-----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, N54xUpVDn2n01zUZ2ZvbQjzs/4I+oQZ9DpvDnuLgFFvMs9aSb29n+6/zDDiwZbA6 ZsMgOPGxzoKam/2G1Dfkpw== 0001193125-04-148610.txt : 20040830 0001193125-04-148610.hdr.sgml : 20040830 20040830114513 ACCESSION NUMBER: 0001193125-04-148610 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040830 DATE AS OF CHANGE: 20040830 EFFECTIVENESS DATE: 20040830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CDC NVEST FUNDS TRUST II CENTRAL INDEX KEY: 0000052136 IRS NUMBER: 041990692 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00242 FILM NUMBER: 041004339 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8003997788 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NVEST FUNDS TRUST II DATE OF NAME CHANGE: 20000202 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS TRUST II DATE OF NAME CHANGE: 19940615 FORMER COMPANY: FORMER CONFORMED NAME: TNE FUNDS TRUST DATE OF NAME CHANGE: 19940615 N-CSRS 1 dncsrs.txt CDC NVEST FUNDS TRUST II UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-242 CDC Nvest Funds Trust II (Exact name of registrant as specified in charter) 399 Boylston Street, Boston, Massachusetts 02116 (Address of principal executive offices) (Zip code) John E. Pelletier, Esq. CDC IXIS Asset Management Distributors, L.P. 399 Boylston Street Boston, Massachusetts 02116 (Name and address of agent for service) Registrant's telephone number, including area code: (617) 449-2801 Date of fiscal year end: December 31, 2004 Date of reporting period: June 30, 2004 Item 1. Reports to Stockholders. [LOGO] CDC Nvest Funds(SM) CDC IXIS Asset Management Distributors Equity Funds Semiannual Report June 30, 2004 CGM Advisor Targeted Equity Fund Hansberger International Fund (formerly CDC Nvest Star International Fund) Harris Associates Focused Value Fund Harris Associates Large Cap Value Fund (formerly Harris Associates Growth and Income Fund) Vaughan Nelson Small Cap Value Fund (formerly CDC Nvest Star Small Cap Fund) Westpeak Capital Growth Fund TABLE OF CONTENTS Management Discussion and Performance................Page 1 Schedule of Investments..........Page 14 Financial Statements.............Page 25 - -------------------------------------------------------------------------------- CGM Advisor Targeted Equity Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- ================================================================================ Objective: Seeks long-term growth of capital through investments in equity securities of companies whose earnings are expected to grow at a faster rate than the overall U.S. economy - -------------------------------------------------------------------------------- Strategy: Generally invests in a focused portfolio of common stocks of large-cap companies - -------------------------------------------------------------------------------- Inception Date: November 27, 1968 - -------------------------------------------------------------------------------- Manager: G. Kenneth Heebner - -------------------------------------------------------------------------------- Symbols: Class A NEFGX Class B NEBGX Class C NEGCX Class Y NEGYX - -------------------------------------------------------------------------------- You Should Know: The fund invests in a small number of securities, which may result in greater volatility than more diversified funds. Growth stocks can be more sensitive to market movements because their prices are based in part on future expectations. The fund may invest in foreign securities that involve risks not associated with domestic securities. ================================================================================ Management Discussion - -------------------------------------------------------------------------------- Strong performance from a few key issues benefited CGM Advisor Targeted Equity Fund during the six months ended June 30, 2004. Total return for Class A shares at net asset value was 3.15% for the period, slightly below the Standard & Poor's 500 Index, which returned 3.44%. However, the fund's performance was above the average for its Morningstar Large Blend category: 2.78% for the six-month period. Fund fully invested to capture growth The fund began 2004 positioned for several years of economic growth with rising employment, consumer confidence and corporate profits. Inflation remains at its lowest level in 40 years. Significant underutilized economic capacity and prospects for productivity growth lead us to expect inflation to remain moderate for some time to come. During the first half of the year, we eliminated positions in pharmaceutical stocks and significantly reduced our homebuilding investments to free up assets for our expanding commitment to energy stocks and key individual issues. Stocks selected for earnings growth were top contributors During the period, several stocks led fund performance: Avon Products, Harman International, and America Movil. All three stocks satisfied our emphasis on earnings. Avon Products, a new acquisition, is a well-known household products company. While business is increasing modestly in the United States, with new products and a motivated sales force, Avon's strongest growth is coming from Eastern Europe, Latin America, and Russia, with prospects for healthy growth in China. Also benefiting from growth abroad is America Movil, a dominant Latin American cellular company. Based in Mexico, America Movil has made important acquisitions in the much-less-saturated markets of Brazil, Columbia and Argentina. With growth rates for cellular service in excess of 20%, these countries offer tremendous business opportunities. Harman International Industries, a leading consumer electronics company, expanded a number of years ago into manufacturing electronics for automobiles. The company most recently introduced a fully automated, voice-activated infotainment system that bundles telephone, stereo, and navigational systems into a single product. We believe the company's future growth rests on the system's price point, as well as lack of competition and Harman's ability to expand its product base from luxury automobiles to more moderately priced cars. Electronics and technology lag Disappointments included AU Optronics, a global electronics company that manufactures flat panel screens for use in TVs, computer monitors, and laptops. Although the company operates in a rapidly expanding market, the stock price declined on fears of excess capacity in the sector. Another stock that lagged was Micron Technology, a manufacturer of random access chips. We sold this issue because the industry's supply and demand dynamic did not develop as favorably as we anticipated, leading to pricing pressure and disappointing earnings. Emphasis on energy stocks Currently, we are most interested in the energy sector. While much attention has been focused on potential supply disruptions in the Middle East, upward pressure on oil prices is also coming from strong demand from Asia, particularly China. Demand for energy stocks dipped recently as investors anticipated a drop in oil prices - an expectation we don't share. Outlook for gradually rising interest rates We expect the Federal Reserve Board to increase short-term interest rates gradually during the coming year. However, we don't anticipate aggressive tightening, which could jeopardize economic recovery. We will remain focused on trying to identify a small number of companies that we believe offer superior growth potential. 1 - -------------------------------------------------------------------------------- CGM Advisor Targeted Equity Fund - -------------------------------------------------------------------------------- Investment Results through June 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- June 30, 1994 through June 30, 2004 [CHART] Line Chart Investment @ N.A.V. 10,000 Fund Inception: 11/27/1968 Sales Charge % 5.75 Statement Date: 6/30/2004 Sales Charge (575) ------ Investment @ M.S.C. 9,425 ====== ----------------------- S&P Class A Class A 500 @ NAV @ M.S.C. Index ---------- ---------- ---------- Month Cumulative Cumulative Cumulative End Value Value Value - ---------- ---------- ---------- ---------- 6/30/1994 10,000 9,425 10,000 7/31/1994 10,348 9,753 10,328 8/31/1994 10,613 10,003 10,752 9/30/1994 10,266 9,675 10,489 10/31/1994 10,307 9,714 10,725 11/30/1994 9,714 9,155 10,334 12/31/1994 9,859 9,292 10,487 1/31/1995 9,625 9,072 10,759 2/28/1995 10,092 9,512 11,179 3/31/1995 10,403 9,805 11,508 4/30/1995 11,048 10,413 11,847 5/31/1995 11,715 11,041 12,321 6/30/1995 12,574 11,851 12,607 7/31/1995 13,141 12,386 13,025 8/31/1995 13,208 12,449 13,058 9/30/1995 13,449 12,676 13,609 10/31/1995 13,172 12,415 13,560 11/30/1995 13,801 13,007 14,155 12/31/1995 13,615 12,832 14,428 1/31/1996 14,092 13,282 14,919 2/29/1996 14,544 13,708 15,058 3/31/1996 14,544 13,708 15,202 4/30/1996 14,273 13,452 15,427 5/31/1996 14,492 13,659 15,824 6/30/1996 14,337 13,513 15,885 7/31/1996 13,499 12,722 15,183 8/31/1996 13,628 12,844 15,503 9/30/1996 14,563 13,725 16,376 10/31/1996 15,419 14,532 16,828 11/30/1996 16,620 15,664 18,100 12/31/1996 16,457 15,511 17,741 1/31/1997 17,943 16,911 18,849 2/28/1997 17,646 16,631 18,997 3/31/1997 16,896 15,924 18,216 4/30/1997 17,858 16,831 19,304 5/31/1997 18,735 17,658 20,479 6/30/1997 19,570 18,445 21,397 7/31/1997 21,466 20,232 23,099 8/31/1997 20,363 19,192 21,805 9/30/1997 21,406 20,175 22,999 10/31/1997 20,566 19,384 22,231 11/30/1997 20,332 19,163 23,260 12/31/1997 20,332 19,163 23,660 1/31/1998 20,664 19,475 23,922 2/28/1998 22,480 21,187 25,647 3/31/1998 23,925 22,550 26,960 4/30/1998 24,843 23,415 27,231 5/31/1998 24,453 23,047 26,763 6/30/1998 25,761 24,280 27,850 7/31/1998 25,898 24,409 27,554 8/31/1998 20,957 19,752 23,570 9/30/1998 21,106 19,893 25,080 10/31/1998 23,231 21,895 27,120 11/30/1998 25,165 23,718 28,764 12/31/1998 27,123 25,563 30,421 1/31/1999 28,961 27,296 31,694 2/28/1999 26,884 25,338 30,709 3/31/1999 27,529 25,946 31,937 4/30/1999 27,433 25,856 33,174 5/31/1999 26,550 25,023 32,391 6/30/1999 28,508 26,868 34,188 7/31/1999 27,839 26,238 33,121 8/31/1999 27,791 26,193 32,957 9/30/1999 26,144 24,641 32,053 10/31/1999 27,147 25,586 34,082 11/30/1999 28,173 26,553 34,775 12/31/1999 31,241 29,444 36,823 1/31/2000 28,798 27,142 34,973 2/29/2000 31,354 29,551 34,311 3/31/2000 31,695 29,873 37,667 4/30/2000 30,502 28,748 36,534 5/31/2000 29,281 27,598 35,784 6/30/2000 29,395 27,705 36,666 7/31/2000 28,457 26,821 36,093 8/31/2000 29,805 28,092 38,335 9/30/2000 28,727 27,075 36,311 10/31/2000 28,787 27,132 36,158 11/30/2000 28,517 26,877 33,307 12/31/2000 29,818 28,104 33,470 1/31/2001 27,174 25,612 34,658 2/28/2001 26,314 24,801 31,498 3/31/2001 25,645 24,170 29,502 4/30/2001 26,760 25,221 31,795 5/31/2001 26,218 24,711 32,008 6/30/2001 26,396 24,878 31,229 7/31/2001 25,628 24,155 30,921 8/31/2001 23,517 22,164 28,986 9/30/2001 21,245 20,023 26,645 10/31/2001 21,373 20,144 27,153 11/30/2001 23,644 22,285 29,236 12/31/2001 24,988 23,551 29,492 1/31/2002 25,756 24,275 29,062 2/28/2002 24,572 23,159 28,501 3/31/2002 24,988 23,551 29,573 4/30/2002 25,052 23,612 27,780 5/31/2002 24,796 23,371 27,575 6/30/2002 23,996 22,617 25,611 7/31/2002 21,341 20,114 23,615 8/31/2002 21,341 20,114 23,770 9/30/2002 20,029 18,877 21,186 10/31/2002 19,549 18,425 23,051 11/30/2002 19,069 17,973 24,408 12/31/2002 17,789 16,766 22,974 1/31/2003 17,789 16,766 22,372 2/28/2003 17,661 16,646 22,037 3/31/2003 18,077 17,038 22,251 4/30/2003 19,229 18,123 24,083 5/31/2003 20,893 19,691 25,352 6/30/2003 21,244 20,023 25,676 7/31/2003 20,828 19,631 26,128 8/31/2003 21,372 20,143 26,638 9/30/2003 21,628 20,385 26,355 10/31/2003 24,316 22,918 27,846 11/30/2003 25,276 23,822 28,091 12/31/2003 25,404 23,943 29,564 1/31/2004 24,828 23,400 30,107 2/29/2004 26,332 24,818 30,525 3/31/2004 27,548 25,964 30,065 4/30/2004 25,372 23,913 29,593 5/31/2004 25,980 24,486 29,999 6/30/2004 26,204 24,689 30,582 Average Annual Total Returns -- June 30, 2004 - --------------------------------------------------------------------------------
Since 6 Months 1 Year 5 Years 10 Years Inception -------- ------ ------- -------- --------- Class A (Inception 11/27/68) Net Asset Value/1/ 3.15% 23.34% -1.67% 10.11% -- With Maximum Sales Charge/2/ -2.73 16.17 -2.83 9.46 -- Class B (Inception 2/28/97) Net Asset Value/1/ 2.81 22.49 -2.41 -- 4.74% With CDSC/3/ -2.19 17.49 -2.71 -- 4.74 Class C (Inception 9/1/98) Net Asset Value/1/ 2.81 22.49 -2.41 -- 2.16 With CDSC/3/ 1.81 21.49 -2.41 -- 2.16 Class Y (Inception 6/30/99) Net Asset Value/1/ 3.35 23.92 -1.25 -- -1.25 - --------------------------------------------------------------------------------
Since Since Since Class B Class C Class Y Comparative Performance 6 Months 1 Year 5 Years 10 Years Incept./6/ Incept./6/ Incept./6/ - ----------------------- -------- ------ ------- -------- ---------- ---------- ---------- S&P 500 Index/4/ 3.44% 19.11% -2.20% 11.83% 6.71% 3.51% -2.20% Morningstar Large Blend Avg./5/ 2.78 17.63 -1.76 10.08 5.76 3.60 -1.76
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those noted. For performance current to the most recent month end, visit www.cdcnvestfunds.com. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio Facts - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Fund Composition 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Common Stocks 99.4 99.5 - -------------------------------------------------------------------------------- Short Term Investments and Other 0.6 0.5 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Ten Largest Holdings 6/30/04 12/31/03 - -------------------------------------------------------------------------------- America Movil SA de CV (ADR) 7.3 5.3 - -------------------------------------------------------------------------------- Avon Products, Inc. 6.6 -- - -------------------------------------------------------------------------------- Mobile Telesystems (ADR) 6.4 -- - -------------------------------------------------------------------------------- D.R. Horton, Inc. 6.2 8.3 - -------------------------------------------------------------------------------- Toyota Motor Corp. (ADR) 5.6 -- - -------------------------------------------------------------------------------- Lennar Corp., Class A 5.2 8.1 - -------------------------------------------------------------------------------- Citigroup, Inc. 5.2 5.2 - -------------------------------------------------------------------------------- ConocoPhillips 5.1 -- - -------------------------------------------------------------------------------- Total SA (ADR) 5.0 4.9 - -------------------------------------------------------------------------------- Yum! Brands, Inc. 4.8 -- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Five Largest Industries 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Oil & Gas 15.5 6.2 - -------------------------------------------------------------------------------- Home Construction, Furnishings & Appliances 14.9 25.9 - -------------------------------------------------------------------------------- Telephone Systems 13.7 4.3 - -------------------------------------------------------------------------------- Cosmetics & Personal Care 10.5 4.1 - -------------------------------------------------------------------------------- Electronics 6.7 -- - -------------------------------------------------------------------------------- Portfolio holdings and asset allocations will vary. Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 5.75%. /3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1 - 6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/ S&P 500 Index is an unmanaged index of U.S. common stock performance. /5/ Morningstar Large Blend Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. /6/ The since-inception performance comparisons shown for each Class of fund shares are calculated as follows: Class B from 2/28/97; Class C from 9/30/98 and Class Y from 6/30/99. 2 - -------------------------------------------------------------------------------- Hansberger International Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- ================================================================================ Objective: Seeks long-term growth of capital - -------------------------------------------------------------------------------- Strategy: Invests in common stocks of small-, mid- and large capitalization companies located outside the U.S. Assets are diversified across developed and emerging markets - -------------------------------------------------------------------------------- Inception Date: December 29, 1995 - -------------------------------------------------------------------------------- Managers: Ronald Holt Barry A. Lockhart Robert Mazuelos Lauretta Reeves Patrick H. Tan Thomas R.H. Tibbles - -------------------------------------------------------------------------------- Symbols: Class A NEFDX Class B NEDBX Class C NEDCX - -------------------------------------------------------------------------------- You Should Know: Foreign securities involve risks not associated with domestic securities, such as currency fluctuations, differing political, economic conditions and accounting standards. Growth stocks can be more sensitive to market movements because their prices are based in part on future expectations. Value stocks may fall out of favor and underperform the overall market during any given period. ================================================================================ Management Discussion - -------------------------------------------------------------------------------- For the six months ended June 30, 2004, Hansberger International Fund (formerly CDC Nvest Star International Fund) returned 1.59%, based on the net asset value of Class A shares. For the same period, the MSCI EAFE Index and the MSCI ACWI ex-U.S. Index (neither of which include the United States) returned 4.86% and 4.10%, respectively, and the MSCI World Index (which includes the United States) returned 3.79%. The average performance of comparable funds in the Morningstar Foreign Large Blend category was 3.12%. Effective March 1, 2004, the fund changed from its Star format with multiple subadvisors to its present format with one investment advisor. Its focus is unchanged - to invest in common stocks of companies located outside the United States - but its assets are allocated between two segments: growth and value. Growth segment buoyed by positive economy For the past several months, the stocks of larger, growth-oriented, high-quality companies that this segment favors tended to lag small-cap, value and low-quality stocks. An environment of historically low interest rates tended to favor value-oriented investors last year and early in the first half of 2004, but during the second quarter, rising energy prices contributed to inflationary fears and spawned an increase in interest rates. As of June 30, there had already been four rate hikes in the U.K., one in the United States, and we believe others are likely this fall in Europe and Canada. To date, global economic growth has been positive, not overheated, and profits of many companies have grown. For example, Japan has seen back-to-back quarters of growth after nearly a decade of stagnation, although to date the primary beneficiaries have been smaller, domestically oriented companies. Reflecting the changing value of the U.S. dollar, geographic areas that benefited this segment included emerging markets, the Pacific Rim ex-Japan, Canada, and Australia. Hong Kong-based apparel company Esprit and German automaker Porsche benefited the fund. Poor performers were low-cost air carrier Ryanair, which we believe may be trying to expand too quickly, and Adecco, an employment agency with a global reach, tainted by accounting questions. Value segment emphasizes Europe and emerging markets First half performance for this segment was positive, helped by European and Japanese equities. Most continental European markets, as well as Japan, posted positive returns as investors appear to finally believe that reports of improving domestic demand and a surge in exports may indicate a sustainable recovery. However, emerging markets did not perform well due to concerns over the U.S. Fed tightening and other, country-specific factors. Individual stocks that did well include Rolls Royce Group, the British manufacturer of jet engines, and European Aeronautic Defense and Space Company (the holding company for Airbus), which gained as the pick-up in the global economy contributed to a rise in air travel. In turn this led to a rise in demand for new aircraft, spare parts and service. Sumitomo Trust & Banking Company and Asahi Glass contributed to the positive performance within the fund's Japanese holdings, although we remain underweight in Japan relative to the benchmark because we believe the market is expensive. Detracting from performance were stocks in the consumer discretionary sector, including Denway Motors, a Honda joint venture in China, and Germany's Volkswagen. The fear of a slowdown in the Chinese economy as well as intense competition from other automobile manufacturers hurt the performance of these two stocks. The fund's Korean holdings also detracted from performance due to Korea's links with China and the potential slowdown there as well. LG Chemical and Kookmin Bank both proved disappointing. Elections, rising interest rates, suggest volatile markets lie ahead We expect many challenges for the balance of 2004 and into 2005, as elections and monetary actions shift the economic landscape around the world. Nonetheless, many companies are doing well and we will continue to deploy our long-term fundamental stockpicking strategy in an effort to add value, even in uncertain times. 3 - -------------------------------------------------------------------------------- Hansberger International Fund - -------------------------------------------------------------------------------- Investment Results through June 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- December 29, 1995 (inception) through June 30, 2004 [CHART] Line Chart Investment @ N.A.V. 10,000 Fund Inception: 12/29/1995 Sales Charge % 5.75 Statement Date: 6/30/2004 Sales Charge (575) ------ Investment @ M.S.C. 9,425 Indexes calculated from 12/31/95 ====== ----------------------- MSCI MSCI MSCI Class A Class A World EAFE ACWI ex USA @ NAV @ M.S.C. Index Index Index ---------- ---------- ---------- ------------------------ Month Cumulative Cumulative Cumulative Cumulative Cumulative End Value Value Value Value Value - ---------- ---------- ---------- ---------- ---------- ----------- 12/29/1995 10,000 9,425 10,000 10,000 10,000 ------ ------ ------ 12/31/1995 10,000 9,425 10,000 10,000 10,000 ------ 1/31/1996 10,088 9,508 10,183 10,043 10,137 2/29/1996 10,264 9,674 10,247 10,080 10,137 3/31/1996 10,528 9,923 10,419 10,297 10,327 4/30/1996 10,872 10,247 10,666 10,598 10,640 5/31/1996 11,136 10,496 10,677 10,406 10,480 6/30/1996 11,176 10,533 10,733 10,467 10,533 7/31/1996 10,664 10,051 10,356 10,164 10,183 8/31/1996 10,952 10,322 10,477 10,189 10,243 9/30/1996 11,136 10,496 10,889 10,462 10,497 10/31/1996 11,048 10,413 10,967 10,357 10,392 11/30/1996 11,496 10,835 11,583 10,772 10,793 12/31/1996 11,667 10,996 11,400 10,636 10,668 1/31/1997 12,136 11,439 11,539 10,266 10,472 2/28/1997 12,388 11,675 11,674 10,437 10,664 3/31/1997 12,266 11,561 11,445 10,477 10,641 4/30/1997 12,388 11,675 11,821 10,535 10,731 5/31/1997 13,028 12,278 12,553 11,223 11,394 6/30/1997 13,627 12,844 13,181 11,845 12,023 7/31/1997 14,146 13,332 13,790 12,039 12,266 8/31/1997 13,352 12,584 12,869 11,142 11,301 9/30/1997 14,082 13,272 13,570 11,769 11,912 10/31/1997 13,061 12,310 12,858 10,867 10,898 11/30/1997 12,908 12,166 13,088 10,759 10,762 12/31/1997 13,146 12,390 13,249 10,855 10,886 1/31/1998 13,104 12,350 13,621 11,354 11,211 2/28/1998 13,996 13,192 14,544 12,085 11,959 3/31/1998 14,566 13,729 15,161 12,460 12,373 4/30/1998 14,651 13,809 15,311 12,561 12,461 5/31/1998 14,353 13,528 15,121 12,503 12,235 6/30/1998 14,056 13,248 15,483 12,601 12,189 7/31/1998 14,013 13,208 15,460 12,731 12,305 8/31/1998 11,794 11,116 13,401 11,157 10,570 9/30/1998 11,683 11,012 13,640 10,818 10,346 10/31/1998 12,534 11,813 14,875 11,948 11,430 11/30/1998 13,206 12,446 15,762 12,563 12,044 12/31/1998 13,673 12,887 16,535 13,062 12,459 1/31/1999 14,150 13,336 16,899 13,027 12,446 2/28/1999 13,971 13,168 16,452 12,719 12,167 3/31/1999 14,541 13,705 17,139 13,253 12,755 4/30/1999 15,323 14,442 17,817 13,793 13,393 5/31/1999 14,940 14,081 17,169 13,086 12,764 6/30/1999 15,816 14,907 17,972 13,599 13,350 7/31/1999 15,638 14,738 17,920 14,006 13,663 8/31/1999 15,527 14,634 17,891 14,061 13,711 9/30/1999 15,170 14,298 17,720 14,205 13,804 10/31/1999 15,706 14,803 18,643 14,740 14,318 11/30/1999 16,879 15,909 19,170 15,256 14,890 12/31/1999 18,819 17,736 20,725 16,628 16,310 1/31/2000 18,119 17,077 19,540 15,574 15,425 2/29/2000 19,253 18,146 19,595 15,996 15,842 3/31/2000 19,310 18,200 20,952 16,620 16,438 4/30/2000 17,911 16,881 20,069 15,748 15,520 5/31/2000 17,097 16,114 19,563 15,367 15,123 6/30/2000 17,599 16,587 20,224 15,971 15,767 7/31/2000 17,126 16,141 19,657 15,305 15,145 8/31/2000 17,637 16,623 20,299 15,441 15,332 9/30/2000 16,973 15,997 19,222 14,692 14,482 10/31/2000 16,329 15,390 18,903 14,348 14,021 11/30/2000 15,586 14,690 17,758 13,813 13,392 12/31/2000 16,519 15,569 18,047 14,307 13,850 1/31/2001 16,840 15,872 18,398 14,300 14,057 2/28/2001 15,763 14,857 16,845 13,229 12,945 3/31/2001 14,732 13,885 15,742 12,353 12,030 4/30/2001 15,683 14,781 16,909 13,220 12,848 5/31/2001 15,866 14,954 16,699 12,764 12,493 6/30/2001 15,735 14,830 16,178 12,246 12,014 7/31/2001 15,447 14,559 15,965 12,025 11,746 8/31/2001 15,113 14,244 15,202 11,722 11,455 9/30/2001 13,535 12,757 13,865 10,538 10,239 10/31/2001 13,800 13,006 14,132 10,807 10,526 11/30/2001 14,583 13,744 14,970 11,206 11,008 12/31/2001 15,035 14,170 15,066 11,273 11,150 1/31/2002 14,677 13,833 14,611 10,675 10,672 2/28/2002 14,711 13,865 14,487 10,750 10,749 3/31/2002 15,589 14,693 15,159 11,390 11,378 4/30/2002 15,485 14,595 14,622 11,419 11,407 5/31/2002 15,577 14,682 14,656 11,574 11,531 6/30/2002 14,630 13,788 13,770 11,118 11,033 7/31/2002 13,227 12,466 12,611 10,021 9,958 8/31/2002 13,250 12,488 12,637 10,001 9,958 9/30/2002 11,616 10,948 11,250 8,929 8,903 10/31/2002 12,253 11,549 12,082 9,410 9,381 11/30/2002 13,134 12,379 12,736 9,838 9,832 12/31/2002 12,566 11,843 12,122 9,508 9,514 1/31/2003 12,125 11,428 11,755 9,112 9,180 2/28/2003 11,789 11,111 11,554 8,904 8,994 3/31/2003 11,639 10,969 11,522 8,735 8,820 4/30/2003 12,856 12,117 12,551 9,601 9,669 5/31/2003 13,771 12,980 13,275 10,192 10,285 6/30/2003 14,084 13,275 13,510 10,444 10,570 7/31/2003 14,374 13,548 13,786 10,699 10,852 8/31/2003 14,826 13,974 14,088 10,959 11,175 9/30/2003 15,023 14,160 14,177 11,299 11,488 10/31/2003 16,090 15,165 15,021 12,004 12,233 11/30/2003 16,368 15,427 15,253 12,273 12,500 12/31/2003 17,469 16,465 16,214 13,232 13,454 1/31/2004 17,864 16,836 16,478 13,420 13,670 2/29/2004 18,084 17,044 16,760 13,732 14,017 3/31/2004 17,910 16,880 16,655 13,815 14,104 4/30/2004 17,400 16,399 16,323 13,514 13,665 5/31/2004 17,458 16,454 16,471 13,555 13,696 6/30/2004 17,749 16,731 16,829 13,875 14,006 Average Annual Total Returns -- June 30, 2004 - --------------------------------------------------------------------------------
