Accelerated prepayments on securities purchased at a premium may result in a loss of principal if the premium has not been fully amortized at the time of prepayment. Although these securities will decrease in value as a result of increases in interest rates generally, they are likely to appreciate less than other fixed-income securities when interest rates decline because of the risk of prepayments. In addition, an increase in interest rates would also increase the inherent volatility of the Fund by increasing the average life of the Fund's portfolio securities. An Adjustable Rate Mortgage security ("ARM"), like a traditional mortgage security, is an interest in a pool of mortgage loans that provides investors with payments consisting of both principal and interest as mortgage loans in the underlying mortgage pool are paid off by the borrowers. ARMs have interest rates that are reset at periodic intervals, usually by reference to some interest rate index or market interest rate. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of adjustable rate securities, these securities are still subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. Because the interest rates are reset only periodically, changes in the interest rate on ARMs may lag changes in prevailing market interest rates. Also, some ARMs (or the underlying mortgages) are subject to caps or floors that limit the maximum change in interest rate during a specified period or over the life of the security. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods. Because of the resetting of interest rates, ARMs are less likely than non-adjustable rate securities of comparable quality and maturity to increase significantly in value when market interest rates fall. 16 Asset-backed Securities Certain Funds may invest in asset-backed securities. The securitization techniques used to develop mortgage securities are also being applied to a broad range of other assets. Through the use of trusts and special purpose vehicles, assets such as automobile and credit card receivables are being securitized in pass-through structures similar to mortgage pass-through structures or in a pay-through structure similar to a Collateralized Mortgage Obligation structure. Generally, the issuers of asset-backed bonds, notes or pass-through certificates are special purpose entities and do not have any significant assets other than the receivables securing such obligations. In general, the collateral supporting asset-backed securities is of shorter maturity than mortgage loans. Instruments backed by pools of receivables are similar to mortgage-backed securities in that they are subject to unscheduled prepayments of principal prior to maturity. When the obligations are pre-paid, the Fund will ordinarily reinvest the prepaid amounts in securities the yields of which reflect interest rates prevailing at the time. Therefore, the Fund's ability to maintain a portfolio that includes high-yielding asset-backed securities will be adversely affected to the extent that prepayments of principal must be reinvested in securities that have lower yields than the prepaid obligations. Moreover, prepayments of securities purchased at a premium could result in a realized loss. Collateralized Mortgage Obligations ("CMOs") Certain Funds may invest in CMOs, which are securities backed by a portfolio of mortgages or mortgage securities held under indentures. The underlying mortgages or mortgage securities are issued or guaranteed by the U.S. government or an agency or instrumentality thereof. The issuer's obligation to make interest and principal payments is secured by the underlying portfolio of mortgages or mortgage securities. CMOs are issued with a number of classes or series which have different maturities and which may represent interests in some or all of the interest or principal on the underlying collateral or a combination thereof. CMOs of different classes are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. In the event of sufficient early prepayments on such mortgages, the class or series of CMO first to mature generally will be retired prior to its maturity. Thus, the early retirement of a particular class or series of CMO held by the Fund would have the same effect as the prepayment of mortgages underlying a mortgage pass-through security. CMOs may be considered derivative securities. "Stripped" Securities Certain Funds may invest in stripped securities, which are usually structured with two or more classes that receive different proportions of the interest and principal distribution on a pool of U.S. government or foreign government securities or mortgage assets. In some cases, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). Stripped securities commonly have greater market volatility than other types of fixed-income securities. In the case of stripped mortgage securities, if the underlying mortgage assets experience greater than anticipated payments of principal, a Fund may fail to recoup fully its investments in IOs. The staff of the SEC has indicated that it views stripped mortgage securities as illiquid unless the securities are issued by the U.S. government or its agencies and are backed by fixed-rate mortgages. The Funds intend to abide by the staff's position. Stripped securities may be considered derivative securities. Zero-coupon Securities; Pay-in-kind and Step Coupon Securities Certain Funds may invest in zero-coupon, pay-in-kind and step coupon securities. Zero-coupon securities are debt obligations that do not entitle the holder to any periodic payments of interest either for the entire life of the obligation or for an initial period after the issuance of the obligations. Pay-in-kind securities pay dividends or interest in the form of additional securities of the issuer, rather than in cash. These securities are issued and traded at a discount from their face amounts. The amount of the discount varies depending on such factors as the time remaining until maturity of the securities, prevailing interest rates, the liquidity of the security and the perceived credit quality of the issuer. The market prices of zero-coupon and pay-in-kind securities generally are more volatile than the market prices of securities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than do other types of securities having similar maturities and credit quality. In order to satisfy a requirement for qualification as a "regulated investment company" under the Code, a Fund must distribute each year at least 90% of its net investment income, including the original issue discount accrued on zero-coupon securities. Because the Fund will not on a current basis receive cash payments from the issuer of a zero-coupon security in respect of accrued original issue discount, in some years the Fund may have to distribute cash obtained from other sources in order to satisfy the 90% distribution requirement under the Code. Such cash might be obtained from selling other portfolio holdings of the Fund. In some circumstances, such sales might be necessary in order to satisfy cash distribution requirements even though investment considerations might otherwise make it undesirable for the Fund to sell such securities at such time. Step coupon bonds trade at a discount from their face value and pay coupon interest. The coupon rate is low for an initial period and then increases to a higher coupon rate thereafter. Market values of these types of securities generally fluctuate in response to changes in interest rates to a greater degree than do conventional 17 interest-paying securities of comparable term and quality. Under many market conditions, investments in such securities may be illiquid, making it difficult for the Fund to dispose of them or determine their current value. When-issued Securities Certain Funds may purchase "when-issued" equity securities, which are traded on a price basis prior to actual issuance. Such purchases will only be made to achieve a Fund's investment objective and not for leverage. The when-issued trading period generally lasts from a few days to months, or a year or more; during this period dividends on equity securities are not payable. No dividend income accrues to the Fund prior to the time it takes delivery. A frequent form of when-issued trading occurs when corporate securities to be created by a merger of companies are traded prior to the actual consummation of the merger. Such transactions may involve a risk of loss if the value of the securities fall below the price committed to prior to actual issuance. Each Trust's custodian will establish a segregated account for each Fund when it purchases securities on a when-issued basis consisting of cash or liquid securities equal to the amount of the when-issued commitments. Securities transactions involving delayed deliveries or forward commitments are frequently characterized as when-issued transactions and are similarly treated by each Fund. Repurchase Agreements Certain Funds may enter into repurchase agreements, by which a Fund purchases a security and obtains a simultaneous commitment from the seller to repurchase the security at an agreed-upon price and date. The resale price is in excess of the purchase price and reflects an agreed-upon market rate unrelated to the coupon rate on the purchased security. Such transactions afford the Fund the opportunity to earn a return on temporarily available cash at relatively low market risk. While the underlying security may be a bill, certificate of indebtedness, note or bond issued by an agency, authority or instrumentality of the U.S. government, the obligation of the seller is not guaranteed by the U.S. government and there is a risk that the seller may fail to repurchase the underlying security. In such event, the Fund would attempt to exercise rights with respect to the underlying security, including possible disposition in the market. However, the Fund may be subject to various delays and risks of loss, including (a) possible declines in the value of the underlying security during the period while the Fund seeks to enforce its rights thereto, (b) possible reduced levels of income and lack of access to income during this period and (c) inability to enforce rights and the expenses involved in the attempted enforcement. Reverse Repurchase Agreements Certain Funds may enter into reverse repurchase agreements. However, a Fund may not engage in reverse repurchase agreements in excess of 5% of the applicable Fund's total assets. In a reverse repurchase agreement a Fund transfers possession of a portfolio instrument to another person, such as a financial institution, broker or dealer, in return for a percentage of the instrument's market value in cash, and agrees that on a stipulated date in the future the Fund will repurchase the portfolio instrument by remitting the original consideration plus interest at an agreed-upon rate. The ability to use reverse repurchase agreements may enable, but does not ensure the ability of, a Fund to avoid selling portfolio instruments at a time when a sale may be deemed to be disadvantageous. When effecting reverse repurchase agreements, assets of the applicable Fund in a dollar amount sufficient to make payment of the obligations to be purchased are segregated on the applicable Fund's records at the trade date and maintained until the transaction is settled. Convertible Securities Certain Funds may invest in convertible securities, including corporate bonds, notes or preferred stocks of U.S. or foreign issuers that can be converted into (that is, exchanged for) common stocks or other equity securities. Convertible securities also include other securities, such as warrants, that provide an opportunity for equity participation. Because convertible securities can be converted into equity securities, their values will normally vary in some proportion with those of the underlying equity securities. Convertible securities usually provide a higher yield than the underlying equity, however, so that the price decline of a convertible security may sometimes be less substantial than that of the underlying equity security. Foreign Securities Certain Funds may invest in foreign securities. Such investments present risks not typically associated with investments in comparable securities of U.S. issuers. Since most foreign securities are denominated in foreign currencies or traded primarily in securities markets in which settlements are made in foreign currencies, the value of these investments and the net investment income available for distribution to shareholders of a Fund may be affected favorably or unfavorably by changes in currency exchange rates or exchange control regulations. Because a Fund may purchase securities denominated in foreign currencies, a change in the value of any such currency against the U.S. dollar will result in a change in the U.S. dollar value of the Fund's assets and the Fund's income available for distribution. 18 In addition, although a Fund's income may be received or realized in foreign currencies, the Fund will be required to compute and distribute its income in U.S. dollars. Therefore, if the value of a currency relative to the U.S. dollar declines after a Fund's income has been earned in that currency, translated into U.S. dollars and declared as a dividend, but before payment of such dividend, the Fund could be required to liquidate portfolio securities to pay such dividend. Similarly, if the value of a currency relative to the U.S. dollar declines between the time a Fund incurs expenses in U.S. dollars and the time such expenses are paid, the amount of such currency required to be converted into U.S. dollars in order to pay such expenses in U.S. dollars will be greater than the equivalent amount in such currency of such expenses at the time they were incurred. There may be less information publicly available about a foreign corporate or government issuer than about a U.S. issuer, and foreign corporate issuers are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. Foreign brokerage commissions and securities custody costs are often higher than those in the United States, and judgments against foreign entities may be more difficult to obtain and enforce. With respect to certain foreign countries, there is a possibility of governmental expropriation of assets, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in those countries. The receipt of interest on foreign government securities may depend on the availability of tax or other revenues to satisfy the issuer's obligations. Investments in foreign securities may include investments in emerging or developing countries, whose economies or securities markets are not yet highly developed. Special considerations associated with these investments (in addition to the considerations regarding foreign investments generally) may include, among others, greater political uncertainties, an economy's dependence on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, highly limited numbers of potential buyers for such securities and delays and disruptions in securities settlement procedures. Certain Funds may invest in foreign equity securities either by purchasing such securities directly or by purchasing "depository receipts." Depository receipts are instruments issued by a bank that represent an interest in equity securities held by arrangement with the bank. Depository receipts can be either "sponsored" or "unsponsored." Sponsored depository receipts are issued by banks in cooperation with the issuer of the underlying equity securities. Unsponsored depository receipts are arranged without involvement by the issuer of the underlying equity securities. Less information about the issuer of the underlying equity securities may be available in the case of unsponsored depository receipts. American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs") are types of depository receipts issued by U.S. banks and European banks, respectively. In addition, certain Funds may invest in securities issued by supranational agencies. Supranational agencies are those agencies whose member nations determine to make capital contributions to support the agencies' activities, and include such entities as the International Bank of Reconstruction and Development (the World Bank), the Asian Development Bank, the European Coal and Steel Community and the Inter-American Development Bank. In determining whether to invest in securities of foreign issuers, the adviser or subadviser of the Fund will consider the likely effects of foreign taxes on the net yield available to the Fund and its shareholders. Compliance with foreign tax law may reduce the Fund's net income available for distribution to shareholders. Foreign Currency Most foreign securities in the Funds' portfolios will be denominated in foreign currencies or traded in securities markets in which settlements are made in foreign currencies. Similarly, any income on such securities is generally paid to the Fund in foreign currencies. The value of these foreign currencies relative to the U.S. dollar varies continually, causing changes in the dollar value of the Fund's portfolio investments (even if the local market price of the investments is unchanged) and changes in the dollar value of the Fund's income available for distribution to its shareholders. The effect of changes in the dollar value of a foreign currency on the dollar value of the Fund's assets and on the net investment income available for distribution may be favorable or unfavorable. A Fund may incur costs in connection with conversions between various currencies. In addition, a Fund may be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when the Fund declares and pays a dividend, or between the time when the Fund accrues and pays an operating expense in U.S. dollars. 19 Foreign Currency Hedging Transactions To protect against a change in the foreign currency exchange rate between the date on which a Fund contracts to purchase or sell a security and the settlement date for the purchase or sale, or to "lock in" the equivalent of a dividend or interest payment in another currency, a Fund might purchase or sell a foreign currency on a spot (i.e., cash) basis at the prevailing spot rate. If conditions warrant, a Fund may also enter into contracts with banks or broker-dealers to purchase or sell foreign currencies at a future date ("forward contracts"). A Fund will maintain cash or other liquid assets eligible for purchase by the Fund in a segregated account with the custodian in an amount at least equal to the lesser of (i) the difference between the current value of the Fund's liquid holdings that settle in the relevant currency and the Fund's outstanding obligations under currency forward contracts, or (ii) the current amount, if any, that would be required to be paid to enter into an offsetting forward currency contract which would have the effect of closing out the original forward contract. The Fund's use of currency hedging transactions may be limited by tax considerations. The Fund may also purchase or sell foreign currency futures contracts traded on futures exchanges. Foreign currency futures contract transactions involve risks similar to those of other futures transactions. See "Futures, Options and Swap Contracts" below. Privatizations In a number of countries around the world, governments have undertaken to sell to investors interests in enterprises that the government has historically owned or controlled. These transactions are known as "privatizations" and may in some cases represent opportunities for significant capital appreciation. In some cases, the ability of U.S. investors, such as the Funds, to participate in privatizations may be limited by local law, and the terms of participation for U.S. investors may be less advantageous than those for local investors. Also, there is no assurance that privatized enterprises will be successful, or that an investment in such an enterprise will retain its value or appreciate in value. Investments in Other Investment Companies Certain Funds may invest in other investment companies. Investment companies, including companies such as iShares, "SPDRs" and "WEBS," are essentially pools of securities. Investing in other investment companies involves substantially the same risks as investing directly in the underlying securities, but may involve additional expenses at the investment company level, such as investment advisory fees and operating expenses. In some cases, investing in an investment company may involve the payment of a premium over the value of the assets held in that investment company's portfolio. As an investor in another investment company, the Fund will bear its ratable share of the investment company's expenses, including advisory fees, and the Fund's shareholders will bear such expenses indirectly, in addition to similar fees and expenses of the Fund. Despite the possibility of greater fees and expenses, investment in other investment companies may be attractive nonetheless for several reasons, especially in connection with foreign investments. Because of restrictions on direct investment by U.S. entities in certain countries, investing indirectly in such countries (by purchasing shares of another fund that is permitted to invest in such countries) may be the most practical and efficient way for a Fund to invest in such countries. In other cases, when a Fund's adviser or subadviser desires to make only a relatively small investment in a particular country, investing through another fund that holds a diversified portfolio in that country may be more effective than investing directly in issuers in that country. Futures, Options and Swap Contracts Futures Contracts A futures contract is an agreement between two parties to buy and sell a particular commodity (e.g., an interest-bearing security) for a specified price on a specified future date. In the case of futures on an index, the seller and buyer agree to settle in cash, at a future date, based on the difference in value of the contract between the date it is opened and the settlement date. The value of each contract is equal to the value of the index from time to time multiplied by a specified dollar amount. For example, long-term municipal bond index futures trade in contracts equal to $1000 multiplied by the Bond Buyer Municipal Bond Index, and S&P 500 Index futures trade in contracts equal to $500 multiplied by the S&P 500 Index. When a trader, such as a Fund, enters into a futures contract, it is required to deposit with (or for the benefit of) its broker as "initial margin" an amount of cash or short-term high-quality securities (such as U.S. Treasury bills or high-quality tax exempt bonds acceptable to the broker) equal to approximately 2% to 5% of the delivery or settlement price of the contract (depending on applicable exchange rules). Initial margin is held to secure the performance of the holder of the futures contract. As the value of the contract changes, the value of futures contract positions increases or declines. At the end of each trading day, the amount of such increase and decline is received and paid respectively by and to the holders of these positions. The amount received or paid is known as "variation margin." If the Fund has a long position 20 in a futures contract it will establish a segregated account with the Fund's custodian containing cash or liquid securities eligible for purchase by the Fund equal to the purchase price of the contract (less any margin on deposit). For short positions in futures contracts, the Fund will establish a segregated account with the custodian with cash or liquid securities eligible for purchase by the Fund that, when added to the amounts deposited as margin, equal the market value of the instruments or currency underlying the futures contracts. Although futures contracts by their terms require actual delivery and acceptance of securities (or cash in the case of index futures), in most cases the contracts are closed out before settlement. A futures sale is closed by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity and with the same delivery date. Similarly, the closing out of a futures purchase is closed by the purchaser selling an offsetting futures contract. Gain or loss on a futures position is equal to the net variation margin received or paid over the time the position is held, plus or minus the amount received or paid when the position is closed, minus brokerage commissions. Options An option on a futures contract obligates the writer, in return for the premium received, to assume a position in a futures contract (a short position if the option is a call and a long position if the option is a put), at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option generally will be accompanied by delivery of the accumulated balance in the writer's futures margin account, which represents the amount by which the market price of the futures contract, at exercise, exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option. The premium paid by the purchaser of an option will reflect, among other things, the relationship of the exercise price to the market price and volatility of the underlying contract, the remaining term of the option, supply and demand and interest rates. Options on futures contracts traded in the United States may only be traded on a U.S. board of trade licensed by the Commodity Futures Trading Commission (the "CFTC"). An option on a security entitles the holder to receive (in the case of a call option) or to sell (in the case of a put option) a particular security at a specified exercise price. An "American style" option allows exercise of the option at any time during the term of the option. A "European style" option allows an option to be exercised only at the end of its term. Options on securities may be traded on or off a national securities exchange. A call option on a futures contract written by a Fund is considered by the Fund to be covered if the Fund owns the security subject to the underlying futures contract or other securities whose values are expected to move in tandem with the values of the securities subject to such futures contract, based on historical price movement volatility relationships. A call option on a security written by a Fund is considered to be covered if the Fund owns a security deliverable under the option. A written call option is also covered if the Fund holds a call on the same futures contract or security as the call written where the exercise price of the call held is (a) equal to or less than the exercise price of the call written or (b) greater than the exercise price of the call written if the difference is maintained by the Fund in cash or liquid securities eligible for purchase by the Fund in a segregated account with its custodian. A put option on a futures contract written by a Fund, or a put option on a security written by the Fund, is covered if the Fund maintains cash or liquid securities eligible for purchase by the Fund with a value equal to the exercise price in a segregated account with the Fund's custodian, or else holds a put on the same futures contract (or security, as the case may be) as the put written where the exercise price of the put held is equal to or greater than the exercise price of the put written. If the writer of an option wishes to terminate its position, it may effect a closing purchase transaction by buying an option identical to the option previously written. The effect of the purchase is that the writer's position will be canceled. Likewise, the holder of an option may liquidate its position by selling an option identical to the option previously purchased. Closing a written call option will permit a Fund to write another call option on the portfolio securities used to cover the closed call option. Closing a written put option will permit the Fund to write another put option secured by the segregated assets used to secure the closed put option. Also, effecting a closing transaction will permit the cash or 21 proceeds from the concurrent sale of any futures contract or securities subject to the option to be used for other Fund investments. If the Fund desires to sell particular securities covering a written call option position, it will close out its position or will designate from its portfolio comparable securities to cover the option prior to or concurrent with the sale of the covering securities. A Fund will realize a profit from closing out an option if the price of the offsetting position is less than the premium received from writing the option or is more than the premium paid to purchase the option; and the Fund will realize a loss from closing out an option transaction if the price of the offsetting option position is more than the premium received from writing the option or is less than the premium paid to purchase the option. Because increases in the market price of a call option will generally reflect increases in the market price of the covering securities, any loss resulting from the closing of a written call option position is expected to be offset in whole or in part by appreciation of such covering securities. Since premiums on options having an exercise price close to the value of the underlying securities or futures contracts usually have a time value component (i.e., a value that diminishes as the time within which the option can be exercised grows shorter) an option writer may profit from the lapse of time even though the value of the futures contract (or security in some cases) underlying the option (and of the security deliverable under the futures contract) has not changed. Consequently, profit from option writing may or may not be offset by a decline in the value of securities covering the option. If the profit is not entirely offset, the Fund will have a net gain from the options transaction, and the Fund's total return will be enhanced. Likewise, the profit or loss from writing put options may or may not be offset in whole or in part by changes in the market value of securities acquired by the Fund when the put options are closed. As an alternative to purchasing call and put options on index futures, a Fund may purchase or sell call or put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures. Certain Funds may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at a time when, in the case of a call warrant, the exercise price is less than the value of the underlying index, or in the case of a put warrant, the exercise price is less than the value of the underlying index. If the Fund were not to exercise an index warrant prior to its expiration, then the Fund would lose the amount of the purchase price paid by it for the warrant. A Fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the Fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the Fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the Fund's ability to exercise the warrants at such time, or in such quantities, as the Fund would otherwise wish to do. Certain Funds may buy and write options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. For example, a decline in the U.S. dollar value of a foreign currency in which portfolio securities are denominated will reduce the U.S. dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of the portfolio securities, the Fund may buy put options on the foreign currency. If the value of the currency declines, the 22 Fund will have the right to sell such currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in part, the adverse effect on its portfolio. Conversely, when a rise in the U.S. dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, a Fund may buy call options on the foreign currency. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to the Fund from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, if currency exchange rates do not move in the direction or to the extent desired, the Fund could sustain losses on transactions in foreign currency options that would require the Fund to forego a portion or all of the benefits of advantageous changes in those rates. Certain Funds may also write options on foreign currencies. For example, to hedge against a potential decline in the U.S. dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, the Fund could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised and the diminution in value of portfolio securities be offset at least in part by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against a potential increase in the U.S. dollar cost of securities to be acquired, a Fund could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow the Fund to hedge the increased cost up to the amount of the premium. If exchange rates do not move in the expected direction, the option may be exercised and the Fund would be required to buy or sell the underlying currency at a loss, which may not be fully offset by the amount of the premium. Through the writing of options on foreign currencies, the Fund also may lose all or a portion of the benefits that might otherwise have been obtained from favorable movements in exchange rates. All call options written by a Fund on foreign currencies will be covered. A call option written on a foreign currency by the Fund is covered if the Fund owns the foreign currency underlying the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other foreign currencies held in its portfolio. A call option is also covered if the Fund has a call on the same foreign currency in the same principal amount as the call written if the exercise price of the call held is (i) equal to or less than the exercise price of the call written or (ii) greater than the exercise price of the call written, if the difference is maintained by the Fund in cash or liquid securities eligible to be purchased by the Fund in a segregated account with the Fund's custodian. For this purpose, a call option is also considered covered if the Fund owns securities denominated in (or which trade principally in markets where settlement occurs in) the same currency, which securities are readily marketable, and the Fund maintains in a segregated account with its custodian cash or liquid securities eligible to be purchased by the Fund in an amount that at all times at least equals the excess of (x) the amount of the Fund's obligation under the call option over (y) the value of such securities. Futures and Options on Tax-exempt Bonds and Bond Indices Tax Exempt Funds may also purchase and sell interest rate futures contracts and tax-exempt bond index futures contracts and may write and purchase related options. Transactions involving futures and options on futures may help to reduce the volatility of the Tax Exempt Fund's net asset value, and the writing of options on futures may yield additional income for the Fund, but these results cannot be assured. Income from options and futures transactions is not tax-exempt. Swap Contracts Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (for example, an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal). A currency swap is an agreement to exchange cash flows on a notional amount based on changes in the relative values of the specified currencies. An index swap is an agreement to make or receive payments based on the different returns that would be achieved if a notional amount were invested in a specified basket of securities (such as the S&P 500 Index or in some other investment (such as U.S. Treasury securities). The Fund will maintain at all times in a segregated account with its custodian cash or liquid securities eligible to be purchased by the Fund in amounts sufficient to satisfy its obligations under swap contracts. 23 Risks The use of futures contracts, options and swap contracts involves risks. One risk arises because of the imperfect correlation between movements in the price of futures contracts and movements in the price of the securities that are the subject of the hedge. A Fund's hedging strategies will not be fully effective unless the Fund can compensate for such imperfect correlation. There is no assurance that the Fund will be able to effect such compensation. Options, futures and swap contracts fall into the broad category of financial instruments known as "derivatives" and involve special risks. Use of options, futures or swaps for other than hedging purposes may be considered a speculative activity, involving greater risks than are involved in hedging. The correlation between the price movement of the futures contract and the hedged security may be distorted due to differences in the nature of the relevant markets. For example, to the extent that the Municipal Income Fund enters into futures contracts on securities other than tax exempt bonds, the value of such futures may not vary in direct proportion to the value of tax exempt bonds that the Fund owns or intends to acquire, because of an imperfect correlation between the movement of taxable securities and tax exempt bonds. If the price of the futures contract moves more than the price of the hedged security, the relevant Fund would experience either a loss or a gain on the future that is not completely offset by movements in the price of the hedged securities. In an attempt to compensate for imperfect price movement correlations, the Fund may purchase or sell futures contracts in a greater dollar amount than the hedged securities if the price movement volatility of the hedged securities is historically greater than the volatility of the futures contract. Conversely, the Fund may purchase or sell fewer contracts if the volatility of the price of hedged securities is historically less than that of the futures contracts. The price of index futures may not correlate perfectly with movement in the relevant index due to certain market distortions. One such distortion stems from the fact that all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions, which could distort the normal relationship between the index and futures markets. Another market distortion results from the deposit requirements in the futures market being less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than does the securities market. A third distortion is caused by the fact that trading hours for foreign stock index futures may not correspond perfectly to hours of trading on the foreign exchange to which a particular foreign stock index future relates. This may result in a disparity between the price of index futures and the value of the relevant index due to the lack of continuous arbitrage between the index futures price and the value of the underlying index. Finally, hedging transactions using stock indices involve the risk that movements in the price of the index may not correlate with price movements of the particular portfolio securities being hedged. Price movement correlation also may be distorted by the illiquidity of the futures and options markets and the participation of speculators in such markets. If an insufficient number of contracts are traded, commercial users may not deal in futures contracts or options because they do not want to assume the risk that they may not be able to close out their positions within a reasonable amount of time. In such instances, futures and options market prices may be driven by different forces than those driving the market in the underlying securities, and price spreads between these markets may widen. The participation of speculators in the market enhances its liquidity. Nonetheless, speculators trading spreads between futures markets may create temporary price distortions unrelated to the market in the underlying securities. Positions in futures contracts and options on futures contracts may be established or closed out only on an exchange or board of trade. There is no assurance that a liquid market on an exchange or board of trade will exist for any particular contract or at any particular time. The liquidity of markets in futures contracts and options on futures contracts may be adversely affected by "daily price fluctuation limits" established by commodity exchanges which limit the amount of fluctuation in a futures or options price during a single trading day. Once the daily limit has been reached in a contract, no trades may be entered into at a price beyond the limit, which may prevent the liquidation of open futures or options positions. Prices have in the past exceeded the daily limit on a number of consecutive trading days. If there is not a liquid market at a particular time, it may not be possible to close a futures or options position at such time, and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. However, if futures or options are used to hedge portfolio securities, an increase in the price of the securities, if any, may partially or completely offset losses on the futures contract. 