-----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, JiZDjLulCeigWQRj0eyL2UfwlfxLuWv+ZyBz8rq2i9eTj/jVauzP2MYfVqy7Mgn6 PwyHxIiEU2l2cfpSKveCqA== 0001193125-05-041861.txt : 20050304 0001193125-05-041861.hdr.sgml : 20050304 20050303184946 ACCESSION NUMBER: 0001193125-05-041861 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050304 DATE AS OF CHANGE: 20050303 EFFECTIVENESS DATE: 20050304 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-00242 FILM NUMBER: 05659271 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-CSR 1 dncsr.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) Coleen Downs Dinneen 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) 449-2810 Date of fiscal year end: December 31, 2004 Date of reporting period: December 31, 2004 Item 1. Reports to Stockholders. [LOGO] CDC NVEST FUNDS/SM/ Equity Funds Annual Report December 31, 2004 CDC Nvest Star Advisers Fund Harris Associates Loomis, Sayles & Company Mercury Advisors CDC Nvest Star Value Fund Harris Associates Loomis, Sayles & Company Vaughan Nelson Investment Management Westpeak Global Advisors 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 InvestmentsPage 23 Financial Statements...Page 43
CDC NVEST STAR ADVISERS FUND Management Discussion - -------------------------------------------------------------------------------- Thanks to strong performance in the fourth quarter, 2004 was a good year for U.S. equities. All classes of stocks were positive, but value stocks outperformed growth, and small-cap value stocks outpaced mid- and large-cap stocks. For the year ended December 31, 2004, CDC Nvest Star Advisers Fund returned 12.88%, based on the net asset value of Class A shares. The fund outperformed the 10.88% return of the Standard & Poor's 500 Index, but fell short of the 18.57% return of the Wilshire 4500 Index. The fund's results were close to the 12.93% average return on the funds in Morningstar's Mid-Cap Growth category. Growth and value stocks of all sizes and in a variety of industries were represented in the fund's four segments. Harris Associates' segment favored undervalued mid- to large-cap companies. Loomis, Sayles & Company manages two segments. In the mid-cap growth segment, Loomis focused on companies with a combination of earnings growth, attractive relative value and strong price trends. In the small-cap value segment, Loomis favored companies whose appreciation potential had not been recognized by the market, in the managers' opinion. Mercury Advisors sought large-cap growth stocks offering the potential for above-average earnings growth and return on equity. HARRIS ASSOCIATES PURSUED A HIGH RATE OF RETURN, ONE STOCK AT A TIME This segment maintained its pursuit of high-quality, undervalued stocks selected on a case-by-case basis. The strongest performers included McDonald's, which closed unprofitable restaurants and enhanced its menu options - strategies that were well received by the market. Masco enjoyed strong earnings growth and gained market share; the company also raised its dividend and bought back some of its stock. New management helped Home Depot profit from strength in the housing market. Xerox reported improved cash flow, reduced its debt and unveiled several new products that were welcomed by the market. Stocks that detracted from results included Interpublic, which was sold in the third quarter of 2004 when management's turnaround efforts proved disappointing. Cardinal Health was also eliminated when shares of this pharmaceutical company rebounded after it was cleared of accounting charges. Although Merck declined significantly when its arthritis drug Vioxx was withdrawn from the market, the stock remains in the segment because Harris Associates believes the decline was an overreaction. LOOMIS MID-CAP GROWTH FOCUSED ON EARNINGS AND REVENUES This segment focused on companies expected to experience superior growth in earnings and revenues, either because of company-specific events, such as a new product introduction or because of good operating leverage. Stock selection in the information technology and consumer discretionary sectors had the greatest positive impact. Strong contributors included Research In Motion, whose Blackberry wireless e-mail device was in demand; Apple Computer, which enjoyed brisk sales of its iPod devices; and Symantec, whose Norton anti-virus products and other security software sold well. Poor performers included Cypress Semiconductor, whose earnings reflected softness in the entire semiconductor industry; Univision, a leading Hispanic broadcaster, which faced disappointing advertising revenues along with the industry as a whole; and internet retailer Amazon.com, which failed to meet second-quarter estimates. The segment's healthcare stocks were reduced and financial stocks were expanded. Currently, the segment emphasizes companies Loomis believes may be able to sustain earnings momentum even if economic growth slows in 2005. LOOMIS SMALL-CAP LOOKED FOR INTRINSIC VALUE IN SELECTED STOCKS This segment focused on companies that were generating strong cash flow and whose intrinsic value seemed likely to improve. The strongest relative performance came from the consumer discretionary sector, led by Kmart Holding, which rose when investors recognized the value of its real estate holdings. The segment also emphasized utilities; contributors included NRG Energy, which benefited from the rapid increase in the price of natural gas. Diversified transportation company Laidlaw International benefited from the proposed, profitable divestiture of its healthcare business. After strong performance in 2003, both Fairchild Semiconductor and American Power Conversion weakened. American Power was sold, but Fairchild remains in the segment and the stock recovered modestly in the fourth quarter. Weaker-than-expected advertising revenues hurt Westwood One, a radio network, but it, too, recovered toward the end of the year. MERCURY ADVISORS POSITIONED TO GROW WITH THE U.S. ECONOMY The Mercury segment was positioned to benefit from improving real growth in the U.S. economy. With this focus, positive investment returns came from stock selection in the healthcare and industrials sectors and an emphasis on energy and consumer discretionary companies. Stock selection in the information technology sector detracted significantly from the segment's relative returns. At the end of the year, the segment maintained its bias toward companies that Mercury believed were likely to profit in a continued improvement in the economy in 2005. As a result, there was a significant emphasis on industrials, materials, and energy companies. However, Mercury is concerned about a possible slowdown in the rate of real growth, led by an overall reduction in real consumer spending in the year ahead. Subadvisors: Harris Associates L.P. Loomis, Sayles & Company, L.P. Mercury Advisors - -------------------------------------------------------------------------------- What You Should Know: Growth stocks can be more sensitive to market movements because their values are based on future expectations. Value stocks may fall out of favor with investors and underperform the overall market during any given period. Foreign investments involve risks not associated with domestic securities, such as currency fluctuations, differing political and economic conditions and different accounting standards. 1 CDC NVEST STAR ADVISERS FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- [CHART] December 31, 1994 through December 31, 2004 Cumulative Maximum S&P 500 S&P 400 Wilshire Value/1/ Sales Charge/2/ Index/5/ Midcap Index/4/ 4500 Index/6/ ---------- --------------- -------- --------------- ------------- 12/31/1994 10,000 9,425 10,000 10,000 10,000 1/31/1995 9,985 9,411 10,259 10,105 10,097 2/28/1995 10,302 9,709 10,659 10,634 10,526 3/31/1995 10,565 9,958 10,974 10,819 10,758 4/30/1995 10,739 10,121 11,297 11,036 10,896 5/31/1995 10,988 10,356 11,748 11,302 11,139 6/30/1995 11,516 10,854 12,021 11,762 11,676 7/31/1995 12,353 11,643 12,420 12,376 12,363 8/31/1995 12,610 11,885 12,451 12,605 12,651 9/30/1995 13,003 12,255 12,977 12,910 12,994 10/31/1995 12,694 11,964 12,930 12,578 12,646 11/30/1995 13,248 12,486 13,498 13,128 13,183 12/31/1995 13,435 12,662 13,758 13,095 13,349 1/31/1996 13,586 12,805 14,226 13,285 13,487 2/29/1996 14,115 13,303 14,358 13,736 13,925 3/31/1996 14,355 13,529 14,496 13,901 14,138 4/30/1996 15,123 14,253 14,710 14,326 14,795 5/31/1996 15,595 14,698 15,089 14,519 15,262 6/30/1996 15,130 14,260 15,147 14,301 14,782 7/31/1996 13,970 13,166 14,478 13,334 13,672 8/31/1996 14,650 13,807 14,783 14,103 14,410 9/30/1996 15,464 14,575 15,615 14,718 15,098 10/31/1996 15,334 14,453 16,046 14,761 14,874 11/30/1996 16,092 15,167 17,259 15,592 15,502 12/31/1996 15,981 15,062 16,917 15,609 15,642 1/31/1997 16,694 15,734 17,973 16,195 16,147 2/28/1997 16,139 15,211 18,114 16,062 15,806 3/31/1997 15,463 14,574 17,370 15,377 14,981 4/30/1997 15,762 14,855 18,407 15,776 15,018 5/31/1997 16,949 15,974 19,528 17,155 16,513 6/30/1997 17,643 16,629 20,403 17,637 17,296 7/31/1997 19,058 17,963 22,026 19,384 18,485 8/31/1997 18,513 17,449 20,792 19,360 18,654 9/30/1997 19,409 18,293 21,931 20,473 19,946 10/31/1997 18,782 17,702 21,198 19,582 19,186 11/30/1997 18,927 17,839 22,180 19,872 19,192 12/31/1997 19,205 18,101 22,561 20,644 19,662 1/31/1998 19,290 18,181 22,810 20,251 19,381 2/28/1998 20,706 19,515 24,455 21,928 20,864 3/31/1998 21,571 20,331 25,708 22,917 21,943 4/30/1998 21,815 20,561 25,966 23,336 22,221 5/31/1998 21,213 19,993 25,520 22,286 21,183 6/30/1998 21,890 20,631 26,557 22,426 21,514 7/31/1998 21,235 20,014 26,274 21,557 20,296 8/31/1998 17,714 16,696 22,475 17,544 16,363 9/30/1998 19,002 17,909 23,915 19,182 17,544 10/31/1998 20,169 19,009 25,860 20,896 18,541 11/30/1998 21,175 19,958 27,428 21,939 19,694 12/31/1998 22,903 21,586 29,008 24,589 21,360 1/31/1999 23,980 22,601 30,221 23,632 21,704 2/28/1999 23,270 21,932 29,282 22,395 20,523 3/31/1999 24,666 23,248 30,453 23,020 21,324 4/30/1999 25,650 24,175 31,633 24,836 23,025 5/31/1999 24,940 23,506 30,886 24,944 22,825 6/30/1999 26,508 24,984 32,600 26,279 23,784 7/31/1999 25,628 24,155 31,582 25,721 23,063 8/31/1999 25,526 24,058 31,426 24,839 22,489 9/30/1999 25,618 24,145 30,564 24,072 22,313 10/31/1999 26,537 25,011 32,498 25,299 23,454 11/30/1999 28,796 27,140 33,159 26,627 25,433 12/31/1999 33,544 31,615 35,112 28,209 28,938 1/31/2000 33,131 31,226 33,348 27,415 28,590 2/29/2000 37,197 35,058 32,716 29,334 33,036 3/31/2000 36,814 34,697 35,917 31,789 31,814 4/30/2000 33,979 32,025 34,836 30,679 27,987 5/31/2000 31,186 29,393 34,122 30,296 25,921 6/30/2000 31,788 29,960 34,963 30,741 29,034 7/31/2000 30,968 29,187 34,416 31,226 28,210 8/31/2000 33,396 31,475 36,554 34,713 31,358 9/30/2000 32,414 30,550 34,624 34,475 30,082 10/31/2000 30,877 29,102 34,478 33,306 27,624 11/30/2000 27,144 25,583 31,760 30,792 22,920 12/31/2000 27,847 26,246 31,915 33,148 24,371 1/31/2001 28,641 26,994 33,047 33,886 25,696 2/28/2001 25,768 24,287 30,034 31,952 22,574 3/31/2001 24,024 22,642 28,131 29,577 20,502 4/30/2001 26,133 24,630 30,317 32,839 22,671 5/31/2001 26,386 24,869 30,521 33,604 23,208 6/30/2001 26,239 24,730 29,778 33,468 23,396 7/31/2001 25,780 24,297 29,485 32,970 22,308 8/31/2001 24,684 23,265 27,639 31,891 21,244 9/30/2001 22,065 20,796 25,407 27,925 18,512 10/31/2001 22,621 21,320 25,891 29,160 19,482 11/30/2001 24,478 23,071 27,877 31,329 20,996 12/31/2001 25,239 23,788 28,122 32,947 22,121 1/31/2002 25,017 23,579 27,711 32,776 21,690 2/28/2002 24,542 23,131 27,177 32,817 21,076 3/31/2002 25,749 24,269 28,199 35,162 22,505 4/30/2002 25,067 23,626 26,489 34,998 22,285 5/31/2002 24,734 23,312 26,294 34,408 21,792 6/30/2002 22,733 21,426 24,421 31,889 20,302 7/31/2002 20,732 19,540 22,518 28,798 18,326 8/31/2002 20,892 19,691 22,665 28,945 18,433 9/30/2002 18,796 17,716 20,202 26,613 17,190 10/31/2002 19,669 18,538 21,980 27,767 17,754 11/30/2002 20,827 19,630 23,274 29,373 18,972 12/31/2002 19,732 18,597 21,907 28,166 18,173 1/31/2003 19,224 18,119 21,333 27,343 17,781 2/28/2003 19,019 17,925 21,013 26,692 17,329 3/31/2003 19,161 18,060 21,217 26,917 17,586 4/30/2003 20,654 19,466 22,964 28,871 19,050 5/31/2003 22,178 20,903 24,174 31,264 20,860 6/30/2003 22,480 21,187 24,483 31,662 21,357 7/31/2003 23,051 21,726 24,914 32,785 22,354 8/31/2003 24,178 22,788 25,400 34,273 23,291 9/30/2003 23,576 22,221 25,130 33,748 23,002 10/31/2003 25,290 23,836 26,552 36,300 24,755 11/30/2003 25,925 24,434 26,786 37,564 25,609 12/31/2003 26,368 24,852 28,190 38,198 26,141 1/31/2004 26,988 25,436 28,708 39,026 27,077 2/29/2004 27,225 25,660 29,107 39,963 27,551 3/31/2004 27,288 25,719 28,668 40,133 27,667 4/30/2004 26,731 25,194 28,218 38,816 26,555 5/31/2004 27,143 25,582 28,605 39,621 26,958 6/30/2004 28,056 26,448 29,161 40,523 27,662 7/31/2004 26,457 24,936 28,196 38,632 26,121 8/31/2004 26,137 24,634 28,310 38,530 26,131 9/30/2004 26,968 25,417 28,617 39,672 27,198 10/31/2004 27,464 25,885 29,054 40,306 27,810 11/30/2004 28,824 27,166 30,230 42,707 29,701 12/31/2004 29,772 28,057 31,258 44,495 30,996 Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
1 Year 5 Years 10 Years Class A (Inception 7/7/94) Net Asset Value/1/ 12.88% -2.36% 11.53% With Maximum Sales Charge/2/ 6.41 -3.51 10.87 Class B (Inception 7/7/94) Net Asset Value/1/ 12.02 -3.10 10.70 With CDSC/3/ 7.02 -3.44 10.70 Class C (Inception 7/7/94) Net Asset Value/1/ 12.00 -3.10 10.70 With CDSC/3/ 11.00 -3.10 10.70 Class Y (Inception 11/15/94) Net Asset Value/1/ 13.52 -1.81 12.02
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Comparative Performance 1 Year 5 Years 10 Years S&P 400 Midcap Index/4/ 16.48% 9.54% 16.10% S&P 500 Index/5/ 10.88 -2.30 12.07 Wilshire 4500 Index/6/ 18.57 1.36 11.96 Morningstar Mid-Cap Growth Fund Avg./7/ 12.93 -3.42 10.25
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. Class Y shares are available to certain institutional investors only. Portfolio Facts ================================================================================
% of Net Assets as of Fund Composition 12/31/04 6/30/04 - --------------------------------------- Common Stocks 98.3 97.1 - --------------------------------------- Short Term Investments and Other 1.7 2.9
% of Net Assets as of Ten Largest Holdings 12/31/04 - ---------------------------------------------- General Electric Co. 1.3 - ---------------------------------------------- Liberty Media Corp., Class A 1.1 - ---------------------------------------------- Washington Mutual, Inc. 1.1 - ---------------------------------------------- Microsoft Corp. 1.0 - ---------------------------------------------- Time Warner, Inc. 1.0 - ---------------------------------------------- McDonald's Corp. 1.0 - ---------------------------------------------- 3M Co. 1.0 - ---------------------------------------------- Home Depot, Inc. 1.0 - ---------------------------------------------- Laidlaw International, Inc. 0.9 - ---------------------------------------------- Intel Corp. 0.9 % of Net Assets as of Five Largest Industries 12/31/04 - ---------------------------------------------- Retail 7.8 - ---------------------------------------------- Media 6.4 - ---------------------------------------------- Health Care - Products 5.4 - ---------------------------------------------- Software 5.2 - ---------------------------------------------- Diversified Financial Services 4.1
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/S&P 400 Midcap Index is an unmanaged index of U.S. mid-sized companies. /5/S&P 500 Index is an unmanaged index of U.S. common stocks. /6/Wilshire 4500 Index is an unmanaged index of 4,500 mid- and smallsized companies. /7/Morningstar Mid-Cap Growth Fund Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Morningstar, Inc. 2 CDC NVEST STAR VALUE FUND Management Discussion - -------------------------------------------------------------------------------- 2004 ended on a high note. Most equity indexes were up for the year, but value stocks led the market. Small- and mid-cap stocks outperformed large-caps. For the 12 months ended December 31, 2004, the total return on CDC Nvest Star Value Fund was 11.37% based on the net asset value of Class A shares and $0.165 in capital gains reinvested during the period. The fund lagged its benchmark, the Russell 1000 Value Index, which returned 16.49%, although it beat the 9.96% average return on the funds in Morningstar's Large Blend category. The fund's four segments include a broad range of stocks in a variety of industries. Harris Associates invests in companies that they believe are trading at a substantial discount to their true business value, with positive cash flow, competitive returns, and favorable growth potential. Loomis, Sayles & Company focuses on companies they believe have below-average valuations and above-average earnings prospects. Vaughan Nelson Investment Management emphasizes established but undervalued companies that the managers believe will rebound. Westpeak Global Advisors employs proprietary research to select stocks based on value and growth potential, while seeking to manage unnecessary risk. HARRIS ASSOCIATES' FUNDAMENTAL SELECTION PROCESS RESULTED IN A HIGH-QUALITY PORTFOLIO Harris Associates believes in selecting stocks based on individual merit rather than broad economic trends. Top performers included Costco, the dominant discounter in the retail market; and Yum! Brands, whose well-known fast-food chains include Kentucky Fried Chicken, Pizza Hut, and Taco Bell. Yum! Brands has gained investor appreciation for its international as well as its domestic business. Another top performer, Carnival Corp., continued to beat analysts' earnings expectations, benefiting from a merger with Princess Cruise Lines, an increase in passengers, and higher fares. Detractors included The Gap, a clothing retailer whose lower-end retail operations have not done as well as high-end retail of late, although the company's strong 2003 earnings made comparisons difficult. Tiffany declined on lower-than-expected sales in Japan, even though its U.S. sales were ahead of plan. The Gap and Tiffany remain in the segment. However, Harris Associates sold Interpublic Group in the third quarter on weak advertising spending industry-wide and management's disappointing turnaround efforts. LOOMIS SAYLES FOCUSED ON STOCKS SELLING AT A DISCOUNT TO THEIR INTRINSIC VALUE Strong performers included financial companies, which benefited from a favorable interest-rate environment and good corporate earnings. Energy companies - especially energy services and coal companies - profited from rising energy prices. Individual stocks with the biggest positive impact on performance included Apple Computer, which rose on strong sales of its iPod music player; JC Penney, which benefited from cost-cutting and capital restructuring; and Exxon Mobil, whose business fundamentals seem excellent. Investments in healthcare were significant detractors, including McKesson (a healthcare products company) and Universal Health Services (which owns and operates hospitals and medical service centers). Both stocks declined on lower-than-expected earnings. VAUGHAN NELSON PURSUED COMPANIES WITH COMPETITIVE ADVANTAGES The segment's allocation to the consumer discretionary, materials, and financial sectors contributed to performance. Individual companies that were leaders included Ultra Petroleum, an independent oil and gas company; Allegheny Technologies, a producer of specialty materials; and Consol Energy, a coal and gas producer. Investments in information technology, consumer staples, and industrials detracted from the segment's performance. The worst performers included two established technology companies: Cisco Systems, a leader in networking and communications; and Intel, a premier semiconductor company. Vaughan Nelson believes both stocks are currently undervalued in light of their potential for recovery and renewed growth, and they remain in the segment. WESTPEAK EMPHASIZED VALUATION, STRONG FUNDAMENTALS AND MOMENTUM This segment benefited from its energy-related investments, including Houston Exploration, an independent natural gas and oil company. Chemical stocks were another source of strength. The segment's relatively small position in media companies was a positive since the sector was weak, but it would have benefited from a larger position in real estate investment trusts (REITs), which were strong during the year. Individual companies that boosted returns included CompuCredit, which provides services to a specialized segment of the consumer credit market; and Energizer Holdings, a manufacturer of batteries, flashlights and shaving products. Although Intel detracted from results, Westpeak continues to believe it is one of the more attractive stocks in the semiconductor industry. They trimmed the segment's position in pharmaceutical giant Pfizer when the company had to withdraw its popular arthritis drug, Celebrex; a reduced position remains in the segment. Subadvisors: Harris Associates L.P. Loomis, Sayles & Company, L.P. Vaughan Nelson Investment Management, L.P. Westpeak Global Advisors, L.P. - -------------------------------------------------------------------------------- What You Should Know: Value stocks may fall out of favor with investors and underperform the overall market during any given period. Foreign investments involve risks not associated with domestic securities, such as currency fluctuations, differing political and economic conditions and different accounting standards. 3 CDC NVEST STAR VALUE FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- [CHART] December 31, 1994 through December 31, 2004 Net Asset Maximum Russell 1000 Value/1/ Sales Charge/2/ Value Index/4/ ---------- --------------- -------------- 12/31/1994 $10,000 $ 9,425 $10,000 1/31/1995 10,028 9,451 10,308 2/28/1995 10,413 9,814 10,716 3/31/1995 10,798 10,177 10,952 4/30/1995 11,197 10,553 11,298 5/31/1995 11,665 10,994 11,772 6/30/1995 11,899 11,215 11,932 7/31/1995 12,285 11,578 12,347 8/31/1995 12,285 11,578 12,522 9/30/1995 12,660 11,932 12,975 10/31/1995 12,351 11,640 12,846 11/30/1995 13,027 12,278 13,496 12/31/1995 13,233 12,472 13,836 1/31/1996 13,686 12,899 14,267 2/29/1996 13,867 13,069 14,375 3/31/1996 13,912 13,112 14,619 4/30/1996 14,078 13,268 14,675 5/31/1996 14,319 13,495 14,859 6/30/1996 14,319 13,495 14,871 7/31/1996 13,852 13,055 14,309 8/31/1996 14,259 13,439 14,718 9/30/1996 15,068 14,201 15,303 10/31/1996 15,535 14,641 15,895 11/30/1996 16,751 15,788 17,047 12/31/1996 16,716 15,755 16,830 1/31/1997 17,134 16,148 17,646 2/28/1997 17,326 16,329 17,905 3/31/1997 16,664 15,706 17,261 4/30/1997 16,977 16,001 17,986 5/31/1997 17,935 16,903 18,991 6/30/1997 18,874 17,789 19,806 7/31/1997 20,301 19,134 21,296 8/31/1997 19,518 18,395 20,537 9/30/1997 20,343 19,173 21,778 10/31/1997 19,466 18,347 21,170 11/30/1997 19,924 18,778 22,106 12/31/1997 20,217 19,054 22,751 1/31/1998 20,176 19,016 22,429 2/28/1998 21,532 20,294 23,939 3/31/1998 22,389 21,102 25,404 4/30/1998 22,369 21,083 25,573 5/31/1998 21,731 20,482 25,194 6/30/1998 21,712 20,463 25,517 7/31/1998 20,974 19,768 25,067 8/31/1998 17,425 16,423 21,336 9/30/1998 18,418 17,359 22,561 10/31/1998 19,963 18,816 24,309 11/30/1998 21,002 19,794 25,441 12/31/1998 21,644 20,400 26,307 1/31/1999 21,086 19,873 26,517 2/28/1999 20,706 19,516 26,143 3/31/1999 20,795 19,600 26,684 4/30/1999 22,405 21,117 29,176 5/31/1999 22,203 20,926 28,855 6/30/1999 22,785 21,475 29,693 7/31/1999 21,757 20,506 28,824 8/31/1999 20,817 19,620 27,754 9/30/1999 19,616 18,488 26,784 10/31/1999 20,575 19,392 28,326 11/30/1999 20,279 19,113 28,104 12/31/1999 20,147 18,989 28,240 1/31/2000 19,525 18,402 27,319 2/29/2000 17,848 16,821 25,289 3/31/2000 19,686 18,554 28,375 4/30/2000 19,633 18,504 28,045 5/31/2000 19,525 18,402 28,340 6/30/2000 19,066 17,970 27,045 7/31/2000 19,119 18,020 27,384 8/31/2000 20,286 19,119 28,907 9/30/2000 19,935 18,788 29,172 10/31/2000 20,475 19,298 29,889 11/30/2000 19,826 18,686 28,779 12/31/2000 20,555 19,373 30,221 1/31/2001 21,205 19,986 30,337 2/28/2001 20,637 19,450 29,494 3/31/2001 19,933 18,787 28,451 4/30/2001 21,177 19,959 29,847 5/31/2001 21,744 20,494 30,517 6/30/2001 21,366 20,137 29,840 7/31/2001 21,176 19,958 29,777 8/31/2001 20,257 19,092 28,584 9/30/2001 18,553 17,486 26,572 10/31/2001 19,121 18,021 26,344 11/30/2001 20,392 19,220 27,875 12/31/2001 20,825 19,627 28,532 1/31/2002 20,527 19,347 28,312 2/28/2002 20,311 19,144 28,357 3/31/2002 21,203 19,984 29,699 4/30/2002 20,554 19,372 28,680 5/31/2002 20,554 19,372 28,824 6/30/2002 18,959 17,869 27,169 7/31/2002 17,310 16,315 24,644 8/31/2002 17,580 16,569 24,830 9/30/2002 15,444 14,556 22,069 10/31/2002 16,445 15,499 23,704 11/30/2002 17,770 16,748 25,197 12/31/2002 16,770 15,805 24,103 1/31/2003 16,364 15,423 23,519 2/28/2003 15,986 15,067 22,892 3/31/2003 16,013 15,092 22,930 4/30/2003 17,501 16,494 24,949 5/31/2003 18,771 17,692 26,559 6/30/2003 19,122 18,023 26,891 7/31/2003 19,338 18,226 27,292 8/31/2003 19,826 18,686 27,717 9/30/2003 19,393 18,278 27,446 10/31/2003 20,666 19,477 29,126 11/30/2003 21,180 19,962 29,521 12/31/2003 22,072 20,803 31,341 1/31/2004 22,315 21,032 31,892 2/29/2004 22,801 21,490 32,576 3/31/2004 22,667 21,363 32,290 4/30/2004 22,315 21,032 31,501 5/31/2004 22,585 21,287 31,823 6/30/2004 23,019 21,695 32,574 7/31/2004 22,342 21,057 32,116 8/31/2004 22,289 21,007 32,572 9/30/2004 22,558 21,261 33,077 10/31/2004 22,856 21,542 33,627 11/30/2004 23,912 22,537 35,327 12/31/2004 24,577 23,174 36,510 Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
1 Year 5 Years 10 Years Class A (Inception 6/5/70) Net Asset Value/1/ 11.37% 4.06% 9.41% With Maximum Sales Charge/2/ 4.94 2.84 8.77 Class B (Inception 9/13/93) Net Asset Value/1/ 10.67 3.28 8.59 With CDSC/3/ 5.67 2.93 8.59 Class C (Inception 12/30/94) Net Asset Value/1/ 10.67 3.25 8.58 With CDSC/3/ 9.67 3.25 8.58 - ---------------------------------------------------------------------------- Comparative Performance 1 Year 5 Years 10 Years Russell 1000 Value Index/4/ 16.49% 5.27% 13.83% Morningstar Large Blend Fund Avg./5/ 9.96 -1.77 10.42
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 12/31/04 6/30/04 - --------------------------------------- Common Stocks 96.9 95.9 - --------------------------------------- Short Term Investments and Other 3.1 4.1
% of Net Assets as of Ten Largest Holdings 12/31/04 - ---------------------------------------------- McDonald's Corp. 2.5 - ---------------------------------------------- Time Warner, Inc. 2.5 - ---------------------------------------------- JPMorgan Chase & Co. 2.5 - ---------------------------------------------- Exxon Mobil Corp. 2.4 - ---------------------------------------------- Waste Management, Inc. 2.0 - ---------------------------------------------- Baxter International, Inc. 1.9 - ---------------------------------------------- Yum! Brands, Inc. 1.9 - ---------------------------------------------- Cendant Corp. 1.9 - ---------------------------------------------- Sovereign Bancorp, Inc. 1.8 - ---------------------------------------------- Citigroup, Inc. 1.8 % of Net Assets as of Five Largest Industries 12/31/04 - ---------------------------------------------- Retail 11.3 - ---------------------------------------------- Diversified Financial Services 9.1 - ---------------------------------------------- Media 7.6 - ---------------------------------------------- Oil & Gas 6.5 - ---------------------------------------------- Banks 6.2
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 1,000 largest U.S. companies within the Russell 3000 Index with lower price-to-book ratios and lower forecasted growth values. /5/Morningstar Large Blend Fund Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Morningstar, Inc. 4 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 - -------------------------------------------------------------------------------- Several key issues delivered strong performance for CGM Advisor Targeted Equity Fund in 2004, and positioned the fund in the top quarter of its peer group for the year. The fund's total return was 13.98% based on the net asset value of Class A shares. The fund outperformed both its benchmark, the Standard & Poor's 500 Index, which returned 10.88% for the year, and Morningstar's Large Blend category, which averaged 9.96%. SECTOR FOCUS UNDERWENT MAJOR SHIFT DURING THE YEAR We began the year fully invested in anticipation of moderate economic growth, rising corporate profits, and modest interest rates. Homebuilding stocks accounted for about one-quarter of the portfolio, making it the fund's largest sector. The fund also had substantial positions in the drug and technology sectors. However, we eliminated these three industry concentrations during the period and shifted the proceeds to energy, foreign cellular phone companies, and domestic restaurants and hotels. KEY ISSUES LED THE FUND'S ADVANCE We focused the portfolio on several key issues that led its advance during the year. These included Mobile TeleSystems, America Movil, and Companhia Vale do Rio Doce. Mobile TeleSystems is Russia's largest cell phone operator. With an unsaturated market, Russia provides a tremendous growth opportunity for cell phone companies, and Mobile TeleSystems is leading the way as firms penetrate the market in the Russian Federation and adjacent former Soviet republics. America Movil, Latin America's dominant cellular company, is benefiting from the same trend. Based in Mexico, America Movil has made important acquisitions in the relatively unsaturated markets of Brazil, Colombia, and Argentina. Strong demand for cellular service in these countries offers extensive growth opportunities in these expanding economies. Companhia Vale do Rio Doce, a Brazilian mining company, is benefiting from strong demand for iron ore that is in very short supply in the rapidly growing economies of China and other Asian countries. The company's copper mining operations are also profiting from higher copper prices. ELECTRONICS AND TECHNOLOGY STOCKS UNDERPERFORMED Disappointments for the year included AU Optronics, Taiwan's largest manufacturer of flat panel screens for use in televisions and computer monitors. Although the company operates in a rapidly expanding global market, the stock price declined on fears of excess capacity in the sector. We eliminated the position in the latter half of the year. Micron Technology designs and manufactures semiconductor products, including Dynamic Random Access Memory (DRAM) chips that store and retrieve data. We sold the issue because the industry's supply and demand dynamic did not develop as favorably as we anticipated, leading to pricing pressure and disappointing earnings. FUND EXPANDED EMPHASIS ON ENERGY AND MULTINATIONALS LIKELY TO BENEFIT FROM A WEAK DOLLAR Our interest in energy stocks mounted during the year, so that it was the fund's largest industry position by year end. While much attention has been focused on potential supply disruptions in the Middle East, upward pressure on oil prices also reflects strong demand from Asia, particularly China. We continue to believe that China's growing appetite for energy, as well as constraints on production, will keep oil prices high. As the year progressed, we also began to focus on multinationals we believe are likely to benefit from the weaker dollar. These included worldwide restaurant operators/franchisers Yum! Brands, which owns Kentucky Fried Chicken, Taco Bell, and Pizza Hut, among others; and McDonald's, a global giant in the fast-food market. We also invested in Marriott International, which has hotel and lodging operations around the world. FORECAST FOR GRADUALLY RISING INTEREST RATES We expect the Federal Reserve Board to increase short-term interest rates gradually during 2005. However, we do not anticipate aggressive tightening, which could jeopardize economic recovery. We remain committed to seeking long-term capital growth by investing in a small number of well-established companies that we believe offer superior growth potential. 5 CGM ADVISOR TARGETED EQUITY FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- [CHART] December 31, 1994 through December 31, 2004 Net Asset Maximum Value/1/ Sales Charge/2/ S&P 500 Index/4/ ---------- --------------- ------------- 12/31/1994 $10,000 $ 9,425 $10,000 1/31/1995 9,763 9,202 10,259 2/28/1995 10,237 9,648 10,659 3/31/1995 10,552 9,945 10,974 4/30/1995 11,206 10,562 11,297 5/31/1995 11,883 11,200 11,748 6/30/1995 12,754 12,021 12,021 7/31/1995 13,329 12,563 12,420 8/31/1995 13,397 12,627 12,451 9/30/1995 13,641 12,857 12,977 10/31/1995 13,360 12,592 12,930 11/30/1995 13,997 13,192 13,498 12/31/1995 13,808 13,014 13,758 1/31/1996 14,293 13,471 14,226 2/29/1996 14,752 13,903 14,358 3/31/1996 14,752 13,903 14,496 4/30/1996 14,477 13,645 14,710 5/31/1996 14,700 13,855 15,089 6/30/1996 14,543 13,707 15,147 7/31/1996 13,692 12,905 14,478 8/31/1996 13,824 13,029 14,783 9/30/1996 14,772 13,923 15,615 10/31/1996 15,640 14,741 16,046 11/30/1996 16,859 15,889 17,259 12/31/1996 16,694 15,734 16,917 1/31/1997 18,201 17,155 17,973 2/28/1997 17,899 16,870 18,114 3/31/1997 17,138 16,153 17,370 4/30/1997 18,115 17,074 18,407 5/31/1997 19,005 17,912 19,528 6/30/1997 19,852 18,711 20,403 7/31/1997 21,776 20,524 22,026 8/31/1997 20,657 19,469 20,792 9/30/1997 21,714 20,466 21,931 10/31/1997 20,863 19,663 21,198 11/30/1997 20,625 19,439 22,180 12/31/1997 20,625 19,439 22,561 1/31/1998 20,961 19,756 22,810 2/28/1998 22,804 21,493 24,455 3/31/1998 24,270 22,875 25,708 4/30/1998 25,202 23,753 25,966 5/31/1998 24,806 23,380 25,520 6/30/1998 26,134 24,631 26,557 7/31/1998 26,272 24,761 26,274 8/31/1998 21,259 20,037 22,475 9/30/1998 21,410 20,179 23,915 10/31/1998 23,566 22,211 25,860 11/30/1998 25,527 24,059 27,428 12/31/1998 27,513 25,931 29,008 1/31/1999 29,378 27,689 30,221 2/28/1999 27,272 25,704 29,282 3/31/1999 27,927 26,321 30,453 4/30/1999 27,829 26,229 31,633 5/31/1999 26,933 25,384 30,886 6/30/1999 28,918 27,255 32,600 7/31/1999 28,238 26,614 31,582 8/31/1999 28,190 26,569 31,426 9/30/1999 26,518 24,994 30,564 10/31/1999 27,537 25,953 32,498 11/30/1999 28,578 26,934 33,159 12/31/1999 31,690 29,868 35,112 1/31/2000 29,212 27,532 33,348 2/29/2000 31,806 29,977 32,716 3/31/2000 32,152 30,303 35,917 4/30/2000 30,943 29,164 34,836 5/31/2000 29,706 27,998 34,122 6/30/2000 29,821 28,107 34,963 7/31/2000 28,870 27,210 34,416 8/31/2000 30,239 28,500 36,554 9/30/2000 29,144 27,468 34,624 10/31/2000 29,205 27,526 34,478 11/30/2000 28,931 27,267 31,760 12/31/2000 30,250 28,510 31,915 1/31/2001 27,567 25,982 33,047 2/28/2001 26,693 25,158 30,034 3/31/2001 26,015 24,519 28,131 4/30/2001 27,146 25,586 30,317 5/31/2001 26,598 25,069 30,521 6/30/2001 26,779 25,239 29,778 7/31/2001 26,000 24,505 29,485 8/31/2001 23,857 22,486 27,639 9/30/2001 21,553 20,313 25,407 10/31/2001 21,682 20,435 25,891 11/30/2001 23,987 22,608 27,877 12/31/2001 25,349 23,892 28,122 1/31/2002 26,128 24,625 27,711 2/28/2002 24,926 23,492 27,177 3/31/2002 25,347 23,889 28,199 4/30/2002 25,413 23,952 26,489 5/31/2002 25,154 23,707 26,294 6/30/2002 24,341 22,942 24,421 7/31/2002 21,647 20,402 22,518 8/31/2002 21,647 20,402 22,665 9/30/2002 20,315 19,147 20,202 10/31/2002 19,828 18,688 21,980 11/30/2002 19,340 18,228 23,274 12/31/2002 18,042 17,005 21,907 1/31/2003 18,042 17,005 21,333 2/28/2003 17,912 16,882 21,013 3/31/2003 18,333 17,279 21,217 4/30/2003 19,501 18,380 22,964 5/31/2003 21,188 19,970 24,174 6/30/2003 21,544 20,305 24,483 7/31/2003 21,122 19,907 24,914 8/31/2003 21,673 20,427 25,400 9/30/2003 21,933 20,672 25,130 10/31/2003 24,659 23,241 26,552 11/30/2003 25,633 24,159 26,786 12/31/2003 25,764 24,283 28,190 1/31/2004 25,179 23,731 28,708 2/29/2004 26,705 25,170 29,107 3/31/2004 27,939 26,332 28,668 4/30/2004 25,732 24,252 28,218 5/31/2004 26,349 24,834 28,605 6/30/2004 26,576 25,048 29,161 7/31/2004 25,311 23,855 28,196 8/31/2004 25,602 24,130 28,310 9/30/2004 27,192 25,628 28,617 10/31/2004 27,515 25,933 29,054 11/30/2004 28,748 27,095 30,230 12/31/2004 29,370 27,685 31,258 Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