Since 6 Months/9/ 1 Year/9/ 5 Years/9/ Inception/9/ ----------- --------- ---------- ------------ Class A (Inception 12/29/95) Net Asset Value/1/ 1.59% 26.01% 2.33% 6.98% With Maximum Sales Charge/2/ -4.25 18.77 1.13 6.24 Class B (Inception 12/29/95) Net Asset Value/1/ 1.21 25.04 1.58 6.20 With CDSC/3/ -3.79 20.04 1.28 6.20 Class C (Inception 12/29/95) Net Asset Value/1/ 1.21 25.04 1.56 6.20 With CDSC/3/ 0.21 24.04 1.56 6.20
- --------------------------------------------------------------------------------
Since Comparative Performance 6 Months 1 Year 5 Years Inception/8/ - ------------------------------------------- -------- ------ ------- ------------ MSCI ACWI ex-U.S. Index/6/ 4.10% 32.50% 0.96% 4.04% MSCI World Index/4/ 3.79 24.57 -1.31 6.31 MSCI EAFE Index/5/ 4.86 32.85 0.40 3.93 Morningstar Foreign Large Blend Fund Avg/7/ 3.12 27.79 -0.27 4.47
All results represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio Facts - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Fund Composition 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Common Stocks 98.2 98.0 - -------------------------------------------------------------------------------- Short Term Investments and Other 1.8 2.0 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Ten Largest Holdings 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Total SA 1.8 1.5 - -------------------------------------------------------------------------------- Canon, Inc. 1.7 0.7 - -------------------------------------------------------------------------------- Societe Generale, Class A 1.7 0.9 - -------------------------------------------------------------------------------- Esprit Holdings, Ltd. 1.5 1.0 - -------------------------------------------------------------------------------- Royal Bank of Scotland Group PLC 1.4 0.6 - -------------------------------------------------------------------------------- Tesco PLC 1.4 0.3 - -------------------------------------------------------------------------------- Novartis AG 1.4 1.3 - -------------------------------------------------------------------------------- Johnson Electric Holdings, Ltd. 1.4 0.3 - -------------------------------------------------------------------------------- Samsung Electronics Co., Ltd. 1.3 1.2 - -------------------------------------------------------------------------------- Manulife Financial Corp. 1.2 0.3 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Five Largest Countries 6/30/04 12/31/03 - -------------------------------------------------------------------------------- United Kingdom 19.2 19.6 - -------------------------------------------------------------------------------- Japan 17.9 12.8 - -------------------------------------------------------------------------------- France 13.9 12.4 - -------------------------------------------------------------------------------- Germany 8.9 8.8 - -------------------------------------------------------------------------------- Hong Kong 5.5 3.1 - -------------------------------------------------------------------------------- Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 5.75%. /3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1 - 6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/ Morgan Stanley Capital International World Index (MSCI World) is an unmanaged index of common stocks from the MSCI developed-market countries. /5/ Morgan Stanley Capital International Europe Australasia and Far East Index (MSCI EAFE) is an unmanaged index of common stocks traded outside the U.S. The MSCI EAFE replaces the MSCI World Index as the fund's comparative index because CDC IXIS Advisors believes it is more representative of the types of stocks in which the fund can invest. /6/ Morgan Stanley Capital International All Countries World Index ex-U.S. (MSCI ACWI-ex-U.S. Index) is an unmanaged index of stock markets throughout the world excluding the United States. /7/ Morningstar Foreign Large Blend Fund Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Morningstar, Inc. /8/ The since-inception performance comparisons shown are calculated from 12/31/95. /9/ Fund performance has been increased by expense waivers, without which performance would have been lower. Note: Effective 3/1/04, the fund changed from a multiple subadvisor format to its present format, with one subadvisor. 4 - -------------------------------------------------------------------------------- Harris Associates Focused Value Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- ================================================================================ Objective: Seeks long-term capital appreciation - -------------------------------------------------------------------------------- Strategy: Focuses on 15 to 20 stocks of mid- to large-cap U.S. companies - -------------------------------------------------------------------------------- Inception Date: March 15, 2001 - -------------------------------------------------------------------------------- Managers: William C. Nygren Floyd J. Bellman - -------------------------------------------------------------------------------- Symbols: Class A NRSAX Class B NRSBX Class C NRSCX - -------------------------------------------------------------------------------- You Should Know: The fund invests in a small number of securities, which may result in greater volatility than more diversified funds. Value stocks may fall out of favor with investors and underperform the over-all market during any given period. ================================================================================ Management Discussion - -------------------------------------------------------------------------------- Although the U.S. economy continued to expand, equity markets were largely unchanged over the first half of 2004, as investors paused to reassess valuations following a period of sharp gains. High oil prices and a worrisome international situation also kept buyers on the sidelines. Against this uncertain background, Harris Associates Focused Value Fund's total return for the six months ended June 30, 2004 was 1.02%, based on the net asset value of Class A shares. Performance trailed the fund's benchmark, the Standard & Poor's 500 Index, which returned 3.44% for the period, and the 3.46% return on Morningstar's Large Value Funds category. Consumer-related, energy and defense issues aided performance The fund's consumer stocks produced favorable results despite weakness in the sector. Attractive new products, the continued popularity of its DeWalt tool brand, and tight cost controls helped boost earnings at Black and Decker Corp. TJX Cos., whose Marshalls and T.J. Maxx chains sell department store overstocks at discounted prices, also contributed. Rising prices for oil and especially for natural gas benefited Burlington Resources. Strong defense spending, increased aerospace manufacturing and a management shake-up helped results at Raytheon, as did the company's decision to terminate its involvement with the utility industry. Financial and healthcare holdings disappointed Concern about higher interest rates pressured financial issues as the period progressed. Slackening mortgage demand undercut earnings expectations at Washington Mutual, but the company's retail bank continues to perform well and we believe the shares still appear attractive. In healthcare, shares of Omnicare, which provides pharmaceutical services to nursing homes and retirees of major corporations, slid despite strong fundamentals. Telecom and technology showed mixed results First Data Corporation, which processes credit card transactions, saw volumes rise with expanding economic activity and a series of acquisitions. But SunGard Data Systems lagged when the securities firms it is targeting as customers for its software and processing solutions were slow to invest in new technology. Company-specific factors also affected performance We eliminated grocery chain Kroger, which faces intense competition from Wal-Mart and club stores, in favor of more attractive opportunities. Problems in Time Warner's AOL division have obscured the company's overall strength, but shares recovered some of the ground lost earlier in the period. A recent addition to the fund, Hospira, which specializes in the growing area of injectable drug delivery systems, rose following its spin-off from Abbott Labs. Value discipline remains the fund's focus We took advantage of volatility in the retail sector to purchase shares of apparel maker Liz Claiborne. This well-managed company has succeeded in a capricious industry by limiting its fashion risk, by absorbing smaller brand lines and selling their products through an established distribution system. We also added AutoNation, which sells automotive parts, used cars and several brands of new cars through a network of dealerships. High gas prices drove investors away for a time; that short-term reaction allowed us to establish a position in this high-quality company while it was selling well below our estimate of its potential value. Recently the markets have been stuck in neutral. However, valuation levels remain fairly high compared to a year ago. For that reason, we expect returns to be relatively modest over the next several months, especially as the presidential election plays out. We believe the portfolio retains solid appreciation potential and we may use possible price increases to lock in profits. At the same time, we will be looking for opportunities among companies whose valuations suffer in a cyclical downturn or those experiencing short-term problems that we think the market has treated too harshly. 5 - -------------------------------------------------------------------------------- Harris Associates Focused Value Fund - -------------------------------------------------------------------------------- Investment Results through June 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- March 15, 2001 (inception) through June 30, 2004 [CHART] Line Chart Investment @ N.A.V. 10,000 Fund Inception: 3/15/2001 Sales Charge % 5.75 Statement Date: 6/30/2004 Sales Charge (575) ------ Investment @ M.S.C. 9,425 ====== S&P 500 Index calculated from 3/31/2001 ----------------------- S&P Class A Class A 500 @ NAV @ M.S.C. Index ---------- ---------- ---------- Month Cumulative Cumulative Cumulative End Value Value Value - ---------- ---------- ---------- ---------- 3/15/2001 10,000 9,425 10,000 ------ 3/31/2001 10,090 9,510 10,000 4/30/2001 10,420 9,821 10,777 5/31/2001 10,690 10,075 10,849 6/30/2001 10,990 10,358 10,585 7/31/2001 11,310 10,660 10,481 8/31/2001 10,870 10,245 9,825 9/30/2001 10,240 9,651 9,032 10/31/2001 10,000 9,425 9,204 11/30/2001 10,680 10,066 9,910 12/31/2001 10,960 10,330 9,997 1/31/2002 10,890 10,264 9,851 2/28/2002 10,600 9,990 9,661 3/31/2002 10,910 10,283 10,024 4/30/2002 10,860 10,235 9,416 5/31/2002 10,930 10,301 9,347 6/30/2002 10,080 9,500 8,681 7/31/2002 9,620 9,067 8,005 8/31/2002 9,960 9,387 8,057 9/30/2002 8,570 8,077 7,181 10/31/2002 8,970 8,454 7,813 11/30/2002 9,470 8,925 8,273 12/31/2002 9,240 8,709 7,787 1/31/2003 9,010 8,492 7,583 2/28/2003 8,890 8,379 7,469 3/31/2003 8,990 8,473 7,542 4/30/2003 9,510 8,963 8,163 5/31/2003 10,120 9,538 8,593 6/30/2003 10,340 9,745 8,703 7/31/2003 10,260 9,670 8,856 8/31/2003 10,680 10,066 9,029 9/30/2003 10,560 9,953 8,933 10/31/2003 11,200 10,556 9,439 11/30/2003 11,690 11,018 9,522 12/31/2003 11,790 11,112 10,021 1/31/2004 12,100 11,404 10,205 2/29/2004 12,180 11,480 10,347 3/31/2004 11,940 11,253 10,191 4/30/2004 11,780 11,103 10,031 5/31/2004 12,040 11,348 10,168 6/30/2004 11,910 11,225 10,366 Average Annual Total Returns -- June 30, 2004 - -------------------------------------------------------------------------------- 6 Months/6/ 1 Year/6/ Since Inception/6/ ----------- --------- ------------------ Class A (Inception 3/15/01) Net Asset Value/1/ 1.02% 15.18% 5.45% With Maximum Sales Charge/2/ -4.80 8.57 3.57 Class B (Inception 3/15/01) Net Asset Value/1/ 0.61 14.26 4.66 With CDSC/3/ -4.39 9.26 3.84 Class C (Inception 3/15/01) Net Asset Value/1/ 0.61 14.26 4.66 With CDSC/3/ -0.39 13.26 4.66 - -------------------------------------------------------------------------------- Since Class A, B, C Comparative Performance 6 Months 1 Year Inception/7/ - ------------------------------------ -------- ------ ------------- S&P 500 Index/4/ 3.44% 19.11% 1.11% Morningstar Large Value Fund Avg./5/ 3.46 19.70 2.36 All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio Facts - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Fund Composition 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Common Stocks 92.5 91.6 - -------------------------------------------------------------------------------- Short Term Investments and Other 7.5 8.4 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Ten Largest Holdings 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Washington Mutual, Inc. 14.7 16.1 - -------------------------------------------------------------------------------- H&R Block, Inc. 7.0 8.6 - -------------------------------------------------------------------------------- Burlington Resources, Inc. 5.6 4.5 - -------------------------------------------------------------------------------- Yum! Brands, Inc. 5.6 5.4 - -------------------------------------------------------------------------------- First Data Corp. 5.5 5.1 - -------------------------------------------------------------------------------- RR Donnelley & Sons Co. 4.8 -- - -------------------------------------------------------------------------------- Omnicare, Inc. 4.4 4.3 - -------------------------------------------------------------------------------- Black & Decker Corp. 4.4 3.6 - -------------------------------------------------------------------------------- TJX Cos., Inc. 4.3 4.1 - -------------------------------------------------------------------------------- Time Warner, Inc. 4.2 4.2 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Five Largest Industries 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Banking 14.7 16.1 - -------------------------------------------------------------------------------- Commercial Services 13.9 12.4 - -------------------------------------------------------------------------------- Pharmaceuticals 10.9 8.5 - -------------------------------------------------------------------------------- Media - Broadcasting & Publishing 10.7 10.8 - -------------------------------------------------------------------------------- Oil & Gas 5.6 4.5 - -------------------------------------------------------------------------------- Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 5.75%. /3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1 - 6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/ S&P 500 Index is an unmanaged index of U.S. common stock performance /5/ Morningstar Large Value Fund Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. /6/ Fund performance has been increased by expense waivers, without which performance would have been lower. /7/ The since-inception performance comparisons shown are calculated from 3/31/01. 6 - -------------------------------------------------------------------------------- Harris Associates Large Cap Value Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- ================================================================================ Objective: Seeks opportunities for long-term capital growth and income - -------------------------------------------------------------------------------- Strategy: Invests primarily in common stock of large-and mid-cap companies in any industry - -------------------------------------------------------------------------------- Inception Date: May 6, 1931 - -------------------------------------------------------------------------------- Managers: Robert M. Levy Edward S. Loeb Michael J. Mangan - -------------------------------------------------------------------------------- Symbols: Class A NEFOX Class B NEGBX Class C NECOX Class Y NEOYX - -------------------------------------------------------------------------------- You Should Know: Value stocks may fall out of favor with investors and under-perform the overall market during any given period. ================================================================================ Management Discussion - -------------------------------------------------------------------------------- Major market indexes were essentially flat over the first six months of 2004 despite the economic expansion and growing corporate earnings. Investors paused to reassess valuations after last year's powerful rally, while worrisome events overseas also put a brake on stock prices. For the six months ended June 30, 2004, Class A shares of Harris Associates Large Cap Value Fund provided a total return of 3.10% at net asset value. These results trailed the fund's benchmark for the period, with the Russell 1000 Value Index returning 3.94%. The average return on the funds in Morningstar's Large Blend Funds category was 2.78%. Housing, energy, leisure and defense holdings made solid contributions Mortgage insurer MGIC Investment Corporation, rebounded as interest rates rose and homeowners held onto their mortgages rather than refinance, reversing earlier trends. Masco Corporation, a diversified manufacturer of home improvement and building products, rode strong waves of new home construction and remodeling of existing houses. Rising energy prices, especially for natural gas, benefited Burlington Resources. The improving economy and job creation encouraged leisure expenditures, benefiting cruise-ship operator Carnival Corporation. Major defense contractor Raytheon, a relatively new addition to the portfolio, saw increases in its government and aerospace businesses. Raytheon also made strategic management changes and terminated its unproductive involvement in the utility industry. Several stocks hit price targets We took profits in Cendant, whose travel and real estate businesses flourished along with the housing boom. When their valuations met our targets, we also eliminated newspaper publisher Gannett; ADP, which processes business payrolls; and household products giant Colgate Palmolive. Some consumer, healthcare, and media issues disappointed Kraft Foods continued to face tough competition from private-label brands and rising costs. Although shares of Home Depot also lagged, the company continues to build greater efficiencies into its business. Shares of McDonald's rose modestly, despite the loss of key management figures. One of the worst performers was Bristol-Myers Squibb, which struggled to overcome regulatory questions concerning its inventory accounting, although we think the stock is attractively valued currently. Comcast fell on fears that its bid to acquire Disney was excessive; the bid was terminated but shares have not recovered despite what we see as inherent strengths and a strong business strategy. Turmoil in the broadcast, cable and advertising industries hurt Liberty Media, TimeWarner, Viacom, and The Interpublic Group. We believe the economic recovery will eventually benefit these media companies. Washington Mutual fell late in the period Long-time holding Washington Mutual fell in late June following management's cautious forecast for the company's mortgage business, which faces reduced activity due to higher interest rates. The company's retail banking operation, however, continues to perform well, and the value of that component alone supports a higher stock price, in our opinion. Also in the financial sector, we added Citigroup, based on our assessment of its valuation and strong positioning for growth in emerging markets. Good return potential remains for carefully selected stocks We were not surprised that returns on stocks were generally muted in the first half of the year, as many stocks had reached levels that we believed approximated their fair value and interest rates were on the rise. Looking ahead, we believe stocks are unlikely to repeat the strong gains of 2003 in the near future. However, we continue to emphasize underperforming areas like media, healthcare, and some consumer stocks, where we think the long-term dynamics are more favorable than the market's present view. 7 - -------------------------------------------------------------------------------- Harris Associates Large Cap Value Fund - -------------------------------------------------------------------------------- Investment Results through June 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- June 30, 1994 through June 30, 2004 [CHART] Line chart Investment @ N.A.V. 10,000 Fund Inception: 5/6/1931 Sales Charge % 5.75 Statement Date: 6/30/2004 Sales Charge (575) ------ Investment @ M.S.C. 9,425 ====== Russell ----------------------- 1000 Class A Class A Value @ NAV @ M.S.C. Index ---------- ---------- ---------- Month Cumulative Cumulative Cumulative End Value Value Value - ---------- ---------- ---------- ---------- 6/30/1994 10,000 9,425 10,000 7/31/1994 10,296 9,704 10,311 8/31/1994 10,733 10,115 10,608 9/30/1994 10,478 