24 An exchange-traded option may be closed out only on a national securities or commodities exchange, which generally provides a liquid secondary market for an option of the same series. If a liquid secondary market for an exchange-traded option does not exist, it might not be possible to effect a closing transaction with respect to a particular option with the result that the Fund would have to exercise the option in order to realize any profit. If a Fund is unable to effect a closing purchase transaction in a secondary market, it will be not be able to sell the underlying security until the option expires or it delivers the underlying security upon exercise. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation or other clearing organization may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. Because the specific procedures for trading foreign stock index futures on futures exchanges are still under development, additional or different margin requirements as well as settlement procedures may be applicable to foreign stock index futures at the time the relevant Funds purchase foreign stock index futures. The successful use of transactions in futures and options depends in part on the ability of a Fund's adviser or subadviser(s) to forecast correctly the direction and extent of interest rate movements within a given time frame. To the extent interest rates move in a direction opposite to that anticipated, a Fund may realize a loss on the hedging transaction that is not fully or partially offset by an increase in the value of portfolio securities. In addition, whether or not interest rates move during the period that the Fund holds futures or options positions, the Fund will pay the cost of taking those positions (i.e., brokerage costs). As a result of these factors, the Fund's total return for such period may be less than if it had not engaged in the hedging transaction. Options trading involves price movement correlation risks similar to those inherent in futures trading. Additionally, price movements in options on futures may not correlate with price movements in the futures underlying the options. Like futures, options positions may become less liquid because of adverse economic circumstances. The securities covering written option positions are expected to offset adverse price movements if those options positions cannot be closed out in a timely manner, but there is no assurance that such offset will occur. Also, an option writer may not effect a closing purchase transaction after it has been notified of the exercise of an option. Over-the-counter Options The Government Securities Fund may enter into over-the-counter options with respect to U.S. Government securities. An over-the-counter option (an option not traded on a national securities exchange) may be closed out only with the other party to the original option transaction. While the Fund will seek to enter into over-the-counter options only with dealers who agree to or are expected to be capable of entering into closing transactions with the Fund, there can be no assurance that the Fund will be able to liquidate an over-the-counter option at a favorable price at any time prior to its expiration. Accordingly, the Fund might have to exercise an over-the-counter option it holds in order to realize any profit thereon and thereby would incur transactions costs on the purchase or sale of the underlying assets. If the Fund cannot close out a covered call option written by it, it will not be able to sell the underlying security until the option expires or is exercised. Furthermore, over-the-counter options are not subject to the protections afforded purchasers of listed options by the Options Clearing Corporation or other clearing organizations. The staff of the SEC has taken the position that over-the-counter options on U.S. government securities and the assets used as cover for written over-the-counter options on U.S. government securities should generally be treated as illiquid securities for purposes of the Funds' investment restrictions relating to illiquid securities. However, if a dealer recognized by the Federal Reserve Bank of New York as a "primary dealer" in U.S. government securities is the other party to an option contract written by the Fund, and the Fund has the absolute right to repurchase the option from the dealer at a formula price established in a contract with the dealer, the SEC staff has agreed that the Fund only needs 25 to treat as illiquid that amount of the "cover" assets equal to the amount at which the formula price exceeds any amount by which the market value of the securities subject to the options exceeds the exercise price of the option (the amount by which the option is "in-the-money"). Loomis Sayles has established standards for the creditworthiness of the primary dealers with which the Government Securities Fund may enter into over-the-counter option contracts having the formula-price feature referred to above. Those standards, as modified from time to time, are implemented and monitored by Loomis Sayles. Such contracts will provide that the Fund has the absolute right to repurchase an option it writes at any time at a repurchase price which represents the fair market value, as determined in good faith through negotiation between the parties, but which in no event will exceed a price determined pursuant to a formula contained in the contract. Although the specific details of the formula may vary between contracts with different primary dealers, the formula will generally be based on a multiple of the premium received by the Fund for writing the option, plus the amount, if any, by which the option is "in-the-money." The formula will also include a factor to account for the difference between the price of the securities and the exercise price of the option if the option is written out-of-the-money. Although each agreement will provide that the Fund's repurchase price shall be determined in good faith (and that it shall not exceed the maximum determined pursuant to the formula), the formula price will not necessarily reflect the market value of the option written, and therefore the Fund might pay more to repurchase the option contract than the Fund would pay to close out a similar exchange-traded option. Economic Effects and Limitations Income earned by a Fund from its hedging activities will be treated as capital gain and, if not offset by net recognized capital losses incurred by the Fund, will be distributed to shareholders in taxable distributions. Although gain from futures and options transactions may hedge against a decline in the value of the Fund's portfolio securities, that gain, to the extent not offset by losses, will be distributed in light of certain tax considerations and will constitute a distribution of that portion of the value preserved against decline. If the Municipal Income Fund is required to use taxable fixed-income securities as margin, the portion of the Fund's dividends that is taxable to shareholders will be larger than if that Fund is permitted to use tax-exempt bonds for that purpose. The Funds intend to comply with guidelines of eligibility for exclusion from the definition of the term "commodity pool operator" adopted by the CFTC and the National Futures Association, which regulate trading in the futures markets. The Funds will use futures contracts and related options primarily for bona fide hedging purposes within the meaning of CFTC regulations. To the extent that a Fund holds positions in futures contracts and related options that do not fall within the definition of bona fide hedging transactions, the aggregate initial margin and premiums required to establish such positions will not exceed 5% of the fair market value of the Fund's net assets, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into. Future Developments The above discussion relates to a Fund's proposed use of futures contracts, options and options on futures contracts currently available. The relevant markets and related regulations are still in the developing stage. In the event of future regulatory or market developments, Funds may also use additional types of futures contracts or options and other investment techniques for the purposes set forth above. Short Sales Certain Funds may sell securities short "against the box", that is: (1) enter into short sales of securities that it currently owns or has the right to acquire through the conversion or exchange of other securities that it owns without additional consideration; and (2) enter into arrangements with the broker-dealers through which such securities are sold short to receive income with respect to the proceeds of short sales during the period the Fund's short positions remain open. In addition, the Select Fund only may make short sales if immediately after such short sale the aggregate value of all securities that the Fund is short (excluding the value of securities sold short against the box) does not exceed 5% of the value of the Select Fund's net assets, and the Fund covers such short sales as described in the following paragraph. In a short sale against the box, a Fund does not deliver from its portfolio securities sold and does not receive immediately the proceeds from the short sale. Instead, the Fund borrows the securities sold short from a broker-dealer 26 through which the short sale is executed, and the broker-dealer delivers such securities, on behalf of the Fund, to the purchaser of such securities. Such broker-dealer is entitled to retain the proceeds from the short sale until the Fund delivers to such broker-dealer the securities sold short. In addition, the Fund is required to pay the broker-dealer the amount of any dividends paid on shares sold short. Finally, to secure its obligation to deliver to such broker-dealer the securities sold short, the Fund must deposit and continuously maintain in a separate account with the Fund's custodian an equivalent amount of the securities sold short or securities convertible into or exchangeable for such securities without the payment of additional consideration. A Fund is said to have a short position in the securities sold until it delivers to the broker-dealer the securities sold, at which time the Fund receives the proceeds of the sale. A Fund may close out a short position by purchasing on the open market and delivering to the broker-dealer an equal amount of the securities sold short, rather than by delivering portfolio securities. With respect to securities that are not sold short against the box, the Select Fund may cover its short positions by maintaining in a separate account with the Fund's custodian cash, U.S. government securities or other liquid securities having a value equal to the excess of (a) the market value of the securities sold short over (b) the value of any cash, U.S. government securities or other liquid securities deposited as collateral with the broker in connection with the short sale. Short sales may protect a Fund against risk of losses in the value of its portfolio securities because any unrealized losses with respect to such portfolio securities should be wholly or partially offset by a corresponding gain in the short position. However, any potential gains in such portfolio securities should be wholly or partially offset by a corresponding loss in the short position. The extent to which such gains or losses are offset will depend on the amount of securities sold short relative to the amount the Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. Short sale transactions involve certain risks. If the price of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund will incur a loss, and if the price declines during this period, the Fund will realize a short-term capital gain. Any realized short-term capital gain will be decreased, and any incurred loss increased, by the amount of transaction costs and any premium, dividend or interest which the Fund may have to pay in connection with such short sale. Certain provisions of the Code may limit the degree to which a Fund is able to enter into short sales. There is no limitation on the amount of each Fund's assets that, in the aggregate, may be deposited as collateral for the obligation to replace securities borrowed to effect short sales and allocated to segregated accounts in connection with short sales. Star Advisers Fund, Star Small Cap Fund and Star Worldwide Fund currently expect that no more than 20%, 25% and 20% of their total assets, respectively, would be involved in short sales against the box. Illiquid Securities (Rule 144A Securities and Section 4(2) Commercial Paper) Illiquid securities are those that are not readily resaleable, which may include securities whose disposition is restricted by federal securities laws. Investment in restricted or other illiquid securities involves the risk that a Fund may be unable to sell such a security at the desired time. Also, a Fund may incur expenses, losses or delays in the process of registering restricted securities prior to resale. Certain Funds may purchase Rule 144A securities, which are privately offered securities that can be resold only to certain qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. Certain Funds may also purchase commercial paper issued under Section 4(2) of the Securities Act of 1933. Investing in Rule 144A securities and Section 4(2) commercial paper could have the effect of increasing the level of a Fund's illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. Rule 144A securities and Section 4(2) commercial paper are treated as illiquid, unless an adviser or subadviser has determined, under guidelines established by each Trust's Board of Trustees, that the particular issue of Rule 144A securities is liquid. Loans of Portfolio Securities Certain Funds may lend up to 33 1/3% of their total assets (taken at current value) in the form of their portfolio securities to broker-dealers under contracts calling for collateral equal to at least the market value of the securities loaned, marked to market on a daily basis. These Funds will continue to benefit from interest or dividends on the securities loaned and may also earn a return from the collateral, which may include shares of money market funds subject to any investment restriction listed in Part I of this Statement. Any voting rights, or rights to consent, relating to securities loaned pass to the borrower. However, if a material event affecting the investment occurs, such loans will be called so that the securities may be voted by the Fund. The Fund pays various 27 fees in connection with such loans, including shipping fees and reasonable custodian and placement fees approved by the Board of Trustees of the Trusts or persons acting pursuant to the direction of the Boards. These transactions must be fully collateralized at all times, but involve some credit risk to the Fund if the other party should default on its obligation and the Fund is delayed in or prevented from recovering the collateral. Short-term Trading Certain Funds may, consistent with their investment objectives, engage in portfolio trading in anticipation of, or in response to, changing economic or market conditions and trends. These policies may result in higher turnover rates in the Fund's portfolio, which may produce higher transaction costs and a higher level of taxable capital gains. Portfolio turnover considerations will not limit any adviser's or subadviser's investment discretion in managing a Fund's assets. The Funds anticipate that their portfolio turnover rates will vary significantly from time to time depending on the volatility of economic and market conditions. Portfolio turnover rates for the Government Securities Fund and Star Advisers Fund differed significantly over the two most recently completed fiscal years due to changes in the number of securities transactions made by these Funds. Money Market Instruments A Fund may seek to minimize risk by investing in money market instruments, which are high-quality, short-term securities. Although changes in interest rates can change the market value of a security, a Fund expects those changes to be minimal and that the Fund will be able to maintain the net asset value of its shares at $1.00, although this value cannot be guaranteed. Money market obligations of foreign banks or of foreign branches or subsidiaries of U.S. banks may be subject to different risks than obligations of domestic banks, such as foreign economic, political and legal developments and the fact that different regulatory requirements apply. Temporary Strategies A Fund has the flexibility to respond promptly to changes in market and economic conditions. In the interest of preserving shareholders' capital, the adviser and subadviser(s) of a Fund may employ a temporary defensive strategy if they determine such a strategy to be warranted. Pursuant to such a defensive strategy, a Fund temporarily may hold cash (U.S. dollars, foreign currencies, or multinational currency units) and/or invest up to 100% of its assets in high quality debt securities or money market instruments of U.S. or foreign issuers. It is impossible to predict whether, when or for how long a Fund will employ defensive strategies. The use of defensive strategies may prevent a Fund from achieving its goal. In addition, pending investment of proceeds from new sales of Fund shares or to meet ordinary daily cash needs, a Fund may temporarily hold cash (U.S. dollars, foreign currencies or multinational currency units) and may invest any portion of its assets in money instruments. - -------------------------------------------------------------------------------- MANAGEMENT OF THE TRUSTS - -------------------------------------------------------------------------------- The Funds are governed by a Board of Trustees, which is responsible for generally overseeing the conduct of Fund business and for protecting the interests of the shareholders. The trustees meet periodically throughout the year to oversee the Funds' activities, review contractual arrangements with companies that provide services to the Funds and review the Funds' performance. Trustees Trustees of the Trusts and their ages (in parentheses), addresses and principal occupations during at least the past five years are listed below. Those marked with an asterisk (*) may be deemed to be an "interested person" of the Trusts as defined in the Investment Company Act of 1940 (the "1940 Act"). GRAHAM T. ALLISON, JR.--Trustee (61); 79 John F. Kennedy Street, Cambridge, Massachusetts 02138; Member of the Contract Review and Governance Committee for the Trusts; Douglas Dillon Professor and Director for the Belfer Center of Science and International Affairs, John F. Kennedy School of Government, Harvard 28 University; Special Advisor to the United States Secretary of Defense; formerly, Assistant Secretary of Defense; formerly, Dean, John F. Kennedy School of Government. DANIEL M. CAIN - Trustee (56); 452 Fifth Avenue, New York, New York 10018; Chairman of the Audit Committee for the Trusts; President and CEO, Cain Brothers & Company, Incorporated (investment banking); Trustee, Universal Health Realty Income Trust (NYSE), eBenX, Inc. (NASDAQ); and Board Member, Norman Rockwell Museum, Sharon Hospital, National Committee for Quality Healthcare, and Columbia University School of Business; KENNETH J. COWAN -- Trustee (69); One Beach Drive, S.E. #2103, St. Petersburg, Florida 33701; Chairman of the Contract Review and Governance Committee for the Trusts; Retired; formerly, Senior Vice President-Finance and Chief Financial Officer, Blue Cross of Massachusetts, Inc. and Blue Shield of Massachusetts, Inc.; formerly, Director, Neworld Bank for Savings and Neworld Bancorp. RICHARD DARMAN - Trustee (58); 1001 Pennsylvania Avenue, N.W., Washington, D.C. 20004; Member of the Contract Review and Governance Committee for the Trusts; Partner, The Carlyle Group (investments); Public Service Professor, John F. Kennedy School of Government, Harvard University; Trustee, Council for Excellence in Government (not for profit); Director, Frontier Ventures (personal investment); Director, Telcom Ventures (telecommunications); Director, Prime Communications (cable communications); Director, Neptune Communications (undersea cable systems); formerly, Director of the U.S. Office of Management and Budget and a member of President Bush's Cabinet; formerly, Managing Director, Shearson Lehman Brothers (investments). *JOHN T. HAILER - President and Trustee (40); President and Chief Executive Officer, CDC IXIS Asset Management Distributors, L.P. (the "Distributor", formerly Nvest Funds Distributor, L.P.); Director and Executive Vice President, CDC IXIS Asset Management Distribution Corporation ("CDC IXIS Distribution Corporation", formerly Nvest Distribution Corporation); President and Chief Executive Officer, CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers", formerly known as Nvest Funds Management, L.P.); formerly, Senior Vice President, Fidelity Investments Institutional Services Company; formerly, Senior Vice President and Director of Retail Business Development, Putnam Investments; Director, Home for Little Wanderers. SANDRA O. MOOSE -- Trustee (59); Exchange Place, Boston, Massachusetts 02109; Member of the Audit Committee for the Trusts; Senior Vice President and Director, The Boston Consulting Group, Inc. (management consulting); Director, Verizon Communications (communications services); Director, Rohm and Haas Company (specialty chemicals); Trustee, Boston Public Library Foundation; Board of Overseers, Museum of Fine Arts and Beth Israel/New England Deaconess Hospital; Director, Alfred P. Sloan Foundation, Harvard Graduate School Society Council; Member, Visiting Committee, Harvard School of Public Health. JOHN A. SHANE -- Trustee (68); 200 Unicorn Park Drive, Woburn, Massachusetts 01801; Member of the Audit Committee for the Trusts; President, Palmer Service Corporation (venture capital organization); Director, Arch Communications Group, Inc. (paging service); Director, Eastern Bank Corporation; Director, Gensym Corporation (developer of expert system software); Director, Overland Data, Inc. (manufacturer of computer tape drives). *PETER S. VOSS -- Chairman of the Board, Chief Executive Officer and Trustee (54); Director, President and Chief Executive Officer, CDC IXIS Asset Management North America, L.P. ("CDC IXIS North America", formerly Nvest Companies, L.P.); Director, CDC IXIS Asset Management Services, Inc ("CIS", formerly Nvest Services Company, Inc.); Director, CDC IXIS Distribution Corporation; Director of various affiliates of CDC IXIS Advisers; formerly, Board Member, Investment Company Institute and United Way of Massachusetts Bay; Committee Member, New York Stock Exchange Listed Company Advisory Committee. PENDLETON P. WHITE -- Trustee (70); 6 Breckenridge Lane, Savannah, Georgia 31411; Member of the Contract Review and Governance Committee for the Trusts; Retired; formerly, President and Chairman of the Executive Committee, Studwell Associates (executive search consultants); formerly, Trustee, The Faulkner Corporation (community hospital corporation). 29 The Contract Review and Governance Committee of the CDC Nvest Funds is comprised solely of disinterested trustees and considers matters relating to advisory, subadvisory and distribution arrangements, potential conflicts of interest between the adviser or subadviser and the Funds, and governance matters relating to the Funds. The Audit Committee of the CDC Nvest Funds is comprised solely of Independent Trustees (as defined below) and considers matters relating to the scope and results of the Funds' audits and serves as a forum in which the independent accountants can raise any issues or problems identified in the audit with the Board of Trustees. This Committee also reviews and monitors compliance with stated investment objectives and policies, SEC and Treasury regulations as well as operational issues relating to the transfer agent. Officers Officers of the Trusts, in addition to Mr. Voss and Mr. Hailer, and their ages (in parentheses) and principal occupations during at least the past five years are listed below. THOMAS P. CUNNINGHAM - Treasurer (55); Senior Vice President, CIS; Senior Vice President, CDC IXIS Advisers; formerly, Vice President, Allmerica Financial Life Insurance and Annuity Company, formerly, Treasurer, Allmerica Investment Trust; formerly, Vice President, First Data Investor Services Group. JOHN E. PELLETIER - Secretary and Clerk (36); Director, CDC IXIS Distribution Corporation; Senior Vice President, General Counsel, Secretary and Clerk, Distributor; Senior Vice President, General Counsel, Secretary and Clerk, CDC IXIS Advisers; Executive Vice President, General Counsel, Secretary and Clerk, CIS; formerly, Senior Vice President and General Counsel, Funds Distributor, Inc. (mutual funds service company); formerly, Vice President and General Counsel, Boston Institutional Group (mutual funds service company); formerly, Senior Vice President and General Counsel, Financial Research Corporation. Each person listed above holds the same position(s) with all four Trusts. Previous positions during the past five years with the Distributor or CDC IXIS Advisers are omitted, if not materially different from a trustee's or officer's current position with such entity. As indicated below under "Trustee Fees," each of the Trusts' trustees is also a trustee of certain other investment companies for which the Distributor acts as principal underwriter. Except as indicated above, the address of each trustee and officer of the Trusts c/o CDC Nvest Funds is 399 Boylston Street, Boston, Massachusetts 02116. Trustee Fees The Trusts pay no compensation to their officers or to their trustees who are interested persons thereof. Each Independent Trustee (as defined below) receives, in the aggregate, 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 that he or she attends. Each committee member receives an additional retainer fee at the annual rate of $6,000. Furthermore, each committee chairman receives an additional retainer fee (beyond the $6,000 fee) at the annual rate of $4,000. These fees are allocated among the mutual fund portfolios in the CDC Nvest Funds Trusts based on a formula that takes into account, among other factors, the relative net assets of each Fund. The term "Independent Trustee" means those trustees who are not "interested persons" of the relevant Trust (as defined by the 1940 Act) and, when applicable, who have no direct or indirect financial interest in the approval of a matter being voted on by the relevant Board of Trustees. During the fiscal year ended December 31, 2000 for CDC Nvest Funds Trust I, II and III, the trustees of the Trusts received the amounts set forth in the following table for serving as a trustee of the Trusts and for also serving as trustees of the other CDC Nvest Funds Trusts. 30
Pension or Aggregate Aggregate Aggregate Retirement Total Compensation Compensation Compensation Benefits Estimated Compensation from from from Accurued as Annual from the CDC Nvest CDC Nvest CDC Nvest Part of Fund Benefits CDC Nvest Funds Trust I Funds Trust II Funds Trust III Expenses Upon Funds Trusts Name of Trustee in 2000* in 2000* in 2000* in 2000 Retirement in 2000*+ --------------- -------------- -------------- --------------- ------------ ---------- -------------- Graham T. Allison, Jr. $42,033 $10,158 $1,490 $0 $0 $60,000 Daniel M. Cain $44,836 $10,835 $1,589 $0 $0 $64,000 Kenneth J. Cowan $44,836 $10,835 $1,589 $0 $0 $64,000 Richard Darman $42,033 $10,158 $1,490 $0 $0 $60,000 Sandra O. Moose $42,033 $10,158 $1,490 $0 $0 $60,000 John A. Shane $42,033 $10,158 $1,490 $0 $0 $60,000 Pendleton P. White $42,033 $10,158 $1,490 $0 $0 $60,000 Peter S. Voss $ 0 $ 0 $ 0 $0 $0 $ 0 John T. Hailer $ 0 $ 0 $ 0 $0 $0 $ 0
*Amounts include payments deferred by trustees for 2000. The total amount of deferred compensation for all periods to date accrued for the trustees follows: Allison ($850,096); Cain ($68,368); Cowan ($101,680); and Darman ($69,575). +Total Compensation represents amounts paid to a Trustee for serving on 6 trusts with a total of 23 funds as of December 31, 2000. During the fiscal year ended January 31, 2001 for CDC Nvest Companies Trust I the Trustees of the Trust received the amounts set forth in the following table for serving as trustee of the Trust: Aggregate Compensation from CDC Nvest Companies Trust I Name of Trustee in 2001 --------------- ------------------ Graham T. Allison, Jr. $151 Daniel M. Cain $155 Kenneth J. Cowan $155 Richard Darman $151 Sandra O. Moose $151 John A. Shane $151 Pendleton P. White $151 Peter S. Voss $ 0 John T. Hailer $ 0 The Funds provide no pension or retirement benefits to trustees, but have adopted a deferred payment arrangement under which each trustee may elect not to receive fees from the Funds on a current basis but to receive in a subsequent period an amount equal to the value that such fees would have been if they had been invested in a Fund or Funds selected by the trustee on the normal payment date for such fees. Each Fund will make an investment in the selected Fund(s) in an amount equal to its pro rata share of the deferred fees. As a result of this arrangement, each Fund, upon making the deferred payments, will be in substantially the same financial position as if the deferred fees had been paid on the normal payment dates. At October 31, 2001, the officers and trustees of the Trusts as a group owned less than 1% of the outstanding shares of each Fund. 31 Advisory and Subadvisory Agreements Each Fund's advisory agreement between the Fund and CDC IXIS Advisers (between the Fund and Capital Growth Management Limited Partnership ("CGM"), in the case of Targeted Equity Fund and between the Fund and AEW Management and Advisors, L.P. ("AEW"), in the case of the AEW Real Estate Fund provides that the adviser (CDC IXIS Advisers, CGM or AEW) will furnish or pay the expenses of the applicable Fund for office space, facilities and equipment, services of executive and other personnel of the Trust and certain administrative services. The adviser is responsible for obtaining and evaluating such economic, statistical and financial data and information and performing such additional research as is necessary to manage each Fund's assets in accordance with its investment objectives and policies. Each Fund pays all expenses not borne by its adviser or subadviser(s) including, but not limited to, the charges and expenses of the Fund's custodian and transfer agent, independent auditors and legal counsel for the Fund and the Trusts' Independent Trustees, 12b-1 fees, all brokerage commissions and transfer taxes in connection with portfolio transactions, all taxes and filing fees, the fees and expenses for registration or qualification of its shares under federal and state securities laws, all expenses of shareholders' and trustees' meetings and of preparing, printing and mailing reports to shareholders and the compensation of trustees who are not directors, officers or employees of the Fund's adviser, subadviser(s) or their affiliates, other than affiliated registered investment companies. In the case of Funds with Class Y shares, certain expenses may be allocated differently among the Fund's Classes A, B and C shares, on the one hand, and Class Y shares on the other hand. (See "Description of the Trust and Ownership of Shares.") Each Fund's advisory agreement and (except in the case of Targeted Equity Fund and AEW Real Estate Fund) each Fund's subadvisory agreement(s) provides that it will continue in effect for two years from its date of execution and thereafter from year to year if its continuance is approved at least annually (i) by the Board of Trustees of the relevant Trust or by vote of a majority of the outstanding voting securities of the relevant Fund and (ii) by vote of a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval. Each Trust has received an exemptive order from the SEC that permits CDC IXIS Advisers to amend or continue existing subadvisory agreements when approved by the Fund's Board of Trustees, without shareholder approval. The exemption also permits CDC IXIS Advisers to enter into new subadvisory agreements with subadvisers that are not affiliated with CDC IXIS Advisers, if approved by the Fund's Board of Trustees. Shareholders will be notified of any subadviser changes. Each advisory and subadvisory agreement may be terminated without penalty by vote of the Board of Trustees of the relevant Trust or by vote of a majority of the outstanding voting securities of the relevant Fund, upon 60 days' written notice, or by the Fund's adviser upon 90 days' written notice, and each terminates automatically in the event of its assignment. Each subadvisory agreement also may be terminated by the subadviser upon 90 days' notice and automatically terminates upon termination of the related advisory agreement. Each advisory and subadvisory agreement provides that the adviser or subadviser shall not be subject to any liability in connection with the performance of its services thereunder in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties. CDC IXIS Advisers oversees the portfolio management services provided to the Funds by each of the subadvisers. Subject to the review of the Trust's trustees, CDC IXIS Advisers monitors each subadviser to assure that the subadviser is managing a Fund's assets consistently with the Fund's investment objective and restrictions and applicable laws and guidelines, including, but not limited to, compliance with the diversification requirements set forth in the 1940 Act and Subchapter M of the Code. In addition, CDC IXIS Advisers and CIS also provide each Fund with administrative services which include, among other things, day-to-day administration of matters related to the Fund's existence, maintenance of its records, preparation of reports and assistance in the preparation of the Fund's registration statement under federal and state laws. CDC IXIS Advisers does not, however, determine what investments will be purchased or sold for any Fund. Because each subadviser manages its portfolio 32 independently from the others, the same security may be held in two or more different Funds (or segments of a Star Fund) or may be acquired for one Fund (or segment of a Star Fund) at a time when the subadviser of another Fund (or segment) deems it appropriate to dispose of the security from that other segment. Similarly, under some market conditions, one or more of the subadvisers may believe that temporary, defensive investments in short-term instruments or cash are appropriate when another subadviser or subadvisers believe continued exposure to the equity markets is appropriate. Because each subadviser directs the trading for its segment or segments of a Star Fund, and does not aggregate its transactions with those of the other subadvisers, a Star Fund may incur higher brokerage costs than would be the case if a single adviser or subadviser were managing the entire Star Fund. Information about the Organization and Ownership of the Advisers and Subadvisers of the Fund CDC IXIS Advisers, formed in 1995, is a limited partnership whose sole general partner, CDC IXIS Distribution Corporation, is a wholly-owned subsidiary of CDC IXIS Asset Management Holdings, LLC ("CDC IXIS Holdings," formerly Nvest Holdings, L.P.), which in turn is a wholly-owned subsidiary of CDC IXIS North America. CDC IXIS Distribution Corporation is also the sole general partner of the Distributor and the sole shareholder of CIS, the transfer and dividend disbursing agent of the Funds. CDC IXIS North America owns the entire limited partnership interest in each of CDC IXIS Advisers and the Distributor. CIS has subcontracted certain of its obligations as the transfer and dividend disbursing agent of the Funds to third parties. CDC IXIS North America is part of the investment management arm of France's Caisse des Depots et Consignations ("CDC"), a major diversified financial institution which, in turn, is wholly-owned by the French government. CDC IXIS North America is wholly-owned by CDC Asset Management, a French entity that is part of CDC. The fourteen principal subsidiary or affiliated asset management firms of CDC IXIS North America, collectively, have more than $131 billion of assets under management or administration as of June 30, 2001. AEW is a registered investment adviser whose origins date back to 1981. AEW is a limited partnership that is a wholly-owned subsidiary of AEW Capital Management, L.P., which in turn is a wholly-owned subsidiary of CDC IXIS Holdings. It is currently anticipated that AEW will convert from a limited partnership into a limited liability company subsequent to the launch of the Fund. CDC IXIS North America owns the entire limited partnership interest in AEW. Loomis, Sayles & Company, L.P. ("Loomis Sayles") was organized in 1926 and is one of the oldest investment management firms in the country. An important feature of the Loomis Sayles investment approach is its emphasis on investment research. Recommendations and reports of the Loomis Sayles research department are circulated throughout the Loomis Sayles organization and are available to the individuals in the Loomis Sayles organization who are responsible for making investment decisions for the Funds' portfolios as well as numerous other institutional and individual clients to which Loomis Sayles provides investment advice. Loomis Sayles is a limited partnership whose sole general partner, Loomis, Sayles & Company, Inc., is a wholly-owned subsidiary of CDC IXIS Holdings. CDC IXIS North America owns the entire limited partnership interest in Loomis Sayles. CGM is a limited partnership whose sole general partner, Kenbob, Inc., is a corporation owned in equal shares by Robert L. Kemp and G. Kenneth Heebner. CDC IXIS North America owns a majority limited partnership interest in CGM. Prior to March 1, 1990, Targeted Equity Fund was managed by Loomis Sayles' Capital Growth Management Division. On March 1, 1990, Loomis Sayles reorganized its Capital Growth Management Division into CGM. In addition to advising the Targeted Equity Fund, CGM acts as investment adviser of CGM Capital Development Fund, CGM Trust, New England Zenith Fund's Capital Growth Series and New England Variable Annuity Fund I. CGM also provides investment advice to other mutual funds and other institutional and individual clients. 