Since 1 Year 5 Years 10 Years Inception Class A (Inception 11/27/68) Net Asset Value/1/ 13.98% -1.51% 11.38% -- With Maximum Sales Charge/2/ 7.48 -2.67 10.72 -- Class B (Inception 2/28/97) Net Asset Value/1/ 13.12 -2.26 -- 5.71% With CDSC/3/ 8.12 -2.61 -- 5.71 Class C (Inception 9/1/98) Net Asset Value/1/ 13.12 -2.26 -- 3.54 With CDSC/3/ 12.12 -2.26 -- 3.54 Class Y (Inception 6/30/99) Net Asset Value/1/ 14.37 -1.07 -- 0.70
- --------------------------------------------------------------------------------
Since Since Since Class B Class C Class Y Comparative Performance 1 Year 5 Years 10 Years Inception/6/ Inception/6/ Inception/6/ S&P 500 Index/4/ 10.88% -2.30% 12.07% 7.21% 4.38% -0.76% Morningstar Large Blend Fund Avg./5/ 9.96 -1.77 10.42 6.25 4.52 -0.31
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 12/31/04 6/30/04 - --------------------------------------- Common Stocks 99.4 99.4 - --------------------------------------- Short Term Investments and Other 0.6 0.6
% of Net Assets as of Ten Largest Holdings 12/31/04 - ---------------------------------------------------- Mobile TeleSystems, Sponsored ADR 7.1 - ---------------------------------------------------- America Movil SA de CV, Class L, ADR 6.4 - ---------------------------------------------------- ConocoPhillips 5.7 - ---------------------------------------------------- Total SA, Sponsored ADR 5.6 - ---------------------------------------------------- Nike, Inc., Class B 5.5 - ---------------------------------------------------- McDonald's Corp. 5.3 - ---------------------------------------------------- General Dynamics Corp. 5.0 - ---------------------------------------------------- FedEx Corp. 4.9 - ---------------------------------------------------- United Technologies Corp. 4.9 - ---------------------------------------------------- Procter & Gamble Co. 4.9 % of Net Assets as of Five Largest Industries 12/31/04 - ---------------------------------------------------- Oil & Gas 23.7 - ---------------------------------------------------- Telecommunications 13.5 - ---------------------------------------------------- Aerospace & Defense 9.9 - ---------------------------------------------------- Mining 9.2 - ---------------------------------------------------- Apparel 5.5
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 stocks. /5/Morningstar Large Blend 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 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. 6 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: Growth: Barry A. Lockhart Patrick H. Tan Thomas R.H. Tibbles Value: Ronald Holt Robert Mazuelos Lauretta Reeves - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Although Hansberger did not become the fund's sole manager until March 1, 2004, for the 12 months ended December 31, 2004 Hansberger International Fund provided a total return of 13.60% based on the net asset value of Class A shares. The fund's benchmarks, the MSCI EAFE Index and the MSCI ACWI ex-U.S. Index (neither of which include the United States) returned 20.70% and 21.36%, respectively, in 2004, while the average performance of Morningstar's Foreign Large Blend fund category was 17.59%. VALUE SEGMENT EMPHASIZES EUROPE, EX U.K., AND EMERGING MARKETS Although it is underweight in the U.K. relative to its benchmark, the fund's value segment continues to emphasize the major economies in Europe and emerging-market economies, including Brazil, Korea, and China. Even though the value segment had a relatively small position in energy - one of the best-performing market sectors in 2004 - the stocks we selected performed well, including Italian oil and gas companies ENI and Saipem, and France's Total. Petrobras, a Brazilian energy company, also benefited this segment. Solid performers in other sectors included Rolls-Royce, the British manufacturer of airplane engines, whose servicing division profited from an overall increase in air travel during the year; E.ON, a leading German electric utility that also produces gas; and ING, a European-based financial company active on a global basis, whose ING Direct subsidiary surpassed its own goals. Stocks that underperformed included Denway Motors, whose business in China suffered when that country's government decided the auto industry was overheating and clamped down on auto loans. We like Denway's long-term prospects and continue to hold the stock. We also continue to hold shares of NEC Corporation, which was one of the first companies in Japan to restructure. Stories in the local news media about slowing sales of computers, DVDs, and cell phones, which NEC makes, hurt the price of its shares, but we believe the combined effects of its restructuring and a turnaround in the Japanese market will benefit this company. However, we sold shares of Britain's largest money manager, Amvescap PLC. GROWTH SEGMENT FOCUSED ON HIGH-QUALITY, LARGE-CAP STOCKS For most of 2004, large-cap stocks of the quality, growth-oriented companies that this segment favors lagged value stocks, which tend to perform well during periods of economic growth and low interest rates. The effects of rate hikes in the U.K., the United States, and other countries have yet to trigger a resurgence in quality growth stocks. Geographic regions that benefited this segment included North America and the Pacific rim ex-Japan. From a sector standpoint, although healthcare was relatively weak in 2004, the segment's selections in this area did well, including Nobel Biocare, a manufacturer of dental implants based in Switzerland. Energy stocks did well, including the segment's holdings in Suncor, a Canadian oil company. Financial stocks were also strong, including the segment's holdings in Hungary's OTP Bank, India's HDFC Bank, and Canadian insurer Manulife. One of the segment's best-performing stocks this year was Esprit, a Hong Kong apparel manufacturer. Disappointments included British Sky Broadcasting, which offers programming as well as satellite services to British television viewers. The stock fell when the company issued a near-term profit warning, but we have confidence in the company's long-term prospects so we still hold the stock. However, we sold Ryanair, a low-cost airline headquartered in Ireland, because the dynamics of this highly competitive industry are not what they once were. OUTLOOK FOR A GRADUAL RISE IN INTEREST RATES We expect interest rates to rise gradually in 2005, primarily in the United States, although there is also some pressure on rates in other parts of the world. While this might support the dollar, domestic budgetary problems and the trade deficit may keep the dollar weak. In general, we look for continued economic growth on a worldwide basis, but at a more moderate rate than in 2004. 7 HANSBERGER INTERNATIONAL FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- [CHART] December 29, 1995 (inception) through December 31, 2004 Net Asset Maximum Sales MSCI EAFE MSCI ACWI ex-U.S. Value/1/ Charge/2/ Index/4/ Index/5/ --------- ------------- --------- ---------------- 12/29/95 10,000 9,425 10,000 10,000 12/31/95 10,000 9,425 10,000 10,000 1/31/96 10,088 9,508 10,043 10,137 2/29/96 10,264 9,673 10,080 10,137 3/31/96 10,527 9,922 10,297 10,327 4/30/96 10,872 10,246 10,598 10,640 5/31/96 11,136 10,495 10,406 10,480 6/30/96 11,176 10,533 10,467 10,533 7/31/96 10,664 10,051 10,164 10,183 8/31/96 10,952 10,322 10,189 10,243 9/30/96 11,136 10,496 10,462 10,497 10/31/96 11,048 10,413 10,357 10,392 11/30/96 11,495 10,834 10,772 10,793 12/31/96 11,665 10,995 10,636 10,668 1/31/97 12,136 11,438 10,266 10,472 2/28/97 12,387 11,675 10,437 10,664 3/31/97 12,265 11,560 10,477 10,641 4/30/97 12,387 11,675 10,535 10,731 5/31/97 13,027 12,278 11,223 11,394 6/30/97 13,626 12,843 11,845 12,023 7/31/97 14,144 13,331 12,039 12,266 8/31/97 13,351 12,583 11,142 11,301 9/30/97 14,081 13,271 11,769 11,912 10/31/97 13,060 12,309 10,867 10,898 11/30/97 12,907 12,165 10,759 10,762 12/31/97 13,145 12,389 10,855 10,886 1/31/98 13,103 12,349 11,354 11,211 2/28/98 13,995 13,190 12,085 11,959 3/31/98 14,565 13,727 12,460 12,373 4/30/98 14,649 13,807 12,561 12,461 5/31/98 14,352 13,527 12,503 12,235 6/30/98 14,055 13,247 12,601 12,189 7/31/98 14,013 13,207 12,731 12,305 8/31/98 11,793 11,115 11,157 10,570 9/30/98 11,682 11,010 10,818 10,346 10/31/98 12,533 11,812 11,948 11,430 11/30/98 13,204 12,445 12,563 12,044 12/31/98 13,672 12,886 13,062 12,459 1/31/99 14,148 13,334 13,027 12,446 2/28/99 13,969 13,166 12,719 12,167 3/31/99 14,539 13,703 13,253 12,755 4/30/99 15,321 14,440 13,793 13,393 5/31/99 14,938 14,079 13,086 12,764 6/30/99 15,814 14,905 13,599 13,350 7/31/99 15,635 14,736 14,006 13,663 8/31/99 15,524 14,631 14,061 13,711 9/30/99 15,167 14,295 14,205 13,804 10/31/99 15,702 14,800 14,740 14,318 11/30/99 16,875 15,905 15,256 14,890 12/31/99 18,814 17,733 16,628 16,310 1/31/2000 18,115 17,073 15,574 15,425 2/29/2000 19,248 18,142 15,996 15,842 3/31/2000 19,304 18,194 16,620 16,438 4/30/2000 17,905 16,875 15,748 15,520 5/31/2000 17,092 16,109 15,367 15,123 6/30/2000 17,593 16,581 15,971 15,767 7/31/2000 17,119 16,135 15,305 15,145 8/31/2000 17,631 16,617 15,441 15,332 9/30/2000 16,968 15,993 14,692 14,482 10/31/2000 16,325 15,387 14,348 14,021 11/30/2000 15,582 14,686 13,813 13,392 12/31/2000 16,516 15,566 14,307 13,850 1/31/2001 16,836 15,868 14,300 14,057 2/28/2001 15,760 14,854 13,229 12,945 3/31/2001 14,730 13,883 12,353 12,030 4/30/2001 15,680 14,778 13,220 12,848 5/31/2001 15,863 14,951 12,764 12,493 6/30/2001 15,732 14,827 12,246 12,014 7/31/2001 15,444 14,556 12,025 11,746 8/31/2001 15,110 14,241 11,722 11,455 9/30/2001 13,533 12,754 10,538 10,239 10/31/2001 13,798 13,004 10,807 10,526 11/30/2001 14,582 13,743 11,206 11,008 12/31/2001 15,034 14,169 11,273 11,150 1/31/2002 14,676 13,832 10,675 10,672 2/28/2002 14,711 13,865 10,750 10,749 3/31/2002 15,589 14,693 11,390 11,378 4/30/2002 15,485 14,594 11,419 11,407 5/31/2002 15,578 14,682 11,574 11,531 6/30/2002 14,631 13,789 11,118 11,033 7/31/2002 13,227 12,467 10,021 9,958 8/31/2002 13,250 12,488 10,001 9,958 9/30/2002 11,615 10,947 8,929 8,903 10/31/2002 12,253 11,548 9,410 9,381 11/30/2002 13,134 12,378 9,838 9,832 12/31/2002 12,565 11,842 9,508 9,514 1/31/2003 12,124 11,427 9,112 9,180 2/28/2003 11,788 11,110 8,904 8,994 3/31/2003 11,637 10,968 8,735 8,820 4/30/2003 12,854 12,115 9,601 9,669 5/31/2003 13,770 12,978 10,192 10,285 6/30/2003 14,082 13,272 10,444 10,570 7/31/2003 14,372 13,546 10,699 10,852 8/31/2003 14,824 13,971 10,959 11,175 9/30/2003 15,021 14,157 11,299 11,488 10/31/2003 16,087 15,162 12,004 12,233 11/30/2003 16,365 15,424 12,273 12,500 12/31/2003 17,467 16,463 13,232 13,454 1/31/2004 17,862 16,835 13,420 13,670 2/29/2004 18,081 17,042 13,732 14,017 3/31/2004 17,908 16,878 13,815 14104 4/30/2004 17,397 16,397 13,514 13665 5/31/2004 17,455 16,451 13,555 13696 6/30/2004 17,745 16,724 13,875 14006 7/31/2004 16,944 15,970 13,427 13598 8/31/2004 17,095 16,112 13,489 13706 9/30/2004 17,536 16,528 13,844 14147 10/31/2004 18,046 17,009 14,317 14639 11/30/2004 19,100 18,002 15,299 15655 12/31/2004 19,847 18,709 15,971 16327 Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
Since 1 Year/8/ 5 Years/8/ Inception/8/ Class A (Inception 12/29/95) Net Asset Value/1/ 13.60% 1.07% 7.91% With Maximum Sales Charge/2/ 7.07 -0.12 7.20 Class B (Inception 12/29/95) Net Asset Value/1/ 12.73 0.32 7.12 With CDSC/3/ 7.73 0.00 7.12 Class C (Inception 12/29/95) Net Asset Value/1/ 12.80 0.32 7.13 With CDSC/3/ 11.80 0.32 7.13 - ---------------------------------------------------------------------------------------------------- Since Comparative Performance 1 Year 5 Years Inception/7/ MSCI ACWI ex-U.S. Index/5/ 21.36% 0.02% 5.60% MSCI EAFE Index/4/ 20.70 -0.80 5.34 Morningstar Foreign Large Blend Fund Avg./6/ 17.59 -2.93 5.78
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 12/31/04 6/30/04 - --------------------------------------- Common Stocks 97.4 98.2 - --------------------------------------- Short Term Investments and Other 2.6 1.8
% of Net Assets as of Ten Largest Holdings 12/31/04 - -------------------------------------------------- Royal Bank of Scotland Group PLC 1.8 - -------------------------------------------------- Societe Generale, Class A 1.8 - -------------------------------------------------- Canon, Inc. 1.7 - -------------------------------------------------- Novartis AG 1.6 - -------------------------------------------------- HBOS PLC 1.6 - -------------------------------------------------- Johnson Electric Holdings, Ltd. 1.4 - -------------------------------------------------- Total SA 1.3 - -------------------------------------------------- Hutchison Whampoa, Ltd. 1.3 - -------------------------------------------------- Samsung Electronics Co., Ltd. 1.2 - -------------------------------------------------- Eni-Ente Nazionale Idrocarburi SpA 1.2 % of Net Assets as of Five Largest Countries 12/31/04 - -------------------------------------------------- United Kingdom 19.0 - -------------------------------------------------- Japan 18.7 - -------------------------------------------------- France 13.9 - -------------------------------------------------- Germany 7.2 - -------------------------------------------------- Hong Kong 5.8
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 Europe Australasia and Far East Index (MSCI EAFE) is an unmanaged index of common stocks traded outside the United States. /5/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. /6/Morningstar Foreign Large Blend 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 are calculated from 12/31/95. /8/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. 8 HARRIS ASSOCIATES FOCUSED VALUE FUND Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks long-term capital appreciation - -------------------------------------------------------------------------------- Strategy: Focuses on 15 to 20 stocks of mid- to largecap 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 overall market during any given period. Management Discussion - -------------------------------------------------------------------------------- Election uncertainty plus possible economic damage from high energy prices left stock prices trendless for most of 2004. However, optimism returned in the fourth quarter as oil prices retreated and the election outcome proved decisive. A strong rally followed, moving the market solidly into the black, although at a slower pace than in 2003. After trailing its benchmark earlier in the year, Harris Associates Focused Value Fund gained significant ground during the fourth-quarter rally. Total return for the year ended December 31, 2004 was 10.77%, based on the net asset value of the fund's Class A shares. Performance was in line with the fund's benchmark, the Standard & Poor's 500 Index, which returned 10.88% for the period, but below the 12.91% average return on Morningstar's Large Value category. CONSUMER DISCRETIONARY ISSUES BOOSTED RETURNS We took advantage of attractive valuations in economically sensitive consumer stocks, a strategy that was rewarded as consumer confidence rebounded. A shift in its product mix contributed to profits for TJX, as the company expanded its offerings of accessories at its T.J. Maxx and Marshall's stores. Yum! Brands stabilized domestic operations at its Pizza Hut division, a unit that is seeing rapid growth in China. AutoNation, the country's largest retailer of new and used cars, continued to execute its strategy of growth by acquiring additional dealerships. AutoNation enjoys strong cash flow, conservative financial management, and large insider ownership -- all characteristics that fit our investment style. Black & Decker continued to execute its sound business strategy and was the portfolio's best performing stock for the year. FINANCIAL, HEALTHCARE, AND MEDIA COMPANIES ALSO ADVANCED Washington Mutual, a banking and mortgage company, recovered after shaking off a mid-year earnings shortfall. In healthcare, we took advantage of low prices to increase our position in Omnicare, which provides pharmaceutical care for seniors in nursing homes and other facilities; shares recovered after a stretch of sluggish performance. Hospira, a leader in the growing market for injectable and other drug delivery systems, rose as investors sought alternatives to the beleaguered pharmaceutical industry. Media and cable companies rebounded as investors recognized the sector's improving prospects; performance had sagged following the collapse of Adelphia (not in the portfolio). Fund holdings in Time Warner and Liberty Media performed well. We increased exposure to Time Warner opportunistically during the year. Cablevision, a new addition, also rose. We were attracted to Cablevision because of its valuation, cash flow, and talented management team. COMPANY-SPECIFIC PROBLEMS AND LOW ENERGY WEIGHTING HURT RESULTS First Data Corporation, a leading processor of credit and debit card transactions, was disappointing. Issues remain in its efforts to work through the acquisition of Concord EFS. There was also some customer defection as contracts came up for renewal. We retained our position based on our assessment of the company's intrinsic value. H&R Block suffered a moderate decline. The mortgage division, which prospered while home sales boomed and rates were low, recently saw some erosion. Competition in the tax preparation market and migration of customers to electronic tax filing were other factors. Although oil and gas exploration company Burlington Resources rose, the fund's lack of significant exposure to such strong sectors as energy, materials, and utilities hurt its 2004 performance comparisons. PORTFOLIO SHIFTS CREATED OPPORTUNITY, POSITIONED FOR CONTINUED PROGRESS During the year we eliminated Sprint and SunGard. We also increased the fund's holdings in Omnicare and Time Warner, and added Cablevision, as mentioned above. We see potential for satisfactory returns continuing into 2005. During the market's sideways trend, we built a high-quality portfolio that we believe is positioned to reward shareholders as the economy moves forward. In the meantime, we are finding more stocks we feel are undervalued among large-cap issues than in the mid-sized companies that we sometimes emphasize. 9 HARRIS ASSOCIATES FOCUSED VALUE FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- LOGO Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
Since 1 Year Inception/7/ Class A (Inception 3/15/01) Net Asset Value/1/ 10.77% 7.28% With Maximum Sales Charge/2/ 4.40 5.62 Class B (Inception 3/15/01) Net Asset Value/1/ 9.87 6.47 With CDSC/3/ 4.87 5.81 Class C (Inception 3/15/01) Net Asset Value/1/ 9.87 6.47 With CDSC/3/ 8.87 6.47
- --------------------------------------------------------------------------------
Since Comparative Performance 1 Year Inception/6/ S&P 500 Index/4/ 10.88% 2.85% Morningstar Large Value Fund Avg./5/ 12.91 4.65
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 12/31/04 6/30/04 - --------------------------------------- Common Stocks 90.6 92.5 - --------------------------------------- Short Term Investments and Other 9.4 7.5
% of Net Assets as of Ten Largest Holdings 12/31/04 - ------------------------------------------ Washington Mutual, Inc. 15.3 - ------------------------------------------ Yum! Brands, Inc. 6.7 - ------------------------------------------ H&R Block, Inc. 6.6 - ------------------------------------------ Time Warner, Inc. 5.0 - ------------------------------------------ RR Donnelley & Sons Co. 4.9 - ------------------------------------------ First Data Corp. 4.6 - ------------------------------------------ Black & Decker Corp. 4.4 - ------------------------------------------ Omnicare, Inc. 4.3 - ------------------------------------------ Burlington Resources, Inc. 4.3 - ------------------------------------------ TJX Cos., Inc. 4.2 % of Net Assets as of Five Largest Industries 12/31/04 - ------------------------------------------ Savings & Loans 15.3 - ------------------------------------------ Commercial Services 14.5 - ------------------------------------------ Retail 13.5 - ------------------------------------------ Media 11.5 - ------------------------------------------ Pharmaceuticals 11.3
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 stocks. /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/The since-inception performance comparisons are calculated from 3/31/01. /7/Fund performance has been increased by expense waivers, without which performance would have been lower. 10 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 underperform the overall market during any given period. Management Discussion - -------------------------------------------------------------------------------- After lacking direction for much of 2004, U.S stock markets moved into the black in the fourth quarter. A decisive outcome to the presidential election, a decline in oil prices, and strong corporate earnings prospects all helped improve investor confidence. However, the market's gains for the year fell short of 2003's results. For the 12 months ended December 31, 2004, Harris Associates Large Cap Value Fund provided a total return of 9.14% based on the net asset value of Class A shares. The fund's results trailed its benchmark, the Russell 1000 Value Index, which returned 16.49%, but it was within a percentage point of the 9.96% average return on the funds in Morningstar's Large Blend category. CONSUMER STOCKS REFLECTED THE ECONOMIC UPTURN McDonald's continued its energetic turnaround. We purchased shares at a time when sales were weak and market share was eroding. Since then, upheaval in the executive suite has not disrupted the successful change in strategy that emphasizes service and quality over growth via expansion. McDonald's has also returned excess capital to its shareholders, including higher dividends and a share repurchase program. We purchased home products conglomerate Masco when its valuation seemed too low given the wide acceptance of the company's products. Expanding earnings have driven shares higher, as Masco's high market share brands, including Delta and Peerless faucets, continue to prosper. Strength in housing also boosted results at Home Depot, as new management has created a more efficient organization through centralized buying, better communications, and other measures. Cruise-ship operator Carnival had a large gain, as the travel industry continued to prosper. Although The Gap was down moderately, we are looking past short-term disappointments and are pleased with the company's overall progress. Separately, Xerox advanced further, as it continues to pay down debt and introduce new products. MOST MEDIA AND FINANCIAL HOLDINGS WERE POSITIVE Liberty Media, whose cable properties include QVC and Discovery, rose late in the year after splitting into domestic and international units; both performed well. Investors upped their assessment of Time Warner and welcomed a move at the AOL division toward developing more advertising revenue and away from subscriber growth. Washington Mutual's shares rose after shaking off a mid-year earnings disappointment. Global ad agency Interpublic was an exception to the positive trend among media stocks. New management has failed to revitalize the firm, despite improving conditions in the advertising business. LOW EXPOSURE TO ENERGY, UTILITIES, AND OTHER INDUSTRIES HURT PERFORMANCE COMPARISONS Results trailed the benchmark chiefly because we were underweight in energy and utilities, as well as in the industrial, materials, and commodity sectors. Our style is to invest in companies when we believe the products or services they offer are out of favor or undervalued, and these industry groups performed well in 2004. They also had a strong, positive influence on the fund's benchmark. The fund benefited from its position in Burlington Resources, an energy exploration company, but our position was relatively small, which diluted its effect on the fund. HEALTHCARE COMPANIES BROUGHT MIXED RESULTS Among major drug makers, Merck's withdrawal of its Vioxx arthritis treatment drove shares down sharply. Bristol-Myers Squibb's shares also declined. We eliminated Cardinal Health, a distributor of pharmaceutical products, when shares rebounded after the company was cleared of accounting charges. Abbott Laboratories and Johnson & Johnson both showed gains, despite weakness in the sector. We believe the current negative tone may not reflect the underlying strength of many healthcare companies. OUTLOOK IS FOR MODEST GAINS IN 2005 We believe corporate profits may expand further next year, but the muted market gains of 2004 could foreshadow a slowing rate of economic expansion. Nonetheless, the potential for satisfactory returns remains. We think the economy will succeed in absorbing moderate interest rate increases in 2005. We also feel that the anxiety over the dollar's weakness is overdone. 11 HARRIS ASSOCIATES LARGE CAP VALUE FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- [CHART] December 31, 1994 through December 31, 2004 Net Asset Maximum Sales Russell 1000 Value/1/ Charge/2/ Value Index/4/ ----------- ------------- -------------- 12/31/1994 $10,000 $ 9,425 $10,000 1/31/1995 10,250 9,661 10,308 2/28/1995 10,588 9,979 10,716 3/31/1995 10,883 10,257 10,952 4/30/1995 11,215 10,570 11,298 5/31/1995 11,579 10,913 11,772 6/30/1995 11,850 11,169 11,932 7/31/1995 12,265 11,559 12,347 8/31/1995 12,379 11,667 12,522 9/30/1995 12,922 12,179 12,975 10/31/1995 12,794 12,059 12,846 11/30/1995 13,222 12,461 13,496 12/31/1995 13,512 12,735 13,836 1/31/1996 13,935 13,134 14,267 2/29/1996 14,011 13,205 14,375 3/31/1996 14,081 13,271 14,619 4/30/1996 14,127 13,315 14,675 5/31/1996 14,343 13,519 14,859 6/30/1996 14,036 13,229 14,871 7/31/1996 13,339 12,572 14,309 8/31/1996 13,659 12,873 14,718 9/30/1996 14,358 13,533 15,303 10/31/1996 14,800 13,949 15,895 11/30/1996 16,116 15,190 17,047 12/31/1996 15,837 14,927 16,830 1/31/1997 16,625 15,669 17,646 2/28/1997 16,831 15,863 17,905 3/31/1997 16,099 15,173 17,261 4/30/1997 16,945 15,971 17,986 5/31/1997 18,032 16,995 18,991 6/30/1997 18,915 17,827 19,806 7/31/1997 20,107 18,951 21,296 8/31/1997 19,534 18,410 20,537 9/30/1997 20,739 19,546 21,778 10/31/1997 19,831 18,690 21,170 11/30/1997 20,685 19,496 22,106 12/31/1997 21,132 19,917 22,751 1/31/1998 21,257 20,034 22,429 2/28/1998 22,964 21,643 23,939 3/31/1998 24,259 22,864 25,404 4/30/1998 24,382 22,980 25,573 5/31/1998 24,051 22,668 25,194 6/30/1998 25,056 23,615 25,517 7/31/1998 24,670 23,252 25,067 8/31/1998 20,940 19,736 21,336 9/30/1998 21,983 20,719 22,561 10/31/1998 23,570 22,215 24,309 11/30/1998 24,640 23,223 25,441 12/31/1998 26,188 24,682 26,307 1/31/1999 26,947 25,398 26,517 2/28/1999 26,300 24,788 26,143 3/31/1999 26,663 25,130 26,684 4/30/1999 28,244 26,620 29,176 5/31/1999 28,117 26,501 28,855 6/30/1999 28,995 27,327 29,693 7/31/1999 28,139 26,521 28,824 8/31/1999 27,759 26,163 27,754 9/30/1999 26,635 25,104 26,784 10/31/1999 27,703 26,110 28,326 11/30/1999 27,784 26,186 28,104 12/31/1999 28,667 27,019 28,240 1/31/2000 27,171 25,608 27,319 2/29/2000 26,255 24,745 25,289 3/31/2000 28,387 26,755 28,375 4/30/2000 27,919 26,313 28,045 5/31/2000 27,059 25,503 28,340 6/30/2000 27,413 25,837 27,045 7/31/2000 27,246 25,679 27,384 8/31/2000 29,074 27,402 28,907 9/30/2000 27,745 26,150 29,172 10/31/2000 27,823 26,223 29,889 11/30/2000 26,165 24,660 28,779 12/31/2000 26,570 25,043 30,221 1/31/2001 26,589 25,060 30,337 2/28/2001 25,010 23,572 29,494 3/31/2001 23,604 22,247 28,451 4/30/2001 25,530 24,062 29,847 5/31/2001 25,568 24,098 30,517 6/30/2001 24,681 23,262 29,840 7/31/2001 23,835 22,464 29,777 8/31/2001 22,371 21,085 28,584 9/30/2001 20,503 19,324 26,572 10/31/2001 21,235 20,014 26,344 11/30/2001 22,739 21,431 27,875 12/31/2001 22,700 21,395 28,532 1/31/2002 22,584 21,286 28,312 2/28/2002 21,986 20,722 28,357 3/31/2002 22,584 21,285 29,699 4/30/2002 21,947 20,685 28,680 5/31/2002 21,850 20,594 28,824 6/30/2002 20,539 19,358 27,169 7/31/2002 19,229 18,123 24,644 8/31/2002 19,710 18,576 24,830 9/30/2002 17,051 16,070 22,069 10/31/2002 17,687 16,670 23,704 11/30/2002 18,881 17,795 25,197 12/31/2002 18,148 17,105 24,103 1/31/2003 17,705 16,687 23,519 2/28/2003 17,146 16,160 22,892 3/31/2003 17,358 16,360 22,930 4/30/2003 18,995 17,903 24,949 5/31/2003 20,422 19,248 26,559 6/30/2003 20,865 19,665 26,891 7/31/2003 20,673 19,484 27,292 8/31/2003 21,368 20,139 27,717 9/30/2003 20,906 19,704 27,446 10/31/2003 21,889 20,630 29,126 11/30/2003 22,659 21,356 29,521 12/31/2003 23,604 22,247 31,341 1/31/2004 23,779 22,411 31,892 2/29/2004 24,337 22,938 32,576 3/31/2004 23,972 22,594 32,290 4/30/2004 23,972 22,594 31,501 5/31/2004 23,992 22,612 31,823 6/30/2004 24,339 22,940 32,574 7/31/2004 23,454 22,105 32,116 8/31/2004 23,568 22,213 32,572 9/30/2004 23,568 22,213 33,077 10/31/2004 24,070 22,686 33,627 11/30/2004 24,725 23,303 35,327 12/31/2004 25,756 24,269 36,510 Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
Since 1 Year/7/ 5 Years/7/ 10 Years/7/ Inception/7/ Class A (Inception 5/6/31) Net Asset Value/1/ 9.14% -2.12% 9.92% -- With Maximum Sales Charge/2/ 2.85 -3.27 9.27 -- Class B (Inception 9/13/93) Net Asset Value/1/ 8.42 -2.84 9.13 -- With CDSC/3/ 3.42 -3.22 9.13 -- Class C (Inception 5/1/95) Net Asset Value/1/ 8.34 -2.84 -- 8.20% With CDSC/3/ 7.34 -2.84 -- 8.20 Class Y (Inception 11/18/98) Net Asset Value/1/ 9.57 -1.62 -- 1.47
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Since Since Class C Class Y Comparative Performance 1 Year 5 Years 10 Years Inception/6/ Inception/6/ Russell 1000 Value Index/4/ 16.49% 5.27% 13.83% 12.54% 6.12% Morningstar Large Blend Fund Avg./5/ 9.96 -1.77 10.42 9.24 2.46
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 12/31/04 6/30/04 - --------------------------------------- Common Stocks 97.3 94.1 - --------------------------------------- Short Term Investments and Other 2.7 5.9