9,875 10,257 10/31/1994 10,643 10,031 10,400 11/30/1994 10,279 9,688 9,980 12/31/1994 10,430 9,830 10,096 1/31/1995 10,690 10,076 10,407 2/28/1995 11,043 10,408 10,819 3/31/1995 11,350 10,697 11,057 4/30/1995 11,696 11,024 11,407 5/31/1995 12,076 11,381 11,886 6/30/1995 12,358 11,647 12,047 7/31/1995 12,790 12,055 12,466 8/31/1995 12,909 12,166 12,642 9/30/1995 13,475 12,700 13,099 10/31/1995 13,343 12,575 12,969 11/30/1995 13,788 12,995 13,626 12/31/1995 14,092 13,282 13,969 1/31/1996 14,533 13,697 14,404 2/29/1996 14,611 13,771 14,513 3/31/1996 14,684 13,840 14,760 4/30/1996 14,734 13,886 14,816 5/31/1996 14,959 14,099 15,002 6/30/1996 14,639 13,797 15,014 7/31/1996 13,911 13,111 14,446 8/31/1996 14,245 13,426 14,860 9/30/1996 14,974 14,113 15,450 10/31/1996 15,435 14,547 16,048 11/30/1996 16,807 15,840 17,211 12/31/1996 16,517 15,567 16,992 1/31/1997 17,338 16,341 17,815 2/28/1997 17,553 16,543 18,077 3/31/1997 16,789 15,824 17,427 4/30/1997 17,672 16,656 18,159 5/31/1997 18,806 17,724 19,174 6/30/1997 19,727 18,593 19,996 7/31/1997 20,971 19,765 21,501 8/31/1997 20,373 19,202 20,735 9/30/1997 21,631 20,387 21,988 10/31/1997 20,682 19,493 21,374 11/30/1997 21,574 20,334 22,319 12/31/1997 22,039 20,772 22,970 1/31/1998 22,169 20,894 22,645 2/28/1998 23,949 22,572 24,170 3/31/1998 25,299 23,844 25,648 4/30/1998 25,428 23,966 25,819 5/31/1998 25,083 23,641 25,437 6/30/1998 26,131 24,629 25,763 7/31/1998 25,729 24,250 25,308 8/31/1998 21,838 20,583 21,542 9/30/1998 22,926 21,608 22,778 10/31/1998 24,582 23,169 24,542 11/30/1998 25,697 24,220 25,686 12/31/1998 27,312 25,742 26,560 1/31/1999 28,103 26,487 26,772 2/28/1999 27,428 25,851 26,394 3/31/1999 27,807 26,208 26,941 4/30/1999 29,455 27,761 29,457 5/31/1999 29,323 27,637 29,133 6/30/1999 30,238 28,500 29,979 7/31/1999 29,346 27,658 29,101 8/31/1999 28,949 27,284 28,021 9/30/1999 27,776 26,179 27,042 10/31/1999 28,888 27,227 28,598 11/30/1999 28,972 27,306 28,375 12/31/1999 29,893 28,174 28,512 1/31/2000 28,333 26,704 27,582 2/29/2000 27,378 25,803 25,532 3/31/2000 29,600 27,898 28,648 4/30/2000 29,113 27,439 28,314 5/31/2000 28,216 26,593 28,613 6/30/2000 28,587 26,943 27,305 7/31/2000 28,411 26,777 27,647 8/31/2000 30,318 28,575 29,185 9/30/2000 28,932 27,269 29,453 10/31/2000 29,012 27,344 30,176 11/30/2000 27,284 25,716 29,056 12/31/2000 27,706 26,113 30,512 1/31/2001 27,726 26,132 30,629 2/28/2001 26,079 24,579 29,777 3/31/2001 24,612 23,197 28,725 4/30/2001 26,622 25,091 30,134 5/31/2001 26,662 25,129 30,811 6/30/2001 25,738 24,258 30,127 7/31/2001 24,854 23,425 30,063 8/31/2001 23,327 21,986 28,859 9/30/2001 21,378 20,149 26,828 10/31/2001 22,141 20,868 26,597 11/30/2001 23,709 22,345 28,143 12/31/2001 23,669 22,308 28,806 1/31/2002 23,548 22,194 28,584 2/28/2002 22,925 21,607 28,630 3/31/2002 23,548 22,194 29,985 4/30/2002 22,885 21,569 28,956 5/31/2002 22,784 21,474 29,101 6/30/2002 21,418 20,186 27,431 7/31/2002 20,052 18,899 24,881 8/31/2002 20,554 19,372 25,069 9/30/2002 17,781 16,759 22,281 10/31/2002 18,444 17,384 23,932 11/30/2002 19,690 18,558 25,440 12/31/2002 18,926 17,838 24,335 1/31/2003 18,464 17,403 23,745 2/28/2003 17,882 16,853 23,112 3/31/2003 18,103 17,062 23,151 4/30/2003 19,811 18,672 25,189 5/31/2003 21,297 20,073 26,815 6/30/2003 21,760 20,508 27,150 7/31/2003 21,559 20,319 27,554 8/31/2003 22,282 21,001 27,983 9/30/2003 21,800 20,546 27,710 10/31/2003 22,825 21,512 29,406 11/30/2003 23,628 22,270 29,805 12/31/2003 24,613 23,197 31,642 1/31/2004 24,794 23,368 32,199 2/29/2004 25,376 23,917 32,889 3/31/2004 24,995 23,557 32,601 4/30/2004 24,995 23,557 31,804 5/31/2004 25,015 23,576 32,129 6/30/2004 25,375 23,918 32,888 Average Annual Total Returns -- June 30, 2004 - --------------------------------------------------------------------------------
Since 6 Months/7/ 1 Year/7/ 5 Years/7/ 10 Years/7/ Inception/7/ ----------- --------- ---------- ----------- ------------ Class A (Inception 5/6/31) Net Asset Value/1/ 3.10% 16.62% -3.45% 9.76% -- With Maximum Sales Charge/2/ -2.85 9.92 -4.59 9.11 -- Class B (Inception 9/13/93) Net Asset Value/1/ 2.75 15.67 -4.16 8.99 -- With CDSC/3/ -2.25 10.67 -4.47 8.99 -- Class C (Inception 5/1/95) Net Asset Value/1/ 2.67 15.81 -4.16 -- 8.03% With CDSC/3/ 1.67 14.81 -4.16 -- 8.03 Class Y (Inception 11/18/98) Net Asset Value/1/ 3.27 16.98 -2.96 -- -0.53
- --------------------------------------------------------------------------------
Since Since Class C Class Y Comparative Performance 6 Months 1 Year 5 Years 10 Years Incept./6/ Incept./6/ - ---------------------------------- -------- ------ ------- -------- ---------- ---------- Russell 1000 Value Index/4/ 3.94% 21.13% 1.87% 12.64% 11.86% 4.53% Morningstar Large Blend Average/5/ 2.78 17.63 -1.76 10.08 8.98 1.34
All returns represents past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio Facts - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Fund Composition 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Common Stocks 94.1 95.9 - -------------------------------------------------------------------------------- Short Term Investments and Other 5.9 4.1 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Ten Largest Holdings 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Home Depot, Inc. 3.8 4.0 - -------------------------------------------------------------------------------- First Data Corp. 3.8 3.3 - -------------------------------------------------------------------------------- Washington Mutual, Inc. 3.6 3.8 - -------------------------------------------------------------------------------- Time Warner, Inc. 3.6 3.9 - -------------------------------------------------------------------------------- Masco Corp. 3.5 2.9 - -------------------------------------------------------------------------------- Gap (The), Inc. 3.2 3.3 - -------------------------------------------------------------------------------- Waste Management, Inc. 3.2 3.3 - -------------------------------------------------------------------------------- Liberty Media Corp., Class A 3.2 4.2 - -------------------------------------------------------------------------------- McDonald's Corp. 3.1 3.6 - -------------------------------------------------------------------------------- Diageo PLC (ADR) 3.0 3.2 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Five Largest Industries 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Media - Broadcasting & Publishing 12.6 13.4 - -------------------------------------------------------------------------------- Beverages, Food & Tobacco 12.5 12.9 - -------------------------------------------------------------------------------- Building Materials 7.3 6.8 - -------------------------------------------------------------------------------- Pharmaceuticals 6.9 6.7 - -------------------------------------------------------------------------------- Banking 5.5 5.9 - -------------------------------------------------------------------------------- Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 5.75%. /3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1 - 6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/ Russell 1000 Value Index is an unmanaged index of the largest 1,000 U.S. companies within the Russell 3000 with lower price-to-book ratios and lower forcasted growth values. /5/ Morningstar Large Blend Average is an average performance of funds with similar investment objectives as calculated without sales charges by Morningstar, Inc. /6/ The since-inception performance comparisons shown for each Class of fund shares are calculated as follows: Class C from 5/31/95 and Class Y from 11/30/98. /7/ Fund performance has been increased by expense waivers, without which performance would have been lower. 8 - -------------------------------------------------------------------------------- Vaughan Nelson Small Cap Value Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- ================================================================================ Objective: Seeks capital appreciation - -------------------------------------------------------------------------------- Strategy: Invests in small capitalization companies with a focus on absolute return using a bottom-up value oriented investment process - -------------------------------------------------------------------------------- Inception Date: December 31, 1996 - -------------------------------------------------------------------------------- Managers: Mark J. Roach Chris D. Wallis Scott J. Weber - -------------------------------------------------------------------------------- Symbols: Class A NEFJX Class B NEJBX Class C NEJCX - -------------------------------------------------------------------------------- You Should Know: Investing in small cap stocks carries special risk, including narrower markets, limited financial and management resources, less liquidity and greater volatility than large-company stocks. Value stocks may fall out of favor with investors and underperform the overall market during any given period. ================================================================================ Management Discussion - -------------------------------------------------------------------------------- During the first half of 2004, stock prices moved in what is called a trading range, gaining a few percentage points and then giving them back. For the six-month period, Vaughan Nelson Small Cap Value Fund (formerly CDC Nvest Star Small Cap Fund) returned 4.59%, based on the net asset value of Class A shares. For the same period the return on the Russell 2000 Index and the Russell 2000 Value Index were 6.76% and 7.83%, respectively, and the Morningstar Small Cap Growth Fund category had an average return of 4.09%. Bear in mind that effective March 1, 2004, the fund changed from its Star format, with multiple subadvisors, to its present format and the portfolio has changed significantly. As the new, sole subadvisor, we take the position that we cannot predict what the market or the economy will do so we construct a portfolio of individual companies that we believe will do well over time. Rather than trying to identify sectors that we think will do well and searching within that group, we start with a set of attributes: companies with prospects for improving profit margins; companies we believe to be valued at a discount to their net asset value; and companies with an attractive dividend yield and what we determine to be minimal risk. Not all the companies in the portfolio have all these characteristics, but each was purchased at what we regard as a discount to its intrinsic value. Price volatility may create buying opportunities We are structured to look for opportunities when volatile markets bring prices down to attractive levels. For example, we screen for companies trading below their book value, or all securities trading below a certain price per share. We also look for secular trends. Energy resources and healthcare are two of the areas we currently like most. Names that have done well for the fund during the brief period since we became sole manager include Mandalay Resort Group, which we began selling at a profit when purchase plans were announced by hotel-casino operator MGM Mirage. The fund has also done well with Quicksilver Resources, a natural gas company. Allegheny Technologies Incorporated, a maker of specialty steel, is benefiting from lower costs and increasing demand for its unique products. Technology sell-off viewed without sentiment When Kana Software warned that "significant deals" had failed to close, we began to sell off the stock. However, when another software company, Reynolds & Reynolds (R&R), warned of an impending shortfall in earnings, we sold a third of the position. We are uncomfortable with the increased uncertainty, but we continue to like R&R, which we believe has a strong balance sheet, solid market share and is attractively valued. We stood firm when escalating energy and raw materials costs caused GrafTech International to miss its earnings targets. This niche company, which manufactures graphite and carbon electrodes and cathodes, enjoys a virtual monopoly in its market and they are raising prices without losing business. Although we are not adding to it, we also are not selling any of the stock. Outlook for stocks is positive As long as the economy continues to maintain its current strength, we believe there is upward potential for stock prices for the balance of 2004 and into 2005. We don't think the market is overvalued, especially in terms of where interest rates are currently. Unless there is a dramatic increase in inflation that is not accompanied by higher earnings estimates, we view the risk/reward potential of stock prices as favorable. Moreover, we believe most of the companies the fund holds have solid business prospects and good valuations. If terrorism or other factors disrupt the economy, we believe the characteristics of the companies represented in the fund's portfolio should provide downside support as well as upside potential for the long term. 9 - -------------------------------------------------------------------------------- Vaughan Nelson Small Cap Value Fund - -------------------------------------------------------------------------------- Investment Results through June 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- December 31, 1996 (inception) through June 30, 2004 [CHART] Line chart Investment @ N.A.V. 10,000 Fund Inception: 12/31/1996 Sales Charge % 5.75 Statement Date: 6/30/2004 Sales Charge (575) ------ Investment @ M.S.C. 9,425 ====== ----------------------- Russell Russell Class A Class A 2000 2000 @ NAV @ M.S.C. Index Value ---------- ---------- ----------------------- Month Cumulative Cumulative Cumulative Cumulative End Value Value Value Value - ---------- ---------- ---------- ---------- ---------- 12/31/1996 10,000 9,425 10,000 10,000 1/31/1997 10,192 9,606 10,200 10,154 2/28/1997 9,920 9,350 9,953 10,250 3/31/1997 9,352 8,814 9,483 9,975 4/30/1997 9,264 8,731 9,509 10,122 5/31/1997 10,448 9,847 10,567 10,928 6/30/1997 11,040 10,405 11,020 11,481 7/31/1997 11,784 11,106 11,533 11,963 8/31/1997 12,104 11,408 11,797 12,153 9/30/1997 13,160 12,403 12,660 12,961 10/31/1997 12,672 11,943 12,104 12,608 11/30/1997 12,376 11,664 12,026 12,746 12/31/1997 12,697 11,967 12,236 13,178 1/31/1998 12,342 11,632 12,043 12,940 2/28/1998 13,349 12,582 12,934 13,722 3/31/1998 14,126 13,314 13,467 14,279 4/30/1998 13,994 13,189 13,542 14,349 5/31/1998 13,135 12,379 12,812 13,841 6/30/1998 13,341 12,574 12,839 13,763 7/31/1998 12,300 11,593 11,800 12,685 8/31/1998 9,624 9,070 9,509 10,699 9/30/1998 10,293 9,701 10,253 11,303 10/31/1998 10,748 10,130 10,671 11,638 11/30/1998 11,758 11,082 11,230 11,953 12/31/1998 12,958 12,212 11,925 12,328 1/31/1999 13,231 12,470 12,083 12,048 2/28/1999 12,122 11,425 11,105 11,226 3/31/1999 12,957 12,212 11,278 11,133 4/30/1999 13,934 13,133 12,289 12,150 5/31/1999 13,818 13,023 12,468 12,523 6/30/1999 14,968 14,107 13,032 12,976 7/31/1999 14,786 13,936 12,674 12,668 8/31/1999 14,654 13,811 12,205 12,205 9/30/1999 15,060 14,194 12,208 11,961 10/31/1999 16,201 15,270 12,257 11,722 11/30/1999 18,064 17,025 12,989 11,783 12/31/1999 21,428 20,196 14,460 12,145 1/31/2000 21,401 20,171 14,227 11,827 2/29/2000 26,680 25,146 16,577 12,550 3/31/2000 25,665 24,189 15,484 12,609 4/30/2000 22,655 21,352 14,552 12,684 5/31/2000 20,816 19,619 13,704 12,490 6/30/2000 22,509 21,215 14,899 12,855 7/31/2000 20,926 19,723 14,419 13,283 8/31/2000 23,526 22,174 15,520 13,877 9/30/2000 22,775 21,466 15,063 13,799 10/31/2000 20,859 19,659 14,391 13,750 11/30/2000 17,222 16,232 12,914 13,470 12/31/2000 18,810 17,729 14,023 14,917 1/31/2001 19,631 18,502 14,753 15,329 2/28/2001 17,101 16,118 13,785 15,307 3/31/2001 15,472 14,582 13,111 15,062 4/30/2001 17,021 16,043 14,136 15,759 5/31/2001 17,375 16,376 14,484 16,164 6/30/2001 17,967 16,934 14,984 16,815 7/31/2001 16,737 15,774 14,173 16,438 8/31/2001 15,711 14,808 13,715 16,381 9/30/2001 13,216 12,456 11,869 14,572 10/31/2001 14,116 13,305 12,563 14,953 11/30/2001 15,358 14,475 13,536 16,028 12/31/2001 16,543 15,592 14,371 17,009 1/31/2002 16,156 15,227 14,222 17,235 2/28/2002 14,868 14,013 13,832 17,340 3/31/2002 16,190 15,259 14,944 18,638 4/30/2002 15,814 14,905 15,080 19,294 5/31/2002 15,051 14,185 14,411 18,656 6/30/2002 14,048 13,240 13,696 18,243 7/31/2002 11,929 11,243 11,627 15,533 8/31/2002 11,917 11,232 11,598 15,463 9/30/2002 10,824 10,201 10,765 14,359 10/31/2002 11,382 10,727 11,110 14,575 11/30/2002 12,259 11,554 12,101 15,738 12/31/2002 11,450 10,792 11,428 15,066 1/31/2003 10,812 10,190 11,111 14,641 2/28/2003 10,436 9,836 10,776 14,149 3/31/2003 10,459 9,858 10,914 14,300 4/30/2003 11,461 10,802 11,949 15,659 5/31/2003 12,635 11,908 13,232 17,257 6/30/2003 13,113 12,359 13,471 17,550 7/31/2003 13,968 13,165 14,314 18,425 8/31/2003 14,686 13,841 14,970 19,125 9/30/2003 14,253 13,433 14,694 18,906 10/31/2003 15,278 14,400 15,928 20,447 11/30/2003 15,723 14,818 16,493 21,232 12/31/2003 15,882 14,969 16,828 22,000 1/31/2004 16,497 15,549 17,559 22,761 2/29/2004 16,406 15,463 17,716 23,201 3/31/2004 16,440 15,495 17,881 23,522 4/30/2004 15,734 14,829 16,970 22,306 5/31/2004 15,791 14,883 17,240 22,575 6/30/2004 16,612 15,660 17,966 23,721 Average Annual Total Returns -- June 30, 2004 - -------------------------------------------------------------------------------- Since 6 Months 1 Year 5 Years Inception -------- ------ ------- --------- Class A (Inception 12/31/96) Net Asset Value/1/ 4.59% 26.67% 2.11% 7.01% With Maximum Sales Charge/2/ -1.42 19.41 0.91 6.17 Class B (Inception 12/31/96) Net Asset Value/1/ 4.28 25.71 1.34 6.21 With CDSC/3/ -0.72 20.71 1.05 6.21 Class C (Inception 12/31/96) Net Asset Value/1/ 4.28 25.81 1.36 6.22 With CDSC/3/ 3.28 24.81 1.36 6.22 - --------------------------------------------------------------------------------
Since Comparative Performance 6 Months 1 Year 5 Years Inception/7/ - ----------------------- -------- ------ ------- ------------ Russell 2000 Index/4/ 6.76% 33.37% 6.63% 8.12% Russell 2000 Value Index/5/ 7.83 35.17 12.82 12.21 Morningstar Small Cap Growth Fund Average/6/ 4.09 28.31 4.19 7.18
All results represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio Facts - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Fund Composition 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Common Stocks 94.6 97.2 - -------------------------------------------------------------------------------- Short Term Investments and Other 5.4 2.8 - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Ten Largest Holdings 6/30/04 12/31/03 - -------------------------------------------------------------------------------- iShares Russell 2000 Value Index Fund 4.7 -- - -------------------------------------------------------------------------------- Triad Hospitals, Inc. 2.9 -- - -------------------------------------------------------------------------------- Equitable Resources, Inc. 2.9 -- - -------------------------------------------------------------------------------- Dollar Thrifty Automotive Group, Inc. 2.7 0.8 - -------------------------------------------------------------------------------- Regis Corp. 2.6 -- - -------------------------------------------------------------------------------- Willbros Group, Inc. 2.0 -- - -------------------------------------------------------------------------------- Sterling Bancshares, Inc. 2.0 0.1 - -------------------------------------------------------------------------------- Southwestern Energy Co. 1.9 0.2 - -------------------------------------------------------------------------------- Consolidated Graphics, Inc. 1.9 -- - -------------------------------------------------------------------------------- Navigant International, Inc. 1.8 -- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Five Largest Industries 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Oil & Gas 10.0 3.6 - -------------------------------------------------------------------------------- Commercial Services 9.1 5.8 - -------------------------------------------------------------------------------- Banking 7.5 3.9 - -------------------------------------------------------------------------------- Aerospace & Defense 6.2 0.5 - -------------------------------------------------------------------------------- Retailers 6.1 3.6 - -------------------------------------------------------------------------------- Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 5.75%. /3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1 - 6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/ Russell 2000 Index is an unmanaged index measuring the stock price performance of the 2,000 smallest companies within the Russell 3000 Index. /5/ The Russell 2000 Value Index is an unmanaged index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. /6/ Morningstar Small Cap Growth Fund Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. /7/ The since-inception performance comparisons shown are calculated from 12/31/96. Note: The fund is changing its benchmark from the Russell 2000 to the Russell 2000 Value Index because the advisor believes the latter is more representative of the types of stocks in which the Fund can invest. Also, effective 3/1/04, the fund changed from a multiple subadvisor format to its present format, with one subadvisor. 10 - -------------------------------------------------------------------------------- Westpeak Capital Growth Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- ================================================================================ Objective: Seeks long-term growth of capital - -------------------------------------------------------------------------------- Strategy: Invests primarily in common stocks of large- and mid-cap companies in any industry - -------------------------------------------------------------------------------- Inception Date: August 3, 1992 - -------------------------------------------------------------------------------- Manager: Westpeak Global Advisors, L.P. Team Management - -------------------------------------------------------------------------------- Symbols: Class A NEFCX Class B NECBX Class C NECGX - -------------------------------------------------------------------------------- You Should Know: Growth stocks can be more sensitive to market movements because their prices are based in part on future expectations. ================================================================================ Management Discussion - -------------------------------------------------------------------------------- During the first half of 2004, the market environment appeared to switch from favoring value stocks in the first quarter to growth stocks in the second. Large-cap stocks also began to outperform stocks of smaller companies in the second quarter, as the risk-taking fervor displayed in 2003 appeared to abate. Higher-risk companies that had been beaten down in the market slide of 1999 through 2002 became less attractive than quality companies with sustained, rising earnings trends - stocks that are the mainstay of Westpeak Capital Growth Fund. For the six months ended June 30, 2004, the total return on Class A shares of the fund was 0.46% at net asset value. The fund's results trailed its benchmark, the Russell 1000 Growth Index, which returned 2.74% for the period, and the average return on Morningstar's Large Growth Fund category, which was 2.42%. Energy stocks advanced, financial stocks retreated Energy stocks benefited from speculation and worries about diminishing supplies due to events in the Middle East. Companies that own large reserves of oil and gas performed well, for the most part, and the fund benefited from its emphasis on these companies. However, our underweight position in oil services relative to the benchmark detracted from performance. Although the prospect of rising interest rates hurt financially sensitive stocks, especially during the second quarter, the fund has benefited from its position in New Century Financial. This mortgage lender has been in the portfolio since last year, and it benefited when low interest rates created a home equity financing boom. However, we have been gradually reducing this position as we trim the fund's exposure to financial services. Medical products companies were positive We purchased shares of Apogent Technologies last year and sold them at a profit shortly after the first quarter of 2004. This manufacturer of medical supplies and diagnostic equipment performed well, but then slid in May and June. Another medical products company, Becton, Dickinson & Co., remains in the fund. We have held this profitable company since 2002 and it has performed well for the fund. Technology generally suffered Technology stocks in general have been hurt this year as investors became more cautious and some companies announced slower-than-expected sales. The worst performing stock in the portfolio during the period was Intel Corp. The fund has owned this renowned semiconductor manufacturer for several years. Although the stock performed poorly for the period, it did better than the industry average and we believe it remains attractive relative to its peers. However, the share price of QLogic Corp., a semiconductor manufacturer, fell steadily after we purchased it last year and continued to fall after we sold the stock in March. We also sold SPX Corp. on weakness when this technical and industrial products company announced it would fall short of profit forecasts. Market outlook continues to be mixed Many market participants had hoped second-quarter results would help stocks break out of the trading range in which they've been stuck this year, but a steady march of earnings disappointments and profit warnings have done little to lure buyers. In addition to financial and energy stocks, the utilities and consumer discretionary sectors have all struggled, although the fund has relatively little exposure to the latter industries. As we enter the third quarter, the fund's greatest emphasis is on consumer staples - products and services that people are likely to buy regardless of the economy - including drug companies, food and beverages, grocery stores, home products, and medical products and services. We continue to downplay the consumer discretionary area, notably the specialty retail area, in an effort to maintain a portfolio that emphasizes quality earnings that are as predictable as possible in a volatile environment. 