33 Westpeak Global Advisors, L.P. ("Westpeak"), organized in 1991, provides investment management services to institutional clients. Westpeak is a limited partnership whose sole general partner, Westpeak Investment Advisors, Inc., is a wholly-owned subsidiary of CDC IXIS Holdings. CDC IXIS North America owns the entire limited partnership interest in Westpeak. Jurika & Voyles, L.P., ("Jurika & Voyles") founded in 1983, has discretionary management authority with respect to assets for various clients including corporations, pension plans, 401(k) plans, profit sharing plans, trusts and estates, foundations and charities, mutual funds and individuals. Jurika & Voyles, a wholly-owned subsidiary of CDC IXIS North America, is engaged in the business of investment management. Harris Associates L.P. ("Harris Associates") was organized in 1995 to succeed to the business of a predecessor limited partnership also named Harris Associates L.P., which together with its predecessor had advised and managed mutual funds since 1970. Harris Associates is a limited partnership whose sole general partner is Harris Associates Inc., a wholly-owned subsidiary of CDC IXIS Holdings. CDC IXIS North America owns the entire limited partnership interest in Harris Associates. Harris Associates also serves as investment adviser to individuals, trusts, retirement plans, endowments and foundations, and manages numerous private partnerships. Fund Asset Management, L.P., doing business as Mercury Advisors ("Mercury Advisors"), was established in October 2000 in order to provide investment management services for institutional and subadvisory relationships. Mercury Advisors is a subsidiary of Merrill Lynch Investment Managers. Montgomery Asset Management, LLC ("Montgomery"), was formed in 1990 and provides investment advisory services to retail and institutional clients which include some of the largest pension funds, foundations and endowments in the United States, Canada and Europe. An affiliate of Commerzbank AG, one of the largest publicly held commercial banks in Germany, Montgomery Asset Management is a limited liability company. RS Investment Management, L.P. ("RS Investment Management") (formerly, Robertson, Stephens & Company Investment Management, L.P.) was formed in 1993 and provides investment advisory services to both private and public investment funds. On February 26, 1999, Robertson Stephens Investment Management Co. LLC purchased Robertson Stephens Investment Management Co. and its subsidiary, RS Investment Management, from BankAmerica Corporation. Vaughan, Nelson, Scarborough & McCullough, L.P. ("VNSM") was formed in 1970 and provides investment advisory services to foundations, university endowments, corporate retirement plans and individuals. VNSM is a limited partnership whose sole general partner Vaughan, Nelson, Scarborough & McCullough, Inc., is a wholly-owned subsidiary of CDC IXIS Holdings. CDC IXIS North America owns the entire limited partnership interest in VNSM. Allocation of Investment Opportunity Among Funds and Other Investors Managed by Advisers and Subadvisers; Cross Relationships of Officers and Trustees Certain officers of AEW have responsibility for the management of other client portfolios. The other clients served by AEW sometimes invest in securities in which the Fund also invests. If the Fund and such other clients advised by AEW desire to buy or sell the same portfolio securities at about the same time, purchases and sales will be allocated, to the extent practicable, on a pro rata basis in proportion to the amounts desired to be purchased or sold for each. It is recognized that in some cases the practices described in this paragraph could have a detrimental effect on 34 the price or amount of the securities, which the Fund purchases or sells. In other cases, however, it is believed that these practices may benefit the Fund. It is the opinion of the Fund's trustees that the desirability of retaining AEW as Adviser outweighs the disadvantages, if any, which might result from these practices. Loomis Sayles has organized its business into six investment platforms: Core Bond, Fixed Income Management, Growth Equity Management, International Equity Management, Investment Counseling and Value Equity Management Group. The Fixed Income Management Group makes investment decisions for the Strategic Income Fund. The Value Equity Management Group makes investment decisions for the Loomis Sayles segment of the Balanced Fund , the Loomis Sayles Small Cap Value segment of the Star Advisers Fund and the Loomis Sayles segment of the Star Value Fund. The Growth Equity Management Group makes investment decisions for the Mid Cap Growth Fund, the Loomis Sayles segment of the Star Small Cap Fund and the growth equity segment of the Balanced Fund. The Core Bond Group makes investment decisions for the High Income Fund and the fixed income segment of the Balanced Fund. The International Equity Group makes investment decisions for the International Equity Fund and the Loomis Sayles segment of the Star Worldwide Fund. The platforms make investment decisions independently of one another. These platforms also have responsibility for the management of other client portfolios. The other investment companies and clients served by Loomis Sayles' investment platforms sometimes invest in securities in which Mid Cap Growth, Balanced, Star Advisers, Star Small Cap, Star Value, Star Worldwide, High Income, Strategic Income and International Equity Funds also invest. If one of these Funds and such other clients advised or subadvised by the same investment platform of Loomis Sayles desire to buy or sell the same portfolio securities at or about the same time, the respective platform allocates purchases and sales will be allocated, to the extent practicable, on a pro rata basis in proportion to the amount desired to be purchased or sold for each Fund or client advised or subadvised by that investment platform. It is recognized that in some cases the practices described in this paragraph could have a detrimental effect on the price or amount of the securities which each of the Funds purchases or sells. In other cases, however, it is believed that these practices may benefit the relevant Fund. It is the opinion of the Trusts' trustees that the desirability of retaining Loomis Sayles as subadviser for Strategic Income, Balanced, Star Advisers, Star Small Cap, Star Value, Star Worldwide, High Income and International Equity Funds outweighs the disadvantages, if any, which might result from these practices. Certain officers and trustees of the Targeted Equity Fund also serve as officers, directors or trustees of other investment companies advised by CGM. The other investment companies and clients served by CGM sometimes invest in securities in which the Targeted Equity Fund also invests. If the Targeted Equity Fund and such other investment companies or clients advised by CGM desire to buy or sell the same portfolio securities at the same time, purchases and sales will be allocated to the extent practicable on a pro rata basis in proportion to the amounts desired to be purchased or sold for each. It is recognized that in some cases the practices described in this paragraph could have a detrimental effect on the price or amount of the securities that the Targeted Equity Fund purchases or sells. In other cases, however, it is believed that these practices may benefit Targeted Equity Fund. It is the opinion of the trustees of CDC Nvest Funds Trust I that the desirability of retaining CGM as adviser for the Targeted Equity Fund outweighs the disadvantages, if any, which might result from these practices. 35 Because of different objectives or other factors, a particular security may be bought for one or more clients of Mercury Advisors or an affiliate when one or more clients of Mercury Advisors or an affiliate are selling the same security. If purchases or sales of securities arise for consideration at or about the same time that would involve the segment of the Star Advisers Fund or other clients or funds for which Mercury Advisors or an affiliate acts as manager, transactions in such securities will be made, insofar as feasible, for the respective funds and clients in a manner deemed equitable to all. To the extent that transactions on behalf of more than one client of Mercury Advisors or an affiliate during the same period may increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price. Certain officers of Westpeak have responsibility for portfolio management for other clients (including affiliates of Westpeak), some of which may invest in securities in which Growth and Income Fund, Capital Growth Fund, and Star Value Fund (Westpeak segment) also may invest. When the Funds and other clients desire to purchase or sell the same security at or about the same time, the purchase and sale orders are ordinarily placed and confirmed separately but may be combined to the extent practicable and allocated as nearly as practicable on a pro rata basis in proportion to the amounts desired to be purchased or sold for each (or if filled over the course of more than one day, allocated randomly using algorithms generated by its trade order management system). It is believed that the ability of those clients to participate in larger volume transactions will in some cases produce better executions for the Funds. However, in some cases this procedure could have a detrimental effect on the price and amount of a security available to the Funds or the price at which a security may be sold. It is the opinion of the trustees of the Trusts that the desirability of retaining Westpeak as subadviser for the Funds outweighs the disadvantages, if any, which might result from these practices. Certain officers and employees of Jurika & Voyles have responsibility for portfolio management of other advisory accounts and clients (including other registered investment companies and accounts of affiliates of Jurika & Voyles) that may invest in securities in which the Small Cap Growth Fund, Relative Value Fund and/or the value component of the Balanced Fund may invest. Where Jurika & Voyles determines that an investment purchase or sale opportunity is appropriate and desirable for more than one advisory account, purchase and sale orders may be executed separately or may be combined and, to the extent practicable, allocated by Jurika & Voyles to the participating accounts. Where advisory accounts have competing interests in a limited investment opportunity, Jurika & Voyles will allocate investment opportunities based on numerous considerations, including the time the competing accounts have had funds available for investment, and the relative amounts of available funds, an account's cash requirements and the time the competing accounts have had investments available for sale. It is Jurika & Voyles' policy to allocate, to the extent practicable, investment opportunities to each client over a period of time on a fair and equitable basis relative to its other clients. It is believed that the ability of the Fund to participate in larger volume transactions in this manner will in some cases produce better executions for the Fund. However, in some cases, this procedure could have a detrimental effect on the price and amount of a security available to the Fund or the price at which a security may be sold. The trustees of CDC Nvest Funds Trust I and CDC Nvest Funds Trust III are of the view that the benefits of retaining Jurika & Voyles as investment manager outweigh the disadvantages, if any, that might result from participating in such transactions. Certain officers and employees of Harris Associates have responsibility for portfolio management of other advisory accounts and clients (including other registered investment companies and accounts of affiliates of Harris Associates) that may invest in securities in which Star Advisers Fund, Star Worldwide Fund, Star Value Fund and/or Star Small Cap Fund may invest. Where Harris Associates determines that an investment purchase or sale opportunity is appropriate and desirable for more than one advisory account, purchase and sale orders may be executed separately or may be combined and, to the extent practicable, allocated by Harris Associates to the participating accounts. In situations in which advisory accounts have competing interests in a limited investment opportunity, Harris Associates will allocate investment opportunities based on numerous considerations, including the time the competing accounts have had funds available for investment, the amounts of available funds, an account's cash requirements and the time the competing accounts have had investments available for sale. It is Harris Associates' policy to allocate, to the extent practicable, investment opportunities to each client over a period of time on a fair and equitable basis relative to its other clients. It is believed that the ability of Star Advisers Fund, Star Worldwide Fund, Star Value Fund and Star Small Cap Fund to participate in larger volume transactions in this manner will in some cases produce better executions for these Funds. However, in some cases, this procedure could have a detrimental effect on the price and 36 amount of a security available to these Funds or the price at which a security may be sold. The trustees of CDC Nvest Funds Trust I are of the view that the benefits of retaining Harris Associates as a subadviser to Star Advisers Fund, Star Worldwide Fund, Star Value Fund and Star Small Cap Fund outweigh the disadvantages, if any, that might result from participating in such transactions. In addition to managing segments of Star Worldwide Fund and Star Small Cap Fund portfolios, Montgomery serves as investment adviser to other mutual funds, pension and profit-sharing plans, and other institutional and private investors. At times, Montgomery may effect purchases and sales of the same investment securities for Star Worldwide Fund and/or Star Small Cap Fund and for one or more other investment accounts. In such cases, it will be the practice of Montgomery to allocate the purchase and sale transactions among the Funds and the accounts in such manner as it deems equitable. In making such allocation, among the main factors to be considered are the respective investment objectives of the Funds and the accounts, the relative size of portfolio holdings of the same or comparable securities, the current availability of cash for investment by the Funds and each account, the size of investment commitments generally held by the Funds and each account and the opinions of the persons at Montgomery responsible for selecting investments for the Funds and the accounts. In those instances when securities transactions are carried on at the same time on behalf of a Fund and other mutual funds and accounts, transactions in such securities for such accounts may be grouped with securities transactions carried out on behalf of a Fund. The practice of grouping orders of various accounts will be followed in order to obtain benefit of best prices or commission rates. In certain cases where the aggregate order may be executed in a series of transactions at various prices, the transactions will be allocated as to amount and price in a manner considered equitable to each account so that each receives, to the extent practicable, the average price for such transactions. Transactions will not be grouped unless it is Montgomery's judgment that such aggregation is consistent with its duty to seek best execution (which includes the duty to seek best price) for the Fund. The books and records of a Fund and any such other account will separately reflect, for each account, the orders of which are aggregated and the securities held by and bought and sold for that account. It is the opinion of the trustees of CDC Nvest Funds Trust I that the desirability of retaining Montgomery as a subadviser to Star Worldwide Fund and Star Small Cap Fund outweighs the disadvantages, if any, which might result from these procedures. In addition to managing a segment the Star Value Fund , Large Cap Value Fund and Large Cap Growth Fund, VNSM serves as investment adviser to foundations, university endowments and corporate retirement and family/individual core funds. Portfolio transactions for each client account are generally completed independently, except when decisions are made to purchase or sell the same securities for a number of client accounts simultaneously. In this event, the transactions are averaged as to the price and allocated as to amount in accordance with the daily purchase or sale orders actually placed for each client account. Such orders are combined when possible to facilitate best execution, as well as for the purpose of negotiating more favorable brokerage commissions. It is the opinion of the trustees of the CDC Nvest Funds Trust I and Trust II that the desirability of retaining VNSM as a subadviser to Star Value Fund and Large Cap Value Fund outweighs the disadvantages, if any, which might result from these procedures. RSIM manages a segment of the CDC Nvest Star Small Cap Fund and serves as an investment advisers or sub-adviser to other mutual funds and separate accounts. Investment decisions for its segment of Star Small Cap Fund and for other investment advisory clients of RS Investment Management and its affiliates are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could be bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more clients are selling the same security. In some instances, one client may sell a particular security to another client. It also sometimes happens that two or more clients simultaneously purchase or sell the same security, in which event each day's transactions in such security are, insofar as possible, averaged as to price and allocated between such clients in a manner which in RS Investment Management's opinion is equitable to each and in accordance with the amount being purchased or sold by each client. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients. RS Investment Management employs staffs of portfolio managers who draw upon a variety of resources for research information. It is the opinion of the trustees of CDC Nvest Funds Trust I that the desirability of retaining RS Investment Management as a subadviser to Star Small Cap Fund outweighs the disadvantages, if any, which could result from these procedures. 37 Description of the Multi-adviser Approach of the Star Funds and Balanced Fund CDC IXIS Advisers believes that the multi-adviser approach to equity investing of the Star Funds and Balanced Fund-- one that combines the varied styles of the subadvisers in selecting securities for the Funds' portfolios -- offers a different investment opportunity than funds managed by a single adviser using a single style. CDC IXIS Advisers believes that assigning portfolio management responsibility for a Fund to several subadvisers, whose varying management styles have resulted in records of success, may increase the likelihood that the Fund may produce superior results for its shareholders, with less variability of return and less risk of persistent under-performance than a fund managed by a single adviser. Of course, past results should not be considered a prediction of future performance, and there is no assurance that a Fund will in fact achieve superior results over any period of time. On a daily basis, capital activity will be allocated equally by CDC IXIS Advisers among the segments of each Star Fund. However, CDC IXIS Advisers may, subject to review of the Trust's Board of Trustees, allocate net investment capital differently among any of the subadvisers. This action may be necessary if, for example, a subadviser determines that it desires no additional investment capital. Similarly, because each segment of each Fund will perform differently from the other segments of the Fund depending upon the investments it holds and changing market conditions, one segment may be larger or smaller at various times than other segments. For example, as of December 31, 2000, the percentages of Star Advisers Fund's net assets held in the segments of the Fund managed by Harris Associates, Janus Capital Corporation (whose segment is now managed by Loomis Sayles), Kobrick (whose segment is now managed by Mercury Advisors), and Loomis Sayles were 16.8%, 36.0%, 24.8% and 22.4%, respectively. As of December 31, 2000, the percentages of Star Worldwide Fund's net assets held in the segments of the Fund managed by Harris Associates (international segment), Harris Associates (domestic segment), Montgomery, and Loomis Sayles were 26.5%, 22.9%, 19.0% and 31.6%, respectively. As of December 31, 2000, the percentages of the Star Small Cap Fund's net assets held in the segment of the Fund managed by RS Investment Management, Montgomery, Loomis Sayles and Harris Associates were 29.9%, 22.8%, 29.7% and 17.6%, respectively. As of December 31, 2000, the percentages of Star Value Fund's net assets held in the segments of the Fund managed by Harris Associates, VNSM, Loomis Sayles and Westpeak were 24.0%, 25.3%, 26.0% and 24.7%, respectively. The Board of Trustees of the Trusts have adopted asset allocation guidelines for the Star Funds to ensure that no segment of any Star Fund becomes too large or too small relative to the other segments of that Star Fund due to performance, market conditions or other factors. CDC IXIS Advisers will generally monitor the asset allocation of the various Star Fund's segments on a monthly basis and when any one segment rises above or falls below the measures stated in the guidelines, action will generally be taken to reallocate cash flow away or towards a specific segment. CDC IXIS Advisers may, subject to the review of the Board of Trustees of the Trusts, allocate net investment capital differently among any of the subadvisers. CDC IXIS Advisers may terminate any subadvisory agreement without shareholder approval. In such case, CDC IXIS Advisers will either enter into an agreement with another subadviser to manage the Fund or Star Fund segment or allocate the segment's assets among the other segments of the Star Fund. Distribution Agreements and Rule 12b-1 Plans. Under a separate agreement with each Fund, the Distributor serves as the principal distributor of each class of shares of the Funds. Under these agreements (the "Distribution Agreements"), the Distributor conducts a continuous offering and is not obligated to sell a specific number of shares. The Distributor bears the cost of making information about the Funds available through advertising and other means and the cost of printing and mailing Prospectuses to persons other than shareholders. Each Fund pays the cost of registering and qualifying its shares under state and federal securities laws and distributing Prospectuses to existing shareholders. The Distributor is compensated under each agreement through receipt of the sales charges on Class A and Class C shares described below under "Net Asset Value and Public Offering Price" and is paid by the Funds the service and distribution fees described in the applicable Prospectus. The Distributor may, at its discretion, reallow the entire sales charge imposed on the sale of Class A and Class C shares of each Fund to investment dealers from time to 38 time. The SEC is of the view that dealers receiving all or substantially all of the sales charge may be deemed underwriters of a Fund's shares. Each Fund has adopted Rule 12b-1 plans (the "Plans") for its Classes A, B and C shares which, among other things, permit it to pay the Distributor monthly fees out of its net assets. These fees consist of a service fee and a distribution fee. Any such fees that are paid by a distributor to securities dealers are known as "trail commissions." Pursuant to Rule 12b-1 under the 1940 Act, each Plan was approved by the shareholders of each Fund, and (together with the related Distribution Agreement) by the Board of Trustees, including a majority of the Independent Trustees of the relevant Trust. (Note that the Government Securities Fund, Massachusetts Fund, and Municipal Income Fund do not offer Class C shares.) Under the Plans, each Fund pays the Distributor a monthly service fee at an annual rate not to exceed 0.25% of the Fund's average daily net assets attributable to the Classes A, B and C shares. In the case of the Class B shares, the Distributor pays investment dealers the first year's service fee at the time of sale, in the amount of up to 0.25% of the amount invested. In the case of Class C shares, the Distributor retains the first year's service fee of 0.25% assessed against such shares. For Class A and, after the first year for Class B and Class C shares, the Distributor may pay up to the entire amount of this fee to securities dealers who are dealers of record with respect to the Fund's shares, on a quarterly basis, unless other arrangements are made between the Distributor and the securities dealer, for providing personal services to investors in shares of the Fund and/or the maintenance of shareholder accounts. This service fee will accrue to securities dealers of record immediately with respect to reinvested income dividends and capital gain distributions of the Fund's Class A and Class B shares. The service fee may be paid only to reimburse the Distributor for expenses of providing personal services to investors, including, but not limited to, (i) expenses (including overhead expenses) of the Distributor for providing personal services to investors in connection with the maintenance of shareholder accounts and (ii) payments made by the Distributor to any securities dealer or other organization (including, but not limited to, any affiliate of the Distributor) with which the Distributor has entered into a written agreement for this purpose, for providing personal services to investors and/or the maintenance of shareholder accounts, which payments to any such organization may be in amounts in excess of the cost incurred by such organization in connection therewith. To the extent that the Distributor's reimbursable expenses in prior years exceeded the maximum amount payable under the relevant Plan for that year, such expenses could be carried forward for reimbursement in future years in which the Plan remains in effect. The amounts of unreimbursed Class A expenses carried over into 2000 from previous plan years were as follows: Fund Amount Carried Forward Amendment Date* ---- ---------------------- --------------- Star Value $1,651,994 9/13/93 Targeted Equity $2,030,882 6/1/93 Bond Income $1,919,349 9/13/93 Balanced $2,041,399 9/13/93 Capital Growth $ 563,284 9/13/93 Government Securities $1,583,658 9/24/93 Municipal Income $1,700,600 9/13/93 Limited Term U.S. Government $2,272,723 9/24/93 International Equity $ 514,256 9/13/93 Short Term Corporate $1,929,283 9/13/93 *The Amendment Date is the date that the plans were amended to stop allowing new sums to be added to the amount being carried forward. Class A shares of Limited Term U.S. Government Fund and Massachusetts Fund pay a monthly distribution fee at an annual rate not to exceed 0.10% of each Fund's average daily net assets. This fee is payable only to reimburse the Distributor for expenses incurred in connection with the distribution of each Fund's shares, but unreimbursed expenses can be carried forward into future years. 39 Each Fund's Class B and Class C shares also pay the Distributor a monthly distribution fee at an annual rate not to exceed 0.75% of the average net assets of the respective Fund's Class B and Class C shares. The Distributor retains the 0.75% distribution fee assessed against both Class B and Class C shares during the first year of investment. After the first year for Class B shares, the Distributor retains the annual distribution fee as compensation for its services as distributor of such shares. After the first year for Class C shares, the Distributor may pay up to the entire amount of this fee to securities dealers who are dealers of record with respect to the Fund's shares, as distribution fees in connection with the sale of the Fund's shares on a quarterly basis, unless other arrangements are made between the Distributor and the securities dealer. As noted in the prospectus, Class B shares automatically convert into Class A shares after 8 years. This conversion from Class B shares to Class A shares occurs once per month for all Class B shares that reach their eighth year over the course of that particular month. Each Plan may be terminated by vote of a majority of the relevant Independent Trustees, or by vote of a majority of the outstanding voting securities of the relevant class of shares of the relevant Fund. Each Plan may be amended by vote of the relevant trustees, including a majority of the relevant Independent Trustees, cast in person at a meeting called for that purpose. Any change in any Plan that would materially increase the fees payable thereunder by the relevant class of shares of the relevant Fund requires approval by vote of the holders of a majority of such shares outstanding. The Trusts' trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. For so long as a Plan is in effect, selection and nomination of those trustees who are Independent Trustees of the relevant Trust shall be committed to the discretion of such Trustees. Many of the Distributor's sales and servicing efforts involve the Funds as well as other mutual funds that are part of the CDC Kobrick Investment Trust (together with the Funds, "CDC Nvest Funds"). Fees paid by Class A, Class B or Class C shares of any Fund may indirectly support sales and servicing efforts relating to shares of the other CDC Nvest Funds. In reporting its expenses to the trustees, the Distributor itemizes expenses that relate to the distribution and/or servicing of a single Fund's shares, and allocates other expenses among the CDC Nvest Funds based on their relative net assets. Expenses allocated to each CDC Nvest Fund are further allocated among its classes of shares annually based on the relative sales of each class, except for any expenses that relate only to the sale or servicing of a single class. The Distributor has entered into selling agreements with investment dealers, including affiliates of the Distributor, for the sale of the Funds' shares. The Distributor may, at its expense, pay an amount not to exceed 0.50% of the amount invested to dealers who have selling agreements with the Distributor. Class Y shares of the Funds may be offered by registered representatives of certain affiliates who are also employees of CDC IXIS North America and may receive compensation from each Fund's adviser or subadviser with respect to sales of Class Y shares. (Note that the Capital Growth Fund, Large Cap Value Fund, Mid Cap Growth Fund, Select Fund, High Income Fund, Massachusetts Fund and Municipal Income Fund do not currently offer Class Y shares.) The Distribution Agreement for any Fund may be terminated at any time on 60 days' written notice without payment of any penalty by the Distributor or by vote of a majority of the outstanding voting securities of the relevant Fund or by vote of a majority of the relevant Independent Trustees. The Distribution Agreements and the Plans will continue in effect for successive one-year periods, provided that each such continuance is specifically approved (i) by the vote of a majority of the relevant Independent Trustees and (ii) by the vote of a majority of the entire Board of Trustees cast in person at a meeting called for that purpose or by a vote of a majority of the outstanding securities of a Fund (or the relevant class, in the case of the Plans). With the exception of the Distributor and its direct and indirect parent companies, no interested person of the Trusts or any trustee of the Trusts had any direct or indirect financial interest in the operation of the Plans or any related agreement. Benefits to the Funds and their shareholders resulting from the Plans are believed to include (1) enhanced shareholder service, (2) asset retention, (3) enhanced bargaining position with third party service providers and economies of scale arising from having higher asset levels and (4) portfolio management opportunities arising from having an enhanced positive cash flow. 40 The Distributor controls the words "CDC Nvest" in the names of the Trusts and the Funds and if it should cease to be the principal distributor of the Funds' shares, the Trusts or the affected Fund may be required to change their names and delete these words or letters. The Distributor also acts as principal distributor for Kobrick Capital Fund, Kobrick Emerging Growth Fund, Kobrick Growth Fund (together, the "Kobrick Funds"), CDC Nvest Cash Management Trust and CDC Nvest Tax Exempt Money Market Trust. The address of the Distributor is 399 Boylston Street, Boston, Massachusetts, 02116. The portion of the various fees and expenses for Classes A, B and, with respect to certain Funds, C shares that are paid (reallowed) to securities dealers are shown below. Income Funds For Class A shares of the Income Funds, the service fee is payable only to reimburse the Distributor for amounts it pays in connection with providing personal services to investors and/or maintaining shareholder accounts. To the extent that the Distributor's reimbursable expenses in any year exceed the maximum amount payable for that year under the relevant service plan, these expenses may be carried forward for reimbursement in future years as long as the Plan remains in effect. The portion of the various fees and expenses for Class A shares of the Income Funds that are paid to securities dealers are shown below: All Income Funds Except Short Term Corporate Income Fund and Limited Term U.S. Government Funds
Maximum Maximum Maximum Sales Charge Maximum Reallowance First Year First Year Paid by Investors or Commission Service Fee Compensation Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price) - --------------- --------------------- ---------------------- --------------------- --------------------- Less than $100,000 4.50% 4.00% 0.25% 4.25% $100,000 - $249,999 3.50% 3.00% 0.25% 3.25% $250,000 - $499,999 2.50% 2.15% 0.25% 2.40% $500,000 - $999,999 2.00% 1.70% 0.25% 1.95% Investments of $1 million or more First $3 million none 1.00%(2) 0.25% 1.25% Excess over $3 million (1) none 0.50%(2) 0.25% 0.75% Investments with no Sales Charge (2) none 0.00% 0.25% 0.25%
41 Short Term Corporate Income and Limited Term U.S. Government Funds Less than $100,000 3.00% 2.70% 0.25% 2.95% $100,000 - $249,999 2.50% 2.15% 0.25% 2.40% $250,000 - $499,999 2.00% 1.70% 0.25% 1.95% $500,000 - $999,999 1.25% 1.00% 0.25% 1.25% Investments of $1 million or more First $3 million none 1.00%(2) 0.25% 1.25% Excess over $3 million (1) none 0.50%(2) 0.25% 0.75% Investments with no Sales Charge (2) none 0.00% 0.25% 0.25%
For investments by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Code with investments of $1 million or more that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for investments in excess of $3 million and up to $10 million. Those Plans with investments of over $10 million are eligible to purchase Class Y shares of the Funds (except Municipal Income Fund), which are described in a separate prospectus. (1) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12 calendar months. (2) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described in the Prospectus for Classes A, B and C shares of the Income Funds under the section entitled "Ways to Reduce or Eliminate Sales Charges." The Class B and Class C service fees are payable regardless of the amount of the Distributor's related expenses. The portion of the various fees and expenses for Class B and Class C shares of the Income Funds that are paid to securities dealers are shown below: Short Term Corporate Income and Limited Term U.S. Government Funds All amounts for Class B None 2.75% 0.25% 3.00% Class C amounts purchased at NAV (1) None 1.00% 0.00% 1.00% All other amounts for Class C 1.00% 2.00% 0.00% 2.00%
(1) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described in the Prospectus for Class A, B and C shares under the section entitled "Ways to Reduce or Eliminate Sales Charges." Also refers to any Class C share accounts established prior to December 1, 2000. 42 High Income, Strategic Income, Bond Income and Government Securities Funds (Class B only for Government Securities Funds)
Maximum Front-End Sales Charge Paid by Maximum Reallowance or Maximum First Year Maximum First Year Investors Commission Service Fee Compensation Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price) --------------- --------------------- ----------------------- --------------------- --------------------- All amounts for Class B None 3.75% 0.25% 4.00% Class C amounts purchased at NAV (1) None 1.00% 0.00% 1.00% All other amounts for Class C 1.00% 2.00% 0.00% 2.00%
Municipal Income Fund For Class A shares of the Municipal Income Fund, the service fee is payable only to reimburse the Distributor for amounts it pays in connection with providing personal services to investors and/or maintaining shareholder accounts. To the extent that the Distributor's reimbursable expenses in any year exceed the maximum amount payable for that year under the relevant service plan, these expenses may be carried forward for reimbursement in future years as long as the Plan remains in effect. The portion of the various fees and expenses for Class A shares of the Massachusetts Fund that are paid to securities dealers are shown below: Municipal Income Fund