% of Net Assets as of Ten Largest Holdings 12/31/04 - ---------------------------------------------- Liberty Media Corp., Class A 4.0 - ---------------------------------------------- Washington Mutual, Inc. 4.0 - ---------------------------------------------- Time Warner, Inc. 3.6 - ---------------------------------------------- McDonald's Corp. 3.6 - ---------------------------------------------- Home Depot, Inc. 3.5 - ---------------------------------------------- Comcast Corp., Special Class A 3.3 - ---------------------------------------------- Masco Corp. 3.2 - ---------------------------------------------- Xerox Corp. 3.2 - ---------------------------------------------- JPMorgan Chase & Co. 3.0 - ---------------------------------------------- Diageo PLC, Sponsored ADR 3.0 % of Net Assets as of Five Largest Industries 12/31/04 - ---------------------------------------------- Media 17.8 - ---------------------------------------------- Retail 15.5 - ---------------------------------------------- Diversified Financial Services 8.2 - ---------------------------------------------- Food 7.3 - ---------------------------------------------- Beverages 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/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 forecasted growth values. /5/Morningstar Large Blend Fund Average is the average performance of funds with similar investment objectives without sales charges, as calculated by Morningstar, Inc. /6/The since-inception performance comparisons for each Class of 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. 12 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 - -------------------------------------------------------------------------------- Vaughan Nelson Small Cap Value Fund provided a total return of 15.28% in 2004, based on the net asset value of Class A shares. The fund lagged both its benchmark, the Russell 2000 Value Index, which returned 22.25% for the year, and the 20.58% average return on the funds in Morningstar's Small Value category. Small-cap value stocks led the market's rise in 2004, as they had in 2003, presenting us with challenges as we searched for attractively priced prospects to help reshape the portfolio when we began managing it in March. Declining markets provide better opportunities for value-oriented investors than periods when prices are rising, and we strive to provide investors with above-average results through full market cycles - the ups and the downs. STOCK SELECTION HELPED MORE THAN SECTOR ALLOCATION Rising oil prices caused energy stocks to do well, and one of the fund's best performers in 2004 was Southwestern Energy. However, the strong performance of this oil and gas explorer/producer had more to do with the fact that the company had assets for which it had not been properly credited. Once this oversight came to light, the stock price rose strongly. Some coal assets owned by Walter Industries, a diversified company that is actively expanding its coal production business, were significantly repriced during the year, causing the stock price to climb. Another strong performer for the fund was MTS Systems, a unique company with a dominant share of a niche market and virtually no debt. The Mechanical Testing and Simulation (MTS) division makes systems that help manufacturers with design and development work, as well as helping them trim manufacturing costs. This division also provides customized systems for simulation and manufacturing of such high-end products as aircraft and suspension systems. UNDERWEIGHT IN FINANCIAL SECTOR AND SOME INDIVIDUAL STOCKS HURT Financial stocks did well during 2004. Although the portfolio included some banks and other financial companies that appreciated, the fund was underweight in this sector relative to the benchmark, which hurt our performance comparisons. Stocks that performed poorly were from different industries. For example, Graftech did well for the fund early in the year, but the stock price began to slide in March when it became apparent that analysts had overestimated the company's earnings prospects. We sold the stock even though Graftech has a profitable business selling graphite to steel manufacturers. However, we are following it with a view to possibly buying it again if the price weakens further. The share price of Navigant International declined when this corporate travel agency trimmed its earnings forecast slightly. We believe this was a one-time event and we continue to hold the stock. Hypercom provides point-of-sale electronic payment solutions to customers internationally as well as domestically. The business is doing well, cash flow is brisk and the company has no debt, but the weakness of the U.S. dollar impacted its earnings estimates. We are not currently planning to add to the position, and if the dollar weakens further we will consider selling it. VALUATIONS OF SMALL-CAP VERSUS LARGE-CAP STOCKS APPEAR TO BE NEAR PARITY After a long run of strong performance by small-cap stocks, it is natural to wonder whether the market may be ready to shift. In our opinion, valuations of small-cap versus large-cap stocks are about equal right now; neither is significantly over- or under-valued. We do not anticipate major gains in 2005, but our long-term outlook is positive. We believe 2005 earnings may already be reflected in current stock prices, and the first half is likely to see the markets rise and fall in a range of about 5%. However, once analysts begin to factor in 2006 earnings forecasts, we believe double-digit returns may become possible again. 13 VAUGHAN NELSON SMALL CAP VALUE FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- [CHART] December 31, 1996 (inception) through December 31, 2004 Net Asset Maximum Sales Russell 2000 Russell 2000 Value/1/ Charge/2/ Index/4/ Value Index/5/ ----------- ------------- -------------- --------------- 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 9,349 9,953 10,250 3/31/1997 9,351 8,814 9,483 9,975 4/30/1997 9,264 8,731 9,509 10,122 5/31/1997 10,447 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 12,375 11,664 12,026 12,746 12/31/1997 12,696 11,966 12,236 13,178 1/31/1998 12,340 11,631 12,043 12,940 2/28/1998 13,348 12,581 12,934 13,722 3/31/1998 14,125 13,313 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 10,294 9,702 10,253 11,303 10/31/1998 10,749 10,131 10,671 11,638 11/30/1998 11,758 11,082 11,230 11,953 12/31/1998 12,957 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 13,024 12,468 12,523 6/30/1999 14,968 14,107 13,032 12,976 7/31/1999 14,785 13,935 12,674 12,668 8/31/1999 14,654 13,811 12,205 12,205 9/30/1999 15,061 14,195 12,208 11,961 10/31/1999 16,203 15,271 12,257 11,722 11/30/1999 18,066 17,027 12,989 11,783 12/31/1999 21,430 20,198 14,460 12,145 1/31/2000 21,402 20,172 14,227 11,827 2/29/2000 26,682 25,148 16,577 12,550 3/31/2000 25,666 24,190 15,484 12,609 4/30/2000 22,655 21,352 14,552 12,684 5/31/2000 20,815 19,619 13,704 12,490 6/30/2000 22,508 21,213 14,899 12,855 7/31/2000 20,925 19,722 14,419 13,283 8/31/2000 23,526 22,174 15,520 13,877 9/30/2000 22,776 21,466 15,063 13,799 10/31/2000 20,858 19,659 14,391 13,750 11/30/2000 17,223 16,232 12,914 13,470 12/31/2000 18,811 17,729 14,023 14,917 1/31/2001 19,631 18,502 14,753 15,329 2/28/2001 17,102 16,119 13,785 15,307 3/31/2001 15,472 14,583 13,111 15,062 4/30/2001 17,023 16,044 14,136 15,759 5/31/2001 17,375 16,376 14,484 16,164 6/30/2001 17,968 16,934 14,984 16,815 7/31/2001 16,737 15,774 14,173 16,438 8/31/2001 15,711 14,807 13,715 16,381 9/30/2001 13,216 12,456 11,869 14,572 10/31/2001 14,116 13,304 12,563 14,953 11/30/2001 15,358 14,475 13,536 16,028 12/31/2001 16,544 15,593 14,371 17,009 1/31/2002 16,157 15,228 14,222 17,235 2/28/2002 14,869 14,014 13,832 17,340 3/31/2002 16,191 15,260 14,944 18,638 4/30/2002 15,815 14,906 15,080 19,294 5/31/2002 15,051 14,186 14,411 18,656 6/30/2002 14,049 13,241 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 10,823 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 9,857 10,914 14,300 4/30/2003 11,462 10,803 11,949 15,659 5/31/2003 12,636 11,909 13,232 17,257 6/30/2003 13,114 12,360 13,471 17,550 7/31/2003 13,970 13,166 14,314 18,425 8/31/2003 14,688 13,843 14,970 19,125 9/30/2003 14,254 13,435 14,694 18,906 10/31/2003 15,279 14,401 15,928 20,447 11/30/2003 15,724 14,820 16,493 21,232 12/31/2003 15,883 14,969 16,828 22,000 1/31/2004 16,497 15,549 17,559 22,761 2/29/2004 16,407 15,463 17,716 23,201 3/31/2004 16,441 15,496 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 16,610 15,655 17,966 23,721 7/31/2004 15,893 14,979 16,756 22,631 8/31/2004 15,734 14,829 16,670 22,853 9/30/2004 16,292 15,355 17,452 23,757 10/31/2004 16,520 15,570 17,796 24,126 11/30/2004 17,774 16,752 19,340 26,267 12/31/2004 18,309 17,260 19,912 26,894 Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
Since 1 Year 5 Years Inception Class A (Inception 12/31/96) Net Asset Value/1/ 15.28% -3.10% 7.85% With Maximum Sales Charge/2/ 8.65 -4.24 7.06 Class B (Inception 12/31/96) Net Asset Value/1/ 14.45 -3.84 7.04 With CDSC/3/ 9.45 -4.15 7.04 Class C (Inception 12/31/96) Net Asset Value/1/ 14.44 -3.83 7.05 With CDSC/3/ 13.44 -3.83 7.05
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Since Comparative Performance 1 Year 5 Years Inception Russell 2000 Index/4/ 18.33% 6.61% 8.99% Russell 2000 Value Index/5/ 22.25 17.23 13.16 Morningstar Small Value Fund Avg./6/ 20.58 15.81 12.36
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 12/31/04 6/30/04 - --------------------------------------- Common Stocks 98.6 94.6 - --------------------------------------- Short Term Investments and Other 1.4 5.4
% of Net Assets as of Ten Largest Holdings 12/31/04 - ----------------------------------------------------- iShares Russell 2000 Value Index Fund 3.7 - ----------------------------------------------------- Regis Corp. 2.6 - ----------------------------------------------------- Healthcare Services Group, Inc. 2.4 - ----------------------------------------------------- DRS Technologies, Inc. 2.2 - ----------------------------------------------------- Raymond James Financial, Inc. 2.0 - ----------------------------------------------------- Consolidated Graphics, Inc. 1.9 - ----------------------------------------------------- Ashford Hospitality Trust, Inc. 1.9 - ----------------------------------------------------- Infinity Property & Casualty Corp. 1.9 - ----------------------------------------------------- Triad Hospitals, Inc. 1.8 - ----------------------------------------------------- MB Financial, Inc. 1.8 % of Net Assets as of Five Largest Industries 12/31/04 - ----------------------------------------------------- Banks 8.2 - ----------------------------------------------------- Commercial Services 7.9 - ----------------------------------------------------- Retail 7.5 - ----------------------------------------------------- Transportation 5.9 - ----------------------------------------------------- Aerospace & Defense 5.7
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/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 Value Fund Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Morningstar, Inc. Note: The fund changed 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. 14 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 - -------------------------------------------------------------------------------- Value stocks continued to outperform growth stocks in 2004, most notably during the latter part of the year, when the Federal Reserve Board's actions seemed to energize the markets, triggering a wave of speculation among depressed stocks. Prices of higher quality, profitable companies -- which this fund seeks to emphasize -- tended to lag lower-quality, more speculative issues. For 2004, the total return on Westpeak Capital Growth Fund was 5.15% based on the net asset value of Class A shares. The fund trailed both its benchmark, the broad-based Russell 1000 Growth Index, which returned 6.30%, and the 7.64% average return on the funds in Morningstar's Large Growth category. ENERGY AND INDUSTRIAL PARTS WERE STRONG, TECHNOLOGY STRUGGLED As oil prices rose throughout most of 2004, the fund's energy stocks did well, especially companies with large energy reserves, like Southwestern Energy Company, and Baker Hughes, which provides products and services to energy exploration companies. In addition, the fund benefited from its position in Energizer Holdings, hotels (including Harrah's Entertainment), and medical products. However, the technology sector continued to lag, as it has for the past few years. Some of the country's most prestigious technology companies are among the fund's largest holdings. FUND'S BEST PERFORMERS INCLUDED HEALTHCARE COMPANIES AND AN INTERNET STOCK We had built up the fund's holdings in UnitedHealth Group before the beginning of the year, and our emphasis in the stock of this healthcare services company was a positive. The fund's long-term position in Becton Dickinson, a profitable manufacturer of medical supplies, was another positive. Although we sold the fund's holdings in Internet services provider Infospace when the company's earnings outlook dimmed, the stock did well for the fund while it was in the portfolio. LEADING TECHNOLOGY COMPANIES AND A PHARMACEUTICAL GIANT WERE BIGGEST DETRACTORS Intel Corp, a renowned semiconductor manufacturer, has been in the portfolio for several years and is among the fund's largest holdings. Although the stock underperformed the benchmark in 2004, it did better than most semiconductor stocks and we believe it is still highly attractive. Another major holding, Cisco Systems, has also been in the portfolio for some time and it, too, underperformed, especially during the third quarter. However, Cisco remains a profitable company and we believe it is attractively valued relative to its future prospects, so we continue to hold the stock. We trimmed the fund's position in Pfizer, which had been the fund's largest holding, when negative headlines about one of its drugs, Celebrex, drove down the share price of this premier pharmaceutical company. Celebrex is just one drug in a broad array of prescription medicines Pfizer offers for human and animal healthcare. We believe the price decline might turn out to have been an overreaction, so we continue to hold a reduced position in Pfizer. FUND IS POSITIONED IN ANTICIPATION OF SECTOR ROTATION IN 2005 As we enter 2005, the fund's largest sectors include technology, with particular emphasis on the computer software and hardware industries. We also favor the aerospace and defense industries. In addition, we are emphasizing interest-sensitive companies in financial services, asset management and the construction business. If the Federal Reserve Board's more restrictive monetary policies slow the economy, growth stocks in general, and technology stocks in particular, may enjoy a period of renewed investor interest. Bargain hunting may give way to a search for companies whose earnings are relatively independent of the economic cycle. Stocks of quality companies, like those featured in the fund's portfolio, may come back into their own. 15 WESTPEAK CAPITAL GROWTH FUND Investment Results through December 31, 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 - -------------------------------------------------------------------------------- [CHART] December 31, 1994 through December 31, 2004 Net Asset Maximum Sales Russell 1000 Value/1/ Charge/2/ Growth Index/4/ ----------- ------------- --------------- 12/31/1994 $10,000 $ 9,425 $10,000 1/31/1995 10,080 9,500 10,214 2/28/1995 10,479 9,877 10,642 3/31/1995 10,825 10,203 10,952 4/30/1995 10,992 10,360 11,192 5/31/1995 11,298 10,649 11,581 6/30/1995 12,051 11,358 12,028 7/31/1995 12,591 11,867 12,528 8/31/1995 12,817 12,080 12,542 9/30/1995 13,251 12,489 13,120 10/31/1995 13,040 12,290 13,129 11/30/1995 13,357 12,589 13,639 12/31/1995 13,078 12,326 13,718 1/31/1996 13,320 12,554 14,176 2/29/1996 13,667 12,881 14,436 3/31/1996 13,539 12,760 14,454 4/30/1996 14,213 13,396 14,834 5/31/1996 14,639 13,798 15,353 6/30/1996 14,440 13,610 15,374 7/31/1996 13,445 12,672 14,473 8/31/1996 13,956 13,154 14,847 9/30/1996 15,115 14,245 15,928 10/31/1996 15,107 14,238 16,024 11/30/1996 15,859 14,947 17,227 12/31/1996 15,304 14,424 16,889 1/31/1997 16,170 15,241 18,074 2/28/1997 15,726 14,822 17,952 3/31/1997 14,551 13,714 16,980 4/30/1997 15,178 14,305 18,108 5/31/1997 16,512 15,563 19,414 6/30/1997 16,973 15,997 20,191 7/31/1997 18,165 17,120 21,977 8/31/1997 17,331 16,334 20,691 9/30/1997 17,854 16,828 21,709 10/31/1997 17,133 16,148 20,907 11/30/1997 17,582 16,571 21,795 12/31/1997 17,942 16,911 22,039 1/31/1998 18,086 17,046 22,698 2/28/1998 19,326 18,215 24,405 3/31/1998 20,190 19,029 25,378 4/30/1998 20,550 19,368 25,729 5/31/1998 20,054 18,901 24,999 6/30/1998 21,097 19,884 26,530 7/31/1998 20,899 19,697 26,355 8/31/1998 17,580 16,569 22,399 9/30/1998 18,635 17,564 24,120 10/31/1998 19,997 18,847 26,059 11/30/1998 21,197 19,978 28,041 12/31/1998 23,156 21,824 30,569 1/31/1999 24,320 22,922 32,364 2/28/1999 22,954 21,634 30,886 3/31/1999 23,459 22,110 32,512 4/30/1999 23,918 22,543 32,554 5/31/1999 23,481 22,131 31,553 6/30/1999 24,725 23,304 33,764 7/31/1999 24,176 22,786 32,691 8/31/1999 24,389 22,987 33,225 9/30/1999 24,033 22,651 32,527 10/31/1999 25,708 24,230 34,983 11/30/1999 26,472 24,949 36,871 12/31/1999 28,886 27,225 40,705 1/31/2000 27,257 25,689 38,797 2/29/2000 28,393 26,761 40,693 3/31/2000 30,668 28,904 43,606 4/30/2000 29,757 28,046 41,531 5/31/2000 28,367 26,736 39,440 6/30/2000 30,236 28,498 42,429 7/31/2000 29,453 27,760 40,660 8/31/2000 31,757 29,931 44,342 9/30/2000 28,822 27,165 40,147 10/31/2000 27,822 26,222 38,247 11/30/2000 24,069 22,685 32,609 12/31/2000 23,243 21,907 31,578 1/31/2001 24,357 22,956 33,759 2/28/2001 21,049 19,839 28,028 3/31/2001 19,085 17,988 24,978 4/30/2001 21,666 20,420 28,137 5/31/2001 21,419 20,187 27,723 6/30/2001 21,084 19,872 27,081 7/31/2001 19,971 18,823 26,404 8/31/2001 18,363 17,308 24,245 9/30/2001 16,478 15,530 21,824 10/31/2001 17,236 16,244 22,969 11/30/2001 18,735 17,658 25,176 12/31/2001 18,488 17,425 25,128 1/31/2002 18,410 17,351 24,685 2/28/2002 17,744 16,723 23,660 3/31/2002 18,349 17,294 24,478 4/30/2002 17,327 16,330 22,481 5/31/2002 16,954 15,979 21,937 6/30/2002 15,559 14,664 19,908 7/31/2002 14,350 13,525 18,813 8/31/2002 14,366 13,540 18,869 9/30/2002 12,847 12,109 16,912 10/31/2002 13,777 12,985 18,463 11/30/2002 14,227 13,408 19,466 12/31/2002 13,296 12,532 18,122 1/31/2003 12,956 12,211 17,682 2/28/2003 13,018 12,269 17,601 3/31/2003 13,281 12,517 17,928 4/30/2003 14,055 13,247 19,254 5/31/2003 14,830 13,977 20,215 6/30/2003 14,969 14,108 20,493 7/31/2003 15,171 14,299 21,003 8/31/2003 15,358 14,475 21,526 9/30/2003 15,419 14,532 21,295 10/31/2003 16,162 15,233 22,491 11/30/2003 16,348 15,408 22,727 12/31/2003 16,843 15,875 23,513 1/31/2004 17,091 16,108 23,993 2/29/2004 17,091 16,108 24,145 3/31/2004 16,782 15,817 23,697 4/30/2004 16,409 15,466 23,422 5/31/2004 16,703 15,743 23,858 6/30/2004 16,920 15,947 24,157 7/31/2004 16,145 15,217 22,791 8/31/2004 16,129 15,202 22,678 9/30/2004 16,223 15,290 22,894 10/31/2004 16,594 15,640 23,251 11/30/2004 17,215 16,225 24,051 12/31/2004 17,717 16,694 24,994 Average Annual Total Returns -- December 31, 2004 - --------------------------------------------------------------------------------
1 Year 5 Years 10 Years Class A (Inception 8/3/92) Net Asset Value/1/ 5.15% -9.32% 5.89% With Maximum Sales Charge/2/ -0.87 -10.38 5.26 Class B (Inception 9/13/93) Net Asset Value/1/ 4.41 -9.97 5.05 With CDSC/3/ -0.59 -10.26 5.05 Class C (Inception 12/30/94) Net Asset Value/1/ 4.42 -10.01 5.03 With CDSC/3/ 3.42 -10.01 5.03
- --------------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years Russell 1000 Growth Index/4/ 6.30% -9.29% 9.59% Morningstar Large Growth Fund Avg./5/ 7.64 -7.64 9.00
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 12/31/04 6/30/04 - --------------------------------------- Common Stocks 98.4 98.6 - --------------------------------------- Short Term Investments and Other 1.6 1.4
% of Net Assets as of Ten Largest Holdings 12/31/04 - ----------------------------------------------------- Microsoft Corp. 5.3 - ----------------------------------------------------- Intel Corp. 4.7 - ----------------------------------------------------- Cisco Systems, Inc. 4.3 - ----------------------------------------------------- International Business Machines Corp. 4.0 - ----------------------------------------------------- Pfizer, Inc. 3.6 - ----------------------------------------------------- Home Depot, Inc. 3.6 - ----------------------------------------------------- Dell, Inc. 3.0 - ----------------------------------------------------- Cardinal Health, Inc. 2.6 - ----------------------------------------------------- Boeing Co. (The) 2.5 - ----------------------------------------------------- Johnson & Johnson 2.4 % of Net Assets as of Five Largest Industries 12/31/04 - ----------------------------------------------------- Software 9.3 - ----------------------------------------------------- Retail 8.0 - ----------------------------------------------------- Diversified Financial Services 7.6 - ----------------------------------------------------- Computers 6.9 - ----------------------------------------------------- Pharmaceuticals 6.8
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. 16 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 the 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 Nvest Funds 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 fund 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' website 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 funds' website and the SEC's website. Quarterly Portfolio Schedules The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE 17 UNDERSTANDING YOUR FUNDS' EXPENSES As a mutual fund shareholder, you incur different costs: transaction costs, including sales charges (loads) on purchases, redemption fees and certain exchange fees and ongoing costs, including management fees, distribution fees (12b-1 fees), and other fund expenses. In addition, each fund assesses a minimum balance fee of $20 on an annual basis for accounts that fall below the required minimum to establish an account. Certain exemptions may apply. These costs are described in more detail in the funds' prospectus. The examples below are intended to help you understand the ongoing costs of investing in the funds and help you compare these with the ongoing costs of investing in other mutual funds. The first line in the table of each Class of fund shares shows the actual account values and actual fund expenses you would have paid on a $1,000 investment in the fund from July 1, 2004 through December 31, 2004. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual fund returns and expenses. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example $8,600 account value divided by $1,000 = $8.60) and multiply the result by the number in the Expenses Paid During Period column as shown below for your Class. The second line in the table of each Class of fund shares provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs, such as sales charges, redemption fees or exchange fees. Therefore, the second line in the table of each fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. If transaction costs were included, total costs would be higher.
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/1/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- CDC Nvest Star Advisers Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,069.00 $9.82 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.64 $9.57 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,064.30 $13.70 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.86 $13.36 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,064.90 $13.70 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.87 $13.35 - ---------------------------------------------------------------------------------------------- Class Y - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,071.90 $7.00 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.38 $6.82
*Expenses are equal to the fund's annualized expense ratio: 1.89%, 2.64%, 2.64% and 1.34% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 18 UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/1/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- CDC Nvest Star Value Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,067.90 $8.73 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.70 $8.51 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,064.50 $12.61 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.92 $12.29 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,064.50 $12.58 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.95 $12.26
*Expenses are equal to the fund's annualized expense ratio: 1.68%, 2.43%, and 2.42% for Class A, B, and C, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period).
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/31/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- CGM Advisor Targeted Equity Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,105.00 $7.52 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.99 $7.21 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,100.30 $11.46 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.22 $10.99 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,100.30 $11.46 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.23 $10.99 - ---------------------------------------------------------------------------------------------- Class Y - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,106.70 $5.74 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.69 $5.50
*Expenses are equal to the fund's annualized expense ratio: 1.42%, 2.17%, 2.17% and 1.08% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 19 UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/1/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- Hansberger International Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,118.20 $10.07 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.63 $ 9.58 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,113.80 $14.00 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.89 $13.32 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,114.50 $14.04 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.86 $13.36
*Expenses are equal to the fund's annualized expense ratio: 1.89%, 2.63%, and 2.64% for Class A, B, and C, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period).
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/1/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- Harris Associates Focused Value Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $ 1,096.60 $8.96 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,016.59 $8.61 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $ 1,092.10 $ 12.88 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $ 1,012.82 $ 12.40 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,092.10 $12.88 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.82 $12.39
*Expenses are equal to the fund's annualized expense ratio: 1.70%, 2.45%, and 2.45% for Class A, B, and C, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 20 UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/1/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- Harris Associates Large Cap Value Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,058.60 $6.73 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.60 $6.59 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,055.20 $10.59 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.83 $10.38 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,055.30 $10.59 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.83 $10.38 - ---------------------------------------------------------------------------------------------- Class Y - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,061.00 $5.20 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.09 $5.10
*Expenses are equal to the fund's annualized expense ratio: 1.30%, 2.05%, 2.05% and 1.00% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period).
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/1/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- Vaughan Nelson Small Cap Value Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,102.20 $10.49 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.16 $10.05 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,097.50 $14.42 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.39 $13.83 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,097.40 $14.43 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.38 $13.83
*Expenses are equal to the fund's annualized expense ratio: 1.98%, 2.73%, and 2.74% for Class A, B, and C, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 21 UNDERSTANDING YOUR FUNDS' EXPENSES (continued)
Beginning Account Ending Account Expenses Paid During Value Value Period* 7/1/04 12/31/04 7/1/04 - 12/31/04 - ---------------------------------------------------------------------------------------------- Westpeak Capital Growth Fund - ---------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,046.70 $9.94 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.42 $9.79 - ---------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,043.00 $13.79 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.64 $13.58 - ---------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------- Actual $1,000 $1,043.10 $13.78 - ---------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.64 $13.57
*Expenses are equal to the fund's annualized expense ratio: 1.93%, 2.69%, and 2.68% for Class A, B, and C, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 22 STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - ---------------------------------------------------------- Common Stocks -- 98.3% of Total Net Assets Advertising -- 1.2% 84,900 Lamar Advertising Co.(c) $ 3,632,022 81,425 R.H. Donnelley Corp.(c)(d) 4,808,146 ------------- 8,440,168 ------------- Aerospace & Defense -- 1.4% 41,550 Armor Holdings, Inc.(d) 1,953,681 36,275 L-3 Communications Holdings, Inc.(c) 2,656,781 130,400 Raytheon Co. 5,063,432 ------------- 9,673,894 ------------- Apparel -- 0.8% 98,475 Coach, Inc.(c) 5,553,990 ------------- Auto Manufacturers -- 0.4% 35,300 Paccar, Inc.(d) 2,840,944 ------------- Auto Parts & Equipment -- 0.4% 303,300 Visteon Corp.(d) 2,963,241 ------------- Banks -- 2.7% 46,725 City National Corp. 3,301,121 80,482 Dearborn Bancorp, Inc.(c) 2,346,855 48,675 East-West Bancorp, Inc. 2,042,403 63,475 Investors Financial Services Corp. 3,172,480 130,650 South Financial Group (The), Inc.(d) 4,250,044 124,700 U.S. Bancorp 3,905,604 ------------- 19,018,507 ------------- Beverages -- 1.9% 80,600 Anheuser-Busch Cos., Inc. 4,088,838 24,000 Coca-Cola Co. (The) 999,120 99,200 Coca-Cola Enterprises, Inc. 2,068,320 101,200 Diageo PLC, Sponsored ADR 5,857,456 ------------- 13,013,734 ------------- Biotechnology -- 0.7% 23,575 Genzyme Corp.(c) 1,369,000 86,300 Gilead Sciences, Inc.(c)(d) 3,019,637 63,600 Incyte Corp.(d) 635,364 ------------- 5,024,001 ------------- Building Materials -- 1.4% 477,400 Comfort Systems USA, Inc.(c) 3,666,432 170,900 Masco Corp. 6,242,977 ------------- 9,909,409 ------------- Chemicals -- 1.9% 33,700 Air Products & Chemicals, Inc. 1,953,589 129,925 Airgas, Inc. 3,444,312 61,000 Dow Chemical Co. (The) 3,020,110 7,100 Du Pont (E.I.) de Nemours & Co. 348,255 84,850 Lyondell Chemical Co. 2,453,862 45,200 Praxair, Inc. 1,995,580 7,200 Sigma-Aldrich Corp. 435,312 ------------- 13,651,020 ------------- Commercial Services -- 3.5% 57,800 Accenture, Ltd., Class A(c) 1,560,600 150,575 Adesa, Inc.(c) 3,195,201 94,325 Aramark Corp., Class B(d) 2,500,556 40,825 Corporate Executive Board Co.(d) 2,732,825 86,475 Exponent, Inc.(c) 2,377,198 20,100 Hewitt Associates, Inc., Class A(c) 643,401 62,500 Manpower, Inc. 3,018,750
Shares Description Value (a) - ----------------------------------------------------------------- Commercial Services -- continued 38,750 Moody's Corp. $ 3,365,437 55,300 Paychex, Inc. 1,884,624 25,700 Robert Half International, Inc.(d) 756,351 83,943 Viad Corp. 2,391,536 ------------- 24,426,479 ------------- Computers -- 2.5% 39,700 Apple Computer, Inc.(c) 2,556,680 19,625 CACI International, Inc., Class A(c) 1,337,051 22,675 Diebold, Inc. 1,263,678 125,200 Hewlett-Packard Co. 2,625,444 85,250 Network Appliance, Inc.(c)(d) 2,832,005 58,300 SanDisk Corp.(c)(d) 1,455,751 31,100 SRA International, Inc., Class A(c) 1,996,620 104,025 Storage Technology Corp.(c)(d) 3,288,230 ------------- 17,355,459 ------------- Distribution & Wholesale -- 0.8% 275,750 BlueLinx Holdings, Inc.(d) 3,990,102 84,000 Wolseley PLC 1,566,312 ------------- 5,556,414 ------------- Diversified Financial Services -- 4.1% 44,100 American Express Co. 2,485,917 35,700 Blackrock, Inc., Class A 2,758,182 13,200 Chicago Mercantile Exchange (The) 3,018,840 96,200 Citigroup, Inc. 4,634,916 73,700 Fannie Mae 5,248,177 21,100 Franklin Resources, Inc. 1,469,615 150,200 JPMorgan Chase & Co. 5,859,302 56,550 T. Rowe Price Group, Inc. 3,517,410 ------------- 28,992,359 ------------- Electric -- 1.6% 44,041 Allete, Inc. 1,618,507 124,225 MDU Resources Group, Inc. 3,314,323 173,475 NRG Energy, Inc.(c) 6,253,774 ------------- 11,186,604 ------------- Electrical Components & Equipment -- 0.8% 98,575 Ametek, Inc. 3,516,170 26,700 Emerson Electric Co. 1,871,670 ------------- 5,387,840 ------------- Electronics -- 2.0% 107,175 Amphenol Corp., Class A(c) 3,937,609 39,450 Cogent, Inc. 1,301,850 13,400 Fisher Scientific International, Inc.(c)(d) 835,892 94,770 Lowrance Electronics, Inc. 2,985,160 147,225 Thermo Electron Corp.(c) 4,444,723 15,400 Waters Corp.(c) 720,566 ------------- 14,225,800 ------------- Engineering & Construction -- 0.7% 122,075 Washington Group International, Inc.(c) 5,035,594 ------------- Environmental Control -- 1.1% 89,050 Nalco Holding Co. 1,738,256 188,100 Waste Management, Inc. 5,631,714 ------------- 7,369,970 ------------- Food -- 3.0% 72,150 Dean Foods Co.(c) 2,377,342 61,200 General Mills, Inc.(d) 3,042,252
See accompanying notes to financial statements. 23 STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Shares Description Value (a) - ------------------------------------------------------------- Food -- continued 71,300 HJ Heinz Co. $ 2,779,987 115,800 Kraft Foods, Inc., Class A(d) 4,123,638 43,000 McCormick & Co., Inc. 1,659,800 51,400 Nestle SA, Sponsored ADR 3,354,282 28,925 Supervalu, Inc. 998,491 28,800 Whole Foods Market, Inc.(d) 2,746,080 ------------- 21,081,872 ------------- Gas -- 1.0% 124,325 Oneok, Inc.(d) 3,533,316 87,225 UGI Corp. 3,568,375 ------------- 7,101,691 ------------- Health Care-Products -- 5.4% 56,200 Alcon, Inc.(d) 4,529,720 48,450 American Medical Systems Holdings, Inc. 2,025,694 120,100 Baxter International, Inc. 4,148,254 29,375 Biomet, Inc. 1,274,581 79,200 Boston Scientific Corp.(c) 2,815,560 38,800 Guidant Corp. 2,797,480 70,000 Johnson & Johnson 4,439,400 28,100 Kinetic Concepts, Inc.(c) 2,144,030 80,500 Medtronic, Inc. 3,998,435 106,425 St. Jude Medical, Inc.(c)(d) 4,462,400 39,500 Varian Medical Systems, Inc.(c) 1,707,980 32,850 Ventana Medical Systems 2,102,071 18,000 Zimmer Holdings, Inc.(c) 1,442,160 ------------- 37,887,765 ------------- Health Care-Services -- 2.1% 50,100 Covance, Inc.(c) 1,941,375 64,950 Omnicare, Inc.(d) 2,248,569 36,700 Sierra Health Services, Inc.(c) 2,022,537 123,250 Triad Hospitals, Inc.(c) 4,586,132 18,500 UnitedHealth Group, Inc. 1,628,555 17,150 WellPoint, Inc. 1,972,250 ------------- 14,399,418 ------------- Home Builders -- 0.7% 24,575 Standard-Pacific Corp. 1,576,240 49,650 Toll Brothers, Inc.(c)(d) 3,406,486 ------------- 4,982,726 ------------- Home Furnishings -- 0.4% 21,800 Harman International Industries, Inc. 2,768,600 ------------- Household Products & Wares -- 1.0% 61,850 Church & Dwight Co., Inc. 2,079,397 62,700 Fortune Brands, Inc. 4,839,186 ------------- 6,918,583 ------------- Insurance -- 2.9% 45,100 Aflac, Inc. 1,796,784 173,175 Assurant, Inc. 5,290,496 25,300 MGIC Investment Corp.(d) 1,743,423 142,650 Old Republic International Corp. 3,609,045 106,725 Platinum Underwriters Holdings, Ltd. 3,319,148 99,250 Protective Life Corp. 4,236,983 ------------- 19,995,879 ------------- Internet -- 1.9% 63,975 Avocent Corp.(c) 2,592,267 7,550 Google, Inc., Class A(c)(d) 1,457,905 73,450 McAfee, Inc. 2,124,909
Shares Description Value (a) - ---------------------------------------------------------------------- Internet -- continued 61,700 Monster Worldwide, Inc.(c) $ 2,075,588 25,350 Shanda Interactive Entertainment, Ltd., ADR(d) 1,077,375 100,500 Yahoo!, Inc.(c) 3,786,840 ------------- 13,114,884 ------------- Iron & Steel -- 0.4% 131,375 Roanoke Electric Steel Corp. 2,715,653 ------------- Leisure Time -- 0.8% 63,900 Carnival Corp.(d) 3,682,557 33,500 Harley-Davidson, Inc. 2,035,125 ------------- 5,717,682 ------------- Lodging -- 3.2% 49,275 Choice Hotels International, Inc. 2,857,950 490,575 La Quinta Corp.(c) 4,459,327 25,850 Las Vegas Sands Corp. 1,240,800 51,000 Marriott International, Inc., Class A 3,211,980 101,400 Starwood Hotels & Resorts Worldwide, Inc. 5,921,760 59,050 Station Casinos, Inc. 3,228,854 23,400 Wynn Resorts, Ltd.(c)(d) 1,565,928 ------------- 22,486,599 ------------- Machinery - Diversified -- 2.0% 109,975 Albany International Corp., Class A 3,866,721 30,100 Cummins, Inc. 2,522,079 19,800 Deere & Co. 1,473,120 33,200 Rockwell Automation, Inc. 1,645,060 221,825 Wabtec Corp. 4,729,309 ------------- 14,236,289 ------------- Media -- 6.4% 191,100 Comcast Corp., Special Class A(c) 6,275,724 191,700 DIRECTV Group (The), Inc.(c) 3,209,058 86,825 Journal Communications, Inc., Class A 1,568,928 715,000 Liberty Media Corp., Class A(c) 7,850,700 94,225 Scholastic Corp.(c) 3,482,556 78,325 Sirius Satellite Radio, Inc.(d) 599,186 359,000 Time Warner, Inc.(c) 6,978,960 133,500 Viacom, Inc., Class B 4,858,065 152,900 Walt Disney Co. 4,250,620 85,175 Westwood One, Inc.(c) 2,293,763 92,900 XM Satellite Radio Holdings, Inc., Class A(c)(d) 3,494,898 ------------- 44,862,458 ------------- Metals -- 0.2% 52,250 Commercial Metals Co. 1,320,880 ------------- Mining -- 0.4% 77,525 Freeport-McMoran Copper & Gold, Inc., Class B(d) 2,963,781 ------------- Miscellaneous - Manufacturing -- 2.9% 83,100 3M Co. 6,820,017 26,200 Eaton Corp.(d) 1,895,832 245,500 General Electric Co. 8,960,750 73,300 Honeywell International, Inc. 2,595,553 ------------- 20,272,152 ------------- Office & Business Equipment -- 1.1% 29,000 Canon, Inc. 1,562,299 359,000 Xerox Corp.(c) 6,106,590 ------------- 7,668,889 ------------- Office Furnishings -- 0.3% 200,539 Interface, Inc., Class A(c) 1,999,374 -------------