11 - -------------------------------------------------------------------------------- Westpeak Capital Growth Fund - -------------------------------------------------------------------------------- Investment Results through June 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- June 30, 1994 through June 30, 2004 [CHART] Line chart Investment @ N.A.V. 10,000 Fund Inception: 8/3/1992 Sales Charge % 5.75 Statement Date: 6/30/2004 Sales Charge (575) ------ Investment @ M.S.C. 9,425 ====== Russell ----------------------- 1000 Class A Class A Growth @ NAV @ M.S.C. Index ---------- ---------- ---------- Month Cumulative Cumulative Cumulative End Value Value Value - ---------- ---------- ---------- ---------- 6/30/1994 10,000 9,425 10,000 7/31/1994 10,384 9,786 10,342 8/31/1994 10,825 10,202 10,917 9/30/1994 10,644 10,032 10,770 10/31/1994 11,107 10,468 11,023 11/30/1994 10,622 10,012 10,669 12/31/1994 10,868 10,243 10,848 1/31/1995 10,955 10,325 11,080 2/28/1995 11,389 10,734 11,544 3/31/1995 11,766 11,089 11,881 4/30/1995 11,946 11,260 12,141 5/31/1995 12,279 11,573 12,563 6/30/1995 13,097 12,344 13,048 7/31/1995 13,683 12,896 13,591 8/31/1995 13,929 13,128 13,605 9/30/1995 14,400 13,572 14,233 10/31/1995 14,171 13,356 14,242 11/30/1995 14,514 13,680 14,796 12/31/1995 14,211 13,394 14,881 1/31/1996 14,473 13,641 15,379 2/29/1996 14,851 13,998 15,660 3/31/1996 14,713 13,867 15,680 4/30/1996 15,446 14,558 16,092 5/31/1996 15,909 14,994 16,655 6/30/1996 15,693 14,790 16,677 7/31/1996 14,612 13,772 15,700 8/31/1996 15,168 14,296 16,105 9/30/1996 16,427 15,482 17,278 10/31/1996 16,418 15,474 17,382 11/30/1996 17,236 16,245 18,687 12/31/1996 16,634 15,677 18,322 1/31/1997 17,574 16,564 19,607 2/28/1997 17,091 16,108 19,474 3/31/1997 15,813 14,904 18,420 4/30/1997 16,495 15,547 19,643 5/31/1997 17,946 16,914 21,061 6/30/1997 18,446 17,386 21,904 7/31/1997 19,741 18,606 23,841 8/31/1997 18,835 17,752 22,445 9/30/1997 19,403 18,287 23,550 10/31/1997 18,620 17,549 22,679 11/30/1997 19,107 18,008 23,643 12/31/1997 19,499 18,378 23,908 1/31/1998 19,656 18,525 24,623 2/28/1998 21,005 19,797 26,475 3/31/1998 21,943 20,681 27,530 4/30/1998 22,334 21,049 27,911 5/31/1998 21,796 20,543 27,119 6/30/1998 22,930 21,612 28,780 7/31/1998 22,715 21,409 28,589 8/31/1998 19,108 18,010 24,299 9/30/1998 20,255 19,090 26,165 10/31/1998 21,735 20,485 28,268 11/30/1998 23,040 21,715 30,419 12/31/1998 25,169 23,722 33,162 1/31/1999 26,435 24,915 35,109 2/28/1999 24,950 23,515 33,505 3/31/1999 25,498 24,032 35,269 4/30/1999 25,997 24,502 35,314 5/31/1999 25,522 24,054 34,229 6/30/1999 26,873 25,328 36,627 7/31/1999 26,276 24,766 35,463 8/31/1999 26,508 24,984 36,042 9/30/1999 26,121 24,619 35,285 10/31/1999 27,941 26,334 37,950 11/30/1999 28,771 27,117 39,997 12/31/1999 31,394 29,589 44,157 1/31/2000 29,623 27,920 42,087 2/29/2000 30,859 29,085 44,144 3/31/2000 33,331 31,415 47,304 4/30/2000 32,342 30,483 45,053 5/31/2000 30,832 29,059 42,784 6/30/2000 32,864 30,974 46,027 7/31/2000 32,013 30,172 44,108 8/31/2000 34,516 32,531 48,102 9/30/2000 31,328 29,526 43,552 10/31/2000 30,241 28,503 41,491 11/30/2000 26,162 24,658 35,375 12/31/2000 25,266 23,813 34,255 1/31/2001 26,475 24,953 36,622 2/28/2001 22,880 21,565 30,405 3/31/2001 20,747 19,554 27,096 4/30/2001 23,552 22,198 30,523 5/31/2001 23,283 21,945 30,074 6/30/2001 22,919 21,601 29,377 7/31/2001 21,710 20,461 28,643 8/31/2001 19,962 18,814 26,301 9/30/2001 17,912 16,882 23,675 10/31/2001 18,735 17,658 24,917 11/30/2001 20,365 19,194 27,311 12/31/2001 20,097 18,941 27,259 1/31/2002 20,012 18,862 26,778 2/28/2002 19,288 18,179 25,666 3/31/2002 19,945 18,798 26,554 4/30/2002 18,833 17,750 24,387 5/31/2002 18,429 17,369 23,797 6/30/2002 16,913 15,940 21,596 7/31/2002 15,599 14,702 20,408 8/31/2002 15,616 14,718 20,469 9/30/2002 13,965 13,162 18,346 10/31/2002 14,975 14,114 20,029 11/30/2002 15,464 14,575 21,117 12/31/2002 14,453 13,622 19,658 1/31/2003 14,083 13,273 19,181 2/28/2003 14,150 13,336 19,093 3/31/2003 14,436 13,606 19,449 4/30/2003 15,279 14,400 20,887 5/31/2003 16,121 15,194 21,929 6/30/2003 16,272 15,337 22,231 7/31/2003 16,492 15,543 22,784 8/31/2003 16,694 15,734 23,351 9/30/2003 16,761 15,797 23,101 10/31/2003 17,570 16,559 24,398 11/30/2003 17,772 16,750 24,654 12/31/2003 18,311 17,258 25,506 1/31/2004 18,580 17,512 26,027 2/29/2004 18,580 17,512 26,193 3/31/2004 18,243 17,194 25,707 4/30/2004 17,839 16,813 25,408 5/31/2004 18,159 17,115 25,882 6/30/2004 18,396 17,342 26,205 ------ Average Annual Total Returns -- June 30, 2004 - --------------------------------------------------------------------------------
Since 6 Months 1 Year 5 Years 10 Years Inception -------- ------ ------- -------- --------- Class A (Inception 8/3/92) Net Asset Value/1/ 0.46% 13.04% -7.30% 6.28% -- With Maximum Sales Charge/2/ -5.29 6.54 -8.39 5.66 -- Class B (Inception 9/13/93) Net Asset Value/1/ 0.11 12.25 -7.98 5.45 -- With CDSC/3/ -4.89 7.25 -8.24 5.45 -- Class C (Inception 12/30/94) Net Asset Value/1/ 0.11 12.28 -8.02 -- 4.84% With CDSC/3/ -0.89 11.28 -8.02 -- 4.84
- --------------------------------------------------------------------------------
Since Class C 6 Months 1 Year 5 Years 10 Years Incept./6/ -------- ------ ------- -------- ---------- Comparative Performance Russell 1000 Growth Index/4/ 2.74% 17.88% -6.48% 10.11% 9.73% Morningstar Large Growth Fund Avg./5/ 2.42 16.58 -4.89 9.06 8.97
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio Facts - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Fund Composition 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Common Stocks 98.6 99.1 - -------------------------------------------------------------------------------- Short Term Investments and Other 1.4 0.9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Ten Largest Holdings 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Pfizer, Inc. 6.8 4.9 - -------------------------------------------------------------------------------- Microsoft Corp. 6.6 5.7 - -------------------------------------------------------------------------------- Intel Corp. 5.1 5.8 - -------------------------------------------------------------------------------- Cisco Systems, Inc. 4.8 4.8 - -------------------------------------------------------------------------------- Johnson & Johnson 4.2 2.3 - -------------------------------------------------------------------------------- General Electric Co. 3.9 3.7 - -------------------------------------------------------------------------------- Home Depot, Inc. 3.4 1.6 - -------------------------------------------------------------------------------- International Business Machines Corp. 3.2 -- - -------------------------------------------------------------------------------- Merck & Co., Inc. 2.8 0.8 - -------------------------------------------------------------------------------- Fannie Mae 2.8 2.8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- % of Net Assets as of ------------------ Five Largest Industries 6/30/04 12/31/03 - -------------------------------------------------------------------------------- Pharmaceuticals 12.1 10.8 - -------------------------------------------------------------------------------- Software 9.0 9.0 - -------------------------------------------------------------------------------- Communications 7.8 5.1 - -------------------------------------------------------------------------------- Semiconductors 7.3 9.1 - -------------------------------------------------------------------------------- Beverages, Food & Tobacco 7.1 5.8 - -------------------------------------------------------------------------------- Portfolio holdings and asset allocations will vary. - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. /2/ Includes maximum sales charge of 5.75%. /3/ Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1 - 6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/ Russell 1000 Growth Index is an unmanaged index measuring the performance of the largest 1000 U.S. growth companies within the Russell 3000. /5/ Morningstar Large Growth Fund Average is the average performance without sales charges of funds with similar investment objectives as calculated by Morningstar, Inc. /6/ The since-inception performance comparisons shown for Class C shares is calculated from 12/31/94. 12 - -------------------------------------------------------------------------------- Additional Information - -------------------------------------------------------------------------------- The views expressed in this report reflect those of the portfolio managers as of the dates indicated. The managers' views are subject to change at any time without notice based on changes in market or other conditions. References to specific securities or industries should not be regarded as investment advice. Because these funds are actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned. For more complete information on any CDC Nvest Fund, contact your financial professional or call CDC IXIS Asset Management Distributors, L.P. and ask for a free prospectus, which contains more complete information including charges and other ongoing expenses. Investors should consider a fund's objective, risks and expenses carefully before investing. This and other information can be found in the prospectus. Please read the prospectus carefully before investing. Proxy Voting Information A description of the funds' proxy voting policies and procedures is available without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; on the funds' web-site at www.cdcnvestfunds.com; and on the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the fund's website and the SEC's website. - -------------------------------------------------------------------------------- NOT FDICINSURED . MAY LOSE VALUE . NO BANK GUARANTEE - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- CGM Advisor Targeted Equity Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Common Stocks -- 99.4% of Total Net Assets Automotive -- 5.6% 515,000 Toyota Motor Corp. (ADR)(c) $ 42,034,300 ------------ Business Services -- 2.3% 210,000 FedEx Corp. 17,154,900 ------------ Cosmetics & Personal Care -- 10.5% 1,060,000 Avon Products, Inc. 48,908,400 534,000 Procter & Gamble Co. 29,070,960 ------------ 77,979,360 ------------ Electronics -- 6.7% 1,759,250 AU Optronics Corp. (ADR)(c) 28,746,145 230,000 Harman International Industries, Inc. 20,930,000 ------------ 49,676,145 ------------ Entertainment & Leisure -- 3.2% 620,000 International Game Technology 23,932,000 ------------ Financial Services -- 5.2% 835,000 Citigroup, Inc. 38,827,500 ------------ Home Construction, Furnishings & Appliances -- 14.9% 160,000 Centex Corp. 7,320,000 1,618,300 D.R. Horton, Inc.(c) 45,959,720 871,800 Lennar Corp., Class A(c) 38,986,896 362,600 Pulte Homes, Inc. 18,866,078 ------------ 111,132,694 ------------ Industrial - Diversified -- 4.2% 346,000 3M Co. 31,143,460 ------------ Internet -- 1.9% 150,000 eBay, Inc.(d) 13,792,500 ------------ Medical Supplies -- 3.6% 230,000 Stryker Corp. 12,650,000 160,000 Zimmer Holdings, Inc.(d) 14,112,000 ------------ 26,762,000 ------------ Oil & Gas -- 15.5% 647,000 Burlington Resources, Inc. 23,408,460 495,000 ConocoPhillips 37,763,550 385,000 Exxon Mobil Corp. 17,097,850 384,000 Total SA (ADR)(c) 36,894,720 ------------ 115,164,580 ------------ Restaurants -- 4.8% 965,000 Yum! Brands, Inc.(d) 35,917,300 ------------ Semiconductors -- 6.2% 305,000 Analog Devices, Inc.(c) 14,359,400 1,450,000 National Semiconductor Corp.(c)(d) 31,885,500 ------------ 46,244,900 ------------ Telephone Systems -- 13.7% 1,500,000 America Movil SA de CV (ADR) 54,555,000 388,300 Mobile Telesystems (ADR) 47,372,600 ------------ 101,927,600 ------------ Textiles, Clothing & Fabrics -- 1.1% 110,000 Nike, Inc., Class B 8,332,500 Total Common Stocks (Identified Cost $614,037,732) 740,021,739 ------------ Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Short Term Investments -- 11.5% $2,577,409 Repurchase Agreement with Investors Bank & Trust Co. dated 6/30/2004 at 0.70% to be purchased at $2,577,459 on 7/01/2004, collateralized by $2,542,705 Small Business Administration Bond, 4.38%, due 4/25/2014 valued at $2,706,280 $ 2,577,409 11,563,312 Bank of America, 1.50%, due 7/21/2004(e) 11,563,312 1,472,871 Bank of Montreal, 1.20%, due 7/23/2004(e) 1,472,871 4,818,047 Bank of Nova Scotia, 1.04%, due 7/06/2004(e) 4,818,047 12,526,920 BGI Prime Money Market Fund(e) 12,526,920 3,854,437 BNP Paribas, 1.08%, due 7/02/2004(e) 3,854,437 3,854,437 BNP Paribas, 1.08%, due 7/29/2004(e) 3,854,437 1,927,219 Caylon, 1.04%, due 7/06/2004(e) 1,927,219 2,890,828 Caylon, 1.34%, due 8/24/2004(e) 2,890,828 260,570 Delaware Funding Corporation, 1.241%, due 260,570 7/22/2004(e) 1,927,219 Den Danske Bank, 1.03%, due 7/02/2004(e) 1,927,219 963,961 Fairway Finance, 1.281%, due 7/26/2004(e) 963,961 3,846,573 Fannie Mae, 1.131%, due 7/14/2004(e) 3,846,573 963,609 Fortis Bank, 1.19%, due 7/14/2004(e) 963,609 2,890,828 Greyhawk Funding, 1.221%, due 7/20/2004(e) 2,890,828 1,927,219 HBOS Halifax Bank of Scotland, 1.08%, due 1,927,219 7/29/2004(e) 2,285,335 Merrill Lynch Premier Institutional Fund(e) 2,285,335 7,708,875 Merrimac Cash Fund-Premium Class(e) 7,708,875 4,809,727 Prefco, 1.111%, due 7/07/2004(e) 4,809,727 2,890,828 Royal Bank of Scotland, 1.05%, due 7/07/2004(e) 2,890,828 1,927,219 Royal Bank of Scotland, 1.06%, due 7/30/2004(e) 1,927,219 2,890,828 Sheffield Receivables Corp, 1.071%, due 2,890,828 7/01/2004(e) 1,927,219 Wells Fargo, 1.19%, due 7/19/2004(e) 1,927,219 2,890,828 Wells Fargo, 1.24%, due 7/26/2004(e) 2,890,828 ------------ Total Short Term Investments (Identified Cost $85,596,318) 85,596,318 ------------ Total Investments -- 110.9% (Identified Cost $699,634,050)(b) 825,618,057 Other assets less liabilities (81,393,995) ------------ Total Net Assets -- 100% $744,224,062 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2004, the net unrealized appreciation on investments based on cost of $699,634,050 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $144,033,415 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (18,049,408) ------------ Net unrealized appreciation $125,984,007 ============ At December 31, 2003, the Fund had a capital loss carryover of approximately $327,887,176 of which $132,783,707 expires on December 31, 2009 and $195,103,469 expires on December 31, 2010. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) All or a portion of this security was on loan to brokers at June 30, 2004. (d) Non-income producing security. (e) Represents investments of securities lending collateral. ADR An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank representing the right to receive securities of the foreign issuer described. The values of ADRs are significantly influenced by trading on exchanges not located in the United States. See accompanying notes to financial statements. 14 - -------------------------------------------------------------------------------- Hansberger International Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Common Stocks -- 98.2% of Total Net Assets Brazil -- 0.5% 24,000 Petroleo Brasileiro SA (ADR) $ 673,680 ----------- Canada -- 2.0% 39,100 Manulife Financial Corp.(d) 1,583,550 40,000 Suncor Energy, Inc. 1,024,400 ----------- 2,607,950 ----------- China -- 2.1% 200,000 China Mobile (Hong Kong), Ltd. 605,151 59,700 China Mobile (Hong Kong), Ltd. (ADR) 905,052 1,732,000 Denway Motors, Ltd. 627,319 17,800 Huaneng Power International, Inc. (ADR)(d) 644,360 ----------- 2,781,882 ----------- Denmark -- 1.6% 27,700 Group 4 Falck AS 713,367 97,000 Vestas Wind Systems AS(d) 1,428,038 ----------- 2,141,405 ----------- Finland -- 1.7% 17,800 Nokia OYJ 257,415 29,700 Nokia OYJ (ADR)(d) 431,838 33,600 Tietoenator OYJ 1,022,205 28,700 UPM-Kymmene OYJ 547,327 ----------- 2,258,785 ----------- France -- 13.9% 9,300 Aventis SA(d) 703,644 45,000 Axa 993,161 58,800 Axa (ADR) 1,301,832 13,900 BNP Paribas 856,770 37,400 Bouygues SA 1,255,014 14,000 Carrefour SA 680,787 17,100 Cie Generale D'Optique Essilor International SA 1,118,650 11,200 Groupe Danone 979,187 6,400 Lafarge SA 572,021 12,400 L'Oreal SA 992,624 14,000 Schneider Electric SA 957,677 25,600 Societe Generale, Class A 2,180,393 42,000 STMicroelectronics NV (New York)(d) 924,420 24,100 Suez SA 502,800 39,400 Thomson Multimedia SA 778,767 12,300 Total SA 2,350,187 10,400 Total SA (ADR) 999,232 ----------- 18,147,166 ----------- Germany -- 7.7% 5,300 Adidas-Salomon AG 634,623 11,500 BASF AG 617,692 12,000 Celesio AG 718,441 8,000 Deutsche Bank AG(d) 630,648 30,500 Deutsche Boerse AG(d) 1,560,128 13,500 E.ON AG 974,505 10,000 Fresenius Medical Care AG(d) 742,584 14,400 Linde AG 794,177 1,950 SAP AG 325,749 16,400 SAP AG (ADR)(d) 685,684 14,000 Schering AG 827,939 21,200 Siemens AG 1,529,041 ----------- 10,041,211 ----------- Hong Kong -- 5.5% 436,900 Esprit Holdings, Ltd. $ 1,954,923 85,200 HSBC Holdings PLC (Hong Kong) 1,283,511 106,000 Hutchison Whampoa, Ltd. 723,682 1,746,500 Johnson Electric Holdings, Ltd. 1,768,959 719,052 Shangri-La Asia, Ltd. 700,642 127,000 Wing Hang Bank, Ltd. 753,888 ----------- 7,185,605 ----------- Hungary -- 0.6% 19,000 OTP Bank Rt (ADR) 144A (d) 783,750 ----------- India -- 0.6% 8,400 Infosys Technologies, Ltd. (ADR)(d) 779,268 ----------- Ireland -- 0.6% 10,900 Bank of Ireland (Dublin) 145,934 51,900 Bank of Ireland (London) 693,596 ----------- 839,530 ----------- Israel -- 0.7% 13,100 Teva Pharmaceutical Industries, Ltd. (ADR)(d) 881,499 ----------- Italy -- 3.1% 68,700 Eni-Ente Nazionale Idrocarburi SpA(d) 1,367,116 33,200 Luxottica Group SpA (ADR) 561,080 80,900 Saipem SpA 737,868 292,400 UniCredito Italiano SpA 1,447,544 ----------- 4,113,608 ----------- Japan -- 17.9% 105,000 Asahi Glass Co., Ltd. 1,095,106 43,200 Canon, Inc. 2,282,564 28,100 Denso Corp. 655,860 11,400 Fanuc, Ltd. 681,957 29,500 Fujisawa Pharmaceutical Co., Ltd. 700,735 15,300 Honda Motor Co., Ltd. 739,518 25,000 Kao Corp. 604,181 296,000 Mazda Motor Corp.(d) 1,044,466 137,000 NEC Corp. 966,837 7,500 Nidec Corp. 770,503 27,100 Nitto Denko Corp. 1,389,552 640 NTT DoCoMo, Inc. 1,146,795 6,200 ORIX Corp. 712,153 9,600 Rohm Co., Ltd. 1,152,088 24,000 Seven-Eleven Japan Co., Ltd. 785,114 89,000 Sharp Corp. 1,425,472 53,000 Shiseido Co., Ltd. 669,653 11,000 SMC Corp. 1,192,741 27,900 Sony Corp. 1,053,701 145 Sumitomo Mitsui Financial Group, Inc.(d) 996,646 203,000 Sumitomo Trust & Banking Co. (The), Ltd.(d) 1,449,400 17,000 Takeda Chemical Industries, Ltd. 748,266 51,000 Tostem Inax Holding Corp. 1,103,653 ----------- 23,366,961 ----------- Mexico -- 0.9% 23,400 Cemex SA de CV (ADR)(d) 680,940 16,000 Telefonos de Mexico SA de CV, Class L (ADR) 532,320 ----------- 1,213,260 ----------- Netherlands -- 4.9% 29,569 ABN AMRO Holding NV 647,908 19,200 Akzo Nobel NV 707,730 36,300 European Aeronautic Defense and Space Co.(d) 1,012,724 42,052 ING Groep NV 1,001,935 See accompanying notes to financial statements. 15 - -------------------------------------------------------------------------------- Hansberger International Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Netherlands -- continued 23,300 Koninklijke Philips Electronics NV $ 628,732 38,000 Koninklijke Philips Electronics NV (New York) 1,033,600 10,100 Unilever NV (ADR)(d) 691,951 21,490 VNU NV 627,844 ------------ 6,352,424 ------------ Republic of Korea -- 4.9% 30,100 Kookmin Bank 935,981 31,600 Kookmin Bank (ADR)(d) 991,608 28,800 LG Chemical, Ltd. 975,383 2,500 Samsung Electronics Co., Ltd, (GDR), 144A(c) 516,010 4,100 Samsung Electronics Co., Ltd. 1,693,980 2,900 Shinsegae Co., Ltd. 698,311 29,900 SK Telecom Co., Ltd. (ADR)(d) 627,601 ------------ 6,438,874 ------------ Singapore -- 1.3% 118,800 DBS Group Holdings, Ltd. 995,820 107,600 Singapore Airlines, Ltd. 701,508 ------------ 1,697,328 ------------ South Africa -- 0.5% 349,700 Old Mutual PLC 663,248 ------------ Spain -- 1.9% 51,300 Banco Bilbao Vizcaya Argentaria SA 686,828 62,400 Telefonica Moviles SA 652,830 78,213 Telefonica SA 1,158,734 ------------ 2,498,392 ------------ Switzerland -- 5.0% 110,000 ABB, Ltd.(c) 602,945 4,700 Nestle SA(c) 1,256,141 6,900 Nobel Biocare Holding AG 1,082,180 40,400 Novartis AG 1,786,109 2,100 Swisscom AG 695,687 16,000 UBS AG 1,129,871 ------------ 6,552,933 ------------ Taiwan -- 1.1% 406,149 Taiwan Semiconductor Manufacturing Co., Ltd. 585,570 96,120 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 798,759 ------------ 1,384,329 ------------ United Kingdom -- 19.2% 110,000 Amvescap PLC 751,462 21,400 AstraZeneca PLC (ADR)(d) 976,696 174,054 Barclays PLC 1,486,702 79,011 BHP Billiton PLC 687,100 19,900 BP PLC (ADR) 1,066,043 125,300 British Sky Broadcasting PLC 1,417,901 103,000 Compass Group PLC 630,092 66,255 GlaxoSmithKline PLC 1,360,871 67,300 GUS PLC 1,038,894 59,645 HBOS PLC 740,053 137,400 Kesa Electricals PLC 723,043 140,410 Kingfisher PLC 731,220 91,781 Lloyds TSB Group PLC 720,507 41,509 Reckitt Benckiser PLC 1,178,825 198,500 Rolls-Royce Group PLC 908,245 63,030 Royal Bank of Scotland Group PLC 1,820,967 346,600 Signet Group PLC 726,731 91,100 Smith & Nephew PLC 981,170 91,632 Standard Chartered PLC 1,494,520 374,554 Tesco PLC 1,814,297 79,400 Unilever PLC $ 788,710 703,816 Vodafone Group PLC 1,546,146 34,300 Vodafone Group PLC (ADR) 758,030 14,700 WPP Group PLC (ADR) 753,081 ------------ 25,101,306 ------------ Total Common Stocks (Identified Cost $118,730,484) 128,504,394 ------------ Preferred Stocks -- 1.2% Germany -- 1.2% 1,290 Porsche AG 869,061 24,400 Volkswagen AG 708,101 ------------ Total Preferred Stocks (Identified Cost $1,510,579) 1,577,162 ------------ Principal Amount - -------------------------------------------------------------------------------- Bonds and Notes -- 0.0% France -- 0.0% 1,750 Axa SA, Zero Coupon Convertible Debt, 0.000%, 12/21/2004, (c) 39,178 ------------ Total Bonds and Notes (Identified Cost $25,613) 39,178 ------------ Short Term Investments -- 16.3% $ 599,390 Repurchase Agreement with Investors Bank & Trust Co. dated 6/30/2004 at 0.70% to be purchased at $599,402 on 7/01/2004, collateralized by $575,811 Small Business Administration Bond, 4.5%, due 1/25/2017 valued at $629,360 599,390 2,895,736 Bank of America, 1.50%, due 7/21/2004(e) 2,895,736 368,843 Bank of Montreal, 1.20%, due 7/23/2004(e) 368,843 1,206,556 Bank of Nova Scotia, 1.04%, due 7/06/2004(e) 1,206,556 3,137,046 BGI Prime Money Market Fund(e) 3,137,046 965,245 BNP Paribas, 1.08%, due 7/02/2004(e) 965,245 965,245 BNP Paribas, 1.08%, due 7/29/2004(e) 965,245 482,623 Caylon, 1.04%, due 7/06/2004(e) 482,623 723,933 Caylon, 1.34%, due 8/24/2004(e) 723,933 65,253 Delaware Funding Corporation, 1.241%, due 7/22/2004(e) 65,253 482,623 Den Danske Bank, 1.03%, due 7/02/2004(e) 482,623 241,399 Fairway Finance, 1.281%, due 7/26/2004(e) 241,399 963,275 Fannie Mae, 1.131%, due 7/14/2004(e) 963,275 241,311 Fortis Bank, 1.19%, due 7/14/2004(e) 241,311 723,933 Greyhawk Funding, 1.221%, due 7/20/2004(e) 723,933 482,623 HBOS Halifax Bank of Scotland, 1.08%, due 7/29/2004(e) 482,623 572,303 Merrill Lynch Premier Institutional Fund(e) 572,303 1,930,490 Merrimac Cash Fund-Premium Class(e) 1,930,490 1,204,472 Prefco, 1.111%, due 7/07/2004(e) 1,204,472 723,933 Royal Bank of Scotland, 1.05%, due 7/07/2004(e) 723,933 482,623 Royal Bank of Scotland, 1.06%, due 7/30/2004(e) 482,623 723,933 Sheffield Receivables Corp, 1.071%, due 7/01/2004(e) 723,933 482,623 Wells Fargo, 1.19%, due 7/19/2004(e) 482,623 723,933 Wells Fargo, 1.24%, due 7/26/2004(e) 723,933 ------------ Total Short Term Investments (Identified Cost $21,389,344) 21,389,344 ------------ Total Investments -- 115.7% (Identified Cost $141,656,020) (b) 151,510,078 Other assets less liabilities (20,551,867) ------------ Total Net Assets-- 100% $130,958,211 ============ See accompanying notes to financial statements. 