Maximum Maximum Maximum Sales Charge Maximum Reallowance First Year First Year Paid by Investors or Commission Service Fee Compensation Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price) - --------------- --------------------- ---------------------- --------------------- --------------------- Less than $100,000 4.50% 4.00% 0.25% 4.25% $100,000 - $249,999 3.50% 3.00% 0.25% 3.25% $250,000 - $499,999 2.50% 2.15% 0.25% 2.40% $500,000 - $999,999 2.00% 1.70% 0.25% 1.95% Investments of $1 million or more First $3 million none 1.00%(2) 0.25% 1.25% Excess over $3 million (1) none 0.50%(2) 0.25% 0.75% Investments with no Sales Charge (2) none 0.00% 0.25% 0.25%
For investments by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Code with investments of $1 million or more that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for investments in excess of $3 million and up to $10 million. Those Plans with investments of over $10 million are eligible to purchase Class Y shares of the Funds (except Municipal Income Fund), which are described in a separate prospectus. (1) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12 calendar months. (2) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described in the Prospectus for Class A, B and C shares of the Income Funds under the section entitled "Ways to Reduce or Eliminate Sales Charges." 43 The Class B shares service fees are payable regardless of the amount of the Distributor's related expenses. The portion of the various fees and expenses for Class B shares of the Massachusetts Fund that are paid to securities dealers are shown below: Municipal Income Fund
Maximum Front-End Sales Charge Paid by Maximum Reallowance or Maximum First Year Maximum First Year Investors Commission Service Fee Compensation Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price) - --------------- ---------------------- ---------------------- --------------------- --------------------- All amounts for Class B None 3.75% 0.25% 4.00%
Massachusetts Fund For Class A shares of the Massachusetts Fund, the service fee is payable only to reimburse the Distributor for amounts it pays in connection with providing personal services to investors and/or maintaining shareholder accounts. To the extent that the Distributor's reimbursable expenses in any year exceed the maximum amount payable for that year under the relevant service plan, these expenses may be carried forward for reimbursement in future years as long as the Plan remains in effect. The portion of the various fees and expenses for Class A shares of the Massachusetts Fund that are paid to securities dealers are shown below:
Maximum Maximum Maximum Sales Charge Maximum Reallowance First Year First Year Paid by Investors or Commission Service Fee Compensation Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price) - --------------- --------------------- --------------------- --------------------- --------------------- Less than $ 50,000 4.25% 3.75% 0.25% 4.00% $50,000 - $ 99,999 4.00% 3.50% 0.25% 3.75% $100,000 - $249,999 3.50% 3.00% 0.25% 3.25% $250,000 - $499,999 2.50% 2.15% 0.25% 2.40% $500,000 - $999,999 2.00% 1.70% 0.25% 1.95% Investments of $1 million or more First $3 Million none 1.00%(1) 0.25% 1.25% Excess over $3 Million none 0.50%(1) 0.25% 0.75% Investments with no Sales Charge(2) none 0.00% 0.25% 0.25%
(1) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12 calendar months. (2) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described in the Prospectus for the Massachusetts Fund under the section entitled "Ways to Reduce or Eliminate Sales Charges." The Class B shares service fees are payable regardless of the amount of the Distributor's related expenses. The portion of the various fees and expenses for Class B shares of the Massachusetts Funds that are paid to securities dealers are shown below:
Maximum Maximum Maximum Reallowance or First Year First Year Commission Service Fee Compensation Investment (% of offering price) (% of net investment) (% of offering price) - --------------- ---------------------- ---------------------- --------------------- All amounts for Class B 3.75% 0.25% 4.00%
44 Equity Funds and Star Funds For Class A shares of the Equity Funds and the Star Funds, the service fee is payable only to reimburse the Distributor for amounts it pays in connection with providing personal services to investors and/or maintaining shareholder accounts. To the extent that the Distributor's reimbursable expenses in any year exceed the maximum amount payable for that year under the relevant service plan, these expenses may be carried forward for reimbursement in future years as long as the Plan remains in effect. The portion of the various fees and expenses for Class A shares of the Equity and Star Funds that are paid to securities dealers are shown below:
Maximum Maximum Maximum Sales Charge Maximum Reallowance First Year First Year Paid by Investors or Commission Service Fee Compensation Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price) - ---------- --------------------- --------------------- --------------------- --------------------- Less than $50,000* 5.75% 5.00% 0.25% 5.25% $50,000 - $99,999 4.50% 4.00% 0.25% 4.25% $100,000 - $249,999 3.50% 3.00% 0.25% 3.25% $250,000 - $499,999 2.50% 2.15% 0.25% 2.40% $500,000 - $999,999 2.00% 1.70% 0.25% 1.95% Investments of $1 million or more First $3 Million none 1.00%(2) 0.25% 1.25% Excess over $3 Million (1) none 0.50%(2) 0.25% 0.75% Investments with no Sales Charge(3) none 0.00% 0.25% 0.25%
45 * (Targeted Equity Fund only) For accounts established prior to February 28, 1997 having a total investment value of between (and including) $25,000 and $49,000, a reduced sales charge of 5.50% of the offering price (or 5.82% of the net amount invested), with a dealer's concession of 4.25% as a percentage of offering price, will be charged on the sale of additional Class A shares of Targeted Equity Fund if the total investment value of Targeted Equity Fund account after such sale is between (and including) $25,000 and $49,000. (1) For investments by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Code with investments of $1 million or more that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for investments in excess of $3 million and up to $10 million. Those Plans with investments of over $10 million are eligible to purchase Class Y shares of the funds, which are described in a separate prospectus. (2) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12 calendar months. (3) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described in the Prospectuses for Classes A, B and C shares of the Equity Funds and the Star Funds under the section entitled "Ways to Reduce or Eliminate Sales Charges." The Class B and Class C service fees are payable regardless of the amount of the Distributor's related expenses. The portion of the various fees and expenses for Class B and Class C shares of the Equity and Star Funds that are paid to securities dealers are shown below:
Maximum Front-End Maximum Sales Charge Paid by Maximum Reallowance First Year Maximum Investors or Commission Service Fee First Year Compensation Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price) ---------- --------------------- --------------------- --------------------- --------------------- All amounts for Class B None 3.75% 0.25% 4.00% Class C amounts purchased at NAV (1) None 1.00% 0.00% 1.00% All other amounts for Class C 1.00% 2.00% 0.00% 2.00%
(1) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described in the Prospectus for Classes A, B and C shares of the Equity Funds and Star Funds under the section entitled "Ways to Reduce or Eliminate Sales Charges." Also refers to any Class C share accounts established prior to December 1, 2000. All Funds Each transaction receives the net asset value next determined after an order is received on sales of each class of shares. The sales charge is allocated between the investment dealer and the Distributor. The Distributor receives the Contingent Deferred Sales Charge (the "CDSC"). Proceeds from the CDSC on Class A and C shares are paid to the Distributor and are used by the Distributor to defray the expenses for services the Distributor provides the Trusts. Proceeds from the CDSC on Class B shares are paid to the Distributor and are remitted to FEP Capital, L.P. to compensate FEP Capital, L.P. for financing the sale of Class B shares pursuant to certain Class B financing and servicing agreements between the Distributor and FEP Capital, L.P. The Distributor may, at its discretion, pay (reallow) the entire sales charge imposed on the sale of Class A or Class C shares to investment dealers from time to time. For new amounts invested at net asset value by an eligible governmental authority, the Distributor may, at its expense, pay investment dealers a commission of 0.025% of the average daily net assets of an account at the end of each calendar quarter for up to one year. These commissions are not payable if the purchase represents the reinvestment of redemption proceeds from any other CDC Nvest Fund or if the account is registered in street name. 46 The Distributor may at its expense provide additional concessions to dealers who sell shares of the Funds, including: (i) full reallowance of the sales charge of Class A or Class C shares, (ii) additional compensation with respect to the sale of Class A, B and C shares and (iii) financial assistance programs to firms who sell or arrange for the sale of Fund shares including, but not limited to, remuneration for: the firm's internal sales contests and incentive programs, marketing and sales fees, expenses related to advertising or promotional activity and events, and shareholder record keeping or miscellaneous administrative services. Payment for travel, lodging and related expenses may be provided for attendance at CDC Nvest Funds' seminars and conferences, e.g., due diligence meetings held for training and educational purposes. The payment of these concessions and any other compensation offered will conform with state and federal laws and the rules of any self-regulatory organization, such as the National Association of Securities Dealers, Inc. The participation of such firms in financial assistance programs is at the discretion of the firm. During the fiscal years ended December 31, 1998, 1999 and 2000, the Distributor received commissions on the sale of Class A shares of CDC Nvest Funds Trust I aggregating $8,591,707, $7,955,714 and $7,347,997, respectively, of which $7,375,844, $6,807,853 and $6,408,805, respectively, was reallowed to other securities dealers and the balance retained by the Distributor. During the fiscal years ended December 31, 1998, 1999 and 2000, the Distributor received CDSCs on the redemption of Classes A, B and C shares of CDC Nvest Funds Trust I aggregating $3,195,287, $3,862,850 and $3,045,740, respectively, of which $3,124,921, $3,603,038 and $2,809,976, respectively, was paid to FEP Capital, L.P. and the balance retained by the Distributor. See "Other Arrangements" for information about amounts received by the Distributor from CDC Nvest Funds Trust I's investment advisers and subadvisers or the Funds directly for providing certain administrative services relating to CDC Nvest Funds Trust I. During the fiscal years ended December 31, 1998, 1999 and 2000, the Distributor received commissions on the sale of the Class A shares of CDC Nvest Funds Trust II aggregating $2,348,271, $2,466,104 and $991,221 respectively, of which $2,206,752, $2,113,378 and $865,094, respectively, was reallowed to other securities dealers and the balance retained by the Distributor. During the fiscal years ended December 31, 1998, 1999 and 2000, the Distributor received CDSCs on the redemption of Classes A, B and C shares of CDC Nvest Funds Trust II aggregating $540,167, $857,306 and $925,772, respectively, of which $497,662, $789,072 and $900,489, respectively, was paid to FEP Capital, L.P. and the balance retained by the Distributor. See "Other Arrangements" for information about amounts received by the Distributor from CDC Nvest Funds Trust II's investment advisers and subadvisers or the Funds directly for providing certain administrative services relating to CDC Nvest Funds Trust II. During the fiscal years ended December 31, 1998, 1999 and 2000, the Distributor received commissions on the sales of the Class A shares of CDC Nvest Funds Trust III aggregating $561,929, $79,050 and $67,184, respectively, of which $502,693, $67,250 and $58,409, respectively, was reallowed to other securities dealers and the balance retained by the Distributor. During the fiscal years ended December 31, 1998, 1999 and 2000, the Distributor received CDSCs on the redemption of Classes A, B and C shares of CDC Nvest Funds Trust III aggregating $51,773, $128,244 and $63,607, respectively, of which $49,553, $123,951 and $63,187, respectively, was paid to FEP Capital, L.P. and the balance retained by the Distributor. See "Other Arrangements" for information about amounts received by the Distributor from CDC Nvest Funds Trust III's investment advisers and subadvisers or the Funds directly for providing certain administrative services relating to CDC Nvest Funds Trust III. During the fiscal year ended January 31, 2001, the Distributor received commissions on the sales of Class A shares of CDC Nvest Companies Trust I aggregating $17,176, of which $15,047 was reallowed to other securities dealers and the balance retained by the Distributor. During the fiscal year ended January 31, 2001, the Distributor received no CDSC's on the redemption of Classes A, B and C shares of CDC Nvest Companies Trust I. See "Other Arrangements" for CDC Nvest Companies Trust I's investment advisers and subadvisers or the Funds directly providing certain administrative services relating to CDC Nvest Companies Trust I. Custodial Arrangements. State Street Bank and Trust Company ("State Street Bank"), 225 Franklin Street, Boston, Massachusetts 02110, serves as the Trusts' custodian. As such, State Street Bank holds in safekeeping certificated securities and cash belonging to each Fund and, in such capacity, is the registered owner of securities in book-entry form belonging to each Fund. Upon instruction, State Street Bank receives and delivers cash and securities 47 of each Fund in connection with Fund transactions and collects all dividends and other distributions made with respect to Fund portfolio securities. State Street Bank also maintains certain accounts and records of the Trusts and calculates the total net asset value, total net income and net asset value per share of each Fund on a daily basis. Independent Accountants. The Trusts' independent accountants are PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110. The independent accountants conduct an annual audit of each Fund's financial statements, assist in the preparation of federal and state income tax returns and consult with the Trusts as to matters of accounting and federal and state income taxation. The information concerning financial highlights in the Prospectuses, and financial statements contained in the Funds' annual reports for the year ended December 31, 2000 and January 31, 2001 for the AEW Real Estate Fund, and incorporated by reference into this Statement, have been so included in reliance on the reports of each Trusts' independent accountants, given on the authority of said firm as experts in auditing and accounting. The Funds' semi-annual reports for the period ended June 30, 2001 and July 31, 2001 for the AEW Real Estate Fund, are incorporated by reference into this Statement but have not been auditied by the independent accountants. Other Arrangements Pursuant to a contract between the Trusts and CIS, CIS acts as shareholder servicing and transfer agent for the Funds and is responsible for services in connection with the establishment, maintenance and recording of shareholder accounts, including all related tax and other reporting requirements and the implementation of investment and redemption arrangements offered in connection with the sale of the Funds' shares. The Funds pay service fees for Classes A, B and C shares representing the higher dollar amount which is based upon either of the following calculations: (1) the annualized rate of 0.184% on the pro rata portion of each Fund's average daily net assets to the extent that the Total Eligible CDC Nvest Assets (as defined below) are equal to or less than $5.7 billion; 0.180% on the pro rata portion of each Fund's average daily net assets to the extent that the Total Eligible CDC Nvest Assets are greater than $5.7 billion and up to $10.7 billion; and 0.175% on the pro rata portion of each Fund's average daily net assets to the extent that the Total Eligible CDC Nvest Assets are in excess of $10.7 billion (subject to an annual portfolio/class minimum of $18,000); or (2) pro rata portion of the annual aggregate minimum fee of $10.5 million. "Total Eligible CDC Nvest Assets" means the average daily net assets of all equity funds offered within the CDC Nvest Family of Funds for which there are exchange privileges among the funds (currently the CDC Nvest Equity Funds). For all Income Funds, this fee is assessed at the greater of (i) 0.142% of average daily net assets up to $1.2 billion; at 0.135% of such assets between $1.2 billion and $6.2 billion; and at 0.13% of such assets in excess of $6.2 billion or (ii) a minimum fee of $1.7 million. For Class Y, each Fund pays a fee of 0.10% of average daily net assets of such class. CIS has subcontracted with State Street Bank for it to provide, through its subsidiary, Boston Financial Data Services, Inc. ("BFDS"), transaction processing, mail and other services. For these services, CIS pays BFDS a monthly per account fee. In addition, pursuant to other servicing agreements, Classes A, B and C shareholders may pay service fees to other firms that provide similar services for their own shareholder accounts. In addition, during the fiscal year ended December 31, 2000, CIS performed certain accounting and administrative services for the Funds, pursuant to an Administrative Services Agreement (the "Administrative Agreement"). Under the Administrative Agreement, CIS provides the following services to the Funds: (i) it provides personnel that perform bookkeeping, accounting, internal auditing and financial reporting functions and clerical functions relating to the Funds, (ii) it provided services required in connection with the preparation of registration statements and prospectuses, registration of shares in various states, shareholder reports and notices, proxy solicitation material furnished to shareholders of the Funds or regulatory authorities and reports and questionnaires for SEC compliance, and (iii) it handles the various registrations and filings required by various regulatory authorities. Subject to certain minimums, the Funds pay CIS a fee equal to the annual rate of 0.035% of the first $5 billion of the Funds' average daily net assets, 0.0325% of the next $5 billion of the Funds' average daily net assets and 0.03% of the Funds' average daily net assets in excess of $10 billion for these services. For these services CIS received the following fees from the Funds for the following fiscal years ending December 31, 1998, 1999 and 2000: 48
Fiscal Year Ended December 31, ---------------------------------------- Fund 1998 1999 2000 - ---- ---- ---- ---- Balanced $ 82,246 $ 99,614 $ 72,761 Bond Income $ 60,796 $ 93,528 $107,368 Capital Growth $ 50,067 $ 74,071 $ 93,578 Government Securities $ 34,398 $ 39,373 $ 29,718 Growth and Income $ 80,888 $153,450 $200,274 Targeted Equity $298,419 $485,101 $636,976 High Income $ 37,309 $ 50,720 $ 46,176 International Equity $ 28,617 $ 29,210 $ 42,639 Large Cap Value $ 21,298 $ 22,000 $ 2,303 (formerly Equity Income) $ 56,908 $ 64,717 $ 53,070 Limited Term U.S. Government Massachusetts $ 35,876 $ 41,880 $ 34,415 Municipal Income $ 47,566 $ 57,743 $ 55,603 Short Term Corporate Income $ 45,463 $ 34,629 $ 21,965 Small Cap Growth $ 13,737 $ 18,707 $ 4,998 Star Advisers $191,247 $310,812 $582,494 Star Small Cap $ 35,775 $ 47,197 $ 90,439 Star Value $ 90,930 $103,852 $ 78,585 Star Worldwide $ 58,980 $ 74,470 $ 98,789 Strategic Income $ 72,358 $ 87,873 $104,135
For these services CIS received the following fees from the Funds for the fiscal year ending January 31, 2001: Fund 2001 - ---- ---- AEW Real Estate Fund $18,482 - -------------------------------------------------------------------------------- PORTFOLIO TRANSACTIONS AND BROKERAGE - -------------------------------------------------------------------------------- All Income Funds. In placing orders for the purchase and sale of portfolio securities for each Income Fund, Loomis Sayles always seeks the best price and execution. Some of each Income Fund's portfolio transactions are placed with brokers and dealers that provide Loomis Sayles with supplementary investment and statistical information or furnish market quotations to that Fund, the other Funds or other investment companies advised by Loomis Sayles. The business would not be so placed if the Funds would not thereby obtain the best price and execution. Although it is not possible to assign an exact dollar value to these services, they may, to the extent used, tend to reduce the expenses of Loomis Sayles. The services may also be used by Loomis Sayles in connection with their other advisory accounts and in some cases may not be used with respect to the Funds. All Equity Funds. In placing orders for the purchase and sale of equity securities, each Equity Fund's adviser or subadviser selects only brokers that it believes are financially responsible, will provide efficient and effective services in executing, clearing and settling an order and will charge commission rates that, when combined with the quality of the foregoing services, will produce the best price and execution for the transaction. This does not necessarily mean that the lowest available brokerage commission will be paid. However, the commissions are believed to be competitive with generally prevailing rates. Each Fund's adviser or subadviser will use its best efforts to obtain information as to the general level of commission rates being charged by the brokerage community from time to time and will evaluate the overall reasonableness of brokerage commissions paid on transactions by reference to 49 such data. In making such evaluation, all factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker in connection with the order, are taken into account. Subject to the overriding objective of obtaining the best possible execution of orders, the Adviser may allocate brokerage transactions to affiliated brokers. Any such transactions will comply with Rule 17e-1 under the 1940 Act. In order for the affiliated broker to effect portfolio transactions for the Fund, the commissions, fees or other remuneration received by the affiliated broker must be reasonable and fair compared to the commissions, fees and other remuneration paid to other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period. Furthermore, the Fund's Board of Trustees, including a majority of those Trustees who are not "interested persons" of the Trust as defined in the 1940 Act have adopted procedures that are reasonably designed to provide that any commissions, fees or other remuneration paid to an affiliated broker are consistent with the foregoing standard. 50 Star Advisers Fund (Segment Advised by Mercury Advisors). Subject to policies established by the Trustees, Mercury Advisors is primarily responsible for the execution of its segment of the Fund's portfolio transactions and the allocation of brokerage. Subject to policies established by the Trustees, Mercury Advisors may have an obligation to deal with a particular dealer or group of dealers in the execution of transactions in portfolio securities of the segment but otherwise does not use any particular broker or dealer. In executing transactions with brokers and dealers, Mercury Advisors seeks to obtain the best results for its segment of the Fund, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution and operations facilities of the firm and the firm's risk in positioning a block of securities. While Mercury Advisors generally seeks reasonably competitive commission rates, its segment of the Fund will not necessarily be paying the lowest spread or commission available. Transactions with respect to the securities of small and emerging growth companies in which its segment of the Fund may invest may involve specialized services on the part of the broker or dealer and thereby entail higher commissions or spreads than would be the case with transactions involving more widely traded securities. Subject to obtaining the best net results, brokers who provide supplemental investment research services to Mercury Advisors may receive orders for transactions by its segment of the Fund. Such supplemental research services ordinarily consist of assessments and analyses of the business or prospects of a company, industry or economic sector. Information so received will be in addition to and not in lieu of the services required to be performed by Mercury Advisors under its Subadvisory Agreement, and the expense of Mercury Advisors will not necessarily be reduced as a result of the receipt of such supplemental information. If, in the judgment of Mercury Advisors, its segment of the Fund will benefit from supplemental research services, Mercury Advisors is authorized to pay brokerage commissions to a broker furnishing such services that are in excess of commissions that another broker may have charged for effecting the same transaction. Certain supplemental research services may primarily benefit one or more other investment companies or other accounts for which Mercury Advisors exercises investment discretion. Conversely, its segment of the Fund may be the primary beneficiary of the supplemental research services received as a result of portfolio transactions effected for such other accounts or investment companies. Mercury Advisors anticipates that its brokerage transactions for its segment of the Fund involving securities of issuers domiciled in countries other than the United States generally will be conducted primarily on the principal stock exchanges of such countries. Brokerage commissions and other transactions costs on foreign stock exchange transactions generally are higher than in the United States, although Mercury Advisors will endeavor to achieve the best net results in effecting portfolio transactions for its segment of the Fund. There generally is less government supervision and regulation of foreign stock exchanges and brokers than in the United States. The ability and decisions to purchase and sell portfolio securities may be affected by foreign laws and regulations relating to the convertibility and repatriation of assets. When trading in securities markets with dealers on a principal basis, including in the OTC market, Mercury Advisors will not deal with affiliated persons, including Merrill Lynch Pierce, Fenner & Smith, Inc. ("Merrill Lynch") and its affiliates, in connection with such transactions. However, an affiliated person of Mercury Advisors may serve as its broker in securities transactions conducted on an agency basis provided that, among other things, the fee or commission received by such affiliated broker is reasonable and fair compared to the fee or commission received by non-affiliated brokers in connection with comparable transactions. In addition, Mercury Advisors may not purchase securities for its segment of the Fund during the existence of any underwriting syndicate for such securities of which Merrill Lynch is a member or in a private placement in which Merrill Lynch serves as placement agent except pursuant to procedures approved by the Trustees of the Fund that either comply with rules adopted by the SEC or with interpretations of the SEC staff, or in accordance with the terms of any applicable SEC exemptive relief. All Equity Funds (Sub-Advised by Loomis Sayles). In placing orders for the purchase and sale of securities for the value equity segment of the Balanced Fund, Mid-Cap Growth Fund, International Equity Fund and the segments of Star Advisers Fund, Star Small Cap Fund, Star Worldwide Fund and Star Value Fund advised by Loomis Sayles, 51 Loomis Sayles follows the same policies as for the other Funds for which it acts as subadviser, except that Loomis Sayles may cause these Funds or segments to pay a broker-dealer that provides brokerage and research services to Loomis Sayles an amount of commission for effecting a securities transaction for the Fund in excess of the amount another broker-dealer would have charged for effecting that transaction. Loomis Sayles must determine in good faith that such greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of that particular transaction or Loomis Sayles' overall responsibilities to the Fund and its other clients. Loomis Sayles' authority to cause these Funds or segments to pay such greater commissions is also subject to such policies as the trustees of the Trusts may adopt from time to time. Receipt of research services from brokers may sometimes be a factor in selecting a broker that Loomis Sayles believes will provide best execution for a transaction. These research services include not only a wide variety of reports on such matters as economic and political developments, industries, companies, securities, portfolio strategy, account performance, daily prices of securities, stock and bond market conditions and projections, asset allocation, and portfolio structure, but also meetings with management representatives of issuers and with other analysts and specialists. Although it is not possible to assign an exact dollar value to these services, they may, to the extent used, tend to reduce Loomis Sayles' expenses. Such services may be used by Loomis Sayles in servicing other client accounts and in some cases may not be used with respect to these Funds or segments. Targeted Equity Fund (Advised by CGM). In placing orders for the purchase and sale of portfolio securities for the Fund, CGM always seeks the best price and execution. Transactions in unlisted securities will be carried out through broker-dealers that make the primary market for such securities unless, in the judgment of CGM, a more favorable price can be obtained by carrying out such transactions through other brokers. Receipt of research services from brokers may sometimes be a factor in selecting a broker that CGM believes will provide the best price and execution for a transaction. These research services include not only a wide variety of reports on such matters as economic and political developments, industries, companies, securities, portfolio strategy, account performance, daily prices of securities, stock and bond market conditions and projections, asset allocation and portfolio structure, but also meetings with management representatives of issuers and with other analysts and specialists. Although it is not possible to assign an exact dollar value to these services, they may, to the extent used, tend to reduce CGM's expenses. Such services may be used by CGM in servicing other client accounts and in some cases may not be used with respect to the Fund. Receipt of services or products other than research from brokers is not a factor in the selection of brokers. Growth and Income Fund, Capital Growth Fund and Star Value Fund Segment (Advised by Westpeak). In placing orders for the purchase and sale of securities, Westpeak always seeks best execution. Westpeak selects only brokers or dealers that it believes are financially responsible, will provide efficient and effective services in executing, clearing and settling an order and will charge commission rates that, when combined with the quality of the foregoing services, will produce best price and execution. This does not necessarily mean that the lowest available brokerage commission will be paid. Westpeak will use its best efforts to obtain information as to the general level of commission rates being charged by the brokerage community from time to time and will evaluate the overall reasonableness of brokerage commissions paid on transactions by reference to such data. In making such evaluation, all factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker in connection with the order, are taken into account. Westpeak may cause the Fund to pay a broker-dealer that provides brokerage and research services to Westpeak an amount of commission for effecting a securities transaction for the Fund in excess of the amount another broker-dealer would have charged effecting that transaction. Westpeak must determine in good faith that such greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of that particular transaction or Westpeak's overall responsibilities to the Fund and its other clients. Westpeak's authority to cause the Fund it manages to pay such greater commissions is also subject to such policies as the trustees of the Trusts may adopt from time to time. Small Cap Growth Fund, Value Equity Segment of Balanced Fund and Relative Value Fund (Advised by Jurika & Voyles). In placing orders for the purchase and sale of portfolio securities for the Funds, Jurika & Voyles always seeks best execution, subject to the considerations set forth below. Transactions in unlisted securities are carried out through broker-dealers who make the market for such securities unless, in the judgment of Jurika & Voyles, a more favorable execution can be obtained by carrying out such transactions through other brokers or dealers. 52 Jurika & Voyles selects only brokers or dealers that it believes are financially responsible, will provide efficient and effective services in executing, clearing and settling an order and will charge commission rates which, when combined with the quality of the foregoing services, will produce best execution for the transaction. This does not necessarily mean that the lowest available brokerage commission will be paid. However, the commissions are believed to be competitive with generally prevailing rates. Jurika & Voyles will use its best efforts to obtain information as to the general level of commission rates being charged by the brokerage community from time to time and will evaluate the overall reasonableness of brokerage commissions paid on transactions by reference to such data. In making such evaluation, all factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker in connection with the order, are taken into account. Receipt of brokerage or research services from brokers may sometimes be a factor in selecting a broker that Jurika & Voyles believes will provide best execution for a transaction. These services include not only a wide variety of reports on such matters as economic and political developments, industries, companies, securities, portfolio strategy, account performance, daily prices of securities, stock and bond market conditions and projections, asset allocation and portfolio structure, but also meetings with management representatives of issuers and with other analysts and specialists. Although it is not possible to assign an exact dollar value to these services, they may, to the extent used, tend to reduce Jurika & Voyles' expenses. Such services may be used by Jurika & Voyles in servicing other client accounts and in some cases may not be used with respect to the Funds. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best execution, Jurika & Voyles may, however, consider purchases of shares of the Funds by customers of broker-dealers as a factor in the selection of broker-dealers to execute the Funds' securities transactions. Jurika & Voyles may cause the Funds to pay a broker-dealer that provides brokerage and research services to Jurika & Voyles an amount of commission for effecting a securities transaction for the Funds in excess of the amount another broker-dealer would have charged for effecting that transaction. Jurika & Voyles must determine in good faith that such greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of that particular transaction or Jurika & Voyles' overall responsibilities to the Funds and its other clients. Jurika & Voyles' authority to cause the Funds to pay such greater commissions is also subject to such policies as the trustees of the Trust may adopt from time to time. Star Advisers, Star Worldwide, Star Value, Star Small Cap and Select Funds (Segments or Funds Advised by Harris Associates). In placing orders for the purchase and sale of portfolio securities for the segments of Star Advisers Fund, Star Worldwide Fund, Star Value Fund, Star Small Cap Fund and Select Fund advised by Harris Associates, Harris Associates always seeks best execution, subject to the considerations set forth below. Transactions in unlisted securities are carried out through broker-dealers that make the market for such securities unless, in the judgment of Harris Associates, a more favorable execution can be obtained by carrying out such transactions through other brokers or dealers. Subject to the above standard, portfolio transactions for each Fund may be executed through Harris Associates Securities L.P., a registered broker-dealer and an affiliate of Harris Associates. Harris Associates selects only brokers or dealers that it believes are financially responsible, will provide efficient and effective services in executing, clearing and settling an order and will charge commission rates which, when combined with the quality of the foregoing services, will produce best execution for the transaction. This does not necessarily mean that the lowest available brokerage commission will be paid. However, the commissions are believed to be competitive with generally prevailing rates. Harris Associates will use its best efforts to obtain information as to the general level of commission rates being charged by the brokerage community from time to time and will evaluate the overall reasonableness of brokerage commissions paid on transactions by reference to such data. In making such evaluation, all factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker in connection with the order, are taken into account. Receipt of brokerage or research services from brokers may sometimes be a factor in selecting a broker that Harris Associates believes will provide best execution for a transaction. These services include not only a wide variety of reports on such matters as economic and political developments, industries, companies, securities, portfolio strategy, account performance, daily prices of securities, stock and bond market conditions and projections, asset allocation and portfolio structure, but also meetings with management representatives of issuers and with other analysts and 53 specialists. Although it is not possible to assign an exact dollar value to these services, they may, to the extent used, tend to reduce Harris Associates' expenses. Such services may be used by Harris Associates in servicing other client accounts and in some cases may not be used with respect to the Funds. Consistent with the Rules of the National Association of Securities Dealers, Inc., and subject to seeking best execution, Harris Associates may, however, consider purchases of shares of Star Advisers Fund, Star Worldwide Fund, Star Small Cap Fund and Select Fund by customers of broker-dealers as a factor in the selection of broker-dealers to execute Fund portfolio transactions. Harris Associates may cause its segments of Star Advisers Fund, Star Worldwide Fund, Star Value Fund and Star Small Cap Fund to pay a broker-dealer that provides brokerage and research services to Harris Associates an amount of commission for effecting a securities transaction for the Fund in excess of the amount another broker-dealer would have charged for effecting that transaction. Harris Associates must determine in good faith that such greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of that particular transaction or Harris Associates' overall responsibilities to the Funds and its other clients. Harris Associates' authority to cause the Funds to pay such greater commissions is also subject to such policies as the trustees of the Trusts may adopt from time to time. Star Worldwide and Star Small Cap Funds (Segments Advised by Montgomery). In all purchases and sales of securities for its segments of the Funds, Montgomery seeks to obtain the most favorable execution available. Pursuant to the subadvisory agreements between CDC IXIS Advisers and Montgomery, Montgomery determines which securities are to be purchased and sold by its segments and which broker-dealers are eligible to execute its segments' portfolio transactions, subject to the instructions of, and review by, CDC IXIS Advisers and the trustees. Purchases and sales of securities within the United States other than on a securities exchange will generally be executed directly with a market-maker unless, in the opinion of Montgomery, a better price and execution can otherwise be obtained by using a broker for the transaction. For Star Worldwide Fund, Montgomery contemplates purchasing most equity securities directly in the securities markets located in developed countries or in the over-the-counter markets. In purchasing ADRs and EDRs (and other similar instruments), Montgomery's segments of Star Worldwide Fund may purchase those listed on stock exchanges, or traded in the over-the-counter markets in the U.S. or Europe, as the case may be. ADRs, like other securities traded in the U.S., will be subject to negotiated commission rates. The foreign and domestic debt securities and money market instruments in which Montgomery's segment of Star Worldwide Fund may invest may be traded in the over-the-counter markets. Purchases of portfolio securities for the segments also may be made directly from issuers or from underwriters. Where possible, purchase and sale transactions will be effected through dealers (including banks) that specialize in the types of securities that this segment will be holding, unless better executions are available elsewhere. Dealers and underwriters usually act as principals for their own account. Purchases from underwriters will include a concession paid by the issuer to the underwriter and purchases from dealers will include the spread between the bid and the asked price. If the execution and price offered by more than one dealer or underwriter are comparable, the order may be allocated to a dealer or underwriter that has provided research or other services as discussed below. In placing portfolio transactions, Montgomery will use its best efforts to choose a broker-dealer capable of providing the services necessary generally to obtain the most favorable execution available. The full range and quality of services available will be considered in making these determinations, such as the firm's ability to execute trades in a specific market required by the segment of the Fund, such as in an emerging market, the size of the order, the difficulty of execution, the operational facilities of the firm involved, the firm's risk in positioning a block of securities, the political, economical or transactional workings or intricacies of any particular market, and other factors. Montgomery may also consider the sale of Star Worldwide Fund and Star Small Cap Fund shares as a factor in the selection of broker-dealers to execute portfolio transactions for its segments. The placement of portfolio transactions with broker-dealers who sell shares of the Funds is subject to rules adopted by the National Association of Securities Dealers, Inc. While Montgomery's general policy is to seek first to obtain the most favorable execution available, in selecting a broker-dealer to execute portfolio transactions, weight may also be given to the ability of a broker-dealer to 54 furnish brokerage, research and statistical services to Montgomery, even if the specific services were not imputed just to the Fund and may be lawfully and appropriately used by Montgomery in advising other clients. Montgomery considers such information, which is in addition to, and not in lieu of, the services required to be performed by it under its subadvisory agreements with CDC IXIS Advisers, to be useful in varying degrees, but of indeterminable value. In negotiating any commissions with a broker or evaluating the spread to be paid to a dealer, the segments of the Funds may therefore pay a higher commission or spread than would be the case if no weight were given to the furnishing of these supplemental services, provided that the amount of such commission or spread has been determined in good faith by Montgomery to be reasonable in relation to the value of the brokerage and/or research services provided by such broker-dealer, which services either produce a direct benefit to the segments of the Funds or assist Montgomery in carrying out its responsibilities to the segments of the Funds. The standard of reasonableness is to be measured in light of Montgomery's overall responsibilities to its segments. The trustees of the Trusts review all brokerage allocations where services other than best execution capabilities are a factor to ensure that the other services provided meet the criteria outlined above and produce a benefit to the Fund. Montgomery's sell discipline for the segments' investments is based on the premise of a long-term investment horizon; however, sudden changes in valuation levels arising from, for example, new macroeconomic policies, political developments, and industry conditions could change the assumed time horizon. Liquidity, volatility, and overall risk of a position are other factors considered by Montgomery in determining the appropriate investment horizon. At the company level, sell decisions are influenced by a number of factors, including current stock valuation relative to the estimated fair value range, or a high price-to-earnings ratio relative to expected growth. Negative changes in the relevant industry sector, or a reduction in international competitiveness and declining financial flexibility, may also signal a sell. Star Small Cap Fund (Segment Advised by RS Investment Management). It is the policy of RS Investment Management, in effecting transactions in portfolio securities, to seek the best execution of orders. The determination of what may constitute best execution in a securities transaction involves a number of judgmental considerations, including, without limitation, the overall direct net economic result to this segment of the Fund (involving both price paid or received and any commissions and other costs), the efficiency with which the transaction is effected, the ability to effect the transaction at all when a large block is involved, the availability of the broker to stand ready to execute possibly difficult transactions for this segment in the future, and the financial strength and stability of the broker. Subject to the policy of seeking best execution of orders at the most favorable prices, RS Investment Management may execute transactions with brokerage firms which provide research services and products to RS Investment Management. The phrase "research services and products" includes advice as to the value of securities, the advisability of investing in, purchasing or selling securities, the availability of securities or purchasers or sellers of securities, the furnishing of analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts, and the obtainment of products such as third-party publications, computer and electronic access equipment, software programs, and other information and accessories that may assist RS Investment Management in furtherance of its investment advisory responsibilities to its advisory clients. Such services and products permit RS Investment Management to supplement its own research and analysis activities, and provide it with information from individuals and research staffs of many securities firms. Generally, it is not possible to place a dollar value on the benefits derived from specific research services and products. RS Investment Management may receive a benefit from these research services and products that is not passed on, in the form of a direct monetary benefit, to this segment of the Fund. If RS Investment Management determines that any research product or service has a mixed use, such that it also serves functions that do not assist in the investment decision-making process, RS Investment Management may allocate the cost of such service or product accordingly. The portion of the product or service that RS Investment Management determines will assist it in the investment decision-making process may be paid for in brokerage commission dollars. Any such allocation may create a conflict of interest for RS Investment Management. Subject to the standards outlined in this and the preceding paragraph, RS Investment Management may arrange to execute a specified dollar amount of transactions through a broker that has provided research products or services. Such arrangements do not constitute commitments by RS Investment Management to allocate portfolio brokerage upon any prescribed basis, other than upon the basis of seeking best execution of orders. 55 Research services and products may be useful to RS Investment Management in providing investment advice to any of the funds or clients it advises. Likewise, information made available to RS Investment Management from brokers effecting securities transactions for such other funds and clients may be utilized on behalf of another fund. Thus, there may be no correlation between the amount of brokerage commissions generated by a particular fund or client and the indirect benefits received by that fund or client. Subject to the policy of seeking the best execution of orders, sales of shares of the Fund may also be considered as a factor in the selection of brokerage firms to execute portfolio transactions for this segment of the Fund. Because selection of executing brokers is not based solely on net commissions, the segment of the Fund advised by RS Investment Management may pay an executing broker a commission higher than that which might have been charged by another broker for that transaction. RS Investment Management will not knowingly pay higher mark-ups on principal transactions to brokerage firms as consideration for receipt of research services or products. While it is not practicable for RS Investment Management to solicit competitive bids for commissions on each portfolio transaction, consideration is regularly given to available information concerning the level of commissions charged in comparable transactions by various brokers. Transactions in over-the-counter securities are normally placed with principal market makers, except in circumstances where, in the opinion of RS Investment Management, better prices and execution are available elsewhere. Large Cap Value Fund, Star Value Fund Segment and Large Cap Growth Fund (Advised by VNSM). In placing orders for the purchase and sale of securities for its Funds or Fund segments, VNSM selects only brokers or dealers that it believes are financially responsible and will provide efficient and effective services in executing, clearing and settling an order. VNSM will use its best efforts to obtain information as to the general level of commission rates being charged by the brokerage community from time to time and will evaluate the overall reasonableness of brokerage commissions paid on transactions by reference to such data. In making such evaluation, all factors affecting liquidity and execution of the order, as well as the amount of the capital commitment by the broker in connection with the order, are taken into account. Transactions in unlisted securities are carried out through broker-dealers who make the primary market for such securities unless, in the judgment of VNSM, a more favorable price can be obtained by carrying out such transactions through other brokers or dealers. Receipt of research services from brokers may sometimes be a factor in selecting a broker that VNSM believes will provide best execution for a transaction. These research services include not only a wide variety of reports on such matters as economic and political developments, industries, companies, securities, portfolio strategy, account performance, daily prices of securities, stock and bond market conditions and projections, asset allocation and portfolio structure, but also meetings with management representatives of issuers and with other analysts and specialists. Although it is not possible to assign an exact dollar value to these services, they may, to the extent used, tend to reduce VNSM's expenses. Such services may be used by VNSM in servicing other client accounts and in some cases may not be used with respect to the Fund. Receipt of services or products other than research from brokers is not a factor in the selection of brokers. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., VNSM may, however, consider purchases of shares of the Fund and other funds managed by VNSM by customers of broker-dealers as a factor in the selection of broker-dealers to execute the Fund's securities transactions. In placing orders for the purchase and sale of securities for the Fund, VNSM may cause the Fund to pay a broker-dealer that provides the brokerage and research services to VNSM an amount of commission for effecting a securities transaction for the Fund in excess of the amount another broker-dealer would have charged for effecting that transaction. VNSM must determine in good faith that such greater commission is reasonable in relation to the value of the brokerage and research services provided by the executing broker-dealer viewed in terms of that particular transaction or VNSM's overall responsibilities to the Trust and its other clients. VNSM's authority to cause the Fund to pay such greater commissions is also subject to such policies as the trustees of the Trust may adopt from time to time. Portfolio Trades of All Subadvisers Subject to the overriding objective of obtaining the best possible execution of orders, each of the subadvisers may allocate brokerage transactions to affiliated brokers. In order for the affiliated broker to effect portfolio transactions for the Fund, the commissions, fees or other remuneration received by the affiliated broker must be reasonable and fair compared to the commissions, fees and other remuneration paid to 56 other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period. Furthermore, the trustees of the Trusts, including a majority of the Independent Trustees, have adopted procedures which are reasonably designed to provide that any commissions, fees or other remuneration paid to an affiliated broker are consistent with the foregoing standard. General Subject to procedures adopted by the Board of Trustees of each Trust, the Funds' brokerage transactions may be executed by brokers that are affiliated with CDC IXIS North America or the Funds' advisers or subadvisers. Any such transactions will comply with Rule 17e-1 under the 1940 Act, except to the extent permitted by the SEC pursuant to exemptive relief or otherwise. Under the 1940 Act, persons affiliated with each Trust are prohibited from dealing with each Trust's Funds as a principal in the purchase and sale of securities. Since transactions in the over-the-counter market usually involve transactions with dealers acting as principals for their own accounts, affiliated persons of the Trusts may not serve as the Funds' dealer in connection with such transactions. However, the Trusts have obtained exemptive relief from the SEC permitting segments of the Star Funds to enter into principal transactions with affiliates of the subadvisers to other segments of the same Star Fund (but not affiliates of the subadviser to such segment). To the extent permitted by applicable law, and in all instances subject to the foregoing policy of best execution, the adviser or subadviser may allocate brokerage transactions in a manner that takes into account the sale of shares of one or more Funds distributed by the Distributor. In addition, the adviser or subadviser may allocate brokerage transactions to broker-dealers (including affiliates of the Distributor) that have entered into arrangements in which the broker-dealer allocates a portion of the commissions paid by a Fund toward the reduction of that Fund's expenses, subject to the requirement that the adviser or subadviser will seek best execution. It is expected that the portfolio transactions in fixed-income securities will generally be with issuers or dealers on a net basis without a stated commission. Securities firms may receive brokerage commissions on transactions involving options, futures and options on futures and the purchase and sale of underlying securities upon exercise of options. The brokerage commissions associated with buying and selling options may be proportionately higher than those associated with general securities transactions. - -------------------------------------------------------------------------------- DESCRIPTION OF THE TRUSTS AND OWNERSHIP OF SHARES - -------------------------------------------------------------------------------- CDC Nvest Funds Trust I is organized as a Massachusetts business trust under the laws of Massachusetts by an Agreement and Declaration of Trust (a "Declaration of Trust") dated June 7, 1985, as amended, and is a "series" company as described in Section 18(f)(2) of the 1940 Act. The name of the Trust has changed several times since its organization - from the date of its organization to September 1986, the name of the Trust was "The New England Life Government Securities Trust"; from September 1986 to March 1994, its name was "The New England Funds"; from April 1994 to January 2000, its name was "New England Funds Trust I'; from January 2000 until April 2001 the name of the Trust was "Nvest Funds Trust I"; and since May 2001 the name of the Trust has been "CDC Nvest Trust I". Prior to January 5, 1996, the name of the Municipal Income Fund was "New England Tax Exempt Income Fund." The initial Fund of the Trust (the Fund now called CDC Nvest Government Securities Fund) commenced operations on September 16, 1985. International Equity Fund commenced operations on May 22, 1992. The Capital Growth Fund was organized in 1992 and commenced operations on August 3, 1992. Star Advisers Fund was organized in 1994 and commenced operations on July 7, 1994. Strategic Income Fund was organized in 1995 and commenced operations on May 1, 1995. Star Worldwide Fund was organized in 1995 and commenced operations on December 29, 1995. Star Small Cap Fund was organized in 1996 and commenced operations on December 31, 1996. Large Cap Growth Fund and Relative Value Fund were organized in 2001 but have not yet commenced operations. The remaining Funds in the Trust are successors to the following corporations which commenced operations in the years indicated: 57 Corporation Date of Commencement of Operations ----------- ---------------------------------- NEL Growth Fund, Inc.* 1968 NEL Retirement Equity Fund, Inc.** 1970 NEL Equity Fund, Inc.*** 1968 NEL Income Fund, Inc.**** 1973 NEL Tax Exempt Bond Fund, Inc.***** 1977 * Predecessor of the Targeted Equity Fund (prior to November 12, 2001, the name of the Fund was "CDC Nvest Growth Fund") ** Predecessor of the Star Value Fund (prior to February 28, 2000 the name of the Fund was "Nvest Value Fund") *** Predecessor of the Balanced Fund **** Predecessor of the Bond Income Fund ***** Predecessor of the Municipal Income Fund CDC Nvest Funds Trust II is organized as a Massachusetts business trust pursuant to a Declaration of Trust dated May 6, 1931, as amended, and consisted of a single Fund (now the Growth and Income Fund) until January 1989, when the Trust was reorganized as a "series" company as described in Section 18(f)(2) of the 1940 Act. The Trust has six separate portfolios. The name of the Trust has changed several times since its organization - from its date of organization until December 1988, its name was "Investment Trust of Boston"; from December 1988 until April 1992, its name was "Investment Trust of Boston Funds"; from April 1992 until March 1994, its name was "TNE Funds Trust"; from April 1994 to January 2000, its name was "New England Funds Trust II"; from January 2000 to April 2001 the name of the Trust was "Nvest Funds Trust II"; and since May 2001 the name of the Trust has been "CDC Nvest Trust II". High Income Fund and Massachusetts Fund are successors to separate investment companies that were organized in 1983 and 1984, respectively, and reorganized as series of the Trust in January 1989. Limited Term U.S. Government Fund was organized in 1988 and commenced operations in January 1989. Short Term Corporate Income Fund was organized in 1991 and commenced operations on October 18th of that year. Prior to December 1, 1998, the name of Short Term Corporate Income Fund was "Adjustable Rate U.S. Government Fund." Prior to May 1, 1999, the name of Growth and Income Fund, which was organized in 1931 and commenced operations on May 6th of that year, was "Growth Opportunities Fund." CDC Nvest Funds Trust III was organized as a Massachusetts business trust pursuant to a Declaration of Trust dated August 22, 1995. The name of the Trust was "New England Funds Trust III" from the date of its organization until January 2000; from January 2000 until April 2001 the name of the Trust was "Nvest Funds Trust III"; and since May 2001 the name of the Trust has been "CDC Nvest Funds Trust III". The Trust has five separate funds (CDC Nvest Small Cap Growth Fund, CDC Nvest Large Cap Value Fund, CDC Nvest Select Fund, CDC Nvest Mid Cap Growth Fund and CDC Nvest Equity Research Fund). CDC Nvest Small Cap Growth Fund was organized in 1998 and commenced operations on March 31, 1998. Prior to November 12, 2001, Small Cap Growth Fund was called "Bullseye Fund". CDC Nvest Large Cap Value Fund was organized in 1995 and commenced operations on November 28, 1995. Prior to January 2001, Large Cap Value Fund was called "Equity Income Fund." CDC Nvest Select Fund and CDC Nvest Mid Cap Growth Fund were organized in 2001 and commenced operations March 15, 2001. CDC Nvest Equity Research Fund was organized in 2001 but is not currently offered to the public. CDC Nvest Companies Trust I is organized as a Massachusetts business trust under the laws of Massachusetts by an Agreement and Declaration of Trust (a "Declaration of Trust") dated March 17, 2000, and is a "series" company as described in Section 18(f)(2) of the 1940 Act. The name of the Trust was "Nvest Companies Trust I" from the date of its organization until May 2001 when the name was changed to "CDC Nvest Companies Trust I". The AEW Real Estate Fund commenced operations on September 1, 2000. The Declarations of Trust of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III and CDC Nvest Companies Trust I permit each Trust's trustees to issue an unlimited number of full and fractional shares of each series. Each Fund is represented by a particular series of shares. The Declarations of Trust further permit each Trust's Board of Trustees to divide the shares of each series into any number of separate classes, each having such rights and preferences relative to other classes of the same series as each Trust's Board of Trustees may determine. When you invest in a Fund, you acquire freely transferable shares of beneficial interest that entitle you to 58 receive annual or quarterly dividends as determined by the respective Trust's Board of trustees and to cast a vote for each share you own at shareholder meetings. The shares of each Fund do not have any preemptive rights. Upon termination of any Fund, whether pursuant to liquidation of the Trust or otherwise, shareholders of each class of the Fund are entitled to share pro rata in the net assets attributable to that class of shares of the Fund available for distribution to shareholders. The Declarations of Trust also permit the Board of Trustees to charge shareholders directly for custodial, transfer agency and servicing expenses. The shares of all the Funds (except as noted in each of the Fund's Prospectuses) are divided into four classes: Class A, Class B, Class C and Class Y. Each Fund offers such classes of shares as set forth in such Fund's Prospectuses. (Note that the Massachusetts Fund, Government Securities Fund and Municipal Income Fund do not currently offer Class C shares. Note that the Large Cap Value Fund, Capital Growth Fund, Mid Cap Growth Fund, Select Fund, High Income Fund, Short Term Corporate Fund, Massachusetts Fund and Municipal Income Fund do not currently offer Class Y shares.) Class Y shares are available for purchase only by certain eligible institutional investors and have higher minimum purchase requirements than Classes A, B and C. All expenses of each Fund (including advisory and subadvisory fees but excluding transfer agency fees and expenses of printing and mailing Prospectuses to shareholders ("Other Expenses")) are borne by its Classes A, B, C and Y shares on a pro rata basis, except for 12b-1 fees, which are borne only by Classes A, B and C and may be charged at a separate rate to each such class. Other Expenses of Classes A, B and C are borne by such classes on a pro rata basis, but Other Expenses relating to the Class Y shares may be allocated separately to the Class Y shares. The Class A, Class B, Class C and Class Y structure could be terminated should certain IRS rulings be rescinded. The assets received by each class of a Fund for the issue or sale of its shares and all income, earnings, profits, losses and proceeds therefrom, subject only to the rights of the creditors, are allocated to, and constitute the underlying assets of, that class of a Fund. The underlying assets of each class of a Fund are segregated and are charged with the expenses with respect to that class of a Fund and with a share of the general expenses of the relevant trust. Any general expenses of the Trust that are not readily identifiable as belonging to a particular class of a Fund are allocated by or under the direction of the trustees in such manner as the trustees determine to be fair and equitable. While the expenses of each Trust are allocated to the separate books of account of each Fund, certain expenses may be legally chargeable against the assets of all of the Funds in a Trust. The Declarations of Trust also permit each Trust's Board of Trustees, without shareholder approval, to subdivide any Fund or series or class of shares into various sub-series or sub-classes with such dividend preferences and other rights as the trustees may designate. While each Trust's Board of Trustees has no current intention to exercise this power, it is intended to allow them to provide for an equitable allocation of the impact of any future regulatory requirements that might affect various classes of shareholders differently. Each Trust's Board of Trustees may also, without shareholder approval, establish one or more additional series or classes or merge two or more existing series or classes. The Declarations of Trust provide for the perpetual existence of the Trusts. Any Trust or any Fund, however, may be terminated at any time by vote of at least two-thirds of the outstanding shares of each Fund affected. Similarly, any class within a Fund may be terminated by vote of at least two-thirds of the outstanding shares of such class. While each Declaration of Trust further provides that the Board of Trustees may also terminate the relevant Trust upon written notice to its shareholders, the 1940 Act requires that the Trust receive the authorization of a majority of its outstanding shares in order to change the nature of its business so as to cease to be an investment company. Voting Rights Shareholders are entitled to one vote for each full share held (with fractional votes for each fractional share held) and may vote (to the extent provided therein) in the election of trustees and the termination of the Trust and on other matters submitted to the vote of shareholders. The Declarations of Trust provide that on any matter submitted to a vote of all shareholders of a Trust, all Trust shares entitled to vote shall be voted together irrespective of series or class unless the rights of a particular series or class would be adversely affected by the vote, in which case a separate vote of that series or class shall also be 59 required to decide the question. Also, a separate vote shall be held whenever required by the 1940 Act or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect that a series or class shall be deemed to be affected by a matter unless it is clear that the interests of each series or class in the matter are substantially identical or that the matter does not affect any interest of such series or class. On matters affecting an individual series or class, only shareholders of that series or class are entitled to vote. Consistent with the current position of the SEC, shareholders of all series and classes vote together, irrespective of series or class, on the election of trustees and the selection of the Trust's independent accountants, but shareholders of each series vote separately on other matters requiring shareholder approval, such as certain changes in investment policies of that series or the approval of the investment advisory and subadvisory agreement relating to that series, and shareholders of each class within a series vote separately as to the Rule 12b-1 plan (if any) relating to that class. There will normally be no meetings of shareholders for the purpose of electing trustees except that, in accordance with the 1940 Act, (i) a Trust will hold a shareholders' meeting for the election of trustees at such time as less than a majority of the trustees holding office have been elected by shareholders, and (ii) if there is a vacancy on the Board of Trustees, such vacancy may be filled only by a vote of the shareholders unless, after filing such vacancy by other means, at least two-thirds of the trustees holding office shall have been elected by the shareholders. In addition, trustees may be removed from office by a written consent signed by the holders of two-thirds of the outstanding shares and filed with a Trust's custodian or by a vote of the holders of two-thirds of the outstanding shares at a meeting duly called for that purpose, which meeting shall be held upon the written request of the holders of not less than 10% of the outstanding shares. Upon written request by the holders of shares having a net asset value of at least $25,000 or at least 1% of the outstanding shares stating that such shareholders wish to communicate with the other shareholders for the purpose of obtaining the signatures necessary to demand a meeting to consider removal of a trustee, the Trusts have undertaken to provide a list of shareholders or to disseminate appropriate materials (at the expense of the requesting shareholders). Except as set forth above, the trustees shall continue to hold office and may appoint successor trustees. Shareholder voting rights are not cumulative. No amendment may be made to a Declaration of Trust without the affirmative vote of a majority of the outstanding shares of the relevant Trust except (i) to change the Trust's or a Fund's name or to cure technical problems in the Declaration of Trust, (ii) to establish and designate new series or classes of Trust shares and (iii) to establish, designate or modify new and existing series or classes of Trust shares or other provisions relating to Trust shares in response to applicable laws or regulations. If one or more new series of a Trust is established and designated by the trustees, the shareholders having beneficial interests in the Funds described in this Statement shall not be entitled to vote on matters exclusively affecting such new series, such matters including, without limitation, the adoption of or any change in the investment objectives, policies or restrictions of the new series and the approval of the investment advisory contracts of the new series. Similarly, the shareholders of the new series shall not be entitled to vote on any such matters as they affect the Funds. Shareholder and Trustee Liability Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of a Trust. However, the Declarations of Trust disclaim shareholder liability for acts or obligations of a Trust and require that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by a Trust or the trustees. The Declarations of Trust provide for indemnification out of each Fund's property for all loss and expense of any shareholder held personally liable for the obligations of the Fund by reason of owning shares of such Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered remote since it is limited to circumstances in which the disclaimer is inoperative and a Fund itself would be unable to meet its obligations. The Declarations of Trust further provide that the relevant Board of Trustees will not be liable for errors of judgment or mistakes of fact or law. However, nothing in the Declarations of Trust protects a trustee against any liability to which the trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The By-Laws of each Trust provide for 60 indemnification by the Trust of trustees and officers of the relevant Trust, except with respect to any matter as to which any such person did not act in good faith in the reasonable belief that his or her action was in or not opposed to the best interests of the Trust. Such persons may not be indemnified against any liability to the Trust or the Trust's shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Each Trust offers only its own Funds' shares for sale, but it is possible that a Trust might become liable for any misstatements in a Prospectus that relate to another Trust. The trustees of each Trust have considered this possible liability and approved the use of the combined Prospectus for Funds of all three Trusts. Code of Ethics The Funds, their advisers and subadvisers, and the Distributor have adopted Codes of Ethics pursuant to Rule 17j-1 under the 1940 Act. The Codes of Ethics permits employees to invest in securities for their own accounts, under certain circumstances, including securities that may be purchased or held by the Funds. The Codes of Ethics are on public file with, and is available from, the SEC. - -------------------------------------------------------------------------------- PORTFOLIO TURNOVER - -------------------------------------------------------------------------------- A Fund's portfolio turnover rate for a fiscal year is calculated by dividing the lesser of purchases or sales of portfolio securities, excluding securities having maturity dates at acquisition of one year or less, for the fiscal year by the monthly average of the value of the portfolio securities owned by the Fund during the fiscal year. High portfolio turnover involves correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Funds, thereby decreasing the Funds' total return. The portfolio turnover rate for the fiscal year ended December 31, 2000 was significantly higher for the Government Securities Fund and Star Advisers Fund compared to the prior two fiscal periods due to, among other things, the unprecedented volatility in the stock market during such period. The Funds expect that their portfolio turnover rates would ordinarily be somewhat lower than the portfolio turnover rates for December 31, 2000, although it is impossible to predict with certainty whether future portfolio turnover rates will be higher or lower than those experienced during past periods. Generally, each Fund intends to invest for long-term purposes. However, the rate of portfolio turnover will depend upon market and other conditions, and it will not be a limiting factor when an adviser or subadviser believes that portfolio changes are appropriate. 