See accompanying notes to financial statements. 24 STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Shares Description Value (a) - -------------------------------------------------------------- Oil & Gas -- 3.7% 61,400 Baker Hughes, Inc. $ 2,619,938 79,600 Burlington Resources, Inc. 3,462,600 12,300 ConocoPhillips 1,068,009 80,200 Devon Energy Corp. 3,121,384 112,900 Energy Partners, Ltd.(d) 2,288,483 44,250 EOG Resources, Inc. 3,157,680 53,725 Noble Corp.(c) 2,672,282 32,700 Occidental Petroleum Corp. 1,908,372 42,700 Pioneer Natural Resources Co. 1,498,770 42,600 Transocean, Inc.(c) 1,805,814 41,675 Ultra Petroleum Corp.(c) 2,005,818 ------------- 25,609,150 ------------- Oil & Gas Services -- 1.4% 162,475 FMC Technologies, Inc.(c) 5,231,695 18,500 Grant Prideco, Inc.(c) 370,925 61,600 Schlumberger, Ltd. 4,124,120 ------------- 9,726,740 ------------- Packaging & Containers -- 0.4% 119,525 Pactiv Corp.(c) 3,022,787 ------------- Pharmaceuticals -- 2.8% 95,900 Abbott Laboratories 4,473,735 24,225 Allergan, Inc. 1,963,921 116,500 Bristol-Myers Squibb Co. 2,984,730 33,400 Forest Laboratories, Inc.(c)(d) 1,498,324 135,325 Hospira, Inc.(c) 4,533,388 104,200 Merck & Co., Inc. 3,348,988 37,150 Valeant Pharmaceuticals International(d) 978,903 ------------- 19,781,989 ------------- Pipelines -- 0.3% 37,775 Questar Corp. 1,925,014 ------------- Real Estate -- 1.2% 45,050 St. Joe Co. (The) 2,892,210 287,850 Trammell Crow Co.(c) 5,212,964 ------------- 8,105,174 ------------- REITS - Diversified -- 0.6% 99,100 iStar Financial, Inc. 4,485,266 ------------- REITS - Mortgage -- 0.8% 225,500 Luminent Mortgage Capital, Inc.(d) 2,683,450 48,525 New Century Financial Corp.(d) 3,101,233 ------------- 5,784,683 ------------- REITS - Shopping Centers -- 0.5% 73,825 Developers Diversified Realty Corp. 3,275,615 ------------- Restaurants -- 0.3% 75,050 Applebee's International, Inc. 1,985,073 ------------- Retail -- 7.8% 60,225 BJ's Wholesale Club, Inc.(c) 1,754,354 95,325 CBRL Group, Inc.(d) 3,989,351 56,375 Chico's FAS, Inc.(c)(d) 2,566,754 51,100 Costco Wholesale Corp. 2,473,751 241,900 Gap (The), Inc.(d) 5,108,928 156,300 Home Depot, Inc. 6,680,262 14,725 Kmart Holding Corp.(c)(d) 1,457,039 107,800 Kohl's Corp.(c) 5,300,526 89,600 Limited Brands, Inc. 2,062,592 217,300 McDonald's Corp. 6,966,638 75,500 Staples, Inc. 2,545,105
Shares Description Value (a) - --------------------------------------------------------------------------------------- Retail -- continued 91,550 Starbucks Corp.(c) $ 5,709,058 92,475 Talbots, Inc. 2,518,094 47,100 Wal-Mart Stores, Inc. 2,487,822 68,125 Yum! Brands, Inc. 3,214,138 ------------- 54,834,412 ------------- Savings & Loans -- 1.7% 176,324 Commercial Capital Bancorp, Inc.(d) 4,087,190 180,000 Washington Mutual, Inc. 7,610,400 ------------- 11,697,590 ------------- Semiconductors -- 2.0% 285,750 Entegris, Inc.(c) 2,843,213 161,650 Fairchild Semiconductor International, Inc.(c) 2,628,429 272,800 Intel Corp.(d) 6,380,792 61,375 Marvell Technology Group, Ltd.(c)(d) 2,176,971 ------------- 14,029,405 ------------- Software -- 5.2% 59,650 Autodesk, Inc. 2,263,718 119,400 Certegy, Inc.(d) 4,242,282 92,800 Cognizant Technology Solutions Corp.(c) 3,928,224 43,225 Dun & Bradstreet Corp.(c) 2,578,371 24,100 Electronic Arts, Inc.(c) 1,486,488 139,900 First Data Corp. 5,951,346 268,200 Microsoft Corp. 7,163,622 86,600 MoneyGram International, Inc. 1,830,724 24,450 NAVTEQ Corp. 1,133,502 231,400 Oracle Corp.(c) 3,174,808 125,550 Sybase, Inc.(c) 2,504,723 ------------- 36,257,808 ------------- Telecommunications -- 2.0% 95,200 Adtran, Inc. 1,822,128 144,625 Comverse Technology, Inc.(c) 3,536,081 142,700 Corning, Inc.(c) 1,679,579 50,875 Harris Corp. 3,143,566 90,800 Juniper Networks, Inc.(c) 2,468,852 46,000 Telefonaktiebolaget LM Ericsson, Sponsored ADR(d) 1,448,540 ------------- 14,098,746 ------------- Transportation -- 1.6% 53,025 CNF, Inc. 2,656,553 307,375 Laidlaw International, Inc.(c) 6,577,825 31,625 UTI Worldwide, Inc. 2,151,133 ------------- 11,385,511 ------------- Total Common Stocks (Identified Cost $548,651,629) 688,125,565 ------------- Principal Amount - --------------------------------------------------------------------------------------- Short Term Investments -- 14.5% $13,360,337 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be repurchased at $13,362,285 on 1/03/2005, collateralized by $10,540,000 Federal Home Loan Mortgage Bond, 2.902%, due 1/15/2033 valued at $10,501,516 and $3,276,117 Small Business Administration Bond 5.125%, due 5/25/2027 valued at $3,528,354 13,360,337 173,639 Bank of America, 2.26%, due 2/15/2005(e) 173,639 4,340,988 Bank of America, 2.27%, due 1/18/2005(e) 4,340,988 4,340,988 Bank of Montreal, 2.125%, due 2/02/2005(e) 4,340,988 9,865,652 Bank of Montreal, 2.26%, due 1/28/2005(e) 9,865,652 4,340,988 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 4,340,988 1,736,395 BGI Institutional Money Market Fund(e) 1,736,395
See accompanying notes to financial statements. 25 STAR ADVISERS FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Principal Amount Description Value (a) - -------------------------------------------------------------------------------------------------- Short Term Investments -- continued $ 3,472,790 BNP Paribas, 2.295%, due 2/23/2005(e) $ 3,472,790 1,736,395 Calyon, 2.27%, due 1/20/2005(e) 1,736,395 12,154,765 Calyon, 2.34%, due 2/02/2005(e) 12,154,765 820,446 Calyon, 2.435%, due 3/16/2005(e) 820,446 2,604,592 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 2,604,592 4,236,804 Fortis Bank, 2.14%, due 1/12/2005(e) 4,236,804 4,340,988 Fortis Bank, 2.20%, due 2/11/2005(e) 4,340,988 7,588,046 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 7,588,046 1,736,395 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 1,736,395 1,736,395 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 1,736,395 1,082,585 Merrill Lynch Premier Institutional Fund(e) 1,082,585 5,209,185 Merrimac Cash Fund-Premium Class(e) 5,209,185 868,197 Ranger Funding, 2.271%, due 1/14/2005(e) 868,197 6,945,580 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 6,945,580 4,340,988 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 4,340,988 1,736,395 Wells Fargo, 2.27%, due 1/25/2005(e) 1,736,395 2,604,592 Wells Fargo, 2.32%, due 1/14/2005(e) 2,604,592 ------------- Total Short Term Investments (Identified Cost $101,374,125) 101,374,125 ------------- Total Investments -- 112.8% (Identified Cost $650,025,754)(b) 789,499,690 Other assets less liabilities (89,481,735) ------------- Total Net Assets -- 100% $ 700,017,955 ============= (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized appreciation on investments based on cost of $653,017,584 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 $ 141,410,290 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (4,928,184) ------------- Net unrealized appreciation $ 136,482,106 ============= At December 31, 2004, the Fund had a capital loss carryover of approximately $224,285,919 of which $161,817,021 expires on December 31, 2009 and $62,468,898 expires on December 31, 2010. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. For the year ended December 31, 2004, the Fund has elected to defer $2,008 of foreign currency losses attributable to Post-October losses. At December 31, 2004, there was no undistributed ordinary income or long-term capital gains except for unrealized appreciation/ depreciation disclosed on a tax basis. (c) Non-income producing security. (d) All or a portion of this security was on loan to brokers at December 31, 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. REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Retail 7.8% Media 6.4 Health Care-Products 5.4 Software 5.2 Diversified Financial Services 4.1 Oil & Gas 3.7 Commercial Services 3.5 Lodging 3.2 Food 3.0 Miscellaneous - Manufacturing 2.9 Insurance 2.9 Pharmaceuticals 2.8 Banks 2.7 Computers 2.5 Health Care-Services 2.1 Machinery - Diversified 2.0 Electronics 2.0 Semiconductors 2.0 Telecommunications 2.0 Other, less than 2% each 32.1
See accompanying notes to financial statements. 26 STAR VALUE FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - ----------------------------------------------------------- Common Stocks -- 96.9% of Total Net Assets Aerospace & Defense -- 1.7% 10,400 Boeing Co. (The) $ 538,408 8,400 General Dynamics Corp. 878,640 17,000 Northrop Grumman Corp. 924,120 ------------- 2,341,168 ------------- Agriculture -- 0.8% 18,500 Altria Group, Inc. 1,130,350 ------------- Auto Parts & Equipment -- 0.4% 2,400 Autoliv, Inc. 115,920 7,100 Johnson Controls, Inc. 450,424 ------------- 566,344 ------------- Banks -- 6.2% 30,875 Bank of America Corp. 1,450,816 6,550 Comerica, Inc.(c) 399,681 8,125 PNC Financial Services Group, Inc. 466,700 14,000 Sky Financial Group, Inc. 401,380 5,850 SunTrust Banks, Inc. 432,198 51,800 U.S. Bancorp 1,622,376 43,076 Wachovia Corp. 2,265,798 23,200 Wells Fargo & Co. 1,441,880 ------------- 8,480,829 ------------- Beverages -- 2.9% 15,150 Anheuser-Busch Cos., Inc. 768,559 16,000 Coca-Cola Co. (The) 666,080 70,000 Pepsi Bottling Group, Inc.(c) 1,892,800 11,900 PepsiCo, Inc. 621,180 ------------- 3,948,619 ------------- Biotechnology -- 0.2% 3,900 Amgen, Inc.(d) 250,185 ------------- Building Materials -- 1.4% 6,100 Genlyte Group, Inc.(d) 522,648 38,475 Masco Corp.(c) 1,405,492 ------------- 1,928,140 ------------- Chemicals -- 1.4% 12,400 Georgia Gulf Corp. 617,520 113 Kronos Worldwide, Inc. 4,605 22,200 NL Industries 490,620 18,650 Praxair, Inc. 823,397 ------------- 1,936,142 ------------- Coal -- 0.9% 15,800 CONSOL Energy, Inc.(c) 648,590 7,350 Peabody Energy Corp. 594,688 ------------- 1,243,278 ------------- Commercial Services -- 2.7% 23,050 Accenture, Ltd., Class A(d) 622,350 108,600 Cendant Corp. 2,539,068 18,100 Equifax, Inc.(c) 508,610 ------------- 3,670,028 ------------- Computers -- 2.1% 4,500 Apple Computer, Inc.(d) 289,800 6,350 DST Systems, Inc.(d) 330,962 15,000 Hewlett-Packard Co. 314,550 14,900 International Business Machines Corp. 1,468,842 16,400 SunGard Data Systems, Inc.(d) 464,612 ------------- 2,868,766 -------------
Shares Description Value (a) - -------------------------------------------------------------- Cosmetics & Personal Care -- 0.3% 7,200 Procter & Gamble Co. $ 396,576 ------------- Distribution & Wholesale -- 0.5% 14,200 Genuine Parts Co. 625,652 ------------- Diversified Financial Services -- 9.1% 21,800 American Express Co. 1,228,866 16,200 AmeriCredit Corp.(c)(d) 396,090 1,800 Capital One Financial Corp.(c) 151,578 5,475 CIT Group, Inc. 250,864 50,433 Citigroup, Inc. 2,429,862 19,000 CompuCredit Corp.(d) 519,460 15,800 Countrywide Financial Corp.(c) 584,758 5,725 Fannie Mae 407,677 13,200 Federated Investors, Inc., Class B 401,280 85,672 JPMorgan Chase & Co. 3,342,065 8,900 Lehman Brothers Holdings, Inc. 778,572 9,200 MBNA Corp. 259,348 22,100 Merrill Lynch & Co., Inc. 1,320,917 10,300 Raymond James Financial, Inc. 319,094 ------------- 12,390,431 ------------- Electric -- 3.5% 12,700 Constellation Energy Group, Inc. 555,117 7,000 Dominion Resources, Inc. 474,180 23,400 Exelon Corp.(c) 1,031,238 4,800 FirstEnergy Corp. 189,648 53,125 PG&E Corp.(d) 1,768,000 21,000 Wisconsin Energy Corp. 707,910 ------------- 4,726,093 ------------- Electrical Components & Equipment -- 0.7% 10,100 Energizer Holdings, Inc.(c)(d) 501,869 9,100 Hubbell, Inc., Class B 475,930 ------------- 977,799 ------------- Electronics -- 0.2% 11,200 Applera Corp. - Applied Biosystems Group 234,192 ------------- Environmental Control -- 2.0% 90,000 Waste Management, Inc. 2,694,600 ------------- Food -- 0.4% 31,500 Tyson Foods, Inc., Class A 579,600 ------------- Forest Products & Paper -- 0.4% 7,500 Louisiana-Pacific Corp. 200,550 7,700 Plum Creek Timber Co., Inc. 295,988 ------------- 496,538 ------------- Gas -- 0.1% 3,700 KeySpan Corp. 145,965 ------------- Health Care-Products -- 4.2% 76,000 Baxter International, Inc. 2,625,040 4,400 Becton Dickinson & Co. 249,920 8,900 Boston Scientific Corp.(d) 316,395 4,600 Dade Behring Holdings, Inc.(c)(d) 257,600 25,000 Guidant Corp. 1,802,500 6,500 Johnson & Johnson 412,230 ------------- 5,663,685 ------------- Health Care-Services -- 2.4% 22,400 Laboratory Corp. of America Holdings(d) 1,115,968 5,200 Pediatrix Medical Group, Inc.(d) 333,060 5,250 Quest Diagnostics 501,637
See accompanying notes to financial statements. 27 STAR VALUE FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Shares Description Value (a) - ------------------------------------------------------------------- Health Care-Services -- continued 15,100 Triad Hospitals, Inc.(d) $ 561,871 16,525 Universal Health Services, Inc., Class B 735,362 ------------- 3,247,898 ------------- Home Builders -- 0.1% 7,400 Technical Olympic USA, Inc. 187,812 ------------- Insurance -- 3.8% 21,000 ACE, Ltd. 897,750 11,100 Allmerica Financial Corp. 364,413 19,000 Allstate Corp. (The) 982,680 8,500 AMBAC Financial Group, Inc. 698,105 9,960 American International Group, Inc. 654,073 290 Berkshire Hathaway, Inc., Class B(d) 851,440 1,900 Erie Indemnity Co., Class A 99,883 13,100 Old Republic International Corp. 331,430 8,300 Principal Financial Group 339,802 ------------- 5,219,576 ------------- Internet -- 0.4% 14,800 Yahoo!, Inc.(d) 557,664 ------------- Iron & Steel -- 0.3% 17,000 Allegheny Technologies, Inc. 368,390 ------------- Leisure Time -- 0.8% 20,000 Carnival Corp. 1,152,600 ------------- Lodging -- 0.1% 3,200 Marriott International, Inc., Class A 201,536 ------------- Media -- 7.6% 70,000 Cablevision Systems Corp., Class A(d) 1,743,000 30,000 DIRECTV Group (The), Inc.(d) 502,200 200,000 Liberty Media Corp., Class A(d) 2,196,000 12,000 Liberty Media International, Inc., Class A(d) 554,760 6,575 McGraw-Hill Cos. (The), Inc. 601,876 39,100 News Corp., Inc., Class A(c)(d) 729,606 172,425 Time Warner, Inc.(d) 3,351,942 12,925 Tribune Co. 544,660 2,800 Viacom, Inc., Class B 101,892 ------------- 10,325,936 ------------- Mining -- 0.6% 11,100 Inco, Ltd.(c)(d) 408,258 4,200 Phelps Dodge Corp. 415,464 ------------- 823,722 ------------- Miscellaneous - Manufacturing -- 2.6% 36,200 General Electric Co. 1,321,300 23,500 Honeywell International, Inc. 832,135 3,800 Illinois Tool Works, Inc.(c) 352,184 29,450 Tyco International, Ltd. 1,052,543 ------------- 3,558,162 ------------- Oil & Gas -- 6.5% 18,650 BP PLC, Sponsored ADR 1,089,160 9,600 ChevronTexaco Corp. 504,096 5,925 ConocoPhillips 514,468 64,350 Exxon Mobil Corp. 3,298,581 23,700 GlobalSantaFe Corp. 784,707 8,200 Houston Exploration Co.(d) 461,742 14,000 Kerr-McGee Corp. 809,060 32,800 Pioneer Natural Resources Co.(c) 1,151,280 2,200 Sunoco, Inc. 179,762 ------------- 8,792,856 -------------
Shares Description Value (a) - ------------------------------------------------------------- Oil & Gas Services -- 0.7% 19,750 Halliburton Co.(c) $ 774,990 8,600 Oil States International, Inc.(d) 165,894 ------------- 940,884 ------------- Pharmaceuticals -- 2.3% 18,400 Abbott Laboratories 858,360 17,200 Merck & Co., Inc. 552,808 62,017 Pfizer, Inc. 1,667,637 ------------- 3,078,805 ------------- Pipelines -- 0.4% 9,700 Equitable Resources, Inc. 588,402 ------------- REITS - Mortgage -- 0.9% 15,200 American Home Mortgage Investment Corp. 520,600 12,400 New Century Financial Corp.(c) 792,484 ------------- 1,313,084 ------------- REITS - Regional Malls -- 0.5% 10,500 Simon Property Group, Inc.(c) 679,035 ------------- Retail -- 11.3% 40,000 Costco Wholesale Corp. 1,936,400 18,100 CVS Corp. 815,767 5,100 Federated Department Stores 294,729 92,300 Gap (The), Inc.(c) 1,949,376 7,800 Home Depot, Inc. 333,372 24,250 J.C. Penney Co., Inc.(c) 1,003,950 3,800 Kohl's Corp.(d) 186,846 105,300 McDonald's Corp. 3,375,918 16,300 Regis Corp. 752,245 52,000 Tiffany & Co. 1,662,440 16,200 United Auto Group, Inc. 479,358 55,000 Yum! Brands, Inc. 2,594,900 ------------- 15,385,301 ------------- Savings & Loans -- 3.9% 16,700 People's Bank 649,463 107,825 Sovereign Bancorp, Inc.(c) 2,431,454 53,000 Washington Mutual, Inc. 2,240,840 ------------- 5,321,757 ------------- Semiconductors -- 1.8% 20,765 Freescale Semiconductor, Inc., Class B 381,245 64,100 Intel Corp.(c) 1,499,299 18,700 Lam Research Corp.(d) 540,617 ------------- 2,421,161 ------------- Software -- 2.0% 40,225 First Data Corp. 1,711,172 6,400 IMS Health, Inc. 148,544 13,300 Microsoft Corp. 355,243 39,500 Oracle Corp.(d) 541,940 ------------- 2,756,899 ------------- Telecommunications -- 4.2% 9,000 Alltel Corp. 528,840 29,625 BellSouth Corp. 823,279 10,025 CenturyTel, Inc. 355,587 58,500 Cisco Systems, Inc.(d) 1,129,050 34,825 Citizens Communications Co. 480,237 32,975 Motorola, Inc. 567,170 26,500 Nokia OYJ, Sponsored ADR 415,255 26,325 SBC Communications, Inc. 678,395 17,000 Verizon Communications, Inc. 688,670 ------------- 5,666,483 -------------
See accompanying notes to financial statements. 28 STAR VALUE FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Shares Description Value (a) - ----------------------------------------------------------------------------------------- Toys, Games & Hobbies -- 0.4% 26,150 Hasbro, Inc. $ 506,787 ------------- Transportation -- 1.2% 9,525 Burlington Northern Santa Fe Corp. 450,628 3,300 Norfolk Southern Corp. 119,427 6,300 Overseas Shipholding Group 347,760 28,600 Werner Enterprises, Inc. 647,504 ------------- 1,565,319 ------------- Total Common Stocks (Identified Cost $102,963,335) 131,955,049 ------------- Units - ----------------------------------------------------------------------------------------- Warrants -- 0.0% Telecommunications -- 0.0% 564 Lucent Technologies, Inc., Expires 12/10/2007(d) 891 ------------- Total Warrants (Identified Cost $0) 891 ------------- Principal Amount - ----------------------------------------------------------------------------------------- Short Term Investments -- 12.2% $4,890,878 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be repurchased at $4,891,591 on 1/03/2005, collateralized by $4,759,742 Small Business Administration Bond, 5.625%, due 9/25/2016 valued at $5,135,422 4,890,878 23,171 Bank of America, 2.26%, due 2/15/2005(e) 23,171 579,262 Bank of America, 2.27%, due 1/18/2005(e) 579,262 579,262 Bank of Montreal, 2.125%, due 2/02/2005(e) 579,262 1,316,475 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,316,475 579,262 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 579,262 231,705 BGI Institutional Money Market Fund(e) 231,705 463,410 BNP Paribas, 2.295%, due 2/23/2005(e) 463,410 231,705 Calyon, 2.27%, due 1/20/2005(e) 231,705 1,621,934 Calyon, 2.34%, due 2/02/2005(e) 1,621,934 109,481 Calyon, 2.435%, due 3/16/2005(e) 109,481 347,557 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 347,557 565,360 Fortis Bank, 2.14%, due 1/12/2005(e) 565,360 579,262 Fortis Bank, 2.20%, due 2/11/2005(e) 579,262 1,012,550 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,012,550 231,705 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 231,705 231,705 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 231,705 144,460 Merrill Lynch Premier Institutional Fund(e) 144,460 695,115 Merrimac Cash Fund-Premium Class(e) 695,115 115,852 Ranger Funding, 2.271%, due 1/14/2005(e) 115,852 926,819 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 926,819 579,262 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 579,262 231,705 Wells Fargo, 2.27%, due 1/25/2005(e) 231,705 347,557 Wells Fargo, 2.32%, due 1/14/2005(e) 347,557 ------------- Total Short Term Investments (Identified Cost $16,635,454) 16,635,454 ------------- Total Investments -- 109.1% (Identified Cost $119,598,789)(b) 148,591,394 Other assets less liabilities (12,349,125) ------------- Total Net Assets -- 100% $ 136,242,269 =============
(a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized appreciation on investments based on cost of $119,915,634 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 $29,502,367 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (826,607) ----------- Net unrealized appreciation $28,675,760 =========== At December 31, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $3,420,348 in undistributed long-term gains. (c) All or a portion of this security was on loan to brokers at December 31, 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. REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Retail 11.3% Diversified Financial Services 9.1 Media 7.6 Oil & Gas 6.5 Banks 6.2 Telecommunications 4.2 Health Care-Products 4.2 Savings & Loans 3.9 Insurance 3.8 Electric 3.5 Beverages 2.9 Commercial Services 2.7 Miscellaneous - Manufacturing 2.6 Health Care-Services 2.4 Pharmaceuticals 2.3 Computers 2.1 Software 2.0 Environmental Control 2.0 Other, less than 2% each 17.6
See accompanying notes to financial statements. 29 CGM ADVISOR TARGETED EQUITY FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - ------------------------------------------------------------------------------------- Common Stocks -- 99.4% of Total Net Assets Aerospace & Defense -- 9.9% 360,000 General Dynamics Corp. $ 37,656,000 362,000 United Technologies Corp. 37,412,700 ------------- 75,068,700 ------------- Apparel -- 5.5% 460,000 Nike, Inc., Class B 41,717,400 ------------- Cosmetics & Personal Care -- 4.9% 679,000 Procter & Gamble Co. 37,399,320 ------------- Electronic Components -- 3.2% 190,000 Harman International Industries, Inc. 24,130,000 ------------- Health Care-Services -- 4.7% 408,000 UnitedHealth Group, Inc. 35,916,240 ------------- Insurance -- 4.4% 510,000 American International Group, Inc. 33,491,700 ------------- Internet -- 2.9% 190,000 eBay, Inc.(c) 22,093,200 ------------- Lodging -- 4.9% 586,000 Marriott International, Inc., Class A 36,906,280 ------------- Mining -- 9.2% 1,530,000 BHP Billiton, Ltd., Sponsored ADR(d) 36,750,600 1,155,000 Companhia Vale do Rio Doce, ADR(d) 33,506,550 ------------- 70,257,150 ------------- Oil & Gas -- 23.7% 610,000 BP PLC, Sponsored ADR 35,624,000 700,000 ChevronTexaco Corp. 36,757,000 495,000 ConocoPhillips 42,980,850 260,000 Devon Energy Corp. 10,119,200 235,000 Exxon Mobil Corp. 12,046,100 384,000 Total SA, Sponsored ADR(d) 42,178,560 ------------- 179,705,710 ------------- Restaurants -- 5.3% 1,265,000 McDonald's Corp. 40,555,900 ------------- Retail -- 2.4% 390,000 Yum! Brands, Inc. 18,400,200 ------------- Telecommunications -- 13.5% 930,000 America Movil SA de CV, Series L, ADR(d) 48,685,500 388,300 Mobile TeleSystems, Sponsored ADR(d) 53,783,433 ------------- 102,468,933 ------------- Transportation -- 4.9% 380,000 FedEx Corp. 37,426,200 ------------- Total Common Stocks (Identified Cost $655,739,063) 755,536,933 ------------- Principal Amount - ------------------------------------------------------------------------------------- Short Term Investments -- 13.3% $ 5,113,179 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be purchased at $5,113,925 on 1/03/2005, collateralized by $5,366,089 Federal Home Loan Mortgage Bond, 2.953%, due 12/15/2031 valued at $5,371,113 5,113,179 189,258 Bank of America, 2.26%, due 2/15/2005(e) 189,258 4,731,462 Bank of America, 2.27%, due 1/18/2005(e) 4,731,462 4,731,462 Bank of Montreal, 2.125%, due 2/02/2005(e) 4,731,462 10,753,072 Bank of Montreal, 2.26%, due 1/28/2005(e) 10,753,072 4,731,462 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 4,731,462
Principal Amount Description Value (a) - ---------------------------------------------------------------------------------------------------- Short Term Investments -- continued $ 1,892,585 BGI Institutional Money Market Fund(e) $ 1,892,585 3,785,169 BNP Paribas, 2.295%, due 2/23/2005(e) 3,785,169 1,892,585 Calyon, 2.27%, due 1/20/2005(e) 1,892,585 13,248,092 Calyon, 2.34%, due 2/02/2005(e) 13,248,092 894,246 Calyon, 2.435%, due 3/16/2005(e) 894,246 2,838,877 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 2,838,877 4,617,906 Fortis Bank, 2.14%, due 1/12/2005(e) 4,617,906 4,731,461 Fortis Bank, 2.20%, due 2/11/2005(e) 4,731,461 8,270,595 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 8,270,595 1,892,585 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 1,892,585 1,892,585 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 1,892,585 1,179,964 Merrill Lynch Premier Institutional Fund(e) 1,179,964 5,677,754 Merrimac Cash Fund-Premium Class(e) 5,677,754 946,292 Ranger Funding, 2.271%, due 1/14/2005(e) 946,292 7,570,338 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 7,570,338 4,731,462 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 4,731,462 1,892,585 Wells Fargo, 2.27%, due 1/25/2005(e) 1,892,585 2,838,877 Wells Fargo, 2.32%, due 1/14/2005(e) 2,838,877 ------------- Total Short Term Investments (Identified Cost $101,043,853) 101,043,853 ------------- Total Investments -- 112.7% (Identified Cost $756,782,916)(b) 856,580,786 Other assets less liabilities (96,727,772) ------------- Total Net Assets -- 100% $ 759,853,014 ============= (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized appreciation on investments based on cost of $756,992,153 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 $ 101,146,182 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (1,557,549) ------------- Net unrealized appreciation $ 99,588,633 ============= At December 31, 2004, the Fund had a capital loss carryover of approximately $141,323,294 which expires on December 31, 2010. This amount may be available to offset future realized capital gains, if any, to the extent provided by regulations. At December 31, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $965,026 in undistributed ordinary income. (c) Non-income producing security. (d) All or a portion of this security was on loan to brokers at December 31, 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. 30 CGM ADVISOR TARGETED EQUITY FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004 Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Oil & Gas 23.7% Telecommunications 13.5 Aerospace & Defense 9.9 Mining 9.2 Apparel 5.5 Restaurants 5.3 Transportation 4.9 Cosmetics & Personal Care 4.9 Lodging 4.9 Health Care-Services 4.7 Insurance 4.4 Electronic Components 3.2 Internet 2.9 Retail 2.4
See accompanying notes to financial statements. 31 HANSBERGER INTERNATIONAL FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - ----------------------------------------------------------------------- Common Stocks -- 97.4% of Total Net Assets Brazil -- 1.2% 15,000 Banco Bradesco SA, Sponsored ADR $ 375,900 12,800 Cia Energetica de Minas Gerais, Sponsored ADR 314,112 22,860 Petroleo Brasileiro SA, ADR 909,371 ------------- 1,599,383 ------------- Canada -- 1.5% 23,600 Manulife Financial Corp.(c) 1,090,320 28,200 Suncor Energy, Inc. 998,280 ------------- 2,088,600 ------------- China -- 2.1% 190,460 China Mobile (Hong Kong), Ltd. 645,648 47,200 China Mobile (Hong Kong), Ltd., Sponsored ADR 809,952 1,649,410 Denway Motors, Ltd. 588,848 476,160 Ping An Insurance Group Co. of China, Ltd.(d) 820,860 ------------- 2,865,308 ------------- Denmark -- 1.0% 110,400 Vestas Wind Systems AS(c)(d) 1,367,208 ------------- Finland -- 2.9% 65,780 Nokia OYJ 1,035,369 44,700 Nokia OYJ, Sponsored ADR 700,449 43,700 Stora Enso OYJ 667,115 32,000 Tietoenator OYJ 1,014,287 27,330 UPM-Kymmene OYJ 605,645 ------------- 4,022,865 ------------- France -- 13.9% 44,520 Axa 1,096,337 45,600 Axa, Sponsored ADR 1,128,600 12,000 BNP Paribas 866,370 34,100 Bouygues SA(c) 1,570,465 12,380 Carrefour SA 587,597 13,200 Cie Generale D'Optique Essilor International SA 1,030,785 22,860 European Aeronautic Defense and Space Co.(c) 662,342 10,670 Groupe Danone 982,085 6,286 Lafarge SA 604,544 14,900 L'Oreal SA 1,127,209 6,971 Sanofi-Aventis 555,223 13,330 Schneider Electric SA 924,475 23,650 Societe Generale, Class A 2,385,014 37,800 STMicroelectronics NV (New York)(c) 730,296 21,240 Suez SA 564,480 43,500 Thomson 1,146,051 8,040 Total SA 1,750,117 10,400 Total SA, Sponsored ADR(c) 1,142,336 ------------- 18,854,326 ------------- Germany -- 6.5% 5,050 Adidas-Salomon AG 815,111 5,800 Allianz AG 763,248 7,620 Deutsche Bank AG 674,005 23,400 Deutsche Boerse AG(c) 1,402,569 11,710 E.ON AG 1,065,594 8,090 Fresenius Medical Care AG 648,184 13,710 Linde AG 852,589 1,350 SAP AG 239,918 16,400 SAP AG, Sponsored ADR 725,044 12,380 Schering AG 921,978 8,100 Siemens AG 684,205 ------------- 8,792,445 -------------
Shares Description Value (a) - ----------------------------------------------------------------------------- Hong Kong -- 5.8% 239,400 Esprit Holdings, Ltd. $ 1,447,549 81,140 HSBC Holdings PLC (Hong Kong) 1,388,347 182,950 Hutchison Whampoa, Ltd. 1,712,288 1,891,730 Johnson Electric Holdings, Ltd. 1,837,458 418,000 Li & Fung, Ltd. 704,464 560,217 Shangri-La Asia, Ltd. 821,623 ------------ 7,911,729 ------------ Hungary -- 0.6% 12,600 OTP Bank Rt, Sponsored ADR, 144A(c) 768,600 ------------ India -- 1.1% 17,700 HDFC Bank, Ltd., ADR 802,872 9,600 Infosys Technologies, Ltd., Sponsored ADR(c) 665,376 ------------ 1,468,248 ------------ Israel -- 0.7% 30,700 Teva Pharmaceutical Industries, Ltd., Sponsored ADR(c) 916,702 ------------ Italy -- 3.5% 65,420 Eni-Ente Nazionale Idrocarburi SpA 1,632,282 31,620 Luxottica Group SpA, Sponsored ADR 644,732 77,040 Saipem SpA 923,538 264,900 UniCredito Italiano SpA 1,517,810 ------------ 4,718,362 ------------ Japan -- 18.7% 100,000 Asahi Glass Co., Ltd. 1,100,828 42,100 Canon, Inc. 2,268,027 42,100 Denso Corp. 1,125,811 38,400 Fujisawa Pharmaceutical Co., Ltd. 1,049,313 5,600 Funai Electric Co., Ltd. 693,931 13,900 Honda Motor Co., Ltd. 719,036 48,600 JS Group Corp. 881,097 24,000 Kao Corp. 612,567 409,000 Kawasaki Heavy Industries, Ltd.(c) 669,381 2,800 Keyence Corp. 626,283 242,000 Mazda Motor Corp.(c) 759,123 131,000 NEC Corp. 812,927 11,600 Nidec Corp. 1,411,437 29,700 Nitto Denko Corp. 1,626,050 488 NTT DoCoMo, Inc. 898,509 5,600 ORIX Corp. 759,396 45,000 Pioneer Corp. 876,766 5,900 Rohm Co., Ltd. 609,255 22,000 Seven-Eleven Japan Co., Ltd. 692,255 81,000 Sharp Corp. 1,320,146 10,100 SMC Corp. 1,154,145 26,600 Sony Corp. 1,026,167 156 Sumitomo Mitsui Financial Group, Inc. 1,132,197 194,000 Sumitomo Trust & Banking Co., Ltd. (The) 1,400,429 16,200 Takeda Pharmaceutical Co., Ltd. 814,340 11,000 World Co., Ltd. 385,777 ------------ 25,425,193 ------------ Mexico -- 0.6% 22,280 Cemex SA de CV, Sponsored ADR 811,439 ------------ Netherlands -- 3.0% 28,987 ABN AMRO Holding NV 765,262 18,280 Akzo Nobel NV 777,006 41,028 ING Groep NV 1,229,307 22,190 Koninklijke Philips Electronics NV 584,317 26,100 Koninklijke Philips Electronics NV 691,650 ------------ 4,047,542 ------------
See accompanying notes to financial statements. 32 HANSBERGER INTERNATIONAL FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Shares Description Value (a) - ---------------------------------------------------------------------------------- Republic of Korea -- 4.1% 17,660 Kookmin Bank(d) $ 690,910 19,500 Kookmin Bank, Sponsored ADR(c)(d) 762,060 16,430 LG Chem, Ltd. 654,692 3,900 Samsung Electronics Co., Ltd. 1,697,208 2,100 Samsung Electronics Co., Ltd., GDR, 144A(c) 456,941 2,760 Shinsegae Co., Ltd. 758,520 28,470 SK Telecom Co., Ltd., ADR(c) 633,458 ------------ 5,653,789 ------------ Singapore -- 1.3% 113,140 DBS Group Holdings, Ltd. 1,115,260 102,470 Singapore Airlines, Ltd. 715,213 ------------ 1,830,473 ------------ South Africa -- 0.6% 333,020 Old Mutual PLC 844,019 ------------ Spain -- 2.7% 64,600 Banco Bilbao Vizcaya Argentaria SA 1,141,926 92,400 Telefonica Moviles SA 1,158,985 75,613 Telefonica SA 1,419,563 ------------ 3,720,474 ------------ Switzerland -- 5.6% 104,750 ABB, Ltd.(d) 583,629 19,880 Lonza Group AG 1,116,364 4,480 Nestle SA 1,169,431 5,300 Nobel Biocare Holding AG 957,971 43,710 Novartis AG 2,197,581 18,600 UBS AG 1,556,120 ------------ 7,581,096 ------------ Taiwan -- 1.0% 387,148 Taiwan Semiconductor Manufacturing Co., Ltd. 615,004 87,620 Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR 743,894 ------------ 1,358,898 ------------ United Kingdom -- 19.0% 19,400 AstraZeneca PLC, Sponsored ADR(c) 705,966 100,418 Barclays PLC 1,124,818 57,711 BHP Billiton PLC 673,538 17,800 BP PLC, Sponsored ADR 1,039,520 150,900 British Sky Broadcasting PLC 1,623,772 234,090 Compass Group PLC 1,099,095 47,100 Exel PLC 652,597 63,095 GlaxoSmithKline PLC 1,477,584 299,300 Group 4 Securicor PLC(d) 795,840 130,264 HBOS PLC 2,113,185 133,710 Kingfisher PLC 791,787 110,401 Lloyds TSB Group PLC 999,680 38,172 Reckitt Benckiser PLC 1,151,425 143,320 Rolls-Royce Group PLC(d) 677,720 4,785,900 Rolls-Royce Group PLC, Class B 9,172 72,094 Royal Bank of Scotland Group PLC 2,417,816 330,070 Signet Group PLC 697,382 82,700 Smith & Nephew PLC 843,939 65,900 Smiths Group PLC 1,038,110 74,831 Standard Chartered PLC 1,388,171 233,488 Tesco PLC 1,436,335 75,610 Unilever PLC 741,521 524,146 Vodafone Group PLC 1,413,796 34,300 Vodafone Group PLC, Sponsored ADR 939,134 ------------ 25,851,903 ------------ Total Common Stocks (Identified Cost $112,795,179) 132,498,602 ------------
Shares Description Value (a) - -------------------------------------------------------------------------------------------------- Preferred Stocks -- 0.7% Germany -- 0.7% 945 Porsche AG $ 597,399 9,640 Volkswagen AG 319,918 ------------ 917,317 ------------ Total Preferred Stocks (Identified Cost $884,110) 917,317 ------------ Principal Amount - -------------------------------------------------------------------------------------------------- Short Term Investments -- 10.9% $2,644,318 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be repurchased at $2,644,704 on 1/03/2005, collateralized by $2,767,732 Federal Home Loan Mortgage Bond, 2.8525%, due 11/15/2031 valued at $2,776,942 2,644,318 24,015 Bank of America, 2.26%, due 2/15/2005(e) 24,015 600,381 Bank of America, 2.27%, due 1/18/2005(e) 600,381 600,381 Bank of Montreal, 2.125%, due 2/02/2005(e) 600,381 1,364,470 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,364,470 600,380 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 600,380 240,152 BGI Institutional Money Market Fund(e) 240,152 480,304 BNP Paribas, 2.295%, due 2/23/2005(e) 480,304 240,152 Calyon, 2.27%, due 1/20/2005(e) 240,152 1,681,066 Calyon, 2.34%, due 2/02/2005(e) 1,681,066 113,472 Calyon, 2.435%, due 3/16/2005(e) 113,472 360,228 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 360,228 585,972 Fortis Bank, 2.14%, due 1/12/2005(e) 585,972 600,380 Fortis Bank, 2.20%, due 2/11/2005(e) 600,380 1,049,466 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,049,466 240,152 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 240,152 240,152 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 240,152 149,727 Merrill Lynch Premier Institutional Fund(e) 149,727 720,457 Merrimac Cash Fund-Premium Class(e) 720,457 120,076 Ranger Funding, 2.271%, due 1/14/2005(e) 120,076 960,609 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 960,609 600,380 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 600,380 240,152 Wells Fargo, 2.27%, due 1/25/2005(e) 240,152 360,228 Wells Fargo, 2.32%, due 1/14/2005(e) 360,228 ------------ Total Short Term Investments (Identified Cost $14,817,070) 14,817,070 ------------ Total Investments -- 109.0% (Identified Cost $128,496,359)(b) 148,232,989 Other assets less liabilities (12,267,150) ------------ Total Net Assets -- 100% $135,965,839 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized appreciation on investments based on cost of $129,348,120 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 $ 21,146,883 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (2,262,014) ------------ Net unrealized appreciation $ 18,884,869 ============ At December 31, 2004, the Fund had a capital loss carryover of approximately $8,938,160 of which $1,066,443 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.