16 - -------------------------------------------------------------------------------- Hansberger International Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2004, the net unrealized appreciation on investments based on cost of $141,656,020 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $12,710,754 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (2,856,696) ----------- Net unrealized appreciation $ 9,854,058 =========== At December 31, 2003, the Fund had a capital loss carryover of approximately $33,932,986 of which $26,061,269 expires on December 31, 2009 and $7,871,717 expires on December 31, 2010. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) Non-income producing security. (d) All or a portion of this security was on loan to brokers at June 30, 2004. (e) Represents investments of securities lending collateral. ADR/GDR - An American Depositary Receipt (ADR) or Global Depositary Receipt (GDR)is a certificate issued by a U.S. bank representing the right to receive securities of the foreign issuer described. The values of ADRs and GDRs are significantly influenced by trading on exchanges not located in the United States. 144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $1,299,760 or 1.0% of net assets. Industry Holdings at June 30, 2004 as a Percentage of Net Assets (unaudited) - ---------------------------------------------------------------------------- Financial Services 19.3% Banking 17.6 Pharmaceuticals 6.5 Oil & Gas 6.3 Communications 5.3 Insurance 4.3 Semiconductors 4.0 Retailers 3.7 Automotive 3.6 Electrical Equipment 3.4 Medical Supplies 3.3 Electronics 3.1 Chemicals 2.8 Heavy Machinery 2.8 Beverages, Food & Tobacco 2.7 Cosmetics & Personal Care 2.7 Building Materials 2.5 Textiles, Clothing & Fabrics 2.0 Other 19.8 See accompanying notes to financial statements. 17 - -------------------------------------------------------------------------------- Harris Associates Focused Value Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Common Stocks -- 92.5% of Total Net Assets Aerospace & Defense -- 3.9% 378,600 Raytheon Co. $ 13,542,522 ------------ Automotive -- 2.5% 497,800 AutoNation, Inc.(c) 8,512,380 ------------ Banking -- 14.7% 1,314,000 Washington Mutual, Inc. 50,772,960 ------------ Biotechnology -- 3.0% 235,300 Chiron Corp.(c) (d) 10,503,792 ------------ Commercial Services -- 13.9% 505,900 H&R Block, Inc.(d) 24,121,312 108,500 Moody's Corp. 7,015,610 503,000 RR Donnelley & Sons Co. 16,609,060 ------------ 47,745,982 ------------ Computers -- 4.0% 525,900 SunGard Data Systems, Inc.(c) 13,673,400 ------------ Media - Broadcasting & Publishing -- 10.7% 181,400 Knight-Ridder, Inc.(d) 13,060,800 851,200 Liberty Media Corp., Class A 7,652,288 42,560 Liberty Media International, Inc.-Class A(c) 1,578,976 829,700 Time Warner, Inc.(c) 14,586,126 ------------ 36,878,190 ------------ Oil & Gas -- 5.6% 534,000 Burlington Resources, Inc. 19,320,120 ------------ Pharmaceuticals -- 10.9% 480,100 Bristol-Myers Squibb Co. 11,762,450 388,400 Hospira, Inc.(c) 10,719,840 351,000 Omnicare, Inc.(d) 15,026,310 ------------ 37,508,600 ------------ Restaurants -- 5.6% 513,900 Yum! Brands, Inc.(c) 19,127,358 ------------ Retailers -- 4.3% 611,900 TJX Cos., Inc. 14,771,266 ------------ Software -- 5.5% 424,700 First Data Corp. 18,907,644 ------------ Telephone Systems -- 2.8% 552,700 Sprint Corp. (FON Group) 9,727,520 ------------ Textiles, Clothing & Fabrics -- 0.7% 69,200 Liz Claiborne, Inc. 2,489,816 ------------ Tools -- 4.4% 241,300 Black & Decker Corp. 14,991,969 ------------ Total Common Stocks (Identified Cost $261,818,763) 318,473,519 ------------ Short Term Investments -- 14.5% $26,946,106 Repurchase Agreement with Investors Bank & Trust Co. dated 6/30/2004 at 0.70% to be purchased at $26,946,630 on 7/01/2004, collateralized by $3,800,107 Federal National Mortgage Association Bond, 1.80%, due 3/25/2031 valued at $3,882,259 and $24,345,284 Federal National Mortgage Association Bond, 1.8%, due 3/25/2031 valued at $24,411,240 $ 26,946,106 3,221,088 Bank of America, 1.50%, due 7/21/2004(e) 3,221,088 410,285 Bank of Montreal, 1.20%, due 7/23/2004(e) 410,285 1,342,120 Bank of Nova Scotia, 1.04%, due 7/06/2004(e) 1,342,120 3,489,512 BGI Prime Money Market Fund(e) 3,489,512 1,073,696 BNP Paribas, 1.08%, due 7/02/2004(e) 1,073,696 1,073,696 BNP Paribas, 1.08%, due 7/29/2004(e) 1,073,696 536,848 Caylon, 1.04%, due 7/06/2004(e) 536,848 805,272 Caylon, 1.34%, due 8/24/2004(e) 805,272 72,585 Delaware Funding Corporation, 1.241%, due 7/22/2004(e) 72,585 536,848 Den Danske Bank, 1.03%, due 7/02/2004(e) 536,848 268,522 Fairway Finance, 1.281%, due 7/26/2004(e) 268,522 1,071,505 Fannie Mae, 1.131%, due 7/14/2004(e) 1,071,505 268,424 Fortis Bank, 1.19%, due 7/14/2004(e) 268,424 805,272 Greyhawk Funding, 1.221%, due 7/20/2004(e) 805,272 536,848 HBOS Halifax Bank of Scotland, 1.08%, due 7/29/2004(e) 536,848 636,605 Merrill Lynch Premier Institutional Fund(e) 636,605 2,147,392 Merrimac Cash Fund-Premium Class(e) 2,147,392 1,339,803 Prefco, 1.111%, due 7/07/2004(e) 1,339,803 805,272 Royal Bank of Scotland, 1.05%, due 7/07/2004(e) 805,272 536,848 Royal Bank of Scotland, 1.06%, due 7/30/2004(e) 536,848 805,272 Sheffield Receivables Corp, 1.071%, due 7/01/2004(e) 805,272 536,848 Wells Fargo, 1.19%, due 7/19/2004(e) 536,848 805,272 Wells Fargo, 1.24%, due 7/26/2004(e) 805,272 ------------ Total Short Term Investments (Identified Cost $50,071,939) 50,071,939 ------------ Total Investments -- 107.0% (Identified Cost $311,890,702)(b) 368,545,458 Other assets less liabilities (24,061,457) ------------ Total Net Assets -- 100% $344,484,001 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2004, the net unrealized appreciation on investments based on cost of $3,111,890,702 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $56,819,450 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (164,694) ----------- Net unrealized appreciation $56,654,756 =========== At December 31, 2003, the Fund had a capital loss carryover of approximately $21,372,149 of which $1,480,080 expires on December 31, 2009, $6,713,084 expires on December 31, 2010 and $13,178,985 expires on December 31, 2011. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) Non-income producing security. (d) All or a portion of this security was on loan to brokers at June 30, 2004. (e) Represents investments of securities lending collateral. See accompanying notes to financial statements. 18 - -------------------------------------------------------------------------------- Harris Associates Large Cap Value Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Common Stocks -- 94.1% of Total Net Assets Advertising -- 1.7% 446,900 Interpublic Group of Cos. (The), Inc.(c) $ 6,135,937 ------------ Aerospace & Defense -- 4.4% 190,200 Honeywell International, Inc. 6,967,026 245,500 Raytheon Co. 8,781,535 ------------ 15,748,561 ------------ Apparel Retailers -- 3.6% 475,200 Gap (The), Inc.(d) 11,523,600 71,800 Limited Brands 1,342,660 ------------ 12,866,260 ------------ Automotive -- 0.6% 32,400 Harley-Davidson, Inc.(d) 2,006,856 ------------ Banking -- 5.5% 246,800 U.S. Bancorp 6,801,808 334,300 Washington Mutual, Inc. 12,917,352 ------------ 19,719,160 ------------ Beverages, Food & Tobacco -- 12.5% 157,700 Anheuser-Busch Cos., Inc. 8,515,800 198,800 Diageo PLC (ADR)(d) 10,884,300 110,200 General Mills, Inc. 5,237,806 168,000 H.J. Heinz Co. 6,585,600 206,800 Kraft Foods, Inc., Class A(d) 6,551,424 101,700 Nestle SA (ADR) 6,903,294 ------------ 44,678,224 ------------ Building Materials -- 7.3% 388,600 Home Depot, Inc. 13,678,720 398,600 Masco Corp.(d) 12,428,348 ------------ 26,107,068 ------------ Entertainment & Leisure -- 3.7% 134,700 Carnival Corp. 6,330,900 265,500 Walt Disney Co. (The) 6,767,595 ------------ 13,098,495 ------------ Environmental Control -- 3.2% 371,900 Waste Management, Inc. 11,398,735 ------------ Financial Services -- 5.5% 188,200 Citigroup, Inc. 8,751,300 151,500 Fannie Mae 10,811,040 ------------ 19,562,340 ------------ Food Retailers -- 1.4% 276,000 Kroger Co. (The)(c) (d) 5,023,200 ------------ Household Products -- 4.7% 123,200 Fortune Brands, Inc. 9,292,976 136,900 Johnson & Johnson 7,625,330 ------------ 16,918,306 ------------ Insurance -- 2.4% 43,200 Aflac, Inc. 1,762,992 91,300 MGIC Investment Corp. 6,926,018 ------------ 8,689,010 ------------ Media - Broadcasting & Publishing -- 12.6% 344,700 Comcast Corp., Special Class A(c) 9,517,167 376,718 DIRECTV Group (The), Inc.(c) 6,441,878 1,254,700 Liberty Media Corp., Class A 11,279,753 730,600 Time Warner, Inc.(c) 12,843,948 133,800 Viacom, Inc., Class B 4,779,336 ------------ 44,862,082 ------------ Medical Supplies -- 2.1% 103,600 Baxter International, Inc. $ 3,575,236 70,200 Guidant Corp. 3,922,776 ------------ 7,498,012 ------------ Office & Business Equipment -- 2.8% 690,000 Xerox Corp.(c) (d) 10,005,000 ------------ Oil & Gas -- 2.5% 141,800 Burlington Resources, Inc. 5,130,324 50,646 ConocoPhillips 3,863,783 ------------ 8,994,107 ------------ Pharmaceuticals -- 6.9% 189,500 Abbott Laboratories 7,724,020 231,500 Bristol-Myers Squibb Co. 5,671,750 74,400 Cardinal Health, Inc.(d) 5,211,720 129,400 Merck & Co., Inc. 6,146,500 ------------ 24,753,990 ------------ Restaurants -- 3.1% 425,000 McDonald's Corp. 11,050,000 ------------ Retailers -- 3.8% 96,100 Costco Wholesale Corp. 3,946,827 155,200 Kohl's Corp.(c) 6,561,856 56,400 Wal-Mart Stores, Inc. 2,975,664 ------------ 13,484,347 ------------ Software -- 3.8% 305,900 First Data Corp. 13,618,668 ------------ Total Common Stocks (Identified Cost $278,809,843) 336,218,358 ------------ Principal Amount - ---------- Short Term Investments -- 15.8% $18,953,083 Repurchase Agreement with Investors Bank & Trust Co. dated 6/30/2004 at 0.70% to be purchased at $18,953,452 on 7/01/2004, collateralized by $18,370,002 Small Business Administration Bond, 4.05%, due 8/25/2028 valued at $19,900,737 18,953,083 5,203,933 Bank of America, 1.50%, due 7/21/2004(e) 5,203,933 662,849 Bank of Montreal, 1.20%, due 7/23/2004(e) 662,849 2,168,306 Bank of Nova Scotia, 1.04%, due 7/06/2004(e) 2,168,306 5,637,596 BGI Prime Money Market Fund 5,637,596 1,734,644 BNP Paribas, 1.08%, due 7/02/2004(e) 1,734,644 1,734,644 BNP Paribas, 1.08%, due 7/29/2004(e) 1,734,644 867,322 Caylon, 1.04%, due 7/06/2004(e) 867,322 1,300,983 Caylon, 1.34%, due 8/24/2004(e) 1,300,983 117,267 Delaware Funding Corporation, 1.241%, due 7/22/2004(e) 117,267 867,322 Den Danske Bank, 1.03%, due 7/02/2004(e) 867,322 433,819 Fairway Finance, 1.281%, due 7/26/2004(e) 433,819 1,731,105 Fannie Mae, 1.131%, due 7/14/2004(e) 1,731,105 433,661 Fortis Bank, 1.19%, due 7/14/2004(e) 433,661 1,300,983 Greyhawk Funding, 1.221%, due 7/20/2004(e) 1,300,983 867,322 HBOS Halifax Bank of Scotland, 1.08%, due 7/29/2004(e) 867,322 1,028,488 Merrill Lynch Premier Institutional Fund(e) 1,028,488 3,469,289 Merrimac Cash Fund-Premium Class(e) 3,469,289 2,164,561 Prefco, 1.111%, due 7/07/2004(e) 2,164,561 1,300,983 Royal Bank of Scotland, 1.05%, due 7/07/2004(e) 1,300,983 867,322 Royal Bank of Scotland, 1.06%, due 7/30/2004(e) 867,322 1,300,983 Sheffield Receivables Corp, 1.071%, due 7/01/2004(e) 1,300,983 867,322 Wells Fargo, 1.19%, due 7/19/2004(e) 867,322 1,300,983 Wells Fargo, 1.24%, due 7/26/2004(e) 1,300,983 ------------ Total Short Term Investments (Identified Cost $56,314,770) 56,314,770 ------------ See accompanying notes to financial statements. 19 - -------------------------------------------------------------------------------- Harris Associates Large Cap Value Fund Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Total Investments -- 109.9% (Identified Cost $335,124,613) (b) $392,533,128 Other assets less liabilities (35,477,575) ------------ Total Net Assets -- 100% $357,055,553 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2004, the net unrealized appreciation on investments based on cost of $335,124,613 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $ 59,557,744 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (2,149,229) ------------ Net unrealized appreciation $ 57,408,515 ============ At December 31, 2003, the Fund had a capital loss carryover of approximately $168,487,529 of which $15,926,671 expires on December 31, 2007, $34,642,742 expires on December 31, 2008 $83,318,807 expires on December 31, 2009, $24,633,843 expires on December 31, 2010 and $9,965,466 expires on December 31, 2011. These amounts, subject to limitations, may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) Non-income producing security. (d) All or a portion of this security was on loan to brokers at June 30, 2004. (e) Represents investments of securities lending collateral. ADR An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank representing the right to receive securities of the foreign issuer described. The values of ADRs are significantly influenced by trading on exchanges not located in the United States. See accompanying notes to financial statements. 20 - -------------------------------------------------------------------------------- Vaughan Nelson Small Cap Value Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Common Stocks -- 94.6% of Total Net Assets Aerospace & Defense -- 6.2% 30,125 Alliant Techsystems, Inc.(c) (d) $ 1,908,117 57,450 DRS Technologies, Inc.(c) 1,832,655 59,275 Esterline Technologies Corp.(c) 1,750,391 39,050 Moog, Inc., Class A(c) 1,449,145 ----------- 6,940,308 ----------- Automotive -- 2.5% 62,525 Aftermarket Technology Corp.(c) 1,031,662 58,975 United Auto Group, Inc. 1,807,584 ----------- 2,839,246 ----------- Banking -- 7.5% 39,700 Chittenden Corp. 1,395,455 48,951 MB Financial, Inc. 1,801,886 54,775 Provident Bankshares Corp. 1,579,711 154,489 Sterling Bancshares, Inc. 2,192,199 83,250 Texas Capital Bancshares, Inc.(c) 1,381,950 ----------- 8,351,201 ----------- Building Materials -- 0.9% 145,475 U.S. Concrete, Inc.(c) 1,025,599 ----------- Business Services -- 1.2% 101,425 Cornell Companies, Inc.(c) 1,379,380 ----------- Commercial Services -- 9.1% 47,900 Consolidated Graphics, Inc.(c) 2,109,995 111,000 Dollar Thrifty Automotive Group, Inc.(c) 3,045,840 128,850 Healthcare Services Group, Inc. 1,971,405 218,175 Integrated Alarm Services Group, Inc. (c) (d) 1,178,145 38,225 Monro Muffler, Inc.(c) 927,338 109,575 Stewart Enterprises, Inc., Class A(c) 891,940 ----------- 10,124,663 ----------- Communications -- 0.8% 105,625 Hypercom Corp.(c) 892,531 ----------- Computer Software & Processing -- 0.8% 354,000 Kana Software Inc.(c) 842,520 ----------- Computers -- 1.0% 47,175 Reynolds & Reynolds Co. (The), Class A 1,091,158 ----------- Electrical Equipment -- 1.7% 24,200 AZZ, Inc.(c) 367,840 150,725 GrafTech International, Ltd.(c) (d) 1,576,583 ----------- 1,944,423 ----------- Electronics -- 1.1% 53,300 MTS Systems Corp. 1,249,885 ----------- Entertainment & Leisure -- 2.7% 64,300 K2, Inc.(c) 1,009,510 113,025 Navigant International, Inc.(c) (d) 2,010,715 ----------- 3,020,225 ----------- Environmental Control -- 1.6% 134,850 Allied Waste Industries, Inc.(c) 1,777,323 ----------- Financial Services -- 3.6% 53,925 Friedman, Billings, Ramsey Group, Inc., Class A 1,067,176 61,925 MCG Capital Corp. 952,406 73,375 Raymond James Financial, Inc. 1,940,769 ----------- 3,960,351 ----------- Health Care Providers -- 4.6% 25,950 Pediatrix Medical Group, Inc.(c) 1,812,607 88,375 Triad Hospitals, Inc.(c) 3,290,201 ----------- 5,102,808 ----------- Heavy Machinery -- 2.8% 18,850 Briggs & Stratton Corp. $ 1,665,398 34,525 Nordson Corp. 1,497,349 ----------- 3,162,747 ----------- Home Construction, Furnishings & Appliances -- 1.1% 92,175 Walter Industries, Inc. 1,255,424 ----------- Household Products -- 1.1% 41,925 Yankee Candle Co. (The), Inc.(c) 1,226,306 ----------- Insurance -- 4.6% 56,075 HCC Insurance Holdings, Inc. 1,873,466 59,925 Infinity Property & Casualty Corp. 1,977,525 237,100 Meadowbrook Insurance Group, Inc.(c) 1,256,630 ----------- 5,107,621 ----------- Investment Companies -- 4.7% 30,150 iShares Russell 2000 Value Index Fund(d) 5,194,845 ----------- Lodging -- 2.3% 162,475 La Quinta Corp.(c) 1,364,790 17,200 Mandalay Resort Group 1,180,608 ----------- 2,545,398 ----------- Media - Broadcasting & Publishing -- 1.3% 74,925 Journal Register Co.(c) 1,498,500 ----------- Metals -- 2.1% 77,475 Allegheny Technologies, Inc.(d) 1,398,424 34,850 Steel Dynamics, Inc.(c) 997,756 ----------- 2,396,180 ----------- Oil & Gas -- 10.0% 63,075 Equitable Resources, Inc.(d) 3,261,608 72,925 Oil States International, Inc.(c) 1,115,753 23,400 Quicksilver Resources, Inc.(c) (d) 1,569,438 4,975 Range Resources Corp. 72,635 73,950 Southwestern Energy Co.(c) (d) 2,120,147 20,125 Ultra Petroleum Corp.(c) 751,266 149,025 Willbros Group, Inc.(c) (d) 2,245,807 ----------- 11,136,654 ----------- Railroads & Equipment -- 1.4% 63,775 Genesee & Wyoming, Inc.(c) 1,511,468 ----------- REITs - Hotels -- 2.7% 181,150 Ashford Hospitality Trust, Inc. 1,512,603 153,300 Highland Hospitality Corp. 1,540,665 ----------- 3,053,268 ----------- REITs - Mortgage -- 1.5% 65,400 American Home Mortgage Investment Corp. 1,695,822 ----------- REITs - Office Buildings -- 1.3% 101,425 American Financial Realty Trust(d) 1,449,363 ----------- Restaurants -- 1.5% 56,025 Triarc Cos., Inc., Class A 578,738 112,125 Triarc Cos., Inc., Class B 1,140,311 ----------- 1,719,049 ----------- Retailers -- 6.1% 56,100 PEP Boys-Manny, Moe & Jack Corp.(d) 1,422,135 64,525 Regis Corp. 2,877,170 25,900 Sports Authority (The), Inc.(c) 929,810 57,950 Zale Corp.(c) 1,579,717 ----------- 6,808,832 ----------- Semiconductors -- 1.3% 128,000 Entegris, Inc.(c) 1,480,960 ----------- See accompanying notes to financial statements. 21 - -------------------------------------------------------------------------------- Vaughan Nelson Small Cap Value Fund Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Software -- 1.3% 57,775 Inter-Tel, Inc. $ 1,442,642 ------------- Transportation -- 2.2% 28,500 Landstar System, Inc.(c) 1,506,795 67,325 RailAmerica, Inc.(c) 982,945 ------------ 2,489,740 ------------ Total Common Stocks (Identified Cost $100,729,937) 105,716,440 ------------ Principal Amount - --------- Short Term Investments -- 20.5% $6,037,234 Repurchase Agreement with Investors Bank & Trust Co. dated 6/30/2004 at 0.70% to be purchased at $6,037,351 on 7/01/2004, collateralized by $6,256,135 Federal National Mortgage Association Bond, 5.15%, due 5/01/2032 valued at $6,339,096 6,037,234 2,349,470 Bank of America, 1.50%, due 7/21/2004(e) 2,349,470 299,263 Bank of Montreal, 1.20%, due 7/23/2004(e) 299,263 978,946 Bank of Nova Scotia, 1.04%, due 7/06/2004(e) 978,946 2,545,257 BGI Prime Money Market Fund(e) 2,545,257 783,157 BNP Paribas, 1.08%, due 7/02/2004(e) 783,157 783,157 BNP Paribas, 1.08%, due 7/29/2004(e) 783,157 391,579 Caylon, 1.04%, due 7/06/2004(e) 391,579 587,367 Caylon, 1.34%, due 8/24/2004(e) 587,367 52,943 Delaware Funding Corporation, 1.241%, due 7/22/2004(e) 52,943 391,579 Den Danske Bank, 1.03%, due 7/02/2004(e) 391,579 195,861 Fairway Finance, 1.281%, due 7/26/2004(e) 195,861 781,559 Fannie Mae, 1.131%, due 7/14/2004(e) 781,559 195,789 Fortis Bank, 1.19%, due 7/14/2004(e) 195,789 587,367 Greyhawk Funding, 1.221%, due 7/20/2004(e) 587,367 391,579 HBOS Halifax Bank of Scotland, 1.08%, due 7/29/2004(e) 391,579 464,341 Merrill Lynch Premier Institutional Fund(e) 464,341 1,566,313 Merrimac Cash Fund-Premium Class(e) 1,566,313 977,255 Prefco, 1.111%, due 7/07/2004(e) 977,255 587,367 Royal Bank of Scotland, 1.05%, due 7/07/2004(e) 587,367 391,579 Royal Bank of Scotland, 1.06%, due 7/30/2004(e) 391,579 587,367 Sheffield Receivables Corp, 1.071%, due 7/01/2004(e) 587,367 391,579 Wells Fargo, 1.19%, due 7/19/2004(e) 391,579 587,367 Wells Fargo, 1.24%, due 7/26/2004(e) 587,367 ------------ Total Short Term Investments (Identified Cost $22,905,275) 22,905,275 ------------ Total Investments -- 115.1% (Identified Cost $123,635,212) (b) 128,621,715 Other assets less liabilities (16,913,747) ------------ Total Net Assets -- 100% $111,707,968 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2004, the net unrealized appreciation on investments based on cost of $123,635,212 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $ 8,702,560 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (3,716,057) ------------ Net unrealized appreciation $ 4,986,503 ============ At December 31, 2003, the Fund had a capital loss carryover of approximately $61,631,063 of which $34,341,113 expires on December 31, 2009 and $27,289,950 expires on December 31, 2010. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) Non-income producing security. (d) All or a portion of this security was on loan to brokers at June 30, 2004. (e) Represents investments of securities lending collateral. REITs Real Estate Investment Trusts See accomanying notes to financial statements. 22 - -------------------------------------------------------------------------------- Westpeak Capital Growth Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Common Stocks -- 98.6% of Total Net Assets Apparel Retailers -- 1.5% 46,400 Gap (The), Inc.(c) $1,125,200 ---------- Banking -- 0.8% 10,200 Wells Fargo & Co. 583,746 ---------- Beverages, Food & Tobacco -- 7.1% 6,400 Altria Group, Inc. 320,320 19,200 Anheuser-Busch Cos., Inc. 1,036,800 11,900 Coca-Cola Co. (The) 600,712 40,600 H.J. Heinz Co. 1,591,520 31,100 Pepsi Bottling Group, Inc. 949,794 15,600 PepsiCo, Inc. 840,528 ---------- 5,339,674 ---------- Biotechnology -- 2.2% 15,500 Amgen, Inc.(d) 845,835 11,200 Invitrogen Corp.(d) 806,288 ---------- 1,652,123 ---------- Building Materials -- 3.4% 72,050 Home Depot, Inc. 2,536,160 ---------- Chemicals -- 0.6% 7,800 Sigma - Aldrich Corp.(c) 464,958 ---------- Commercial Services -- 3.1% 24,400 Convergys Corp.(d) 375,760 20,800 Equifax, Inc. 514,800 47,800 Rent-A-Center, Inc.(d) 1,430,654 ---------- 2,321,214 ---------- Communications -- 7.8% 32,600 Boston Communications Group(d) 334,150 152,200 Cisco Systems, Inc.(d) 3,607,140 55,000 Polycom, Inc.(d) 1,232,550 9,100 QUALCOMM, Inc. 664,118 ---------- 5,837,958 ---------- Computers -- 3.2% 27,600 International Business Machines Corp. 2,432,940 ---------- Cosmetics & Personal Care -- 2.5% 22,200 Estee Lauder Cos. (The), Inc., Class A 1,082,916 18,700 Gillette Co. (The) 792,880 ---------- 1,875,796 ---------- Electrical Equipment -- 1.8% 30,100 Energizer Holdings, Inc.(d) 1,354,500 ---------- Electronics -- 1.1% 38,800 Applera Corp. - Applied Biosystems Group 843,900 ---------- Financial Services -- 5.5% 5,200 Capital One Financial Corp. 355,576 10,200 CompuCredit Corp.