61 - -------------------------------------------------------------------------------- HOW TO BUY SHARES - -------------------------------------------------------------------------------- The procedures for purchasing shares of the Funds are summarized in the Prospectuses. All purchases made by check should be in U.S. dollars and made payable to CDC Nvest Funds, or, in the case of a retirement account, the custodian or trustee. For purchase of Fund shares by mail, the settlement date is the first business day after receipt of the check by the transfer agent so long as it is received by the close of regular trading of the New York Stock Exchange (the "Exchange") on a day when the Exchange is open; otherwise the settlement date is the following business day. For telephone orders, the settlement date is the third business day after the order is made. Shares may also be purchased either in writing, by phone (exept for Class Y shares), by electronic funds transfer using Automated Clearing House ("ACH"), or by exchange as described in the Prospectuses through firms that are members of the National Association of Securities Dealers, Inc. and that have selling agreements with the Distributor. You may also use CDC Nvest Funds Personal Access Line(R) (800-225-5478, press 1) or CDC Nvest Funds Web site (www.cdcnvestfunds.com) to purchase Fund shares (except for Class Y shares). For more information, see the section entitled "Shareholder Services" in this Statement. A shareholder may purchase additional shares electronically through the ACH system so long as the shareholder's bank or credit union is a member of the ACH system and the shareholder has a completed, approved ACH application on file. Banks may charge a fee for transmitting funds by wire. With respect to shares purchased by federal funds, shareholders should bear in mind that wire transfers may take two or more hours to complete. The Distributor may at its discretion accept a telephone order for the purchase of $5,000 or more of a Fund's Class A, B and C shares. Payment must be received by the Distributor within three business days following the transaction date or the order will be subject to cancellation. Telephone orders must be placed through the Distributor or your investment dealer. If you wish transactions in your account to be effected by another person under a power of attorney from you, special rules as summarized in the Prospectus may apply. - -------------------------------------------------------------------------------- NET ASSET VALUE AND PUBLIC OFFERING PRICE - -------------------------------------------------------------------------------- The method for determining the public offering price and net asset value per share is summarized in the Prospectus. The total net asset value of each class of shares of a Fund (the excess of the assets of such Fund attributable to such class over the liabilities attributable to such class) is determined at the close of regular trading (normally 4:00 p.m. Eastern time) on each day that the Exchange is open for trading. The weekdays that the Exchange is expected to be closed are New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Securities listed on a national securities exchange or on the NASDAQ National Market System are valued at their last sale price, or, if there is no reported sale during the day, the last reported bid price estimated by a broker. Unlisted securities traded in the over-the-counter market are valued at the last reported bid price in the over-the-counter market or on the basis of yield equivalents as obtained from one or more dealers that make a market in the securities. U.S. government securities are traded in the over-the-counter market. Options, interest rate futures and options thereon that are traded on exchanges are valued at their last sale price as of the close of such exchanges. Securities for which current market quotations are not readily available and all 62 other assets are taken at fair value as determined in good faith by the Board of Trustees, although the actual calculations may be made by persons acting pursuant to the direction of the Board. Generally, trading in foreign government securities and other fixed-income securities, as well as trading in equity securities in markets outside the United States, is substantially completed each day at various times prior to the close of the Exchange. Securities traded on a foreign exchange will be valued at their last sale price (or the last reported bid price, if there is no reported sale during the day), on the exchange on which they principally trade, as of the close of regular trading on such exchange except for securities traded on the London Stock Exchange ("British Equities"). British Equities will be valued at the mean between the last bid and last asked prices on the London Stock Exchange. The value of other securities principally traded outside the United States will be computed as of the completion of substantial trading for the day on the markets on which such securities principally trade. Securities principally traded outside the United States will generally be valued several hours before the close of regular trading on the Exchange, generally 4:00 p.m. Eastern time, when the Funds compute the net asset value of their shares. Occasionally, events affecting the value of securities principally traded outside the United States may occur between the completion of substantial trading of such securities for the day and the close of the Exchange, which events will not be reflected in the computation of a Fund's net asset value. If events materially affecting the value of a Fund's securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or in accordance with procedures approved by the Trusts' trustees. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded but rather, may be priced by another method that the Board of Trustees believes accurately reflects fair value. Trading in some of the portfolio securities of some of the Funds takes place in various markets outside the United States on days and at times other than when the Exchange is open for trading. Therefore, the calculation of these Funds' net asset value does not take place at the same time as the prices of many of its portfolio securities are determined, and the value of the Fund's portfolio may change on days when the Fund is not open for business and its shares may not be purchased or redeemed. The per share net asset value of a class of a Fund's shares is computed by dividing the number of shares outstanding into the total net asset value attributable to such class. The public offering price of a Class A share or a Class C share of a Fund is the net asset value per share next-determined after a properly completed purchase order is accepted by CIS or State Street Bank, plus a sales charge as set forth in the Fund's Prospectus. The public offering price of a Class B or Y share of a Fund is the next-determined net asset value. - -------------------------------------------------------------------------------- REDUCED SALES CHARGES - -------------------------------------------------------------------------------- The following special purchase plans are summarized in the Prospectuses and are described in greater detail below. Cumulative Purchase Discount. A Fund shareholder may make an initial or an additional purchase of Class A shares and be entitled to a discount on the sales charge payable on that purchase. This discount will be available if the shareholder's "total investment" in the Fund reaches the breakpoint for a reduced sales charge in the table under "How Sales Charges Are Calculated-Class A shares" in the Prospectus. The total investment is determined by adding the amount of the additional purchase, including sales charge, to the current public offering price of all series and classes of shares of the CDC Nvest Trusts held by the shareholder in one or more accounts. If the total investment exceeds the breakpoint, the lower sales charge applies to the entire additional investment even though some portion of that additional investment is below the breakpoint to which a reduced sales charge applies. For example, if a shareholder who already owns shares of one or more Funds or other of the CDC Nvest Funds with a value at the current public offering price of $30,000 makes an additional purchase of $20,000 of Class A shares of another Fund or CDC Nvest Fund, the reduced sales charge of 4.5% of the public offering price will apply to the entire amount of the additional investment. Letter of Intent. A Letter of Intent (a "Letter"), which can be effected at any time, is a privilege available to investors that reduces the sales charge on investments in Class A shares. Ordinarily, reduced sales charges are available for single purchases of Class A shares only when they reach certain breakpoints (e.g., $50,000, $100,000, etc.). By 63 signing a Letter, a shareholder indicates an intention to invest enough money in Class A shares within 13 months to reach a breakpoint. If the shareholder's intended aggregate purchases of all series and classes of the Trusts over a defined 13-month period will be large enough to qualify for a reduced sales charge, the shareholder may invest the smaller individual amounts at the public offering price calculated using the sales load applicable to the 13-month aggregate investment. A Letter is a non-binding commitment, the amount of which may be increased, decreased or canceled at any time. The effective date of a Letter is the date it is received in good order by the Distributor, or, if communicated by a telephone exchange or order, at the date of telephoning provided a signed Letter, in good order, reaches the Distributor within five business days. A reduced sales charge is available for aggregate purchases of all series and classes of shares of the Trusts pursuant to a written Letter effected within 90 days after any purchase. In the event the account was established prior to 90 days before the effective date of the Letter, the account will be credited with the Rights of Accumulation ("ROA") towards the breakpoint level that will be reached upon the completion of the 13 months' purchases. The ROA credit is the value of all shares held as of the effective dates of the Letter based on the "public offering price computed on such date." The cumulative purchase discount, described above, permits the aggregate value at the current public offering price of Class A shares of any accounts with the Trusts held by a shareholder to be added to the dollar amount of the intended investment under a Letter, provided the shareholder lists them on the account application. State Street Bank will hold in escrow shares with a value at the current public offering price of 5% of the aggregate amount of the intended investment. The amount in escrow will be released when the commitment stated in the Letter is completed. If the shareholder does not purchase shares in the amount indicated in the Letter, the shareholder agrees to remit to State Street Bank the difference between the sales charge actually paid and that which would have been paid had the Letter not been in effect, and authorizes State Street Bank to redeem escrowed shares in the amount necessary to make up the difference in sales charges. Reinvested dividends and distributions are not included in determining whether the Letter has been completed. Combining Accounts. Purchases of all series and classes of the CDC Nvest Funds (excluding the CDC Nvest Cash Management Trust and CDC Nvest Tax Exempt Money Market Trust (the "Money Market Funds") unless the shares were purchased through an exchange with another CDC Nvest Fund) by or for an investor, the investor's spouse, parents, children, siblings, in-laws, grandparents or grandchildren and any other account of the investor, including sole proprietorships, in any Trust may be treated as purchases by a single individual for purposes of determining the availability of a reduced sales charge. Purchases for a single trust estate or a single fiduciary account may also be treated as purchases by a single individual for this purpose, as may purchases on behalf of a participant in a tax-qualified retirement plan and other employee benefit plans, provided that the investor is the sole participant in the plan. Any other group of individuals acceptable to the Distributor may also combine accounts for such purpose. The values of all accounts are combined to determine the sales charge. Combining with Other Series and Classes of the CDC Nvest Funds. A shareholder's total investment for purposes of the cumulative purchase discount includes the value at the current public offering price of any shares of series and classes of the Trusts that the shareholder owns (which excludes shares of the Money Market Funds unless such shares were purchased by exchanging shares of any other CDC Nvest Fund). Shares owned by persons described in the preceding paragraph may also be included. Clients of Advisers or Subadvisers. No front-end sales charge or CDSC applies to investments of $25,000 or more in Class A shares and no front-end sales charge applies to investments of $25,000 or more in Class C shares of the Funds by (1) clients of an adviser or subadviser to any series of the Trusts; any director, officer or partner of a client of an adviser or subadviser to any series of the Trusts; or the spouse, parents, children, siblings, in-laws, grandparents or grandchildren of the foregoing; (2) any individual who is a participant in a Keogh or IRA Plan under a prototype of an 64 adviser or subadviser to any series of the Trusts if at least one participant in the plan qualifies under category (1) above; and (3) an individual who invests through an IRA and is a participant in an employee benefit plan that is a client of an adviser or subadviser to any series of the Trusts. Any investor eligible for this arrangement should so indicate in writing at the time of the purchase. Offering to Employees of Metropolitan Life Insurance Company ("MetLife") and Associated Entities. There is no front-end sales charge, CDSC or initial investment minimum related to investments in Class A shares of the Funds by any of the Trusts' advisers or subadvisers, the Distributor or any other company affiliated with New England Financial or MetLife; current and former directors and trustees of the Trusts; agents and general agents of New England Financial or MetLife and their insurance company subsidiaries; current and retired employees of such agents and general agents; registered representatives of broker-dealers who have selling arrangements with the Distributor; the spouse, parents, children, siblings, in-laws, grandparents or grandchildren of the persons listed above and any trust, pension, profit sharing or other benefit plans for any of the foregoing persons and any separate account of New England Financial or MetLife or any insurance company affiliated with New England Financial or MetLife. Eligible Governmental Authorities. There is no sales charge or CDSC related to investments in Class A shares and there is no front-end sales charge related to investments in Class C shares of any Fund by any state, county or city or any instrumentality, department, authority or agency thereof that has determined that a Fund is a legally permissible investment and that is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of any registered investment company. Investment Advisory Accounts. Class A or Class C shares of any Fund may be purchased at net asset value by investment advisers, financial planners or other intermediaries who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services; clients of such investment advisers, financial planners or other intermediaries who place trades for their own accounts if the accounts are linked to the master account of such investment adviser, financial planner or other intermediary on the books and records of the broker or agent; and retirement and deferred compensation plans and trusts used to fund those plans, including, but not limited to, those defined in Sections 401(a), 403(b), 401(k) and 457 of the Code and "rabbi trusts." Investors may be charged a fee if they effect transactions through a broker or agent. Certain Broker-Dealers and Financial Services Organizations. Class A or Class C shares of any Fund also may be purchased at net asset value through certain broker-dealers and/or financial services organizations without any transaction fee. Such organizations may also receive compensation based upon the average value of the Fund shares held by their customers. This compensation may be paid by CDC IXIS Advisers, Loomis Sayles and/or Harris Associates out of its own assets, and/or be paid indirectly by the Fund in the form of servicing, distribution or transfer agent fees. Class C shares may be purchased at net asset value by an investor who buys through a Merrill Lynch omnibus account. However, a CDSC will apply if shares are sold within 12 months of purchase. Certain Retirement Plans. Class A and Class C shares of the Funds are available at net asset value for investments by participant-directed 401(a) and 401(k) plans that have 100 or more eligible employees or by retirement plans whose third party administrator or dealer has entered into a service agreement with the Distributor to perform certain administrative services, subject to certain operational and minimum size requirements specified from time to time by the Distributor. This compensation may be paid indirectly by the Fund in the form of service and/or distribution fees. Bank Trust Departments or Trust Companies. Class A and Class C shares of the Funds are available at net asset value for investments by non-discretionary and non-retirement accounts of bank trust departments or trust companies, but are unavailable if the trust department or institution is part of an organization not principally engaged in banking or trust activities. Shareholders of Reich and Tang Government Securities Trust. Shareholders of Reich and Tang Government Securities Trust may exchange their shares of that fund for Class A shares of the Funds at net asset value and without imposition of a sales charge. Certain Accounts of Targeted Equity Fund. For accounts established prior to February 28, 1997 having a total investment value of between (and including) $25,000 and $49,000, a reduced sales charge of 5.50% of the 65 offering price (or 5.82% of the net amount invested), with a dealer's concession of 4.25% as a percentage of offering price, will be charged on the sale of additional Class A shares of Targeted Equity Fund if the total investment value of Targeted Equity Fund account after such sale is between (and including) $25,000 and $49,000. The reduction or elimination of the sales charges in connection with special purchase plans described above reflects the absence or reduction of expenses associated with such sales. - -------------------------------------------------------------------------------- SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- Open Accounts A shareholder's investment is automatically credited to an open account maintained for the shareholder by State Street Bank. Following each transaction in the account, a shareholder will receive a confirmation statement disclosing the current balance of shares owned and the details of recent transactions in the account. After the close of each calendar year, State Street Bank will send each shareholder a statement providing federal tax information on dividends and distributions paid to the shareholder during the year. This statement should be retained as a permanent record. CIS may charge a fee for providing duplicate information. The open account system provides for full and fractional shares expressed to three decimal places and, by making the issuance and delivery of stock certificates unnecessary, eliminates problems of handling and safekeeping, and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed certificates. Certificates will not be issued for Class B, Class C or Class Y shares. The costs of maintaining the open account system are paid by the Funds and no direct charges are made to shareholders. Although the Funds have no present intention of making such direct charges to shareholders, they each reserve the right to do so. Shareholders will receive prior notice before any such charges are made. Automatic Investment Plans (Classes A, B and C Shares) Subject to each Fund's investor eligibility requirements, investors may automatically invest in additional shares of a Fund on a monthly basis by authorizing the Distributor to draw checks on an investor's bank account. The checks are drawn under the Investment Builder Program, a program designed to facilitate such periodic payments, and are forwarded to CIS for investment in the Fund. A plan may be opened with an initial investment of $100 or more and thereafter regular monthly checks of $100 or more will be drawn on the investor's account. The reduced minimum initial investment pursuant to an automatic investment plan is referred to in the Prospectus. An Investment Builder application must be completed to open an automatic investment plan. An application may be found in the Prospectus or may be obtained by calling the Distributor at 800-225-5478 or your investment dealer. This program is voluntary and may be terminated at any time by CIS upon notice to existing plan participants. The Investment Builder Program plan may be discontinued at any time by the investor by written notice to CIS, which must be received at least five business days prior to any payment date. The plan may be discontinued by State Street Bank at any time without prior notice if any check is not paid upon presentation; or by written notice to the shareholder at least thirty days prior to any payment date. State Street Bank is under no obligation to notify shareholders as to the nonpayment of any check. Retirement Plans Offering Tax Benefits (Classes A, B and C Shares) The federal tax laws provide for a variety of retirement plans offering tax benefits. These plans may be funded with shares of the Funds or with certain other investments. The plans include H.R. 10 (Keogh) plans for self-employed individuals and partnerships, individual retirement accounts (IRAs), corporate pension trust and profit 66 sharing plans, including 401(k) plans, and retirement plans for public school systems and certain tax exempt organizations, i.e., 403(b) plans. The reduced minimum initial investment available to retirement plans offering tax benefits is referred to in the Prospectus. For these plans, initial investments in a Fund must be at least $250 for each participant in corporate pension and profit sharing plans and Keogh plans, at least $500 for IRAs and at least $100 for any subsequent investments. There is a special initial and subsequent investment minimum of $25 for payroll deduction investment programs for SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement plans. Income dividends and capital gain distributions must be reinvested (unless the investor is over age 59 1/2 or disabled). These types of accounts may be subject to fees. Plan documents and further information can be obtained from the Distributor. An investor should consult a competent tax or other adviser as to the suitability of a Fund's shares as a vehicle for funding a plan, in whole or in part, under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and as to the eligibility requirements for a specific plan and its state as well as federal tax aspects. Certain retirement plans may also be eligible to purchase Class Y shares. See the Prospectus relating to Class Y shares. Systematic Withdrawal Plans (Classes A, B and C Shares) An investor owning a Fund's shares having a value of $10,000 or more at the current public offering price may establish a Systematic Withdrawal Plan providing for periodic payments of a fixed or variable amount. An investor may terminate the plan at any time. A form for use in establishing such a plan is available from the servicing agent or your investment dealer. Withdrawals may be paid to a person other than the shareholder if a signature guarantee is provided. Please consult your investment dealer or the Distributor. A shareholder under a Systematic Withdrawal Plan may elect to receive payments monthly, quarterly, semiannually or annually for a fixed amount of not less than $50 or a variable amount based on (1) the market value of a stated number of shares, (2) a specified percentage of the account's market value or (3) a specified number of years for liquidating the account (e.g., a 20-year program of 240 monthly payments would be liquidated at a monthly rate of 1/240, 1/239, 1/238, etc.). The initial payment under a variable payment option may be $50 or more. In the case of shares subject to a CDSC, the amount or percentage you specify may not, on an annualized basis, exceed 10% of the value, as of the time you make the election, of your account with the Fund with respect to which you are electing the Plan. Withdrawals of Class B shares of a Fund under the Plan will be treated as redemptions of shares purchased through the reinvestment of Fund distributions, or, to the extent such shares in your account are insufficient to cover Plan payments, as redemptions from the earliest purchased shares of such Fund in your account. No CDSC applies to redemptions pursuant to the Plan. All shares under the Plan must be held in an open (uncertificated) account. Income dividends and capital gain distributions will be reinvested (without a sales charge in the case of Class A and Class C shares) at net asset value determined on the record date. Since withdrawal payments represent proceeds from the liquidation of shares, withdrawals may reduce and possibly exhaust the value of the account, particularly in the event of a decline in net asset value. Accordingly, a shareholder should consider whether a Systematic Withdrawal Plan and the specified amounts to be withdrawn are appropriate in the circumstances. The Funds and the Distributor make no recommendations or representations in this regard. It may be appropriate for a shareholder to consult a tax adviser before establishing such a plan. See "Redemptions" and "Tax Status" below for certain information as to federal income taxes. It may be disadvantageous for a shareholder to purchase on a regular basis additional Fund shares with a sales charge while redeeming shares under a Systematic Withdrawal Plan. Accordingly, the Funds and the Distributor do not recommend additional investments in Class A and Class C shares by a shareholder who has a withdrawal plan in effect and who would be subject to a sales load on such additional investments. CDC Nvest Funds may modify or terminate this program at any time. 67 Because of statutory restrictions this plan is not available to pension or profit-sharing plans, IRAs or 403(b) plans that have State Street Bank as trustee. Dividend Diversification Program You may also establish a Dividend Diversification Program, which allows you to have all dividends and any other distributions automatically invested in shares of the same class of another CDC Nvest Fund, subject to the investor eligibility requirements of that other Fund and to state securities law requirements. Shares will be purchased at the selected Fund's net asset value (without a sales charge or CDSC) on the dividend record date. A dividend diversification account must be in the same registration (shareholder name) as the distributing Fund account and, if a new account in the purchased Fund is being established, the purchased Fund's minimum investment requirements must be met. Before establishing a Dividend Diversification Program into any other CDC Nvest Fund, you must obtain and carefully read a copy of that Fund's Prospectus. Exchange Privilege A shareholder may exchange the shares of any Fund for shares of the same class of any other CDC Nvest Fund (subject to the investor eligibility requirements, if any, of the CDC Nvest Fund into which the exchange is being made) on the basis of relative net asset values at the time of the exchange without any sales charge. An exchange of shares in one Fund for shares of another Fund is a taxable event on which gain or loss may be recognized. Exchanges of Class A shares of Short Term Corporate Income Fund (formerly Adjustable Rate U.S. Government Fund) purchased before December 1, 1998 will also pay the difference between any sales charge already paid on their shares and the higher sales charge of the Fund into which they are exchanging. In certain limited circumstances, the Distributor may waive the requirement that shareholders pay the difference between any sales charge already paid on their shares and the higher sales charge of the Fund into which they are exchanging at the time of the exchange. When an exchange is made from the Class A, Class B or Class C shares of one Fund to the same class of shares of another Fund, the shares received by the shareholder in the exchange will have the same age characteristics as the shares exchanged. The age of the shares determines the expiration of the CDSC and, for the Class B shares, the conversion date. If you own Class A, Class B or Class C shares, you may also elect to exchange your shares of any Fund for shares of the same class of the Money Market Funds. On all exchanges of Class A or C shares subject to a CDSC and Class B shares into the Money Market Funds, the exchange stops the aging period relating to the CDSC, and, for Class B shares only, conversion to Class A shares. The aging period resumes only when an exchange is made back into Classes A, B and C shares of a Fund. Shareholders may also exchange their shares in the Money Market Funds for shares of the same class of any other CDC Nvest Fund listed below, subject to those funds' eligibility requirements and sales charges. Class C shares in accounts of CDC Nvest Cash Management Trust - Money Market Series established on or after December 1, 2000 may exchange into Class C shares of an CDC Nvest Fund subject to its sales charge and CDSC schedule. Class C shares in accounts of CDC Nvest Cash Management Trust - Money Market Series established prior to December 1, 2000 or that have been previously subject to a front-end sales charge may exchange into Class C shares of a CDC Nvest Fund without paying a front-end sales charge. If you own Class Y shares, you may exchange those shares for Class Y shares of other Funds or for Class A shares of the Money Market Funds. These options are summarized in the Prospectus. An exchange may be effected, provided that neither the registered name nor address of the accounts are different and provided that a certificate representing the shares being exchanged has not been issued to the shareholder, by (1) a telephone request to the Fund or CIS at 800-225-5478 or (2) a written exchange request to the Fund or CDC IXIS Asset Management Services, P.O. Box 8551, Boston, MA 02266-8551. You must acknowledge receipt of a current Prospectus for a Fund before an exchange for that Fund can be effected. The minimum amount for an exchange is $1,000. Agents, general agents, directors and senior officers of New England Financial and its insurance company subsidiaries may, at the discretion of New England Financial, elect to exchange Class A shares of any series of the 68 Trusts acquired in connection with deferred compensation plans offered by New England Financial for Class Y shares of any series of the Trusts which offers Class Y shares. To obtain a Prospectus and more information about Class Y shares, please call the Distributor toll free at 800-225-5478. Except as otherwise permitted by SEC rule, shareholders will receive at least 60 days advance notice of any material change to the exchange privilege. The investment objectives of the CDC Nvest Funds and the Money Market Funds as set forth in the Prospectuses are as follows: Equity Funds: CDC Nvest AEW Real Estate Fund seeks above-average income and long-term growth of capital. CDC Nvest Mid Cap Growth Fund seeks long-term growth from investments in common stocks or their equivalent. CDC Nvest Select Fund seeks long-term capital appreciation. CDC Nvest Targeted Equity Fund seeks long-term growth of capital through investments in equity securities of companies whose earnings are expected to grow at a faster rate than that of the overall United States economy. CDC Nvest Capital Growth Fund seeks long-term growth of capital. CDC Nvest Balanced Fund seeks a reasonable long-term investment return from a combination of long-term capital appreciation and moderate current income. CDC Nvest Growth and Income Fund seeks opportunities for long-term capital growth and income. CDC Nvest International Equity Fund seeks total return from long-term capital growth and dividend income. CDC Nvest Large Cap Value Fund seeks total return from capital growth and dividend income. CDC Nvest Jurika & Voyles Small Cap Growth Fund seeks long-term growth of capital. CDC Nvest Large Cap Growth Fund seeks long-term growth of capital by investing at least 65% of its total assets in equity securities of companies with large market capitalizations that the subadviser believes have better than average long-term growth potential. CDC Nvest Jurika & Voyles Relative Value Fund seeks long-term growth of capital. Star Funds: CDC Nvest Star Advisers Fund seeks long-term growth of capital. CDC Nvest Star Worldwide Fund seeks long-term growth of capital. CDC Nvest Star Small Cap Fund seeks capital appreciation. CDC Nvest Star Value Fund seeks a reasonable long-term investment return from a combination of market appreciation and dividend income from equity securities. 69 Income Funds: CDC Nvest Government Securities Fund seeks a high level of current income consistent with safety of principal by investing in U.S. government securities. CDC Nvest Limited Term U.S. Government Fund seeks a high current return consistent with preservation of capital. CDC Nvest Short Term Corporate Income Fund seeks a high level of current income consistent with preservation of capital. CDC Nvest Strategic Income Fund seeks high current income with a secondary objective of capital growth. CDC Nvest Bond Income Fund seeks a high level of current income consistent with what the Fund considers reasonable risk. It invests primarily in corporate and U.S. government bonds. CDC Nvest High Income Fund seeks high current income plus the opportunity for capital appreciation to produce a high total return. Tax Free Income Funds: CDC Nvest Municipal Income Fund seeks as high a level of current income exempt from federal income taxes as is consistent with reasonable risk and protection of shareholders' capital. The Fund invests primarily in debt securities of municipal issuers, which pay interest that is exempt from regular federal income tax but may be subject to the federal alternative minimum tax. CDC Nvest Massachusetts Tax Free Income Fund seeks as high a level of current income exempt from federal and Massachusetts personal income taxes. Money Market Funds: CDC Nvest Cash Management Trust - Money Market Series seeks maximum current income consistent with preservation of capital and liquidity. CDC Nvest Tax Exempt Money Market Trust seeks current income exempt from federal income taxes consistent with preservation of capital and liquidity. As of June 30, 2001, the net assets of the CDC Nvest Funds and the Money Market Funds totaled approximately $5.9 billion. 70 Automatic Exchange Plan (Classes A, B and C Shares) As described in the Prospectus following the caption "Additional Investor Services," a shareholder may establish an Automatic Exchange Plan under which shares of a Fund are automatically exchanged each month for shares of the same class of one or more of the other funds. Registration on all accounts must be identical. The two dates each month on which exchanges may be made are the 15th and 28th (or the first business day thereafter if either the 15th or the 28th is not a business day) until the account is exhausted or until CIS is notified in writing to terminate the plan. Exchanges may be made in amounts of $100 or more. The Service Options Form is available from CIS or your financial representative to establish an Automatic Exchange Plan. Broker Trading Privileges The Distributor may, from time to time, enter into agreements with one or more brokers or other intermediaries to accept purchase and redemption orders for Fund shares until the close of regular trading on the Exchange (normally, 4:00 p.m. Eastern time on each day that the Exchange is open for trading); such purchase and redemption orders will be deemed to have been received by the Fund when the authorized broker or intermediary accepts such orders; and such orders will be priced using that Fund's net asset value next computed after the orders are placed with and accepted by such brokers or intermediaries. Any purchase and redemption orders received by a broker or intermediary under these agreements will be transmitted daily to the Distributor no later than the time specified in such agreement; but, in any event, no later than 9:30 a.m. following the day that such purchase or redemption orders are received by the broker or intermediary. Self-Servicing Your Account with CDC Nvest Funds Personal Access Line(R) and Web Site CDC Nvest Funds shareholders may access account information, including share balances and recent account activity online, by visiting our Web site at www.cdcnvestfunds.com. Transactions may also be processed online for certain accounts (restrictions may apply). Such transactions include purchases, redemptions and exchanges, and shareholders are automatically eligible for these features. CDC Nvest Funds has taken measures to ensure the security of shareholder accounts, including the encryption of data and the use of personal identification (PIN) numbers. In addition, you may restrict these privileges from your account by calling CDC Nvest Funds at 800-225-5478, or writing to us at P.O. Box 8551, Boston, MA 02116. More information regarding these features may be found on our Web site at www.cdcnvestfunds.com. Investor activities through these mediums are subject to the terms and conditions outlined in the following CDC Nvest Funds Online and Telephonic Customer Agreement. This agreement is also posted on our Web Site. The initiation of any activity through the CDC Nvest Funds Personal Access Line(R), or Web site at www.cdcnvestfunds.com by an investor shall indicate agreement with the following terms and conditions: CDC Nvest Funds Online and Telephonic Customer Agreement NOTE: ACCESSING OR REQUESTING ACCOUNT INFORMATION OR TRANSACTIONS THROUGH THIS SITE CONSTITUTES AND SHALL BE DEEMED TO BE AN ACCEPTANCE OF THE FOLLOWING TERMS AND CONDITIONS. The accuracy, completeness and timeliness of all mutual fund information provided is the sole responsibility of the mutual fund company that provides the information. No party that provides a connection between this Web Site and a mutual fund or its transfer agency system can verify or ensure the receipt of any information transmitted to or from a mutual fund or its transfer agent, or the acceptance by, or completion of any transaction with, a mutual fund. The online acknowledgments or other messages that appear on your screen for transactions entered do not mean that the transactions have been received, accepted or rejected by the mutual fund. These acknowledgments are only an indication that the transactional information entered by you has either been transmitted to the mutual fund, or that it cannot be transmitted. It is the responsibility of the mutual fund to confirm to you that it has received the information and accepted or rejected a transaction. It is the responsibility of the mutual fund to deliver to you a current prospectus, confirmation statement and any other documents or information required by applicable law. NO TRANSACTION SHALL BE DEEMED ACCEPTED UNTIL YOU RECEIVE A WRITTEN CONFIRMATION FROM THE FUND COMPANY. 