See accompanying notes to financial statements. 33 HANSBERGER INTERNATIONAL FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004 For the year ended December 31, 2004, the Fund has elected to defer $9,235 of foreign currency losses attributable to Post-October losses. At December 31, 2004, there was no undistributed ordinary income or long-term capital gains except for unrealized appreciation/depreciation disclosed on a tax basis. (c) All or a portion of this security was on loan to brokers at December 31, 2004. (d) Non-income producing security. (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 $1,225,541 or 0.9% of net assets.
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Banks 18.7% Telecommunications 7.2 Pharmaceuticals 6.4 Oil & Gas 5.5 Electrical Components & Equipment 5.3 Insurance 5.1 Food 3.6 Chemicals 3.1 Health Care-Products 3.1 Hand & Machine Tools 2.5 Building Materials 2.5 Home Furnishings 2.3 Engineering & Construction 2.2 Auto Manufacturers 2.2 Retail 2.1 Electronics 2.0 Other, less than 2% each 24.3
See accompanying notes to financial statements. 34 HARRIS ASSOCIATES FOCUSED VALUE FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - ------------------------------------------------------------------------------------------- Common Stocks -- 90.6% of Total Net Assets Aerospace & Defense -- 4.0% 378,600 Raytheon Co. $ 14,701,038 ------------- Apparel -- 2.4% 203,800 Liz Claiborne, Inc. 8,602,398 ------------- Beverages -- 3.2% 548,500 Coca-Cola Enterprises, Inc. 11,436,225 ------------- Commercial Services -- 14.5% 485,900 H&R Block, Inc.(c) 23,809,100 127,800 Moody's Corp. 11,099,430 503,000 RR Donnelley & Sons Co. 17,750,870 ------------- 52,659,400 ------------- Hand & Machine Tools -- 4.4% 178,900 Black & Decker Corp.(c) 15,802,237 ------------- Health Care-Products -- 1.6% 170,300 Baxter International, Inc. 5,882,162 ------------- Media -- 11.5% 84,500 Cablevision Systems Corp., Class A(d) 2,104,050 181,400 Knight-Ridder, Inc.(c) 12,142,916 851,200 Liberty Media Corp., Class A(d) 9,346,176 932,700 Time Warner, Inc.(d) 18,131,688 ------------- 41,724,830 ------------- Oil & Gas -- 4.3% 357,800 Burlington Resources, Inc. 15,564,300 ------------- Pharmaceuticals -- 11.3% 480,100 Bristol-Myers Squibb Co. 12,300,162 388,400 Hospira, Inc.(d) 13,011,400 452,800 Omnicare, Inc. 15,675,936 ------------- 40,987,498 ------------- Retail -- 13.5% 497,800 AutoNation, Inc.(d) 9,562,738 611,900 TJX Cos., Inc.(c) 15,377,047 513,900 Yum! Brands, Inc. 24,245,802 ------------- 49,185,587 ------------- Savings & Loans -- 15.3% 1,314,000 Washington Mutual, Inc. 55,555,920 ------------- Software -- 4.6% 393,600 First Data Corp. 16,743,744 ------------- Total Common Stocks (Identified Cost $250,117,258) 328,845,339 ------------- Principal Amount - ------------------------------------------------------------------------------------------- Short Term Investments -- 16.1% $ 34,625,799 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be repurchased at $34,630,848 on 1/03/2005, collateralized by $10,472,407 Federal Home Loan Mortgage Bond, 2.803%, due 6/15/2034 valued at $10,502,808 and $21,080,000 Federal Home Loan Mortgage Bond, 2.902%, due 1/15/2033 valued at $21,003,033 and $4,544,305 Small Business Administration Bond, 4.625%, due 11/25/2022 valued at $4,857,089 34,625,799 47,324 Bank of America, 2.26%, due 2/15/2005(e) 47,324 1,183,096 Bank of America, 2.27%, due 1/18/2005(e) 1,183,096 1,183,096 Bank of Montreal, 2.125%, due 2/02/2005(e) 1,183,096 2,688,792 Bank of Montreal, 2.26%, due 1/28/2005(e) 2,688,792 1,183,096 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 1,183,096
Principal Amount Description Value (a) - -------------------------------------------------------------------------------------------------- Short Term Investments -- (continued) $ 473,238 BGI Institutional Money Market Fund(e) $ 473,238 946,477 BNP Paribas, 2.295%, due 2/23/2005(e) 946,477 473,238 Calyon, 2.27%, due 1/20/2005(e) 473,238 3,312,669 Calyon, 2.34%, due 2/02/2005(e) 3,312,669 223,605 Calyon, 2.435%, due 3/16/2005(e) 223,605 709,858 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 709,858 1,154,702 Fortis Bank, 2.14%, due 1/12/2005(e) 1,154,702 1,183,096 Fortis Bank, 2.20%, due 2/11/2005(e) 1,183,096 2,068,052 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 2,068,052 473,238 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 473,238 473,238 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 473,238 295,049 Merrill Lynch Premier Institutional Fund(e) 295,049 1,419,715 Merrimac Cash Fund-Premium Class(e) 1,419,715 236,619 Ranger Funding, 2.271%, due 1/14/2005(e) 236,619 1,892,954 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 1,892,954 1,183,096 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 1,183,096 473,238 Wells Fargo, 2.27%, due 1/25/2005(e) 473,238 709,858 Wells Fargo, 2.32%, due 1/14/2005(e) 709,858 ------------- Total Short Term Investments (Identified Cost $58,613,143) 58,613,143 ------------- Total Investments -- 106.7% (Identified Cost $308,730,401)(b) 387,458,482 Other assets less liabilities (24,361,324) ------------- Total Net Assets -- 100% $ 363,097,158 ============= (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized appreciation on investments based on cost of $308,730,401 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 $ 78,728,081 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value -- ------------- Net unrealized appreciation $ 78,728,081 ============= At December 31, 2004, the Fund had a capital loss carryover of approximately $10,136,380 which expires on December 31, 2011. This amount may be available to offset future realized capital gains, if any, to the extent provided by regulations. At December 31, 2004, there was no undistributed ordinary income or long-term capital gains except for unrealized appreciation/depreciation disclosed on a tax basis. (c) All or a portion of this security was on loan to brokers at December 31, 2004. (d) Non-income producing security. (e) Represents investments of securities lending collateral.
See accompanying notes to financial statements. 35 HARRIS ASSOCIATES FOCUSED VALUE FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004 Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Savings & Loans 15.3% Commercial Services 14.5 Retail 13.5 Media 11.5 Pharmaceuticals 11.3 Software 4.6 Hand & Machine Tools 4.4 Oil & Gas 4.3 Aerospace & Defense 4.0 Beverages 3.2 Apparel 2.4 Other, less than 2% each 1.6
See accompanying notes to financial statements. 36 HARRIS ASSOCIATES LARGE CAP VALUE FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - --------------------------------------------------------------- Common Stocks -- 97.3% of Total Net Assets Aerospace & Defense -- 2.6% 234,900 Raytheon Co. $ 9,121,167 ------------- Banks -- 2.0% 224,800 U.S. Bancorp 7,040,736 ------------- Beverages -- 6.7% 145,300 Anheuser-Busch Cos., Inc. 7,371,069 43,000 Coca-Cola Co. (The) 1,790,090 171,900 Coca-Cola Enterprises, Inc. 3,584,115 182,300 Diageo PLC, Sponsored ADR(c) 10,551,524 ------------- 23,296,798 ------------- Building Materials -- 3.2% 303,500 Masco Corp. 11,086,855 ------------- Diversified Financial Services -- 8.2% 173,400 Citigroup, Inc. 8,354,412 132,700 Fannie Mae 9,449,567 268,300 JPMorgan Chase & Co. 10,466,383 ------------- 28,270,362 ------------- Environmental Control -- 2.9% 337,900 Waste Management, Inc. 10,116,726 ------------- Food -- 7.3% 136,900 General Mills, Inc.(c) 6,805,299 128,500 H.J. Heinz Co. 5,010,215 206,800 Kraft Foods, Inc., Class A(c) 7,364,148 92,700 Nestle SA, Sponsored ADR 6,049,454 ------------- 25,229,116 ------------- Health Care-Products -- 5.9% 213,300 Baxter International, Inc. 7,367,382 69,900 Guidant Corp. 5,039,790 126,100 Johnson & Johnson 7,997,262 ------------- 20,404,434 ------------- Household Products & Wares -- 2.5% 113,000 Fortune Brands, Inc. 8,721,340 ------------- Insurance -- 1.8% 81,300 Aflac, Inc. 3,238,992 44,600 MGIC Investment Corp. 3,073,386 ------------- 6,312,378 ------------- Leisure Time -- 2.1% 64,500 Carnival Corp. 3,717,135 60,200 Harley-Davidson, Inc. 3,657,150 ------------- 7,374,285 ------------- Media -- 17.8% 344,300 Comcast Corp., Special Class A(d) 11,306,812 345,400 DIRECTV Group (The), Inc.(d) 5,781,996 1,254,700 Liberty Media Corp., Class A(d) 13,776,606 644,900 Time Warner, Inc.(d) 12,536,856 235,600 Viacom, Inc., Class B 8,573,484 354,600 Walt Disney Co. (The) 9,857,880 ------------- 61,833,634 ------------- Miscellaneous - Manufacturing -- 1.4% 132,100 Honeywell International, Inc. 4,677,661 ------------- Office & Business Equipment -- 3.2% 644,900 Xerox Corp.(d) 10,969,749 -------------
Shares Description Value (a) - --------------------------------------------------------------------------------------------- Oil & Gas -- 2.3% 141,800 Burlington Resources, Inc. $ 6,168,300 22,200 ConocoPhillips 1,927,626 ------------- 8,095,926 ------------- Pharmaceuticals -- 5.6% 172,800 Abbott Laboratories 8,061,120 209,800 Bristol-Myers Squibb Co. 5,375,076 187,700 Merck & Co., Inc. 6,032,678 ------------- 19,468,874 ------------- Retail -- 15.5% 92,100 Costco Wholesale Corp. 4,458,561 435,800 Gap (The), Inc.(c) 9,204,096 282,100 Home Depot, Inc. 12,056,954 192,200 Kohl's Corp.(d) 9,450,474 71,800 Limited Brands, Inc. 1,652,836 390,400 McDonald's Corp. 12,516,224 84,900 Wal-Mart Stores, Inc. 4,484,418 ------------- 53,823,563 ------------- Savings & Loans -- 4.0% 324,300 Washington Mutual, Inc. 13,711,404 ------------- Software -- 2.3% 189,500 First Data Corp. 8,061,330 ------------- Total Common Stocks (Identified Cost $268,523,000) 337,616,338 ------------- Principal Amount - --------------------------------------------------------------------------------------------- Short Term Investments -- 7.1% $ 9,247,571 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be repurchased at $9,248,920 on 1/03/2005, collateralized by $931,368 Small Business Administration Bond, 5.375%, due 1/25/2017 valued at $976,088 and $8,079,543 Small Business Administration Bond, 5.375%, due 1/25/2017 valued at $8,733,862 9,247,571 30,039 Bank of America, 2.26%, due 2/15/2005(e) 30,039 750,995 Bank of America, 2.27%, due 1/18/2005(e) 750,995 750,995 Bank of Montreal, 2.125%, due 2/02/2005(e) 750,995 1,706,767 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,706,767 750,995 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 750,995 300,398 BGI Institutional Money Market Fund(e) 300,398 600,796 BNP Paribas, 2.295%, due 2/23/2005(e) 600,796 300,397 Calyon, 2.27%, due 1/20/2005(e) 300,397 2,102,785 Calyon, 2.34%, due 2/02/2005(e) 2,102,785 141,938 Calyon, 2.435%, due 3/16/2005(e) 141,938 450,597 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 450,597 732,971 Fortis Bank, 2.14%, due 1/12/2005(e) 732,971 750,995 Fortis Bank, 2.20%, due 2/11/2005(e) 750,995 1,312,739 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,312,739 300,398 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 300,398 300,398 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 300,398 187,288 Merrill Lynch Premier Institutional Fund(e) 187,288 901,194 Merrimac Cash Fund-Premium Class(e) 901,194 150,199 Ranger Funding, 2.271%, due 1/14/2005(e) 150,199 1,201,592 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 1,201,592 750,995 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 750,995 300,398 Wells Fargo, 2.27%, due 1/25/2005(e) 300,398 450,596 Wells Fargo, 2.32%, due 1/14/2005(e) 450,596 ------------- Total Short Term Investments (Identified Cost $24,474,036) 24,474,036 -------------
See accompanying notes to financial statements. 37 HARRIS ASSOCIATES LARGE CAP VALUE FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004 Total Investments -- 104.4% (Identified Cost $292,997,036)(b) $362,090,374 Other assets less liabilities (15,288,229) ------------ Total Net Assets -- 100% $346,802,145 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized appreciation on investments based on cost of $294,643,614 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 $ 70,283,743 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (2,836,983) ------------ Net unrealized appreciation $ 67,446,760 ============ At December 31, 2004, the Fund had a capital loss carryover of approximately $134,352,059 of which $16,433,943 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 may be available to offset future realized capital gains, if any, to the extent provided by regulations. For the year ended December 31, 2004, the Fund has elected to defer $159,806 of capital losses attributable to Post-October losses. At December 31, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $357,277 in undistributed ordinary income. (c) All or a portion of this security was on loan to brokers at December 31, 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.
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Media 17.8% Retail 15.5 Diversified Financial Services 8.2 Food 7.3 Beverages 6.7 Health Care-Products 5.9 Pharmaceuticals 5.6 Savings & Loans 4.0 Building Materials 3.2 Office & Business Equipment 3.2 Environmental Control 2.9 Aerospace & Defense 2.6 Household Products & Wares 2.5 Oil & Gas 2.3 Software 2.3 Leisure Time 2.1 Banks 2.0 Other, less than 2% each 3.2
See accompanying notes to financial statements. 38 VAUGHAN NELSON SMALL CAP VALUE FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - ------------------------------------------------------------------------ Common Stocks -- 98.6% of Total Net Assets Aerospace & Defense -- 5.7% 30,125 Alliant Techsystems, Inc.(c)(d) $ 1,969,572 57,450 DRS Technologies, Inc.(c) 2,453,689 23,800 Esterline Technologies Corp.(c) 777,070 27,100 Moog, Inc., Class A(c) 1,228,985 ------------- 6,429,316 ------------- Automobiles -- 0.7% 40,650 Monaco Coach Corp. 836,170 ------------- Banks -- 8.2% 48,951 MB Financial, Inc. 2,063,285 54,800 Provident Bankshares Corp. 1,993,076 114,015 Republic Bancorp, Inc. 1,742,149 46,075 United Bankshares, Inc. 1,757,761 54,900 WesBanco, Inc. 1,755,153 ------------- 9,311,424 ------------- Building Materials -- 1.1% 167,650 U.S. Concrete, Inc.(c) 1,285,875 ------------- Chemicals -- 1.0% 21,800 Georgia Gulf Corp. 1,085,640 ------------- Commercial Services -- 7.9% 47,900 Consolidated Graphics, Inc.(c) 2,198,610 101,425 Cornell Cos., Inc.(c) 1,539,631 62,500 Dollar Thrifty Automotive Group, Inc.(c) 1,887,500 27,275 McGrath Rentcorp 1,189,463 100,600 Navigant International, Inc.(c) 1,224,302 55,700 Team, Inc.(c) 866,135 ------------- 8,905,641 ------------- Distribution & Wholesale -- 1.3% 41,050 Watsco, Inc. 1,445,781 ------------- Diversified Financial Services -- 3.0% 57,650 Friedman, Billings, Ramsey Group, Inc., Class A 1,117,833 74,450 Raymond James Financial, Inc. 2,306,461 ------------- 3,424,294 ------------- Electrical Components & Equipment -- 2.1% 30,100 AZZ, Inc.(c) 489,125 57,300 MTS Systems Corp. 1,937,313 ------------- 2,426,438 ------------- Food -- 0.6% 52,500 Gold Kist, Inc.(c) 715,050 ------------- Health Care-Services -- 5.5% 128,850 Healthcare Services Group, Inc. 2,685,234 23,375 Pediatrix Medical Group, Inc.(c) 1,497,169 56,075 Triad Hospitals, Inc.(c) 2,086,551 ------------- 6,268,954 ------------- Holding Companies - Diversified -- 1.4% 48,600 Walter Industries, Inc.(d) 1,639,278 ------------- Household Products & Wares -- 1.3% 45,175 Yankee Candle Co. (The), Inc.(c)(d) 1,498,906 ------------- Insurance -- 4.8% 40,875 Allmerica Financial Corp.(c) 1,341,926 61,250 HCC Insurance Holdings, Inc. 2,028,600 59,925 Infinity Property & Casualty Corp. 2,109,360 ------------- 5,479,886 -------------
Shares Description Value (a) - ----------------------------------------------------------------- Investment Companies -- 4.7% 21,450 iShares Russell 2000 Value Index Fund(d) $ 4,138,992 66,675 MCG Capital Corp. 1,142,143 ------------- 5,281,135 ------------- Iron & Steel -- 4.3% 57,375 Allegheny Technologies, Inc. 1,243,316 55,287 Gibraltar Industries, Inc. 1,305,879 47,975 Olympic Steel, Inc.(d) 1,271,817 26,800 Steel Dynamics, Inc. 1,015,184 ------------- 4,836,196 ------------- Leisure Time -- 1.6% 111,500 K2, Inc.(c)(d) 1,770,620 ------------- Lodging -- 1.6% 194,575 La Quinta Corp.(c) 1,768,687 ------------- Machinery - Diversified -- 2.9% 41,300 Briggs & Stratton Corp.(c)(d) 1,717,254 40,550 Nordson Corp. 1,624,838 ------------- 3,342,092 ------------- Media -- 1.3% 75,925 Journal Register Co.(c) 1,467,630 ------------- Mining -- 0.7% 29,025 Century Aluminum Co. 762,196 ------------- Miscellaneous - Manufacturing -- 1.4% 177,200 Jacuzzi Brands, Inc. 1,541,640 ------------- Oil & Gas -- 3.2% 86,475 Comstock Resources, Inc.(c) 1,906,774 22,175 Southwestern Energy Co.(c) 1,124,051 11,375 Ultra Petroleum Corp.(c) 547,479 ------------- 3,578,304 ------------- Oil & Gas Services -- 3.0% 76,200 Oil States International, Inc.(c) 1,469,898 85,925 Willbros Group, Inc.(c)(d) 1,980,571 ------------- 3,450,469 ------------- Pipelines -- 1.3% 24,550 Equitable Resources, Inc.(d) 1,489,203 ------------- Real Estate -- 1.7% 57,650 CB Richard Ellis Group, Inc., Class A(c) 1,934,158 ------------- REITS - Hotel -- 3.4% 198,600 Ashford Hospitality Trust, Inc. 2,158,782 153,300 Highland Hospitality Corp. 1,723,092 ------------- 3,881,874 ------------- REITS - Mortgage -- 1.6% 51,800 American Home Mortgage Investment Corp. 1,774,150 ------------- REITS - Office Buildings -- 1.7% 118,875 American Financial Realty Trust 1,923,398 ------------- Retail - 7.5% 64,525 Regis Corp. 2,977,829 120,825 Triarc Cos., Inc., Class B 1,481,315 68,925 United Auto Group, Inc. 2,039,491 65,275 Zale Corp.(c)(d) 1,949,764 ------------- 8,448,399 ------------- Semiconductors -- 1.7% 147,000 Asyst Technologies, Inc.(c) 748,230
See accompanying notes to financial statements. 39 VAUGHAN NELSON SMALL CAP VALUE FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Shares Description Value (a) - ------------------------------------------------------------------------------------- Semiconductors -- continued 16,675 ATMI, Inc.(c)(d) $ 375,688 43,825 Brooks Automation, Inc.(c) 754,667 ------------- 1,878,585 ------------- Software -- 2.6% 52,250 Inter-Tel, Inc. 1,430,605 56,750 Reynolds & Reynolds Co. (The), Class A 1,504,443 ------------- 2,935,048 ------------- Telecommunications -- 0.8% 160,225 Hypercom Corp.(c) 948,532 ------------- Transportation -- 5.9% 6,900 Arlington Tankers, Ltd. 158,355 63,775 Genesee & Wyoming, Inc., Class A(c) 1,793,991 22,350 Landstar System, Inc.(c) 1,645,854 122,250 RailAmerica, Inc.(c) 1,595,363 67,000 Werner Enterprises, Inc. 1,516,880 ------------- 6,710,443 ------------- Trucking & Leasing -- 1.1% 27,510 Amerco, Inc.(c)(d) 1,264,910 ------------- Total Common Stocks (Identified Cost $97,108,617) 111,740,322 ------------- Principal Amount - ------------------------------------------------------------------------------------- Short Term Investments -- 16.4% $ 1,891,143 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be repurchased at $1,891,419 on 1/03/2005, collateralized by $1,970,075 Federal Home Loan Mortgage Bond, 2.902%, due 3/15/2032 valued at $1,986,949 1,891,143 32,852 Bank of America, 2.26%, due 2/15/2005(e) 32,852 821,308 Bank of America, 2.27%, due 1/18/2005(e) 821,308 821,308 Bank of Montreal, 2.125%, due 2/02/2005(e) 821,308 1,866,566 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,866,566 821,308 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 821,308 328,523 BGI Institutional Money Market Fund(e) 328,523 657,046 BNP Paribas, 2.295%, due 2/23/2005(e) 657,046 328,523 Calyon, 2.27%, due 1/20/2005(e) 328,523 2,299,663 Calyon, 2.34%, due 2/02/2005(e) 2,299,663 155,227 Calyon, 2.435%, due 3/16/2005(e) 155,227 492,785 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 492,785 801,597 Fortis Bank, 2.14%, due 1/12/2005(e) 801,597 821,308 Fortis Bank, 2.20%, due 2/11/2005(e) 821,308 1,435,647 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 1,435,647 328,523 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 328,523 328,523 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 328,523 204,823 Merrill Lynch Premier Institutional Fund(e) 204,823 985,570 Merrimac Cash Fund-Premium Class(e) 985,570 164,262 Ranger Funding, 2.271%, due 1/14/2005(e) 164,262 1,314,093 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 1,314,093 821,308 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 821,308 328,523 Wells Fargo, 2.27%, due 1/25/2005(e) 328,523 492,785 Wells Fargo, 2.32%, due 1/14/2005(e) 492,785 ------------- Total Short Term Investments (Identified Cost $18,543,214) 18,543,214 ------------- Total Investments -- 115.0% (Identified Cost $115,651,831)(b) 130,283,536 Other assets less liabilities (16,945,681) ------------- Total Net Assets -- 100% $ 113,337,855 =============
(a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized appreciation on investments based on cost of $115,609,992 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 $16,077,384 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (1,403,840) ----------- Net unrealized appreciation $14,673,544 =========== At December 31, 2004, the Fund had a capital loss carryover of approximately $42,306,805 of which $15,016,855 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. At December 31, 2004, there was no undistributed ordinary income or long-term capital gains except for unrealized appreciation/depreciation disclosed on a tax basis. (c) Non-income producing security. (d) All or a portion of this security was on loan to brokers at December 31, 2004. (e) Represents investments of securities lending collateral. REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Banks 8.2% Commercial Services 7.9 Retail 7.5 Transportation 5.9 Aerospace & Defense 5.7 Health Care-Services 5.5 Insurance 4.8 Investment Companies 4.7 Iron & Steel 4.3 REITS - Hotel 3.4 Oil & Gas 3.2 Diversified Financial Services 3.0 Oil & Gas Services 3.0 Machinery - Diversified 2.9 Software 2.6 Electrical Components & Equipment 2.1 Other, less than 2% each 23.9
See accompanying notes to financial statements. 40 WESTPEAK CAPITAL GROWTH FUND -- SCHEDULE OF INVESTMENTS Investments as of December 31, 2004
Shares Description Value (a) - ----------------------------------------------------------------- Common Stocks -- 98.4% of Total Net Assets Aerospace & Defense -- 4.5% 35,000 Boeing Co. (The) $ 1,811,950 13,500 General Dynamics Corp. 1,412,100 ------------ 3,224,050 ------------ Banks -- 2.2% 49,100 U.S. Bancorp 1,537,812 ------------ Beverages -- 3.3% 2,200 Anheuser-Busch Cos., Inc. 111,606 11,900 Coca-Cola Co. (The) 495,397 33,600 Pepsi Bottling Group, Inc.(c) 908,544 15,600 PepsiCo, Inc. 814,320 ------------ 2,329,867 ------------ Biotechnology -- 2.4% 17,800 Amgen, Inc.(d) 1,141,870 10,100 Genentech, Inc.(d) 549,844 ------------ 1,691,714 ------------ Chemicals -- 2.2% 24,900 Sherwin-Williams Co. (The) 1,111,287 7,100 Sigma-Aldrich Corp. 429,266 ------------ 1,540,553 ------------ Commercial Services -- 2.7% 55,000 Cendant Corp. 1,285,900 23,700 Equifax, Inc. 665,970 ------------ 1,951,870 ------------ Computers -- 6.9% 50,000 Dell, Inc.(d) 2,107,000 28,800 International Business Machines Corp. 2,839,104 ------------ 4,946,104 ------------ Cosmetics & Personal Care -- 2.4% 23,400 Kimberly-Clark Corp. 1,539,954 3,800 Procter & Gamble Co. 209,304 ------------ 1,749,258 ------------ Distribution & Wholesale -- 1.2% 2,700 Ingram Micro, Inc., Class A(d) 56,160 11,800 W.W. Grainger, Inc. 786,116 ------------ 842,276 ------------ Diversified Financial Services -- 7.6% 26,700 American Express Co. 1,505,079 17,500 Ameritrade Holding Corp.(d) 248,850 19,900 Capital One Financial Corp.(c) 1,675,779 72,800 Charles Schwab Corp. (The)(c) 870,688 12,000 Fannie Mae 854,520 10,500 MBNA Corp. 295,995 ------------ 5,450,911 ------------ Electrical Components & Equipment -- 1.8% 26,500 Energizer Holdings, Inc.(c)(d) 1,316,785 ------------ Electronics -- 2.9% 38,800 Applera Corp. - Applied Biosystems Group 811,308 23,400 Taser International, Inc.(c)(d) 739,206 11,200 Waters Corp.(d) 524,048 ------------ 2,074,562 ------------ Forest Products & Paper -- 0.0% 739 Neenah Paper, Inc.(c) 24,091 ------------
Shares Description Value (a) - --------------------------------------------------------------- Health Care-Products -- 5.4% 28,500 Becton Dickinson & Co. $ 1,618,800 10,300 Dade Behring Holdings, Inc.(c)(d) 576,800 26,600 Johnson & Johnson 1,686,972 ------------ 3,882,572 ------------ Health Care-Services -- 2.4% 15,700 Laboratory Corp. of America Holdings(d) 782,174 10,500 UnitedHealth Group, Inc. 924,315 ------------ 1,706,489 ------------ Home Builders -- 2.3% 2,100 NVR, Inc.(d) 1,615,740 ------------ Insurance -- 0.9% 4,300 Aflac, Inc. 171,312 1,600 American International Group, Inc. 105,072 7,600 W.R. Berkley Corp. 358,492 ------------ 634,876 ------------ Internet -- 1.5% 8,400 Travelzoo, Inc.(c)(d) 801,612 6,600 Yahoo!, Inc.(d) 248,688 ------------ 1,050,300 ------------ Leisure Time -- 0.4% 4,900 Harley-Davidson, Inc. 297,675 ------------ Lodging -- 0.9% 11,500 Choice Hotels International, Inc. 667,000 ------------ Media -- 0.3% 8,800 Westwood One, Inc.(d) 236,984 ------------ Mining -- 0.2% 3,400 Newmont Mining Corp. 150,994 ------------ Miscellaneous - Manufacturing -- 2.0% 15,300 Illinois Tool Works, Inc. 1,418,004 ------------ Office & Business Equipment -- 0.7% 10,400 Pitney Bowes, Inc. 481,312 ------------ Oil & Gas -- 0.5% 6,400 Southwestern Energy Co.(d) 324,416 ------------ Oil & Gas Services -- 1.0% 13,600 Baker Hughes, Inc. 580,312 2,500 BJ Services Co. 116,350 ------------ 696,662 ------------ Pharmaceuticals -- 6.8% 31,900 Cardinal Health, Inc.(c) 1,854,985 12,700 Merck & Co., Inc. 408,178 96,250 Pfizer, Inc. 2,588,163 ------------ 4,851,326 ------------ Pipelines -- 1.4% 13,600 Kinder Morgan, Inc. 994,568 ------------ REITS - Mortgage -- 0.0% 700 American Home Mortgage Investment Corp. 23,975 ------------ REITS - Regional Malls -- 0.2% 4,000 General Growth Properties, Inc. 144,640 ------------ Retail -- 8.0% 17,200 Costco Wholesale Corp. 832,652 31,800 Family Dollar Stores(c) 993,114 49,800 Gap (The), Inc.(c) 1,051,776 59,350 Home Depot, Inc. 2,536,619
See accompanying notes to financial statements. 41 WESTPEAK CAPITAL GROWTH FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of December 31, 2004
Shares Description Value (a) - ------------------------------------------------------------------------------------------- Retail -- continued 5,200 Wal-Mart Stores, Inc. $ 274,664 ------------ 5,688,825 ------------ Semiconductors -- 5.2% 16,600 Altera Corp.(d) 343,620 143,300 Intel Corp. 3,351,787 ------------ 3,695,407 ------------ Software -- 9.3% 29,200 Automatic Data Processing, Inc. 1,295,020 36,600 IMS Health, Inc. 849,486 4,800 Intuit, Inc.(d) 211,248 142,200 Microsoft Corp. 3,798,162 35,500 Oracle Corp.(d) 487,060 ------------ 6,640,976 ------------ Telecommunications -- 6.8% 158,500 Cisco Systems, Inc.(d) 3,059,050 20,900 NII Holdings, Inc., Class B(c)(d) 991,705 18,200 QUALCOMM, Inc. 771,680 ------------ 4,822,435 ------------ Transportation -- 2.1% 14,900 FedEx Corp. 1,467,501 ------------ Total Common Stocks (Identified Cost $70,597,744) 70,172,530 ------------ Principal Amount - ------------------------------------------------------------------------------------------- Short Term Investments -- 17.5% $ 1,446,143 Repurchase Agreement with Investors Bank & Trust Co. dated 12/31/2004 at 1.75% to be repurchased at $1,446,354 on 1/03/2005, collateralized by $1,406,351 Small Business Administration Bond, 5.505%, due 8/25/2016 valued at $1,518,450 1,446,143 21,832 Bank of America, 2.26%, due 2/15/2005(e) 21,832 545,794 Bank of America, 2.27%, due 1/18/2005(e) 545,794 545,794 Bank of Montreal, 2.125%, due 2/02/2005(e) 545,794 1,240,413 Bank of Montreal, 2.26%, due 1/28/2005(e) 1,240,413 545,794 Bank of Nova Scotia, 2.33%, due 1/13/2005(e) 545,794 218,318 BGI Institutional Money Market Fund(e) 218,318 436,635 BNP Paribas, 2.295%, due 2/23/2005(e) 436,635 218,318 Calyon, 2.27%, due 1/20/2005(e) 218,318 1,528,224 Calyon, 2.34%, due 2/02/2005(e) 1,528,224 103,155 Calyon, 2.435%, due 3/16/2005(e) 103,155 327,477 Federal Home Loan Bank, 2.184%, due 1/05/2005(e) 327,477 532,695 Fortis Bank, 2.14%, due 1/12/2005(e) 532,695 545,794 Fortis Bank, 2.20%, due 2/11/2005(e) 545,794 954,049 Goldman Sachs Group, Inc., 2.353%, due 1/03/2005(e) 954,049 218,318 HBOS Halifax Bank of Scotland, 2.025%, due 1/21/2005(e) 218,318 218,318 Lloyds TSB Bank, 2.28%, due 2/02/2005(e) 218,318 136,114 Merrill Lynch Premier Institutional Fund(e) 136,114 654,953 Merrimac Cash Fund-Premium Class(e) 654,953 109,159 Ranger Funding, 2.271%, due 1/14/2005(e) 109,159 873,271 Royal Bank of Canada, 2.25%, due 1/19/2005(e) 873,271 545,794 Royal Bank of Scotland, 2.36%, due 2/17/2005(e) 545,794 218,318 Wells Fargo, 2.27%, due 1/25/2005(e) 218,318 327,477 Wells Fargo, 2.32%, due 1/14/2005(e) 327,477 ------------ Total Short Term Investments (Identified Cost $12,512,157) 12,512,157 ------------ Total Investments -- 115.9% (Identified Cost $83,109,901)(b) 82,684,687 Other assets less liabilities (11,336,934) ------------ Total Net Assets -- 100% $ 71,347,753 ============
(a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At December 31, 2004, the net unrealized depreciation on investments based on cost of $83,558,398 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 $ 6,668,477 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (7,542,188) ----------- Net unrealized depreciation $ (873,711) =========== At December 31, 2004, the Fund had a capital loss carryover of approximately $53,439,207 of which $22,458,247 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. At December 31, 2004, there was no undistributed ordinary income or long-term capital gains except for unrealized appreciation/depreciation disclosed on a tax basis. (c) All or a portion of this security was on loan to brokers at December 31, 2004. (d) Non-income producing security. (e) Represents investments of securities lending collateral. REITS Real Estate Investment Trusts
Holdings at December 31, 2004 as a Percentage of Net Assets (unaudited) Software 9.3% Retail 8.0 Diversified Financial Services 7.6 Computers 6.9 Pharmaceuticals 6.8 Telecommunications 6.8 Health Care-Products 5.4 Semiconductors 5.2 Aerospace & Defense 4.5 Beverages 3.3 Electronics 2.9 Commercial Services 2.7 Cosmetics & Personal Care 2.4 Health Care-Services 2.4 Biotechnology 2.4 Home Builders 2.3 Chemicals 2.2 Banks 2.2 Transportation 2.1 Miscellaneous - Manufacturing 2.0 Other, less than 2% each 11.0
See accompanying notes to financial statements. 42 STATEMENTS OF ASSETS & LIABILITIES December 31, 2004
CDC Nvest CDC Nvest CGM Advisor Star Advisers Star Value Targeted Equity Fund Fund Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ASSETS Investments at cost $ 650,025,754 $ 119,598,789 $ 756,782,916 Net unrealized appreciation (depreciation) 139,473,936 28,992,605 99,797,870 --------------------- --------------------- --------------------- Investments at value 789,499,690 148,591,394 856,580,786 Receivable for Fund shares sold 134,305 27,303 216,742 Receivable for securities sold 1,658,041 524,972 5,807,859 Dividends and interest receivable 936,755 162,038 1,001,078 Tax reclaims receivable 7,019 -- 9,439 Securities lending income receivable 12,308 844 29,947 Prepaid insurance expense 3,760 712 3,823 --------------------- --------------------- --------------------- TOTAL ASSETS 792,251,878 149,307,263 863,649,674 --------------------- --------------------- --------------------- LIABILITIES Collateral on securities loaned, at value 88,013,788 11,744,576 95,930,674 Payable for securities purchased 2,074,842 846,708 5,534,905 Payable for Fund shares redeemed 696,716 127,853 917,951 Management fees payable 615,603 85,990 444,297 Deferred Trustees' fees 287,793 150,906 540,306 Transfer agent fees payable 325,241 46,180 234,749 Accounting and administrative fees payable 39,057 7,529 39,107 Other accounts payable and accrued expenses 180,883 55,252 154,671 --------------------- --------------------- --------------------- TOTAL LIABILITIES 92,233,923 13,064,994 103,796,660 --------------------- --------------------- --------------------- NET ASSETS $ 700,017,955 $ 136,242,269 $ 759,853,014 ===================== ===================== ===================== NET ASSETS CONSIST OF: Paid in capital $ 788,110,108 $ 104,297,067 $ 801,162,956 Undistributed (overdistributed) net investment income (loss) (135,059) (143,263) 424,719 Accumulated net realized gain (loss) (227,432,491) 3,095,860 (141,532,531) Net unrealized appreciation (depreciation) of investments and foreign currency translations 139,475,397 28,992,605 99,797,870 --------------------- --------------------- --------------------- NET ASSETS $ 700,017,955 $ 136,242,269 $ 759,853,014 ===================== ===================== ===================== COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: Class A shares: Net assets $ 392,725,546 $ 105,358,955 $ 689,966,737 ===================== ===================== ===================== Shares of beneficial interest 20,942,558 11,813,348 76,247,213 ===================== ===================== ===================== Net asset value and redemption price per share $ 18.75 $ 8.92 $ 9.05 ===================== ===================== ===================== Offering price per share (100/[100-maximum sales charge] of net asset value) $ 19.89 $ 9.46 $ 9.60 ===================== ===================== ===================== Class B shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 223,348,773 $ 27,803,912 $ 57,527,490 ===================== ===================== ===================== Shares of beneficial interest 13,239,416 3,387,504 6,804,442 ===================== ===================== ===================== Net asset value and offering price per share $ 16.87 $ 8.21 $ 8.45 ===================== ===================== ===================== Class C shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 58,883,360 $ 3,079,402 $ 3,213,562 ===================== ===================== ===================== Shares of beneficial interest 3,486,535 375,190 380,199 ===================== ===================== ===================== Net asset value and offering price per share $ 16.89 $ 8.21 $ 8.45 ===================== ===================== ===================== Class Y shares: Net assets $ 25,060,276 $ -- $ 9,145,225 ===================== ===================== ===================== Shares of beneficial interest 1,264,598 -- 990,459 ===================== ===================== ===================== Net asset value, offering and redemption price per share $ 19.82 $ -- $ 9.23 ===================== ===================== =====================