(d) 176,460 29,100 Fannie Mae(c) 2,076,576 19,200 MBNA Corp. 495,168 22,500 New Century Financial Corp.(c) 1,053,450 ---------- 4,157,230 ---------- Health Care Providers -- 3.0% 6,300 Coventry Health Care, Inc.(d) 308,070 30,800 UnitedHealth Group, Inc. 1,917,300 ---------- 2,225,370 ---------- Healthcare-Services -- 1.2% 23,100 Laboratory Corp. of America Holdings(d) 917,070 ---------- Household Products -- 4.2% 57,000 Johnson & Johnson $3,174,900 ---------- Industrial - Diversified -- 3.9% 89,800 General Electric Co. 2,909,520 ---------- Insurance -- 1.8% 14,300 AMBAC Financial Group, Inc.(c) 1,050,192 4,500 American International Group, Inc. 320,760 ---------- 1,370,952 ---------- Internet -- 2.5% 19,800 Infospace, Inc.(d) 753,192 19,700 Symantec Corp.(d) 862,466 6,600 Yahoo!, Inc.(d) 239,778 ---------- 1,855,436 ---------- Lodging -- 0.9% 11,900 Harrah's Entertainment, Inc. 643,790 ---------- Media - Broadcasting & Publishing -- 2.6% 10,800 McGraw-Hill Cos. (The), Inc. 826,956 31,200 Viacom, Inc., Class B 1,114,464 ---------- 1,941,420 ---------- Medical Supplies -- 4.1% 32,200 Becton, Dickinson & Co.(c) 1,667,960 5,800 Boston Scientific Corp.(d) 248,240 10,200 Hillenbrand Industries, Inc. 616,590 7,000 St. Jude Medical, Inc.(d) 529,550 ---------- 3,062,340 ---------- Mining -- 0.3% 6,800 Freeport-McMoran Copper & Gold, Inc., 225,420 ---------- Class B(c) Oil & Gas -- 1.8% 12,800 Anadarko Petroleum Corp. 750,080 15,900 Baker Hughes, Inc. 598,635 ---------- 1,348,715 ---------- Pharmaceuticals -- 12.1% 42,200 Abbott Laboratories 1,720,072 5,790 Hospira, Inc.(d) 159,804 44,400 Merck & Co., Inc. 2,109,000 148,950 Pfizer, Inc. 5,106,006 ---------- 9,094,882 ---------- Retailers -- 1.1% 12,000 RadioShack Corp. 343,560 9,500 Wal-Mart Stores, Inc. 501,220 ---------- 844,780 ---------- Semiconductors -- 7.3% 28,000 Altera Corp.(c) (d) 622,160 28,500 Applied Materials, Inc.(d) 559,170 139,400 Intel Corp. 3,847,440 18,000 Texas Instruments, Inc. 435,240 ---------- 5,464,010 ---------- Software -- 9.0% 32,500 Automatic Data Processing, Inc. 1,361,100 11,400 Citrix Systems, Inc.(d) 232,104 9,700 IMS Health, Inc. 227,368 173,100 Microsoft Corp. 4,943,736 ---------- 6,764,308 ---------- Telephone Systems -- 0.2% 7,200 Nextel Communications, Inc., Class A(d) 191,952 ---------- See accompanying notes to financial statements. 23 - -------------------------------------------------------------------------------- Westpeak Capital Growth Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of June 30, 2004 (unaudited) Shares Description Value (a) - -------------------------------------------------------------------------------- Tools -- 1.5% 17,900 Black & Decker Corp.(c) $ 1,112,127 ----------- Transportation -- 0.5% 4,300 FedEx Corp. 351,267 ----------- Total Common Stocks (Identified Cost $76,321,948) 74,023,658 ----------- Principal Amount - ---------- Short Term Investments -- 11.6% $ 640,508 Repurchase Agreement with Investors Bank & Trust Co. dated 6/30/2004 at 0.70% to be purchased at $640,520 on 7/01/2004, collateralized by $672,075 Countrywide Home Loans Bond, 1.85%, due 4/25/2033 valued at $672,533 640,508 1,123,349 Bank of America, 1.50%, due 7/21/2004(e) 1,123,349 143,087 Bank of Montreal, 1.20%, due 7/23/2004(e) 143,087 468,062 Bank of Nova Scotia, 1.04%, due 7/06/2004(e) 468,062 1,216,957 BGI Prime Money Market Fund(e) 1,216,957 374,450 BNP Paribas, 1.08%, due 7/02/2004(e) 374,450 374,450 BNP Paribas, 1.08%, due 7/29/2004(e) 374,450 187,225 Caylon, 1.04%, due 7/06/2004(e) 187,225 280,837 Caylon, 1.34%, due 8/24/2004(e) 280,837 25,314 Delaware Funding Corporation, 1.241%, due 7/22/2004(e) 25,314 187,225 Den Danske Bank, 1.03%, due 7/02/2004(e) 187,225 93,647 Fairway Finance, 1.281%, due 7/26/2004(e) 93,647 373,686 Fannie Mae, 1.131%, due 7/14/2004(e) 373,686 93,612 Fortis Bank, 1.19%, due 7/14/2004(e) 93,612 280,837 Greyhawk Funding, 1.221%, due 7/20/2004(e) 280,837 187,225 HBOS Halifax Bank of Scotland, 1.08%, due 7/29/2004(e) 187,225 222,015 Merrill Lynch Premier Institutional Fund(e) 222,015 748,899 Merrimac Cash Fund-Premium Class(e) 748,899 467,254 Prefco, 1.111%, due 7/07/2004(e) 467,254 280,837 Royal Bank of Scotland, 1.05%, due 7/07/2004(e) 280,837 187,225 Royal Bank of Scotland, 1.06%, due 7/30/2004(e) 187,225 280,837 Sheffield Receivables Corp, 1.071%, due 7/01/2004(e) 280,837 187,225 Wells Fargo, 1.19%, due 7/19/2004(e) 187,225 280,837 Wells Fargo, 1.24%, due 7/26/2004(e) 280,837 ----------- Total Short Term Investments (Identified Cost $8,705,600) 8,705,600 ----------- Total Investments -- 110.2% (Identified Cost $85,027,548) (b) 82,729,258 Other assets less liabilities (7,682,243) ----------- Total Net Assets -- 100% $75,047,015 ----------- (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At June 30, 2004, the net unrealized depreciation on investments based on cost of $85,027,548 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $ 5,031,114 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (7,329,404) ----------- Net unrealized depreciation $(2,298,290) =========== At December 31, 2003, the Fund had a capital loss carryover of approximately $57,629,674 of which $26,648,714 expires on December 31, 2009, $26,883,047 expires on December 31, 2010 and $4,097,913 expires on December 31, 2011. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) All or a portion of this security was on loan to brokers at June 30, 2004. (d) Non-income producing security. (e) Represents investments of securities lending collateral. See accompanying notes to financial statements. 24 Statements of Assets & Liabilities June 30, 2004 (unaudited)
CGM Advisor Hansberger Harris Associates Harris Associates Targeted Equity International Focused Value Large Cap Value Fund Fund Fund Fund --------------- ------------- ----------------- ----------------- ASSETS Investments at cost $ 699,634,050 $141,656,020 $311,890,702 $ 335,124,613 Net unrealized appreciation (depreciation) 125,984,007 9,854,058 56,654,756 57,408,515 ------------- ------------ ------------ ------------- Investments at value 825,618,057 151,510,078 368,545,458 392,533,128 Receivable for Fund shares sold 94,788 230,609 852,138 428,138 Receivable for securities sold 49,417,606 671,836 -- 2,211,195 Dividends and interest receivable 1,380,725 272,089 347,540 291,230 Tax reclaims receivable 42,850 53,277 -- -- Securities lending income receivable 104,650 12,849 4,020 11,985 ------------- ------------ ------------ ------------- TOTAL ASSETS 876,658,676 152,750,738 369,749,156 395,475,676 ------------- ------------ ------------ ------------- LIABILITIES Collateral on securities loaned, at value 83,018,909 20,789,954 23,125,833 37,361,687 Payable for securities purchased 46,928,983 654,998 591,920 -- Payable for Fund shares redeemed 1,196,981 71,985 1,009,062 556,634 Management fees payable 425,622 84,698 283,719 121,733 Deferred Trustees' fees 468,671 56,444 26,389 185,497 Transfer agent fees payable 205,415 60,455 108,977 100,865 Accounting and administrative fees payable 49,126 8,301 18,149 19,292 Deferred expense payable -- -- 36,348 -- Other accounts payable and accrued expenses 140,907 65,692 64,758 74,415 ------------- ------------ ------------ ------------- TOTAL LIABILITIES 132,434,614 21,792,527 25,265,155 38,420,123 ------------- ------------ ------------ ------------- NET ASSETS $ 744,224,062 $130,958,211 $344,484,001 $ 357,055,553 ============= ============ ============ ============= NET ASSETS CONSIST OF: Paid in capital $ 858,008,701 $135,663,150 $309,676,072 $ 413,771,418 Undistributed (overdistributed) net investment income (loss) 576,642 (46,947) (1,281,036) (304,323) Accumulated net realized gain (loss) (240,345,288) (14,513,675) (20,565,791) (113,820,057) Net unrealized appreciation (depreciation) on investments and foreign currency translations 125,984,007 9,855,683 56,654,756 57,408,515 ------------- ------------ ------------ ------------- NET ASSETS $ 744,224,062 $130,958,211 $344,484,001 $ 357,055,553 ============= ============ ============ ============= COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: Class A shares: Net assets $ 678,530,599 $ 65,912,468 $103,086,419 $ 221,106,994 ============= ============ ============ ============= Shares of beneficial interest 82,846,323 4,306,479 8,656,934 17,509,478 ============= ============ ============ ============= Net asset value and redemption price per share $ 8.19 $ 15.31 $ 11.91 $ 12.63 ============= ============ ============ ============= Offering price per share $ 8.69 $ 16.24 $ 12.64 $ 13.40 ============= ============ ============ ============= Class B shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 54,884,601 $ 50,403,914 $106,273,415 $ 84,525,349 ============= ============ ============ ============= Shares of beneficial interest 7,145,365 3,543,254 9,147,374 7,068,530 ============= ============ ============ ============= Net asset value and offering price per share $ 7.68 $ 14.23 $ 11.62 $ 11.96 ============= ============ ============ ============= Class C shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 2,725,696 $ 14,641,829 $135,124,167 $ 22,874,039 ============= ============ ============ ============= Shares of beneficial interest 354,988 1,028,914 11,628,799 1,915,268 ============= ============ ============ ============= Net asset value and offering price per share $ 7.68 $ 14.23 $ 11.62 $ 11.94 ============= ============ ============ ============= Class Y shares: Net assets $ 8,083,166 $ -- $ -- $ 28,549,171 ============= ============ ============ ============= Shares of beneficial interest 968,859 -- -- 2,204,280 ============= ============ ============ ============= Net asset value, offering and redemption price per share $ 8.34 $ -- $ -- $ 12.95 ============= ============ ============ =============
See accompanying notes to financial statements. 25 Vaughan Nelson Westpeak Small Cap Value Capital Growth Fund Fund - --------------- -------------- $123,635,212 $ 85,027,548 4,986,503 (2,298,290) ------------ ------------ 128,621,715 82,729,258 72,206 8,572 118,633 573,794 159,676 72,932 30 -- 4,149 1,547 ------------ ------------ 128,976,409 83,386,103 ------------ ------------ 16,868,041 8,065,092 -- -- 139,481 73,489 80,582 46,169 61,196 65,191 58,599 38,202 6,290 4,169 -- -- 54,252 46,776 ------------ ------------ 17,268,441 8,339,088 ------------ ------------ $111,707,968 $ 75,047,015 ============ ============ $151,192,268 $132,697,186 (895,403) (404,797) (43,575,400) (54,947,084) 4,986,503 (2,298,290) ------------ ------------ $111,707,968 $ 75,047,015 ============ ============ $ 45,231,044 $ 59,858,510 ============ ============ 3,101,616 5,479,458 ============ ============ $ 14.58 $ 10.92 ============ ============ $ 15.47 $ 11.59 ============ ============ $ 54,373,577 $ 14,109,464 ============ ============ 3,986,062 1,480,294 ============ ============ $ 13.64 $ 9.53 ============ ============ $ 12,103,347 $ 1,079,041 ============ ============ 886,799 113,416 ============ ============ $ 13.65 $ 9.51 ============ ============ $ -- $ -- ============ ============ -- -- ============ ============ $ -- $ -- ============ ============ 26 Statements of Operations For the Six Months Ended June 30, 2004 (unaudited)
CGM Advisor Hansberger Harris Associates Harris Associates Targeted Equity International Focused Value Large Cap Value Fund Fund Fund Fund --------------- ------------- ----------------- ----------------- INVESTMENT INCOME Dividends $ 6,281,236 $ 1,962,599 $ 2,458,410 $ 2,372,917 Interest 15,526 6,292 39,501 29,104 Securities lending income 277,257 53,728 14,917 22,850 Less net foreign taxes withheld (364,509) (268,224) -- -- ------------ ------------ ----------- ----------- 6,209,510 1,754,395 2,512,828 2,424,871 ------------ ------------ ----------- ----------- Expenses Management fees 2,693,437 584,216 1,697,443 1,192,903 Service fees - Class A 885,446 78,276 125,851 273,283 Service and distribution fees - Class B 280,851 280,392 536,942 436,392 Service and distribution fees - Class C 13,535 67,310 657,096 97,520 Trustees' fees and expenses 40,885 8,329 12,366 18,910 Accounting and administrative 262,087 42,950 110,620 115,283 Custodian 64,251 90,360 28,017 33,437 Transfer agent fees - Class A, Class B, Class C 1,258,121 313,927 506,208 634,907 Transfer agent fees - Class Y 9,619 -- -- 18,996 Audit and tax services 13,431 18,157 11,389 11,669 Legal 25,472 4,868 10,654 10,504 Shareholder reporting 67,177 25,096 34,223 41,233 Registration 38,435 24,818 20,999 32,224 Deferred expense reimbursement -- -- 12,846 -- Miscellaneous 33,634 7,229 17,134 17,025 ------------ ------------ ----------- ----------- Total expenses before reductions 5,686,381 1,545,928 3,781,788 2,934,286 ------------ ------------ ----------- ----------- Less reimbursement/waiver -- (11,186) -- (289,886) Less reductions (404,500) (13,647) (7,777) (9,870) ------------ ------------ ----------- ----------- Net expenses 5,281,881 1,521,095 3,774,011 2,634,530 ------------ ------------ ----------- ----------- Net investment income (loss) 927,629 233,300 (1,261,183) (209,659) ------------ ------------ ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments - net 88,107,957 21,104,353 874,757 8,006,023 Foreign currency transactions - net -- (353,619) -- -- Change in unrealized appreciation (depreciation) on: Investments - net (65,402,272) (19,147,006) 2,553,205 2,650,797 Foreign currency translations - net -- (5,940) -- -- ------------ ------------ ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currency transactions 22,705,685 1,597,788 3,427,962 10,656,820 ------------ ------------ ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 23,633,314 $ 1,831,088 $ 2,166,779 $10,447,161 ============ ============ =========== ===========
See accompanying notes to financial statements. 27 Vaughan Nelson Westpeak Small Cap Value Capital Growth Fund Fund - --------------- -------------- $ 475,227 $ 416,386 11,284 2,151 19,516 2,238 ------------ ----------- 506,027 420,775 ------------ ----------- 534,789 291,716 56,810 76,915 274,453 75,663 60,449 5,632 8,040 7,357 37,072 25,497 39,853 23,858 296,262 211,451 ------------ ----------- 17,811 11,566 4,060 3,019 26,863 17,417 27,925 21,738 ------------ ----------- 10,152 7,707 1,394,539 779,536 -- -- (33,515) (14,290) ------------ ----------- 1,361,024 765,246 ------------ ----------- (854,997) (344,471) ------------ ----------- 18,501,468 2,838,623 (273) -- (12,858,388) (2,160,035) -- -- ------------ ----------- 5,642,807 678,588 ------------ ----------- $ 4,787,810 $ 334,117 ============ =========== 28 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
CGM Advisor Hansberger International Targeted Equity Fund Fund -------------------------------- -------------------------------- Six Months Ended Six Months Ended June 30, Year Ended June 30, Year Ended 2004 December 31, 2004 December 31, (unaudited) 2003 (unaudited) 2003 ---------------- ------------- ---------------- ------------- FROM OPERATIONS: Net investment income (loss) $ 927,629 $ (3,122,630) $ 233,300 $ (860,042) Net realized gain (loss) on investments and foreign currency transactions 88,107,957 106,028,525 20,750,734 4,108,518 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (65,402,272) 147,570,284 (19,152,946) 34,846,636 ------------ ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations 23,633,314 250,476,179 1,831,088 38,095,112 ------------ ------------- ------------- ------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: -- -- -- -- ------------ ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (70,925,011) (115,291,688) (3,488,320) (19,850,820) ------------ ------------- ------------- ------------- Redemption fees Class A 460 -- 52 -- Class B 37 -- 42 -- Class C 2 -- 12 -- Class Y 5 -- -- -- ------------ ------------- ------------- ------------- Total increase (decrease) in net assets (47,291,193) 135,184,491 (1,657,126) 18,244,292 NET ASSETS Beginning of period 791,515,255 656,330,764 132,615,337 114,371,045 ------------ ------------- ------------- ------------- End of period $744,224,062 $ 791,515,255 $ 130,958,211 $ 132,615,337 ============ ============= ============= ============= UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 576,642 $ (350,987) $ (46,947) $ (280,247) ============ ============= ============= =============
See accompanying notes to financial statements. 29
Harris Associates Harris Associates Vaughan Nelson Westpeak Focused Value Fund Large Cap Value Fund Small Cap Value Fund Capital Growth Fund - ------------------------------ ------------------------------ ------------------------------ ------------------------------ Six Months Ended Six Months Ended Six Months Ended Six Months Ended June 30, Year Ended June 30, Year Ended June 30, Year Ended June 30, Year Ended 2004 December 31, 2004 December 31, 2004 December 31, 2004 December 31, (unaudited) 2003 (unaudited) 2003 (unaudited) 2003 (unaudited) 2003 - ---------------- ------------ ---------------- ------------ ---------------- ------------ ---------------- ------------ $ (1,261,183) $ (2,201,302) $ (209,659) $ (400,858) $ (854,997) $ (2,106,900) $ (344,471) $ (780,856) 874,757 (5,444,642) 8,006,023 (6,367,843) 18,501,195 11,598,714 2,838,623 (1,825,695) 2,553,205 74,168,695 2,650,797 78,036,056 (12,858,388) 22,419,975 (2,160,035) 20,729,574 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ 2,166,779 66,522,751 10,447,161 71,267,355 4,787,810 31,911,789 334,117 18,123,023 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ -- -- -- -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ 14,915,585 20,155,440 (1,832,871) 57,978,163 (6,225,783) (14,351,582) (6,326,091) (12,927,717) 2 -- -- -- 1 -- -- -- 1 -- -- -- 1 -- -- -- 1 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ 17,082,368 86,678,191 8,614,290 129,245,518 (1,437,971) 17,560,207 (5,991,974) 5,195,306 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ 327,401,633 240,723,442 348,441,263 219,195,745 113,145,939 95,585,732 81,038,989 75,843,683 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ $344,484,001 $327,401,633 $357,055,553 $348,441,263 $111,707,968 $113,145,939 $75,047,015 $ 81,038,989 ============ ============ ============ ============ ============ ============ =========== ============ $ (1,281,036) $ (19,853) $ (304,323) $ (94,664) $ (895,403) $ (40,406) $ (404,797) $ (60,326) ============ ============ ============ ============ ============ ============ =========== ============
30 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share outstanding throughout each period.
Income (loss) from investment operations: Net asset ----------------------------------------- value, Net Net realized beginning investment and unrealized Total from of income gain (loss) on investment the period (loss) investments operations ---------- ---------- -------------- ---------- CGM Advisor Targeted Equity Fund Class A 6/30/2004(h) $ 7.94 $ 0.01(c) $ 0.24 $ 0.25 12/31/2003 5.56 (0.03)(c) 2.41 2.38 12/31/2002 7.81 (0.06)(c) (2.19) (2.25) 12/31/2001 9.36 (0.03)(c) (1.49) (1.52) 12/31/2000 11.00 0.09(c) (0.60) (0.51) 12/31/1999 11.36 0.02 1.57 1.59 Class B 6/30/2004(h) 7.47 (0.02)(c) 0.23 0.21 12/31/2003 5.28 (0.07)(c) 2.26 2.19 12/31/2002 7.47 (0.11)(c) (2.08) (2.19) 12/31/2001 9.02 (0.09)(c) (1.43) (1.52) 12/31/2000 10.67 0.01(c) (0.58) (0.57) 12/31/1999 11.15 (0.05) 1.52 1.47 Class C 6/30/2004(h) 7.47 (0.02)(c) 0.23 0.21 12/31/2003 5.27 (0.07)(c) 2.27 2.20 12/31/2002 7.47 (0.11)(c) (2.09) (2.20) 12/31/2001 9.02 (0.09)(c) (1.43) (1.52) 12/31/2000 10.67 0.01(c) (0.58) (0.57) 12/31/1999 11.15 (0.05) 1.52 1.47 Class Y 6/30/2004(h) 8.07 0.03(c) 0.24 0.27 12/31/2003 5.63 0.01(c) 2.43 2.44 12/31/2002 7.85 (0.02)(c) (2.20) (2.22) 12/31/2001 9.37 0.01(c) (1.50) (1.49) 12/31/2000 11.01 0.12(c) (0.60) (0.48) 12/31/1999(d) 11.94 0.03 0.99 1.02 Hansberger International Fund Class A 6/30/2004(h) $15.07 $ 0.06(c) $ 0.18 $ 0.24 12/31/2003 10.84 (0.04)(c) 4.27 4.23 12/31/2002 13.02 (0.05)(c) (2.08) (2.13) 12/31/2001 14.42 0.13(c) (1.42) (1.29) 12/31/2000 19.90 (0.02)(c) (2.43) (2.45) 12/31/1999 16.08 (0.07)(c) 5.98 5.91 Class B 6/30/2004(h) 14.06 (0.01)(c) 0.18 0.17 12/31/2003 10.19 (0.12)(c) 3.99 3.87 12/31/2002 12.32 (0.14)(c) (1.94) (2.08) 12/31/2001 13.74 0.03(c) (1.36) (1.33) 12/31/2000 19.26 (0.16)(c) (2.33) (2.49) 12/31/1999 15.73 (0.20)(c) 5.82 5.62 Less distributions: ----------------------------------------------------------- Dividends Distributions from from net net investment realized Total Redemption income capital gains distributions fee -------------- ------------- ------------- ---------- CGM Advisor Targeted Equity Fund Class A 6/30/2004(h) $ -- $ -- $ -- $0.00(i) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.06) (1.07) (1.13) -- 12/31/1999 -- (1.95) (1.95) -- Class B 6/30/2004(h) -- -- -- 0.00(i) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.01) (1.07) (1.08) -- 12/31/1999 -- (1.95) (1.95) -- Class C 6/30/2004(h) -- -- -- 0.00(i) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.01) (1.07) (1.08) -- 12/31/1999 -- (1.95) (1.95) -- Class Y 6/30/2004(h) -- -- -- 0.00(i) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.09) (1.07) (1.16) -- 12/31/1999(d) -- (1.95) (1.95) -- Hansberger International Fund Class A 6/30/2004(h) $ -- $ -- $ -- 0.00(i) 12/31/2003 -- -- -- -- 12/31/2002 (0.05) -- (0.05) -- 12/31/2001 (0.03) (0.08) (0.11) -- 12/31/2000 -- (3.03) (3.03) -- 12/31/1999 -- (2.09) (2.09) -- Class B 6/30/2004(h) -- -- -- 0.00(i) 12/31/2003 -- -- -- -- 12/31/2002 (0.05) -- (0.05) -- 12/31/2001 (0.01) (0.08) (0.09) -- 12/31/2000 -- (3.03) (3.03) -- 12/31/1999 -- (2.09) (2.09) --
(a) A sales charge for Class A 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) 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. (c) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (d) For the period June 30, 1999 (inception) through December 31, 1999. (e) Had certain expenses not been reduced during the period total return would have been lower. (f) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period. Without this reimbursement, expenses would have been higher. (g) Computed on an annualized basis for periods less than one year. (h) For the six months ended June 30, 2004 (unaudited). (i) Amount rounds to less than $0.01 per share. See accompanying notes to financial statements. 31 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Ratios to average net assets: ----------------------------------------- Net asset Net assets, Expenses value, Total end of after expense Net investment Portfolio end of return the period Expenses reductions income (loss) turnover the period (%) (a) (000) (%)(g) (%) (b)(g) (%) (g) rate (%) - ---------- ------- ----------- -------- ------------- -------------- --------- $ 8.19 3.2 $ 678,531 1.41 1.31 0.29 138 7.94 42.8 724,214 1.57 1.48 (0.40) 261 5.56 (28.8) 602,989 1.47 1.39 (0.86) 223 7.81 (16.2) 1,012,161 1.38 1.35 (0.39) 243 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 7.68 2.8 54,885 2.16 2.06 (0.44) 138 7.47 41.5 56,880 2.32 2.23 (1.14) 261 5.28 (29.3) 45,633 2.23 2.15 (1.62) 223 7.47 (16.8) 78,744 2.13 2.10 (1.14) 243 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 7.68 2.8 2,726 2.16 2.06 (0.43) 138 7.47 41.8 2,647 2.32 2.23 (1.14) 261 5.27 (29.5) 2,187 2.23 2.15 (1.62) 223 7.47 (16.8) 4,162 2.13 2.10 (1.14) 243 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 8.34 3.4 8,083 1.08 0.97 0.65 138 8.07 43.3 7,773 1.03 0.94 0.16 261 5.63 (28.3) 5,522 0.92 0.84 (0.31) 223 7.85 (15.9) 8,785 0.87 0.83 0.13 243 9.37 (4.2) 12,260 0.85 0.83 1.16 266 11.01 9.7 15,418 0.87 0.87 0.48 206 $15.31 1.6(e) $ 65,912 1.93(f) 1.91(f) 0.81 66 15.07 39.0(e) 59,762 2.30(f) 2.27(f) (0.34) 92 10.84 (16.4) 50,053 2.19 2.18 (0.45) 91 13.02 (9.0) 71,536 2.12 2.10 0.98 110 14.42 (12.2) 102,507 2.01 2.01 (0.13) 175 19.90 37.6 126,415 2.06 2.06 (0.42) 91 14.23 1.2(e) 50,404 2.68(f) 2.66(f) (0.09) 66 14.06 38.0(e) 60,296 3.05(f) 3.02(f) (1.09) 92 10.19 (17.0) 53,306 2.94 2.93 (1.20) 91 12.32 (9.7) 82,861 2.87 2.85 0.23 110 13.74 (12.8) 114,450 2.76 2.76 (0.88) 175 19.26 36.6 141,338 2.81 2.81 (1.17) 91
32 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share outstanding throughout each period.