71 You are responsible for reviewing all mutual fund account statements received by you in the mail in order to verify the accuracy of all mutual fund account information provided in the statement and transactions entered through this site. You are also responsible for promptly notifying the mutual fund of any errors or inaccuracies relating to information contained in, or omitted from your mutual fund account statements, including errors or inaccuracies arising from the transactions conducted through this site. TRANSACTIONS ARE SUBJECT TO ALL REQUIREMENTS, RESTRICTIONS AND FEES AS SET FORTH IN THE PROSPECTUS OF THE SELECTED FUND. THE CONDITIONS SET FORTH IN THIS AGREEMENT EXTEND NOT ONLY TO TRANSACTIONS TRANSMITTED VIA THE INTERNET BUT TO TELEPHONIC TRANSACTIONS INITIATED THROUGH THE CDC NVEST FUNDS PERSONAL ACCESS LINE(R) You are responsible for the confidentiality and use of your personal identification numbers, account numbers, social security numbers and any other personal information required to access the site or transmit telephonically. Any individual that possesses the information required to pass through all security measures will be presumed to be you. All transactions submitted by an individual presumed to be you will be solely your responsibility. You agree that CDC Nvest Funds does not have the responsibility to inquire as to the legitimacy or propriety of any instructions received from you or any person believed to be you, and is not responsible or liable for any losses that may occur from acting on such instructions. CDC Nvest Funds is not responsible for incorrect data received via the Internet or telephonically from you or any person believed to be you. Transactions submitted over the Internet and telephonically are solely your responsibility and CDC Nvest Funds makes no warranty as to the correctness, completeness, or the accuracy of any transmission. Similarly CDC Nvest Funds bears no responsibility for the performance of any computer hardware, software, or the performance of any ancillary equipment and services such as telephone lines, modems, or Internet service providers. The processing of transactions over this site or telephonically will involve the transmission of personal data including social security numbers, account numbers and personal identification numbers. While CDC Nvest Funds has taken reasonable security precautions including data encryption designed to protect the integrity of data transmitted to and from the areas of our Web site that relate to the processing of transactions, we disclaim any liability for the interception of such data. You agree to immediately notify CDC Nvest Funds if any of the following occurs: 1. You do not receive confirmation of a transaction submitted via the Internet or telephonically within five (5) business days. 2. You receive confirmation of a transaction of which you have no knowledge and was not initiated or authorized by you. 3. You transmit a transaction for which you do not receive a confirmation number. 4. You have reason to believe that others may have gained access to your personal identification number (PIN) or other personal data. 5. You notice an unexplained discrepancy in account balances or other changes to your account, including address changes, and banking instructions on any confirmations or statements. Any costs incurred in connection with the use of the CDC Nvest Funds Personal Access Line(R) or the CDC Nvest Funds Internet site including telephone line costs, and Internet service provider costs are solely your responsibility. Similarly CDC Nvest Funds makes no warranties concerning the availability of Internet services, or network availability. CDC Nvest Funds reserves the right to suspend, terminate or modify the Internet capabilities offered to shareholders without notice. 72 YOU HAVE THE ABILITY TO RESTRICT INTERNET AND TELEPHONIC ACCESS TO YOUR ACCOUNTS BY NOTIFYING CDC NVEST FUNDS OF YOUR DESIRE TO DO SO. Written notifications to CDC Nvest Funds should be sent to: CDC Nvest Funds P O Box 8551 Boston, MA 02266-8551 Notification may also be made by calling 800-225-5478 during normal business hours. - -------------------------------------------------------------------------------- REDEMPTIONS - -------------------------------------------------------------------------------- The procedures for redemption of shares of a Fund are summarized in the Prospectus. As described in the Prospectus, a CDSC may be imposed on certain purchases of Classes A, B and C shares. For purposes of the CDSC, an exchange of shares from one Fund to another Fund is not considered a redemption or a purchase. For federal tax purposes, however, such an exchange is considered a sale and a purchase and, therefore, would be considered a taxable event on which you may recognize a gain or loss. In determining whether a CDSC is applicable to a redemption of Class A, Class B or Class C shares, the calculation will be determined in the manner that results in the lowest rate being charged. Therefore, for Class B shares it will be assumed that the redemption is first of any Class A shares in the shareholder's Fund account, second of shares held for over six years, third of shares issued in connection with dividend reinvestment and fourth of shares held longest during the six-year period. For Class C shares and Class A shares subject to CDSC, it will be assumed that the redemption is first of any shares that have been in the shareholder's Fund account for over a year, and second of any shares that have been in the shareholder's Fund account for under a year. The charge will not be applied to dollar amounts representing an increase in the net asset value of shares since the time of purchase or reinvested distributions associated with such shares. Unless you request otherwise at the time of redemption, the CDSC is deducted from the redemption, not the amount remaining in the account. To illustrate, assume an investor purchased 100 Class B shares at $10 per share (at a cost of $1,000) and in the second year after purchase, the net asset value per share is $12 and, during such time, the investor has acquired 10 additional shares under dividend reinvestment. If at such time the investor makes his or her first redemption of 50 shares (proceeds of $600), 10 shares will not be subject to the CDSC because of dividend reinvestment. With respect to the remaining 40 shares, the CDSC is applied only to the original cost of $10 per share and not to the increase in the net asset value of $2 per share. Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 4% (the applicable rate in the second year after purchase). For Class B shares purchased prior to May 1, 1997, the CDSC will be calculated as follows: 4% if redemption occurs within the first year, 3% if redemption occurs within the second year or third year, 2% if redemption occurs within the fourth year, 1% if redemption occurs within the 5th year and no CDSC for redemptions after the fifth year. Class C shares purchased prior to March 1, 1998 are not subject to a CDSC on redemption. Signatures on redemption requests must be guaranteed by an "Eligible Guarantor Institution," as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. However, a signature guarantee will not be required if the proceeds of the redemption do not exceed $100,000 and the proceeds check is made payable to the registered owner(s) and mailed to the record address. If you select the telephone redemption service in the manner described in the next paragraph, shares of a Fund may be redeemed by calling toll free 800-225-5478. A wire fee, currently $5.00, will be deducted from the proceeds. Telephone redemption requests must be received by the close of regular trading on the Exchange. Requests made after that time or on a day when the Exchange is not open for business cannot be accepted and a new request on a later day 73 will be necessary. The proceeds of a telephone withdrawal will normally be sent on the first business day following receipt of a proper redemption request, which complies with the redemption procedures established by the Funds from time to time. In order to redeem shares by telephone, a shareholder must either select this service when completing the Fund application or must do so subsequently on the Service Options Form, available from CIS or your investment dealer. When selecting the service, a shareholder may have their withdrawal proceeds sent to their bank, in which case the shareholder must designate a bank account on their application or Service Options Form to which the redemption proceeds should be sent as well as provide a check marked "VOID" and/or a deposit slip that includes the routing number of their bank. Any change in the bank account so designated may be made by furnishing to CIS or your investment dealer a completed Service Options Form with a signature guarantee. Whenever the Service Options Form is used, the shareholder's signature must be guaranteed as described above. Telephone redemptions may only be made if the designated bank is a member of the Federal Reserve System or has a correspondent bank that is a member of the System. If the account is with a savings bank, it must have only one correspondent bank that is a member of the System. The Funds, the Distributor and State Street Bank are not responsible for the authenticity of withdrawal instructions received by telephone, subject to established verification procedures. CIS, as agreed to with the Funds, will employ reasonable procedures to confirm that your telephone instructions are genuine, and if it does not, if may be liable for any losses due to unauthorized or fraudulent instructions. Such verification procedures include, but are not limited to, requiring a form of personal identification prior to acting on an investor's telephone instructions and recording an investor's instructions. Check writing is available on Class A shares of Limited Term U.S. Government Fund and Short Term Corporate Income Fund. To elect check writing for your account, select the check writing option on your application and complete the attached signature card. To add check writing to an existing account, please call 800-225-5478 for our Service Options Form. The Funds will send you checks drawn on State Street Bank. You will continue to earn dividends on shares redeemed by check until the check clears. Each check must be written for $500 or more. The check writing privilege does not apply to shares for which you have requested share certificates to be issued. Check writing is not available for investor accounts containing Class A shares subject to a CDSC. If you use withdrawal checks, you will be subject to State Street Bank's rules governing checking accounts. Limited Term U.S. Government Fund, Short Term Corporate Income Fund and the Distributor are in no way responsible for any check writing account established with State Street Bank. You may not close your account by withdrawal check because the exact balance of your account will not be known until after the check is received by State Street Bank. The redemption price will be the net asset value per share (less any applicable CDSC) next determined after the redemption request and any necessary special documentation are received by State Street Bank or your investment dealer in proper form. Payment normally will be made by State Street Bank on behalf of the Fund within seven days thereafter. However, in the event of a request to redeem shares for which the Fund has not yet received good payment, the Funds reserve the right to withhold payments of redemption proceeds if the purchase of shares was made by a check which was deposited within ten calendar days prior to the redemption request (unless the Fund is aware that the check has cleared). The CDSC may be waived on redemptions made from IRA accounts due to attainment of age 59 1/2 for IRA shareholders who established accounts prior to January 3, 1995. The CDSC may also be waived on redemptions made from IRA accounts due to death, disability, return of excess contribution, required minimum distributions at age 70 1/2 (waivers apply only to amounts necessary to meet the required minimum amount), certain withdrawals pursuant to a systematic withdrawal plan, not to exceed 10% annually of the value of the account, and redemptions made from the account to pay custodial fees. The CDSC may be waived on redemptions made from 403(b)(7) custodial accounts due to attainment of age 59 1/2 for shareholders who established custodial accounts prior to January 3, 1995. The CDSC may also be waived on redemptions necessary to pay plan participants or beneficiaries from qualified retirement plans under Section 401 of the Code, including profit sharing plans, money purchase plans, 401(k) and custodial accounts under Section 403(b)(7) of the Code. Distributions necessary to pay plan participants and 74 beneficiaries include payment made due to death, disability, separation from service, normal or early retirement as defined in the plan document, loans from the plan and hardship withdrawals, return of excess contributions, required minimum distributions at age 70 1/2 (waivers only apply to amounts necessary to meet the required minimum amount), certain withdrawals pursuant to a systematic withdrawal plan, not to exceed 10% annually of the value of your account, and redemptions made from qualified retirement accounts or Section 403(b)(7) custodial accounts necessary to pay custodial fees. A CDSC will apply in the event of plan level transfers, including transfers due to changes in investment where assets are transferred outside of CDC Nvest Funds, including IRA and 403(b)(7) participant-directed transfers of assets to other custodians (except for the reasons given above) or qualified transfers of assets due to trustee-directed movement of plan assets due to merger, acquisition or addition of additional funds to the plan. In order to redeem shares electronically through the ACH system, a shareholder's bank or credit union must be a member of the ACH system and the shareholder must have a completed, approved ACH application on file. In addition, the telephone request must be received no later than 4:00 p.m. (Eastern time). Upon receipt of the required information, the appropriate number shares will be redeemed and the monies forwarded to the bank designated on the shareholder's application through the ACH system. The redemption will be processed the day the telephone call is made and the monies generally will arrive at the shareholder's bank within three business days. The availability of these monies will depend on the individual bank's rules. The Funds will normally redeem shares for cash; however, the Funds reserve the right to pay the redemption price wholly or partly in kind if the relevant Trust's Board of Trustees determines it to be advisable and in the interest of the remaining shareholders of a Fund. The redemptions in kind will be selected by the Fund's subadviser in light of the Fund's objective and will not generally represent a pro rata distribution of each security held in the Fund's portfolio. If portfolio securities are distributed in lieu of cash, the shareholder will normally incur brokerage commissions upon subsequent disposition of any such securities. However, the Funds have elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which the Funds are obligated to redeem shares solely in cash for any shareholder during any 90-day period up to the lesser of $250,000 or 1% of the total net asset value of the relevant Fund at the beginning of such period. The Funds do not currently intend to impose any redemption charge (other than the CDSC imposed by the Funds' distributor), although it reserves the right to charge a fee not exceeding 1% of the redemption price. A redemption constitutes a sale of shares for federal income tax purposes on which the investor may realize a long- or short-term capital gain or loss. See also "Income Dividends, Capital Gain Distributions and Tax Status," below. The Funds may also close your account and send you the proceeds if the balance in your account falls below a minimum amount set by each Trust's Board of Trustees (currently $1,000 for all accounts except Keogh, pension and profit sharing plans, automatic investment plans, IRA accounts and accounts that have fallen below the minimum solely because of fluctuations in the net asset value per share). Shareholders who are affected by this policy will be notified of the Fund's intention to close the account and will have 60 days immediately following the notice to bring the account up to the minimum. Reinstatement Privilege (Class A and Class C shares only) The Prospectus describes redeeming shareholders' reinstatement privileges for Class A and Class C shares. Written notice and the investment check from persons wishing to exercise this reinstatement privilege must be received by your investment dealer within 120 days after the date of the redemption. The reinstatement or exchange will be made at net asset value next determined after receipt of the notice and the investment check and will be limited to the amount of the redemption proceeds or to the nearest full share if fractional shares are not purchased. Even though an account is reinstated, the redemption will constitute a sale for federal income tax purposes. Investors who reinstate their accounts by purchasing shares of the Funds should consult with their tax advisers with respect to the effect of the "wash sale" rule if a loss is realized at the time of the redemption. 75 - -------------------------------------------------------------------------------- STANDARD PERFORMANCE MEASURES - -------------------------------------------------------------------------------- Calculations of Yield Each Fund (except Targeted Equity, Growth and Income, Star Advisers, Star Worldwide, Star Small Cap, Star Value, International Equity, Large Cap Value, Small Cap Growth, Mid Cap Growth, Select and Capital Growth Funds) may advertise the yield of its Classes A, B, C and Y shares. Yield for each class will be computed by annualizing net investment income per share for a recent 30-day period and dividing that amount by the maximum offering price per share of the relevant class (reduced by any undeclared earned income expected to be paid shortly as a dividend) on the last trading day of that period. Net investment income will reflect amortization of any market value premium or discount of fixed-income securities (except for obligations backed by mortgages or other assets) and may include recognition of a pro rata portion of the stated dividend rate of dividend paying portfolio securities. Each Fund's yield will vary from time to time depending upon market conditions, the composition of its portfolio and operating expenses of the relevant Trust allocated to each Fund. These factors, possible differences in the methods used in calculating yield and the tax exempt status of distributions should be considered when comparing a Fund's yield to yields published for other investment companies and other investment vehicles. Yield should also be considered relative to changes in the value of the Fund's shares and to the relative risks associated with the investment objectives and policies of the Fund. Yields do not take into account any applicable sales charges or CDSC. Yield may be stated with or without giving effect to any expense limitations in effect for a Fund. For those funds that present yields reflecting an expense limitation or waiver, its yield would have been lower if no limitation or waiver were in effect. Each Fund may also present one or more distribution rates for each class in its sales literature. These rates will be determined by annualizing the class's distributions from net investment income and net short-term capital gain over a recent 12-month, 3-month or 30-day period and dividing that amount by the maximum offering price or the net asset value. If the net asset value, rather than the maximum offering price, is used to calculate the distribution rate, the rate will be higher. Each of the Tax Free Funds may also advertise a taxable equivalent yield, calculated as described above except that, for any given tax bracket, net investment income will be calculated using as gross investment income an amount equal to the sum of (i) any taxable income of the Fund plus (ii) the tax-exempt income of the Fund divided by the difference between 1 and the effective federal (or combined federal and state) income tax rate for taxpayers in that tax bracket. To see the taxable equivalent yield calculation charts for these Funds, see the section entitled "Miscellaneous Investment Practices." At any time in the future, yields and total return may be higher or lower than past yields and there can be no assurance that any historical results will continue. Investors in the Funds are specifically advised that share prices, expressed as the net asset values per share, will vary just as yield will vary. An investor's focus on the yield of a Fund to the exclusion of the consideration of the share price of that Fund may result in the investor's misunderstanding the total return he or she may derive from the Fund. Calculation of Total Return and Average Annual Total Return. Total return (including average annual total return) is a measure of the change in value of an investment in a Fund over the period covered, which assumes that any dividends or capital gains distributions are automatically reinvested in shares of the same class of that Fund rather than paid to the investor in cash. Each Fund may show each class' total return and average annual total return for the one-year, five-year and ten-year periods (or for the life of the class, if shorter) through the end of the most recent calendar quarter. The formula for total return used by the Funds is prescribed by the SEC and includes three steps: (1) adding to the total number of shares of the particular class that would be purchased by a hypothetical $1,000 investment in the Fund (with or without giving effect to the deduction of sales charge or CDSC, if applicable) at the beginning of the period all additional shares that would have been purchased if all dividends and distributions paid or distributed during the period had been automatically reinvested; (2) calculating the value of the hypothetical initial investment as of the end of the period by multiplying the total number of shares owned at the end of the period by the net asset value per share of the relevant class on the last trading day of the period; (3) dividing this account value for the hypothetical 76 investor by the amount of the initial investment, and annualizing the result where appropriate. Total return may be stated with or without giving effect to any expense limitations in effect for a Fund. For those funds that present returns reflecting an expense limitation or waiver, its total return would have been lower if no limitation or waiver were in effect. Performance Comparisons Yield and Total Return. Yields and total returns will generally be higher for Class A shares than for Class B and Class C shares of the same Fund, because of the higher levels of expenses borne by the Class B and Class C shares. Because of its lower operating expenses, Class Y shares of each Fund can be expected to achieve a higher yield and total return than the same Fund's Classes A, B and C shares. The Funds may from time to time include their yield and total return in advertisements or in information furnished to present or prospective shareholders. The Funds may from time to time include in advertisements its total return and the ranking of those performance figures relative to such figures for groups of mutual funds categorized by Morningstar, Inc. ("Morningstar") or Lipper, Inc. ("Lipper") as having similar investment objectives or styles. The Funds may cite their ratings, recognition or other mention by Morningstar or any other entity. Morningstar's rating system is based on risk-adjusted total return performance and is expressed in a star-rating format. The risk-adjusted number is computed by subtracting a fund's risk score (which is a function of the fund's monthly returns less the 3-month Treasury Bill return) from the fund's load adjusted total return score. This numerical score is then translated into rating categories with the top 10% labeled five star, the next 22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled two star and the bottom 10% one star. A high rating reflects either above-average returns or below-average risk or both. Each Fund may also compare its performance or ranking against all funds tracked by Morningstar or another independent service, including Lipper. Lipper Indices and Averages are calculated and published by Lipper, an independent service that monitors the performance of more than 1,000 funds. The Funds may also use comparative performance as computed in a ranking by Lipper or category averages and rankings provided by another independent service. Should Lipper or another service reclassify a Fund to a different category or develop (and place a Fund into) a new category, the Fund may compare its performance or ranking against other funds in the newly assigned category, as published by the service. Total return may also be used to compare the performance of the Fund against certain widely acknowledged standards or indices for stock and bond market performance or against the U.S. Bureau of Labor Statistics' Consumer Price Index. The Consumer Price Index, published by the U.S. Bureau of Labor Statistics, is a statistical measure of changes, over time, in the prices of goods and services in major expenditure groups. The Morgan Stanley REIT Index is a market capitalization-weighted, unmanaged, total-return index of REITs that meet certain liquidity requirements. The index was designed to track the total-return performance of a broad group of REIT stocks assuming dividend reinvestment in the index on the ex-dividend date. The index is composed only of publicly traded equity REITs and does not include REITs that invest primarily in healthcare facilities, real estate mortgages, or debt securities. The Wilshire REIT Index is a market capitalization-weighted and unmanaged index of U.S. publicly traded REITs. This index is a subset of the Wilshire Real Estate Securities Index. The Wilshire Real Estate Securities Index is a market capitalization-weighted and unmanaged index of equity securities whose primary business is equity ownership of commercial real estate, equity (non-health) REITs, and storage properties. The NAREIT Equity Index is a market capitalization-weighted, unmanaged index of equity REITs, which are defined as REITs with 75% or greater of their gross invested book assets invested directly or indirectly in the equity ownership of real estate. 77 The S&P 500 Index is a market capitalization-weighted and unmanaged index showing the changes in the aggregate market value of 500 stocks relative to the base period 1941-43. The S&P 500 Index is composed almost entirely of common stocks of companies listed on the Exchange, although the common stocks of a few companies listed on the American Stock Exchange or traded over-the-counter are included. The S&P 400 Index is a market capitalization-weighted and unmanaged index that includes approximately 10% of the capitalization of U.S. equity securities. This index is comprised of stocks in the middle capitalization range. Any midcap stocks already included in the S&P 500 Index are excluded from this index. The Lehman Aggregate Bond Index is a market capitalization-weighted aggregate index that includes nearly all debt issued by the U.S. Treasury, U.S. government agencies, U.S. corporations rated investment grade, and U.S. agency debt backed by mortgage pools. The Lehman U.S. Government Bond Index (the "Lehman Government Index") is a measure of the market value of all public obligations of the U.S. Treasury which must have at least one year to final maturity; all publicly issued debt of all agencies of the U.S. government and all quasi-federal corporations; and all corporate debt guaranteed by the U.S. government. The Lehman Intermediate U.S. Government Bond Index (the "Lehman Int. Government Index") is a market capitalization-weighted and unmanaged index of bonds issued by the U.S. government and its agencies having maturities between one and ten years. The Lehman Government/Corporate Bond Index (the "Lehman G/C Index") includes securities in the Government and Corporate Indices. The Government Index includes treasuries (i.e., public obligations of the U.S. Treasury that have remaining maturities of more than one year) and agencies (i.e., publicly issued debt of U.S. Government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. Government). The Corporate Index includes publicly issued U.S. corporate and Yankee debentures and secured notes that meet specified maturity, liquidity and quality requirements. The Lehman Intermediate Government/Corporate Bond Index (the "Lehman Int. G/C Index") is a market capitalization-weighted and unmanaged index composed of the Lehman Government and Corporate Bond indices which include bonds with maturities of up to ten years. The Lehman High Yield Corporate Bond Index is a market capitalization- weighted and unmanaged index of fixed-rate, noninvestment grade and coupon-bearing bonds with an outstanding par value of at least $150 million. Generally securities in the index must be rated Ba1 or lower by Moody's Investors Service, including defaulted issues. If no Moody's rating is available, bonds must be rated BB+ or lower by S&P ; and if no S&P rating is available, bonds must be rated below investment grade by Fitch Investor's Service ("Fitch"). A small number of unrated bonds are included in the index; to be eligible they must have previously held a high yield rating or have been associated with a high yield issuer, and must trade accordingly. The Lehman Universal Bond Index is an unmanaged index representing 85% of the return of the Lehman Brothers Aggregate Bond Index, 5% of the Lehman Brothers High Yield Corporate Bond Index, 4% of the Lehman Brothers Emerging Market Index, 5% of Eurodollar instruments and 1% of Rule 144A Commercial Paper. The Lehman Brothers Municipal Bond Index is a composite measure of the total return performance of the municipal bond market. This index is computed from prices on approximately 42,000 bonds. The Lehman Mutual Fund Short (1-5) Investment Grade Debt Index is an unmanaged index composed of publicly issued, fixed-rate, nonconvertible investment grade domestic corporate debt with maturities of 1 to 5 years. The Dow Jones Industrial Average is a market value-weighted and unmanaged index of 30 large industrial stocks traded on the Exchange. 78 The Consumer Price Index, published by the U.S. Bureau of Labor Statistics, is a statistical measure of changes, over time, in the prices of goods and services in major expenditure groups. The Russell 3000 Index is a market capitalization-weighted index that comprises 3,000 of the largest capitalized U.S. companies whose common stock is traded in the United States on the Exchange, the American Stock Exchange and NASDAQ. The Russell 2000 Index represents the smallest 2,000 companies within the Russell 3000 Index as measured by market capitalization. The Russell 1000 Index represents the largest 1,000 companies within the Russell 3000 Index. The Russell 1000 Growth Index is an unmanaged subset of stocks from the larger Russell 1000 Index, selected for their greater growth orientation. The Russell 1000 Value Index is an unmanaged subset of stocks from the larger Russell 1000 Index, selected for their greater value orientation. The Russell Mid-Cap Growth Index is a market capitalization weighted index of medium capitalization stocks determined by Russell to be growth stocks as measured by their price-to-book ratios and forecasted growth values. The Morgan Stanley Capital International Europe, Australasia and Far East Index (the "MSCI EAFE Index") is a market capitalization-weighted and unmanaged index of common stocks traded outside the United States. The stocks in the index are selected with reference to national and industry representation and weighted in the EAFE Index according to their relative market values (market price per share times the number of shares outstanding). The Morgan Stanley Capital International Europe, Australasia and Far East (Gross Domestic Product) Index (the "EAFE (GDP) Index") is a market capitalization-weighted and unmanaged index of common stocks traded outside the United States. The stocks in the index are selected with reference to national and industry representation and weighted in the EAFE (GDP) Index according to their relative market values. The relative market value of each country is further weighted with reference to the country's relative gross domestic product. The Morgan Stanley Capital International World ND Index (the "MSCI World Index") is a market capitalization-weighted and unmanaged index that includes common stock from all 23 MSCI developed market countries. The "ND" indicates that the index is listed in U.S. dollars, with net dividends reinvested. International Equity and Star Worldwide Funds may compare their performance to the Salomon-Russell Broad Market Index Global X-US and to universes of similarly managed investment pools compiled by Frank Russell Company and Intersec Research Corporation. Advertising and promotional materials may refer to the maturity and duration of the Income Funds. Maturity refers to the period of time before a bond or other debt instrument becomes due. Duration is a commonly used measure of the price responsiveness of a fixed-income security to an interest rate change (i.e., the change in price one can expect from a given change in yield). Articles and releases, developed by the Funds and other parties, about the Funds regarding performance, rankings, statistics and analyses of the individual Funds' and the fund group's asset levels and sales volumes, numbers of shareholders by Fund or in the aggregate for CDC Nvest Funds, statistics and analyses of industry sales volumes and asset levels, and other characteristics may appear in advertising, promotional literature, publications, including, but not limited to, those publications listed in Appendix B to this Statement, and on various computer networks, for example, the Internet. In particular, some or all of these publications may publish their own rankings or performance reviews of mutual funds, including, but not limited to, Lipper and Morningstar. References to these rankings or reviews or reprints of such articles may be used in the Funds' advertising and promotional literature. Such advertising and promotional material may refer to CDC IXIS North America, its structure, goals and objectives and the advisory subsidiaries of CDC IXIS North America, including their portfolio management responsibilities, portfolio managers and their categories and background; their tenure, styles and strategies and their shared commitment to fundamental investment principles and may identify specific clients, as well as discuss the types of institutional investors who have selected the advisers to manage their investment portfolios and the reasons for that selection. The references may discuss the independent, entrepreneurial nature of each advisory organization and allude to or include excerpts from articles appearing in the 79 media regarding CDC IXIS North America, its advisory subsidiaries and their personnel. For additional information about the Funds' advertising and promotional literature, see Appendix C. The Funds may use the accumulation charts below in their advertisements to demonstrate the benefits of monthly savings at an 8% and 10% rate of return, respectively. Investments At 8% Rate of Return 5 yrs. 10 15 20 25 30 ------ ------ ------- ------- ------- ------- $ 50 3,698 9,208 17,417 29,647 47,868 75,015 75 5,548 13,812 26,126 44,471 71,802 112,522 100 7,396 18,417 34,835 59,295 95,737 150,029 150 11,095 27,625 52,252 88,942 143,605 225,044 200 14,793 36,833 69,669 118,589 191,473 300,059 500 36,983 92,083 174,173 296,474 478,683 750,148 80 Investments At 10% Rate of Return 5 yrs. 10 15 20 25 30 ------ ------- ------- ------- ------- --------- $ 50 3,904 10,328 20,896 38,285 66,895 113,966 75 5,856 15,491 31,344 57,427 100,342 170,949 100 7,808 20,655 41,792 76,570 133,789 227,933 150 11,712 30,983 62,689 114,855 200,684 341,899 200 15,616 41,310 83,585 153,139 267,578 455,865 500 39,041 103,276 208,962 382,848 668,945 1,139,663 The Funds' advertising and sales literature may refer to historical, current and prospective political, social, economic and financial trends and developments that affect domestic and international investment as it relates to any of the CDC Nvest Funds. The Funds' advertising and sales literature may include historical and current performance and total returns of investment alternatives to the CDC Nvest Funds. For example, the advertising and sales literature of any of the CDC Nvest Funds, but particularly that of Star Worldwide Fund and International Equity Fund, may discuss all of the above international developments, including, but not limited to, international developments involving Europe, North and South America, Asia, the Middle East and Africa, as well as events and issues affecting specific countries that directly or indirectly may have had consequences for the CDC Nvest Funds or may have influenced past performance or may influence current or prospective performance of the CDC Nvest Funds. Articles, releases, advertising and literature may discuss the range of services offered by the Trusts, the Distributor and the transfer agent of the Funds, with respect to investing in shares of the Funds and customer service. Such materials may discuss the multiple classes of shares available through the Trusts and their features and benefits, including the details of the pricing structure. The Distributor may make reference in its advertising and sales literature to awards, citations and honors bestowed on it by industry organizations and other observers and raters including, but not limited to, Dalbar's Quality Tested Service Seal and Key Honors Award. Such reference may explain the criteria for the award, indicate the nature and significance of the honor and provide statistical and other information about the award and the Distributor's selection including, but not limited to, the scores and categories in which the Distributor excelled, the names of funds and fund companies that have previously won the award and comparative information and data about those against whom the Distributor competed for the award, honor or citation. The Distributor may publish, allude to or incorporate in its advertising and sales literature testimonials from shareholders, clients, brokers who sell or own shares, broker-dealers, industry organizations and officials and other members of the public, including, but not limited to, Fund performance, features and attributes, or service and assistance provided by departments within the organization, employees or associates of the Distributor. Advertising and sales literature may also refer to the beta coefficient of the CDC Nvest Funds. A beta coefficient is a measure of systematic or undiversifiable risk of a stock. A beta coefficient of more than 1 means that the company's stock has shown more volatility than the market index (e.g., the S&P 500 Index) to which it is being related. If the beta is less than 1, it is less volatile than the market average to which it is being compared. If it equals 1, its risk is the same as the market index. High variability in stock price may indicate greater business risk, instability in operations and low quality of earnings. The beta coefficients of the CDC Nvest Funds may be compared to the beta coefficients of other funds. The Funds may enter into arrangements with banks exempted from broker-dealer registration under the Securities Exchange Act of 1934. Advertising and sales literature developed to publicize such arrangements will explain the relationship of the bank to the CDC Nvest Funds and the Distributor as well as the services provided by the bank relative to the Funds. The material may identify the bank by name and discuss the history of the bank including, but not limited to, the type of bank, its asset size, the nature of its business and services and its status and standing in the industry. 