See accompanying notes to financial statements. 43
Hansberger Harris Associates Harris Associates Vaughan Nelson Westpeak International Focused Value Large Cap Value Small Cap Value Capital Growth Fund Fund Fund Fund Fund - --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ 128,496,359 $ 308,730,401 $ 292,997,036 $ 115,651,831 $ 83,109,901 19,736,630 78,728,081 69,093,338 14,631,705 (425,214) - --------------------- --------------------- --------------------- --------------------- --------------------- 148,232,989 387,458,482 362,090,374 130,283,536 82,684,687 137,641 456,143 162,900 73,058 20,657 39,684 -- -- -- -- 141,697 360,775 607,358 218,372 59,250 58,793 -- -- -- -- 4,949 107 2,930 4,285 10,179 671 1,768 1,833 573 385 - --------------------- --------------------- --------------------- --------------------- --------------------- 148,616,424 388,277,275 362,865,395 130,579,824 82,775,158 - --------------------- --------------------- --------------------- --------------------- --------------------- 12,172,752 23,987,344 15,226,465 16,652,071 11,066,014 56,088 -- -- -- -- 127,719 596,074 271,718 283,514 137,769 90,342 303,029 112,934 85,361 45,347 67,920 36,853 216,157 73,021 77,062 73,230 134,719 133,652 72,161 45,464 6,844 18,420 20,041 5,841 3,997 55,690 103,678 82,283 70,000 51,752 - --------------------- --------------------- --------------------- --------------------- --------------------- 12,650,585 25,180,117 16,063,250 17,241,969 11,427,405 - --------------------- --------------------- --------------------- --------------------- --------------------- $ 135,965,839 $ 363,097,158 $ 346,802,145 $ 113,337,855 $ 71,347,753 ===================== ===================== ===================== ===================== ===================== $ 126,090,029 $ 294,542,310 $ 413,730,549 $ 141,044,137 $ 125,737,733 (526,717) (36,853) 136,701 51,736 (74,878) (9,340,359) (10,136,380) (136,158,443) (42,389,723) (53,889,888) 19,742,886 78,728,081 69,093,338 14,631,705 (425,214) - --------------------- --------------------- --------------------- --------------------- --------------------- $ 135,965,839 $ 363,097,158 $ 346,802,145 $ 113,337,855 $ 71,347,753 ===================== ===================== ===================== ===================== ===================== $ 73,706,846 $ 108,041,636 $ 222,434,404 $ 45,137,695 $ 57,419,664 ===================== ===================== ===================== ===================== ===================== 4,304,852 8,273,575 16,630,845 2,809,079 5,021,668 ===================== ===================== ===================== ===================== ===================== $ 17.12 $ 13.06 $ 13.37 $ 16.07 $ 11.43 ===================== ===================== ===================== ===================== ===================== $ 18.16 $ 13.86 $ 14.19 $ 17.05 $ 12.13 ===================== ===================== ===================== ===================== ===================== $ 45,212,594 $ 110,275,439 $ 79,948,614 $ 54,651,556 $ 12,915,579 ===================== ===================== ===================== ===================== ===================== 2,851,809 8,687,993 6,336,330 3,649,893 1,299,534 ===================== ===================== ===================== ===================== ===================== $ 15.85 $ 12.69 $ 12.62 $ 14.97 $ 9.94 ===================== ===================== ===================== ===================== ===================== $ 17,046,399 $ 144,780,083 $ 26,392,123 $ 13,548,604 $ 1,012,510 ===================== ===================== ===================== ===================== ===================== 1,074,894 11,404,640 2,094,573 904,338 102,060 ===================== ===================== ===================== ===================== ===================== $ 15.86 $ 12.69 $ 12.60 $ 14.98 $ 9.92 ===================== ===================== ===================== ===================== ===================== $ -- $ -- $ 18,027,004 $ -- $ -- ===================== ===================== ===================== ===================== ===================== -- -- 1,312,207 -- -- ===================== ===================== ===================== ===================== ===================== $ -- $ -- $ 13.74 $ -- $ -- ===================== ===================== ===================== ===================== =====================
44 STATEMENTS OF OPERATIONS For the Year Ended December 31, 2004
CDC Nvest CDC Nvest CGM Advisor Star Advisers Star Value Targeted Equity Fund Fund Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- INVESTMENT INCOME Dividends $ 7,862,633 $ 2,278,279 $ 12,031,859 Interest 107,675 23,364 24,059 Securities lending income 107,625 15,181 416,679 Less net foreign taxes withheld (24,032) (3,582) (643,007) --------------------- --------------------- --------------------- 8,053,901 2,313,242 11,829,590 --------------------- --------------------- --------------------- Expenses Management fees 7,430,406 1,026,814 5,233,103 Service fees - Class A 907,809 264,465 1,712,687 Service and distribution fees - Class B 2,426,636 285,614 552,535 Service and distribution fees - Class C 590,286 25,611 28,229 Trustees' fees and expenses 85,475 37,845 124,891 Accounting and administrative 460,770 89,143 486,061 Custodian 161,300 79,372 125,694 Transfer agent fees - Class A, Class B, Class C 2,770,001 555,495 2,429,666 Transfer agent fees - Class Y 52,556 -- 19,464 Audit and tax services 36,642 29,072 27,010 Legal 49,570 9,595 51,924 Shareholder reporting 180,421 37,622 120,467 Registration 71,642 38,906 71,091 Miscellaneous 61,249 21,610 71,062 --------------------- --------------------- --------------------- Total expenses 15,284,763 2,501,164 11,053,884 Less reimbursement/waiver -- -- -- --------------------- --------------------- --------------------- Net expenses 15,284,763 2,501,164 11,053,884 --------------------- --------------------- --------------------- Net investment income (loss) (7,230,862) (187,922) 775,706 --------------------- --------------------- --------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSLATIONS Realized gain (loss) on: Investments - net 92,347,670 14,932,687 186,920,714 Foreign currency transactions - net (5,706) -- -- Change in unrealized appreciation (depreciation) of: Investments - net (4,149,423) (382,788) (91,588,409) Foreign currency transactions - net 362 -- -- --------------------- --------------------- --------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions 88,192,903 14,549,899 95,332,305 --------------------- --------------------- --------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,962,041 $ 14,361,977 $ 96,108,011 ===================== ===================== =====================
Hansberger International Fund --------------------- --------------------- INVESTMENT INCOME Dividends $ 2,831,079 Interest 32,433 Securities lending income 89,804 Less net foreign taxes withheld (285,227) --------------------- 2,668,089 --------------------- Expenses Management fees 1,097,894 Service fees - Class A 162,480 Service and distribution fees - Class B 509,319 Service and distribution fees - Class C 143,216 Trustees' fees and expenses 25,369 Accounting and administrative 82,666 Custodian 181,399 Transfer agent fees - Class A, Class B, Class C 632,659 Transfer agent fees - Class Y -- Audit and tax services 36,513 Legal 8,997 Shareholder reporting 49,099 Registration 40,922 Miscellaneous 15,860 --------------------- Total expenses 2,986,393 Less reimbursement/waiver (11,186) --------------------- Net expenses 2,975,207 --------------------- Net investment income (loss) (307,118) --------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSLATIONS Realized gain (loss) on: Investments - net 26,046,228 Foreign currency transactions - net (410,005) Change in unrealized appreciation (depreciation) of: Investments - net (9,264,434) Foreign currency transactions - net (1,309) --------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions 16,370,480 --------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 16,063,362 =====================
See accompanying notes to financial statements. 45
Harris Associates Harris Associates Vaughan Nelson Westpeak Focused Value Large Cap Value Small Cap Value Capital Growth Fund Fund Fund Fund ---- --------------------- --------------------- --------------------- - --------------------- --------------------- --------------------- --------------------- $ 5,129,095 $ 5,449,650 $ 1,151,109 $ 1,221,369 165,627 82,324 36,654 4,832 19,302 31,577 39,989 35,261 -- (27,498) -- -- - --------------------- --------------------- --------------------- --------------------- 5,314,024 5,536,053 1,227,752 1,261,462 - --------------------- --------------------- --------------------- --------------------- 3,426,387 2,354,906 1,019,012 557,319 255,192 541,436 110,829 147,891 1,064,555 834,735 535,320 140,871 1,341,064 218,832 121,533 10,655 31,050 57,746 25,337 24,265 221,730 226,999 71,162 48,358 58,490 66,828 75,723 48,688 1,013,878 1,280,682 577,700 417,004 -- 37,045 -- -- 22,906 23,467 35,818 23,258 21,123 22,154 7,379 4,688 90,769 76,210 50,183 36,056 45,551 58,356 52,205 40,912 36,336 36,614 21,661 16,660 - --------------------- --------------------- --------------------- --------------------- 7,629,031 5,836,010 2,703,862 1,516,625 -- (613,592) -- -- - --------------------- --------------------- --------------------- --------------------- 7,629,031 5,222,418 2,703,862 1,516,625 - --------------------- --------------------- --------------------- --------------------- (2,315,007) 313,635 (1,476,110) (255,163) - --------------------- --------------------- --------------------- --------------------- 11,304,168 14,432,239 19,642,510 3,895,820 -- -- (273) -- 24,626,530 14,335,620 (3,213,186) (286,959) -- -- -- -- - --------------------- --------------------- --------------------- --------------------- 35,930,698 28,767,859 16,429,051 3,608,861 - --------------------- --------------------- --------------------- --------------------- $ 33,615,691 $ 29,081,494 $ 14,952,941 $ 3,353,698 ===================== ===================== ===================== =====================
46 STATEMENTS OF CHANGES IN NET ASSETS
CDC Nvest Star Advisers Fund -------------------------------------------- Year Ended December 31, 2004 2003 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income (loss) $ (7,230,862) $ (8,401,745) Net realized gain (loss) on investments and foreign currency transactions 92,341,964 17,243,427 Net change in unrealized appreciation (depreciation) on investments (4,149,061) 182,793,440 --------------------- --------------------- Increase in net assets resulting from operations 80,962,041 191,635,122 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Long-Term capital gain Class A -- -- Class B -- -- Class C -- -- --------------------- --------------------- -- -- --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (116,500,139) (99,821,845) --------------------- --------------------- Redemption Fees Class A -- -- Class B -- -- Class C -- -- Class Y -- -- --------------------- --------------------- -- -- --------------------- --------------------- Total increase (decrease) in net assets (35,538,098) 91,813,277 --------------------- --------------------- NET ASSETS Beginning of period 735,556,053 643,742,776 --------------------- --------------------- End of period $ 700,017,955 $ 735,556,053 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (135,059) $ 1,210 ===================== =====================
CDC Nvest Star Value Fund -------------------------------------------- Year Ended December 31, 2004 2003 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income (loss) $ (187,922) $ (418,478) Net realized gain (loss) on investments and foreign currency transactions 14,932,687 4,594,089 Net change in unrealized appreciation (depreciation) on investments (382,788) 31,376,271 --------------------- --------------------- Increase in net assets resulting from operations 14,361,977 35,551,882 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Long-Term capital gain Class A (1,926,692) -- Class B (548,440) -- Class C (60,195) -- --------------------- --------------------- (2,535,327) -- --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (17,975,676) (22,910,231) --------------------- --------------------- Redemption Fees Class A -- -- Class B -- -- Class C -- -- Class Y -- -- --------------------- --------------------- -- -- --------------------- --------------------- Total increase (decrease) in net assets (6,149,026) 12,641,651 --------------------- --------------------- NET ASSETS Beginning of period 142,391,295 129,749,644 --------------------- --------------------- End of period $ 136,242,269 $ 142,391,295 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (143,263) $ (120,827) ===================== =====================
See accompanying notes to financial statements. 47
CGM Advisor Hansberger Targeted Equity Fund International Fund - -------------------------------------------- -------------------------------------------- Year Ended December 31, Year Ended December 31, 2004 2003 2004 2003 - --------------------- --------------------- --------------------- --------------------- - --------------------- --------------------- --------------------- --------------------- $ 775,706 $ (3,122,630) $ (307,118) $ (860,042) 186,920,714 106,028,525 25,636,223 4,108,518 (91,588,409) 147,570,284 (9,265,743) 34,846,636 - --------------------- --------------------- --------------------- --------------------- 96,108,011 250,476,179 16,063,362 38,095,112 - --------------------- --------------------- --------------------- --------------------- -- -- -- -- -- -- -- -- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- (127,772,868) (115,291,688) (12,713,186) (19,850,820) - --------------------- --------------------- --------------------- --------------------- 2,396 -- 170 -- 181 -- 118 -- 12 -- 38 -- 27 -- -- -- - --------------------- --------------------- --------------------- --------------------- 2,616 -- 326 -- - --------------------- --------------------- --------------------- --------------------- (31,662,241) 135,184,491 3,350,502 18,244,292 - --------------------- --------------------- --------------------- --------------------- 791,515,255 656,330,764 132,615,337 114,371,045 - --------------------- --------------------- --------------------- --------------------- $ 759,853,014 $ 791,515,255 $ 135,965,839 $ 132,615,337 ===================== ===================== ===================== ===================== $ 424,719 $ (350,987) $ (526,717) $ (280,247) ===================== ===================== ===================== =====================
Harris Associates Harris Associates Focused Value Fund Large Cap Value Fund - -------------------------------------------- -------------------------------------------- Year Ended December 31, Year Ended December 31, 2004 2003 2004 2003 - --------------------- --------------------- --------------------- --------------------- - --------------------- --------------------- --------------------- --------------------- $ (2,315,007) $ (2,201,302) $ 313,635 $ (400,858) 11,304,168 (5,444,642) 14,432,239 (6,367,843) 24,626,530 74,168,695 14,335,620 78,036,056 - --------------------- --------------------- --------------------- --------------------- 33,615,691 66,522,751 29,081,494 71,267,355 - --------------------- --------------------- --------------------- --------------------- -- -- -- -- -- -- -- -- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- 2,079,342 20,155,440 (30,720,612) 57,978,163 - --------------------- --------------------- --------------------- --------------------- 149 -- -- -- 149 -- -- -- 194 -- -- -- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- 492 -- -- -- - --------------------- --------------------- --------------------- --------------------- 35,695,525 86,678,191 (1,639,118) 129,245,518 - --------------------- --------------------- --------------------- --------------------- 327,401,633 240,723,442 348,441,263 219,195,745 - --------------------- --------------------- --------------------- --------------------- $ 363,097,158 $ 327,401,633 $ 346,802,145 $ 348,441,263 ===================== ===================== ===================== ===================== $ (36,853) $ (19,853) $ 136,701 $ (94,664) ===================== ===================== ===================== =====================
48 STATEMENTS OF CHANGES IN NET ASSETS (continued)
Vaughan Nelson Small Cap Value Fund -------------------------------------------- Year Ended December 31, 2004 2003 --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income (loss) $ (1,476,110) $ (2,106,900) Net realized gain (loss) on investments and foreign currency transactions 19,642,237 11,598,714 Net change in unrealized appreciation (depreciation) of investments (3,213,186) 22,419,975 --------------------- --------------------- Increase in net assets resulting from operations 14,952,941 31,911,789 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Long-Term capital gain Class A -- -- Class B -- -- Class C -- -- --------------------- --------------------- -- -- --------------------- --------------------- IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (14,761,490) (14,351,582) --------------------- --------------------- Redemption Fees Class A 188 -- Class B 225 -- Class C 52 -- Class Y -- -- --------------------- --------------------- 465 -- --------------------- --------------------- Total increase (decrease) in net assets 191,916 17,560,207 --------------------- --------------------- NET ASSETS Beginning of period 113,145,939 95,585,732 --------------------- --------------------- End of period $ 113,337,855 $ 113,145,939 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 51,736 $ (40,406) ===================== =====================
Westpeak Capital Growth Fund -------------------------------------------- Year Ended December 31, 2004 2003 --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income (loss) $ (255,163) $ (780,856) Net realized gain (loss) on investments and foreign currency transactions 3,895,820 (1,825,695) Net change in unrealized appreciation (depreciation) of investments (286,959) 20,729,574 --------------------- --------------------- Increase in net assets resulting from operations 3,353,698 18,123,023 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Long-Term capital gain Class A -- -- Class B -- -- Class C -- -- --------------------- --------------------- -- -- --------------------- --------------------- IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (13,044,934) (12,927,717) --------------------- --------------------- Redemption Fees Class A -- -- Class B -- -- Class C -- -- Class Y -- -- --------------------- --------------------- -- -- --------------------- --------------------- Total increase (decrease) in net assets (9,691,236) 5,195,306 --------------------- --------------------- NET ASSETS Beginning of period 81,038,989 75,843,683 --------------------- --------------------- End of period $ 71,347,753 $ 81,038,989 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (74,878) $ (60,326) ===================== =====================
See accompanying notes to financial statements. 49 This Page Intentionally Left Blank 50 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 period (loss) investments operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- STAR ADVISERS FUND Class A 12/31/2004 $ 16.61 $ (0.12)(b) $ 2.26 $ 2.14 $ -- $ -- $ -- 12/31/2003 12.43 (0.13)(b) 4.31 4.18 -- -- -- 12/31/2002 15.90 (0.11)(b) (3.36) (3.47) -- -- -- 12/31/2001 17.55 (0.05)(b) (1.59) (1.64) -- (0.01) (0.01) 12/31/2000 24.50 (0.06)(b) (3.87) (3.93) -- (3.02) (3.02) Class B 12/31/2004 15.06 (0.23)(b) 2.04 1.81 -- -- -- 12/31/2003 11.35 (0.22)(b) 3.93 3.71 -- -- -- 12/31/2002 14.64 (0.20)(b) (3.09) (3.29) -- -- -- 12/31/2001 16.29 (0.16)(b) (1.48) (1.64) -- (0.01) (0.01) 12/31/2000 23.14 (0.22)(b) (3.61) (3.83) -- (3.02) (3.02) Class C 12/31/2004 15.08 (0.23)(b) 2.04 1.81 -- -- -- 12/31/2003 11.37 (0.22)(b) 3.93 3.71 -- -- -- 12/31/2002 14.66 (0.20)(b) (3.09) (3.29) -- -- -- 12/31/2001 16.30 (0.16)(b) (1.47) (1.63) -- (0.01) (0.01) 12/31/2000 23.16 (0.22)(b) (3.62) (3.84) -- (3.02) (3.02) Class Y 12/31/2004 17.46 (0.05)(b) 2.41 2.36 -- -- -- 12/31/2003 12.98 (0.04)(b) 4.52 4.48 -- -- -- 12/31/2002 16.50 (0.02)(b) (3.50) (3.52) -- -- -- 12/31/2001 18.13 0.04(b) (1.66) (1.62) -- (0.01) (0.01) 12/31/2000 25.08 0.03(b) (3.96) (3.93) -- (3.02) (3.02) STAR VALUE FUND Class A 12/31/2004 $ 8.16 $ 0.00(b)(c) $ 0.93 $ 0.93 $ -- $ (0.17) $ (0.17) 12/31/2003 6.20 (0.01)(b) 1.97 1.96 -- -- -- 12/31/2002 7.70 (0.01)(b) (1.49) (1.50) -- -- -- 12/31/2001 7.60 (0.02)(b) 0.12 0.10 -- -- -- 12/31/2000 7.45 0.01 0.14 0.15 0.00(c) -- -- Class B 12/31/2004 7.57 (0.06)(b) 0.87 0.81 -- (0.17) (0.17) 12/31/2003 5.80 (0.06)(b) 1.83 1.77 -- -- -- 12/31/2002 7.26 (0.06)(b) (1.40) (1.46) -- -- -- 12/31/2001 7.22 (0.07)(b) 0.11 0.04 -- -- -- 12/31/2000 7.13 (0.04) 0.13 0.09 0.00(c) -- -- Class C 12/31/2004 7.57 (0.05)(b) 0.86 0.81 -- (0.17) (0.17) 12/31/2003 5.80 (0.06)(b) 1.83 1.77 -- -- -- 12/31/2002 7.26 (0.06)(b) (1.40) (1.46) -- -- -- 12/31/2001 7.22 (0.07)(b) 0.11 0.04 -- -- -- 12/31/2000 7.14 (0.05) 0.13 0.08 0.00(c) -- --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004) 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)Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (c)Amount rounds to less than $0.01 per share. See accompanying notes to financial statements. 51
Ratios to average net assets: ---------------------------- Net asset Net assets, value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%) (a) (000's) (%) (loss) (%) rate (%) ---------- --------- ----------- --------- -------------- --------- $ 18.75 12.9 $ 392,726 1.87 (0.71) 104 16.61 33.6 354,755 1.99 (0.94) 102 12.43 (21.8) 269,180 1.89 (0.75) 95 15.90 (9.4) 389,405 1.83 (0.31) 183 17.55 (17.0) 525,479 1.62 (0.25) 524 16.87 12.0 223,349 2.62 (1.50) 104 15.06 32.7 272,533 2.74 (1.69) 102 11.35 (22.5) 282,361 2.64 (1.50) 95 14.64 (10.1) 491,614 2.58 (1.06) 183 16.29 (17.6) 649,107 2.37 (1.00) 524 16.89 12.0 58,883 2.62 (1.48) 104 15.08 32.6 60,783 2.74 (1.69) 102 11.37 (22.4) 54,291 2.64 (1.50) 95 14.66 (10.0) 87,245 2.58 (1.06) 183 16.30 (17.6) 118,921 2.37 (1.00) 524 19.82 13.5 25,060 1.33 (0.27) 104 17.46 34.5 47,485 1.34 (0.30) 102 12.98 (21.3) 37,911 1.29 (0.15) 95 16.50 (9.0) 55,970 1.29 0.23 183 18.13 (16.6) 73,310 1.25 0.12 524 $ 8.92 11.4 $ 105,359 1.66 0.03 56 8.16 31.6 110,228 1.81 (0.15) 75 6.20 (19.5) 99,894 1.68 (0.21) 67 7.70 1.3 137,855 1.64 (0.28) 77 7.60 2.0 154,179 1.62 0.10 129 8.21 10.7 27,804 2.41 (0.72) 56 7.57 30.5 30,029 2.56 (0.90) 75 5.80 (20.1) 27,808 2.43 (0.96) 67 7.26 0.6 44,325 2.39 (1.03) 77 7.22 1.3 45,364 2.37 (0.65) 129 8.21 10.7 3,079 2.41 (0.70) 56 7.57 30.5 2,134 2.56 (0.90) 75 5.80 (20.1) 2,047 2.43 (0.96) 67 7.26 0.6 2,833 2.39 (1.03) 77 7.22 1.1 2,496 2.40 (0.68) 129
52 FINANCIAL HIGHLIGHTS (continued) 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 period (loss) (b) investments operations ---------- ---------- -------------- ---------- CGM ADVISOR TARGETED EQUITY FUND Class A 12/31/2004 $ 7.94 $ 0.01 $ 1.10 $ 1.11 12/31/2003 5.56 (0.03) 2.41 2.38 12/31/2002 7.81 (0.06) (2.19) (2.25) 12/31/2001 9.36 (0.03) (1.49) (1.52) 12/31/2000 11.00 0.09 (0.60) (0.51) Class B 12/31/2004 7.47 (0.04) 1.02 0.98 12/31/2003 5.28 (0.07) 2.26 2.19 12/31/2002 7.47 (0.11) (2.08) (2.19) 12/31/2001 9.02 (0.09) (1.43) (1.52) 12/31/2000 10.67 0.01 (0.58) (0.57) Class C 12/31/2004 7.47 (0.04) 1.02 0.98 12/31/2003 5.27 (0.07) 2.27 2.20 12/31/2002 7.47 (0.11) (2.09) (2.20) 12/31/2001 9.02 (0.09) (1.43) (1.52) 12/31/2000 10.67 0.01 (0.58) (0.57) Class Y 12/31/2004 8.07 0.04 1.12 1.16 12/31/2003 5.63 0.01 2.43 2.44 12/31/2002 7.85 (0.02) (2.20) (2.22) 12/31/2001 9.37 0.01 (1.50) (1.49) 12/31/2000 11.01 0.12 (0.60) (0.48) HANSBERGER INTERNATIONAL FUND Class A 12/31/2004 $ 15.07 $ 0.02 $ 2.03 $ 2.05 12/31/2003 10.84 (0.04) 4.27 4.23 12/31/2002 13.02 (0.05) (2.08) (2.13) 12/31/2001 14.42 0.13 (1.42) (1.29) 12/31/2000 19.90 (0.02) (2.43) (2.45) Class B 12/31/2004 14.06 (0.09) 1.88 1.79 12/31/2003 10.19 (0.12) 3.99 3.87 12/31/2002 12.32 (0.14) (1.94) (2.08) 12/31/2001 13.74 0.03 (1.36) (1.33) 12/31/2000 19.26 (0.16) (2.33) (2.49)
Less distributions: ----------------------------------------- Dividends Distributions from from net net investment realized Total Redemption income capital gains distributions fee -------------- ------------- ------------- ---------- CGM ADVISOR TARGETED EQUITY FUND Class A 12/31/2004 $ -- $ -- $ -- $ 0.00(e) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.06) (1.07) (1.13) -- Class B 12/31/2004 -- -- -- 0.00(e) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.01) (1.07) (1.08) -- Class C 12/31/2004 -- -- -- 0.00(e) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.01) (1.07) (1.08) -- Class Y 12/31/2004 -- -- -- 0.00(e) 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- 12/31/2001 (0.03) -- (0.03) -- 12/31/2000 (0.09) (1.07) (1.16) -- HANSBERGER INTERNATIONAL FUND Class A 12/31/2004 $ -- $ -- $ -- $ 0.00(e) 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) -- Class B 12/31/2004 -- -- -- 0.00(e) 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) --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004) 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)Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (c)Had certain expenses not been reduced during the period total return would have been lower. (d)The investment adviser waived a portion of its advisory fee during the period. Without this waiver, expenses would have been higher. (e)Amount rounds to less than a $0.01 per share. (f)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. Prior to 2004, expenses in this table were presented net of such waivers and/or reimbursements. See accompanying notes to financial statements. 53
Ratios to average net assets: -------------------------------------- Net asset Net assets, Expenses after value, Total end of reimbursement/ Net investment Portfolio end of return the period Expenses waiver income turnover the period (%) (a) (000's) (%) (f) (%) (loss) (%) rate (%) - ---------- --------- ----------- --------- -------------- -------------- --------- $ 9.05 14.0 $ 689,967 1.42 N/A 0.16 265 7.94 42.8 724,214 1.57 N/A (0.40) 261 5.56 (28.8) 602,989 1.47 N/A (0.86) 223 7.81 (16.2) 1,012,161 1.38 N/A (0.39) 243 9.36 (4.6) 1,413,685 1.18 N/A 0.83 266 8.45 13.1 57,527 2.17 N/A (0.58) 265 7.47 41.5 56,880 2.32 N/A (1.14) 261 5.28 (29.3) 45,633 2.23 N/A (1.62) 223 7.47 (16.8) 78,744 2.13 N/A (1.14) 243 9.02 (5.2) 107,594 1.93 N/A 0.08 266 8.45 13.1 3,214 2.17 N/A (0.58) 265 7.47 41.8 2,647 2.32 N/A (1.14) 261 5.27 (29.5) 2,187 2.23 N/A (1.62) 223 7.47 (16.8) 4,162 2.13 N/A (1.14) 243 9.02 (5.2) 5,830 1.93 N/A 0.08 266 9.23 14.4 9,145 1.08 N/A 0.51 265 8.07 43.3 7,773 1.03 N/A 0.16 261 5.63 (28.3) 5,522 0.92 N/A (0.31) 223 7.85 (15.9) 8,785 0.87 N/A 0.13 243 9.37 (4.2) 12,260 0.85 N/A 1.16 266 $ 17.12 13.6(c) $ 73,707 1.92 1.91(d) 0.14 81 15.07 39.0(c) 59,762 2.32 2.30(d) (0.34) 92 10.84 (16.4) 50,053 2.19 N/A (0.45) 91 13.02 (9.0) 71,536 2.12 N/A 0.98 110 14.42 (12.2) 102,507 2.01 N/A (0.13) 175 15.85 12.7(c) 45,213 2.67 2.66(d) (0.60) 81 14.06 38.0(c) 60,296 3.07 3.05(d) (1.09) 92 10.19 (17.0) 53,306 2.94 N/A (1.20) 91 12.32 (9.7) 82,861 2.87 N/A 0.23 110 13.74 (12.8) 114,450 2.76 N/A (0.88) 175
54 FINANCIAL HIGHLIGHTS (continued) 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 period (loss) (b) investments operations income capital gains distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ------------- ---------- HANSBERGER INTERNATIONAL FUND (continued) Class C 12/31/2004 $ 14.06 $ (0.09) $ 1.89 $ 1.80 $ -- $ -- $ -- $ 0.00(h) 12/31/2003 10.19 (0.12) 3.99 3.87 -- -- -- -- 12/31/2002 12.33 (0.14) (1.95) (2.09) (0.05) -- (0.05) -- 12/31/2001 13.75 0.03 (1.36) (1.33) (0.01) (0.08) (0.09) -- 12/31/2000 19.27 (0.16) (2.33) (2.49) -- (3.03) (3.03) -- HARRIS ASSOCIATES FOCUSED VALUE FUND Class A 12/31/2004 $ 11.79 $ (0.02) $ 1.29 $ 1.27 $ -- $ -- $ -- $ 0.00(h) 12/31/2003 9.24 (0.03) 2.58 2.55 -- -- -- -- 12/31/2002 10.96 (0.03) (1.69) (1.72) -- -- -- -- 12/31/2001(f) 10.00 (0.01) 0.97 0.96 -- -- -- -- Class B 12/31/2004 11.55 (0.11) 1.25 1.14 -- -- -- 0.00(h) 12/31/2003 9.12 (0.10) 2.53 2.43 -- -- -- -- 12/31/2002 10.90 (0.11) (1.67) (1.78) -- -- -- -- 12/31/2001(f) 10.00 (0.07) 0.97 0.90 -- -- -- -- Class C 12/31/2004 11.55 (0.11) 1.25 1.14 -- -- -- 0.00(h) 12/31/2003 9.12 (0.10) 2.53 2.43 -- -- -- -- 12/31/2002 10.90 (0.11) (1.67) (1.78) -- -- -- -- 12/31/2001(f) 10.00 (0.07) 0.97 0.90 -- -- -- -- HARRIS ASSOCIATES LARGE CAP VALUE FUND Class A 12/31/2004 $ 12.25 $ 0.04 $ 1.08 $ 1.12 $ -- $ -- $ -- $ -- 12/31/2003 9.42 0.01 2.82 2.83 -- -- -- -- 12/31/2002 11.78 0.01 (2.37) (2.36) -- -- -- -- 12/31/2001 13.79 (0.01) (2.00) (2.01) -- -- -- -- 12/31/2000 15.33 0.01 (1.09) (1.08) -- (0.46) (0.46) -- Class B 12/31/2004 11.64 (0.05) 1.03 0.98 -- -- -- -- 12/31/2003 9.02 (0.07) 2.69 2.62 -- -- -- -- 12/31/2002 11.37 (0.07) (2.28) (2.35) -- -- -- -- 12/31/2001 13.40 (0.10) (1.93) (2.03) -- -- -- -- 12/31/2000 15.03 (0.10) (1.07) (1.17) -- (0.46) (0.46) --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004) 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)Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (c)The investment adviser waived a portion of its advisory fee and/or reimbursed a portion of the Fund's expenses during the period. Without this waiver/reimbursement, expense ratios would have been higher. (d)Had certain expenses not been reduced during the period, total return would have been lower. (e)Portfolio turnover excludes the impact of assets as a result of a merger with another Fund. (f)For the period March 15, 2001, (inception) through December 31, 2001. (g)Computed on an annualized basis for periods less than one year. (h)Amount rounds to less than $0.01 per share. (i)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. Prior to 2004, expenses in this table were presented net of such waivers and/or reimbursements. See accompanying notes to financial statements. 55
Ratios to average net assets: --------------------------------------- Net asset Net assets, Expenses after value, Total end of reimbursement/ Net investment Portfolio end of return the period Expenses waiver income turnover the period (%) (a) (000's) (%) (g)(i) (%) (g) (loss) (%) (g) rate (%) - ---------- --------- ----------- ---------- -------------- -------------- --------- $ 15.86 12.8(d) $ 17,046 2.67 2.66(c) (0.63) 81 14.06 38.0(d) 12,557 3.07 3.05(c) (1.09) 92 10.19 (17.0) 11,013 2.94 N/A (1.20) 91 12.33 (9.7) 16,493 2.87 N/A 0.23 110 13.75 (12.8) 23,949 2.76 N/A (0.88) 175 $ 13.06 10.8 $ 108,042 1.70 N/A (0.15) 26 11.79 27.6(d) 95,957 1.84 1.70(c) (0.28) 30 9.24 (15.7)(d) 68,660 1.79 1.70(c) (0.35) 12 10.96 9.6(d) 45,987 2.08 1.70(c) (0.08) 10 12.69 9.9 110,275 2.45 N/A (0.90) 26 11.55 26.6(d) 107,017 2.59 2.45(c) (1.03) 30 9.12 (16.3)(d) 85,794 2.54 2.45(c) (1.10) 12 10.90 9.0(d) 62,671 2.83 2.45(c) (0.83) 10 12.69 9.9 144,780 2.45 N/A (0.90) 26 11.55 26.6(d) 124,427 2.59 2.45(c) (1.03) 30 9.12 (16.3)(d) 86,269 2.54 2.45(c) (1.10) 12 10.90 9.0(d) 34,406 2.83 2.45(c) (0.86) 10 $ 13.37 9.1(d) $ 222,434 1.49 1.30(c) 0.30 27 12.25 30.0(d) 215,259 1.62 1.45(c) 0.07 30(e) 9.42 (20.0) 130,751 1.56 N/A 0.07 195 11.78 (14.6) 211,138 1.46 N/A (0.05) 154 13.79 (7.3) 290,714 1.31 N/A 0.04 139 12.62 8.4(d) 79,949 2.24 2.05(c) (0.46) 27 11.64 29.1(d) 91,085 2.37 2.20(c) (0.69) 30(e) 9.02 (20.7) 71,436 2.31 N/A (0.68) 195 11.37 (15.1) 120,361 2.21 N/A (0.80) 154 13.40 (8.1) 165,767 2.06 N/A (0.71) 139
56 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: ----------------------------------------- Net asset value, Net realized beginning Net and unrealized Total from of investment gain (loss) on investment period income (loss) investments operations ---------- ------------- -------------- ---------- HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued) Class C 12/31/2004 $ 11.63 $ (0.05)(b) $ 1.02 $ 0.97 12/31/2003 9.01 (0.07)(b) 2.69 2.62 12/31/2002 11.36 (0.07)(b) (2.28) (2.35) 12/31/2001 13.38 (0.10)(b) (1.92) (2.02) 12/31/2000 15.01 (0.10)(b) (1.07) (1.17) Class Y 12/31/2004 12.54 0.07(b) 1.13 1.20 12/31/2003 9.59 0.06(b) 2.89 2.95 12/31/2002 11.93 0.07(b) (2.41) (2.34) 12/31/2001 13.87 0.06(b) (2.00) (1.94) 12/31/2000 15.36 0.07(b) (1.10) (1.03) VAUGHAN NELSON SMALL CAP VALUE FUND Class A 12/31/2004 $ 13.94 $ (0.13)(b) $ 2.26 $ 2.13 12/31/2003 10.05 (0.19)(b) 4.08 3.89 12/31/2002 14.52 (0.21)(b) (4.26) (4.47) 12/31/2001 16.51 (0.21)(b) (1.78) (1.99) 12/31/2000 23.42 (0.28) (2.30) (2.58) Class B 12/31/2004 13.08 (0.22)(b) 2.11 1.89 12/31/2003 9.51 (0.26)(b) 3.83 3.57 12/31/2002 13.84 (0.28)(b) (4.05) (4.33) 12/31/2001 15.86 (0.30)(b) (1.72) (2.02) 12/31/2000 22.85 (0.44) (2.22) (2.66) Class C 12/31/2004 13.09 (0.22)(b) 2.11 1.89 12/31/2003 9.51 (0.26)(b) 3.84 3.58 12/31/2002 13.84 (0.28)(b) (4.05) (4.33) 12/31/2001 15.86 (0.30)(b) (1.72) (2.02) 12/31/2000 22.85 (0.44) (2.22) (2.66)