Income (loss) from investment operations: Net asset ----------------------------------------- value, Net Net realized beginning investment and unrealized Total from of income gain (loss) on investment the period (loss) investments operations ---------- ---------- -------------- ---------- Hansberger International Fund (continued) Class C 6/30/2004(i) $14.06 $ 0.00 (c) $ 0.17 $ 0.17 12/31/2003 10.19 (0.12)(c) 3.99 3.87 12/31/2002 12.33 (0.14)(c) (1.95) (2.09) 12/31/2001 13.75 0.03(c) (1.36) (1.33) 12/31/2000 19.27 (0.16)(c) (2.33) (2.49) 12/31/1999 15.75 (0.21)(c) 5.82 5.61 Harris Associates Focused Value Fund Class A 6/30/2004(i) $11.79 $(0.01)(c) $ 0.13 $ 0.12 12/31/2003 9.24 (0.03)(c) 2.58 2.55 12/31/2002 10.96 (0.03)(c) (1.69) (1.72) 12/31/2001(g) 10.00 (0.01)(c) 0.97 0.96 Class B 6/30/2004(i) 11.55 (0.06)(c) 0.13 0.07 12/31/2003 9.12 (0.10)(c) 2.53 2.43 12/31/2002 10.90 (0.11)(c) (1.67) (1.78) 12/31/2001(g) 10.00 (0.07)(c) 0.97 0.90 Class C 6/30/2004(i) 11.55 (0.06)(c) 0.13 0.07 12/31/2003 9.12 (0.10)(c) 2.53 2.43 12/31/2002 10.90 (0.11)(c) (1.67) (1.78) 12/31/2001(g) 10.00 (0.07)(c) 0.97 0.90 Harris Associates Large Cap Value Fund Class A 6/30/2004(i) $12.25 $ 0.01(c) $ 0.37 $ 0.38 12/31/2003 9.42 0.01(c) 2.82 2.83 12/30/2002 11.78 0.01(c) (2.37) (2.36) 12/31/2001 13.79 (0.01)(c) (2.00) (2.01) 12/31/2000 15.33 0.01(c) (1.09) (1.08) 12/31/1999 16.57 0.08 1.40 1.48 Class B 6/30/2004(i) 11.64 (0.04)(c) 0.36 0.32 12/31/2003 9.02 (0.07)(c) 2.69 2.62 12/31/2002 11.37 (0.07)(c) (2.28) (2.35) 12/31/2001 13.40 (0.10)(c) (1.93) (2.03) 12/31/2000 15.03 (0.10)(c) (1.07) (1.17) 12/31/1999 16.37 (0.04) 1.36 1.32 Less distributions: ----------------------------------------------------------- Dividends Distributions from from net net investment realized Total Redemption income capital gains distributions fee -------------- ------------- ------------- ---------- Hansberger International Fund (continued) Class C 6/30/2004(i) $ -- $ -- $ -- $0.00(j) 12/31/2003 -- -- -- -- 12/31/2002 (0.05) -- (0.05) -- 12/31/2001 (0.01) (0.08) (0.09) -- 12/31/2000 -- (3.03) (3.03) -- 12/31/1999 -- (2.09) (2.09) -- Harris Associates Focused Value Fund Class A 6/30/2004(i) $ -- $ -- $ -- $0.00(j) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001(g) -- -- -- -- Class B 6/30/2004(i) -- -- -- 0.00(j) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001(g) -- -- -- -- Class C 6/30/2004(i) -- -- -- 0.00(j) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001(g) -- -- -- -- Harris Associates Large Cap Value Fund Class A 6/30/2004(i) $ -- $ -- $ -- $ -- 12/31/2003 -- -- -- -- 12/30/2002 -- -- -- -- 12/31/2001 -- -- -- -- 12/31/2000 -- (0.46) (0.46) -- 12/31/1999 (0.06) (2.66) (2.72) -- Class B 6/30/2004(i) -- -- -- -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 -- -- -- -- 12/31/2000 -- (0.46) (0.46) -- 12/31/1999 -- (2.66) (2.66) --
(a) A sales charge for Class A 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) 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. (c) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (d) 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. (e) Had certain expenses not been reduced during the period, total return would have been lower. (f) Portfolio turnover excludes the impact of an increase in assets as a result of a merger with another Fund. (g) For the period March 15, 2001 (inception) through December 31, 2001. (h) Computed on an annualized basis for periods less than one year. (i) For the six months ended June 30, 2004 (unaudited). (j) Amount rounds to less than $0.01 per share. See accompanying notes to financial statements. 33
Ratios to average net assets: ------------------------------------------- Net asset Net assets, Expenses value, Total end of after expense Net investment Portfolio end of return the period Expenses reductions income (loss) turnover the period (%)(a) (000) (%)(h) (%)(b)(h) (%)(h) rate(%) - ---------- ------ ----------- -------- ------------- -------------- --------- $14.23 1.2(e) $ 14,642 2.68(d) 2.66(d) 0.07 66 14.06 38.0(e) 12,557 3.05(d) 3.02(d) (1.09) 92 10.19 (17.0) 11,013 2.94 2.93 (1.20) 91 12.33 (9.7) 16,493 2.87 2.85 0.23 110 13.75 (12.8) 23,949 2.76 2.76 (0.88) 175 19.27 36.5 28,703 2.81 2.81 (1.17) 91 $11.91 1.0(e) $103,086 1.70(d) 1.70(d) (0.21) 13 11.79 27.6(e) 95,957 1.70(d) 1.69(d) (0.28) 30 9.24 (15.7)(e) 68,660 1.70(d) 1.69(d) (0.35) 12 10.96 9.6(e) 45,987 1.70(d) 1.63(d) (0.08) 10 11.62 0.6(e) 106,273 2.45(d) 2.45(d) (0.97) 13 11.55 26.6(e) 107,017 2.45(d) 2.44(d) (1.03) 30 9.12 (16.3)(e) 85,794 2.45(d) 2.44(d) (1.10) 12 10.90 9.0(e) 62,671 2.45(d) 2.39(d) (0.83) 10 11.62 0.6(e) 135,124 2.45(d) 2.45(d) (0.97) 13 11.55 26.6(e) 124,427 2.45(d) 2.44(d) (1.03) 30 9.12 (16.3)(e) 86,269 2.45(d) 2.44(d) (1.10) 12 10.90 9.0(e) 34,406 2.45(d) 2.39(d) (0.86) 10 $12.63 3.1(e) $221,107 1.30(d) 1.29(d) 0.08 15(f) 12.25 30.0(e) 215,259 1.45(d) 1.43(d) 0.07 30(f) 9.42 (20.0) 130,751 1.56 1.54 0.07 195 11.78 (14.6) 211,138 1.46 1.41 (0.05) 154 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 11.96 2.8(e) 84,525 2.05(d) 2.05(d) (0.67) 15(f) 11.64 29.1(e) 91,085 2.20(d) 2.18(d) (0.69) 30(f) 9.02 (20.7) 71,436 2.31 2.29 (0.68) 195 11.37 (15.1) 120,361 2.21 2.16 (0.80) 154 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
34 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: ----------------------------------------- -------------------------------------------- Net asset value, Net Net realized Dividends Distributions beginning investment and unrealized Total from from from net of income gain (loss) on investment net investment realized Total Redemption the period (loss) investments operations income capital gains distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ------------- ---------- Harris Associates Large Cap Value Fund (continued) Class C 6/30/2004(h) $11.63 $(0.04)(c) $ 0.35 $ 0.31 $ -- $ -- $ -- $ -- 12/31/2003 9.01 (0.07)(c) 2.69 2.62 -- -- -- -- 12/31/2002 11.36 (0.07)(c) (2.28) (2.35) -- -- -- -- 12/31/2001 13.38 (0.10)(c) (1.92) (2.02) -- -- -- -- 12/31/2000 15.01 (0.10)(c) (1.07) (1.17) -- (0.46) (0.46) -- 12/31/1999 16.35 (0.04) 1.36 1.32 -- (2.66) (2.66) -- Class Y 6/30/2004(h) 12.54 0.03(c) 0.38 0.41 -- -- -- -- 12/31/2003 9.59 0.06(c) 2.89 2.95 -- -- -- -- 12/31/2002 11.93 0.07(c) (2.41) (2.34) -- -- -- -- 12/31/2001 13.87 0.06(c) (2.00) (1.94) -- -- -- -- 12/31/2000 15.36 0.07(c) (1.10) (1.03) -- (0.46) (0.46) -- 12/31/1999 16.57 0.02 1.51 1.53 (0.08) (2.66) (2.74) -- Vaughan Nelson Small Cap Value Fund Class A 6/30/2004(h) $13.94 $(0.08)(c) $ 0.72 $ 0.64 $ -- $ -- $ -- $0.00(i) 12/31/2003 10.05 (0.19)(c) 4.08 3.89 -- -- -- -- 12/31/2002 14.52 (0.21)(c) (4.26) (4.47) -- -- -- -- 12/31/2001 16.51 (0.21)(c) (1.78) (1.99) -- -- -- -- 12/31/2000 23.42 (0.28) (2.30) (2.58) -- (4.33) (4.33) -- 12/31/1999 15.66 (0.27) 10.22 9.95 -- (2.19) (2.19) -- Class B 6/30/2004(h) 13.08 (0.12)(c) 0.68 0.56 -- -- -- 0.00(i) 12/31/2003 9.51 (0.26)(c) 3.83 3.57 -- -- -- -- 12/31/2002 13.84 (0.28)(c) (4.05) (4.33) -- -- -- -- 12/31/2001 15.86 (0.30)(c) (1.72) (2.02) -- -- -- -- 12/31/2000 22.85 (0.44) (2.22) (2.66) -- (4.33) (4.33) -- 12/31/1999 15.43 (0.39) 10.00 9.61 -- (2.19) (2.19) -- Class C 06/30/2004(h) 13.09 (0.12)(c) 0.68 0.56 -- -- -- -- 12/31/2003 9.51 (0.26)(c) 3.84 3.58 -- -- -- -- 12/31/2002 13.84 (0.28)(c) (4.05) (4.33) -- -- -- -- 12/31/2001 15.86 (0.30)(c) (1.72) (2.02) -- -- -- -- 12/31/2000 22.85 (0.44) (2.22) (2.66) -- (4.33) (4.33) -- 12/31/1999 15.43 (0.39) 10.00 9.61 -- (2.19) (2.19) --
(a) A sales charge for Class A 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) 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. (c) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (d) 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. (e) Had certain expenses not been reduced during the period, total return would have been lower. (f) Portfolio turnover excludes the impact of assets as a result of a merger with another Fund. (g) Computed on an annualized basis for periods less than one year. (h) For the six months ended June 30, 2004 (unaudited). (i) Amount rounds to less than $0.01 per share. See accompanying notes to financial statements. 35
Ratios to average net assets: ------------------------------------------- Net asset Net assets, Expenses value, Total end of after expense Net investment Portfolio end of return the period Expenses reductions income (loss) turnover the period (%)(a) (000) (%)(g) (%)(b)(g) (%)(g) rate(%) - ---------- ------ ----------- -------- ------------- -------------- --------- $11.94 2.7(e) $ 22,874 2.05(d) 2.05(d) (0.67) 15(f) 11.63 29.1(e) 15,553 2.20(d) 2.18(d) (0.69) 30(f) 9.01 (20.7) 6,440 2.31 2.29 (0.68) 195 11.36 (15.1) 10,553 2.21 2.16 (0.80) 154 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 12.95 3.3 28,549 0.98 0.97 0.41 15(f) 12.54 30.8 26,545 1.01 0.99 0.51 30(f) 9.59 (19.6) 10,569 0.96 0.94 0.66 195 11.93 (14.0) 11,918 0.91 0.87 0.52 154 13.87 (7.0) 10,131 0.87 0.84 0.48 139 15.36 9.8 14,377 0.96 0.96 (0.73) 133 $14.58 4.6 $ 45,231 2.03 1.97 (1.07) 137 13.94 38.7 45,442 2.33 2.31 (1.69) 156 10.05 (30.8) 38,441 2.13 2.11 (1.72) 160 14.52 (12.1) 69,873 2.08 2.07 (1.43) 174 16.51 (12.2) 89,714 1.88 1.88 (1.19) 216 23.42 65.4 84,725 2.06 2.06 (1.54) 263 13.64 4.3 54,374 2.78 2.72 (1.82) 137 13.08 37.5 55,662 3.08 3.06 (2.44) 156 9.51 (31.3) 46,215 2.88 2.86 (2.47) 160 13.84 (12.7) 82,060 2.83 2.82 (2.18) 174 15.86 (12.9) 107,083 2.63 2.63 (1.94) 216 22.85 64.1 102,029 2.81 2.81 (2.29) 263 13.65 4.3 12,103 2.78 2.72 (1.82) 137 13.09 37.6 12,042 3.08 3.06 (2.44) 156 9.51 (31.3) 10,930 2.88 2.86 (2.47) 160 13.84 (12.7) 22,047 2.83 2.82 (2.18) 174 15.86 (12.9) 28,090 2.63 2.63 (1.94) 216 22.85 64.1 26,027 2.81 2.81 (2.29) 263
36 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share outstanding throughout each period.
Income (loss) from investment operations: ----------------------------------------- Net asset value, Net Net realized beginning investment and unrealized Total from of income gain (loss) on investment the period (loss)(c) investments operations ---------- ---------- -------------- ----------- Westpeak Capital Growth Fund - ---------------------------- Class A 6/30/2004(e) $10.87 $(0.04) $ 0.09 $ 0.05 12/31/2003 8.58 (0.08) 2.37 2.29 12/31/2002 11.93 (0.09) (3.26) (3.35) 12/31/2001 15.04 (0.13) (2.95) (3.08) 12/31/2000 22.86 (0.18) (4.14) (4.32) 12/31/1999 20.67 (0.13) 5.05 4.92 Class B 6/30/2004(e) 9.52 (0.07) 0.08 0.01 12/31/2003 7.56 (0.13) 2.09 1.96 12/31/2002 10.61 (0.15) (2.90) (3.05) 12/31/2001 13.47 (0.20) (2.63) (2.83) 12/31/2000 21.06 (0.32) (3.77) (4.09) 12/31/1999 19.37 (0.27) 4.69 4.42 Class C 6/30/2004(e) 9.50 (0.07) 0.08 0.01 12/31/2003 7.56 (0.13) 2.07 1.94 12/31/2002 10.60 (0.14) (2.90) (3.04) 12/31/2001 13.47 (0.20) (2.64) (2.84) 12/31/2000 21.06 (0.32) (3.77) (4.09) 12/31/1999 19.37 (0.27) 4.69 4.42 Less distributions: ---------------------------------------------- Dividends Distributions from from net net investment realized Total Redemption income capital gains distributions fee -------------- ------------- ------------- ---------- Westpeak Capital Growth Fund - ---------------------------- Class A 6/30/2004(e) $-- $ -- $ -- $-- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 -- (0.03) (0.03) -- 12/31/2000 -- (3.50) (3.50) -- 12/31/1999 -- (2.73) (2.73) -- Class B 6/30/2004(e) -- -- -- -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 -- (0.03) (0.03) -- 12/31/2000 -- (3.50) (3.50) -- 12/31/1999 -- (2.73) (2.73) -- Class C 6/30/2004(e) -- -- -- -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 -- (0.03) (0.03) -- 12/31/2000 -- (3.50) (3.50) -- 12/31/1999 -- (2.73) (2.73) --
(a) A sales charge for Class A 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) The Fund has 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. (c) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (d) Computed on an annualized basis for periods less than one year. (e) For the six months ended June 30, 2004 (unaudited). See accompanying notes to financial statements. 37
Ratios to average net assets: ------------------------------- Net asset Net assets, Expenses value, Total end of after expense Net investment Portfolio end of return the period Expenses reductions income (loss) turnover the period (%)(a) (000) (%)(d) (%)(b)(d) (%)(d) rate(%) - ---------- -------- ----------- -------- ------------- --------------- --------- $10.92 0.5 $ 59,859 1.85 1.81 (0.73) 64 10.87 26.7 63,380 1.93 1.89 (0.85) 107 8.58 (28.1) 58,729 1.75 1.71 (0.84) 103 11.93 (20.5) 98,412 1.62 1.58 (0.99) 90 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 9.53 0.1 14,109 2.60 2.56 (1.48) 64 9.52 25.9 16,485 2.68 2.64 (1.60) 107 7.56 (28.8) 16,267 2.50 2.46 (1.59) 103 10.61 (21.0) 35,409 2.37 2.33 (1.74) 90 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 9.51 0.1 1,079 2.60 2.56 (1.48) 64 9.50 25.7 1,174 2.68 2.64 (1.60) 107 7.56 (28.7) 847 2.50 2.46 (1.59) 103 10.60 (21.1) 1,745 2.37 2.33 (1.74) 90 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
38 - -------------------------------------------------------------------------------- Notes To Financial Statements - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) 1. Organization. CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and CDC Nvest Funds Trust III (the "Trusts" and each a "Trust") are organized as Massachusetts business trusts. Each Trust is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end management investment company. Each Declaration of Trust permits the Trustees to issue an unlimited number of shares of the Trust in multiple series (individually, a "Fund" and, collectively, the "Funds"). Information presented in these financial statements pertains to the equity funds of the Trusts; the financial statements of the other Funds of the Trusts are presented in separate reports. The following Funds are included in this report: CDC Nvest Funds Trust I: CGM Advisor Targeted Equity Fund (the "Targeted Equity Fund") Hansberger International Fund (the "International Fund"), formerly CDC Nvest Star International Fund Vaughan Nelson Small Cap Value Fund (the "Small Cap Value Fund"), formerly CDC Nvest Star Small Cap Fund Westpeak Capital Growth Fund (the "Capital Growth Fund") CDC Nvest Funds Trust II: Harris Associates Large Cap Value Fund (the "Large Cap Value Fund"), formerly Harris Associates Growth and Income Fund CDC Nvest Funds Trust III: Harris Associates Focused Value Fund (the "Focused Value Fund") Each Fund offers Class A, Class B, and Class C shares. Targeted Equity Fund and Large Cap Value Fund also offer Class Y shares. Class A shares are sold with a maximum front end sales charge of 5.75%. Class B shares do not pay a front end sales charge, but pay a higher ongoing distribution fee than Class A shares for eight years (at which point they automatically convert to Class A shares), and are subject to a contingent deferred sales charge ("CDSC") if those shares are redeemed within six years of purchase. Class C shares do not pay a front end sales charge, do not convert to any other class of shares and pay a higher ongoing distribution fee than Class A shares and may be subject to a CDSC of 1.00% if those shares are redeemed within one year. Prior to February 1, 2004 a 1% front end sales charge was imposed on Class C shares. Class Y shares do not pay a front end sales charge, a CDSC or distribution fees. They are intended for institutional investors with a minimum initial investment of $1,000,000. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees and transfer agent fees applicable to such class), and votes as a class only with respect to its own Rule 12b-1 Plan. Shares of each class would receive their pro rata share of the net assets of a Fund, if the Fund were liquidated. The Trustees approve separate dividends from net investment income on each class of shares. 2. Significant Accounting Policies. The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds' financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. a. Security Valuation. Equity securities for which market quotations are readily available are valued at market price on the basis of valuations furnished to the Fund by a pricing service which has been authorized by the Board of Trustees. The pricing service provides the last reported sale price for securities listed on an applicable securities exchange or on the NASDAQ National Market system, or, if no sale was reported and in the case of over-the-counter securities not so listed, the last reported bid price. Securities traded on the NASDAQ National Market are valued at the NASDAQ Official Closing Price ("NOCP"), or if lacking an NOCP, at the most recent bid quotation on the NASDAQ National Market. Debt securities for which market quotations are readily available (other than short-term obligations with a remaining maturity of less than sixty days) are generally valued at market price on the basis of valuations furnished by a pricing service authorized by the Board of Trustees, which service determines valuations for normal, institutional-size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Short-term obligations with a remaining maturity of less than sixty days are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value as determined in good faith by the Fund's investment adviser and subadviser, pursuant to the procedures approved by the Board of Trustees. b. Security Transactions and Related Investment Income. Security transactions are accounted for on trade date. Dividend income is recorded on ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified, and interest income is recorded on an accrual basis. Interest income is increased by the accretion of discount and decreased by the amortization of premium. Investment income is recorded net of foreign taxes withheld when recovery of such taxes is uncertain. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. c. Foreign Currency Translation. The books and records of the Funds are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. Since the values of investment securities are presented at the foreign exchange rates prevailing at the end of the period, it is not practical to isolate that portion of the results of operations arising from changes in exchange rates from fluctuations arising from changes in market prices of the investment securities. Such changes are included with the net realized and unrealized gain or loss on investments. 39 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) Net realized foreign exchange gains or losses arise from: sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities at the end of the fiscal periods, resulting from changes in exchange rates. d. Forward Foreign Currency Contracts. The International Fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuation. Also, a contract to buy or sell can offset a previous contract. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Fund's Statement of Assets and Liabilities. The U.S. dollar value of the currencies the Fund has committed to buy or sell, if any, is shown in the portfolio composition under the caption "Forward Currency Contracts Outstanding." These amounts represent the aggregate exposure to each currency the Fund has acquired or hedged through currency contracts outstanding at period end. All contracts are "marked-to-market" daily at the applicable exchange rates and any gains or losses are recorded for financial statement purposes as unrealized until settlement date. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. e. Federal and Foreign Income Taxes. The Trusts treat each Fund as a separate entity for federal income tax purposes. Each Fund intends to meet the requirements of the Internal Revenue Code applicable to regulated investment companies, and to distribute to its shareholders substantially all of its net investment income and any net realized capital gains, at least annually. Accordingly, no provision for federal income tax has been made. A Fund may be subject to foreign taxes on income and gains on investments that are accrued based upon the Fund's understanding of the tax rules and regulations that exist in the countries in which the Fund invests. Foreign governments may also impose taxes or other payments on investments with respect to foreign securities, such taxes are accrued as applicable. f. Dividends and Distributions to Shareholders. Dividends and distributions are recorded on ex-dividend date. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for book and tax purposes of items such as distributions from real estate investment trusts, net operating losses, non-deductible expenses, foreign currency transactions and gains realized from passive foreign investment companies. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital accounts. Distributions from net investment income and short-term capital gains are considered to be ordinary income for tax purposes. g. Repurchase Agreements. Each Fund, through its custodian, receives delivery of the underlying securities collateralizing repurchase agreements. It is each Fund's policy that the market value of the collateral be at least equal to 102% of the repurchase price, including interest. Each Fund's subadviser (adviser for the Targeted Equity Fund) is responsible for determining that the value of the collateral is at all times at least equal to 102% of the repurchase price, including interest. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities. 3. Purchases and Sales of Securities. For the six months ended June 30, 2004, purchases and sales of securities (excluding short-term investments) were as follows: Fund Purchases Sales - ---- --------- ----- Targeted Equity Fund $1,066,862,548 $1,134,794,195 International Fund 85,590,997 89,219,902 Focused Value Fund 54,670,572 39,543,192 Large Cap Value Fund 51,107,227 61,200,743 Small Cap Value Fund 141,226,384 151,085,315 Capital Growth Fund 49,558,774 56,553,221 4. Management Fees and Other Transactions with Affiliates. a. Management Fees. CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") is the investment adviser to each of the Funds except the Targeted Equity Fund. Capital Growth Management Limited Partnership ("CGM") is the investment adviser to the Targeted Equity Fund. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund's average daily net assets:
Percentage of Average Daily Net Assets -------------------------------------------------------------------- First Next Next Next Over Fund $200 million $300 million $500 million $1 billion $2 billion - ---- ------------ ------------ ------------ ---------- ---------- Targeted Equity Fund 0.750% 0.700% 0.650% 0.650% 0.600% International Fund 0.800% 0.750% 0.750% 0.750% 0.750% Focused Value Fund 1.000% 1.000% 1.000% 0.950% 0.950% Large Cap Value Fund 0.700% 0.650% 0.600% 0.600% 0.600% Small Cap Value Fund 0.900% 0.900% 0.900% 0.900% 0.900% Capital Growth Fund 0.750% 0.700% 0.650% 0.650% 0.650%
40 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) Prior to March 1, 2004, the International Fund and Small Cap Value Fund each paid management fees at the annual rate of 1.05% of each Fund's average daily net assets. For the six months ended June 30, 2004, the management fees and waivers for each Fund were as follows:
Percentage of Average Gross Waiver of Net Daily Net Assets* Management Management Management --------------------- Fund Fee Fee Fee Gross Net - ---- ---------- ---------- ---------- ----- ----- Targeted Equity Fund $2,693,437 $ -- $2,693,437 0.700% 0.700% International Fund 584,216 11,186 573,030 0.880% 0.870% Focused Value Fund 1,697,443 -- 1,697,443 1.000% 1.000% Large Cap Value Fund 1,192,903 -- 1,192,903 0.680% 0.680% Small Cap Value Fund 534,789 -- 534,789 0.950% 0.950% Capital Growth Fund 291,716 -- 291,716 0.750% 0.750%