81 In addition, sales literature may be published concerning topics of general investor interest for the benefit of registered representatives and the Funds' prospective shareholders. These materials may include, but are not limited to, discussions of college planning, retirement planning and reasons for investing and historical examples of the investment performance of various classes of securities, securities markets and indices. - -------------------------------------------------------------------------------- INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS - -------------------------------------------------------------------------------- As described in the Prospectus, it is the policy of each Fund to pay its shareholders, as dividends, substantially all net investment income and to distribute annually all net realized long-term capital gains, if any, after offsetting any capital loss carryovers. Ordinary income dividends and capital gain distributions are payable in full and fractional shares of the relevant class of the particular Fund based upon the net asset value determined as of the close of the Exchange on the record date for each dividend or distribution. Shareholders, however, may elect to receive their ordinary income dividends or capital gain distributions, or both, in cash. The election may be made at any time by submitting a written request directly to CDC Nvest Funds. In order for a change to be in effect for any dividend or distribution, it must be received by CDC Nvest Funds on or before the record date for such dividend or distribution. If you elect to receive your dividends in cash and the dividend checks sent to you are returned "undeliverable" to the Fund or remain uncashed for six months, your cash election will automatically be changed and your future dividends will be reinvested. No interest will accrue on amounts represented by uncashed dividend or redemption checks. As required by federal law, detailed federal tax information will be furnished to each shareholder for each calendar year on or before January 31st of the succeeding year. Each Fund intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify, each Fund must, among other things, (i) derive at least 90% of its gross income in each taxable year from dividends, interest, payments with respect to certain securities loans, gains from the sale of securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (ii) distribute at least 90% of the sum of its taxable net investment income, net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital losses for such year; and (iii) diversify its holdings so that at the end of each fiscal quarter, (a) at least 50% of the value of its total assets consists of cash, U.S. government securities, securities of other regulated investment companies, and other securities limited generally, with respect to any one issuer, to no more than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its assets is invested in the securities (other than those of the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers which the Fund controls and which are engaged in the same, similar or related trades or businesses. So long as it qualifies for treatment as a regulated investment company, a Fund will not be subject to federal income tax on income paid to its shareholders in the form of dividends or capital gains distributions. An excise tax at the rate of 4% will be imposed on the excess, if any, of each Fund's "required distribution" over its actual distributions in any calendar year. Generally, the "required distribution" is 98% of the Fund's ordinary income for the calendar year plus 98% of its capital gain net income recognized during the one-year period ending on October 31st (or December 31st, if the Fund is so permitted to elect and so elects) plus undistributed amounts from prior years. Each Fund intends to make distributions sufficient to avoid imposition of the excise tax. 82 Fund distributions paid to you either in cash or reinvested in additional shares (other than "exempt-interest dividends" paid by the Municipal Income and Massachusetts Funds, as described in the relevant Prospectuses) are generally taxable to you either as ordinary income or as capital gains. Distributions derived from short-term capital gains (i.e., gains from capital assets that the Fund held for not more than one year) or investment income are generally taxable at ordinary income rates. If you are a corporation investing in a Fund, a portion of these dividends may qualify for the dividends-received deduction provided that you meet certain holding period requirements. However, any distributions received by a Fund from REITs will not qualify for the corporate dividends-received deduction. Distributions of net long-term capital gains (i.e., the excess of net gains from capital assets held for more than one year over net losses from capital assets held for not more than one year) that are designated by a Fund as capital gain dividends will generally be taxable to a shareholder receiving such distributions as long-term capital gain (generally taxed at a maximum 20% tax rate for noncorporate shareholders) regardless of how long the shareholder has held Fund shares. Distributions declared and payable by a Fund during October, November or December to shareholders of record on a date in any such month and paid by the Fund during the following January will be treated for federal tax purposes as paid by the Fund and received by shareholders on December 31st of the year in which declared. Dividends and distributions on a Fund's shares are generally subject to federal income tax as described herein to the extent they do not exceed the Fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when a Fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized gains may be required to be distributed even when a Fund's net asset value also reflects unrealized losses. Fund distributions will be treated as described above whether you receive them in cash or reinvest them in additional shares. Under the Code, the interest on certain "private activity bonds" is an item of tax preference, which, depending on the shareholder's particular tax situation, might subject the shareholder to an alternative minimum tax with a maximum rate of 28%. The interest on tax exempt bonds issued after certain dates in 1986 is retroactively taxable from the date of issuance if the issuer does not comply with certain requirements concerning the use of bond proceeds and the application of earnings on bond proceeds. Investors may not deduct part or all of the interest on indebtedness incurred or continued to purchase or carry shares of an investment company paying exempt-interest dividends, such as the Massachusetts and Municipal Income Funds. Under rules used by the Internal Revenue Service, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares. Each Fund's transactions, if any, in foreign currencies and foreign currency denominated bonds and its hedging activities are likely to result in a difference between the Fund's book income and taxable income. This difference may cause a portion of the Fund's income distributions to constitute a return of capital or capital gain for tax purposes or require the Fund to make distributions exceeding book income to avoid excise tax liability and to qualify as a regulated investment company. Funds investing in foreign securities may own shares in certain foreign investment entities, referred to as "passive foreign investment companies." In order to avoid U.S. federal income tax, and an additional charge on a portion of any "excess distribution" from such companies or gain from the disposition of such shares, each Fund has elected to "mark to market" annually its investments in such entities and to distribute any resulting net gain to shareholders. Each Fund may also elect to treat the passive foreign investment company as a "qualified electing fund." As a result, each Fund may be required to sell securities it would have otherwise continued to hold in order to make distributions to shareholders to avoid any Fund-level tax. Funds investing in foreign securities may be liable to foreign governments for taxes relating primarily to investment income or capital gains on foreign securities in the Fund's portfolio. Each Fund may in some circumstances be eligible to, and in its discretion may, make an election under the Code that would allow Fund shareholders who are U.S. citizens or U.S. corporations to claim a foreign tax credit or deduction (but not both) on 83 their U.S. income tax return. If a Fund makes the election, the amount of each shareholder's distribution reported on the information returns filed by such Fund with the IRS must be increased by the amount of the shareholder's portion of the Fund's foreign tax paid. A Fund's investments in options, futures contracts, hedging transactions, forward contracts, swaps and certain other transactions will be subject to special tax rules (including mark-to-market, constructive sale, straddle, wash sale, short sale and other rules), the effect of which may be to accelerate income to the Fund, defer Fund losses, cause adjustments in the holding periods of Fund securities, convert capital gain into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character distributions to Fund shareholders. Transactions in foreign currencies, currency-currency denominated debt securities and certain foreign currency options, future contracts, and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. Sales, redemptions and exchanges of each Fund's shares are taxable events and, accordingly, shareholders may realize gains and losses on these transactions. Currently, if shares have been held for more than one year, gain or loss realized will be taxed at long-term federal tax rates (generally taxed at a maximum 20% rate for noncorporate shareholders). For taxable years beginning after December 31, 2000, the maximum capital gain tax rates for capital assets (including Fund shares) held by a noncorporate Shareholder for more than 5 years will be 8 percent and 18 percent (rather than 10 percent and 20 percent). The 18 percent rate applies only to assets the holding period for which begins after December 31, 2000 (including by way of an election to mark the asset to market, and to pay the tax on any gain thereon, as of January 2, 2001). The mark-to-market election may be disadvantageous from a federal tax perspective, and shareholders should consult their tax advisors before making such an election. A loss on the sale of shares held for six months or less will be disallowed for federal income tax purposes to the extent of any exempt-interest dividends received with respect to such shares and thereafter treated as a long-term capital loss to the extent of any long-term capital gain dividend paid to the shareholder with respect to such shares. Furthermore, no loss will be allowed on the sale of Fund shares to the extent the shareholder acquired other shares of the same Fund within a period beginning 30 days prior to the sale of the loss shares and ending 30 days after such sale. A Fund's investments in REIT equity securities may require the Fund to accrue and distribute income not yet received. In order to generate sufficient cash to make required distributions, the Fund may be required to sell securities in its portfolio that it otherwise would have continued to hold (including when it is not advantageous to do so). The Fund's investments in REIT equity securities may at other times result in the Fund's receipt of cash in excess of the REIT's earnings; if the Fund distributes such amounts, such distribution could constitute a return of capital to Fund shareholders for federal income tax purposes. A Fund's investments in certain debt obligations may cause the Fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the Fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. The foregoing is a general and abbreviated summary of the applicable provisions of the Code and related regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and regulations. The Code and regulations are subject to change by legislative or administrative actions. Dividends and distributions also may be subject to state and local taxes. Shareholders are urged to consult their tax advisers regarding specific questions as to federal, state, local and, where applicable, foreign taxes. Each Fund (possibly excepting Municipal Income Fund and Massachusetts Fund) is required to withhold a percentage of all income dividends and capital gains distributions it pays to you if you do not provide a correct, certified taxpayer identification number, if a Fund is notified that you have underreported income in the past or if you fail to certify to a Fund that you are not subject to such withholding. This percentage is currently (after August 6, 2001) set at 30.5% and will be gradually reduced to 28% but will return to 31% for amounts paid after 84 December 31, 2010, unless Congress enacts tax legislation providing otherwise. If you are a tax-exempt shareholder, however, these backup withholding rules will not apply so long as you furnish the Fund with an appropriate certification. Backup withholding also generally does not apply to corporations. The foregoing discussion relates solely to U.S. federal income tax law. Non-U.S. investors should consult their tax advisers concerning the tax consequences of ownership of shares of the Fund, including the certification and filing requirements imposed on foreign investors in order to qualify for exemption from the 31% back-up withholding tax rates described above (or a reduced rate of withholding provided by treaty). 85 - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The financial statements of the Funds and the related reports of independent accountants included in the Funds' annual reports for the year ended December 31, 2000, and January 31, 2001 for the AEW Real Estate Fund, are incorporated herein by reference. The financial statements of the Funds included in the semi-annual reports for the period ended June 30, 2001 and July 31, 2001 for the AEW Real Estate Fund, are incorporated herein by reference but have not been audited by the independent accountants. Each Fund's annual and semi-annual reports are available upon request and without charge. Each Fund will send a single copy of its annual and semi-annual reports to an address at which more than one shareholder of record with the same last name has indicated that mail is to be delivered. Shareholders may request additional copies of any annual or semi-annual report by telephone at (800) 225-5478 or by writing to the Distributor at: CDC IXIS Asset Management Distributors, L.P., 399 Boylston Street, Boston, Massachusetts 02116. 86 APPENDIX A DESCRIPTION OF SECURITIES RATINGS Certain of the Funds make use of average portfolio credit quality standards to assist institutional investors whose own investment guidelines limit their investments accordingly. In determining a Fund's overall dollar-weighted average quality, unrated securities are treated as if rated, based on the adviser's or subadviser's view of their comparability to rated securities. A Fund's use of average quality criteria is intended to be a guide for those investors whose investment guidelines require that assets be invested according to comparable criteria. Reference to an overall average quality rating for a Fund does not mean that all securities held by the Fund will be rated in that category or higher. A Fund's investments may range in quality from securities rated in the lowest category in which the Fund is permitted to invest to securities rated in the highest category (as rated by Moody's or S&P or, if unrated, determined by the adviser or a subadviser to be of comparable quality). The percentage of a Fund's assets invested in securities in a particular rating category will vary. Following is a description of Moody's and S&P's ratings applicable to fixed income securities. Moody's Investors Service, Inc. Corporate and Municipal Bond Ratings Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risks appear somewhat larger than with Aaa securities. A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment sometime in the future. Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba: Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's bond ratings, where specified, are applicable to financial contracts, senior bank obligations and insurance company senior policyholder and claims obligations with an original maturity in excess of one year. Obligations relying upon support mechanisms such as letter-of-credit and bonds of indemnity are excluded unless explicitly rated. Obligations of a branch of a bank are considered to be domiciled in the country in which the branch is located. Unless noted as an exception, Moody's rating on a bank's ability to repay senior obligations extends only to branches located in countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch obligations are rated at the lower of the bank's rating or Moody's Sovereign Rating for the Bank Deposits for the country in which the branch is located. When the currency in which an obligation is denominated is not the same as the currency of the country in which the obligation is domiciled, Moody's ratings do not incorporate an opinion as to whether payment of the obligation will be affected by the actions of the 87 government controlling the currency of denomination. In addition, risk associated with bilateral conflicts between an investor's home country and either the issuer's home country or the country where an issuer branch is located are not incorporated into Moody's ratings. Moody's makes no representation that rated bank obligations or insurance company obligations are exempt from registration under the Securities Act of 1933 or issued in conformity with any other applicable law or regulation. Nor does Moody's represent any specific bank or insurance company obligation is legally enforceable or a valid senior obligation of a rated issuer. Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating classified from Aa through Caa in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Corporate Short-Term Debt Ratings Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity. PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories. Standard & Poor's Ratings Services Issue Credit Rating Definitions A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor. Issue credit ratings are based on current information furnished by the obligors or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any credit rating and may, on occasion, rely on unaudited financial information. Credit ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances. Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days -- including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings. Issue credit ratings are based, in varying degrees, on the following considerations: likelihood of payment -- capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; nature of and provisions of the obligation; protection afforded by , and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. 88 The issue rating definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation applies when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.) Accordingly, in the case of junior debt, the rating may not conform exactly with the category definition. Corporate and Municipal Bond Ratings Investment Grade AAA: An obligation rated AAA has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA: An obligation rated `AA' differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A: An obligation rated `A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB: An obligation rated `BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Speculative Grade Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB: An obligation rated `BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligors' inadequate capacity to meet its financial commitment on the obligation. B: An obligation rated `B' is more vulnerable to nonpayment than obligations rated `BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC: An obligation rated `CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC: An obligation rated `CC' is currently highly vulnerable to nonpayment. C: A subordinated debt or preferred stock obligation rated `C' is CURRENTLY HIGHLY VULNERABLE to nonpayment. The `C' rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A `C' also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying. CI: The rating CI is reserved for income bonds on which no interest is being paid. D: An obligation rated `D' is in payment default. The `D' rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The `D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Provisional ratings: The letter "p" indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or 89 entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise his own judgment with respect to such likelihood and risk. r: This symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include: obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk -- such as interest-only or principal-only mortgage securities; and obligations with unusually risky interest terms, such as inverse floaters. The absence of an "r" symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return. N.R.: This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy. Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties. Commercial Paper Rating Definitions A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Ratings are graded into several categories, ranging from A for the highest quality obligations to D for the lowest. These categories are as follows: A-1: A short-term obligation rated `A-1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligors' capacity to meet its financial commitment on these obligations is extremely strong. A-2: A short-term obligation rated `A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3: A short-term obligation rated `A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B: A short-term obligation rated `B' is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. C: A short-term obligation rated `C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D: A short-term obligation rated `D' is in payment default. The `D' rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The `D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. A commercial paper rating is not a recommendation to purchase, sell or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to Standard & Poor's by the issuer or obtained from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information. 90 APPENDIX B MEDIA THAT MAY CONTAIN FUND INFORMATION ABC and affiliates Fort Worth Star-Telegram Palm Beach Post Adam Smith's Money World Fortune Pension World America OnLine Fox Network and affiliates Pensions and Investments Anchorage Daily News Fund Action Personal Investor Arizona Republic Fund Decoder Philadelphia Inquirer Atlanta Constitution Global Finance Porter, Sylvia (syndicated column) Atlanta Journal (the) Guarantor Portland Oregonian Austin American Statesman Hartford Courant Prodigy Baltimore Sun Houston Chronicle Public Broadcasting Service Bank Investment Marketing INC Quinn, Jane Bryant (syndicated column) Barron's Indianapolis Star Registered Representative Bergen County Record (NJ) Individual Investor Research Magazine Bloomberg Business News Institutional Investor Resource B'nai B'rith Jewish Monthly International Herald Tribune Reuters Bond Buyer Internet Rocky Mountain News Boston Business Journal Investment Advisor Rukeyser's Business (syndicated column) Boston Globe Investment Company Institute Sacramento Bee Boston Herald Investment Dealers Digest San Diego Tribune Broker World Investment Profiles San Francisco Chronicle Business Radio Network Investment Vision San Francisco Examiner Business Week Investor's Business Daily San Jose Mercury CBS and affiliates IRA Reporter Seattle Post-Intelligencer CFO Journal of Commerce Seattle Times Changing Times Kansas City Star Securities Industry Management Chicago Sun Times KCMO (Kansas City) Smart Money Chicago Tribune KOA-AM (Denver) St. Louis Post Dispatch Christian Science Monitor Los Angeles Times St. Petersburg Times Christian Science Monitor News Service Leckey, Andrew (syndicated column) Standard & Poor's Outlook Cincinnati Enquirer Lear's Standard & Poor's Stock Guide Cincinnati Post Life Association News Stanger's Investment Advisor CNBC Lifetime Channel Stockbroker's Register CNN Miami Herald Strategic Insight Columbus Dispatch Milwaukee Sentinel Tampa Tribune CompuServe Money Time Dallas Morning News Money Maker Tobias, Andrew (syndicated column) Dallas Times-Herald Money Management Letter Toledo Blade Denver Post Morningstar UPI Des Moines Register Mutual Fund Market News US News and World Report Detroit Free Press Mutual Funds Magazine USA Today Donoghues Money Fund Report National Public Radio USA TV Network Dorfman, Dan (syndicated column) National Underwriter Value Line Dow Jones News Service NBC and affiliates Wall St. Journal Economist New England Business Wall Street Letter FACS of the Week New England Cable News Wall Street Week Fee Adviser New Orleans Times-Picayune Washington Post Financial News Network New York Daily News WBZ and WBZ-TV Financial Planning New York Times WCVB-TV Financial Planning on Wall Street Newark Star Ledger WEEI Financial Research Corp. Newsday WHDH Financial Services Week Newsweek Worcester Telegram Financial World Nightly Business Report World Wide Web Fitch Insights Orange County Register Worth Magazine Forbes Orlando Sentinel WRKO
91 APPENDIX C ADVERTISING AND PROMOTIONAL LITERATURE References may be included in CDC Nvest Funds' advertising and promotional literature to CDC IXIS North America and its affiliates that perform advisory and subadvisory functions for CDC Nvest Funds including, but not limited to: Harris Associates, Loomis Sayles, CGM, Westpeak, Jurika & Voyles, VNSM, AEW and Mercury Advisors. Reference also may be made to the Funds of their respective fund groups, namely, the Loomis Sayles Funds and the Oakmark Family of Funds advised by Harris Associates. References may be included in CDC Nvest Funds' advertising and promotional literature to other CDC IXIS North America affiliates including, but not limited to AEW Capital Management, L.P., Snyder Capital Management, L.P., Reich & Tang Asset Management LLC and their fund groups. References to subadvisers unaffiliated with CDC IXIS North America that perform subadvisory functions on behalf of CDC Nvest Funds and their respective fund groups may be contained in CDC Nvest Funds' advertising and promotional literature including, but not limited to, Montgomery, RS Investment Management and Mercury Advisors. CDC Nvest Funds' advertising and promotional material will include, but is not limited to, discussions of the following information about both affiliated and unaffiliated entities: o Specific and general assessments and forecasts regarding U.S. and world economies, and the economies of specific nations and their impact on the CDC Nvest Funds; o Specific and general investment emphasis, specialties, fields of expertise, competencies, operations and functions; o Specific and general investment philosophies, strategies, processes, techniques and types of analysis; o Specific and general sources of information, economic models, forecasts and data services utilized, consulted or considered in the course of providing advisory or other services; o The corporate histories, founding dates and names of founders of the entities; o Awards, honors and recognition given to the entities; o The names of those with ownership interest and the percentage of ownership interest; o The industries and sectors from which clients are drawn and specific client names and background information on current individual, corporate and institutional clients, including pension and profit sharing plans; o Current capitalizations, levels of profitability and other financial and statistical information; o Identification of portfolio managers, researchers, economists, principals and other staff members and employees; o The specific credentials of the above individuals, including, but not limited to, previous employment, current and past positions, titles and duties performed, industry experience, educational background and degrees, awards and honors; o Specific and general reference to past and present notable and renowned individuals including reference to their field of expertise and/or specific accomplishments; 92 o Current and historical statistics regarding: - total dollar amount of assets managed - CDC Nvest Funds' assets managed in total and by fund - the growth of assets - asset types managed - numbers of principal parties and employees, and the length of their tenure, including officers, portfolio managers, researchers, economists, technicians and support staff - the above individuals' total and average number of years of industry experience and the total and average length of their service to the adviser or sub-adviser; o The general and specific strategies applied by the advisers in the management of CDC Nvest Funds portfolios including, but not limited to: - the pursuit of growth, value, income oriented, risk management or other strategies - the manner and degree to which the strategy is pursued - whether the strategy is conservative, moderate or extreme and an explanation of other features and attributes - the types and characteristics of investments sought and specific portfolio holdings - the actual or potential impact and result from strategy implementation - through its own areas of expertise and operations, the value added by sub-advisers to the management process - the disciplines it employs, e.g., in the case of Loomis Sayles, the strict buy/sell guidelines and focus on sound value it employs, and goals and benchmarks that it establishes in management, e.g., CGM pursues growth 50% above the S&P 500 - the systems utilized in management, the features and characteristics of those systems and the intended results from such computer analysis, e.g., Westpeak's efforts to identify overvalued and undervalued issues; and o Specific and general references to portfolio managers and funds that they serve as portfolio manager of, other than CDC Nvest Funds, and those families of funds, other than CDC Nvest Funds. Any such references will indicate that CDC Nvest Funds and the other funds of the managers differ as to performance, objectives, investment restrictions and limitations, portfolio composition, asset size and other characteristics, including fees and expenses. References may also be made to industry rankings and ratings of the Funds and other funds managed by the Funds' advisers and sub-advisers, including, but not limited to, those provided by Morningstar, Lipper, Forbes and Worth. In addition, communications and materials developed by CDC Nvest Funds will make reference to the following information about CDC IXIS North America and its affiliates: CDC IXIS North America is a subsidiary of CDC Asset Management. CDC Asset Management is part of the investment management arm of France's Caisse des Depots et Consignations, a major diversified financial institution. As of June 30, 2001 CDC IXIS North America had more than $131 billion in assets under management. In addition, promotional materials may include: o Specific and general references to CDC Nvest Funds multi-manager approach through CDC IXIS North America' affiliates and outside firms including, but not limited to, the following: - that each adviser/manager operates independently on a day-to-day basis and maintains an image and identity separate from CDC IXIS North America and the other investment managers - other fund companies are limited to a "one size fits all" approach but CDC Nvest Funds draws upon the talents of multiple managers whose expertise best matches the fund objective 93 - in this and other contexts reference may be made to CDC Nvest Funds' slogan "Where The Best Minds Meet"(R) and that CDC Nvest Funds' ability to match the talent to the task is one more reason it is becoming known as "Where The Best Minds Meet." - CDC IXIS Advisers may distribute sales and advertising materials that illustrate the Star Concept by using historical category comparisons of a general nature. Categories from mutual fund ranking services, such as Morningstar, Inc., are selected for each of the Fund segments based on current investment styles and are subject to change with market conditions. There will be differences between the performance of the categories and the CDC Nvest Star Fund being illustrated. The illustrations are used for hypothetical purposes only as a general demonstration of how the Star Concept works. CDC IXIS Intermediary Services (formerly Nvest Managed Account Services, Nvest Advisor Services and Nvest Retirement Services), divisions of CDC IXIS North America, may be referenced in Fund advertising and promotional literature concerning the marketing services it provides to CDC IXIS North America affiliated fund groups including: CDC Nvest Funds, Loomis Sayles Funds, Jurika & Voyles, Oakmark Funds and Delafield Fund. CDC IXIS Intermediary Services will provide marketing support to CDC IXIS North America affiliated fund groups targeting financial advisers, financial intermediaries and institutional clients who may transact purchases and other fund-related business directly with these fund groups. Communications will contain information including, but not limited to: descriptions of clients and the marketplaces to which it directs its efforts; the mission and goals of CDC IXIS Intermediary Services and the types of services it provides which may include: seminars; its 1-800 number, web site, Internet or other electronic facilities; qualitative information about the funds' investment methodologies; information about specific strategies and management techniques; performance data and features of the funds; institutional oriented research and portfolio manager insight and commentary. Additional information contained in advertising and promotional literature may include: rankings and ratings of the funds including, but not limited to, those of Morningstar and Lipper; statistics about the advisers', fund groups' or a specific fund's assets under management; the histories of the advisers and biographical references to portfolio managers and other staff including, but not limited to, background, credentials, honors, awards and recognition received by the advisers and their personnel; and commentary about the advisers, their funds and their personnel from third-party sources including newspapers, magazines, periodicals, radio, television or other electronic media. References may be included in CDC Nvest Funds' advertising and promotional literature about its 401(k) and retirement plans. The information may include, but is not limited to: o Specific and general references to industry statistics regarding 401(k) and retirement plans including historical information, industry trends and forecasts regarding the growth of assets, numbers of plans, funding vehicles, participants, sponsors and other demographic data relating to plans, participants and sponsors, third party and other administrators, benefits consultants and other organizations involved in 401(k) and retirement programs with whom CDC Nvest Funds may or may not have a relationship. o Specific and general references to comparative ratings, rankings and other forms of evaluation as well as statistics regarding the CDC Nvest Funds as a 401(k) or retirement plan funding vehicle produced by, including, but not limited to, Investment Company Institute and other industry authorities, research organizations and publications. o Specific and general discussion of economic, legislative, and other environmental factors affecting 401(k) and retirement plans, including, but not limited to, statistics, detailed explanations or broad summaries of: - past, present and prospective tax regulation, IRS requirements and rules, including, but not limited to, reporting standards, minimum distribution notices, Form 5500, Form 1099R and other relevant forms and documents, Department of Labor rules and standards and other regulations. This includes 94 past, current and future initiatives, interpretive releases and positions of regulatory authorities about the past, current or future eligibility, availability, operations, administration, structure, features, provisions or benefits of 401(k) and retirement plans; - information about the history, status and future trends of Social Security and similar government benefit programs including, but not limited to, eligibility and participation, availability, operations and administration, structure and design, features, provisions, benefits and costs; and - current and prospective ERISA regulation and requirements. o Specific and general discussion of the benefits of 401(k) investment and retirement plans, and, in particular, the CDC Nvest Funds 401(k) and retirement plans, to the participant and plan sponsor, including explanations, statistics and other data, about: - increased employee retention - reinforcement or creation of morale - deductibility of contributions for participants - deductibility of expenses for employers - tax deferred growth, including illustrations and charts - loan features and exchanges among accounts - educational services materials and efforts, including, but not limited to, videos, slides, presentation materials, brochures, an investment calculator, payroll stuffers, quarterly publications, releases and information on a periodic basis and the availability of wholesalers and other personnel. o Specific and general reference to the benefits of investing in mutual funds for 401(k) and retirement plans, and CDC Nvest Funds as a 401(k) or retirement plan funding vehicle. o Specific and general reference to the role of the investment dealer and the benefits and features of working with a financial professional including: - access to expertise on investments - assistance in interpreting past, present and future market trends and economic events - providing information to clients including participants during enrollment and on an ongoing basis after participation - promoting and understanding the benefits of investing, including mutual fund diversification and professional management. 95 -----END PRIVACY-ENHANCED MESSAGE-----