Less distributions: -------------------------------------- Distributions from net realized Total Redemption capital gains distributions fee ------------- ------------- ---------- HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued) Class C 12/31/2004 $ -- $ -- $ -- 12/31/2003 -- -- -- 12/31/2002 -- -- -- 12/31/2001 -- -- -- 12/31/2000 (0.46) (0.46) -- Class Y 12/31/2004 -- -- -- 12/31/2003 -- -- -- 12/31/2002 -- -- -- 12/31/2001 -- -- -- 12/31/2000 (0.46) (0.46) -- VAUGHAN NELSON SMALL CAP VALUE FUND Class A 12/31/2004 $ -- $ -- $ 0.00(f) 12/31/2003 -- -- -- 12/31/2002 -- -- -- 12/31/2001 -- -- -- 12/31/2000 (4.33) (4.33) -- Class B 12/31/2004 -- -- 0.00(f) 12/31/2003 -- -- -- 12/31/2002 -- -- -- 12/31/2001 -- -- -- 12/31/2000 (4.33) (4.33) -- Class C 12/31/2004 -- -- 0.00(f) 12/31/2003 -- -- -- 12/31/2002 -- -- -- 12/31/2001 -- -- -- 12/31/2000 (4.33) (4.33) --
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004) 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)Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (c)The investment adviser waived a portion of its advisory fee and/or reimbursed a portion of the Fund's expenses during the period. Without this waiver/reimbursement, expense ratios would have been higher. (d)Had certain expenses not been reduced during the period, total return would have been lower. (e)Portfolio turnover excludes the impact of assets as a result of a merger with another Fund. (f)Amount rounds to less than $0.01 per share. (g)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. Prior to 2004, expenses in this table were presented net of such waivers and/or reimbursements. See accompanying notes to financial statements. 57
Ratios to average net assets: -------------------------------------- Net asset Net assets, Expenses after value, Total end of reimbursement/ Net investment Portfolio end of return the period Expenses waiver income turnover the period (%) (a) (000's) (%) (g) (%) (loss) (%) rate (%) - ---------- --------- ----------- --------- -------------- -------------- --------- $ 12.60 8.3(d) $ 26,392 2.24 2.05(c) (0.42) 27 11.63 29.1(d) 15,553 2.37 2.20(c) (0.69) 30(e) 9.01 (20.7) 6,440 2.31 N/A (0.68) 195 11.36 (15.1) 10,553 2.21 N/A (0.80) 154 13.38 (8.1) 19,373 2.06 N/A (0.71) 139 13.74 9.6 18,027 0.99 N/A 0.58 27 12.54 30.8 26,545 1.01 N/A 0.51 30(e) 9.59 (19.6) 10,569 0.96 N/A 0.66 195 11.93 (14.0) 11,918 0.91 N/A 0.52 154 13.87 (7.0) 10,131 0.87 N/A 0.48 139 $ 16.07 15.3 $ 45,138 2.01 N/A (0.89) 172 13.94 38.7 45,442 2.33 N/A (1.69) 156 10.05 (30.8) 38,441 2.13 N/A (1.72) 160 14.52 (12.1) 69,873 2.08 N/A (1.43) 174 16.51 (12.2) 89,714 1.88 N/A (1.19) 216 14.97 14.5 54,652 2.76 N/A (1.65) 172 13.08 37.5 55,662 3.08 N/A (2.44) 156 9.51 (31.3) 46,215 2.88 N/A (2.47) 160 13.84 (12.7) 82,060 2.83 N/A (2.18) 174 15.86 (12.9) 107,083 2.63 N/A (1.94) 216 14.98 14.4 13,549 2.76 N/A (1.63) 172 13.09 37.6 12,042 3.08 N/A (2.44) 156 9.51 (31.3) 10,930 2.88 N/A (2.47) 160 13.84 (12.7) 22,047 2.83 N/A (2.18) 174 15.86 (12.9) 28,090 2.63 N/A (1.94) 216
58 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: ---------------------------------------- -------------------------- Net asset value, Net Net realized Distributions beginning investment and unrealized Total from from net of income gain (loss) on investment realized Total period loss (b) investments operations capital gains distributions ---------- ---------- -------------- ---------- ------------- ------------- WESTPEAK CAPITAL GROWTH FUND Class A 12/31/2004 $ 10.87 $ (0.02)(c) $ 0.58 $ 0.56 $ -- $ -- 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) (0.03) (0.03) 12/31/2000 22.86 (0.18) (4.14) (4.32) (3.50) (3.50) Class B 12/31/2004 9.52 (0.09)(c) 0.51 0.42 -- -- 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) (0.03) (0.03) 12/31/2000 21.06 (0.32) (3.77) (4.09) (3.50) (3.50) Class C 12/31/2004 9.50 (0.09)(c) 0.51 0.42 -- -- 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) (0.03) (0.03) 12/31/2000 21.06 (0.32) (3.77) (4.09) (3.50) (3.50)
(a)A sales charge for Class A shares and Class C (prior to February 1, 2004) 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)Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (c)Includes special one-time distribution from Microsoft Corp. Without this distribution, net investment loss per share would have been $(0.08), $(0.14) and $(0.14) for Class A, Class B and Class C shares, respectively, and the ratio of net investment loss to average net assets would have been (0.76)%, (1.52)% and (1.51)% for Class A, Class B and Class C shares, respectively. See accompanying notes to financial statements. 59
Ratios to average net assets: ------------------------ Net asset Net assets, value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%) (a) (000's) (%) (loss) (%) rate (%) ---------- --------- ----------- --------- -------------- --------- $ 11.43 5.2 $ 57,420 1.89 (0.18)(c) 121 10.87 26.7 63,380 1.93 (0.85) 107 8.58 (28.1) 58,729 1.75 (0.84) 103 11.93 (20.5) 98,412 1.62 (0.99) 90 15.04 (19.5) 143,425 1.40 (0.80) 118 9.94 4.4 12,916 2.64 (0.97)(c) 121 9.52 25.9 16,485 2.68 (1.60) 107 7.56 (28.8) 16,267 2.50 (1.59) 103 10.61 (21.0) 35,409 2.37 (1.74) 90 13.47 (20.1) 56,884 2.15 (1.55) 118 9.92 4.4 1,013 2.64 (0.94)(c) 121 9.50 25.7 1,174 2.68 (1.60) 107 7.56 (28.7) 847 2.50 (1.59) 103 10.60 (21.1) 1,745 2.37 (1.74) 90 13.47 (20.1) 2,487 2.15 (1.55) 118
60 NOTES TO FINANCIAL STATEMENTS 61 NOTES TO FINANCIAL STATEMENTS For the Year Ended December 31, 2004 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 Board of Trustees to authorize the issuance of 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: CDC Nvest Star Advisers Fund (the "Star Advisers Fund") CDC Nvest Star Value Fund (the "Star Value Fund") 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. Star Advisers Fund, 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 higher ongoing Rule 12b-1 fees 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 higher ongoing Rule 12b-1 fees, 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 1.00% front end sales charge was imposed on Class C shares. Class Y shares do not pay a front end sales charge, a CDSC or Rule 12b-1 fees. They are intended for institutional investors with a minimum initial investment of $1,000,000, though some categories of investors are excepted from the minimum investment amount. Most expenses of the Trusts can be directly attributed to a Fund. Expenses which cannot be directly attributed are generally apportioned based on the relative net assets of each of the Funds in the Trusts. 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, 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 Funds' 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 thereafter 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. Investment income and realized and unrealized gains and losses are allocated on a pro rata basis to each Class based on the relative net assets of each Class to the total net assets of the Fund. 62 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 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. 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 Funds' 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 period, resulting from changes in exchange rates. d. Forward Foreign Currency Contracts. The Star Advisers Fund, the Star Value Fund and the International Fund may use foreign currency contracts to facilitate transactions in foreign securities and to manage their currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Funds' 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 Funds' 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 Funds' policy that the market value of the collateral be at least equal to 102% of the repurchase price, including interest. Each Funds' 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 Funds' ability to dispose of the underlying securities. 3. Purchases and Sales of Securities. For the year ended December 31, 2004, purchases and sales of securities (excluding short-term investments) were as follows:
Fund Purchases Sales ---- --------- ----- Star Advisers Fund $ 716,519,780 $ 832,001,558 Star Value Fund 74,743,252 94,746,061 Targeted Equity Fund 1,990,392,107 2,111,742,035 International Fund 104,342,844 119,367,331 Focused Value Fund 82,778,902 89,750,124 Large Cap Value Fund 90,210,688 116,996,430 Small Cap Value Fund 176,285,987 190,840,484 Capital Growth Fund 89,493,359 103,242,716
63 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 4. Management Fees and Other Transactions with Affiliates. a. Management Fees. IXIS Asset Management Advisors, L.P. ("IXIS Advisors"), formerly CDC IXIS Asset Management Advisers, L.P., 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 - ---- ------------ ------------ ------------ ---------- ---------- Star Value Fund 0.750% 0.700% 0.650% 0.650% 0.650% 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%
Star Advisers Fund pays management fees at the annual rate of 1.05% of the first $750 million of the Fund's average daily net assets and 0.95% of such assets in excess of $750 million. Prior to May 1, 2004, the Fund paid management fees at the annual rate of 1.05% of the first $1 billion of the Fund's average daily net assets, 1.00% of the next $1 billion and 0.95% of such assets in excess of $2 billion. 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. The adviser also contractually agreed to waive a portion of its advisory fee for International Fund so that the effective management fee was 1.00%. For the year ended December 31, 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 ---- ---------- ---------- ---------- ------ ------ Star Advisers Fund $7,430,406 $ -- $7,430,406 1.050% 1.050% Star Value Fund 1,026,814 -- 1,026,814 0.750% 0.750% Targeted Equity Fund 5,233,103 -- 5,233,103 0.700% 0.700% International Fund 1,097,894 11,186 1,086,708 0.840% 0.830% Focused Value Fund 3,426,387 -- 3,426,387 1.000% 1.000% Large Cap Value Fund 2,354,906 -- 2,354,906 0.680% 0.680% Small Cap Value Fund 1,019,012 -- 1,019,012 0.930% 0.930% Capital Growth Fund 557,319 -- 557,319 0.750% 0.750%
IXIS Advisors has entered into subadvisory agreements for each Fund listed below. Payments to IXIS Advisors are reduced in the amount of payments to the subadvisers. Star Advisers Fund Harris Associates L.P. ("Harris") Loomis, Sayles & Company, L.P. ("Loomis Sayles") Mercury Advisors Star Value Fund Harris Loomis Sayles Vaughan Nelson Investment Management, L.P. ("Vaughan Nelson") Westpeak Global Advisors, L.P. ("Westpeak") International Fund Hansberger Global Investors, Inc. ("Hansberger") Focused Value Fund Harris Large Cap Value Fund Harris Small Cap Value Fund Vaughan Nelson Capital Growth Fund Westpeak
64 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 IXIS Advisors, CGM, Harris, Loomis Sayles, Vaughan Nelson and Westpeak are subsidiaries of IXIS Asset Management North America, L.P. ("IXIS North America"). Hansberger is an affiliated money manager of IXIS North America. Certain officers and directors of IXIS Advisors and its affiliates are also officers or Trustees of the Funds. Broker commissions paid to affiliated broker/dealers by the Funds were as follows:
Fund Commission ---- ---------- Star Advisers Fund $188,230 Star Value Fund 10,080 Focused Value Fund 14,434 Large Cap Value Fund 14,878 Small Cap Value Fund 4,371
b. Accounting and Administrative Expense. During the period, IXIS Asset Management Services Company ("IXIS Services"), formerly CDC IXIS Asset Management Services, Inc., a wholly-owned subsidiary of IXIS North America, performed certain accounting and administrative services for the Funds and subcontracted with Investors Bank & Trust Company ("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 and CDC Nvest Companies Trust I ("CDC Nvest Funds Trusts") and Loomis Sayles Funds I and Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS Services, each Fund paid IXIS Services 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 Funds' pro rata portion, allocated based on the combined assets of the CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts, of the annual aggregate minimum fee of $5 million. For the year ended December 31, 2004, amounts paid to IXIS Services for accounting and administrative expense were as follows:
Accounting And Fund Administrative ---- -------------- Star Advisers Fund $460,770 Star Value Fund 89,143 Targeted Equity Fund 486,061 International Fund 82,666 Focused Value Fund 221,730 Large Cap Value Fund 226,999 Small Cap Value Fund 71,162 Capital Growth Fund 48,358
Effective January 1, 2005, IXIS Advisors assumed responsibility for providing accounting and administrative services to the Funds. c. Transfer Agent Fees. IXIS Services 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. During the period, Classes A, B and C paid service fees monthly representing the higher amount based on the following calculations: (1)Each Fund's pro rata portion of 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 Class A, Class B and Class C accounts in Load Equity Funds. Load Equity Funds consist of all equity funds within the CDC Nvest Funds Trusts, Loomis Sayles Growth Fund, CDC IXIS International Equity Fund, which was renamed the Hansberger Foreign Growth Fund on February 1, 2005, 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 an annual aggregate minimum fee of $8.4 million. 65 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 Class Y paid service fees monthly representing the higher amount based on the following calculations: (1)Each Fund's pro rata portion of 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 an annual aggregate minimum 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. Effective January 1, 2005, each Load Equity Fund, for its Class A, B, and C shares, will pay fees to IXIS Services representing a pro rata portion of the greater of: (1)An aggregate annual minimum fee of approximately $6.8 million for all Load Equity Funds; or (2)An annual account based fee of $25.44 for each open account and $2.00 for each closed account, aggregated for all Load Equity Funds. Each Load Equity Fund, for its Class Y shares, will pay fees to IXIS Services representing a pro rata portion of the greater of: (1)An aggregate annual minimum fee of approximately $1 million for all No Load Retail Funds and Load Funds Class Y; or (2)An annual account based fee of $25.44 for each open account in an Equity Fund, $25.25 for each open account in a Fixed Income Fund and $2.00 for each closed account, aggregated for all No Load Retail Funds and Load Funds Class Y. Each class of shares is subject to a monthly class minimum of $1,500. In addition, pursuant to other servicing agreements, each class pays service fees to other firms that provide similar services for their own shareholder accounts. IXIS Services and BFDS and other firms are also reimbursed by the Funds for out-of-pocket expenses. For the year ended December 31, 2004, amounts paid to IXIS Services as compensation for its services as transfer agent were as follows:
Transfer Agent Fund Fee ---- -------------- Star Advisers Fund $2,214,033 Star Value Fund 450,254 Targeted Equity Fund 2,025,928 International Fund 489,524 Focused Value Fund 680,834 Large Cap Value Fund 1,015,753 Small Cap Value Fund 425,161 Capital Growth Fund 329,353
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 IXIS Asset Management Distributors, L.P. ("IXIS Distributors") formerly CDC IXIS Asset Management Distributors, L.P., the Fund's distributor (a wholly-owned subsidiary of 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 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 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 IXIS Distributors in providing personal services to investors in Class B and Class C shares and/or the maintenance of shareholder accounts. 66 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 Also under the Class B and Class C Plans, each Fund pays IXIS Distributors a monthly distribution fee at the annual rate of 0.75% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by IXIS Distributors in connection with the marketing or sale of Class B and Class C shares. For the year ended December 31, 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 ---- ------- ------- ------- ------- ------- Star Advisers Fund $ 907,809 $606,659 $147,572 $1,819,977 $ 442,714 Star Value Fund 264,465 71,404 6,403 214,210 19,208 Targeted Equity Fund 1,712,687 138,134 7,057 414,401 21,172 International Fund 162,480 127,330 35,804 381,989 107,412 Focused Value Fund 255,192 266,139 335,266 798,416 1,005,798 Large Cap Value Fund 541,436 208,684 54,708 626,051 164,124 Small Cap Value Fund 110,829 133,830 30,383 401,490 91,150 Capital Growth Fund 147,891 35,218 2,664 105,653 7,991
Commissions (including CDSC) on Fund shares paid to IXIS Distributors by investors in shares of the Funds during the year ended December 31, 2004 were as follows:
Fund ---- - Star Advisers Fund $736,098 Star Value Fund 110,716 Targeted Equity Fund 333,241 International Fund 124,644 Focused Value Fund 492,975 Large Cap Value Fund 326,330 Small Cap Value Fund 139,904 Capital Growth Fund 73,219
e. Trustees Fees and Expenses. The CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts do not pay any compensation directly to their officers or Trustees who are directors, officers or employees of IXIS Advisors, IXIS Distributors, IXIS North America, IXIS Services or their affiliates. Each Trustee who is an independent Trustee of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts receives, 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 attended. Each committee chairman receives an additional retainer fee at the annual rate of $7,000. Each committee member receives a meeting attendance fee of $3,750 per committee meeting attended. The co-chairmen of the Board each receive an additional annual retainer of $25,000. These fees are allocated to the various series of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts 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. Prior to July 1, 2004, the Trust paid each independent Trustee a $45,000 annual retainer and a $4,500 fee per meeting attended. In addition, each committee member received a retainer fee at the annual rate of $7,000 while each committee chairman received a $5,000 annual retainer (beyond the $7,000). Each committee member received a $1,750 fee per meeting attended. The retainer fees assumed four Board or committee meetings per year. 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 a designated Fund or certain other funds of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts on the normal payment date. Deferred amounts remain in the Funds until distributed in accordance with the Plan. f. Redemption fees. Effective May 1, 2004, shareholders of Class A shares of Targeted Equity Fund, Focused Value Fund, Small Cap Value Fund and International Fund were charged a 2% redemption fee if they redeemed, 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 exchange 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. 67 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 g. Publishing Services. IXIS Services performs certain desktop publishing services for the Funds. Fees for these services are presented in the Statements of Operations as a part of shareholder reporting. For the year ended December 31, 2004, amounts paid to IXIS Services as compensation for these services were as follows:
Publishing Services Fund Fees ---- ------------------- Star Advisers Fund $1,108 Star Value Fund 928 Targeted Equity Fund 858 International Fund 1,126 Focused Value Fund 873 Large Cap Value Fund 461 Small Cap Value Fund 1,193 Capital Growth Fund 830
5. Line of Credit. Each Fund, along with certain other portfolios, participates in a $50,000,000 committed line of credit provided by IBT under a credit agreement (the "Agreement") dated April 30, 2002. Advances under the Agreement are taken primarily for temporary or emergency purposes. Interest is charged to each participating Fund based on its borrowing at a rate per annum equal to the Federal Funds rate plus 0.45%. 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 during the year ended December 31, 2004. 6. Security Lending. Each Fund has entered into an agreement with IBT, as an 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 December 31, 2004, were as follows:
Market Value of Value of Collateral Fund Securities on Loan Received ---- ------------------ ------------------- Star Advisers Fund $85,386,028 $88,013,788 Star Value Fund 11,274,472 11,744,576 Targeted Equity Fund 93,408,963 95,930,674 International Fund 11,604,148 12,172,752 Focused Value Fund 23,368,942 23,987,344 Large Cap Value Fund 14,745,778 15,226,465 Small Cap Value Fund 16,170,885 16,652,071 Capital Growth Fund 10,676,677 11,066,014
7. Brokerage Commission Recapture. Each Fund has entered into agreements with certain brokers whereby the brokers will rebate a portion of brokerage commissions. All amounts rebated by the brokers are returned to the Funds under such agreements and are presented as realized gains in the Statements of Operations. For the year ended December 31, 2004, amounts rebated under these agreements were as follows:
Fund Rebates ---- ------- Star Advisers Fund $ 85,945 Star Value Fund 45,937 Targeted Equity Fund 694,343 International Fund 26,035 Focused Value Fund 32,314 Large Cap Value Fund 20,832 Small Cap Value Fund 66,797 Capital Growth Fund 26,491
Previously, such rebates were presented as a reduction of expenses in the Statements of Operations. This reclassification has no impact on total net assets of the Funds. 8. Contingent Expense Obligations. IXIS Advisors 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 year ended December 31, 2004, certain class level expenses have been reimbursed as follows: Large Cap Value Fund $613,592. 68 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 IXIS Advisors shall be permitted to recover expenses it has borne (whether through reduction of its management fee or otherwise) in later periods to the extent the Funds' expenses fall below the expense limits, provided, however, that the Funds are not obligated to pay such deferred fees more than one year after the end of the fiscal year in which the fee was deferred. At December 31, 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:
Expense Limit as a Percentage of Average Expenses Subject Daily Net Assets to Possible - - --------------------------------------- Expiration of Reimbursement Fund Class A Class B Class C Class Y Waiver through 2005 - ---- ------- ------- ------- ------- -------------- ---------------- Focused Value Fund 1.70% 2.45% 2.45% -- April 30, 2005 -- Large Cap Value Fund 1.30% 2.05% 2.05% 1.05% April 30, 2005 $613,592
9. 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 December 31, 2004: France 13.9%, Japan 18.7%, and the United Kingdom 19.0%. The Fund pursues its objectives 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. 10. Capital Shares. Each Fund may issue an unlimited number of shares of beneficial interest. Transactions in capital shares were as follows: Year Ended December 31, 2004 ----------------------------------- CDC Nvest Star Advisers Fund Shares Amount - ---------------------------- ---------------- ----------------- Class A Shares sold 3,621,946 $ 61,819,311 Shares repurchased (4,042,630) (69,134,083) ---------------- ----------------- Net increase (decrease) (420,684) $ (7,314,772) ---------------- ----------------- Class B Shares sold 1,023,105 $ 15,892,084 Shares repurchased (5,878,024) (90,809,102) ---------------- ----------------- Net increase (decrease) (4,854,919) $ (74,917,018) ---------------- ----------------- Class C Shares sold 189,049 $ 2,929,359 Shares repurchased (734,192) (11,393,435) ---------------- ----------------- Net increase (decrease) (545,143) $ (8,464,076) ---------------- ----------------- Class Y Shares sold 218,190 $ 3,966,766 Shares repurchased (1,673,188) (29,771,039) ---------------- ----------------- Net increase (decrease) (1,454,998) $ (25,804,273) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (7,275,744) $ (116,500,139) ================ =================
Year Ended December 31, 2003 ----------------------------------- CDC Nvest Star Advisers Fund Shares Amount - ---------------------------- ---------------- ----------------- Class A Shares sold 4,698,412 $ 65,219,946 Shares repurchased (4,998,858) (68,998,837) ---------------- ----------------- Net increase (decrease) (300,446) $ (3,778,891) ---------------- ----------------- Class B Shares sold 1,455,180 $ 18,516,959 Shares repurchased (8,227,621) (102,616,431) ---------------- ----------------- Net increase (decrease) (6,772,441) $ (84,099,472) ---------------- ----------------- Class C Shares sold 194,012 $ 2,480,648 Shares repurchased (938,013) (11,591,919) ---------------- ----------------- Net increase (decrease) (744,001) $ (9,111,271) ---------------- ----------------- Class Y Shares sold 262,069 $ 3,940,480 Shares repurchased (462,570) (6,772,691) ---------------- ----------------- Net increase (decrease) (200,501) $ (2,832,211) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (8,017,389) $ (99,821,845) ================ =================
69 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 Year Ended December 31, 2004 ----------------------------------- CDC Nvest Star Value Fund Shares Amount - ------------------------- ---------------- ----------------- Class A Shares sold 963,269 $ 8,089,262 Shares issued in connection with the reinvestment of: Distributions from net realized gain 214,596 1,883,282 ---------------- ----------------- 1,177,865 9,972,544 Shares repurchased (2,880,533) (24,188,526) ---------------- ----------------- Net increase (decrease) (1,702,668) $ (14,215,982) ---------------- ----------------- Class B Shares sold 406,698 $ 3,154,676 Shares issued in connection with the reinvestment of: Distributions from net realized gain 65,280 527,181 ---------------- ----------------- 471,978 3,681,857 Shares repurchased (1,049,412) (8,162,688) ---------------- ----------------- Net increase (decrease) (577,434) $ (4,480,831) ---------------- ----------------- Class C Shares sold 139,514 $ 1,078,896 Shares issued in connection with the reinvestment of: Distributions from net realized gain 5,506 44,489 ---------------- ----------------- 145,020 1,123,385 Shares repurchased (51,629) (402,248) ---------------- ----------------- Net increase (decrease) 93,391 $ 721,137 ---------------- ----------------- Increase (decrease) derived from capital shares transactions (2,186,711) $ (17,975,676) ================ ================= Year Ended December 31, 2004 ----------------------------------- CGM Advisor Targeted Equity Fund Shares Amount - -------------------------------- ---------------- ----------------- Class A Shares sold 2,521,858 $ 20,870,954 Shares repurchased (17,497,433) (142,925,716) ---------------- ----------------- Net increase (decrease) (14,975,575) $ (122,054,762) ---------------- ----------------- Class B Shares sold 584,350 $ 4,509,878 Shares repurchased (1,391,402) (10,654,125) ---------------- ----------------- Net increase (decrease) (807,052) $ (6,144,247) ---------------- ----------------- Class C Shares sold 105,596 $ 786,319 Shares repurchased (79,774) (611,842) ---------------- ----------------- Net increase (decrease) 25,822 $ 174,477 ---------------- ----------------- Class Y Shares sold 129,331 $ 1,094,935 Shares repurchased (101,673) (843,271) ---------------- ----------------- Net increase (decrease) 27,658 $ 251,664 ---------------- ----------------- Increase (decrease) derived from capital shares transactions (15,729,147) $ (127,772,868) ================ =================
Year Ended December 31, 2003 ----------------------------------- CDC Nvest Star Value Fund Shares Amount - ------------------------- ---------------- ----------------- Class A Shares sold 1,104,961 $ 7,639,153 Shares issued in connection with the reinvestment of: Distributions from net realized gain -- -- ---------------- ----------------- 1,104,961 7,639,153 Shares repurchased (3,694,156) (25,006,261) ---------------- ----------------- Net increase (decrease) (2,589,195) $ (17,367,108) ---------------- ----------------- Class B Shares sold 595,770 $ 3,795,458 Shares issued in connection with the reinvestment of: Distributions from net realized gain -- -- ---------------- ----------------- 595,770 3,795,458 Shares repurchased (1,421,634) (8,919,193) ---------------- ----------------- Net increase (decrease) (825,864) $ (5,123,735) ---------------- ----------------- Class C Shares sold 62,780 $ 394,765 Shares issued in connection with the reinvestment of: Distributions from net realized gain -- -- ---------------- ----------------- 62,780 394,765 Shares repurchased (133,770) (814,153) ---------------- ----------------- Net increase (decrease) (70,990) $ (419,388) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (3,486,049) $ (22,910,231) ================ ================= Year Ended December 31, 2003 ----------------------------------- CGM Advisor Targeted Equity Fund Shares Amount - -------------------------------- ---------------- ----------------- Class A Shares sold 3,272,602 $ 21,476,490 Shares repurchased (20,406,401) (130,309,788) ---------------- ----------------- Net increase (decrease) (17,133,799) $ (108,833,298) ---------------- ----------------- Class B Shares sold 703,119 $ 4,292,342 Shares repurchased (1,738,618) (10,346,801) ---------------- ----------------- Net increase (decrease) (1,035,499) $ (6,054,459) ---------------- ----------------- Class C Shares sold 38,555 $ 239,637 Shares repurchased (98,860) (579,017) ---------------- ----------------- Net increase (decrease) (60,305) $ (339,380) ---------------- ----------------- Class Y Shares sold 98,496 $ 670,426 Shares repurchased (117,263) (734,977) ---------------- ----------------- Net increase (decrease) (18,767) $ (64,551) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (18,248,370) $ (115,291,688) ================ =================
70 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 Year Ended December 31, 2004 ----------------------------------- Hansberger International Fund Shares Amount - ----------------------------- ---------------- ----------------- Class A Shares sold 1,378,026 $ 21,181,534 Shares repurchased (1,039,791) (15,979,778) ---------------- ----------------- Net increase (decrease) 338,235 $ 5,201,756 ---------------- ----------------- Class B Shares sold 234,404 $ 3,365,251 Shares repurchased (1,672,509) (23,865,174) ---------------- ----------------- Net increase (decrease) (1,438,105) $ (20,499,923) ---------------- ----------------- Class C Shares sold 324,631 $ 4,638,364 Shares repurchased (142,798) (2,053,383) ---------------- ----------------- Net increase (decrease) 181,833 $ 2,584,981 ---------------- ----------------- Increase (decrease) derived from capital shares transactions (918,037) $ (12,713,186) ================ ================= Year Ended December 31, 2004 ----------------------------------- Harris Associates Focused Value Fund Shares Amount - ------------------------------------ ---------------- ----------------- Class A Shares sold 2,211,604 $ 26,494,287 Shares repurchased (2,074,206) (24,982,274) ---------------- ----------------- Net increase (decrease) 137,398 $ 1,512,013 ---------------- ----------------- Class B Shares sold 773,815 $ 9,061,361 Shares repurchased (1,352,436) (15,825,604) ---------------- ----------------- Net increase (decrease) (578,621) $ (6,764,243) ---------------- ----------------- Class C Shares sold 2,570,290 $ 30,041,268 Shares repurchased (1,937,670) (22,709,696) ---------------- ----------------- Net increase (decrease) 632,620 $ 7,331,572 ---------------- ----------------- Increase (decrease) derived from capital shares transactions 191,397 $ 2,079,342 ================ =================
Year Ended December 31, 2003 ----------------------------------- Hansberger International Fund Shares Amount - ----------------------------- ---------------- ----------------- Class A Shares sold 5,487,733 $ 61,630,766 Shares repurchased (6,139,050) (69,259,645) ---------------- ----------------- Net increase (decrease) (651,317) $ (7,628,879) ---------------- ----------------- Class B Shares sold 290,640 $ 3,415,741 Shares repurchased (1,233,804) (13,640,399) ---------------- ----------------- Net increase (decrease) (943,164) $ (10,224,658) ---------------- ----------------- Class C Shares sold 125,234 $ 1,506,714 Shares repurchased (312,978) (3,503,997) ---------------- ----------------- Net increase (decrease) (187,744) $ (1,997,283) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (1,782,225) $ (19,850,820) ================ ================= Year Ended December 31, 2003 ----------------------------------- Harris Associates Focused Value Fund Shares Amount - ------------------------------------ ---------------- ----------------- Class A Shares sold 2,875,956 $ 29,849,185 Shares repurchased (2,168,603) (22,052,029) ---------------- ----------------- Net increase (decrease) 707,353 $ 7,797,156 ---------------- ----------------- Class B Shares sold 1,701,970 $ 16,766,807 Shares repurchased (1,844,300) (18,116,704) ---------------- ----------------- Net increase (decrease) (142,330) $ (1,349,897) ---------------- ----------------- Class C Shares sold 3,353,028 $ 33,891,515 Shares repurchased (2,040,296) (20,183,334) ---------------- ----------------- Net increase (decrease) 1,312,732 $ 13,708,181 ---------------- ----------------- Increase (decrease) derived from capital shares transactions 1,877,755 $ 20,155,440 ================ =================
71 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 Year Ended December 31, 2004 ----------------------------------- Harris Associates Large Cap Value Fund Shares Amount - -------------------------------------- ---------------- ----------------- Class A Shares sold 2,114,459 $ 26,293,904 Shares issued - merger -- -- ---------------- ----------------- 2,114,459 26,293,904 Shares repurchased (3,058,528) (38,152,674) ---------------- ----------------- Net increase (decrease) (944,069) $ (11,858,770) ---------------- ----------------- Class B Shares sold 539,873 $ 6,373,696 Shares issued - merger -- -- ---------------- ----------------- 539,873 6,373,696 Shares repurchased (2,028,413) (23,942,400) ---------------- ----------------- Net increase (decrease) (1,488,540) $ (17,568,704) ---------------- ----------------- Class C Shares sold 1,068,463 $ 12,555,826 Shares issued - merger -- -- ---------------- ----------------- 1,068,463 12,555,826 Shares repurchased (311,574) (3,687,561) ---------------- ----------------- Net increase (decrease) 756,889 $ 8,868,265 ---------------- ----------------- Class Y Shares sold 278,070 $ 3,599,061 Shares issued - merger -- -- ---------------- ----------------- 278,070 3,599,061 Shares repurchased (1,082,092) (13,760,464) ---------------- ----------------- Net increase (decrease) (804,022) $ (10,161,403) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (2,479,742) $ (30,720,612) ================ =================