* Annualized CDC IXIS Advisers has entered into subadvisory agreements for each Fund listed below. Payments to CDC IXIS Advisers are reduced by payments to the subadvisers. International Fund Hansberger Global Investors, Inc. Focused Value Fund Harris Associates L.P. Large Cap Value Fund Harris Associates L.P. Small Cap Value Fund Vaughan Nelson Investment Management, L.P. Capital Growth Fund Westpeak Global Advisors, L.P. CDC IXIS Advisers and each of the subadvisers are wholly-owned subsidiaries of CDC IXIS Asset Management North America, L.P. ("CDC IXIS North America"), CGM is a 50% owned subsidiary of CDC IXIS North America. Certain officers and directors of CDC IXIS Advisers are also officers or Trustees of the Funds. Broker commissions paid to affiliated broker/dealers by the Funds were as follows: Fund Commission - ---- ---------- Focused Value Fund $ 5,832 Large Cap Value Fund 6,156 Small Cap Value Fund 4,371 b. Accounting and Administrative Expense. CDC IXIS Asset Management Services, Inc. ("CIS"), a wholly owned subsidiary of CDC IXIS North America, performs certain accounting and administrative services for the Funds and has subcontracted with Investors Bank & Trust Co. ("IBT") to serve as subadministrator. Pursuant to an agreement among CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC Nvest Cash Management Trust, CDC Nvest Companies Trust I (the "CDC Nvest Funds Trusts"), Loomis Sayles Funds I, Loomis Sayles Funds II (the "Loomis Sayles Funds Trusts") and CIS, each Fund pays CIS its pro rata portion of a group fee for these services representing the higher amount based on the following calculations: (1) Percentage of Eligible Average Daily Net Assets First Next Over $5 billion $5 billion $10 billion ---------- ---------- ----------- 0.0675% 0.0625% 0.0500% or (2) Each Fund's pro rata portion, allocated based on the combined assets of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts of the annual aggregate minimum fee of $5 million. For the six months ended June 30, 2004, amounts paid to CIS for accounting and administrative expense were as follows: Accounting And Fund Administrative - ---- -------------- Targeted Equity Fund $262,087 International Fund 42,950 Focused Value Fund 110,620 Large Cap Value Fund 115,283 Small Cap Value Fund 37,072 Capital Growth Fund 25,497 41 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) c. Transfer Agent Fees. CIS is the transfer and shareholder servicing agent for each Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. Each Fund pays CIS service fees for servicing shareholder accounts. Classes A, B and C pay service fees monthly representing the higher amount based on the following calculations: (1) An annual aggregate fee determined by applying an annual fee rate (see schedule below) to the eligible average daily net assets. Eligible assets are the average daily net assets of all accounts in Load Equity funds. Load Equity funds consist of all equity funds within the CDC Nvest Funds Trusts, Loomis Sayles Growth Fund, Loomis Sayles International Equity Fund and Loomis Sayles Research Fund. First Next Over $5.7 billion $5 billion $10.7 billion ------------ ---------- ------------- 0.184% 0.180% 0.175% Each Class of shares is subject to a monthly Class minimum of $1,500 allocated based on the combined assets of Class A, Class B and Class C. or (2) An allocated portion, based on eligible assets, of a minimum annual aggregate fee of $8.4 million. Class Y pays service fees monthly representing the higher amount based on the following calculations: (1) An annual aggregate fee determined by applying an annual rate of 0.026% to the eligible average daily net assets. Eligible assets are the average daily net assets of all accounts in No-Load Retail Funds* and Load Funds - Class Y**. Class Y shares are subject to a monthly Class minimum of $1,250. or (2) An allocated portion, based on eligible assets of a minimum annual aggregate fee of $650,000. * No-Load Retail Funds consist of Loomis Sayles Aggressive Growth Fund, Loomis Sayles Bond Fund, Loomis Sayles Global Bond Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles Small Cap Value Fund, Loomis Sayles Tax-Managed Equity Fund, Loomis Sayles Value Fund and Loomis Sayles Worldwide Fund. ** Load Funds - Class Y consist of all Funds with Class Y offered within the CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts. In addition, pursuant to other servicing agreements, the Funds pay service fees to other firms that provide similar services for their own shareholder accounts. CIS and BFDS and other firms are also reimbursed by the Funds for out-of-pocket expenses. For the six months ended June 30, 2004, amounts paid to CIS as compensation for its services as transfer agent were as follows: Transfer Agent Fund Fee - ---- -------------- Targeted Equity Fund $1,034,856 International Fund 242,090 Focused Value Fund 332,295 Large Cap Value Fund 505,922 Small Cap Value Fund 212,968 Capital Growth Fund 167,087 d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act, the Trusts have adopted a Service Plan relating to each Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to each Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, each Fund pays CDC IXIS Asset Management Distributors, L.P. ("CDC IXIS Distributors"), the Fund's distributor (a wholly owned subsidiary of CDC IXIS North America), a monthly service fee at the annual rate of 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses incurred by CDC IXIS Distributors in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. Under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a monthly service fee at the annual rate of 0.25% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in providing personal services to investors in Class B and Class C shares and/or the maintenance of shareholder accounts. Also under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a monthly distribution fee at the annual rate of 0.75% of the average daily net assets attributable to 42 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in connection with the marketing or sale of Class B and Class C shares. For the six months ended June 30, 2004, the Funds paid the following service and distribution fees: Service Fee Distribution Fee ------------------------------- ------------------- Fund Class A Class B Class C Class B Class C - ---- --------- -------- -------- -------- -------- Targeted Equity Fund $885,446 $ 70,213 $ 3,384 $210,638 $ 10,151 International Fund 78,276 70,098 16,828 210,294 50,482 Focused Value Fund 125,851 134,236 164,274 402,706 492,822 Large Cap Value Fund 273,283 109,098 24,380 327,294 73,140 Small Cap Value Fund 56,810 68,613 15,112 205,840 45,337 Capital Growth Fund 76,915 18,916 1,408 56,747 4,224 Commissions (including CDSC) on Fund shares paid to CDC IXIS Distributors by investors in shares of the Funds during the six months ended June 30, 2004 were as follows: Fund - ---- Targeted Equity Fund $225,507 International Fund 81,586 Focused Value Fund 289,908 Large Cap Value Fund 226,245 Small Cap Value Fund 79,474 Capital Growth Fund 46,227 e. Trustees Fees and Expenses. The Trust does not pay any compensation directly to its officers or Trustees who are directors, officers or employees of CDC IXIS Advisers, CDC IXIS Asset Management Distributors, L.P., CDC IXIS North America, CIS or its affiliates. Each other Trustee receives a retainer fee at the annual rate of $45,000 and meeting attendance fees of $4,500 for each meeting of the Board of Trustees attended. Each committee member receives an additional retainer fee at the annual rate of $7,000 while each committee chairman receives a retainer fee (beyond the $7,000 fee) at the annual rate of $5,000. The retainer fees assume four Board or Committee meetings per year; Trustees are compensated for each additional Board or Committee meeting in excess of four per year, at the rate of $4,500 and $1,750, respectively. These fees are allocated to the various series of the Trust based on a formula that takes into account, among other factors, the relative net assets of each Fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings. Effective July 1, 2004, each independent Trustee will receive, in the aggregate, a retainer fee at the annual rate of $50,000 and meeting attendance fees of $5,000 for each meeting of the Board of Trustees that he or she attends. Each committee chairman will receive an additional retainer fee at the annual rate of $7,000. Each Trustee will be compensated $3,750 per Committee meeting that he or she attends. A deferred compensation plan (the "Plan") is available to the Trustees on a voluntary basis. Each participating Trustee will receive an amount equal to the value that such deferred compensation would have been had it been invested in the Trust or certain other series of the Trusts on the normal payment date. Deferred amounts remain in the Trust until distributed in accordance with the Plan. f. Publishing Services. CIS performs certain desktop publishing services for the Funds. Fees for these services are presented in the Statements of Operations as shareholder reporting. For the six months ended June 30, 2004, amounts paid to CIS as compensation for these services were as follows: Publishing Fund Services Fee - ---- ------------ Targeted Equity Fund $127 International Fund 395 Focused Value Fund 127 Large Cap Value Fund 99 Small Cap Value Fund 462 Capital Growth Fund 99 g. Redemption fees. Shareholders of Class A shares of Targeted Equity Fund, Focused Value Fund and International Fund will be charged a 2% redemption fee if they redeem, including redeeming by exchange, Class A shares of these Funds within 60 days of their acquisition (including acquisition by exchange). The redemption fee is intended to offset the costs to the Funds of short-term trading, such as portfolio transaction and market impact costs associated with redemption activity and administrative costs associated with processing redemptions. The redemption fee is deducted from the shareholder's redemption or exchange proceeds and is paid to the Fund. The "first-in, first-out" (FIFO) method is used to determine the holding period of redeemed or exchanged shares, which means that if you acquired shares on different days, the shares acquired first will be redeemed or exchanged first for purposes of determining whether the redemption fee applies. A new holding period begins with each purchase or exchange. These fees are broken out on the Statements of Changes in Net Assets. 43 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) 5. Line of Credit. Each Fund along with certain other funds that comprise the CDC Nvest Funds Trusts participate in a $50,000,000 committed line of credit provided by IBT. Advances under the Agreement are taken primarily for temporary or emergency purposes. Borrowings under the Agreement bear interest at a rate tied to one of several short-term rates that may be selected by the lender from time to time. In addition, the Funds are charged a facility fee equal to 0.10% per annum on the unused portion of the line of credit. The annual cost of maintaining the line of credit and the facility fee is apportioned pro rata among the participating funds. There were no borrowings as of or during the six months ended June 30, 2004. 6. Security Lending. Each Fund has entered into an agreement with IBT, as agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The Funds receive fees for lending their securities. The market value of securities on loan to borrowers and the value of collateral held by the Funds with respect to such loans at June 30, 2004, were as follows: Market Value of Value of Collateral Fund Securities on Loan Received - ---- ------------------ ------------------- Targeted Equity Fund $80,307,478 $83,018,909 International Fund 19,914,076 20,789,954 Focused Value Fund 22,385,332 23,125,833 Large Cap Value Fund 36,206,173 37,361,687 Small Cap Value Fund 16,248,997 16,868,041 Capital Growth Fund 7,845,514 8,065,092 7. Expense Reductions and Contingent Expense Obligations. Each Fund has entered into agreements with certain brokers whereby the brokers will rebate a portion of brokerage commissions. Amounts earned by the Funds under such agreements are presented as a reduction of expenses in the Statements of Operations. For the six months ended June 30, 2004, expenses were reduced under these agreements as follows: Fund Reductions - ---- ---------- Targeted Equity Fund $404,500 International Fund 13,647 Focused Value Fund 7,777 Large Cap Value Fund 9,870 Small Cap Value Fund 33,515 Capital Growth Fund 14,290 CDC IXIS Advisers has given binding undertakings to certain Funds to defer its management fees and, if necessary, bear certain expenses associated with these Funds to limit their operating expenses. These undertakings are in effect until the dates under "Expiration of Waiver" below and will be reevaluated on an annual basis. For the six months ended June 30, 2004, certain class level expenses have been reimbursed as follows: Large Cap Value Fund $289,886. If in the following fiscal year the actual operating expenses of a Fund that previously received a deferral or reimbursement are less than the expense limit for that Fund, the Fund is required to pay an amount of additional expense that is the lower of the difference between the expense limit and the actual amount of fees previously waived or expenses reimbursed. For the six months ended June 30, 2004, the investment adviser has been reimbursed by Focused Value Fund for $12,846 of expenses deferred in 2003. At June 30, 2004, the expense limits as a percentage of average daily net assets and amounts subject to possible reimbursement under the expense limitation agreements were as follows:
Expenses Subject Expenses Subject Total to Possible to Possible Expenses Subject Expense Limit as a Percentage Expiration Reimbursement Reimbursement to Possible of Average Daily Net Assets of Waiver through 2004 through 2005 Reimbursement ---------------------------------- -------------- ---------------- ---------------- ---------------- Fund Class A Class B Class C Class Y - ---- ------- ------- ------- ------- Focused Value Fund 1.70% 2.45% 2.45% -- April 30, 2005 $377,187 $ 0 $377,187 Large Cap Value Fund 1.30% 2.05% 2.05% 1.05% April 30, 2005 471,915 289,886 761,801
8. Concentration of Risk. Focused Value Fund is a non-diversified Fund. Compared with diversified mutual funds, the Fund may invest a greater percentage of its assets in a particular company. Therefore, the Fund's returns could be significantly affected by the performance of any one of the small number of stocks in its portfolio. International Fund had the following geographic concentrations in excess of 10% of its total net assets at June 30, 2004: France 13.9%, Japan 17.9%, and United Kingdom 19.2%. The Fund pursues its objective by investing in foreign securities. There are certain risks involved in investing in foreign securities that are in addition to the usual risks inherent in domestic investments. These risks include those resulting from future adverse political or economic developments and the possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. 44 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) 9. Capital Shares. Each Fund may issue an unlimited number of shares of beneficial interest. Transactions in capital shares were as follows:
CGM Advisor Targeted Equity Fund -------------------------------------------------------- Six Months Ended June 30, 2004 Year Ended (unaudited) December 31, 2003 -------------------------- --------------------------- Shares Amount Shares Amount ----------- ------------ ----------- ------------- Class A: Shares sold 1,852,394 $ 15,296,677 3,272,602 $ 21,476,490 Shares repurchased (10,228,859) (82,768,301) (20,406,401) (130,309,788) ----------- ------------ ----------- ------------- Net increase (decrease) (8,376,465) $(67,471,624) (17,133,799) $(108,833,298) ----------- ------------ ----------- ------------- Class B: Shares sold 320,631 $ 2,457,246 703,119 $ 4,292,342 Shares repurchased (786,760) (5,969,249) (1,738,618) (10,346,801) ----------- ------------ ----------- ------------- Net increase (decrease) (466,129) $ (3,512,003) (1,035,499) $ (6,054,459) ----------- ------------ ----------- ------------- Class C: Shares sold 33,280 $ 254,719 38,555 $ 239,637 Shares repurchased (32,669) (248,294) (98,860) (579,017) ----------- ------------ ----------- ------------- Net increase (decrease) 611 $ 6,425 (60,305) $ (339,380) ----------- ------------ ----------- ------------- Class Y: Shares sold 51,380 $ 422,989 98,496 $ 670,426 Shares repurchased (45,322) (370,798) (117,263) (734,977) ----------- ------------ ----------- ------------- Net increase (decrease) 6,058 $ 52,191 (18,767) $ (64,551) ----------- ------------ ----------- ------------- Increase (decrease) derived from capital shares transactions (8,835,925) $(70,925,011) (18,248,370) $(115,291,688) =========== ============ =========== =============
45 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - --------------------------------------------------------------------------------
Hansberger International Fund Harris Associates Focused Value Fund - --------------------------------------------------- ---------------------------------------------------- Six Months Ended Six Months Ended June 30, 2004 Year Ended June 30, 2004 Year Ended (unaudited) December 31, 2003 (unaudited) December 31, 2003 - ----------------------- ------------------------- ------------------------ ------------------------- Shares Amount Shares Amount Shares Amount Shares Amount - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ 773,920 $ 11,835,596 5,487,733 $ 61,630,766 1,487,643 $ 17,791,551 2,875,956 $ 29,849,185 (434,058) (6,638,190) (6,139,050) (69,259,645) (966,886) (11,575,283) (2,168,603) (22,052,029) - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ 339,862 $ 5,197,406 (651,317) $ (7,628,879) 520,757 $ 6,216,268 707,353 $ 7,797,156 - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ 155,094 $ 2,223,116 290,640 $ 3,415,741 510,762 $ 5,998,533 1,701,970 $ 16,766,807 (901,754) (12,841,002) (1,233,804) (13,640,399) (630,002) (7,349,007) (1,844,300) (18,116,704) - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ (746,660) $(10,617,886) (943,164) $(10,224,658) (119,240) $ (1,350,474) (142,330) $ (1,349,897) - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ 196,669 $ 2,801,026 125,234 $ 1,506,714 1,727,887 $ 20,236,183 3,353,028 $ 33,891,515 (60,816) (868,866) (312,978) (3,503,997) (871,108) (10,186,392) (2,040,296) (20,183,334) - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ 135,853 $ 1,932,160 (187,744) $ (1,997,283) 856,779 $ 10,049,791 1,312,732 $ 13,708,181 - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ -- $ -- -- $ -- -- $ -- -- $ -- -- -- -- -- -- -- -- -- - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ -- $ -- -- $ -- -- $ -- -- $ -- - -------- ------------ ---------- ------------ --------- ------------ ---------- ------------ (270,945) $ (3,488,320) (1,782,225) $(19,850,820) 1,258,296 $ 14,915,585 1,877,755 $ 20,155,440 ======== ============ ========== ============ ========= ============ ========== ============
46 - -------------------------------------------------------------------------------- Notes To Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2004 (unaudited) 9. Capital Shares (continued):
Harris Associates Large Cap Value Fund ----------------------------------------------------- Six Months Ended June 30, 2004 Year Ended (unaudited) December 31, 2003 ------------------------- ------------------------- Shares Amount Shares Amount ---------- ------------ ---------- ------------ Class A: Shares sold 1,370,587 $ 17,034,760 2,100,861 $ 22,762,821 Shares issued - merger -- -- 5,074,724 54,776,568 ---------- ------------ ---------- ------------ 1,370,587 17,034,760 7,175,585 77,539,389 Shares repurchased (1,436,023) (17,900,297) (3,485,439) (36,836,357) ---------- ------------ ---------- ------------ Net increase (decrease) (65,436) $ (865,537) 3,690,146 $ 40,703,032 ---------- ------------ ---------- ------------ Class B: Shares sold 356,699 $ 4,208,530 856,774 $ 9,891,819 Shares issued - merger -- -- 1,413,315 14,555,728 ---------- ------------ ---------- ------------ 356,699 4,208,530 2,270,089 24,447,547 Shares repurchased (1,113,039) (13,129,338) (2,366,418) (24,751,845) ---------- ------------ ---------- ------------ Net increase (decrease) (756,340) $ (8,920,808) (96,329) $ (304,298) ---------- ------------ ---------- ------------ Class C: Shares sold 713,473 $ 8,394,584 706,519 $ 7,419,708 Shares issued - merger -- -- 101,458 1,043,494 ---------- ------------ ---------- ------------ 713,473 8,394,584 807,977 8,463,202 Shares repurchased (135,889) (1,604,655) (185,271) (1,965,684) ---------- ------------ ---------- ------------ Net increase (decrease) 577,584 $ 6,789,929 622,706 $ 6,497,518 ---------- ------------ ---------- ------------ Class Y: Shares sold 230,300 $ 2,984,652 60,321 $ 637,760 Shares issued - merger -- -- 1,419,922 15,668,839 ---------- ------------ ---------- ------------ 230,300 2,984,652 1,480,243 16,306,599 Shares repurchased (142,249) (1,821,107) (465,803) (5,224,688) ---------- ------------ ---------- ------------ Net increase (decrease) 88,051 $ 1,163,545 1,014,440 $ 11,081,911 ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (156,141) $ (1,832,871) 5,230,963 $ 57,978,163 ========== ============ ========== ============
47 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - --------------------------------------------------------------------------------
Vaughan Nelson Small Cap Value Fund Westpeak Capital Growth Fund - -------------------------------------------------- -------------------------------------------------- Six Months Ended Six Months Ended June 30, 2004 Year Ended June 30, 2004 Year Ended (unaudited) December 31, 2003 (unaudited) December 31, 2003 - ---------------------- ------------------------- ---------------------- ------------------------- Shares Amount Shares Amount Shares Amount Shares Amount - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ 236,342 $ 3,416,675 735,059 $ 8,197,295 197,024 $ 2,145,423 459,334 $ 4,434,198 -- -- -- -- -- -- -- -- - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ 236,342 3,416,675 735,059 8,197,295 197,024 2,145,423 459,334 4,434,198 (395,542) (5,629,463) (1,297,834) (14,135,491) (549,918) (5,970,311) (1,474,769) (14,012,775) - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ (159,200) $(2,212,788) (562,775) $ (5,938,196) (352,894) $(3,824,888) (1,015,435) $ (9,578,577) - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ 178,832 $ 2,396,661 495,700 $ 5,413,902 82,979 $ 792,170 241,744 $ 2,031,512 -- -- -- -- -- -- -- -- - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ 178,832 2,396,661 495,700 5,413,902 82,979 792,170 241,744 2,031,512 (447,214) (5,972,386) (1,100,218) (11,475,987) (334,842) (3,198,464) (660,282) (5,491,199) - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ (268,382) $(3,575,725) (604,518) $ (6,062,085) (251,863) $(2,406,294) (418,538) $ (3,459,687) - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ 61,629 $ 821,511 92,836 $ 1,009,312 10,533 $ 100,145 43,266 $ 374,020 -- -- -- -- -- -- -- -- - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ 61,629 821,511 92,836 1,009,312 10,533 100,145 43,266 374,020 (94,766) (1,258,781) (321,688) (3,360,613) (20,742) (195,054) (31,761) (263,473) - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ (33,137) $ (437,270) (228,852) $ (2,351,301) (10,209) $ (94,909) 11,505 $ 110,547 - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ -- $ -- -- $ -- -- $ -- -- $ -- -- -- -- -- -- -- -- -- - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ -- $ -- -- $ -- -- $ -- -- $ -- - -------- ----------- ---------- ------------ -------- ----------- ---------- ------------ (460,719) $(6,225,783) (1,396,145) $(14,351,582) (614,966) $(6,326,091) (1,422,468) $(12,927,717) ======== =========== ========== ============ ======== =========== ========== ============
48 - -------------------------------------------------------------------------------- Additional Information - -------------------------------------------------------------------------------- Shareholder Meeting (Unaudited). At a special shareholders' meeting held on February 18, 2004, shareholders of the Vaughan Nelson Small Cap Value Fund (hereinafter referred to as the "Fund") voted for the following proposal: 1. Approval of a new subadvisory agreement for the Fund among CDC Nvest Funds Trust I, CDC IXIS Asset Management Advisers, L.P. and Vaughan Nelson Investment Management, L.P.
Voted For Voted Against Abstained Votes Broker Non-Votes Total Votes - ------------- ------------- --------------- ---------------- ------------- 5,995,736.288 177,986.322 189,268.957 0 6,362,991.567
49 Item 2. Code of Ethics. Not Applicable Item 3. Audit Committee Financial Expert. Not Applicable Item 4. Principal Accountant Fees and Services. Not Applicable Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not Applicable Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. Not Applicable. Item 9. Submission of Matters to a Vote of Securities Holders. There were no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees. Item 10. Controls and Procedures. The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. Item 11. Exhibits. (a) (1) Not applicable. (a) (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2), as herewith as exhibits (a)(2)(1) and (a)(2)(2) (a) (3) Not applicable. (b) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are filed herewith as Exhibit (b) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CDC Nvest Funds Trust II By: /s/ John T. Hailer ---------------------------------------- Name: John T. Hailer Title: President and Chief Executive Officer Date: August 20, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John T. Hailer ---------------------------------------- Name: John T. Hailer Title: President and Chief Executive Officer Date: August 20, 2004 By: /s/ Nicholas H. Palmerino --------------------------------------- Name: Nicholas H. Palmerino Title: Treasurer Date: August 20, 2004 EX-99.CERT 2 dex99cert.txt CERTIFICATION 302 (a)(2)(1) CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certifications I, John T. Hailer, certify that: 1. I have reviewed this report on Form N-CSR of CDC Nvest Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows), of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing of this report (the "Evaluation Date"); and c. Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to the significant deficiencies and material weaknesses. Date: August 20, 2004 /s/ John T. Hailer ------------------------------------- John T. Hailer President & Chief Executive Officer Exhibit (a)(2)(2) CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certifications I, Nicholas H. Palmerino, certify that: 1. I have reviewed this report on Form N-CSR of CDC Nvest Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows), of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing of this report (the "Evaluation Date"); and c. Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to the significant deficiencies and material weaknesses. Date: August 20, 2004 /s/ Nicholas H. Palmerino ---------------------------------------- Nicholas H. Palmerino Treasurer EX-99.906CT 3 dex99906ct.txt CERTIFICATION 906 Exhibit (b) CDC Nvest Funds Trust II Section 906 Certification In connection with the report on Form N-CSR for the period ended June 30, 2004 for the Registrant (the "Report"), the undersigned each hereby certifies to the best of his knowledge, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as applicable; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. By: By: President & Chief Executive Officer Treasurer CDC Nvest Funds Trust II CDC Nvest Funds Trust II /s/ John T. Hailer /s/ Nicholas H. Palmerino - ----------------------------------- ----------------------------------- John T. Hailer Nicholas H. Palmerino Date: August 20, 2004 Date: August 20, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the CDC Nvest Funds Trust II and will be retained by the CDC Nvest Funds Trust II and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----