Year Ended December 31, 2003 ----------------------------------- Harris Associates Large Cap Value Fund Shares Amount - -------------------------------------- ---------------- ----------------- Class A Shares sold 2,100,861 $ 22,762,821 Shares issued - merger 5,074,724 54,776,568 ---------------- ----------------- 7,175,585 77,539,389 Shares repurchased (3,485,439) (36,836,357) ---------------- ----------------- Net increase (decrease) 3,690,146 $ 40,703,032 ---------------- ----------------- Class B Shares sold 856,774 $ 9,891,819 Shares issued - merger 1,413,315 14,555,728 ---------------- ----------------- 2,270,089 24,447,547 Shares repurchased (2,366,418) (24,751,845) ---------------- ----------------- Net increase (decrease) (96,329) $ (304,298) ---------------- ----------------- Class C Shares sold 706,519 $ 7,419,708 Shares issued - merger 101,458 1,043,494 ---------------- ----------------- 807,977 8,463,202 Shares repurchased (185,271) (1,965,684) ---------------- ----------------- Net increase (decrease) 622,706 $ 6,497,518 ---------------- ----------------- Class Y Shares sold 60,321 $ 637,760 Shares issued - merger 1,419,922 15,668,839 ---------------- ----------------- 1,480,243 16,306,599 Shares repurchased (465,803) (5,224,688) ---------------- ----------------- Net increase (decrease) 1,014,440 $ 11,081,911 ---------------- ----------------- Increase (decrease) derived from capital shares transactions 5,230,963 $ 57,978,163 ================ =================
72 NOTES TO FINANCIAL STATEMENTS (continued) For the Year Ended December 31, 2004 Year Ended December 31, 2004 ----------------------------------- Vaughan Nelson Small Cap Value Fund Shares Amount - ----------------------------------- ---------------- ----------------- Class A Shares sold 397,634 $ 5,765,216 Shares repurchased (849,371) (12,182,549) ---------------- ----------------- Net increase (decrease) (451,737) $ (6,417,333) ---------------- ----------------- Class B Shares sold 291,248 $ 3,924,012 Shares repurchased (895,799) (12,076,096) ---------------- ----------------- Net increase (decrease) (604,551) $ (8,152,084) ---------------- ----------------- Class C Shares sold 171,240 $ 2,309,106 Shares repurchased (186,838) (2,501,179) ---------------- ----------------- Net increase (decrease) (15,598) $ (192,073) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (1,071,886) $ (14,761,490) ================ ================= Year Ended December 31, 2004 ----------------------------------- Westpeak Capital Growth Fund Shares Amount - ---------------------------- ---------------- ----------------- Class A Shares sold 313,633 $ 3,392,393 Shares repurchased (1,124,317) (12,133,801) ---------------- ----------------- Net increase (decrease) (810,684) $ (8,741,408) ---------------- ----------------- Class B Shares sold 142,812 $ 1,353,045 Shares repurchased (575,435) (5,454,484) ---------------- ----------------- Net increase (decrease) (432,623) $ (4,101,439) ---------------- ----------------- Class C Shares sold 14,061 $ 133,009 Shares repurchased (35,626) (335,096) ---------------- ----------------- Net increase (decrease) (21,565) $ (202,087) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (1,264,872) $ (13,044,934) ================ =================
Year Ended December 31, 2003 ----------------------------------- Vaughan Nelson Small Cap Value Fund Shares Amount - ----------------------------------- ---------------- ----------------- Class A Shares sold 735,059 $ 8,197,295 Shares repurchased (1,297,834) (14,135,491) ---------------- ----------------- Net increase (decrease) (562,775) $ (5,938,196) ---------------- ----------------- Class B Shares sold 495,700 $ 5,413,902 Shares repurchased (1,100,218) (11,475,987) ---------------- ----------------- Net increase (decrease) (604,518) $ (6,062,085) ---------------- ----------------- Class C Shares sold 92,836 $ 1,009,312 Shares repurchased (321,688) (3,360,613) ---------------- ----------------- Net increase (decrease) (228,852) $ (2,351,301) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (1,396,145) $ (14,351,582) ================ ================= Year Ended December 31, 2003 ----------------------------------- Westpeak Capital Growth Fund Shares Amount - ---------------------------- ---------------- ----------------- Class A Shares sold 459,334 $ 4,434,198 Shares repurchased (1,474,769) (14,012,775) ---------------- ----------------- Net increase (decrease) (1,015,435) $ (9,578,577) ---------------- ----------------- Class B Shares sold 241,744 $ 2,031,512 Shares repurchased (660,282) (5,491,199) ---------------- ----------------- Net increase (decrease) (418,538) $ (3,459,687) ---------------- ----------------- Class C Shares sold 43,266 $ 374,020 Shares repurchased (31,761) (263,473) ---------------- ----------------- Net increase (decrease) 11,505 $ 110,547 ---------------- ----------------- Increase (decrease) derived from capital shares transactions (1,422,468) $ (12,927,717) ================ =================
73 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and shareholders of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and CDC Nvest Funds Trust III (collectively, the "Trusts") In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the CDC Nvest Star Advisers Fund, CDC Nvest Star Value Fund, 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) and Westpeak Capital Growth Fund, each a series within the Trusts (collectively, the "Funds"), at December 31, 2004, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 23, 2005 74 ADDITIONAL INFORMATION Shareholder Meetings (unaudited) At a special shareholder meeting held on November 17, 2004, shareholders of the CGM Advisor Targeted Equity Fund voted for the following proposal: 1. Approval of a new advisory agreement between CDC Nvest Funds Trust I, on behalf of the CGM Advisor Targeted Equity Fund and Capital Growth Management Limited Partnership.
Voted For Voted Against Abstained Votes Total Votes --------- ------------- --------------- ----------- 52,499,751.821 1,853,357.475 2,286,063.471 56,639,172.767
At a special shareholder meeting held on February 18, 2004, shareholders of the Vaughan Nelson Small Cap Value Fund voted for the following proposal: 1. Approval of a new subadvisory agreement for the Vaughan Nelson Small Cap Value Fund among CDC Nvest Funds Trust I, IXIS Asset Management Advisors, L.P. and Vaughan Nelson Investment Management, L.P.
Voted For Voted Against Abstained Votes Total Votes --------- ------------- --------------- ----------- 5,995,736.288 177,986.322 189,268.957 6,362,991.567
75 TRUSTEE AND OFFICER INFORMATION The table below provides certain information regarding the Trustees and Officers of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and CDC Nvest Funds Trust III (the "Trusts"). Unless otherwise indicated, the address of all persons below is 399 Boylston Street, Boston, MA 02116. The statement of additional information includes additional information about the Trustees of the Trusts and is available by calling CDC Nvest Funds at 800-225-5478.
Position(s) Held with the Number of Portfolios in Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen*** Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held - ---------------------- -------------------------- --------------------- ---------------------------- INDEPENDENT TRUSTEES Graham T. Allison, Jr. Trustee, Contract Review Douglas Dillon Professor and 41; (3/23/40) and Governance Committee Director for the Belfer Center Director, Taubman Centers, Member, since 1984 for of Science and International Inc. (real estate investment CDC Nvest Funds Trust I, Affairs, John F. Kennedy trust); Advisory Board 1993 for CDC Nvest Funds School of Government, Member, USEC Inc. (energy Trust II and 1995 for CDC Harvard University supplier) Nvest Funds Trust III Edward A. Benjamin Trustee, Audit Committee Retired 41; (5/30/38) Member, since 2003 Director, Coal, Energy Investments & Management, LLC; Director, Precision Optics Corporation (optics manufacturer) Daniel M. Cain Trustee, Chairman of the President and Chief Executive 41; (2/24/45) Audit Committee, since Officer, Cain Brothers & Trustee, Universal Health 1996; Co-Chairman of the Company, Incorporated Realty Income Trust; Board, since 2004 (investment banking) Director, Sheridan Healthcorp (physician practice management) Paul G. Chenault Trustee, Contract Review Retired; Trustee, First Variable 41; (9/12/33) and Governance Committee Life (variable life insurance) Director, Mailco Office Member, since 2003 Products, Inc. (mailing equipment) Kenneth J. Cowan Trustee, Chairman of the Retired 41; None (4/5/32) Contract Review and Governance Committee, since 1993 for CDC Nvest Funds Trust I, 1975 for CDC Nvest Funds Trust II and 1995 for CDC Nvest Funds Trust III; Co- Chairman of the Board, since 2004 Richard Darman Trustee, Contract Review Partner, The Carlyle Group 41; (5/10/43) and Governance Committee (investments); formerly, Director and Chairman of Member, since 1996 Professor, John F. Kennedy the Board of Directors, AES School of Government, Corporation (independent Harvard University power company)
76 TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen*** Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held - ---------------------- -------------------------- --------------------- ---------------------------- INDEPENDENT TRUSTEES continued Sandra O. Moose Trustee, Audit Committee President, Strategic Advisory 41; (2/17/42) Member, since 1982 for Services (management Director, Verizon CDC Nvest Funds Trust I, consulting); formerly, Senior Communications; Director, 1993 for CDC Nvest Funds Vice President and Director, Rohm and Haas Company Trust II, 1995 for CDC The Boston Consulting Group, (specialty chemicals); Nvest Funds Trust III Inc. (management consulting) Director, AES Corporation John A. Shane Trustee, Contract Review President and Director, Palmer 41; (2/22/33) and Governance Committee Service Corporation (venture Director, Gensym Member, since 1993 for capital organization) Corporation (software and CDC Nvest Funds Trust I, technology services 1982 for CDC Nvest Funds provider); Director, Abt Trust II, 1995 for CDC Associates Inc. (research and Nvest Funds Trust III consulting firm) INTERESTED TRUSTEES Robert J. Blanding/1/ Trustee, since 2003 President, Chairman, Director 41; (4/17/47) and Chief Executive Officer, None 555 California Street Loomis, Sayles & Company, San Francisco, CA 94104 L.P.; President and Chief Executive Officer -- Loomis Sayles Funds I; Chief Executive Officer -- Loomis Sayles Funds II John T. Hailer/2/ President, Chief Executive President and Chief Executive 41; (11/23/60) Officer and Trustee, since Officer, IXIS Asset None 2000 Management Distributors, L.P.; Executive Vice President -- Loomis Sayles Funds I; President -- Loomis Sayles Funds II OFFICERS Coleen Downs Dinneen Secretary, Clerk and Chief Senior Vice President, General Not Applicable (12/16/60) Legal Officer, since 2004 Counsel, Secretary and Clerk (formerly, Deputy General Counsel, Assistant Secretary and Assistant Clerk), IXIS Asset Management Distribution Corporation, IXIS Asset Management Distributors, L.P., IXIS Asset Management Advisors, L.P. and IXIS Asset Management Services Company; Chief Compliance Officer, IXIS Asset Management Advisors, L.P.
77 TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen*** Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held - ---------------------- -------------------------- --------------------- ---------------------------- OFFICERS (continued) Michael C. Kardok Treasurer, Principal Senior Vice President, IXIS Not Applicable (7/17/59) Financial and Accounting Asset Management Advisors, Officer, since 2004 L.P. and IXIS Asset Management Distributors, L.P.; formerly, Senior Vice President, IXIS Asset Management Services Company; formerly, Senior Director, PFPC Inc; formerly, Vice President -- Division Manager, First Data Investor Services, Inc. Frank LoPiccolo Anti-Money Laundering President, Chief Executive Not Applicable (4/1/53) Officer, since 2003 Officer and Director (formerly, Executive Vice President), IXIS Asset Management Services Company John E. Pelletier Chief Operating Officer, Executive Vice President and Not Applicable (6/24/64) since 2004 Chief Operating Officer (formerly, General Counsel, Secretary and Clerk), IXIS Asset Management Distributors, L.P. and IXIS Asset Management Advisors, L.P.; Executive Vice President (formerly, Senior Vice President, General Counsel, Secretary and Clerk), IXIS Asset Management Distribution Corporation; Director (formerly, President, Chief Executive Officer, General Counsel, Secretary and Clerk), IXIS Asset Management Services Company
78 TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen*** Name and Date of Birth Served and Term of Office* During Past 5 Years** and Other Directorships held - ---------------------- -------------------------- --------------------- ---------------------------- OFFICERS (continued) Kristin Vigneaux Chief Compliance Officer, Chief Compliance Officer for Not Applicable (9/25/69) since 2004 Mutual Funds, IXIS Asset Management Distributors, L.P., IXIS Asset Management Advisors, L.P. and IXIS Asset Management Services Company; formerly, Vice President, IXIS Asset Management Services Company
* All Trustees serve until retirement, resignation or removal from the Board. The current retirement age is 72. At a meeting held on November 19, 2004, the Trustees voted to suspend the retirement policy until 2006. ** Previous positions during the past five years with IXIS Asset Management Distributors, L.P. (the "Distributor"), IXIS Asset Management Advisors, L.P. or Loomis, Sayles & Company, L.P. are omitted if not materially different from a trustee's or officer's current position with such entity. As indicated, each Trustee is also a trustee of certain other investment companies for which the Distributor acts as principal underwriter. ***The Trustees of the Trusts serve as Trustees of a fund complex that includes all series of 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, AEW Real Estate Income Fund, Loomis Sayles Funds I and Loomis Sayles Funds II. /1/ Mr. Blanding is deemed an "interested person" of the Trusts because he holds the following positions with affiliated persons of the Trusts: President, Chairman, Director and Chief Executive Officer of Loomis, Sayles & Company, L.P. /2/ Mr. Hailer is an "interested person" of the Trusts because he holds the following positions with affiliated persons of the Trusts: Director and Executive Vice President of IXIS Asset Management Distribution Corporation, President and Chief Executive Officer of IXIS Asset Management Advisors, L.P. 79 Item 2. Code of Ethics. The Trust has adopted a code of Ethics that applies to the Trust's principal executive officer, principal financial officer and persons performing similar functions. Item 3. Audit Committee Financial Expert. Not Applicable Item 4. Principal Accountant Fees and Services. Fees paid to Principal Accountant by the Trust. The table below sets forth fees billed by the Trust's principal accountant, PricewaterhouseCoopers LLP, for the past two fiscal years for professional services rendered in connection with a) the audit of the Trust's annual financial statements and services provided in connection with regulatory filings; b) audit-related services (including services that are reasonably related to the performance of the audit of the registrant's financial statements and but not reported under "Audit Fees"); c) tax compliance, tax advice and tax planning and d) all other fees billed for professional services rendered by the principal accountant to the Trust, other than the services provided reported as a part of (a) through (c) of this Item.
Audit-related Audit fees fees/1/ Tax fees/2/ All other fees - ------------------------------------------------------------------------------------------------ 2003 2004 2003 2004 2003 2004 2003 2004 - ------------------------------------------------------------------------------------------------ CDC Nvest Funds Trust II $23,250 $23,250 $7,000 N/A $19,365 $5,615 N/A N/A - ------------------------------------------------------------------------------------------------
/1./ The audit related fees for 2003 consist of $7,000 related to agreed upon procedures as a result of a merger regarding two series of the Trust. /2./ The tax fees consist of a review of a) the Trust's tax returns (2003 & 2004), b) tax analysis relating to the merger of two series of the Trust (2003), and c) year-end shareholder reporting (2004). Aggregate fees billed to the Trust for non-audit services for 2003 and 2004 were $26,365 and $5,615, respectively. Fees paid to Principal Accountant By Adviser and Control Affiliates. The following table sets forth the non-audit services provided by the Trust's principal accountant to CDC IXIS Asset Management Advisers, L.P. and entities controlling, controlled by or under common control with CDC IXIS Asset Management Advisers, L.P. that provide ongoing services to the Trust ("Control Affiliates") for the last two fiscal years. Audit-related fees/1/ Tax fees All other fees - ------------------------------------------------------------------------- 2003 2004 2003 2004 2003 2004 - ------------------------------------------------------------------------- Control Affiliates 107,239 $115,650 N/A N/A N/A $12,000 - ------------------------------------------------------------------------- /1./ The audit related fees for 2003 consist of a) SAS 70 internal examination of IXIS Asset Management Services Company (formerly CDC IXIS Asset Management Services, Inc.), b) anti-money laundering review for IXIS Asset Management Company and the performance of agreed upon procedures relating to the review of certain 12b-1 fees for IXIS Asset Management Distributors, L.P. Aggregate fees billed to Control Affiliates for non-audit services during 2003 and 2004 were $223,539 and $301,650, respectively None of the series described above were approved pursuant to (c)(7)(i)(C) of Regulation S-X. Audit Committee Pre Approval Policies. Annually, the Trust's Audit Committee reviews the audit, audit-related, tax and other non-audit services together with the projected fees, for services proposed to be rendered to the Trust and/or other entities for which pre-approval is required during the upcoming year. Any subsequent revisions to already pre-approved services or fees (including fee increases) and requests for pre-approval of new services would be presented for consideration quarterly as needed. If, in the opinion of management, a proposed engagement by the Trust's independent accountants needs to commence before the next regularly scheduled Audit Committee meeting, any member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement, but only for engagement to provide audit, audit related and tax services. This approval is subject to review of the full Audit committee at its next quarterly meeting. All other engagements require the approval of all the members of the audit committee. 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. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. Not Applicable. Item 10. Submission of Matters to a Vote of Securities Holders. The following represents new procedures by which shareholders may recommend nominees to the registrant's board of trustees: Shareholders that wish to recommend a candidate to the Board must submit any such recommendation in writing to the following address: Attention of the Board of Trustees, c/o Secretary of the Funds, IXIS Asset Management Services Advisor, L.P., 399 Boylston Street, Boston, MA 02116 (the "Shareholder Recommendation"). Recommendations by email will not be accepted. The Shareholder Recommendation must contain sufficient background information concerning the candidate to enable a proper judgment to be made as to the candidate's qualifications, which may include (i) the recommended candidate's knowledge of the mutual fund industry; (ii) any experience possessed by the recommended candidate's as a director or senior officer of other public companies; (iii) the recommended candidate's educational background; (iv) the recommended candidate's reputation for high ethical standards and personal and professional integrity; (v) any specific financial, technical or other expertise possessed by the recommended candidate, and the extent to which such expertise would complement the Board's existing mix of skills and qualifications; (vi) the recommended candidate's perceived ability to contribute to the ongoing functions of the Board, including the recommended candidate's ability and commitment to attend meetings regularly and work collaboratively with other members of the Board; (vii) the recommended candidate's ability to qualify as an Independent Trustee for purposes of applicable regulations; and (viii) such other factors as the appropriate Board Committee may request in light of the existing composition of the Board and any anticipated vacancies or other transitions. The Shareholder Recommendation must be received in a timely manner (and in any event no later than the date specified for receipt of shareholder proposals in any applicable proxy statement with respect to a Fund). A Shareholder Recommendation shall be kept on file and considered by the Board for six (6) months from the date of receipt, after which the Shareholder Recommendation shall be considered stale and discarded. Item 11. 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 12. Exhibits. (a) (1) Code of Ethics required by Item 2 hereof, filed herewith as exhibit (a)(1) (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: February 18, 2005 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: February 18, 2005 By: /s/ Michael C. Kardok ---------------------------------------- Name: Michael C. Kardok Title: Treasurer Date: February 18, 2005 EX-99.CODEETH 2 dex99codeeth.txt CODE OF ETHICS 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 AEW REAL ESTATE INCOME FUND LOOMIS SAYLES FUNDS I LOOMIS SAYLES FUNDS II Dated August, 2003 CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Covered Persons/Purpose of the Code This Code of Ethics (this "Code") pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 has been adopted by the registered investment companies (each a "Fund" and, collectively, the "Funds") listed on Exhibit A and applies to each Fund's Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer (the "Covered Persons," all covered persons are set forth in Exhibit B) for the purpose of promoting: . Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; . Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the registrant . Compliance with applicable governmental laws, rules and regulations; . The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code of violations of the Code; and . Accountability for adherence to the Code. Each Covered Person should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to conflicts of interest. II. Covered Persons Should Handle Ethically Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Person's private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Person's, or a member of the Covered Person's family or household, receives improper personal benefits as a result of the Covered Person's position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Persons and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (including the regulations thereunder, the "1940 Act") and the Investment Advisers Act of 1940 (including the regulations thereunder, the "Investment Advisers Act"). For example, Covered Persons may not engage in certain transactions with the Fund because of their status as "affiliated persons" of the Fund. The Funds and their investment advisers; subadvisers; distributors and administrators (each a "Service Provider" and, collectively, the "Service Providers") compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. See also Section V of this code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Funds and their Service Providers of which the Covered Persons are also officers or employees. As a result, this Code recognizes that the Covered Persons will, in the normal course of their duties (whether for the Funds or for a Service Provider, or for each), be involved in establishing policies and implementing decisions that will have different effects on the Service Providers and the Funds. The participation of the Covered Persons in such activities is inherent in the contractual relationships between the Funds and their Service Providers and is consistent with the performance by the Covered Persons of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the 1940 Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Trustees ("Boards") that the Covered Persons may also be officers or employees of one or more other investment companies covered by this or other codes and that such service, by itself, does not give rise to a conflict of interest. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not the subject of provisions of the 1940 Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Persons should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Person should not be placed improperly before the interest of a Fund. Each Covered Person must not: . use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Person would benefit personally to the detriment of the Fund; -2- . cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Person rather than the benefit the Fund; or . retaliate against any other Covered Person or any employee of the Funds or their Service Providers for reports of potential violations that are made in good faith. There are some conflict of interest situations that should always be approved by the Chief Legal Officer ("CLO") of the Fund (or, with respect to activities of the CLO if he/she is a Covered Person, by the President ). These conflict of interest situations are listed below: . service on the board of directors or governing board of a publicly traded entity; . acceptance of any investment opportunity, gift, gratuity or other thing of more than nominal value from any person or entity that does business, or desires to do business, with the Fund. This restriction shall not apply to (i) gifts from a single giver so long as their aggregate annual value does not exceed the equivalent of $100 or (ii) attending business meals, business related conferences, sporting events and other entertainment events at the expense of a giver, so long as the expense is reasonable; . any ownership interest in, or any consulting relationship with, any entities doing business with a Fund, other than a Service Provider or an affiliate of a Service Provider. This restriction shall not apply to or otherwise limit the ownership of publicly traded securities so long as the Covered Person's ownership does not exceed more than 2% of the outstanding securities of the relevant class; and . a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Person's employment with a Service Provider or its affiliate. This restriction shall not apply to or otherwise limit (i) the ownership of publicly traded securities so long as the Covered Person's ownership does not exceed more than 2% of the particular class of security outstanding or (ii) the receipt by the Service Provider of research or other benefits in exchange for "soft dollars". III. Disclosure and Compliance . Each Covered Person should familiarize himself with the disclosure requirements generally applicable to a Fund; . Each Covered Person should not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the -3- Fund, including to the Fund's Board and auditors, and to governmental regulators and self-regulatory organizations; . Each Covered Person should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and . It is the responsibility of each Covered Person to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Person must: . upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Person), affirm in writing to the Funds that he/she has received, read, and understands the Code; . annually thereafter affirm to the Funds that he/she has complied with the requirements of the Code; and . notify the CLO of the Funds promptly if he/she knows of any violation of this Code (with respect to violations by the CLO if he/she is a Covered Person, the Covered Person shall report to the President). Failure to do so is itself a violation of this Code. The CLO of a Fund is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers other than those this Code states can be granted by the CLO, sought by the CLO or Covered Person will be considered by the relevant Fund's Audit Committee (the "Committee"). The Funds will follow these procedures in investigating and enforcing this Code: . the CLO will take all appropriate action to investigate any potential violations reported, which may include the use of internal or external counsel, accountants or other personnel; . if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action; . any matter that the CLO believes is a violation will be reported to the Committee; -4- . if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Person; . the Committee will be authorized to grant waivers, as it deems appropriate; and . any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities of the Covered Persons who are subject to this Code, they are superseded by this Code to the extent that they conflict with the provisions of this Code. The Funds and their Service Providers' codes of ethics under Rule 17j-1 under the 1940 Act and the Service Providers' more detailed compliance policies and procedures are separate requirements applying to the Covered Persons and others, and are not part of this Code. VI. Amendments Any amendments to this Code with respect to a Fund, other than administrative amendments to Exhibits A and B, must be approved or ratified by a majority vote of the Fund's Board, including a majority of independent trustees. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone except as permitted by the Board. VIII. Internal Use The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. -5- Exhibit A Registered Investment Companies 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 AEW Real Estate Income Fund Loomis Sayles Funds I Loomis Sayles Funds II -6- Exhibit B Persons Covered by this Code of Ethics
- ------------------------------------------------------------------------------------- Principal Executive Principal Financial Principal Accounting Trust Officer Officer Officer - ------------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Funds Trust I Trustee, President and Treasurer Treasurer Chief Executive Officer - ------------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Funds Trust II Trustee, President and Treasurer Treasurer Chief Executive Officer - ------------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Funds Trust Trustee, President and Treasurer Treasurer III Chief Executive Officer - ------------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Companies Trustee, President and Treasurer Treasurer Trust I Chief Executive Officer - ------------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Cash Trustee, President and Treasurer Treasurer Management Chief Executive Officer Trust - ------------------------------------------------------------------------------------- AEW Real John. T. Hailer, Michael Kardok, Michael Kardok, Estate Income Trustee, President and Treasurer Treasurer Fund Chief Executive Officer - ------------------------------------------------------------------------------------- Loomis Robert J. Blanding, Sayles Funds Trustee, President and I Chief Executive Officer - ------------------------------------------------------------------------------------- Loomis Robert J. Blanding, Michael Kardok, Michael Kardok, Sayles Funds Trustee, Chief Treasurer Treasurer II Executive Officer; John T. Hailer, Trustee, President - -------------------------------------------------------------------------------------
-7- EX-99.CERT 3 dex99cert.txt CERTIFCATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit (a)(2)(1) CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certification 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; 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 18, 2005 /s/ John T. Hailer ---------------------------------------- John T. Hailer President & Chief Executive Officer Exhibit (a)(2)(1) CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certification I, Michael C. Kardok, 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; 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 18, 2005 /s/ Michael C. Kardok ---------------------------------------- Michael C. Kardok Treasurer EX-99.906CERT 4 dex99906cert.txt CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit (b) CDC Nvest Funds Trust II Section 906 Certification In connection with the report on Form N-CSR for the period ended December 31, 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/ Michael C. Kardok - ------------------------------------- ---------------------------------------- John T. Hailer Michael C. Kardok Date: February 18, 2005 Date: February 18, 2005 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 (the "Commission") or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----